Pandy v. Indep. Bank

• Decision Date: 20 June 2016
• Docket Number: Supreme Court Case No. 15SC345
• Citation: 372 P.3d 1047,2016 CO 49
• Parties: Joseph T. PANDY, a/k/a Joseph Pandy Jr., Elizabeth Pandy, a/k/a Elizabeth A. Pandy; The Joseph Pandy Jr. and Elizabeth Pandy Living Trust, a/k/a Joseph Pandy Jr. and Elizabeth A. Pandy Living Trust dated November 10, 2003; Joseph T. Pandy as Trustee, Elizabeth A. Pandy as Trustee, Petitioners, v. INDEPENDENT BANK, a Michigan bank, Respondent.
• Court: Colorado Supreme Court

372 P.3d 1047

2016 CO 49

Joseph T. PANDY, a/k/a Joseph Pandy Jr., Elizabeth Pandy, a/k/a Elizabeth A. Pandy; The Joseph Pandy Jr. and Elizabeth Pandy Living Trust, a/k/a Joseph Pandy Jr. and Elizabeth A. Pandy Living Trust dated November 10, 2003; Joseph T. Pandy as Trustee, Elizabeth A. Pandy as Trustee, Petitioners

v.INDEPENDENT BANK, a Michigan bank, Respondent.

Supreme Court Case No. 15SC345

Supreme Court of Colorado.

June 20, 2016

Attorneys for Petitioners: The Whitmer Law Firm, LLC, Kent H. Whitmer, William G. Berry, Hot Sulphur Springs, Colorado

Attorneys for Respondent: The Law Firm of John A. Lobus, P.C., John A. Lobus, Lakewood, Colorado

En Banc

JUSTICE GABRIEL

delivered the Opinion of the Court.

¶ 1 This case principally concerns whether property titled in the name of a judgment debtor's co-settled revocable trust is subject to a judgment lien against the debtor. The petitioners, Joseph T. Pandy and Elizabeth Pandy, are co-settlors and co-trustees of a revocable trust that holds title to certain real property in Colorado. The respondent, Independent Bank (the “Bank”), obtained two judgments against Mr. Pandy in Michigan. After domesticating those judgments in the district court for Grand County, Colorado and recording transcripts of the Colorado judgments with the Grand County Clerk and Recorder, the Bank filed the present action to quiet title and for a decree of foreclosure.

¶ 2 The Pandys subsequently moved for judgment on the pleadings, arguing that the Bank's complaint was barred by what they argued was the applicable statute of limitations, namely, the three-year statute set forth in section 13–80–101(1)(k), C.R.S. (2015)

. The district court denied the Pandys' motion, and the Pandys brought an interlocutory appeal in the court of appeals. A division of that court affirmed the district court's denial of the motion for judgment on the pleadings, Indep. Bank v. Pandy , 2015 COA 3, ¶¶ 1, 31–32, ––– P.3d ––––, and we granted certiorari.¹

¶ 3 We now affirm. We conclude that as a settlor of a revocable trust, Mr. Pandy held an ownership interest in the trust's assets. Accordingly, the Bank could properly seek to enforce its judgment against Mr. Pandy in this case, and its action was not barred by the statute of limitations set forth in section 13–80–101(1)(k)

.

I. Facts and Procedural History

¶ 4 Although this case is before us on an abbreviated record, the pertinent facts appear to be undisputed.

¶ 5 The Pandys are co-settlors and co-trustees of a revocable trust known as the Joseph Pandy Jr. & Elizabeth Pandy Living Trust, aka The Joseph Pandy Jr. & Elizabeth A. Pandy Living Trust Dated November 10, 2003 (the “Trust”). In 2005, the Trust took title to certain real property in Grand County (the “Property”).

¶ 6 In August 2010, the Bank obtained judgments against Mr. Pandy in the amounts of $923,356.16 and $34,953.93 in a Michigan state court. In April 2012, the Bank domesticated these judgments in the Grand County district court and recorded transcripts of the domesticated judgments in that county.

¶ 7 In March 2014, the Bank filed a Complaint for Quiet Title and Decree of Foreclosure against the Pandys. The complaint sought, among other things, (1) an order decreeing that the Bank's recorded transcripts of judgment were valid liens on the Property to the extent of Mr. Pandy's ownership interest therein and (2) a decree of foreclosure directing the Grand County sheriff to sell the Property in a foreclosure sale and to apply the proceeds to satisfy the costs and fees associated with the foreclosure and the Bank's judgment against Mr. Pandy.

¶ 8 The Pandys subsequently filed a C.R.C.P. 12(c)

motion for judgment on the pleadings, asserting that the Bank's complaint was barred by the three-year statute of limitations set forth in section 13–80–101(1)(k). In that motion, the Pandys contended that the Bank's cause of action accrued in Michigan when the judgment entered there. They further argued that under Michigan law, the statute of limitations on noncontractual money obligations is ten years. Section 13–80–101(1)(k), however, provides that all civil actions accruing outside of Colorado must be commenced within three years if the limitations period of the place in which the action accrued was greater than that in Colorado. Accordingly, the Pandys asserted that the present action was governed by section 13–80–101(1)(k)'s three-year statute.

¶ 9 In a written order, the district court denied the Pandys' motion. After expressing its uncertainty as to the meaning of section 13–80–101(1)(k)

, the court concluded that once the Bank domesticated its judgment, section 13–52–102(1), C.R.S. (2015), applied and allowed the Bank to collect on its judgment.

¶ 10 In reaching this conclusion, the court noted that in enacting section 13–52–102(1)

, the Colorado legislature sought to make it easy for judgment creditors to collect against Colorado judgment debtors. Specifically, section 13–52–102(1) allowed a judgment creditor to collect by domesticating a foreign judgment instead of filing a second lawsuit, which, the court observed, was the proper procedure prior to the enactment of section 13–52–102. The court also based its finding on the fact that the Bank was no longer attempting to obtain a judgment. Rather, it was attempting to collect on a judgment, and section 13–80–101(1)(k) did not address the time period in which a party may do so.

¶ 11 After receiving the district court's order, the Pandys petitioned the court of appeals for leave to file an interlocutory appeal pursuant to C.A.R. 4.2

. The court granted the petition, and a division ultimately affirmed the district court's ruling. See Indep. Bank , ¶¶ 1, 32. Like the district court, the division concluded that section 13–80–101(1)(k)'s three-year statute of limitations did not bar the Bank's action to collect on its previously obtained judgment. Id. at ¶¶ 27, 31. The division further noted the Bank's contentions (and the record support therefor) that (1) the Trust was revocable; (2) as a result, the Trust's assets were also assets of its settlors, the Pandys; and (3) therefore, Mr. Pandy's assets were subject to the claims of his creditors, including the Bank. Id. at ¶¶ 28–29. The division stated that if the Trust was indeed revocable (which is undisputed here), then the Bank's foreclosure and quiet title action “would merely constitute an attempt to collect on its previously established and properly domesticated judgment.” Id. at ¶ 30.

¶ 12 The Pandys then sought, and we granted, certiorari.

II. Standard of Review

¶ 13 This case presents a question of law, namely, whether property titled in the name of a judgment debtor's co-settled revocable trust is subject to a judgment lien against the debtor. We review issues of law de novo. People in the Interest of S.N. v. S.N. , 2014 CO 64, ¶ 5, 329 P.3d 276, 279

.

III. Analysis

¶ 14 We begin by addressing whether Mr. Pandy, as a co-settlor of the Trust, had an ownership interest in the Trust and, if so, whether the Bank could properly seek to enforce its judgment against that interest. We then consider whether the statute of limitations set forth in section 13–80–101(1)(k)

applies and bars the Bank's claims in this case.

A. Settlor's Interest in Revocable Trust Property

¶ 15 The Pandys contend that the division erred in holding that property titled in the name of a judgment debtor's co-settled revocable trust can also be the debtor's property and thus is subject to liens obtained by the debtor's judgment creditors pursuant to section 13–52–102(1)

.

¶ 16 A revocable trust is “[a] trust in which the settlor reserves the right to terminate the trust and recover the trust property and any undistributed income.” Revocable Trust , Black's Law Dictionary (10th ed. 2014). Moreover, the nature and extent of the beneficial interests or powers that a settlor may reserve or confer on others are not specifically limited. Restatement (Third) of Trusts § 25

cmt. b (2016). As a result, “the settlor of a revocable trust necessarily retains the functional equivalent of ownership of the trust assets.” 3 Austin Wakeman Scott, William Franklin Fratcher & Mark L. Ascher, Scott & Ascher on Trusts § 15.4.2, at 960 (5th ed. 2007); see also Restatement (Third) of Trusts § 25 cmt. a (2016) (“In other substantive respects (such as creditors' rights), the property held in a revocable trust is ordinarily to be treated as if it were property of the settlor and not of the beneficiaries.”). This is true even though legal title to the trust's assets may be held by the trust or a trustee. See Restatement (Third) of Trusts § 74

cmt. a (2016) (noting that the Restatement section concerning the effect of the power of revocation “deals with situations in which a person currently has, by reason of a power of revocation, ... the equivalent of ownership of the trust property, even though the legal title to the property is held by the trustee”); see also § 38–30–108.5(1), C.R.S. (2015) (“A trust may acquire, convey, encumber, lease, or otherwise deal with any interest in real or personal property in the name of the trust.”).

¶ 17 In light of these principles, and absent any contrary authority cited by the Pandys, we conclude that Mr. Pandy, as co-settlor of the revocable Trust, retained an ownership interest in the Trust's assets. The question thus becomes whether that interest is properly subject to the claims of Mr. Pandy's creditors.

¶ 18 Although this court does not appear to have addressed this question, numerous other courts have done so, and they generally have concluded that the assets of a revocable trust are properly subject to the claims of the settlor's creditors. See, e.g. , In re Kester , 339 B.R. 749, 755 (10th Cir. BAP 2006)

, aff'd , 493 F.3d 1208 (10th Cir. 2007) (noting the general rule in Kansas that during a trust settlor's lifetime, the property of a revocable trust is subject to claims of the settlor's creditors); In re Morgenstern , 542 B.R. 650, 656 (Bankr....