Plymouth Capital Co., Inc. v. District Court of Elbert County, No. 97SA464

• Docket Nº: No. 97SA464
• Citation: 955 P.2d 1014
• Case Date: April 06, 1998
• Court: Supreme Court of Colorado

Page 1014

955 P.2d 1014 98 CJ C.A.R. 1515 PLYMOUTH CAPITAL COMPANY, INC., a Delaware corporation, Petitioner,
v.
The DISTRICT COURT OF ELBERT COUNTY; and the Honorable
Kevin Sidel, an acting District Court Judge
thereof, Respondents. No. 97SA464. Supreme Court of Colorado,
En Banc. April 6, 1998.

Christopher E. Acker, Colorado Springs, for Petitioner.

Andrew J. Felser, P.C., Andrew J. Felser, Denver, for Respondents Deirdre Stewart and Gerald Brindamour.

Justice KOURLIS delivered the Opinion of the Court.

This proceeding concerns the application of C.R.C.P. 120. We exercise original jurisdiction over the matter pursuant to C.A.R. 21. On December 23, 1997, at the request of Plymouth Capital Company, Inc. (Plymouth), we issued a rule to show cause why a Rule 120 hearing should not be held immediately to determine whether a reasonable probability of default exists under a certain deed of trust. We now make that rule absolute.

I.

In October of 1995, Deirdre Stewart and Gerald Brindamour (the Debtors) executed a promissory note payable to Plymouth. The note was secured by a deed of trust, also executed by the Debtors, encumbering certain real property and improvements in Elizabeth, Colorado, owned by the Debtors.

The Debtors and Plymouth became involved in a controversy over their respective rights and obligations. The Debtors filed a civil action in Elbert County against Plymouth and other defendants alleging, in pertinent part, fraud, violation of the Colorado

Page 1015

Consumer Protection Act, negligent misrepresentation, breach of fiduciary duty, negligence, and breach of the implied covenant of good faith and fair dealing.

Plymouth commenced foreclosure on the property through the Elbert County Public Trustee's office and, in connection with that foreclosure, filed an application for an order authorizing sale pursuant to Rule 120 in the Elbert County District Court. See C.R.C.P. 120. The Debtors filed a response in the Rule 120 proceeding claiming defenses to the default in payment under the Note, and additionally requesting consolidation of the Rule 120 proceeding with the pending civil case. The trial court denied the motion to consolidate and ordered that the application for an order authorizing sale be set for hearing.

At the hearing, at Debtors' request, the Rule 120 court entered an order staying the Rule 120 proceeding pending the outcome of the civil case. Plymouth objected to the entry of a stay as being outside the jurisdiction of the trial court under Rule 120.

Plymouth then sought relief through the original jurisdiction of this court. We now conclude that the trial judge exceeded the proper scope of jurisdiction under Rule 120.

II.

The hearing contemplated by Rule 120 operates as an integral part of our streamlined, non-judicial foreclosure system. Colorado's procedure for foreclosure by public trustee has been in force and effect since 1894. See Act Concerning Deeds of Trust, Mar. 5, 1894, ch. 6, 1894 Colo. Sess. Laws 50 (adopting H.B. 48). Prior to creation of the office of public trustee, two methods of foreclosure existed. See Andrea Bloom, Foreclosure by Private Trustee: Now is the Time for Colorado, 65 Denv. U.L.Rev. 41, 44 (1988). One method required foreclosure by judicial process, a slower, more costly procedure in which debtors had, among other things, a right of redemption. The other method involved issuance of trust deeds to private trustees who could quickly and inexpensively dispense with property according to the terms of the trust instrument. See id. at 44-45. These private transactions, however, did not provide a right of redemption or other protections for debtors. See id. Through creation of a public trustee's office, the General Assembly sought to ensure the protection of debtors while maintaining a speedy, efficient procedure for creditors. See id. at 45-46; Malcom Lindsey, Foreclosures by the Public Trustee, 9 Dicta 6, 7-9 (1932). Hence, our statutes now strike a balance between efficiency and protection of debtors' rights, without the need for extensive judicial supervision.

Foreclosure of a deed of trust by public trustee's sale under the applicable statutes is activated by a power of sale in the deed of trust. See §§ 38-38-101 to -701, 10 C.R.S. (1997). The creditor, or owner of the evidence of debt secured by the deed of trust, must obtain an order authorizing the public trustee to conduct the sale. See § 38-38-105, 10 C.R.S. (1997). Rule 120 governs the very specialized civil proceeding in which an interested person may file a verified motion in court seeking the order authorizing sale under the power of sale contained in the recorded instrument.

The original purpose of Rule 120 was to provide a method of establishing compliance with the Soldiers' and Sailors' Civil Relief Act of 1940. See Moreland v. Marwich, Ltd., 665 P.2d 613, 616 (Colo.1983); Hal Tudor and Bruce Nelson, C.R.C.P. Rule 120: Understanding the Revision, 6 Colo. Law. 41, 41 (1977). Under this federal law, enacted during World War II, creditors cannot foreclose on a mortgage or deed of trust against a member of the military without a court order. See 50 App. U.S.C. § 532(3) (1990). Courts have discretion to stay foreclosures as equity requires, with a view...