Tekai Corp. v. Transamerica Title Ins. Co., 76-297

• Decision Date: 28 July 1977
• Docket Number: No. 76-297,76-297
• Parties: TEKAI CORPORATION, a Colorado Corporation, Plaintiff-Appellant, and Cyrus L. Colburn, Jr., Additional Defendant-Appellant, and William L. Bromberg, Thomas R. Bromberg, John A. Jourgensen, and John Jourgensen Paints, Inc., Defendants-Appellants, v. TRANSAMERICA TITLE INSURANCE COMPANY, Defendant-Appellee, and Colorado National Bank of Denver, Intervenor-Appellee. . I
• Court: Colorado Court of Appeals

Page 321

571 P.2d 321

39 Colo.App. 528

TEKAI CORPORATION, a Colorado Corporation, Plaintiff-Appellant and Cyrus L. Colburn, Jr., Additional Defendant-Appellant and William L. Bromberg, Thomas R. Bromberg, John A. Jourgensen and John Jourgensen Paints, Inc., Defendants-Appellants, v. TRANSAMERICA TITLE INSURANCE COMPANY, Defendant-Appellee and Colorado National Bank of Denver, Intervenor-Appellee.

No. 76-297.

Colorado Court of Appeals Div. I.

July 28, 1977.

As Modified On Denial of Rehearings Aug. 25, 1977.

Certiorari Denied Nov. 15, 1977.

Hoffman, McDermott & Hoffman, Daniel S. Hoffman, Denver, for plaintiff-appellant Tekai Corp. and additional defendant-appellant, Cyrus L. Colburn, Jr.

Aldo G. Notarianni, Denver, for defendants-appellants.

Neef, Swanson & Myer, Robert Swanson, William P. Denious, Jr., Denver, for defendant-appellee Transamerica Title Ins. Co. and intervenor-appellee Colorado National Bank of Denver.

Davis, Graham & Stubbs, Denver, for intervenor-appellee Colorado National Bank.

COYTE, Judge.

This litigation arises out of the foreclosure and sale of certain property under a mechanic's lien. The plaintiff, Tekai Corporation, commenced an action to set aside the sale, and the other parties ¹ asserted the several cross-claims and counterclaims. Following a bifurcated trial to the court, a judgment was entered nullifying the sale and variously disposing of the remaining claims. We affirm the judgment in part, reverse it in part, and remand the cause for further proceedings.

In January 1971, Jourgensen Paints filed a mechanic's lien statement against Tekai in the amount of $1,040.48, which represented the cost of materials furnished for use at an office building then owned by Tekai at 2222 East 18th Avenue in Denver. Jourgensen Paints subsequently initiated suit against Tekai seeking a judgment for the amount of its lien and a decree of foreclosure. A notice of lis pendens was filed at the commencement of the suit.

In January 1972, Tekai and Colburn sought and procured a loan from the Colorado National Bank, with Colburn assuming personal liability for the indebtedness. In connection with the loan, Colorado National obtained a mortgagee's title insurance commitment from Transamerica covering properties of Tekai, including the 18th Avenue property. As an additional aspect of the transaction, Colburn and Transamerica entered into an agreement by which Colburn delivered $1,500 to Transamerica in return for its issuance of the commitment to Colorado National with no exception of Jourgensen Paints' lien. The agreement relative to this $1,500 provides, in pertinent part:

"If no such Certificate of Dismissal (in the lien action) shall have been recorded prior to January 26, 1973, (Transamerica is) hereby authorized and directed to retain said funds until such time as such Certificate of Dismissal has been recorded and to use so much thereof as may be necessary to discharge said judgment entered thereunder and to pay any costs or expenses incurred in connection therewith, returning the balance, if any, to (Colburn)."

Jourgensen Paints meanwhile proceeded to judgment in its lien suit and obtained a decree of foreclosure on the 18th Avenue property. After the requisite publication of notice, a sheriff's sale was held in February 1973. Jourgensen Paints bid $1,344.06, which constituted the indebtedness owed the company, and for that amount, received a certificate of purchase. The property was not redeemed within the statutory period, and Jourgensen Paints was in due course issued a sheriff's deed, which it promptly recorded. The parties agreed that at the date of the sale, the property had an appraised value in the range of $168,000 to $178,000.

Tekai thereafter initiated the suit which is the subject of this appeal. By various motions, the additional parties and claims were incorporated in the action.

The Jourgensen Group's Appeal

I

The Jourgensen group first contends that the trial court erred in setting aside the sheriff's sale. We disagree and affirm that portion of the judgment.

Generally, inadequacy of price alone is not a sufficient ground upon which to set aside a judicial sale. Chew v. Acacia Mutual Life Insurance Co., 165 Colo. 43, 437 P.2d 339 (1968). However, when the totality of circumstances demonstrates that a sale has resulted in an unconscionable condition which is shocking to the conscience of the court, it is within the equitable powers of the court to remedy the condition. Handy v. Rogers, 143 Colo. 1, 351 P.2d 819 (1960); see also Fulton Investment Co. v. Smith, 27 Colo.App. 279, 149 P. 444 (1915).

Here, the trial court found that Jourgensen Paint failed to give actual notice to Tekai or its counsel of the impending sale and the redemption period, that it had not attempted to satisfy its judgment through methods less onerous and oppressive than foreclosure, and that no other bidders were present at the sale. The court concluded that these circumstances, when coupled with the grossly inadequate sale price, required that the sale be set aside.

It is not disputed that Jourgensen Paints proceeded in accordance with the applicable statutory provisions, see §§ 38-22-101 et seq., C.R.S. 1973, nor that counsel for the company had on several occasions prior to January 1973 discussed with Tekai's counsel the possibility of satisfying the judgment. Further, Jourgensen Paints bid the precise amount of its judgment and costs and no deficiency judgment was obtained through the sale.

As the Jourgensen group now argues, the above facts are relevant in establishing the equities here. See, e. g., Chew v. Acacia Mutual Life Insurance Co., supra; La Fitte v. Salisbury, 43 Colo. 248, 95 P. 1065 (1908); Conway v. John, 14 Colo. 30, 23 P. 170 (1890); Victor Investment Co. v. Roerig, 22 Colo.App. 257, 124 P. 349 (1912). Nevertheless, the findings made by the trial court in support of its decision are also undisputed and equally pertinent to its equitable resolution of the matter. Under the circumstances, we conclude that the trial court did not abuse its discretion in setting aside the sale. See generally 30 Am.Jur.2d Executions §§ 713 and 733.

In view of our disposition of this issue, it is unnecessary to discuss Colorado National's arguments directed toward the validity of the judgment upon which the foreclosure decree was based. Even assuming the bank's contentions were properly before this court absent cross-appeal, see City of Delta v. Thompson, Colo.App., 548 P.2d 1292 (1975), the record is inadequate to permit our consideration of this issue.

II

The Jourgensen group next contends that the trial court erred in permitting Tekai to attack collaterally the judgment obtained in Jourgensen Paints' lien action. We disagree.

Contrary to the Jourgensen group's argument, Tekai's suit was a direct attack on the execution and sale rather than a collateral attack on the judgment supporting the execution. Cf. Clarke v. Asher, 53 Colo. 313, 125 P. 358 (1912); see also Prudential Corp. v. Bazaman, 512 S.W.2d 85 (Tex.Civ.App.1974). And we further hold that an execution sale may be set aside either on motion in the court which issued the process or in an independent action in a court possessing equitable jurisdiction. Nussbaumer v. Superior Court, 107 Ariz. 504, 489 P.2d 843 (1971); and see generally 33 C.J.S. Executions § 239. Accordingly, the trial court did not err in refusing to dismiss the action, nor was the suit precluded by the terms of the previous judgment.

III

In its final assignment of error, the Jourgensen group asserts that the trial court erred in allowing Colorado National to intervene in the action. We reject this contention.

The Jourgensen group's theory is that Colorado National, which was afforded notice of Jourgensen Paints' foreclosure action by means of the lis pendens, was thereafter bound by the outcome of that litigation. However, the authorities relied on by the Jourgensen group, e. g., Howard v. Fisher, 86 Colo. 493, 283 P. 1042 (1929) are relevant only to establishing the priority of liens and do not involve, as does this appeal, the question of intervention in an independent equitable action to set aside a foreclosure sale. See Nussbaumer v. Superior Court, supra.

C.R.C.P. 24 is to be liberally construed in order that all related controversies may be resolved in one action. City of Delta v. Thompson, supra. Where, as here, intervention is permitted by the trial court, its ruling will not be disturbed absent an abuse of discretion. Groendyke Transport, Inc. v. District Court, 140 Colo. 190, 343 P.2d 535 (1959).

In its complaint for intervention, Colorado National asserted both an interest relating to the property which would be impaired by the litigation and claims in common with plaintiff Tekai, and requested a final adjudication of the rights of all parties in the property. Attached to the complaint was a copy of Tekai's promissory note in favor of the bank secured by a deed of trust to the property in question. In view of these circumstances, the trial court did not err in allowing intervention. See C.R.C.P. 24 and 105.

With respect to the priority of its lien, Jourgensen Paints was not deprived of its statutory rights by the trial court's resolution of the conflicting claims. Generally, in the event a foreclosure sale is set aside, the parties are to be restored as nearly as possible to the status quo ante, George Hogg & Son v. Budnick, 227 Ky. 602, 13 S.W.2d 756 (1929), including any rights previously available to the creditor under the judgment. Wambaugh v. Gates, 11 Paige Ch. 505 (1845).

Here, rather than affixing a lien in favor of Jourgensen Paints on Colorado National's interest in the property which it had acquired through its foreclosure of the deed of trust securing the Tekai loan, cf. Brug v. Herbst, 78 Colo. 128, 239 P. 868 (1925), the trial court directed that the funds deposited in the court's registry by Colorado National...