No. 2051 | Colo. Ct. App. | Apr 15, 1902
Lead Opinion
On the 19th day of October, 1889, The Grand Mesa Land and Cattle Company of Colorado executed a trust deed, whereby it conveyed to E. L. Kellogg, as trustee, certain real estate to secure the payment of its two promissory notes, made on the same day, for $5,382.05 and $3,487.55, respectively, and
The complaint averred that Lamb, with full knowledge that the land conveyed by the trust deed had been released without payment of the money secured upon it, and with intent to defraud the plaintiff, procured the foreclosure of his mortgage, took the title, and, for the purpose of making it appear that the land had passed to an innocent purchaser,' conveyed it, without any consideration, to The Delta County Land and Cattle Company, upon which, at the time it received its deed, full knowledge of all the facts was charged.
When the plaintiff had introduced his evidence, the Delta company moved for a nonsuit. The motion was denied, and the company declining to offer any evidence in its own behalf, judgment was entered cancelling the deed of release, and ordering a fores closure of the trust deed to Kellogg. From this judgment The Delta County Land and Cattle Company has appealed.
In the complaint, the plaintiff’s right to relief against the act of Kellogg in releasing the land, is based on the fraudulent practices of Lamb, and the fraudulent acquiescence of the Delta company in his conduct. A decree is sought subjecting and subordinating the title held by that company to the lien of the trust deed to Kellogg, and the sole ground of the plaintiff’s claim to such decree, as set forth in his
In a number of cases, we have held deeds of release, executed by trustees without payment of the money secured, and without authority from the holder of the debt, to be invalid even as against purchasers who had no actual knowledge of the facts. These cases seem to be relied upon with considerable confidence by the plaintiff; and they will receive attention later. First, however, it will be in order to outline the features of the case before us.
The Grand Mesa Land and Cattle Company by its trust deed of October 19, 1889, conveyed to Kel
When the debt which a trust deed secures is fully paid, the power of the trustee is extinguished, and the owner of the equity is entitled to a reconveyance of the legal estate. The trustee’s deed to a stranger would simply invest the latter with the title the former had. The owner of the equity and the owner of the secured debt would be equally unaffected by it. But a release to the owner of the equity would unite both titles in him. In case the debt has been paid, no question can arise upon the deed of release; but if the debt has not been paid the release is fraudulent. It is no release so far as the owner of the equity is concerned; but his relation to the instrument does not determine the status of an innocent purchaser from him.
It is provided by our recording act that all deeds or conveyances of, or affecting title to, real estate, or any interest therein, may be recorded in the office of the recorder of the county wherein the real estate is situate, and from and after their filing for record, and not before, they shall take effect as to subsequent bona fide purchasers and incumbrancers not having notice thereof.—1 Mils’ Ann. Stats., sec. 446.
In Bank v. Miner, 9 Colo. App. 361" court="Colo. Ct. App." date_filed="1897-04-15" href="https://app.midpage.ai/document/first-national-bank-v-miner-7834183?utm_source=webapp" opinion_id="7834183">9 Colo. App. 361, the recorded release showed upon its face that it was executed at the request, not of the holder of the debt secured, but of a party who had, apparently, no right to make, the request. This fact we held sufficient to put a subsequent incumbrancer upon inquiry. In Kenney v. Bank, 12 Colo. App. 24" court="Colo. Ct. App." date_filed="1898-09-15" href="https://app.midpage.ai/document/kenney-v-jefferson-county-bank-7834627?utm_source=webapp" opinion_id="7834627">12 Colo. App. 24, the facts disclosed by the record were that the trustee advertised and sold the land conveyed by the trust deed some seven months before the note which the deed secured was due. The payee of the note — The Colorado Securities Company —purchased the land and received a deed, from which afterwards it caused its name to he erased, and the name of a stranger substituted as grantee. The deed recited a consideration of twenty-five dollars. The land was worth over $12,000. This stranger then made his promissory note to The Colorado Securities Company for $4,000, and secured it by trust deed of the land. The note was sold to Kenney. The origi
In that opinion we reiterated wbat we have frequently said before, and what the supreme court has strongly expressed in Improvement Co. v. Whitehead, 25 Colo. 358, namely, that the powers of a trustee depend entirely upon the terms of the instrument appointing him, and no power is conferred unless expressed in the writing. We also said that the authority to execute a release deed is necessarily incident to, and dependent upon, the power vested by the trust deed; that what would destroy or defeat the power to sell, would create the right to release, and that it is only after the power is extinguished by payment that it is possible for the trustee to reconvey the title discharged of the incumbrance. We also approved an expression in the opinion in Bank v. Miner, supra, that without authority from the party for whose benefit the trust deed was given, the act of the trustee in releasing it was void. Every utterance of a court must be interpreted by the facts to which it is applied. Under the facts of Harker v. Scudder, it was not possible for the trustee to reconvey the title discharged of the incumbrance, and under the facts of Bank v. Miner, the act of the trustee in releasing the land without authority from the party for whose benefit the trust deed was given, was . void. However, as an abstract proposition, the truth of the statement that a release deed executed without payment of the money secured, or without the request of the owner of the debt, is of no effect, may safely be affirmed. But the question of the right of Mr. Kellogg to release the land in controversy here, or of the effect of his deed upon the title, is not the question to be now determined. The question before us is whether, under the provisions of our recording act, when the record shows a complete and regular chain
In each of the cases I have reviewed, the record disclosed some circumstance calculated to excite suspicion, and which demanded inquiry outside of the record; and in each case the necessity of such inquiry, to warrant the proposed purchase or incumbrance, was emphasized in the opinion. But in the'case at bar, there was nothing on the face of the record to indicate an imperfection in the title. The debt was past due, the release recited its payment, and persons proposing to invest in the property had the right to presume that, being overdue, it was paid. There is a legal presumption that parties perform their contracts. Upon the record Kellogg appeared to have the proper authority to execute the release. The presumption was that he had such authority, and the record itself did not, nor did it point to anything which did, indicate that a purchaser might not safely rely on the presumption. It has never been held by the supreme court, or by this court, that a person who is not chargeable with knowledge of a defect, and who finds a clear and perfect title upon the record, purchases, nevertheless, at his peril; and such is not the law.
The remaining case to which reference is made— Barstow v. Stone, 10 Col. App. 396—is not in point. The only question there was whether a successor in trust could execute a valid release, when'no contingency had arisen upon' which, by the terms of the trust deed, the title held by the trustee might become vested in him. We held that, having no title, he could convey none; but we declined to pass upon the question of superiority of equity, because it was not in the case..
If not-directly, at least, by very strong implica
“From the foregoing statement it will be seen that the trust deed to Griswold, given to secure the payment of the note of $1,200 to Gara, constituted a prior lien upon the property, and the execution of the release deed by Griswold to Shugart, without the payment of the note or the express authority of the holder, was an unwarranted éxercise of power on his part, and was ineffectual to destroy Gara’s lien as between him and the grantor, and subsequent purchasers with notice of such abuse of power. The only question, therefore, to be determined is whether Appelman had such notice, or its equivalent; by being put upon inquiry by anything contained upqn the re*327 cord of the title to the lot. That he did not have actual notice may be conceded, but that he had before him what was equivalent, namely constructive notice from the record, admits of no doubt. The original trust deed, of which he was bound to take notice, disclosed a contract by which the debt thereby secured was not due at the time its release was attempted. And by sundry mesne conveyances in the line of his title he was notified that the equity in the lot was vested in Griswold, the trustee, subject to this trust deed, and held by him subject to this security at the time the release was executed and recorded; that the release to Shugart, who at the time had no interest in the property, was in effect a release to himself. Under this condition of the title, if the trustee’s power was not extinguished, it is evident that its exercise was a gross violation of his trust. * * * With notice, therefore, of the conveyances through • whieh Griswold became vested with . the equity in the lot, and of the release of the trust deed by him while such owner, and before the maturity of the note secured thereby, appellant was apprised of facts sufficient to cast a suspicion upon the bona fides of the transaction, and put him upon inquiry whether the plaintiff’s note had in fact been paid; and he cannot, after ignoring these facts, and dealing directly with the unfaithful trustee in relation to the trust’ property, invoke the doctrine that courts of equity extend to innocent purchasers without notice. ’ ’
The foregoing language is hardly susceptible of an interpretation in harmony with the theory of plaintiff’s counsel. Upon that theory, the statement "that the release was ineffectual to destroy Gara’s lien as between him and the grantor, and subsequent purchasers with notice of the abuse of power, is meaningless, because, if the release was an absolute nullity, it would be immaterial whether purchasers
Upon the evidence, as it is ’presented in this record, I think the deed of Lamb to The Delta Land and Cattle Company vested a good title in the latter, and that the court erred in cancelling the deed of release.
Let the judgment be reversed. Reversed.
Wilson, P. J., concurs.
Dissenting Opinion
dissenting.
The Grand Mesa Land and Cattle Company made two promissory notes payable to Gill, and se-’ cured the came by trust deed on real estate to Kellogg, as trustee; this, recorded, authorized the trustee to sell on default of payment of notes. The notes were assigned to appellee, plaintiff below. There
This proceeding is to cancel the unauthorized release.
Is the release operative against appellee?
The public records charged Lamb and appellant with notice of the trust deed and its provisions.
“The powers of a trustee depend entirely upon the terms of the instrument appointing him,' and no power is conferred unless expressed in writing.”—The Bent-Otero Improvement Co. v. Whitehead, 25 Colo. 358, 54 Pac. 1023; Kenney v. Bank, 12 Colo. App. 33, 54 Pac. 404.
The trustee had by- the trust deed express power under certain conditions to sell and convey the equitable estate of the trustor; by the same instrument, as an incident to this power, he was impliedly authorized, upon certain conditions, to execute a release discharging the lien of the trust deed. — Harker v. Scudder, 15 Colo. App. 69" court="Colo. Ct. App." date_filed="1900-04-15" href="https://app.midpage.ai/document/harker-v-scudder-7835158?utm_source=webapp" opinion_id="7835158">15 Colo. App. 69, 61 Pac. 197, 1 Colo. Decisions 670.
“Whatever restrictions or limitations there are upon the expressed power (to sell) it logically follows, attach to all incidents of it (the power to release).”—Barker v. Scudder, supra.
In Improvement Company v. Whitehead, supra, the trust deed secured a note; the power to sell of the trustee therein was conditioned on the request of the beneficiary; the trustee foreclosed without this request, selling to a third party. At the instance of the beneficiary the sale was vacated on the ground
‘ ‘ The assignments of error present but one question, and that is whether a trustee named in a deed of trust, wherein the power of sale is conditioned upon the request of the beneficiary, can sell the land and convey to the purchaser a good title without such request, or without any circumstance from which the purchaser could infer such request on his part. The powers of a trustee depend entirely upon the terms of the instrument appointing him, and no power is conferred unless expressed in writing. Such request, therefore, becomes a condition precedent to his power to sell; and since the rule of caveat emptor applies to trustees sales, the purchaser is bound to take notice that all matters in pais upon the existence of which the trustee’s power to act depends have been complied with.”
In Kenney v. Bank, 12 Colo. App. 24" court="Colo. Ct. App." date_filed="1898-09-15" href="https://app.midpage.ai/document/kenney-v-jefferson-county-bank-7834627?utm_source=webapp" opinion_id="7834627">12 Colo. App. 24, 54 Pac. 404, it is said: “The trustee in a deed of trust is clothed with no' powers save those which are expressed in writing, and if his authority to act is dependent upon matters in pais, parties dealing with the trustee are hound to see that the authority is expressly given by the instrument and that the facts exist which authorize the trustee to act.”
It is clear from the authorities that the trustee cannot by sale convey the equitable estate of the trustor or discharge the lien of the beneficiary, under
“Parties dealing with the trustee are bound to see * * * that the facts exist which authorize the trustee to act.”—Kenney v. Bank, supra.
If this be true, that is, that the trustee cannot by foreclosure convey the equitable estate of the trustor, or affect the lien of the beneficiary, without observance of the conditions prerequisite, and, if it be further true, that the power to release is from the same instrument, the trust deed, and that “whatever restrictions or limitations there are upon the expressed power (to sell) it logically follows attach to all incidents of it (the power to release),” how can it be that the trustee can execute a release discharging the lien of the trust deed without complying with the terms of the instrument whereby he derives his authority, and of which instrument and its limitations on the powers of the trustee all parties, by the public records, have notice? The same principle o’f law which renders the doctrine caveat emptor applicable to a purchaser under a trustee’s sale ought, and it seems upon authority does apply to releases by a trustee. The reason for the rule in both instances is the information as to the agent’s authority furnished by the recorded trust deed.
As I understand the former decisions of this court they sustain this conclusion. In Harker v. Scudder, supra, a trust deed to séeure a note, with power to the trustee upon certain conditions to sell, was given upon certain lots. A release deed was executed as to certain of the lots, which recited as a consideration therefor, that the payor had discharged part of the secured note, and that the release was
‘ ‘ Whatever may be the rule in other states, and whatever may be the conflict of authority, the rule with reference to the pivotal and decisive question in this case has been positively settled in this jurisdiction by harmonious decisions in both appellate courts. This rule as laid down in Kenney v. Bank, 12 Colo. App. 33, 54 Pac. 404, is: “It is undoubtedly true (and in this all the authorities agree) that a trustee by written instrument is clothed with no powers save those which are expressed in the writing; and if his authority to act is in any wise or at all dependent upon.matters in pais, the parties dealing with the trustee are bound in the one case to see that the authority is expressly given by the instrument, and in the other that those facts exist which authorize the trustee to act. ” In a later case this was quoted approvingly by our supreme court. Improvement Co. v. Whitehead, 25 Colo. 358, 54 Pac. 1024. In this case the supreme court also says: ‘ ‘ The powers of a trustee depend entirely upon the terms of the instrument appointing him, and no power is conferred unless expressed in the writing.” In Bank v. Miner, 9 Colo. App. 367, 48 P. 839" court="Wyo." date_filed="1897-04-26" href="https://app.midpage.ai/document/daley-v-anderson-6587473?utm_source=webapp" opinion_id="6587473">48 Pac. 839, the court said: “Without authority from the party for whose benefit the trust deed was given, the act of the trustee in releasing it was void. ’ ’ Applying this rule to the case at bar, it being undisputed that Mrs. Scudder did not
I have quoted thus at length the portions of the opinion pertinent to the questions before us, that it may be seen how the court reasoned, and what it ruled. It seems to me that the ruling there made, and the reasoning therein justifying such ruling, if applied to the facts of the case under consideration, would necessitate a cancellation of the Kellogg release deed.
In Kenney v. Bank, 12 Colo. App. 25, 54 Pac. 404, the facts, so far as material to one of the grounds of the ruling therein, were: A trust deed securing a note was foreclosed without the knowledge or consent of the beneficiary, the bank; a trustee’s deed placed of record, and a note and trust deed executed by the grantee hypothecated for value to another party, Kenney. On application of the beneficiary under the foreclosed trust deed, the bank, the foreclosure was set aside. One of the grounds for granting the relief was that the trustee had no power to make the sale; this it was held vitiated the sale even as against Kenney who took the note and trust deed without knowledge that the trustee had not complied with the conditions prerequisite to the sale. The court said:
“It was Kenney’s duty to see not only that the power was granted but that the facts which authorized its exercise likewise existed. Under the proof*335 neither existed. The note was not due, and therefore the trustee had no authority to sell to enforce the payment of it, unless there had been a default in the payment of the interest, and the holder had elected to declare the whole sum due. The latter was undoubtedly a matter in pais. The logical deduction is that as an original proposition the sale was wholly and totally invalid, did not affect the bank’s title, nor by the execution of the security by Duffy did Kenney acquire any interest. * * * We therefore conclude upon these authorities that there was enough in the transaction to put Mr. Kenney upon inquiry, and that he was not an innocent purchaser for value without notice, and that even had he not been put upon inquiry by these matters, the trustee had no authority to sell when he did. The facts which were prerequisite to the exercise of such authority did not exist. This being true the trustee could in no way dispose of or incumber the property to the disadvantage of the original lienor. The lien of the Jefferson County Bank was therefore superior to that held by Mr. Kenney.”
In Bank v. Miner, 9 Colo. App. 362, 48 Pac. 837, the facts so far as material to this citation are: The note of Miner, payee First National Bank, with Shimer thereon as surety, with reference to Miner, was secured by a trust deed. This recited its giving to secure the note, and to secure Shimer in his surety-ship. A release of the trust deed was executed by the trustee wherein he recited payment of the note and that the release was executed at instance of Shimer. The note had not been paid and the payee therein, the bank, had not authorized the release of the trust deed. While the release was of record a trust deed was executed to secure a third party. The beneficiary under the first trust deed, the bank, brought suit to cancel the release. The court said:
*336 “The release executed by Morse recited that W. A. Miner had fully paid and satisfied the original note. This recital was not true. * * * At the time the release was written it was unpaid, and it is still unpaid. The release also recited that it was made at the request of Frank Shimer. Shimer had no authority to order a release. As he had not paid the debt, the security did not belong to him. Its release could be legally authorized only by the bank, the holder of the debt; and the paper did not purport to be executed by its authority. Without authority from the party for whose benefit the trust deed was given, the act of the trustee in releasing it was void. The mortgage to the Union Bank of Greeley was executed before this supposed release was made; but even had it been executed subsequently, as was the case with the mortgage to Bronk, the recital in the releasing instrument that it was executed at Shimer’s instance, and the absence of any appearance of authority from the owner of the debt, would have made it its duty to inquire into the facts, if it intended its mortgage to be a prior lien.”
Judgment was entered cancelling the release. If the note secured by the first trust deed had been paid then the release was properly executed, and was effective in discharging the lien of the trust deed. If the recitals in the recorded release were conclusive upon the beneficiary under the first trust deed, First National Bank, as to the fact of payment, then the release could not be questioned at the instance of such beneficiary, yet, at the instance of such beneficiary the court cancelled the release deed. In effect its holding was that the release was void because unauthorized by the beneficiary under the trust deed; that the recitals in the release deed, of payment of the note, although the release was recorded, were not proof of such fact in favor of a subsequent incumbrancer.
As to Appelman v. Gara, supra, it was not necessary for the court to decide therein the question before us, and in my opinion it did not decide it. The release was cancelled upon the ground that the facts were sufficient to charge a subsequent innnocent purchaser with notice.
If section 446, 1 Mills’ Ann. Stats., validates the release deed in the present case as against appellee, Talcott, and in favor of appellant, I am unable to see why it did not cure the various unauthorized instruments placed of record in the above cases. This section, in my judgment, has no greater effect upon the release deed in the present case than it would have upon a forged instrument.
Three Illinois cases are cited in support of the opinion of the court herein. In my judgment they are not in point. In Porter v. McNabney, 77 Ill. 235" court="Ill." date_filed="1875-01-15" href="https://app.midpage.ai/document/porter-v-mcnabney-6958169?utm_source=webapp" opinion_id="6958169">77 Ill. 235, the grantor in the trust deed securing the note conveyed the encumbered premises to the party shown by the records to be the holder of the note thus secured. To this beneficiary the trustee likewise released. The laws of Illinois required an assignment of the note secured by trust deed to be placed of record to render such assignment of the note and trust deed valid against innnocent parties. The land was conveyed by the party shown by the records to be the holder of the note and to whom deed of release was executed, and to whom the grantor in the trust deed had conveyed
Our statute did not require appellee, Talcott, to record his assignment of the note or trust deed; such recording was not necessary to protect the assignment to him against a subsequent lienor.—Kenney v. Bank, supra.
A statement of the facts in Ogle v. Turpin, 102 Ill. 148" court="Ill." date_filed="1881-11-10" href="https://app.midpage.ai/document/ogle-v-turpin-6961544?utm_source=webapp" opinion_id="6961544">102 Ill. 148, distinguishes it from the case before us. Runyan held notes payable to himself by Allen secured by mortgage on lands. The notes Runyan endorsed to Ogle: The statute required the assignment of the
notes and mortgage to go of record in order to be valid against third parties without notice. This was not done. Runyan obtained a deed for the mortgaged premises from Allen. Runyan thereupon, without the knowledge or consent of Ogle, on his (Runyan’s) apparent title, which appeared perfect of record, obtained a loan from another party giving trust deed with usual power of sale to secure the same. Ogle brought suit to foreclose his released mortgage. The court dismissed the bill, upholding the release. The court inter alia said:
*339 “As the record stood it showed that Runyan was the owner of the title free from encumbrances. The assignment of the notes operated as an equitable assignment of the mortgage, and the assignment was an instrument that related to or affected the title of the land, and to be come operative as to creditors and purchasers the assignment of the mortgage should have been formally made and recorded to charge notice to all persons dealing with the title, or at least the assignment on the note should have referred to the mortgage, and that assignment should have been recorded. As between the parties the mere assignment without recording was all that was required to assign the mortgage, but as to strangers it was otherwise.”
As our statute did hot require an assignment of the notes and mortgage to Talcott placed of record to make it effectual as to strangers, Lamb was not justified from the silence of the record in believing that Gill was still the owner of the notes and the proper party to authorize the release.
In Howard v. Ross the release was executed by the party alone entitled, according to the records, to execute the release, and was authorized by the only party, according to the records, entitled to authorize the release. The assignee of the securities in such case, as in the two Illinois cases, had failed to effectuate his assignment as to strangers by complying with the statute requiring its record.
The facts herein summed up are: Appellee held a note secured by a recorded trust deed; without his knowledge or consent the trustee executed and placed of record a release. Thereafter appellant, by mesne conveyances from the trustor, acquired the encumbered property. Appellee asks, appellant resists, the cancellation of the fraudulent release.
The appellee has done all the law required of him to preserve his security; he is without fault.
“If the validity of the deed depends on an act in pais, the party claiming under that deed is as much bound to prove the performance of the act as he would be bound to prove any matter of record on which its validity might depend. It forms a part of his title; it is a link in the chain, which is essential to its continuity, and which it is incumbent on him to preserve. These facts should be examined by him before he becomes a purchaser, and the evidence of them should be preserved as a necessary muniment of title.”—Williams v. Peyton, 4 Wheat. 77" court="SCOTUS" date_filed="1819-02-18" href="https://app.midpage.ai/document/williams-v-peytons-lessee-85254?utm_source=webapp" opinion_id="85254">4 Wheaton 77, approved in Kenney v. The Bank and in Improvement Company v. Whitehead, supra.
“There is no principle which substitutes the declaration of the trustees, however solemnly made, in place of the fact which could alone authorize them to recover. The purchaser, if he would be safe, must not content himself with the recital that the trusts have ceased, but must ascertain at his peril whether such is the case.”—Briggs v. Davis, 20 N.Y. 15" court="NY" date_filed="1859-09-05" href="https://app.midpage.ai/document/briggs-v--davis-3600486?utm_source=webapp" opinion_id="3600486">20 N. Y. 15.
Although forewarned by the contents of the trust deed and the law, appellant made no investigation as to the existence of facts authorizing the trustee to release. The trustee had no authority to release. Appellant, the party in fault, is the one who should suffer by the fraudulent release.
It was not the purpose of our recording act to give validity to a forged or unauthorized instrument. The records might contain a forged deed; an innocent
In my opinion the judgment of the lower court should be affirmed.