Opinion by
In this interpleader action, defendants, Robert F. and Hona W. Parker, appeal the trial court's judgment dismissing their cross-claims against defendants, Shawn and Crystal Osthoff; the United States of America, Farmers Home Administration, n/k/a Farm Service Agency (FSA); and Richard D. and Barbara P. Merrill The Parkers further appeal the trial court's judgment granting the Merrills and the Osthoffs' requests for attorney fees. We affirm in part, reverse in part, and remand for further proceedings.
This case arose from an interpleader action filed by the Washington County treasurer and ex-officio public trustee, plaintiff, Ma-ryin A. Elrick, as a result of excess proceeds held by her following a foreclosure sale. The trial court dismissed the Parkers' cross-claims against the Osthoffs and FSA and ruled in favor of the Merrills following a bench trial.
The trial court made findings of fact as follows. On or about June 3, 1981, the Mer-rills executed a promissory note and deed of trust secured by the property in question. The principal amount of the note was $8338,-390, payable to FSA. Subsequently, FSA granted the Merrills additional loans secured by the wheat crop growing on the property in 1997, as well as other equipment on the property. These loans totaled $230,420.
On or about October 15, 1995, the Merrilis entered a lease agreement with the Osthoffs which expired by its terms on December 1, 1996. However, the lease permitted the Os-thoffs to enter the property to harvest a winter wheat crop in the summer of 1997 that would be planted in the fall of 1996. The Osthoffs did plant this erop in the fall of 1996, and harvested the wheat in July 1997.
On February 9, 1996, the Merrills received a chapter 7 discharge of their debts in bankruptcy, including a discharge of their obligations pursuant to three separate deeds of trust secured by the property at issue here.
After the public sale, the Parkers purchased the promissory note secured by the first deed of trust, and obtained an assignment of the second deed of trust.
On April 16, 1997, FSA filed with the public trustee a notice of claim to redeem the excess proceeds as payment for the debt secured by the erop and other equipment. However, FSA did not redeem.
On May 27, 1997, the Parkers filed with the public trustee a notice of claim for the excess proceeds and a notice seeking payment of that balance as an overpayment. Also on May 27, 1997, the Merrills filed with the public trustee a claim for the excess funds pursuant to the homestead exemption, § 38-38-111, C.R.S.1999.
Subsequently, the Parkers filed their cross-claim for waste against the Merrills. The cross-claim alleged that the Merrilis had caused $7,500 worth of damage to various items of personalty on the property.
Two months after the public trustee filed this action, the Parkers amended their cross-complaint and joined the Osthoffs as defendants, alleging that the Parkers had acquired ownership of a wheat crop on the property that had been planted, cultivated, and harvested by the Osthoffs. The amended cross-complaint also requested reimbursement from the Merrills for taxes and interest owed on the property that the Parkers had paid during the redemption period.
Pursuant to $ 38-88-8302(8), C.R.S. 1999, the period of redemption expired on June 18, 1997. and at that time, a public trustee deed was issued to the Parkers. However, under § 38-38-303(1), C.R.S. 1999, FSA still had ten days after June 18, 1997, within which to redeem the property. Therefore, on June 18, 1997, the Parkers obtained title to the property subject to FSA's right to redeem. After June 28, 1997, the Parkers obtained title to the property free of FSA's redemption rights. See Graham v. Alcoves, Inc.,
The trial court dismissed the Parkers claims against the Osthoffs, concluding that the Osthoffs did not receive notice of the foreclosure sale, and thus their lease to the 1997 winter wheat crop was not extinguished by it.
The trial court then granted the Osthoffs' request for attorney fees against the Parkers and their attorney, jointly and severally, concluding that the Parkers' claims were frivolous, groundless, and without substantial justification.
The trial court also dismissed the Parkers' claims against FSA, finding that the Parkers did not meet their burden of showing that FSA had waived its sovereign immunity. Accordingly, the court concluded that it lacked jurisdiction to adjudicate the cross-claims against FSA.
In addition, after a bench trial, the court dismissed the claims against the Merrills, determining that the Parkers had not established their claim for damages. The trial court then awarded attorney fees against the Parkers and their attorney in favor of the Merrills on the same basis that it had awarded the Osthoffs' attorney fees.
I. Dismissal of FSA
The Parkers assert the trial court erred in concluding they had not met their burden to show that FSA had waived its sovereign immunity by entering an appearance and requesting the excess proceeds from the foreclosure sale. We disagree.
A trial court's conclusion as to whether immunity has been waived is a determination as to subject matter jurisdiction, and is subject to a mixed standard of review. The trial court's factual findings will not be reversed on appeal unless clearly erroneous. However, the existence of subject matter jurisdiction is a question of law and is therefore subject to de novo review. City of Boulder v. Public Service Co.,
It is undisputed that FSA is a federal government agency protected by the doctrine of sovereign immunity. The Parkers nevertheless argue that because FSA entered an appearance to request the excess proceeds, it waived its sovereign immunity, and therefore, was subject to the jurisdiction of the trial court.
The trial court determined that the Par-kers did not meet their burden to prove FSA had waived its immunity. We conclude that the record supports the trial court's factual determinations. We further agree with the trial court's legal conclusion that FSA did not waive its sovereign immunity merely by requesting the excess proceeds from the foreclosure sale.
Based on this disposition, we do not address any of the Parkers' cross-claims against FSA, nor do we address any responses raised by FSA, other than sovereign immunity.
II. Removal
The Parkers next assert the trial court erred in refusing to remove this case to federal court. We disagree.
Pursuant to 28 U.S.C. § 1441(a) (1994), a defendant may remove a civil case brought in state court to federal district court if the case could have been originally brought in federal court. Although a defendant may remove a case to federal court, a plaintiff may not request such removal. National Cigarette Service Co. v. Farr,
Here, only FSA had the authority to request removal to federal court. Because FSA did not make such a request, and instead sought dismissal based on lack of subject matter jurisdiction, the trial court did not err.
III. Osthoffs' Motion to Dismiss
The Parkers contend the trial court erred in dismissing their cross-claims against the Osthoffs for the wheat erop on the property that was harvested by the Osthoffs in July 1997. Conversely, the Osthoffs contend they are entitled to the wheat crop pursuant to their lease with the Merrills. We agree with the Parkers, subject to any equitable claims the Osthoffs may assert.
Sections 38-88-501 to 38-88-506, C.R.S. 1999, govern the determination of title to foreclosed property upon the expiration of the foreclosure redemption period.
Section 38-88-501, C.R.S.1999, provides:
Upon the expiration of the period of redemption allowed to the owner, ... title to the property sold shall vest in the holder of the certificate of purchase.... Subject to the provisions of sections 38-38-506 and 38-41-212(2), such title shall be free and clear of all liens and encumbrances junior to the lien foreclosed.
(emphasis added).
Section 88-38-506(1), C.R.8.1999, provides:
For the purposes of this section, "omitted party" means any person who: (a) Subsequent to the recording of a mortgage, deed of trust, or other lien instrument, ... has obtained a valid possessory interest and is in actual possession of such property; and (b) is not notified pursuant to section 38-38-101(7)(a) of a public trustee's foreclosure sale....
Section 38-38-506(8), C.R.S.1999, provides that if the omitted party is a lessee, the lessee's interests pursuant to the lease are not affected by a foreclosure if, at any time prior to the transfer of title pursuant to § 38-388-501, a document is filed with the public trustee or sheriff affirming the lessee's interest in the property.
Here, it is undisputed that the Osthoffs were not notified pursuant to § 38-88-101(7)(a), C.R.8.1999, of the public trustee's foreclosure sale, and thus, under § 88-38-506(1), they were omitted parties.
However, based on the provisions of § 38-38-506(8), the Osthoffs' lease is not saved from extinguishment by their omitted party status. It is undisputed that neither the foreclosing lienor -FSA - nor the certificate of purchase holders - the Parkers -- filed a document with the public trustee affirming the Osthoffs' interest in the winter wheat crop harvested after the redemption period expired.
In addition, the supreme court has explicitly held that a lease is extinguished upon foreclosure where a party purchasing property subject to a lease is neither a party to the lease nor aware of the existence of the lease. See First Interstate Bank v. Tanktech, Inc.,
Here, on appeal, none of the parties alleges that the Parkers were parties to the lease or were aware of its existence. Furthermore, none of the parties contends that the Parkers were on inquiry notice of the Os-thoffs' lease interest in the wheat crop. See generally Adelson v. Board of County Commissioners,
Nevertheless, the Osthoffs rely, as did the trial court, on § 1340-105, C.R.S.1999, to argue that they are entitled to the wheat crop as an "away-going crop." This is a crop planted by a tenant prior to the expiration of a lease, but harvested after the lease expires. See Westing v. Marlatt,
Section 13-40-105 provides:
In all cases arising under section 18-40-104(1)(c) to (1)(i), the person in possession is entitled to cultivate and gather the crops, if any, planted or sown by him previous to the service of the demand to deliver up possession, and then grown or growing on the premises, and shall have the right to enter such premises for the purpose of cultivating or removing such crops, first paying or tendering to the party entitled to the possession of said premises a reasonable compensation for the use of the land before removing such crops.
Here, the trial court incorrectly determined that the Osthoffs were entitled to harvest the winter wheat crop because it was a "going away crop" as contemplated by § 13-40-105. (Although the trial court used the term "going away crop," the case law uses the phrase "away-going crop").
Sections 18-40-104(1)(c) to (1)(i), C.R.S.1999, and, in turn, § 1340-105, only apply in forcible entry and detainer (FED) actions when a landlord has evicted a tenant after a crop has been planted, but before it has been harvested. See generally Clark v. Morris,
Here, the trial court found that the Parkers did not demand that the Osthoffs vacate the property. Moreover, the record reflects that the Parkers were unaware of the Osthoffs' interest in the wheat until after the wheat had been harvested. Accordingly, because the Parkers did not pursue an FED action against the Osthoffs, we conclude § 13-40-105 does not apply here. In addition, based on Tanktech, we conclude that the Osthoffs' lease was extinguished upon the foreclosure of FSA's deed of trust. Thus, in July 1997, the Osthoffs were not entitled to remove any portion of the winter wheat crop.
However, as the Parkers concede in their briefs on appeal, the Osthoffs may be entitled to equitable relief for the value of their work expended in cultivating and harvesting the wheat crop. Consequently, the Parkers are entitled to the three-quarters portion of the wheat crop that the Osthoffs wrongfully removed from the property, or its reasonable value, subject to any equitable claims that the Osthoffs may raise. We do not address the one-quarter portion of the crop removed for the benefit of FSA because, as discussed above, FSA did not waive its sovereign immunity.
We remand this matter to the trial court to determine the amount of damages to which the Parkers are entitled for the wheat crop harvested by the Osthoffs in July 1997. On remand, the trial court should also consider any equitable remedies to which the Osthoffs may be entitled, including but not limited to a claim based on unjust enrichment.
IV. Claims against the Merrilis
A. Claim for Waste
The Parkers contend the trial court erred in denying their claim for waste based on the Merrills' refusal to pay interest on the other two deeds of trust or the taxes or insurance due on the property while remaining in possession during the redemption period. The Parkers also contend the judgment for waste should be paid from the excess proceeds of the foreclosure sale. We agree in part and remand to the trial court for further proceedings.
Whether the alleged damage to the property constituted waste is a question of fact, and the trial court's determination will not be disturbed on appeal unless clearly erroneous. (Gregg Homes, Inc. v. Gregg & Co. Builders, Inc.,
Section 88-38-602, C.R.S.1999, provides:
(1) During the period of redemption, ... the person in possession shall not commit waste, and the purchaser shall have such action or remedy for waste, including injunction, as he would have as owner of the premises. During such period, the owner of the premises shall keep the premises in repair, shall use reasonable diligence to continue to keep the premises yielding an adequate income, and shall pay current taxes before a penalty accrues and interest becomes due on any prior encumbrance, keep the premises insured for the protection of the holder of the certificate of purchase, ... and failure to do so shall constitute waste. . In case of waste committed or danger of waste or an actual probability of the security being rendered inadequate, a receiver may be appointed to take possession and preserve the property at any time after the sale under such foreclosure.
Although the Merrills had a right to remain on the property during the period of redemption, they also had a duty to prevent waste, including paying the taxes, insurance, and interest on prior encumbrances on the property.
We conclude the trial court erred in part in dismissing the Parkers' claim for waste based on the Merrills' failure to pay interest, taxes, and insurance on the property during the redemption period. The trial court concluded that the Parkers' only remedy for preventing such waste was the appointment of a receiver or injunctive relief pursuant to § 88-38-602. However, the statute is not so limited. The statutory language specifically allows the purchaser to pursue any actions or remedies that would be available to an owner, including those for injune-tive relief, This language is precatory and not limiting, and therefore, allows a purchaser to pursue a claim for damages as well as one for injunctive relief. See Israel v. Rifle Econolodge Joint Venture,
We therefore conclude that the Par-kers, pursuant to § 88-88-602, could bring an action for damages or an injunction. Because the Parkers were entitled to damages, a request for injunctive relief would have been inappropriate. Home Shopping Club, Inc. v. Roberts Broadcasting Co.,
In addition, § 38-38-602 provides that to prevent waste a receiver may be appointed; a purchaser is not required to seek the appointment of a receiver. This conclusion is supported by $ 38-38-602(2), which allows a purchaser to regain possession of the property if a receiver has not been requested and the owner has abandoned possession.
Thus, pursuant to § 38-38-602, the Parkers are entitled to a judgment for waste. However, because the Parkers do not allege that they paid any insurance premiums on the property, they are not entitled to recovery for this item.
Similarly, because the Mervrills bankruptcy discharge extinguished their obligations under the first and second deeds of trust, as discussed below, the Parkers are not entitled to a judgment for interest.
A discharge in bankruptcy enjoins creditors from attempting to collect dis-chargeable debts as personal liabilities of the debtor. See 11 U.S.C. § 524(a)(2)(1994); United Guaranty Residential Insurance Co. v. Dimmick,
Furthermore, a debtor may establish a defense to an action to collect a debt by introducing a certified copy of the order of discharge. The burden then shifts to the creditor to show that the claim is excepted from discharge under 11 U.S.C. $ 523(a) (1994). Blecker v. Kofoed,
Here, the Merrills produced a certified copy of the order that discharged the debt obligations covered by both deeds of trust. Thus, the burden was on the Parkers to show how their claim for interest on those debts is excepted from discharge. The Parkers did not present evidence sufficient to meet this burden. Thus, the Parkers are not entitled to interest on the two deeds of trust.
The Parkers, however, may be entitled to reimbursement for taxes paid during the redemption period. It is unclear from the record for what taxes the Parkers request reimbursement. 11 U.S.C. § 523 (1994), provides that the discharge of a debtor does not discharge him or her from any debt for a tax specified in 11 U.S.C. § 507(a)(8) (1994). 11 U.S.C. § 507(a)(8)(B) includes "a property tax assessed before the commencement of the case and last payable without penalty after one year before the date of the filing of the petition." Thus, on remand, the trial court should determine whether the taxes requested by the Parkers are included within 11 U.S.C. $ 507(a)(8)(B).
If the court determines that the taxes are included within the definition in 11 U.S.C. § 507(a)(8)(B), it should then consider evidence regarding the specific periods for which the Parkers paid the taxes (Le., were they 1996 taxes or quarterly taxes for the redemption period). The court should also determine whether the taxes should be prorated based on the periods for which they were paid-before or after the redemption period.
Finally, we note that because the Parkers did not allege at trial that the Os-thoffs' failure to cultivate the entire parcel
B. Compensation From Court Registry
The Parkers next assert that they are entitled to compensation for waste in the amount $84,049.06. The Parkers further assert they are entitled to satisfy that entitlement out of the excess proceeds held in the court registry. As discussed above, the Par-kers may be entitled to a judgment for waste. However, we do not agree that they are entitled to satisfy any such judgment out of the exeess proceeds.
Pursuant to § 38-88-111, C.R.S.1999, upon the expiration of the redemption period, excess funds held by the public trustee shall be paid "first to the last redeeming lienor, ... and the balance, if any, shall be paid in order of priority, to junior lienors who have duly filed notice of intent to redeem ... and who have failed to redeem ... and finally to the owner of record as of the day of the foreclosure sale."
Here, FSA was a junior lienholder that duly filed a notice of intent to redeem, but did not redeem within the time allowed. Thus, pursuant to § 388-88-111, the excess funds must be distributed to FSA. In addition, the Merrills and FSA had entered a stipulation pursuant to which FSA is entitled to the proceeds. Therefore, the Parkers are not entitled to the excess funds.
On remand, the trial court shall determine the amount of taxes, if any, to which the Parkers are entitled.
V. Attorney Fees
The Parkers next assert the trial court improperly granted the Osthoffs' and the Merrills' request for attorney fees against them and their attorney. We agree.
To prevail on a claim for attorney fees pursuant to § 13-17-102, C.R.S.1999, a defendant has the burden of proving by a preponderance of the evidence that the plaintiffs claims lack substantial justification. Lack of substantial justification is defined as "substantially frivolous, substantially groundless, or substantially vexatious." Section 13-17-102, C.R.8.1999.
The decision to award attorney fees is within the sound discretion of the trial court, and such award will not be disturbed on appeal unless the court abused its discretion in making the award. Board of County Commissioners v. Eason,
A claim is frivolous if the proponent has no rational argument to support the claim based on the evidence or the law. A claim is groundless if there is no credible evidence to support the allegations in the complaint. Board of County Commissioners v. Eason, supra.
A. Parkers Attorney's Appeal
The Osthoffs and Merrills contend that even if we reverse the awards of attorney fees against the Parkers, we must affirm the awards against their attorney because her name was not on the notice of appeal, and she did not file a separate notice of appeal. We disagree.
Until recently, divisions of this court have held that where a trial court awards attorney fees against a party and the attorney jointly and severally, the attorney could not appeal the award unless the attorney was named on the notice of appeal or filed a separate notice of appeal. See, eg., Maul v. Shaw,
B. Osthoffs' Attorney Fees
The Parkers and their attorney contend the trial court erred in awarding attorney fees against them and in favor of the Os-thoffs. We agree.
Here, relying on Engel v. Engel,
We now reverse the trial court's award of attorney fees in favor of the Osthoffs because, as discussed above, the Parkers claims regarding the wheat crop were meritorious, at least in part. See In re Marriage of Paul,
Further, we conclude the trial court's reliance on Emgel was misplaced. The court concluded that because the Parkers' claims against the Osthoffs did not survive a motion to dismiss, it was required to award attorney fees to the Osthoffs. However, the Engel court held that a claim is groundless "if the allegations of the complaint, while sufficient to survive a motion to dismiss ... are not supported by credible evidence at trial." Engel v. Engel, supra,
- C. Merrills® Attorney Fees
After a bench trial, the court further concluded that because the Parkers' claims against the Merrills lacked substantial justification, the Merrills were also entitled to an award of attorney fees. As previously discussed, the Parkers' claims against the Mer-rills did not lack substantial Justification, and thus the trial court also abused its discretion in awarding attorney fees in favor of the Merrills and against the Parkers and their attorney. See In re Marriage of Paul, su-pro.
D. Appellate Attorney Fees
Based on the above analysis, the Merrills and the Osthoffs are not entitled to attorney fees for pursuing this appeal.
VI Garnishment
The Parkers further contend the trial court erred when it issued a writ of garnishment in favor of the Osthoffs before a final judgment had been entered pursuant to C.R.C.P. 54(b). We agree that a writ of garnishment should not have been issued, but for a different reason.
Here, the writ of garnishment was issued for funds owed by the Parkers and their attorney pursuant to the trial court's award of attorney fees in favor of the Osthoffs. Because we have determined that the trial court improperly awarded attorney fees against the Parkers and their attorney, we do not need to decide whether the court erred in issuing the writ of garnishment before it had entered a final judgment.: Rather, we conclude that any funds garnished as a result of the improper attorney fee award shall be released from the court registry and returned to the Parkers and their attorney.
VII. Conclusion
Because of this disposition, we do not address the remaining arguments raised by the parties.
In sum, we affirm the trial court's dismissal of FSA and the court's refusal to remove