First Nаtional Bank of Southglenn, a national banking corporation v. Energy Fuels Corporation, a Colorado corporation
No. 79SC139
Supreme Court of Colorado
September 15, 1980
Rehearing denied November 3, 1980
618 P.2d 1115
Sharp and Black, P.C., Mary Jane Simmons, for respondent.
En Banc.
JUSTICE ERICKSON delivered the opinion of the Court.
We granted certiorari to review the court of appeals’ decision in Chatfield Bank v. Energy Fuels Corp., et al., 42 Colo. App. 233, 599 P.2d 923 (1979). The court of appeals interpreted the redemption statute,
Ben and Kathleen Pickering owned residential real property in joint tenancy. The respondent, Energy Fuels Corporation (Energy Fuels), held a judgment lien against Ben Pickering. Subsequently, Ben and Kаthleen Pickering executed a second deed of trust to Chatfield Bank and a third deed of trust to the petitioner, First National Bank of Southglenn (Southglenn Bank).
The redemption issue was triggered when the Pickerings defaulted on a first deed of trust, and the holder of the deed of trust foreclosed. Energy Fuels, Chatfield Bank, and Southglenn Bank filed timely notice of their intent to redeem the real рroperty, and deposited with the public trustee the required sums to effect redemption. The public trustee concluded that Energy Fuels had the first right to redeem the entire property because its judgment lien was filed first. Chatfield Bank, followed by Southglenn Bank, was entitled to the subsequent redemption rights in the public
As a result, Chatfield Bank filed suit in the district court to restrain Energy Fuels’ attempt to redeem Kathleen Pickering‘s interest in the property ahead of Chatfield Bank and Southglenn Bank. The district court held that Energy Fuels’ right to redeem was limited to the undivided interest in the property belonging to Ben Pickering. The district court further found that Chatfield Bank, followed by Southglenn Bank, held the first right to redeem Kathleen Pickering‘s interest in the real property.
The court of appeаls reversed the district court, holding that Energy Fuels had priority to redeem the entire property because its judgment lien was filed first. The court of appeals also held that Chatfield Bank and Southglenn Bank must pay Energy Fuels the amount of the judgment debt owed by Ben Pickering if they sought to redeem the property.
We hold that Energy Fuels only possesses the first right to redeem Ben Pickering‘s undivided interest in the property and that Southglenn Bank may redeem Kathleen Pickering‘s undivided interest without paying Ben Pickering‘s debt to Energy Fuels.1 In concluding that Energy Fuels had no lien prior to Southglenn Bank on Kathleen Pickering‘s undivided interest, we rely on the language and purpose of the redemption statute.
As a judgment creditor of Ben Pickering, Energy Fuels possessed the right to file a lien against his property.
Southglenn Bank holds a right to redeem the real property because of the debt owed jointly by the Pickerings. Energy Fuels contends that Southglenn Bank must pay Energy Fuels thе full amount of its lien held against Ben Pickering‘s interest in the real property to comply with the redemption statute. The conclusion urged by Energy Fuels contradicts the plain language of the statute.
The redemption statute requires a junior lienor to pay all liens “prior to his own” held by prior redeemers before redeeming the property.
When a joint tenant severs the tenancy by conveying his interest without the consent of the other joint tenants, he causes the person acquiring his interest to become a tenant in common with the remaining tenants. Id. The same result occurs when the interest of a joint tenant in real property is subject to execution and sale by a judgment creditor. 4A Pоwell on Real Property ¶618 at 676 (1979). The joint tenancy is severed by operation of law by the execution sale and the purchaser becomes a tenant in common with the remaining tenants. See 2 American Law of Property § 6.2 at 10 (1952). After the execution sale, the property may be partitioned.
“The individual interest of one joint tenant is subject to levy upon execution against him. While interest of a joint tenant is subject to levy, it is not severed until sale. Such interest may be sold without making the other coparceners parties to the action. The levy and sale operate as a severance of the joint tenancy, and the purchaser at the sale becomes a tenant in common with the other owners.”
4 Thompson on Real Property, supra, § 1780 at 37-39. The real property interest of two joint tenants cannot be used to satisfy the judgment creditor of one joint tenant.
Even though the Pickerings owned real property in joint tenancy, Kathleen Pickering‘s interest could not be used to satisfy Ben Pickering‘s debt. If the Pickerings had not defaulted on their first deed of trust, Energy Fuels could only enforce its lien through a judicial sale and could only cause Ben Pickering‘s interest to be sold. The purchaser at the sale would then become а tenant in common with Kathleen Pickering. See
Energy Fuels relies on Walker v. Wallace, 79 Colo. 380, 246 P. 553 (1926), which held that a judgment creditor of one of two tenants in common of land had the right to redeem the entire property.4 While Walker provides some guidance for our decision, there are important factuаl distinctions. The applicable redemption statute in 1926 was markedly different from
The policy underlying statutory redemption supports our conclusion. In Walker v. Wallace, supra at 382, we stated that, “a liberal construction is to be given the statute allowing redemption, to the end that all property of a debtor may pay as many debts as possible.” The statute seeks to benefit both debtors and creditors by reducing the property owner‘s debt while satisfying every possible creditor through the continual redemption of the same piece of real property. As in Walker, we seek to insure that as many debts as possible are paid by allowing both Energy Fuels and Southglenn Bank to redeem the real property according to their respective liens.
Our approach furthers this policy by allowing both Ben and Kathleen Pickering to reduce their joint and separate debts while enabling their creditors to partially satisfy their claims. Otherwise, Kathleen Pickering would be severely prejudiced because her creditor would be forced to pay off Ben Pickering‘s debt before collecting her debt. The court of appeals decision detracts from this policy by allowing Kathleen Pickering‘s property to be used to satisfy Ben Pickering‘s debt while her debt remains unpaid.
Accordingly, we hold that Energy Fuels may redeem Ben Pickering‘s interest in the real property and that Southglenn Bank may redeem Kathleen Pickering‘s interest in the property.
Judgment reversed, and cause remanded to the Colorado Court of Appeals with directions to reinstate the judgment of the District Court of Arapahoe County.
CHIEF JUSTICE HODGES and JUSTICE LEE do not participate.
JUSTICE LOHR dissenting:
The majority construes
The facts are stated in the majority opinion.
The right of redemption from a real property foreclosure sale is purely statutory. Walker v. Wallace, 79 Colo. 380, 246 P. 553 (1926). Thus, we must look to the statute to determine the characteristics of that right. The amount to be paid to effect redemption is specified:
“[The redeeming encumbrancer or lienor] may redeem . . . by paying all redemptiоn amounts theretofore paid with interest and the amount of all such liens [liens used to effect prior redemptions] with interest prior to his own . . . .” (Emphasis added.)
The redemption amounts include “the sum for which the property was sold, with interest from the date of sale at the rate specified in the original instrument, together with any taxes paid or other proper charges аs now provided by law, . . . .”
The clear prescription of the amount to be paid removes any ambiguity in the term “liens . . . prior to his own.”
For many years we have recognized that the holder of a judgment lien on an undivided interest in real property may redeem the entire property from a sale in foreclosure of a prior lien on the entire property. Moreover, he must redeem the entire property if he is to redeem at all; partial redemption is not permitted. Walker v. Wallace, supra; see Chain O‘Mines, Inc. v. Williamson, 101 Colo. 231, 72 P.2d 265 (1937); Leach v. Torbert, 71 Colo. 85, 204 P. 334 (1922); Bailey v. Erny, 68 Colo. 211, 189 P. 18 (1920). In Walker v. Wallace, supra at 384, we stated that, under the statute then in effect, “that property which has been sold in an execution sale in its entirety or en massе, if redeemed at all, must be redeemed en masse.”2 79 Colo. 380, 384, 246 P. 553, 554 (1926). We went on to hold: “As Walker was obligated to pay, if he redeemed, the entire amount for which the land had been sold, together with interest, and as there is no provision in our statute for a redemption at all except by payment of the entire sum, and not a moiety of that sum, for which the land was sold at the sale redeemed from, it follows necessarily that he may redeem, if at all, in whole only. To the same effect is Martin v. Sprague, 29 Minn. 53, 11 N.W. 143 (1882); O‘Brien v. Krenz, 36 Minn. 136, 30 N.W. 458 (1886); Sharpe v. Baker, 51 Ind. App. 547, 571, 96 N.E. 627, 99 N.E. 44 (1911).” 79 Colo. 380, 385, 246 P. 553, 554-5 (1926). See F. Stork and D. Sears, Colorado Security Law 218 (1955). Changes in the statutes since the cited cases were decided have not extended to authorization of partial redemption.
Although statutory content governs the results of statutory redemption cases, it is worthy of note that the general rule is “that a mortgage is an entire thing, and must be redeemed as such, and that the mortgagee cannot be compelled to divide his debt and his security.” 9 G. Thompson, Commentaries on the Modern Law of Real Property 745 (1958); see 52 Mich. L. Rev. 312 (1953); 55 Am. Jur. 2d Mortgages § 886 (1971); 59 C.J.S. Mortgages § 834 (1949).
The majority correctly points out that to require First National Bank of Southglenn to pay the amount secured by Energy Fuels’ lien on Ben Pickering‘s interest as a condition to redeeming from the sale of Kathleen Pickerings’ interest utilizes Kathleen Pickering‘s property interest to reduce Ben Pickering‘s debt. However, the construction adopted by the majority leads to other problems not raised as issues in this case. It
In no area of the law are certainty and prеdictability more important than in the law of real property. Numerous and important commercial transactions occur daily based upon the predictability of legal consequences of documents and relationships. The statute which we construe in this case does not contemplate partial redemption. In electing to prohibit partial rеdemption, the legislature had conflicting policies and interests to evaluate. Their choice is clearly expressed, and is confirmed by case law of long standing. Walker v. Wallace, supra. I would not warp the statute in an effort to avoid a result which may not be fully equitable to all parties in this case.
I would affirm the judgment of the court of appeals.