12 Colo. App. 24 | Colo. Ct. App. | 1898
This record presents a sharply defined controversy between these parties, each of whom asserts a priority of lien by trust deed on the same property. The bank’s security antedates Kenney’s by about four years and a half, yet Kenney insists that he has the superior claim because of an attempted and fraudulent foreclosure of the first security by the trustee.
The arguments of counsel are almost wholly based on their conflicting theories respecting the effect of an indorsement of commercial paper secured by a deed of trust and the equity of a second lienor which it is said springs up and becomes superior when the holder of the first note fails to spread on the county records some transfer which shall give to the public notice of his rights.
We shall not attempt to resolve all phases of the proposition nor to reach the logical conclusions which would per
In 1889 the Empire Land & Canal Company held title to a part of section 18, township 36, range 10 east. This company likewise owned a canal which supplied water to irrigate this and other lands. On the 7th of December the corporation gave its note to the Colorado Securities Company for $3,500, due the 1st of December, 1894, with interest at seven per cent. To secure this note the canal company gave a deed of trust on the land and convej'ed by an independent instrument five water rights subject to certain conditions. Henry J. Aldrich was the grantee in the trust deed and took title for the benefit of the beneficiary. He was at this time president of the Colorado Securities Company and acted for it and in its behalf. In 1890 the securities company borrowed $5,000 of the Jefferson County Bank, a corporation doing business in Golden. To secure the payment of this note, the company indorsed the note of the Empire Land & Canal Company, wrote a guarantee on the back of it, and delivered it to the bank. From time to time some payments were made by the securities company on their note and at the time of the commencement of this suit $3,400 was due on the four notes then outstanding which were secured by the indorsement of the other paper. No further recital of the situation, debt, and claim between the securities company and the bank is necessary either to the decision of the case or to the apprehension of the litigation. The note and the trust deed were delivered to the bank and remained in its possession up to the time of the trial. In May, 1894, Aldrich in the execution of a fraudulent scheme attempted to foreclose this trust deed- given by the Empire Land & Canal Company. The note had not matured and the bank did not request Aldrich to enforce the security. What he did was in the execution of his fraudulent purpose, without authority of the holder of the note, and so far as the record discloses, without the request or direction of the secu
The proof of the circumstances attending the sale, the execution and delivery of the deed, its alteration, and the substitution of Duffy’s name in the instrument, with the evidence respecting His connection with the transaction was objected to by the appellant. The exception is urged as error. We have grave doubts whether the objection ought to be available under the circumstances in which it was taken and preserved. The proof was offered at the beginning of plaintiff’s case. Kenney objected because he was an innocent purchaser and could not be prejudiced by the fraud
While xve are alxvays averse to deciding an absolutely nexv
There is no provision in our statute which requires” or compels, or which would even permit the record of such an instrument. The note is secured by the trust deed. The beneficiary, however, who is the payee of the paper has in no general or accurate sense an interest in the title. The legal title is in the trustee for the beneficiary’s benefit. It passes entirely out of the trustor and into the trustee who holds the legal title for the benefit of the parties in interest. If
If the premise be true, it would follow that even though the bank had procured from the securities company an assignment and had put it on record, it would not have given notice to the subsequent lienor. The bank could not thus have protected its title but would have had still to rely on the right and the interest acquired by the indorsement, and the invalidity of the acts of the trustee in his attempted foreclosure. In many states it has been holden that the mortgagee cannot release the security to the prejudice of the holder of the note who holds by indorsement before maturity. This has been adjudged in states where assignments of mortgages may be recorded. Ogle v. Turpin, 102 Ill. 148; Barbour v. Scottish-American Mortgage Co., 102 Ill. 121; Harris v. Cook, 28 N. J. Eq. 346; Black et al. v. Reno et al., 59 Fed. Rep. 917; Hutchings v. Clark, 64 Cal. 228; Stanley v. Valentine et al., 79 Ill. 544; Lee v. Clark, 89 Mo. 553; Brown v. Henry, 106 Pa. St. 262; Hull v. Diehl et. al., 52 Pac. Rep. 782.
Further and beyond all this, 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
The application of the principle is very simple. The original note was payable to the order of the Colorado Securities Company. It was secured by a trust deed on certain lands, executed by the then owner of the property and the makers of the note. The note was transferred before maturity to the Jefferson County Bank which was the holder for value and an innocent taker. The note was not due until the 1st day of December, 1894. By the terms of the instrument the only authority possessed by the trustee was one to advertise and sell the property conveyed to him on the nonpayment of the note at maturity, or on the nonpayment of the interest, when, “ at the request of the holder,” he might sell the property for the unpaid interest and the principal which at the option ■ of the holder would then become due. Of this power and the limits of it Kenney had constructive notice. He was advised by the deed that to make good title through a sale, the trustee could only act on the maturity of the paper unless there was a default in the payment of interest when on the request of the holder who should declare the whole sum due he might sell. Of this much Kenney had notice. According to the decision in the 4th Wheaton, Kenney was bound at his peril to ascertain either that the note had matured and that the trustee sold to enforce it, or that there were unpaid installments of interest, and the holder of the note had requested
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.
Regardless of all these considerations and of the points for which the appellant contends, we find enough in the record to entirely defeat Mr. Kenney’s claim of title. When the property was sold the Colorado Securities Company became the purchaser. This is under the assumption that the sale did occur, and that on behalf of the securities company, Aldrich bid it in. If we may be permitted to assume for the purpose of the discussion that the sale was valid and regular, and it is only on that theory that Mr. Kenney can succeed, then the securities company was the purchaser at the sale. Duffy was not. He was not there. The property was never struck off to him. He never paid any part of the consideration expressed hi the deed nor did he bid at the sale. So far as he and the Colorado Securities Company are concerned he never got any title. Having got none he could convey none. After the sale, the deed from Aldrich, the trustee, to the Colorado Securities Company was executed. It was signed and acknowledged and we assume, and to our satisfaction the evidence demonstrates, that it was recorded. After the sale and the execution of the deed whatever may have theretofore been the situation, Aldrich’s authority as a trustee was at an end. He was no longer a trustee for the parties or either of them. Whatever he did afterwards with reference to
Under these circumstances we are quite of the opinion on either basis that the decree of the court which established the title of the Jefferson County Bank was right, based on correct principles, and it will accordingly be affirmed.
. Affirmed.