Summary
ruling that a judgment lien creditor has priority over a person who holds only an equitable interest in the property
Summary of this case from Atlas Biologicals, Inc. v. KutrubesOpinion
No. 21955.
Decided January 8, 1968.
Action to quiet title to vacated portion of street. From a judgment quieting title in plaintiffs as to vacated portion of street subject to defendants' judgment lien, plaintiffs brought error.
Affirmed.
1. DEEDS — Builder — Conveyance — Trust Officer — Developer — Retention and Control — Delivery — Invalidity — Agents — Intent. Where builder of proposed apartment building executed warranty deed conveying certain lots to trust officer of bank at behest of real estate developer who acquired deed and who retained complete control over both deed and property, held, under such circumstances there was no valid delivery of deed from builder to trust officer by virtue of fact that builder had physically given such deed to developer, since both builder and trust officer were controlled agents of developer who never intended such deed to become operative as transfer of title until recorded.
2. MUNICIPAL CORPORATIONS — Builder — Conveyance — Trust Officer — Delivery — Recordation — Developer — Ordinance — Vacation — Street — Lots — Record Owner. Where builder of proposed apartment building at behest of real estate developer executed warranty deed conveying certain lots to trust officer of bank which deed was conveying certain lots to trust officer of bank which deed was neither delivered nor recorded at that time but which was retained by developer who subsequently recorded it after city council had enacted ordinance vacating portion of street fronting lots, held, under such circumstances, trial court properly held that effect of vacation ordinance was to vest disputed title to vacated portion in builder who was record owner at the time street was vacated.
3. JUDGMENT — Lien — Creditor — Same Footing — Purchaser in Good Faith — Tests. The lien of a judgment creditor stands upon the precise footing as that of an innocent purchaser or encumbrancer in good faith, subject to the same tests as to good faith and regularity generally.
4. VENDOR AND PURCHASER — Rights — Bona Fide — Unrecorded Deed — Interest — — Actual — Apparent. The right acquired by a bona fide purchaser of real estate without notice of an unrecorded deed are not measured by the actual interest of the seller in the land, but rather by his apparent interest.
5. Innocent — Negligent Encumbrancer — Suffer. As between the negligent encumbrancer and the innocent purchaser for value, the former must suffer.
6. JUDGMENT — Creditor — Filing of Transcript — Before Recording of Deed — Lien — Priority — Grantee. If before the recording of a deed a judgment creditor, without notice of the conveyance, files a transcript of his judgment, the lien of his judgment becomes superior to the rights of the grantee in the deed.
7. Vacated Portion of Street — Debtor — Builder — Recorded Lien — Correction Deed — Lots — Failure to Abolish. Reviewing court is of the view that title to vacated portion of street in question vested in judgment debtor, the builder of the proposed apartment building, when it became subject to judgment creditors' recorded lien on particular date; and a correction deed, executed by judgment debtor after the stated particular date and intended to include portion of vacated street with lots, did not abolish the lien.
8. MUNICIPAL CORPORATIONS — Record Title — Lots — Vacation of Street — Ordinance — Recording of Deed — Effect. Reviewing court is of the view that since record title to lots was in judgment debtor, the builder of the proposed apartment building, at time street was vacated pursuant to ordinance, recording of deed to lots after street vacation served to convey only the lots and not a portion of the already vacated street even though such deed was executed prior to the enactment of the municipal ordinance in question.
9. REFORMATION OF INSTRUMENTS — Prejudice — Judgment Creditor — Without Notice — Lien — Disputed Property. Reformation will not lie to the prejudice of a judgment creditor without notice who has a valid lien upon disputed property.
10. JUDGMENT — Creditor Without Notice — Lien — Debtor — Superiority — Third Party — Equitable Interests. A creditor who, acting in good faith and without notice of equitable interests, acquires a lien under the statutes against the apparent interest of his judgment debtor, acquires a valid lien superior to third party's equitable interests.
Error to the District Court of El Paso County, Honorable John F. Gallagher, Judge.
Eugene O. Perkins, for plaintiffs in error.
Robert W. Johnson, for defendants in error.
This controversy concerns a judgment lien asserted by the defendants in error, who were defendants in the trial court, in a vacated portion of Farragut Street located adjacent to Lots 9 and 10 (except the West 50 feet thereof) and Lots 11, 12 and 13, Block 28, East End Addition to the City of Colorado Springs.
We shall refer to that portion of Farragut Street in Colorado Springs adjoining the lots on their eastern boundary as the "street" or "vacated street."
The record disclosed that Everett Conover, the sole stockholder of plaintiff corporation, Sky Harbor, Inc., entered into an agreement in 1954 with R. C. Munro, Jr., concerning the acquisition and improvement of the lots prior to their transfer to Sky Harbor, Inc., one of the plaintiffs in error here. The two parties agreed in substance that Conover would purchase this property and place record title in Munro's name. Munro agreed to erect an apartment building on the site, and further agreed that upon its completion he would reconvey the improved property in exchange for other realty owned by Conover. Pursuant to this agreement, the lots were purchased in October 1954 and the deed to Munro was duly recorded. Shortly thereafter, Munro suffered financial difficulties which prevented his construction of the apartment building. Conover then excused Munro from his performance and thereupon approached Harold A. White, a trust officer of the Exchange National Bank in Colorado Springs, and requested White to replace Munro as nominal owner of the lots. White consented and, on December 6, 1954, Conover had Munro execute a warranty deed conveying the lots to White.
Neither Conover nor Munro delivered the latter's deed to White and unfortunately it was not recorded at that time. Instead, Conover acquired and retained exclusive possession of the Munro deed, recording it at a later time as hereafter appears. Conover, however, directed White to execute a deed conveying the lots to Conover, but neither of the parties intended this instrument to have any legal effect unless Conover chose to record it for his protection.
At the trial Conover testified that he had delayed recording Munro's deed to White because he anticipated that a second developer might appear, and that Munro could execute a new conveyance of the property to that developer. The first deed then would not be used. When Conover failed to discover such a suitable alternate grantee, he recorded the Munro deed to White on December 29, 1955. Concurrently, Conover recorded a new warranty deed from White, obtained two days previously, conveying the lots to Sky Harbor.
The record also discloses that on July 11, 1955, which was prior to White's execution of the deed to Sky Harbor and while Munro's deed to White remained unrecorded, the Colorado Springs City Council enacted an ordinance vacating the portion of Farragut Street fronting the lots described in the Munro and White deeds. The effects of this vacating ordinance was to vest to whoever were then the owners of lots abutting Farragut Street the title to the vacated roadway. C.R.S. 1953, 120-1-12(3).
Sky Harbor's difficulties arise out of the fact that in December 1961, the Jenners, without any actual notice on Conover's interest in the lots or vacated street, obtained a $5,258.44 judgment against Munro which they duly recorded on January 2, 1962, in the El Paso County records. The judgment thereupon became a lien upon all real property which the judgment debtor, Munro, the owned or thereafter acquired. C.R.S. 1953, 77-1-2.
Contending that White was the owner, the plaintiffs brought suit to quiet their title in the portion of the vacated street as against the Jenners' judgment lien. The trial court quieted title in the plaintiffs as to the vacated portion of the street subject, however, to the Jenners' judgment lien. From this judgment plaintiffs bring their writ of error asserting several grounds for reversal, none of which we find to be of merit for reasons hereinafter set forth.
The trial court's decree was based upon a finding that Munro's deed to White, although dated December 6, 1954, did not become legally effective until it was recorded which was after the enactment of the street vacation ordinance in July 1955.
[1, 2] Although it is urged by Sky Harbor that Munro constructively delivered his deed to White by physically giving it to Conover, such did not, under the facts in this case, constitute a valid delivery. This is so because the record discloses that both Munro and White were the controlled agents of Conover with the latter, according to the undisputed evidence, retaining complete control over both the deed and the property. It is clear that Conover at no time intended that Munro's deed to White would become operative as a transfer of title until Conover decided to record it. Therefore, title did not pass to White until December 1955. Barnes v. Spangler, 93 Colo. 254, 25 P.2d 732 (1933); Griffith v. Sands, 84 Colo. 456, 271 P. 191 (1928); McGowan v. Lockwood, 65 Colo. 264, 176 P. 298 (1918). And see 23 Am. Jr. 2d, Deeds, §§ 89 and 96. The trial court, in our view, properly held that the effect of the vacation ordinance was to vest the disputed title in Munro, who was the owner at the time the street was vacated. See C.R.S. 1953, 120-1-12.
[3-6] In Wedman v. Carpenter, 65 Colo. 63, 173 P. 57 (1918), this court stated:
"It is settled in this state that the lien of a judgment creditor stands upon the precise footing as that of an innocent purchaser or encumbrancer in good faith, subject to the same tests as to good faith and regularity generally. * * * It is well settled in this jurisdiction that the rights acquired by a bona fide purchaser of real estate, without notice of an unrecorded deed, are not measured by the actual interest of the seller in the land, but rather by his apparent interest. * * * As between the negligent encumbrancer and an innocent purchaser for value, the former must suffer. (Emphasis added.)
And in Fleming v. McFerson, 94 Colo. 1, 28 P.2d 1013 (1933), we stated:
"* * * if before the recording of the deed the judgment creditor, without notice of the conveyance, files a transcript of the judgment, the lien of his judgment is superior to the rights of the grantee in the deed. * * *
* * *
"In WESTERN CHEMICAL MFG. CO. VS. McCAFFREY, 47 Colo. 397, 107 P. 1081, (135 Am.St.Rep. 234) we said:
' Authorities are cited holding that a judgment lien does not prevail over prior equitable claims, and that it attaches to the actual, rather than to the apparent, interest of the judgment debtor. But these authorities are not from the appellate courts of this state, and in this jurisdiction a contrary doctrine prevails. * * * No resulting trust nor unrecorded deed can operate to defeat the right of a judgment creditor who has caused his judgment to become a lien by proper record, unless the creditor had notice of the trust or unrecorded deed at the time his lien attached.' * * *." (Emphasis and part in parentheses added.)
[7, 8] Here the title to a portion of the vacated street rested in Munro when it became subject to the Jenners' recorded lien in January 1962. Needless to say, a correction deed, executed by Munro after January 1962, did not abolish the lien. And, since in legal effect there was no deed outstanding, the recording of the original deed to White after the street vacation served to convey only the lots and not a portion of the already vacated street. See Morrissey v. Achziger, 147 Colo. 510, 364 P.2d 187 (1961).
[9, 10] In conclusion, we comment on the plaintiffs' contention that the trial court erred in refusing to grant reformation of the original Munro deed and to include within it the vacated street. Plaintiff, however, misconceives the applicable law in this regard. In this jurisdiction reformation will not lie to the prejudice of a judgment creditor without notice who has a valid lien upon disputed property. Wedman, supra. And a creditor who, acting in good faith and without notice of equitable interests, acquires a lien under the statutes against the apparent interest of his judgment debtor, acquires a valid lien superior to a third party's equitable interests. Fleming, supra, and Wedman, supra.
The judgment is affirmed.
MR. CHIEF JUSTICE MOORE, MR. JUSTICE HODGES and MR. JUSTICE KELLEY concur.