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Fleet Real Estate Funding Corp. v. Koch
Citations: 805 P.2d 1206; 15 Brief Times Rptr. 87; 1991 Colo. App. LEXIS 24; 1991 WL 10273Docket: 89CA2115
Court: Colorado Court of Appeals; January 30, 1991; Colorado; State Appellate Court
Doris Koch appealed a trial court judgment that declared her secured interest in certain real property junior to and extinguished by the foreclosure of a superior deed of trust held by Fleet Real Estate Funding Corporation. Koch and Donald Martin purchased the property as tenants in common and simultaneously granted Future Funding, Inc. (FFI) a deed of trust as repayment for the purchase money. Koch later secured her loan to Martin with a deed of trust against his 50 percent interest in the property, recorded on April 29, 1985. The recorded co-financing statement indicated that FFI's deed of trust had priority over Koch's. After default on the first deed of trust, Fleet, as successor to FFI, initiated a public trustee's sale. Koch received notice of the sale and had the right to redeem but did not do so, leading to Fleet obtaining a public trustee's deed. Fleet filed an action to quiet title, which resulted in the trial court affirming Fleet's title as paramount and extinguishing Koch's interest. Koch argued that Fleet’s public trustee's sale did not terminate her interest because her deed of trust was recorded before Fleet's, referencing Colorado statute 38-39-110, which states that a foreclosing lienor's title will be free of subsequent liens after the redemption period. However, the court found no merit in this argument, citing Colorado statute 38-35-109(1), which prioritizes recorded interests unless the party claiming a prior interest had no notice of the superior unrecorded instrument. Koch, as an obligor on the Fleet deed of trust, acknowledged that Fleet’s interest was intended to be superior. The court concluded that the timing of the recordation did not alter the priority of Fleet's deed of trust. Koch argues that the language of section 38-39-110 conflicts with the recording statute. Courts must harmonize conflicting statutes to fulfill their purposes; section 38-39-110 aims to ensure that titles acquired at foreclosure are free from technical defects based on record title. Section 38-35-109(1) establishes general record priorities but allows actual notice to take precedence over recorded notice in certain circumstances. The phrase "liens and encumbrances recorded or filed subsequent" in 38-39-110 is interpreted to exclude superior liens not recorded when actual or imputed notice exists. This interpretation allows an innocent encumbrancer to obtain good title while preventing a property interest holder from acquiring superior title contrary to their knowledge. If a later-filed encumbrance is intended by agreement to be superior to an earlier one, a title obtained through a public trustee's deed by someone with actual notice remains subject to the first recorded interest. The court dismisses Koch's other arguments as unmeritorious and denies Fleet's request for attorney fees, affirming the judgment. Judges Pierce and Criswell concur.