First National Bank v. Energy Fuels Corp.

618 P.2d 1115, 200 Colo. 540, 1980 Colo. LEXIS 740

• Court: Supreme Court of Colorado
• Decided: September 15, 1980
• Docket: 79SC139
• Status: Published

Opinions

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, section 38-39-103(1), C.R.S. 1973, as granting to a judgment creditor of one joint tenant a right to redeem the entire property from a foreclosure sale ahead of lienors who held deeds of trust which were filed after the judgment lien but were executed by both joint tenants on the entire property. We reverse, and remand to the court of appeals with directions.

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 Kathleen 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 property, 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 trustee’s opinion.

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 appeals 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.

Section 38-39-103(1), C.R.S. 1973, provides the relevant procedure for lienors to redeem real property after public sale. A creditor holding the senior lien “on the sold premises or some part thereof subsequent to the lien upon which the sale was held may redeem” the real property by reimbursing the purchaser of the property. Id. (Emphasis added.) Subsequent lienors may also redeem by paying the previous redeemer “all redemption amounts theretofore paid with interest and the amount of all such liens with interest prior to his own . ... Id. (Emphasis added.)²

As a judgment creditor of Ben Pickering, Energy Fuels possessed the right to file a lien against his property. Section 13-52-102(1), C.R.S. 1973. A judgment lienor is entitled to redeem property from a public trustee sale. Patterson v. Serafini, 187 Colo. 209, 532 P.2d 965 (1974). According to the plain language of section 38-39-103(1), Energy Fuels, possessing a lien on “some part” of the sold premises (Ben Pickering’s interest), holds the first right to redeem Ben Pickering’s interest in the real property. If Energy Fuels had been the only lienor seeking to redeem, or the only person with the right to redeem, it could redeem the whole property. Leach v. Torbert, 71 Colo. 85, 204 P. 334 (1922); Walker v. Wallace, 79 Colo. 380, 246 P. 553 (1926); Section 38-39-103(1), C.R.S. 1973. In this case, however, another lienor — Southglenn Bank — also has a first right to redeem an interest in the real property.

Southglenn Bank holds a right to redeem the real property because of the debt owed jointly by the Pickerings. Energy Fuels contends that South-glenn Bank must pay Energy Fuels the 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. Section 38-39-103(1), C.R.S. 1973. Section 13-52-102(1), C.R.S. 1973, states that a properly filed lien attaches to the real property of a judgment debtor.³ This statute, detailing the real property subject to execution, does not allow a judgment creditor of one joint tenant to enforce his claim against the property interest of the other joint tenant. See Ziegler v. Bonnell, 52 Cal.App.2d 217, 126 P.2d 118 (1942); Neyrey v. Cavallino, 316 So.2d 866 (La. App. 1975). With a judgment against Ben Pickering, Energy Fuels’ lien attached only to his undivided interest in the real property. Energy Fuels had no lien on Kathleen Pickering’s interest in the real property. Southglenn Bank’s lien, which secured a joint debt, attached to both Ben and Kathleen Pickering’s interests. Southglenn Bank held the only lien on Kathleen Pickering’s interest in the property. Therefore, we hold that no liens existed on Kathleen Pickering’s interest prior to Southglenn Bank, and Southglenn Bank may redeem her interest in the property withouf paying the amount of Ben Pickering’s debt to Energy Fuels.

Our decision is consistent with the law governing real property held in joint tenancy. Rights in real property held in joint tenancy are fixed and vested in the joint tenants at the time of the creation of the tenancy. In re Estate of Lee v. Graber, 170 Colo. 419, 462 P.2d 492 (1969); Smith v. Greenberg, 121 Colo. 417, 218 P.2d 514 (1950). A joint tenant cannot alienate, encumber, or transfer the interest of other joint tenants without their consent. Sullivan’s Estate v. Commissioner of Internal Revenue, 175 F.2d 657 (9th Cir. 1949). Until the joint tenancy is severed, each joint tenant owns an undivided interest in the real property as a whole. C. Smith, Real Property Survey 114 (1956). A joint tenancy is severed by destroying one of the four necessary unities of time, title, interest, and possession, either by operation of law, by death, or by the acts of one joint tenant without the consent of the other tenants. 4 Thompson on Real Property § 1780 (1976 Repl. Vol.).

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 Powell 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. Section 38-28-101, C.R.S. 1973. If the partition prejudices any interested party, a court may order the sale of the real property and each co-owner will receive their aliquot share of the sale price. Section 38-28-107, C.R.S. 1973. A judgment creditor must recognize that his rights against one joint tenant do not grant him the right to levy an execution against the other joint tenants.

“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 co-parceners 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 a tenant in common with Kathleen Pickering. See Carmack v. Place, 188 Colo. 303, 535 P.2d 197 (1975). Energy Fuels, as a judgment creditor, cannot obtain more through redemption than it could by execution, or by other means.

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 factual distinctions. The applicable redemption statute in 1926 was markedly different from section 38-39-103(1), C.R.S. 1973.⁵ Also, Walker concerned only one creditor seeking to redeem. This case involves competing lien-holders who each possess a superior lien on separate interests of real property held in joint tenancy.

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.

JUSTICE LOHR dissents.

CHIEF JUSTICE HODGES and JUSTICE LEE do not participate.

1 Chatfield Bank was the original plaintiff in this action, but only Southglenn Bank petitioned this Court for certiorari after the court of appeals decision. In this opinion, we only consider the respective redemption rights of Energy Fuels and Southglenn Bank, assuming that Chatfield Bank no longer intends to redeem.

2 Section 38-39-103(1), C.R.S. 1973, provides in full, that:

“If no redemption is made within the redemption period provided for in section 38-39-102, the en-cumbrancer or lienor having the senior lien, according to the records of the county clerk and recorder’s office of the county where the real estate is situate, on the sold premises or some part thereof subsequent to the lien upon which such sale was held may redeem within ten days after the expiration of the above redemption period by paying the amount required by section 38-39-102, and each subsequent encumbrancer and lienor in succession shall have and be allowed a five-day period to redeem, according to the priority of his lien, and may redeem within the five-day period allotted to him by paying all redemption amounts theretofore paid with interest and the amount of all such liens with interest prior to his own held by such persons as are evidenced in the manner required in this section or, if no encumbrancer or lienor prior to himself has redeemed, by paying the amount required in section 38-39-102.”

3 Section 13-52-102(1), C.R.S. 1973, states in full, that:

“All goods and chattels, lands, tenements, and real estate of every person against whom any judgment is obtained in any court of record, either at law or in equity, for any debt, damages, costs, or any other sum of money are liable to be sold on execution to be issued upon such judgment. The transcript of the docket entry of any judgment in the judgment docket, certified by the clerk, may be filed with the recorder of any county; and from the time of filing such transcript the judgment shall become a lien upon all the real property of such judgment debtor, not exempt from execution in such county, owned by him or which he may afterwards acquire until said lien expires. The lien shall continue for six years from the entry of judgment unless the judgment is previously satisfied.” (Emphasis added.)

4 We stated in Walker that, “property which has been sold in an execution sale in its entirety or en masse, if redeemed at all, must be redeemed en masse.” Walker v. Wallace, 79 Colo. at 384.

5 Section 5951, Compiled Laws of Colorado 1921 stated that the redeeming lienor must only pay “the amount of money for which said premises shall have been sold.” Section 38-39-103(1), C.R.S. 1973, requires this lienor to also pay the “amount of liens prior to his own.” This “prior to his own” language forms the basis of our decision and was not present in Walker.