Valley Bank of Frederick v. Rowe

851 P.2d 267, 17 Brief Times Rptr. 403, 1993 Colo. App. LEXIS 65, 1993 WL 67671
CourtColorado Court of Appeals
DecidedMarch 11, 1993
DocketNo. 92CA0221
StatusPublished
Cited by4 cases

This text of 851 P.2d 267 (Valley Bank of Frederick v. Rowe) is published on Counsel Stack Legal Research, covering Colorado Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Valley Bank of Frederick v. Rowe, 851 P.2d 267, 17 Brief Times Rptr. 403, 1993 Colo. App. LEXIS 65, 1993 WL 67671 (Colo. Ct. App. 1993).

Opinion

Opinion by

Judge PIERCE.

In this action to quiet title, defendants, Jerald L. and Geraldine S. Rowe, appeal from a summary judgment entered in favor of plaintiff, Valley Bank of Frederick (bank). We reverse and remand.

Richard L. and Leslie M. Sorenson borrowed money from the Farmers Home Administration (FmHA) for the purchase of a 41-acre farm, secured by a deed of trust on the farm and 15 shares of water stock issued by the Ish Ditch Company, which was owned or operated by the Boulder and Larimer County Irrigating and Manufacturing Ditch Company. The water stock represented all of the water used by the farm.

On February 8, 1978, the Rowes purchased the farm from the Sorensons and agreed to assume the Sorensons’ FmHA loan. The Sorensons and the FmHA indorsed the water stock certificate to the Rowes on February 9, 1978, and subsequently the ditch company issued a new certificate solely in the name of the Rowes. In order to obtain purchase money for the farm, the Rowes executed a promissory note in favor of the Sorensons in the amount of $10,000, pledging the water stock as collateral. The Rowes later paid the note to the Sorensons in full and obtained a release.

In February 1981, the Rowes borrowed approximately $100,000 from the bank, secured by a second deed of trust on the farm. In lieu of foreclosure and deficiency, the Rowes conveyed the farm to the bank by quitclaim deed in August 1982. Neither the second deed of trust nor the quitclaim deed specifically referred to the water stock or to water rights in the farm.

In October 1983, the Rowes defaulted on the note to the FmHA, whereupon the FmHA initiated foreclosure proceedings. The FmHA purchased the farm at a public trustee sale and later sold its interest in the farm to the bank. The public trustee’s certificate of sale listed both the farm and the water stock.

The Boulder and Larimer County Irrigating and Manufacturing Ditch Company refused to issue a new water stock certificate in the name of the bank without the Rowes’ indorsement. As a result, the bank brought this action to quiet title to the water stock in December 1990.

In July 1991, the bank filed a motion for summary judgment. At that time, the Rowes’ attorney was temporarily suspended from the practice of law. Consequently, the Rowes, unaware that a summary judgment motion had been filed, filed no response, and the trial court entered summary judgment in favor of the bank on October 22, 1990.

Upon learning of the summary judgment, the Rowes obtained new counsel and, in November 1990, filed a motion for relief from judgment under C.R.C.P. 60(b). However, finding that the Rowes did not have a meritorious defense against the bank’s claim, the trial court denied the motion.

I.

On appeal, the Rowes’ contend that the trial court erred in refusing to grant their motion for relief from judgment under C.R.C.P. 60(b). We agree.

Although the decision to relieve a party from a judgment or final order under C.R.C.P. 60(b) lies within the sound discretion of the trial court, such decision may be overturned if abuse of that discretion is shown. See Johnston v. S.W. Devanney & Co., 719 P.2d 734 (Colo.App.1986).

[269]*269A court may relieve a party from any final order or judgment for mistake, inadvertence, surprise, excusable neglect, or any other good cause justifying relief from the judgment. C.R.C.P. 60(b). In order to warrant relief from a judgment, a party setting forth such “good cause” must also allege a defense which is prima facie meritorious. Henritze v. Borden Co., 163 Colo. 589, 432 P.2d 2 (1967).

A.

The Rowes contend they alleged “good cause” under C.R.C.P. 60(b) to have the summary judgment against them set aside because of malfeasance by their attorney. We agree.

The ordinary negligence of an attorney may be imputed to his client, see Middleton v. Stavely, 124 Colo. 88, 235 P.2d 596 (1951), and generally such negligence does not constitute “excusable neglect” which would justify relief from a judgment. Guynn v. State Farm Mutual Auto Insurance Co., 725 P.2d 1162 (Colo.App.1986). However, the gross negligence of counsel will not be imputed to the client and may be considered excusable neglect entitling the client to relief from judgment. Dudley v. Keller, 33 Colo.App. 320, 521 P.2d 175 (1974).

Here, the trial court did not reach the issue of good cause for relief from the summary judgment. Nevertheless, we rule that the Rowes alleged sufficient “good cause” to set aside the summary judgment. In their motion for relief, the Rowes alleged that they were unaware that their attorney had been suspended from the practice of law. The bank’s motion for summary judgment was filed while the suspension was in effect, and the Rowes received no notice of the motion or hearing. Upon learning of the summary judgment, the Rowes obtained new counsel and promptly filed a motion for relief from the judgment.

Counsel’s failure to act or to inform the Rowe’s of the situation constitutes gross negligence, and absent a showing of negligence on the part of the Rowes, there is sufficient good cause to set aside the judgment against them. See Dudley v. Keller, supra.

B.

Next, the Rowes contend that the trial court erred in finding that they lacked a meritorious defense to the bank's claims. They argue that they did not intend to convey the water stock to the bank under the second deed of trust .or quitclaim deed, and therefore, the bank did not obtain title to the water stock under the “appurtenances” clause of the quitclaim deed. Alternatively, they contend that the FmHA indorsed the water stock to them, and therefore, the water stock was released from the original deed of trust and could not have passed to the bank following the foreclosure sale.

We agree that these allegations, if established at trial, would constitute a meritorious defense to the bank’s claims. Therefore, we hold that the trial court abused its discretion in denying the Rowes’ motion for relief from judgment.

1.

Relying on Kinoshita v. North Denver Bank, 31 Colo.App. 227, 501 P.2d 1337 (1972), aff’d, 181 Colo. 183, 508 P.2d 1264 (1973), the trial court concluded that, although neither the second deed of trust nor the quitclaim deed given to the bank specifically described the water stock, the water stock was appurtenant to the land and therefore was transferred to the bank along with the land. We disagree.

In Kinoshita, a landowner defaulted on a bank loan for which he had pledged certain property and water stock as collateral. The deed of trust specifically described the water stock and the stock certificates, together with the stock’s powers executed in blank, were delivered to the bank.

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Bluebook (online)
851 P.2d 267, 17 Brief Times Rptr. 403, 1993 Colo. App. LEXIS 65, 1993 WL 67671, Counsel Stack Legal Research, https://law.counselstack.com/opinion/valley-bank-of-frederick-v-rowe-coloctapp-1993.