Court Opinion

ID: 5167448
Source: CourtListenerOpinion
Date Created: 2022-01-02 03:50:39.370361+00
Date Added: 2024-06-11T08:25:55.607469
License: Public Domain

Judge NEY
dissenting.
The majority concludes that it is compelled to apply the holding in Bray v. Trower, 87 Colo. 240, 248, 286 P. 275, 278 (1930) which states: “[S]ince the two trust deeds are of equal dignity and importance in this one respect, Emery v. Ward, [68 Colo. 373, 191 P. 99 (1920) ], is not in point, and the recording statute governs.” (phrase emphasis supplied) In my view, this statement does not control under the circumstances here; thus, I dissent.
In Bray, there was alleged fraud and lack of notice to the parties. Because the court determined that the priority of the purchase money mortgages was governed by the recording statute, it did not address priority between a vendor and third party purchase money mortgage.
Here, however, it is undisputed that all parties had actual notice of both purchase money mortgages and there was no allegation of fraud. Therefore, the facts here are distinguishable from those in both Emery v. Ward, and Bray v. Trower. I conclude that the priority between vendor and third party purchase money mortgages in the sale of real estate, absent fraud and lack of notice, is an issue of first impression in this state.
A.
Emery v. Ward, supra, involved a purchase money mortgage and a prior judgment lien. The court recognized the special nature of a purchase money mortgage, but did not address the priority between two purchase money mortgages. Therefore, although the logic of Emery may be helpful to an analysis of purchase money mortgage law, it is not dispositive of the issue presented here.
B.
A close reading of Bray reveals that the court did not apply the rationale of Emery because Emery did not involve two purchase money mortgages created in the same transaction. The “one respect” in which the Bray purchase money mortgages were of equal importance and dignity refers to the fact that they were both purchase money mortgages created in the same transaction, unlike the inequality of a judgment lien and purchase 'money mortgage as in Emery.
Because fraud and lack of notice were determinative factual issues in Bray v. Trow-er, the supreme court resolved that the recording statute governed the priority. It disposed of the case on this issue and did not reach the issue of the priority of two purchase money mortgages, created in the same transaction, without fraud or lack of notice. My reading of Bray does not compel me, as it did the majority, to apply the holding of Bray v. Trower to the facts in the present case.
C.
A purchase money mortgage given to a vendor of real estate, in the absence of a *184contrary intent of the parties to it and subject to the operation of the recording acts, has priority over a purchase money mortgage on that real estate in favor of a person who is not its vendor. See Restatement (Third) of Property-Mortgages § 7.2(c)(1997).
I conclude that a vendor and third-party purchase money mortgage are not of equal status. The former provides the seller with security for the unpaid balance of the purchase price of the sold land. Alternatively, a third-party’s purchase money deed of trust provides a third-party cash lender with security for its loan.
The priority of the security given to vendor who receives a purchase money mortgage was determined by the supreme court in Chambers v. Nation, 178 Colo. 124, 128, 497 P.2d 5, 7 (1972):
[I]n any purchase money security agreement the title to the property which is the subject matter of the agreement never rests with the purchaser in an unencumbered state. The purchaser never acquires a title which is completely free of the vendor’s security interest, and, ... the property does not really ‘belong’ to him, except in an equitable sense. It follows, then, that the [third party’s] lien ... could not and did not attach to [vendor’s] purchase money security interest in the personal property involved here, (emphasis supplied)
From my reading of Chambers, I conclude that where a buyer gives the seller a deed of trust at the same time the buyer receives the deed, the title is never unencumbered. Thus, the third-party lien is not of equal priority with the vendor’s. Where all parties have actual knowledge of the transactions, therefore, the order of recordation of the deeds of trust has no effect on their relative priority. See Fecteau v. Fries, 253 Mich. 51, 234 N.W. 113 (1931).
Although the purchase mortgages in Chambers were chattel mortgages, the supreme court has rejected a distinction between real estate and chattel mortgages and has applied the simultaneous act doctrine to both. See Robinson v. Wright, 90 Colo. 417, 9 P.2d 618 (1932) and Bank v. Legler, 142 Colo. 333, 350 P.2d 1059 (1960).
Applying these principles to the facts in this case, I conclude that when the buyers executed the note to ALH, secured by the deed of trust, title never rested unencumbered in buyers, and therefore, the Bank’s deed of trust could not have priority over ALH’s deed of trust.
Therefore, I would follow the lead of the other jurisdictions that have adopted the reasoning of Restatement (Third) of Property § 7.2, and would affirm the trial court.