Court Opinion

ID: 5178165
Source: CourtListenerOpinion
Date Created: 2022-01-06 01:21:44.865687+00
Date Added: 2024-06-11T08:26:27.688980
License: Public Domain

JUSTICE COATS,
specially concurring.
€ 27 While I concur in the majority opinion and fully agree that we need not reach the issue of the negotiability of deeds of trust under Article 3 or Colorado's Uniform Commercial Code, in light of Justice Hood's alternate opinion urging the treatment of the deed of trust in this case as a negotiable instrument, I write separately to explain my own understanding of the controlling statutes.
28 I emphasize "controlling statutes" because I think it clear that the question whether a deed of trust referenced by, and securing a promise to pay contained in, a negotiable instrument is therefore to be treated as inseparable from that negotiable instrument itself, is first and foremost a matter of statutory interpretation. By contrast, Justice Hood would resolve the question on the basis of ancient interpretations of the common law and principles of equity,; and the decisions of two intermediate appellate courts still relying on pre-Uniform Commercial Code. precedent in their respective states. See Carnegie Bank v. Shalleck, 256 N.J.Super. 23, 606 A.2d 389, 400 (N.J.Super.Ct.App.Div.1992) (citing Magie v. Reynolds, 51 N.J. Eq. 113, 26 A. 150 (N.J. Ch.Div.1893)); Pitman Place Dev., LLC v. Howard Invs., LLC, 330 S.W.3d 519, 536 (Mo.Ct.App.2010) (citing Bellistri v. Ocwen Loon Serv., LLC, 284 S.W.3d 619, 623 (Mo.Ct.App.2009) (relying in turn on George v. Surkamp, 336 Mo. 1, 76 S.W.2d 368, 371 (1934))). Justice Hood relies primarily on the authority of an 1882 decision of the United States Supreme Court, sitting as an appellate court for one of its territoriee-the Territory of Colorado-rather than as the highest constitutional court in our federal system of government, and interpreting then-controlling principles of law and equity. See Carpenter v. Longan, 83 U.S. (16 Wall.) 271, 21 L.Ed. 313 (1872). While the view expressed in Carpenter had become accepted by a majority of the jurisdictions of this country by some point in the first half of the twentieth century, prior to the widespread adoption of the Uniform Commercial Code, a substantial minority of states offered compelling objections and remained unwilling to adopt it. See W.W. Allen, Annotation, Right of Holder of Negotiable Paper Secured by Mortgage or of Trustee in Mortgage to Protection as Regards Defenses Against Mortgage, 127 ALR. 190 (1940), Since the widespread adoption of the Commercial Code, the two examples cited by the majority appear to be isolated examples of states unselfconsciously continuing to rely on their pre-Code precedents.
$29 Although we have previously made clear that our adoption of the Uniform Commercial Code allows for the continued vitality of preexisting principles of law and equity only to the extent that they have not been displaced by the Code, and that "displacement," as that term appears in the Code, contemplates the abrogation of common law rules without requiring unequivocal, explicit reference to the doctrine in question, see Clancy Sys. Int'l, Inc. v. Salazar, 177 P.8d 1235, 1287 (Colo.2008), Justice Hood offers no explanation why the rule of Carpenter, even if we were to find it useful as a matter of policy, has not been displaced by the statutory scheme of the Code. And although the Code treats the age-old problem of the bona fide purchaser in its own way, through its own scheme of tightly interlocking concepts like the "negotiable instrument" and the "holder in due course," Justice Hood offers no explanation how the Code can be interpreted to allow for the treatment of a security document as a negotiable instrument, or how the legislature's distinctly separate treatment of real property interests, including mortgages and deeds of trust, can be reconciled with their conversion into commercial paper.
30 In perhaps the only case decided by this court concerning the effect of referencing a deed of trust in a promissory note, we addressed the converse question: whether the note lost its character as a negotiable instrument by being collateralized by the mortgage. In Haberl v. Bigelow, 855 P.2d 1368 (Colo.1993), we answered that question with a resounding "no." Although, as the court of appeals noted below, we did not directly answer the question whether a deed of trust can, nevertheless, become a negotiable instrument by partaking in the character *285of the promissory note, our reasoning in Ha-berl could hardly be considered favorable,. In fact, our rationale in. Haberl necessarily implied that it cannot. For the very reason that a deed of trust, by definition, includes undertakings other than simply an unconditional promise or order to pay a fixed amount of money on demand or at a definite time, it cannot, in and of itself, be a negotiable instrument, a proposition with which Justice Hood clearly agrees. . If the deed of. trust were treated as an integral part of, or inseparable from, a promissory note for which it provided security, as Justice Hood would have it, the effect would necessarily be to strip the note of its character as a negotiable instrument rather than to turn the deed into a negotiable instrument. In combination with the deed of trust, the note would necessarily - state additional undertakings or instructions, and for that reason, if no other, fail to meet the statutory definition of a "negotiable instrument." .
{31 Apart from the fact that the Code's definition of "negotiable instrument" therefore necessarily displaces the "equitable" solution carved out in Corpenter, the legislature's choice to separately define "spurious liens," without including the defenses applicable to negotiable instruments, and to provide a specific, expedited process for having such liens declared invalid and removed further demonstrate its intent to draw a clear demarcation between negotiable instruments and liens. Part 2 of title 38, article 35 of the revised statutes, entitled "Spurious Liens and Documents," defines, in pertinent part, a "[s]purious lien" to mean "a purported lien or claim of lien that ... [is not ereated, suffered, assumed, or agreed to by the owner of the property it purports to encumber." § 38-835-201(4), (4)(c),, C.R.S. (2015). The legislature similarly provides for an expedited procedure by which any person whose property is affected by a recorded lien he believes to be spurious may petition the district court for an order to show cause why the lien should not be declared invalid and ordered released. § 88-35-204, C.RS8. (2015), Although easily lost sight of in Justice Hood's discussion of negotiable instruments and holders in due course under the Commercial Code, the action at issue here is one brought by Fiseus pursuant to this Part 2.
¶ 32 A lien is an encumbrance on property. For the foregoing reasons, the Uniform Commercial Code simply eannot be construed to include a Hen within the definition of a negotiable instrument or intend that one can be a holder in due course of a lien. In light of the legislature's express provision for the removal of any lien that is "spurious," however, even if a deed of trust collateraliz-ing a promissory note could be considered a combination lien and negotiable instrument, the lien would nevertheless be subject to removal, as long as it was "not created, suffered, assumed, or agreed to by the owner of the property it purports to encumber." The trier of fact in this spurious len action expressly found from the evidence that Fiseus did not create, suffer, assume, or agree to Liberty's lien on his property.
133 Justice Hood's contention that the reasoning of cases pre-dating our adoption of the commercial code remains valid today seems to me best explained as an attempt to substitute a court-devised solution to the dilemma of the bona fide purchaser for the one chosen by the legislature, With regard to the class of which this case stands as a good example, it is a mystery to me how one could find greater equities to lie with a trader in commercial paper than with a homeowner who has been victimized by forgery. __
1 34 Notwithstanding my doubts about the position taken by Justice Hood's alternate opinion, I coneur in the majority opinion and fully concur with its determination that we need not reach the negotiability of deeds of trust in this case.