Opinion
No. 26467
Decided December 23, 1974. Opinion modified and as modified rehearing denied March 10, 1975.
Action by debtor, in default on deed of trust, asking that public trustee sale be declared void and that trustee be temporarily enjoined from issuing a deed, and also requesting that excess moneys above trust deed indebtedness be paid to her. Trial court denied temporary injunction, upheld constitutionality of foreclosure sale and ordered that excess from sale be paid by public trustee to lienor last redeeming. Appeal to Court of Appeals transferred to Supreme Court because of constitutional questions raised.
Reversed
1. HOMESTEAD — Real Estate — Judgment Lien — Negative — Exempt — Execution. Real estate which has not been subjected specifically to a judgment lien by levy before a homestead is placed thereon, is exempt from execution.
2. Debtor's Property — Foreclosed — Filing of Homestead — Prior to Levy on Judgment — Foreclosure Sale — Excess to Debtor. Where judgment debtor's homestead property was foreclosed by public trustee following default on trust deed, and debtor caused homestead exemption to be entered of record prior to levy on judgment obtained by realty company against debtor, held, under these circumstances, debtor, by virtue of the homestead, was entitled to excess from foreclosure sale, despite the fact that debtor did not redeem property within statutory exemption period and immediately after expiration of such period assignee of judgment against debtor redeemed the property; debtor's homestead rights are superior to the judgment lien.
3. MORTGAGES — Homestead Property — Foreclosed — Absent — Filing — Notice of Lis Pendens — Issues — Validity — Sale — Moot. Where, in addition to prayer for payment of excess from foreclosure sale, judgment debtor — whose homestead property was foreclosed by public trustee following default — sought to have public trustee's sale declared void because of unconstitutional reasons and to temporarily and preliminarily enjoin public trustee from issuing a deed, held, absent a filing of notice of lis pendens of this action prior to issuance of deed, the issues relating to the validity of the trustee's sale became moot.
4. PARTIES — Indispensable — Savings and Loan — Foreclosure Sale — Void — Not a Party — Constitutionality — Public Trustee's Sale — Not Considered. Where savings and loan association, which was an indispensable party in proceedings to declare its foreclosure sale void, was not a party to such proceeding, constitutionality of public trustee's sale of the property would not be considered.
Appeal from the District Court of the City and County of Denver, Honorable Robert E. McLean, Judge.
Marshall A. Snider, Tucker K. Trautman, Legal Aid Society of Metropolitan Denver, Howard I. Rosenberg, for plaintiff-appellant.
Max P. Zall, City Attorney, Herman Atencio, Assistant, for defendant-appellee F. J. Serafini.
Barnes Jensen, Gerald L. Jensen, for defendant-appellee Key Realty Company.
Grant, Shafroth, Toll and McHendrie, Charles H. Haines, Jr., Ronald C. Butz, for defendants-appellees Advance Mortgage Corporation and Russell D. Berget and Sharon K. Berget.
The Boston Federal Savings Loan Association (Boston Federal) held a deed of trust embracing a residence, which had been executed to the public trustee as security for a loan. The plaintiff purchased the property, agreeing to pay the deed of trust. Later the Boston Federal declared the note, with an unpaid balance of $11,675.86, to be in default and filed written demand for sale with the public trustee. In the meantime the defendant Key Realty Company (Key Realty) had become an assignee of a judgment against the plaintiff in an amount of in excess of $10,000. Transcript of this judgment was placed of record, but there has not been a levy thereunder. Following the recording of the transcript of judgment, the plaintiff caused a homestead exemption to be entered of record with respect to the residence.
The public trustee advertised the property for sale under provision of the deed of trust and as provided by statute. At the sale the property was sold for $15,050, being an excess of $3,374.14 above the trust deed indebtedness. The plaintiff then brought this action, asking that the sale be declared void and that the public trustee be temporarily enjoined from issuing a deed. She also requested that the excess of $3,374.14 be paid to her. The court denied the temporary injunction. The plaintiff has not filed a notice of lis pendens.
The plaintiff did not redeem within the statutory six-month redemption period and, immediately after expiration of that period, Key Realty, as assignee of the judgment, redeemed the property for $15,601.50. The public trustee then issued a deed to Key Realty.
Under stipulation the court ordered the plaintiff to vacate the premises, and for moving and relocation expenses ordered $1000 of the $3,374.14 to be paid to plaintiff. The remaining $2,374.14 is hereinafter referred to as excess. After the district court's judgment, the excess was paid to Key Realty.
Key Realty sold the property to the appellees Berget for $24,000 and the appellee Advance Mortgage Corporation made a loan to the Bergets secured by a deed of trust on the property. The Bergets and Advance Mortgage Corporation were not parties in the trial court and, after the case was here on appeal and on their motion, we ordered that they be made appellees.
The plaintiff's appeal was to the Court of Appeals, from which we accepted jurisdiction because of the constitutional questions raised.
The plaintiff contends that the public trustee's sale was void because:
1. The statutory process of foreclosure violates due process as it does not provide the land owner with any notice or opportunity to be heard as to the propriety of the foreclosure or the foreclosure procedure;
2. The notice of foreclosure sale as provided in C.R.S. 1963, 118-3-13 does not comply with due process as it does not inform the land owner of the right to a hearing to contest the foreclosure;
3. The opportunity of a land owner whose property is being foreclosed by the public trustee to file an independent suit to enjoin the sale does not constitute a constitutionally valid "opportunity for a hearing."
The trial court ruled against the plaintiff as to the constitutional questions. It further ordered that, under C.R.S. 1963, 118-3-13 and 118-9-3 as amended in 1973 (Colo. Sess. Laws 1973, ch. 336 at 1153), the excess should be paid by the public trustee to the lienor last redeeming, Key Realty. We decline to pass upon the constitutional questions and reverse as to the payment of the excess.
I.
[1,2] Our homestead statute reads:
"Every householder in the state of Colorado, being the head of a family, shall be entitled to a homestead not exceeding in value the sum of five thousand dollars, except from execution and attachment, arising from any debt, contract or civil obligation, entered into or incurred after the effective date of this section." C.R.S. 1963, 77-3-1.
Except as to the amount of dollars, this statute has remained unchanged since it was approved on January 10, 1868. R.S. p. 385, § 57. C.R.S. 1963, 77-3-2 provides for the manner in which a homestead may be created in the office of the county clerk and recorder.
The amendments of 118-3-13 and 118-9-3 in 1973, mentioned above, added the following language to those sections:
"(6) If, at a foreclosure sale by a public trustee, the property is struck and sold for an amount in excess of the expenses of sale and moneys due the beneficiary or legal holder of the indebtedness, the excess moneys shall be paid into the hands of the county treasurer to be held in escrow by him until the end of all redemption periods as provided in sections 118-9-2 and 118-9-3.
"(7) Upon the expiration of all redemption periods as provided in sections 118-9-2 and 118-9-3, if notice of intent to redeem has been duly filed, and if no redemption is made as provided in said sections, the excess moneys shall be paid to the junior lienors in the order of their priority and then to the owner of record as of the day of the foreclosure sale. The public trustee may request proof in the form of an affidavit establishing the amount due on any junior lienor.
* * * *
"(4) When a lienor redeems property from a foreclosure sale, escrow funds, not to exceed the amount due on such lien, shall be paid to the last person or institution redeeming said property. Moneys in excess of such lien shall be paid to the owner of record as of the day of the foreclosure sale."
In 1894 this Court held, in Weare v. Johnson, 20 Colo. 363, 38 P. 374, that real estate, which had not been subjected specifically to a judgment lien by levy before a homestead was placed thereon, was exempt from execution. To the same effect is the leading case in this jurisdiction on this subject. Sterling National Bank v. Francis, 78 Colo. 204, 240 P. 945 (1925). Other Colorado authorities are cited in the latter opinion.
The right of homestead is so precious that, if the General Assembly had intended to overrule Sterling National Bank v. Francis, supra, it would have expressed the new rule in specific language. We hold that the 1973 amendment did not change the rule of Sterling National Bank. By virtue of the homestead, the plaintiff is entitled to the excess. Her homestead rights are superior to the judgment lien.
II.
[3,4] In addition to the prayer for payment of the excess, the only relief requested by the plaintiff in her complaint was to have the public trustee's sale declared void because of unconstitutional reasons and to temporarily and preliminarily enjoin the public trustee from issuing a deed. Absent a filing of notice of lis pendens of this action prior to the issuance of the deed, the issues relating to the validity of the trustee's sale became moot after the court denied the temporary injunction. We, therefore, decline to rule upon the constitutional questions.
There are two further reasons for our failure to approach these questions. First, the plaintiff has asked us to rule that she is entitled to the excess money, and we have so ruled. It is inconsistent for her to claim that the sale was void, since her right to the excess is predicated upon a valid sale. Second, we should not be considering the constitutional questions with Boston Federal not before us as a party. It is an indispensable party in any proceedings to declare the sale under its foreclosure to be void.
The judgment is reversed and the cause remanded to the district court with directions to enter judgment in favor of the plaintiff and against Key Realty for $2,374.14, plus interest and costs as may be proper, and to dismiss the complaint insofar as it relates to the constitutional questions.
MR. JUSTICE LEE and MR. JUSTICE HODGES dissent.
MR. JUSTICE ERICKSON does not participate.