Opinion
No. 76-843
Decided February 23, 1978. Rehearing denied March 16, 1978. Certiorari denied June 19, 1978.
Purchasers of land brought action seeking to enjoin foreclosure action brought by the seller, and from the dismissal of their complaint, purchasers appealed.
Affirmed
1. MORTGAGES — Foreclosure Sale — Surrender — Promissory Note — Secured by Property — Equivalent — Payment in Cash — Satisfies — Statute — Deed of Trust. On purchase of property at foreclosure sale, the surrender by the purchaser of the promissory note that was secured by the property and the entry of a credit for the amount of the bid is equivalent to payment in cash and satisfies the requirements of either the deed of trust or the statute which mandates that payment to a public trustee at a foreclosure sale be in the form of cash, certified check, or cashier's check.
2. Foreclosure Sale — Promissory Note — Securing Foreclosed Property — Tendered — Public Trustee — No Obligation — Determine Property — More Than Nominal Value. Where a nonrecourse promissory note secured only by the property subject to foreclosure was tendered to the public trustee at the foreclosure sale, the public trustee was not obligated, before proceeding with the foreclosure, to determine that the property securing that note had more than nominal value.
Appeal from the District Court of Jefferson County, Honorable Winston W. Wolvington, Judge.
Brownstein, Hyatt, Farber Madden, Douglas M. Tisdale, Harry L. Simon, for plaintiffs-appellants.
Fairfield Woods, Howard Holme, Peter F. Breitenstein, for defendants-appellees.
Plaintiffs, The Good Fund, Ltd., 1972, and Good Financial Corporation, (collectively "Good"), appeal from an order of the trial court dismissing their amended complaint for a permanent injunction against defendants, Marcus F. Church, Marcus F. Church as Trustee, and the Jefferson County Public Trustee. We affirm.
In May 1973, Good purchased a parcel of agricultural real property from Church by making a down payment and executing a nonrecourse promissory note and deed of trust to evidence and secure its obligations for the balance of the purchase price. Sometime in the next two years, Good learned that the purchased parcel was apparently damaged by radioactive and other toxic contamination and was therefore unsuitable to residential development. Subsequently, Good defaulted on its note.
In September 1975, Church brought an action pursuant to C.R.C.P. 120 to foreclose on the deed of trust, and to obtain an order authorizing the public trustee's sale of the property. Before the hearing on the foreclosure proceeding, Good filed suit against Church in the federal district court seeking rescission of the sale and cancellation of the note and deed of trust, and seeking recovery against Church and third parties for the land's wrongful contamination.
On November 14, 1975, after a hearing, the trial court issued its order authorizing sale of the subject parcel. Pursuant to that order, on November 18, 1975, the public trustee held a foreclosure sale, at which Church, as the holder of Good's note, and beneficiary of the accompanying deed of trust, tendered back the note's outstanding balance as the successful bid.
On May 14, 1976, four days prior to the expiration of the period for redemption, in an attempt to forestall the foreclosure, Good filed a complaint, accompanied by a motion for temporary restraining order, seeking a preliminary injunction barring the defendants from engaging in "all actions . . . affect[ing] the title to the [subject] property" until Good's federal court action was concluded. On May 17, 1976, the court denied Good's motion for a temporary restraining order, ruling, inter alia, that Church's production of Good's nonrecourse promissory note instead of cash at the foreclosure sale was sufficient to comply with the statutory requirements governing the form of payments to the public trustee.
After the redemption period expired, Church moved to dismiss Good's complaint. After allowing Good to amend his complaint to request a permanent injunction, the court granted the motion to dismiss.
On appeal, Good contends that the trial court erred in finding Church's tender of the outstanding balance of Good's nonrecourse promissory note sufficient to comply with the mandate of § 38-37-138, C.R.S. 1973, which requires that payment to a public trustee at a foreclosure sale be in the form of cash, certified check, or a cashier's check. We disagree.
[1] The holder of a note and beneficiary of the securing deed of trust need not tender "a bag of cash" at a foreclosure sale. To require such a party "to actually pay its bid in cash which would be immediately returned by the trustee" in exchange for the note and deed of trust would be to require the performance of "an idle ceremony." Thomason v. Pacific Mutual Life Insurance Co., 74 S.W.2d 162 (Tex Civ. App. 1934). Accordingly, the surrender of the note secured by the property and entry of a credit on the debt for the amount of the bid is deemed equivalent to payment in cash and satisfies the requirements of the applicable statute or of the deed of trust. See Bennett v. Morrison, 78 Colo. 464, 242 P. 636 (1925); Semmes Nurseries, Inc. v. McDade, 288 Ala. 523, 262 So.2d 127 (1972); Witter v. Bank of Milpitas, 204 Cal. 570, 269 P. 614 (1928). See generally 59 C.J.S. Mortgages § 576.
[2] Good argues, however, that here the tendered note had no value since it allowed recourse only against the subject property. Because of contamination, he urges, the land was of only nominal value, and therefore, the note was not equivalent to cash.
We decline to impose on the public trustee the duty of ascertaining that the underlying security of a nonrecourse purchase money note at a foreclosure sale has more than nominal value. Such a requirement would make the foreclosure proceeding exceedingly difficult, if not impossible, to administer.
Accordingly, the trial court properly refused to enter the permanent injunction on the basis that the foreclosure sale was defective.
Judgment affirmed.
JUDGE SMITH and JUDGE RULAND concur.