July 18, 2019

Colorado Court of Appeals: Use of Stock Certificate as Exhibit Does Not Qualify as a Filing or Recording

The Colorado Court of Appeals issued its opinion in Battle North, LLC v. Sensible Housing Co. on Thursday, June 18, 2015.

Spurious Documents—CRS §§ 38-35-201(3) and -204.

This case involves a dispute over ownership of real property in Eagle County (Pine Martin parcel). In 1998, Mortgage Investment Corporation (MIC) filed for judicial foreclosure on a deed of trust encumbering the Pine Martin parcel and the Piney Lumber parcel. Defendants included Pine Martin Mining Company (PMMC) and Piney Lumber Company (PLC). PMMC claimed ownership of the Pine Martin parcel and PLC claimed ownership of the Piney Lumber parcel. This essentially converted the foreclosure case to a quiet title action.

In 2000, PMMC and PLC moved for partial summary judgment and MIC filed a cross-motion for partial summary judgment. In 2004, the motions still pending, MIC assigned its interest in the matter to Ginn Battle Lender, LLC (Ginn). PMMC and PLC purported to transfer their interests in the parcels to respondent Sensible Housing Company (Sensible) by quitclaim deeds that Sensible recorded in the Eagle County Clerk and Recorder’s Office. Two of the deeds, one recorded in 2006 and one in 2008, were from PMMC to Sensible and concerned the Pine Martin parcel. These deeds are at issue in this case.

Pursuant to an approved stipulation for how to proceed to resolve the quiet title case, Sensible filed as an exhibit a purported 1915 Stock Certificate certifying that 1,251,000 shares of the capital stock of PMMC had been issued to Bouvier. Sensible’s principal, Tucker, claimed he had obtained those shares from Bouvier’s heir in 1996. On that authority, Tucker created and recorded the 2006 and 2008 quitclaim deeds.

In 2009, the district court granted Ginn’s cross-motion for summary judgment and denied Sensible’s motion. It found the 1915 Stock Certificate and related documents were incredible as a matter of law and therefore Sensible had no interest in either parcel. Sensible appealed, and a division of the Court affirmed summary judgment as to the Piney Lumber parcel but reversed as to the Pine Martin parcel, finding the 1915 Stock Certificate not “so incredible that no reasonable jury could believe it.”

In April 2012, Battle North, LLC (Battle North) filed a petition for an order to show cause pursuant to CRS § 38-35-204 and CRCP 105.1, alleging the 1915 Stock Certificate was a spurious document and requesting an order directing Sensible to show cause why it should not be declared invalid. Battle North amended the petition to request that the two quitclaim deeds also be declared invalid as spurious documents. Following a hearing, the district court made extensive findings, including that the 1915 Stock Certificate was created by Tucker and was a sham, and that both it and the two quitclaim deeds were spurious documents; the court therefore “released” the three documents. The court also awarded Battle Mountain attorney fees and costs pursuant to CRS § 38-35-204(2).

On appeal, Sensible argued that the priority rule required the district court to stay this case pending resolution of the quiet title action. The Court disagreed, holding that CRCP 105.1 allowed Battle North to bring this petition in a separate action and that staying the case would not further the policies behind the priority rule.

Sensible then argued that allowing Battle North to litigate this action contravened the mandate of the Court in an earlier appeal of the quiet title action where it remanded for further proceedings as to the Pine Martin parcel. The Court found nothing in that order precluding Battle North form proceeding as permitted by CRS § 38-35-204 and CRCP 105.1.

Sensible contended that its use of the 1915 Stock Certificate as an exhibit in the quiet title action did not entitle Battle North to relief under CRS § 38-35-204; filing a document as an exhibit in a civil case does not qualify as recording or filing a document within the meaning of the statute. The Court agreed. It held that “recorded or filed” as used in CRS § 38-35-204(1) is limited by its having to affect a person’s real or personal property. The filing of an exhibit in a civil case does not affect a person’s real property. Moreover, there would be no way to “release” such a document (the remedy in the statute). Thus, although the Court did not disturb the finding that the 1915 Stock Certificate was a sham, it was error to rule it was a spurious document under the statute, and that part of the order was reversed.

Sensible argued that the quitclaim deeds were not spurious because a quitclaim deed can convey only the title or interest that the grantor had, and the district court determined that the newly created PMMC had no title or interest to convey. Therefore, Battle North’s property could not have been affected by the recording of the quitclaim deeds. The Court found this argument to be without merit. Sensible argued that unless a document was a valid lien or encumbrance against real property, it cannot be a spurious document, because it cannot affect real property. However, in that case, the document would not be spurious.

Sensible argued that Battle North is not a “person whose real . . . property is affected by” the 1915 Stock Certificate and quitclaim deeds because it does not own the Pine Martin parcel. This argument was based on deficiencies in the treasurer’s deeds by which Battle North claimed title. The Court rejected those arguments on multiple grounds.

The Court also awarded Battle Mountain reasonable appellate attorney fees for defending the judgment as to the quitclaim deeds. The case was remanded to the district court for a determination of that amount.

Summary and full case available here, courtesy of The Colorado Lawyer.