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Fiscus v. Liberty Mortgage Corp.

Court of Appeals of Colorado, Third Division

June 19, 2014

Raymond L. Fiscus, a/k/a Ray Fiscus, Petitioner-Appellee,
Liberty Mortgage Corporation, a Georgia corporation; BB& T Corporation, a North Carolina corporation; and Branch Banking and Trust Company, a North Carolina corporation, Respondents-Appellants

          Mesa County District Court No. 12CV4196. Honorable Valerie J. Robison, Judge.

         Hoskin Farina & Kampf, David M. Dodero, Nicholas H. Gower, Grand Junction, Colorado, for Petitioner-Appellee.

         Dufford, Waldeck, Milburn, & Krohn, L.L.P., Christopher G. McAnany, Grand Junction, Colorado, for Respondents-Appellants.

         Opinion by JUDGE MILLER. Webb and Gabriel, JJ., concur.


         MILLER, JUDGE

          [¶1] Appellants, Liberty Mortgage Corporation, BB& T Corporation, and Branch Banking and Trust Company (collectively, the banks), appeal the trial court's order declaring Branch Banking and Trust's deed of trust against the property owned by appellee, Raymond L. Fiscus, a/k/a Ray Fiscus (owner), invalid and ordering its release. The banks also appeal the trial court's order awarding owner attorney fees and costs. We affirm and remand with directions for further proceedings regarding owner's attorney fees on appeal.

          [¶2] Owner sued the banks under the spurious lien statute, sections 38-35-201 to -204, C.R.S. 2013, seeking to have a deed of trust recorded by Branch Banking and Trust in 2009 declared spurious. The deed of trust on owner's separately owned property was recorded after his wife executed it as his attorney-in-fact, based on a forged power of attorney. The trial court declared the deed of trust spurious and ordered its release. On appeal, the banks challenge the trial court's rulings regarding (1) the statute of limitations; (2) whether counterclaims and third-party claims may be raised in spurious lien actions, which is an issue of first impression discussed in Part IV; (3) the allocation of the burden of proof; (4) whether owner ratified the deed of trust; (5) whether a holder in due course defense was available to the banks; and (6) the award of attorney fees and costs to owner. We affirm the trial court's rulings.

         I. Background

          [¶3] Owner filed his petition for a show cause hearing under the spurious lien statute and C.R.C.P. 105.1, seeking to invalidate the 2009 deed of trust. The banks counterclaimed against owner, asking to judicially foreclose on the property, alleging unjust enrichment, and seeking an equitable lien against the property. The banks also filed a third-party complaint against wife alleging theft. The trial court held that counterclaims and third-party claims are not permitted in this limited statutory proceeding and dismissed them without prejudice under C.R.C.P. 12(f).

          [¶4] The court held a three-day hearing on the show cause petition, at which owner, wife, wife's daughter, a forensic document expert, and a representative of BB& T testified. The trial court found the following facts, and its findings are supported by the record.

          [¶5] Owner and Vicky Casper-Fiscus (wife) were married in 1985. In 1987, owner purchased in his own name a property that served as the couple's marital residence. During the marriage, wife handled the household bills and financial matters, including the payment of the couple's mortgage loan, and arranging for the preparation of their joint tax returns through an accounting firm. Owner did not regularly review bank statements for the couple's joint accounts.

          [¶6] In August 2008, a deed of trust on owner's property was recorded to secure a loan made by Wells Fargo Financial in the amount of approximately $220,000. Wife executed the deed of trust by signing it in her own name, as owner's attorney-in-fact. A relatively small portion of the proceeds from the loan was used to pay off the remaining balance of the original 1987 mortgage loan. In April 2009, another deed of trust on owner's property was recorded securing a loan made by Liberty Mortgage in the amount of $220,000. Wife also executed this deed of trust as owner's attorney-in-fact. Wife used the proceeds of the 2009 loan to pay off the loan secured by the 2008 deed of trust, which was then released. Owner was unaware of the 2008 and 2009 loans and deeds of trust.

          [¶7] In December 2011, a representative from Merrill Lynch called owner to request authorization for a $5000 transfer wife had attempted to initiate from his IRA account. Owner learned from the representative that wife previously had transferred $10,000 from his IRA account. Owner determined that wife had done so with the assistance of her son-in-law, who had impersonated owner on the phone. Owner obtained a credit report and discovered numerous unauthorized credit cards open in his name, as well as a $220,000 deed of trust in favor of Branch Banking and Trust of which he had been previously unaware.

          [¶8] In January 2012, owner researched property records in his name and discovered the 2008 and 2009 deeds of trust. He also discovered that powers of attorney had been recorded on the same dates the deeds of trust had been recorded. Each power of attorney purported to authorize wife to act as owner's attorney-in-fact. Wife signed owner's name on the power of attorney forms, and her daughter notarized his purported signature.

          [¶9] Owner filed a report with the sheriff regarding wife's unauthorized actions. He notified Branch Banking and Trust that he had been a victim of identity theft and requested that his loan account be closed immediately.

          [¶10] Based on these facts, the trial court concluded that the 2009 deed of trust was a spurious lien and document and ordered that it be released. It also awarded owner $82,248.98 in attorney fees and costs incurred in pursuing this action.

         II. The Spurious Lien Statute

          [¶11] A spurious lien is a purported lien or claim of lien that, as pertinent here, " [i]s not created, suffered, assumed, or agreed to by the owner of the property it purports to encumber . . . ." § 38-35-201, C.R.S. 2013. The spurious lien statute provides for an expedited show cause proceeding to determine the validity of a lien upon the filing of a petition supported by an affidavit alleging that the petitioner's real property has been encumbered by a recorded or filed lien or document. § 38-35-204, C.R.S. 2013. The statute also requires the award of attorney fees and costs to the prevailing party. § § 38-35-204(1)(c), (2)-(3). C.R.C.P. 105.1 sets forth specific procedures governing show cause actions under the spurious lien statute. See Westar Holdings P'ship v. Reece, 991 P.2d 328, 331-32 (Colo.App. 1999).

         III. Statute of Limitations

          [¶12] The banks contend the trial court erred when it held that owner's spurious lien petition was not barred by the statute of limitations. We disagree.

         A. Standard of Review

          [¶13] We review de novo a trial court's application of the statute of limitations where the facts relevant to the date on which the statute of limitations accrues are undisputed. Sterenbuch v. Goss, 266 P.3d 428, 432 (Colo.App. 2011).

         B. Law and Analysis

          [¶14] Spurious lien actions must be brought within two years of accrual. § 13-80-102(1)(i), C.R.S. 2013; Deutsche Bank Trust Co. Americas v. Samora, 321 P.3d 590, 2013 COA 81, ¶ 21. A cause of action accrues on the date " both the injury and its cause are known or should have been known by the exercise of reasonable diligence." § 13-80-108(1), C.R.S. 2013. The parties disagree about when owner's action accrued.

          [¶15] Owner first became aware of the deed of trust between December 2011 and January 2012, when he learned of the loan from his credit report and searched the real property records. The banks, however, argue that the recording of the deed of trust on April 15, 2009, constituted constructive notice of the deed to owner, and that the statute of limitations for owner's spurious lien action expired two years later on April 15, 2011. Under the banks' argument, owner's action, which was filed on March 29, 2012, was untimely.

          [¶16] The banks rely on section 38-35-106(1), C.R.S. 2013, the general recording notice statute, which provides:

Any written instrument required or permitted to be acknowledged affecting title to real property, whether acknowledged, unacknowledged, or defectively acknowledged, after being recorded in the office of the county clerk and recorder of the county where the real property is situate, shall be notice to ...

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