Chapter 24 - § 24.3 • PUBLIC TRUSTEE FORECLOSURE
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§ 24.3.1—In General
Historical Background
Colorado's procedure for foreclosure by public trustee has been in force and effect since 1894.33 Prior to the creation of the office of public trustee, two methods of foreclosure existed. One method required foreclosure by judicial procedure in which debtors had, among other things, a right of redemption. The other method involved issuance of trust deeds to private trustees who could quickly and inexpensively dispense with property according to the terms of the trust instrument. These private transactions, however, did not provide a right of redemption or other protections for debtors. Through the creation of a public trustee's office, it was sought to ensure the protection of debtors while maintaining a speedy, efficient procedure for creditors.34
The powers of a private trustee depended entirely upon the terms of the instrument appointing him or her, and no power was conferred unless expressed in the instrument. The rule of caveat emptor applied to sales by private trustees, and the purchaser was bound to take notice that all matters in pais upon the existence of which the trustee's power to act depended had been complied with.35 A sale by one not named as a trustee was void.36
A private trustee could resign, before or after the default, without the consent or request of anyone.37 In the absence of a recital in the trustee's deed, executed by a substitute trustee, to the effect that he had been appointed in the manner the trust deed provided, the trustee's deed was not prima facie evidence of title in the grantee. It was necessary to prove that the appointment was in accordance with the terms of the trust deed by evidence aliunde.38
Recitals in a trustee's deed were held to be prima facie evidence of the matters stated in them,39 although this view was subsequently modified to apply only to recitals of fact which were material to the execution of the trust by the trustee.40 But where recitals essential to the validity of the deed were missing, the deed was void.41
Initiating a Public Trustee Foreclosure
If the holder of an evidence of debt42 declares a violation of a covenant of a deed of trust43 and elects to publish all or a portion of the property therein described for sale, the holder or the attorney for the holder44 must file with the public trustee of the county where the property is located the following:45
• A notice of election and demand46 signed and acknowledged by the holder of the evidence of debt or signed by the attorney for the holder.
• The original evidence of debt, including any modifications to the original evidence of debt, together with the original indorsement47 or assignment thereof,48 if any, to the holder of the evidence of debt or other proper indorsement or assignment or, in lieu of the original evidence of debt, the following:
• ○ A corporate surety bond49 in the amount of one and one-half times the face amount of the original evidence of debt;
• • ○ A copy of the evidence of debt and a certification signed and properly acknowledged by a holder of an evidence of debt acting for itself, or as agent, nominee, or trustee or a statement signed by the attorney for such holder, citing the paragraph of C.R.S. § 38-38-100.3(20) under which the holder claims to be a qualified holder and certifying or stating that the copy of the evidence of debt is true and correct and that the use of the copy is subject to the conditions described in C.R.S. § 38-38-101(2)(a); or
• • ○ A certified copy of a monetary judgment entered by a court of competent jurisdiction.
• The original recorded deed of trust securing the evidence of debt and any original recorded modifications of the deed of trust or any recorded partial releases of the deed of trust, or in lieu thereof, one of the following:
• • ○ Certified copies of the recorded deed of trust and any recorded modifications of the deed of trust or recorded partial releases of the deed of trust; or
• • ○ Copies of the recorded deed of trust, any recorded modifications of the deed of trust, or recorded partial releases of the deed of trust and a certification signed and properly acknowledged by the holder of the evidence of debt acting for itself or as an agent, nominee, or trustee or a signed statement by the attorney for such holder, citing the paragraph of C.R.S. § 38-38-100.3(20) under which the holder claims to be a qualified holder and certifying or stating that the copies of the recorded deed of trust and any recorded modifications of the deed of trust or recorded partial releases of the deed of trust are true and correct and that the use of the copies is subject to the conditions described in C.R.S. § 38-38-101(2)(a).
• A combined notice,50 except that the combined notice may be omitted with the prior approval of the officer because the officer will supply the combined notice.
• A mailing list51 containing the names and addresses of the persons listed in C.R.S. § 38-38-103(1)(a)(I).52
• If a loan servicer of the evidence of debt is described in the notice of election and demand and the loan servicer is not the holder, a statement executed by the holder of the evidence of debt or the attorney for such holder, describing to the best of such person's knowledge, the name of the loan servicer.
• Any affidavit recorded pursuant to C.R.S. § 38-35-109(5) affecting the deed of trust, which affidavit shall be accepted by the public trustee as modifying the deed of trust for all purposes only if the affidavit is filed with the public trustee at the same time as the other documents required under C.R.S. § 38-38-101(1).
• A statement executed by the holder of an evidence of debt, or the attorney for such holder, identifying, to the best knowledge of the person executing such statement, the name and address of the current owner of the property described in the notice of election and demand.
• A separate document notifying the public trustee that the property referred to in the notice of election and demand is property that requires posting under C.R.S. § 38-38-802.53 If this document is not filed at the time the other required documents54 are filed with the public trustee, and the holder thereafter determines that the property requires posting, the holder must request that the public trustee rerecord the notice of election and demand; thereafter, all deadlines for the foreclosure are determined according to the date of the rerecording of the notice of election and demand as though the foreclosure was commenced on such date. If this document is filed in error, the holder may withdraw it by filing with the public trustee an affidavit signed by the holder or the attorney for the holder affirming both that the document required by C.R.S. § 38-38-101(h) was filed in error and that the property has not been posted pursuant to C.R.S. § 38-38-802. In order to be effective, and thereby notify the public trustee that the property is not eligible for posting, the affidavit must be filed with the public trustee no later than 14 calendar days after the date of the determination of the public trustee that the filing is complete.55
The public trustee may require a deposit of up to $650 or the amount of the fee permitted pursuant to C.R.S. § 38-37-104(1)(b)(I), whichever is greater,56 at the time the notice of election and demand is filed, to be applied against the fees and cost of the public trustee.57
Foreclosure by Qualified Holder Without Original Evidence of Debt, Original or Certified Copy of Deed of Trust, or Proper Indorsement
A qualified holder,58 whether acting for itself or as agent, nominee, or trustee, that elects to foreclose without the original evidence of debt or without the original recorded deed of trust or a certified copy thereof, or without proper indorsement or assignment of an evidence of debt, is, by operation of law, deemed to have agreed to indemnify and defend any person liable for repayment of any portion of the original evidence of debt in the event that the original evidence of debt is presented for payment to the extent of any amount, other than the amount of a deficiency remaining under the evidence of debt after deducting the amount bid at sale, and any person who sustains a loss due to any title defect that results from reliance upon a sale at which the original evidence of debt was not presented. His or her indemnity is limited to actual economic loss suffered together with any court costs and reasonable attorney fees and costs incurred in defending a claim brought as a direct and proximate cause of the failure to produce the original evidence of debt, but such indemnity does not include, and no claimant is entitled to, any special, incidental, consequential, reliance, expectation, or punitive damages of any kind.59
If a qualified holder or his or her attorney commences a foreclosure without production of the original evidence of debt, proper indorsement or assignment, or the original recorded deed of trust or a certified copy thereof, the qualified holder or his or her attorney may submit the original evidence of debt, proper indorsement or assignment, or the original recorded deed of trust or a certified copy thereof to the officer prior to the sale. In such event, the sale will be conducted and administered as if the original evidence of debt, proper indorsement or assignment, or the original recorded deed of trust or a certified copy thereof had been submitted at the time of commencement of such proceeding, and any indemnity deemed to have been given by the qualified holder will be null and void as to the instrument so produced.60
If a foreclosure is conducted where the original evidence of debt, proper indorsement or assignment, or original recorded deed of trust or a certified copy thereof has not been produced, the only claims are against the indemnitor and not against the foreclosed property or the attorney for the holder of the evidence...
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