2021 Colorado Code
Title 38 - Property - Real and Personal
Article 35 - Conveyancing and Recording
Part 1 - General Provisions
§ 38-35-117. Mortgages, Not a Conveyance - Lien Theory

Mortgages, trust deeds, or other instruments intended to secure the payment of an obligation affecting title to or an interest in real property shall not be deemed a conveyance, regardless of its terms, so as to enable the owner of the obligation secured to recover possession of real property without foreclosure and sale, but the same shall be deemed a lien.

History. Source: L. 27: P. 592, § 12. CSA: C. 40, § 118. CRS 53: § 118-6-17. C.R.S. 1963: § 118-6-17. History. Source: L. 27: P. 592, § 12. CSA: C. 40, § 118. CRS 53: § 118-6-17. C.R.S. 1963: § 118-6-17.

For sales by public trustee, see article 37 of this title.

Analysis

• I. GENERAL CONSIDERATION.
• II. EFFECT OF SECTION.
• III. EVIDENCE.

Law reviews. For article, “Must Colorado Real Property Installment Sale Contracts Be Foreclosed as Mortgages?”, see 9 Dicta 320 (1932). For note, “Validity of ‘Myself' Notes and Deeds of Trust”, see 30 Rocky Mt. L. Rev. 195 (1958).

Value tends to show transaction's character. In an action to have a deed, absolute on its face, declared a mortgage, value is one test tending to show the character of the transaction. Wilson v. Giem, 90 Colo. 27 , 5 P.2d 880 (1931); Taylor v. Briggs, 99 Colo. 89 , 60 P.2d 1081 (1936).

Deeds as security agreement within section. Where the grantor executed deeds for certain real property to the grantee under an agreement, the agreement is a security arrangement in the fullest sense since it provided for extension of existing loans, set forth the terms of future loans, and left grantor in possession and holding equitable title; therefore, the deeds are instruments which secured the payment of an obligation, and as such, they fell squarely within the provisions of this section and had the legal effect of mortgages and had to be foreclosed as such. Weil v. Colo. Livestock Prod. Credit Ass'n, 30 Colo. App. 301, 494 P.2d 134 (1971).

Cannot sever a joint tenancy. Deed of trust is not a conveyance but is, instead, a lien and thus cannot sever a joint tenancy. Webster v. Mauz, 702 P.2d 297 (Colo. App. 1985).

Equitable mortgage. A deed deposited in escrow to be delivered to the grantee on failure of the grantor to pay a debt due the grantee is an equitable mortgage. Larson v. Hinds, 155 Colo. 282 , 394 P.2d 129 (1964).

Conveyance with contemporaneous bond to reconvey evidence of mortgage. A conveyance of land, with contemporaneous bond to reconvey, is sometimes accepted as strong evidence that a mortgage is intended, but where it appears that an absolute transfer is the purpose of the parties, this intention prevails. Baird v. Baird, 48 Colo. 506 , 111 P. 79 (1910).

No instrument intended to secure the payment of a debt shall be deemed a conveyance, regardless of its terms. Ver Straten v. Worth, 79 Colo. 30 , 243 P. 1104 (1926); Reid v. Pyle, 51 P.3d 1064 (Colo. App. 2002).

Quitclaim deed with contemporaneous written agreement constituting security. A quitclaim deed, taken in connection with a contemporaneous written agreement concerning possession of the property, held to constitute security for a debt, and therefore a mortgage. Ver Straten v. Worth, 79 Colo. 30 , 243 P. 1104 (1926).

Deed of trust given as security deemed mortgage. A deed of trust given as security for a debt is a mortgage. McGovney v. Gwillim, 16 Colo. App. 284, 65 P. 346 (1901).

Quitclaim deed given as security deemed mortgage. A quitclaim deed, given and intended as security for a debt, is a mortgage. Morris v. Cheney, 81 Colo. 393 , 255 P. 987 (1927).

Installment contract for sale of land deemed mortgage. Where A contracted to sell land to B, the latter to pay the purchase price in installments, the contract is in effect a mortgage which secured to A the performance of the obligations of B. Pope v. Parker, 84 Colo. 535 , 271 P. 1118 (1928).

Where vendor retains possession of property sold. A contract for the sale and purchase of real estate on the installment plan, where the vendor retained possession is not to be a mortgage, and not to be treated as such under this section. Am. Mtg. Co. v. Logan, 90 Colo. 157 , 7 P.2d 953 (1932).

Installment contract where time is of essence not mortgage. An installment contract where time is of the essence is not a mortgage and is not to be treated as such, for if it were, either actually or in effect, a mortgage, the vendor could not recover possession under the unlawful detainer act until after foreclosure and sale, and then only in the event that he purchased at the sale. Am. Mtg. Co. v. Logan, 90 Colo. 157 , 7 P.2d 953 (1932).

Lease and option to purchase property granted to lessee as consideration for allowing foreclosure of a deed of trust given to creditors for purchase price did not constitute an equitable mortgage where there was no underlying debt or obligation secured by the return of title to property to creditors and the granting of a lease and option to lessee. Alien, Inc. v. Futterman, 924 P.2d 1063 (Colo. App. 1995).

Stipulation that mortgagee becomes absolute owner upon default void. No force will be given to a stipulation in a mortgage, or in a deed intended as a mortgage, or in any instrument executed at the same time accompanying such deed by which the mortgagor agrees that, if he fails to make payment by a stated time, the mortgagee shall become the absolute owner of the property because the deed when executed, being simply a mortgage for the security of a debt, cannot become anything else, except through the execution of a subsequent agreement based upon a valuable consideration. Larson v. Hinds, 155 Colo. 282 , 394 P.2d 129 (1964).

Provision for vendor's re-entry upon default void. A provision in sale contract that upon default vendor might re-enter and sell premises is void. Pope v. Parker, 84 Colo. 535 , 271 P. 1118 (1928).

Receiver to be appointed to collect rents and profits. Although this section provides that the owner of a real estate mortgage shall not be entitled to the possession of the mortgaged property without foreclosure and sale, where such a mortgage pledges rents and profits as part of the security, and the security is inadequate and the mortgagor insolvent, a court of equity may appoint a receiver any time after filing the suit of foreclosure to collect the rents and profits and have the same applied on the mortgage debt. Moncrieff v. Hare, 38 Colo. 221 , 87 P. 1082 (1906); Elmira Mechanics' Soc'y v. Stanchfield, 160 F. 811 (8th Cir. 1908).

A director's deed resulting from an IRS tax sale was not an instrument intended to secure payment of an obligation under this section and was not a lien that must be foreclosed upon in order for the plaintiffs to assert their ownership rights. Behr v. Burge, 940 P.2d 1084 (Colo. App. 1996).

Applied in Fairview Mining Corp. v. Am. Mines & Smelting Co., 86 Colo. 77 , 278 P. 800 (1929); Jenkins v. Peet, 19 B.R. 105 (Bankr. D. Colo. 1982 ).

Mortgage does not vest title in the mortgagee. Fehringer v. Martin, 22 Colo. App. 634, 126 P. 1131 (1912).

The mortgagor is still the owner, notwithstanding the mortgage. Hendricks v. Town of Julesburg, 55 Colo. 59 , 132 P. 61 (1913).

Mortgagee has a lien merely; if the mortgagee is out of possession and not entitled to possession, he cannot maintain an action of trespass for damages. Pueblo & A.V.R.R. v. Beshoas, 8 Colo. 32 , 5 P. 639 (1884).

This section deprives the mortgagee of all possession and right of possession, before or after the condition is broken, until after foreclosure and sale. Pueblo & A.V.R.R. v. Beshoas, 8 Colo. 32 , 5 P. 639 (1884); Moncrieff v. Hare, 38 Colo. 221 , 87 P. 1082 (1906); Fid. Bond & Mtg. Co. v. Paul, 90 Colo. 94 , 6 P.2d 462 (1931); Erwin v. West, 105 Colo. 71 , 99 P.2d 201 (1939).

Mortgagee has no right to possession until after foreclosure and sale and expiration of period of redemption. Moncrieff v. Hare, 38 Colo. 221 , 87 P. 1082 (1906); Morris v. Cheney, 81 Colo. 393 , 255 P. 987 (1927).

Colorado has adopted by statute a lien theory of mortgages, which theory generally prohibits a mortgagee from acquiring possession of a mortgaged property until a foreclosure and sale have occurred. Martinez v. Cont'l Enter., 730 P.2d 308 (Colo. 1986).

Under a lien theory, the mortgage on a deed of trust creates a lien against real property but does not convey title. Hohn v. Morrison, 870 P.2d 513 (Colo. App. 1993).

In a lien theory jurisdiction such as Colorado, a mortgage, deed of trust, or other interest “intended to secure the payment of an obligation affecting title to or an interest in real property shall not be deemed a conveyance” but is, instead, a lien; however, the fact that a mortgage or deed of trust is a security interest, rather than an ownership interest in real property, does not mean that it is not an asset. Herstam v. Bd. of Dirs., 895 P.2d 1131 (Colo. App. 1995).

Section's effect unchanged if mortgage in form of deed absolute. The fact that the mortgage is in the form of a deed absolute on its face does not change the rule, provided by this section, as it affects the mortgagee and his representatives. Pueblo & A.V.R.R. v. Beshoas, 8 Colo. 32 , 5 P. 639 (1884); Fehringer v. Martin, 22 Colo. App. 634, 126 P. 1131 (1912).

An unconditional tender of the amount due by the debtor releases the lien of the mortgage unless the creditor establishes a justifiable and good faith reason for rejection of the tender. Hohn v. Morrison, 870 P.2d 513 (Colo. App. 1993).

To the extent a clause in a deed of trust giving the mortgagee the right to possession of property subject to the deed of trust on default on note was inconsistent with statute dealing with right to possession, the statute prevails. Martinez v. Cont'l Enter., 730 P.2d 308 (Colo. 1986).

Regardless of the terms in the deed of trust, lender has only an inchoate right to rents until mortgagor defaults and lender takes some “effectual step”, such as filing foreclosure or gaining rightful possession, to subject assigned rents to payment of the debt. Galleria Towers v. Crump Warren & Sommer, 831 P.2d 908 (Colo. App. 1991).

Extrinsic evidence may prove deed. A deed, purporting to be an absolute conveyance, may be proven by extrinsic evidence, either parol or written, to be in effect a mortgage. Baird v. Baird, 48 Colo. 506 , 111 P. 79 (1910); Davis v. Pursel, 55 Colo. 287 , 134 P. 107 (1913); Denver Sanitarium & Hosp. Ass'n v. Roberts, 65 Colo. 60 , 174 P. 300 (1918); Oppegard v. Oppegard, 90 Colo. 483 , 10 P.2d 333 (1932); Larson v. Hinds, 155 Colo. 282 , 394 P.2d 129 (1964).

Oral evidence is admissible to show a deed is a mortgage, even though fraud or mistake is not alleged specifically. Ver Straten v. Worth, 79 Colo. 30 , 243 P. 1104 (1926).

Oral evidence is admissible to show that the deed in effect is a mortgage, notwithstanding a contemporaneous written agreement. Townsend v. Petersen, 12 Colo. 491 , 21 P. 619 (1889); Armor v. Spalding, 14 Colo. 302 , 23 P. 789 (1890); Perot v. Cooper, 17 Colo. 80 , 28 P. 391 (1891); Davis v. Hopkins, 18 Colo. 153 , 32 P. 70 (1893); Butsch v. Smith, 40 Colo. 64 , 90 P. 61 (1907); Blackstock v. Robertson, 42 Colo. 472 , 94 P. 336 (1908).

In an action to redeem from what purports to be an absolute sale of lands, though the object of the parties to the transaction is expressed in one or more separate writings, it is competent to prove by parol evidence that the real transaction is a mortgage, regardless of the number of writings by which it is evidenced. Blackstock v. Robertson, 42 Colo. 472 , 94 P. 336 (1908).

Evidence must be clear, certain, and unequivocal, and it must be convincing beyond a reasonable doubt in order to sustain a bill to declare an absolute deed a mortgage. Whitsett v. Kershow, 4 Colo. 419 (1878); Townsend v. Petersen, 12 Colo. 491 , 21 P. 619 (1889); Armor v. Spalding, 14 Colo. 302 , 23 P. 789 (1890); Davis v. Hopkins, 18 Colo. 153 , 32 P. 70 (1893); Graff v. Portland Town & Mineral Co., 12 Colo. App. 106, 54 P. 854 (1898); Butsch v. Smith, 40 Colo. 64 , 90 P. 61 (1907); Enos v. Anderson, 40 Colo. 395 , 93 P. 475 (1907); Baird v. Baird, 48 Colo. 506 , 111 P. 79 (1910); Denver Sanitarium & Hosp. Ass'n v. Roberts, 65 Colo. 60 , 174 P. 300 (1918); Oppegard v. Oppegard, 90 Colo. 483 , 10 P.2d 333 (1932).

Party alleging mortgage has burden of proof. The burden of so establishing the fact rests upon the party who alleges the conveyance to be a mortgage. Oppegard v. Oppegard, 90 Colo. 483 , 10 P.2d 333 (1932).