Summary
The Colorado Supreme Court held that judgment liens do not attach to real property in which the judgment debtor has no legal or equitable interest, including property fraudulently benefited by the debtor but titled in another's name. The court concluded that Colorado's race-notice statute did not determine priority among the creditors because the debtor had no attachable interest when the judgments were recorded. The creditor who first filed an action to uncover the fraudulent transfer and obtained a constructive trust and lis pendens therefore had first priority, while intervening creditors shared subsequent priority equally.
Topics
Practice areas
Questions Presented
- Whether a judgment debtor who fraudulently pays off a promissory note encumbering real property titled in the debtor's spouse holds a legal or equitable interest to which creditors' recorded judgment liens may attach.
- Whether a junior judgment creditor who first brings an action to uncover the fraudulent transfer and obtains a constructive trust and equitable lien has priority over senior creditors whose judgments were recorded earlier.
Holdings
- Because Altberger had neither a legal nor an equitable interest in the townhouse when the other creditors recorded their judgments, those judgment recordings did not create liens on the townhouse.
- Colorado's race-notice statute does not determine priority where the judgment debtor had no legal or equitable interest in the property when the judgments were recorded.
- Whalen obtained first priority because he was the first creditor to bring an action uncovering the fraud, record a notice of lis pendens, and successfully obtain a constructive trust and equitable lien on the townhouse.
- Shepler, Thornock, and Lamb established liens at the same time and therefore shared equally in priority after Whalen satisfied his judgment.
Key quotations
“Where the judgment debtor had neither a legal nor an equitable interest in the property, recording a judgment does not create a lien on the property because there is no interest on which the lien could attach.” (1085-86)
“Where it is alleged that property titled in the name of another has been fraudulently conveyed by the judgment debtor, the creditor must file an action to uncover the fraud.” (1086)
“We hold that Whalen takes first priority because he first established a lien that attached to the property by bringing the action to uncover the fraud and impose the constructive trust.” (1090)
Factual background
The parties were judgment creditors of Sanford Altberger and Orovi, Inc. The townhouse where Altberger lived with his wife had always been titled solely in the wife's name, but Altberger transferred $353,000 from Orovi to pay off the townhouse mortgage while he and Orovi owed numerous creditors. Whalen discovered the transaction, filed an action alleging fraudulent transfer, and recorded a notice of lis pendens; the trial court found the transfer fraudulent and imposed a constructive trust and equitable lien for the creditors' benefit.
Procedural history
Whalen filed an action seeking an equitable lien or constructive trust and a writ of execution against a townhouse titled solely in Judith Altberger's name, alleging that Sanford Altberger fraudulently caused his corporation to pay off the property's mortgage. Shepler, Thornock, and Lamb intervened. The trial court imposed a constructive trust and equitable lien for the benefit of the creditors but applied judgment-recording priority, placing Whalen last. The court of appeals reversed and awarded priority to Whalen; the Supreme Court affirmed.