Colorado § 38-38-602 - Appointment of receiver to prevent waste.

§ 38-38-602. Appointment of receiver to prevent waste.

(1) During the period of redemption, the owner of the premises or the person in possession shall not commit waste, and the purchaser shall have such action or remedy for waste, including injunction, as he would have as owner of the premises. During such period, the owner of the premises shall keep the premises in repair, shall use reasonable diligence to continue to keep the premises yielding an adequate income, and shall pay current taxes before a penalty accrues and interest becomes due on any prior encumbrance, keep the premises insured for the protection of the holder of the certificate of purchase, and, in case of a leasehold, pay the rent and other sums due under the lease, and failure to do so shall constitute waste. In case of waste committed or danger of waste or an actual probability of the security being rendered inadequate, a receiver may be appointed to take possession and preserve the property at any time after the sale under such foreclosure. A receiver appointed before the sale shall continue after sale unless otherwise directed by the court.

(2) If the facts would justify the appointment of a receiver under this section but one is not applied for and if the premises are abandoned by the owner thereof, the purchaser may take possession and shall be subject to the same duties and liabilities for the care of the premises and for the application of the rents and profits as would a receiver.

(3) Nothing in this article shall restrict the power of the court in the appointment of a receiver pursuant to existing law or pursuant to agreement between the parties.

Source: L. 90: Entire article R&RE, p. 1674, § 2, effective October 1.

Editor's note: This section is similar to former § 38-39-113, as it existed prior to 1990.

ANNOTATION

Law reviews. For article, "Foreclosure by Sale by Public Trustee of Deeds of Trust in Colorado", see 14 Dicta 5 (1936). For article, "Foreclosure by Sale by Public Trustee of Deeds of Trust in Colorado", see 28 Dicta 437 (1951). For article, "Public Trustee's Deeds and Redemption Under Section 362 of the Bankruptcy Code", see 12 Colo. Law. 229 (1983). For article, "Use of Receivers in Real Estate Foreclosures", see 16 Colo. Law. 988 (1987).

Annotator's note. Since § 38-38-602 is similar to § 38-39-113 as it existed prior to the 1990 repeal and reenactment of this article and article 39, relevant cases construing that provision have been included in the annotations to this section.

Applicability of section. The section applies primarily to the obligation of the owner of the premises while in possession and the rights of the holder of the certificate of purchase, where the owner abandons possession. Ginsberg v. Bennett, 101 Colo. 121, 71 P.2d 419 (1937).

Section puts affirmative duty on the mortgagor in possession during the redemption period to keep the premises in repair, use reasonable diligence to keep the premises yielding an adequate income, and to pay current taxes before penalties accrue. Schwab v. Martin, 165 Colo. 547, 441 P.2d 17 (1968).

Although the owners had a right to remain on the property during the redemption period, they also had a duty to prevent waste, including paying the taxes, insurance, and interest on prior encumbrances on the property. However, because the purchasers did not pay any insurance premiums on the property and because the owners' obligations to pay interest under the first and second deeds of trust were extinguished in bankruptcy, the purchasers are not entitled to recover for these items. Elrick v. Merrill, 10 P.3d 689 (Colo. App. 2000).

Purchasers entitled to appointment of receiver. The purchasers who had surrendered their notes and deeds of trust to the public trustee were entitled to appointment of a receiver after sale, both under the terms of their deeds of trust and under this section which specifically authorizes appointment of a receiver after sale where there is danger of waste. Schwab v. Martin, 165 Colo. 547, 441 P.2d 17 (1968).

Receivership for property's protection inures to owner's benefit. Where the receivership was necessary for the protection of the real property, the subject matter of the receivership inures to the benefit of the record owner and not for the benefit of the purchasers. Phillips v. Webster, 162 Colo. 315, 426 P.2d 774 (1967).

Sections permit holder's possession without applying for appointment of receiver. This section and § 38-39-112 permit the holder of a certificate of purchase to take possession of the property sold without applying for the appointment of a receiver by the court where the property was abandoned by the owner. Graham v. Alcoves., Inc., 148 Colo. 379, 366 P.2d 375 (1961).

Mortgagee has but inchoate lien on rentals. Under this section and the general law as announced both prior, and subsequent, to the enactment of this section, a mortgagee, even though the rents are pledged as security, until he takes some effectual step to subject them to the payment of his debt, has but an inchoate or passive lien on such rentals. Moncreiff v. Hare, 38 Colo. 221, 87 P. 1082 (1906); Fisher v. Norman Apts., Inc., 101 Colo. 173, 72 P.2d 1092 (1937); Megginson v. Hall, 111 Colo. 104, 137 P.2d 411 (1943).

Mortgagor entitled to rentals absent pledge of rentals in trust deed. Where a trust deed does not expressly pledge rents and profits of the mortgaged premises in payment of the debt, and where the mortgagor is in possession, no receiver appointed, and no foreclosure decree entered, the mortgagor is entitled to the rentals. Erwin v. West, 105 Colo. 71, 99 P.2d 201 (1939).

Court may appoint a receiver in the event of default without regard to the adequacy or value of collateral property or the solvency of any party liable on the debt where the parties have agreed by contract for such appointment. Bank of Am. Nat'l Trust & Sav. Ass'n v. Denver Hotel Ass'n Ltd. P'ship, 830 P.2d 1138 (Colo. App. 1992).

Applied in Friedrichs v. Midland Sav. & Loan Co., 94 Colo. 563, 31 P.2d 493 (1934); Rowe v. Tucker, 38 Colo. App. 532, 560 P.2d 843 (1977); Jenkins v. Peet, 13 B.R. 721 (D. Colo. 1981); Valley Fed. S & L v. Aspen Accommodations, 716 P.2d 483 (Colo. App. 1986); Bank of Am. v. Denver Hotel Ass'n, 830 P.2d 1138 (Colo. App. 1992).

PART 7

GENERAL PROVISIONS AND APPLICATION