## Facts

- ALH Holding Company sold real property to Linda Crocker and Robert Hackley for $165,000.
- The buyers borrowed $110,000 from ALH and executed a promissory note secured by a vendor’s purchase money deed of trust in ALH’s favor.
- The buyers also borrowed $55,000 from the Bank of Telluride and executed a promissory note secured by a purchase money deed of trust in the Bank’s favor.
- Before closing, ALH and the Bank each knew the other would be making a purchase money loan secured by a deed of trust on the same property.
- The closing occurred June 29, 1993; the next day both deeds of trust were recorded, with the Bank’s deed recorded first.
- The buyers defaulted on both notes.
- The Bank initiated public trustee foreclosure, asserting its deed of trust was superior.
- ALH sued for injunctive relief and a declaratory judgment determining the liens’ priority.

## Issues

1. Whether Colorado’s race-notice recording statute determines priority between a vendor’s purchase money deed of trust and a third-party purchase money deed of trust executed as part of the same sale transaction.
2. Whether a third-party purchase money lender that recorded first can obtain priority when it had actual notice of the vendor’s purchase money security interest before acquiring its own interest.
3. Whether Colorado common law gives priority to the vendor’s contemporaneously executed purchase money deed of trust over a third-party purchase money deed of trust.

## Decision

- The Colorado Supreme Court reversed the court of appeals and reinstated the district court’s judgment for ALH.
- The recording statute did not resolve priority because the Bank had actual notice of ALH’s purchase money deed of trust before the Bank acquired its interest.
- Under Colorado law apart from the recording statute, ALH’s vendor’s purchase money deed of trust, executed contemporaneously with the sale, had priority over the Bank’s third-party purchase money deed of trust despite the Bank’s earlier recording.

## Legal Principles

- A race-notice recording statute protects a subsequent purchaser or encumbrancer only if it takes without notice of a prior unrecorded interest and records first; actual notice defeats statutory protection.
- A vendor’s purchase money deed of trust executed as part of the same transaction as the conveyance of title has priority over a third-party purchase money deed of trust encumbering the same property.
- When conveyance and purchase money security are contemporaneous, the buyer does not obtain unencumbered title capable of supporting a superior intervening lien in favor of a third-party lender participating in the same transaction with notice.

## Conclusion

Colorado recognized priority in the vendor’s contemporaneously executed purchase money deed of trust over a third-party purchase money deed of trust where the third-party lender had actual notice of the vendor’s interest, making a first-to-record outcome unavailable under the recording statute.


ALH Holding Co. v. Bank of Telluride, 18 P.3d 742 (Colo. 2000)