Colorado`s race-notice system makes the date of registration the default destination key of priority for all deposit rights. See § 38-35-109 (1), C.R.S. 2014; Premier Bank v. Bd. Of. Cnty. Comm`rs, 214 p.3d 574 , 579 (Colo. App. 2009) („Race-notice is the linchpin of Colorado real estate law. Its purpose is to allow a buyer or mortgage borrower, by analyzing the chain of ownership, to determine exactly what he acquires. „(Citation omitted)). However, Colorado`s racial notification system does not prohibit parties from altering these individual seniority rights against one another in private.
See Co-Alliance, LLP v. Monticello Farm Serv., Inc., 7 N.E.3d 355, 358 (ind. Ct. App. 2014) („Subordination agreements are nothing more than contractual changes to deposit priorities.” On the other hand, partial subordination has a neutral effect on third parties. According to the partial subordination approach „if A C is subordinated, C becomes the highest secured creditor, but only to the extent of A`s initial right of deposit”. Tomar at 16 years old. This means that if the interest of C is greater than that of A, C can only recover before B to the extent of the interest of A. All the interest that C has beyond that of A can only be recovered after payment of B`s interest.
„In this partial approach of subordination, B is in no way concerned by the agreement between A and C, in which he was not initiated.” B remains in second place after the total amount of A`s initial deposit and does not receive a stroke of luck and does not suffer the negative consequences. . Essentially, B`s interest is absolutely not affected by A and C`s subordination agreement.” Id. Subordination agreements shall not affect the priority of the rights of pledge of third parties who are not parties to such an agreement. This is the critical approach that underlies the partial subordination approach. The Colorado Court of Appeals recently ruled on a first-impression issue in Colorado about the impact of a subordination agreement on deposit priorities. In particular, the Court of Justice had to decide whether to apply to this analysis the partial subordination approach or the total subordination approach. In the end, the Colorado Court of Appeals sided with the majority of the courts that considered this issue and applied the partial subordination approach to the analysis of pledge rights. See Tomar Development, Inc. v. Friend, — P.3d —, 2015 COA 73, 2015 WL 3503880 (Colo.
App. 2015). The effects of this decision are explained in this article. It should be noted that courts that have adopted the full subordination approach have not addressed this issue for more than 20 years. Given the logical appeal of partial subordination, it is possible that the partial subordination approach may be widely accepted by U.S. courts in the coming years. . .