Cedar Lane Investments v. American Roofing Supply Of Colorado Springs, Inc.

919 P.2d 879 (1996)

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Nature of the Case

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Facts

Capps, a stockholder, and employee of D, embezzled more than $200,000 from the company. Approximately $50,000 of this amount was used as a down payment on commercial real estate that he and his wife purchased from Cedar Lane pursuant to an installment land contract. The contract required, in addition to the $50,000 down payment, that the Cappses pay $750 in monthly interest and make a balloon payment of $100,000 after two and a half years. Thirty payments were made totaling $22,500, and constructed improvements on the real estate costing in excess of $16,000 were done. The cost of the improvements was funded courtesy of D. The Cappses defaulted on the installment land contract by failing to make the balloon payment. P then commenced a forcible entry and detainer action. D filed a lis pendens and a judgment lien against the real estate. However, while its counsel attended the detainer hearing, D did not formally intervene. The court concluded that the Cappses had no right, title, or interest in the property, terminated the installment land contract, and granted P immediate possession. P then commenced this quiet title action. D filed a counterclaim seeking recovery of the money taken from it by Allan Capps and paid to P. It set forth a claim for relief based on § 18-4-405, C.R.S. (1995 Cum. Supp.) and another based on a claim of unjust enrichment. P asserted status as a bona fide purchaser without knowledge that Capps had stolen the money invested in the property and argued that D had no right, title, or interest in the property and requested that title be quieted in it. D argued it was entitled either to recover its funds under § 118-4-405 or to equitable relief for unjust enrichment. It requested that the court impose a constructive trust or equitable lien on the real estate. The trial court concluded that, because P was no longer in actual possession of the stolen funds, D was not entitled to relief under § 18-4-405. It also ruled that D was not entitled to equitable relief because P had received the funds from the Cappses without knowledge of any claim by D. the court found that P was not unjustly enriched by the improvements to the real estate because P had not initiated them.