CEDAR LANE INVESTMENTS V. AMERICAN ROOFING SUPPLY OF COLORADO SPRINGS, INC.
919 P.2d 879 (1996)
NATURE OF THE CASE: This was a quiet title action. American Roofing (D) appealed the
judgment. Cedar Lane Investments (P) brought an action to quiet title against D. D
counterclaimed, seeking recovery of money taken from it by the purchaser and paid to the
seller pursuant to Colo. Rev. Stat. 18-4-405 (1995). The District Court of El Paso County
entered a judgment in favor of the seller.
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.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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