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

• Decision Date: 18 April 1996
• Docket Number: No. 95CA0602,95CA0602
• Citation: 919 P.2d 879
• Parties: CEDAR LANE INVESTMENTS, a Colorado general partnership, Plaintiff-Appellee, v. AMERICAN ROOFING SUPPLY OF COLORADO SPRINGS, INC., a Colorado Corporation, Defendant-Appellant. . IV
• Court: Colorado Court of Appeals

Page 879

919 P.2d 879

CEDAR LANE INVESTMENTS, a Colorado general partnership Plaintiff-Appellee, v. AMERICAN ROOFING SUPPLY OF COLORADO SPRINGS, INC., a Colorado Corporation, Defendant-Appellant.

No. 95CA0602.

Colorado Court of Appeals Div. IV.

April 18, 1996.

Rehearing Denied May 23, 1996.

Quimby & Higgins, B. Douglas Quimby, Sharon A. Higgins, Jayne Candea-Ramsey, Colorado Springs, for Plaintiff-Appellee.

Bill Edie, Colorado Springs, for Defendant-Appellant.

The Iuppa Law Firm, Barney Iuppa, Colorado Springs, for Defendant-Appellant (on the opening brief).

Opinion by Judge BRIGGS.

In this quiet title action, defendant, American Roofing Supply of Colorado Springs, Inc. (American Roofing), appeals from the judgment in favor of plaintiff, Cedar Lane Investments (Cedar Lane). We affirm in part, reverse in part, and remand for further proceedings.

Allan Capps, a stockholder and employee of American Roofing, 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.

After the Cappses entered into possession, they made 30 payments totalling $22,500 and constructed improvements on the real estate costing in excess of $16,000. The cost of the improvements was also funded with money Allan Capps stole from American Roofing.

The Cappses defaulted on the installment land contract by failing to make the balloon payment. Cedar Lane then commenced a forcible entry and detainer (F.E.D.) action against them. At that time, American Roofing had filed a lis pendens and a judgment lien against the real estate. However, while its counsel attended the F.E.D. hearing, American Roofing did not formally intervene.

One of the issues the Cappses raised at the hearing was whether they were entitled to any equitable relief from their default on the installment land contract pursuant to Grombone v. Krekel, 754 P.2d 777 (Colo.App.1988). Cedar Lane's counsel argued, among other things, that the Cappses had no equitable interest in the property because the money they expended for the down payment and improvements belonged not to the Cappses, but to American Roofing.

After the hearing, the trial court indicated it was satisfied with the statement of Cedar Lane's counsel that American Roofing would be allowed to claim whatever interest it believed it had in the property. The court therefore concluded that the Cappses had no right, title, or interest in the property, terminated the installment land contract, and granted Cedar Lane immediate possession.

Cedar Lane then commenced this quiet title action. American Roofing filed a counterclaim seeking recovery of the money taken from it by Allan Capps and paid to Cedar Lane. 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.

Both parties filed motions for summary judgment. Cedar Lane, relying in part on its asserted status as a bona fide purchaser without knowledge that Capps had stolen the money invested in the property, argued that American Roofing had no right, title, or interest in the property and requested that title be quieted in it. American Roofing argued it was entitled either to recover its funds under § 18-4-405 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 Cedar Lane was no longer in actual possession of the stolen funds, American Roofing was not entitled to relief under § 18-4-405. It also ruled that American Roofing was not entitled to equitable relief because Cedar Lane had received the funds from the Cappses without knowledge of any claim by American Roofing. Finally, the court found Cedar Lane was not unjustly enriched by the improvements to the real estate because Cedar Lane had not initiated them.

I.

American Roofing first contends that the trial court erred in concluding that it was not entitled to recover the stolen funds pursuant to § 18-4-405. We disagree.

Section 18-4-405 permits the rightful owner of property to recover stolen property in the possession of another person and, in certain circumstances, to obtain treble damages. The property may be recovered even if the person in possession is a bona fide purchaser for value. See In re Marriage of Allen, 724 P.2d 651 (Colo.1986).

The statute does not define "possession." However, in In re Marriage of Allen, supra, the supreme court interpreted the statute to permit recovery only against a person having possession of the actual property stolen. The court further noted: "Section 18-4-405 should not be read as a codification of the remedy of replevin or as a delineation of the grounds for creating a constructive trust. Instead, it provides independent remedies to the owner of stolen property in circumstances specifically described in the statute." In re Marriage of Allen, supra, 724 P.2d at 658.

The stolen property that American Roofing seeks to recover is the money Allan Capps used to purchase and improve the real estate. It is undisputed that Cedar Lane no longer has possession of the money, having used it for matters relating to its business. Therefore, because Cedar Lane is no longer in "possession" of the money, we conclude that the trial court properly granted summary judgment in favor of Cedar Lane on the claim against it under § 18-4-405. See In re Marriage of Allen, supra.

American Roofing also contends that it is entitled to damages based on a theory of conversion. However, that argument was not raised in the trial court and thus is not properly before us. We therefore decline to address it. See Matthews v. Tri-County Water Conservancy District, 200 Colo. 202, 613 P.2d 889 (1980); Hansen v. GAB Business Services, Inc., 876 P.2d 112 (Colo.App.1994).

II.

American Roofing also contends that the trial court erred in not granting it equitable relief. We conclude that further proceedings are necessary.

A.

American Roofing initially contends that Cedar Lane is precluded under the doctrine of judicial estoppel from contesting whether American Roofing had an interest in the real estate and that the trial court, on this basis, was required to grant the requested equitable relief. However, this argument is also raised for the first time on appeal, and we therefore likewise decline to address it. See Matthews v. Tri-County Water Conservancy District, supra; Hansen v. GAB Business Services, Inc., supra.

B.

To recover under a theory of unjust enrichment or quantum meruit, American Roofing must establish that: (1) a benefit was conferred on Cedar Lane; (2) the benefit was appreciated by Cedar Lane; and (3) the benefit was accepted by Cedar Lane under circumstances that would make it inequitable for Cedar Lane to retain the benefit without payment of its value. See Cablevision of Breckenridge, Inc. v. Tannhauser Condominium Ass'n, 649 P.2d 1093 (Colo.1982); Law Offices of Losavio v. Law Firm of McDivitt, 865 P.2d 934 (Colo.App.1993).

A constructive trust is a remedy for unjust enrichment. See 1 D. Dobbs, Law of Remedies § 4.3(2) at 597 (2d ed. 1993). It is an equitable device used to compel a person who unfairly holds property of another to convey that property to one to whom it justly belongs. Its purpose is to prevent the unjust enrichment of the person holding the property at the expense of the rightful owner. In re Marriage of Allen, supra.

An equitable lien is a special and limited form of a constructive trust. It provides a security interest in the property which can be used to satisfy the claim of a person who may have only a partial interest in the property. See Leyden v. Citicorp Industrial Bank, 782 P.2d 6 (Colo.1989).

Cedar Lane relies on the supreme court's conclusion in In re Marriage of Allen, supra, that neither a constructive trust nor an equitable lien may be used to defeat the interests of a bona fide purchaser for value. It contends that it was, in effect, a bona fide purchaser for value of the money received from the Cappses and the improvements to the property. Thus, it reasons, neither a constructive trust nor an equitable lien is appropriate.

In support of the contention that it was a bona fide purchaser for value, Cedar Lane argues that it gave "value" because it received the down payment pursuant to an arm's-length transaction involving an installment land contract: it agreed to transfer immediate possession of the real estate to the Cappses, it was required to give clear title to the real estate upon satisfaction by the Cappses of the terms of the installment land contract, and it gave up the opportunity to use the real estate or to sell it to someone else. Cedar Lane further argues that, as to the improvements, a claim for unjust enrichment is not supportable because it did not require, request, or encourage the Cappses to make the improvements.

We agree that a vendor can be treated in effect as a bona fide purchaser for value of money received. See generally 1 D. Dobbs, Law of Remedies, supra, § 4.7(2). However, with regard to the down payment, Cedar Lane's argument focuses on a strict definition of "value" at the time of the contract. In contrast, the supreme court has concluded that, in determining whether sufficient value has been given, the focus should be on whether, in light of the consideration exchanged, the person claiming bona fide purchaser status has been unjustly enriched. See In re Marriage of Allen, supra.

By accepting the obligations of the installment land contract and transferring possession of the real estate to the Cappses, Cedar Lane initially gave sufficient consideration to defeat a claim of unjust...