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

Allan Capps embezzled more than $200,000 from American Roofing Supply of Colorado Springs, Inc. (American Roofing) (defendant). Capps and his wife used $50,000 of the stolen funds as a down payment on real estate purchased from Cedar Lane Investments (Cedar Lane) (plaintiff) under an installment land contract. After taking possession of the land, the Cappses used $22,300 and $16,000 of the embezzled funds on installment payments and improvements, respectively. The Cappses defaulted on their contract, and Cedar Lane commenced a forcible-entry-and-detainer action. By then, American Roofing had filed a lis pendens and judgment lien against the real estate in question. During the repossession action, the Cappses raised the issue whether they were entitled to equitable relief from their default. Cedar Lane argued that the Cappses were not entitled to equitable relief because the money used to purchase and improve the property belonged to American Roofing, not the Cappses. The trial court found that the Cappses had no rights in the property and granted possession to Cedar Lane. Cedar Lane next sued American Roofing to quiet title. American Roofing asserted a counterclaim for unjust enrichment to recover the money taken by Capps and given to Cedar Lane. Both parties filed motions for summary judgment. The trial court ruled in favor of Cedar Lane, finding that Cedar Lane was a bona fide purchaser (BFP) that received funds from the Cappses without knowledge of any claim by American Roofing. American Roofing appealed.