In re Courson

Anthony Courson, who had an ownership interest in Randall’s Auto Sales, Inc. (Randall’s), bought a boat and trailer from Randall’s and financed the purchase through First Security Bank (First Security). The terms of the loan required Courson to insure the boat and the trailer for the benefit of First Security. First Security sold the loan to Wells Fargo Bank. Randall’s later sold the boat and trailer to Jeff Buxton but did not transfer title to him. Buxton financed his purchase through Gesa Credit Union (Gesa) and, as required by the terms of his loan, insured the boat and trailer through Safeco Insurance Company (Safeco) for the benefit of Gesa. At the time of Buxton’s purchase, neither he nor Gesa knew that the boat and trailer were collateral for Wells Fargo’s loan to Courson, nor did they know that Courson had failed to pay off the loan. About a year after Buxton purchased the boat and trailer, they were destroyed in an accident, and Safeco paid Gesa for the loss. Safeco did not learn of Wells Fargo’s interest in the property until after its payment to Gesa. Courson subsequently declared bankruptcy. Wells Fargo later obtained a judgment against Courson in the amount of his original loan. The judgment was not dischargeable in bankruptcy. Fearing that Courson would not pay the judgment, Wells Fargo petitioned the court for an equitable lien on the insurance proceeds that Safeco had paid to Gesa. Gesa moved to dismiss Wells Fargo’s claim.