Summary
denying recovery where defendant could not have stopped benefit and could not reasonably return it
Summary of this case from DCB Construction Co. v. Central City Development Co.Opinion
No. 77-379
Decided June 22, 1978.
Mechanic's lien claimant appealed trial court's dismissal of its unjust enrichment cross-claim against mortgage lender who had purchased the subject property at foreclosure sale.
Affirmed
1. MORTGAGES — Purchaser — Foreclosure Sale — Takes Property — Subject — Valid Liens — Not Personal Obligations. A purchaser at a foreclosure sale takes the property subject only to valid liens, and these liens are enforceable only against the property and are not personal obligations.
2. MECHANICS' LIENS — Lien Invalid — Claimant — May Proceed — Personal Action — Enforce — Any Other Remedy — Must Establish — Entitlement — Relief Sought. If a mechanic's lien is invalid, a claimant entitled thereto may proceed in a personal action as in an action on contract, and such a claimant is not prevented from enforcing any other remedy which it otherwise would have had; however, as in any other action the claimant must establish that it is entitled to the relief sought.
3. Lien Claimant — Unjust Enrichment — Action — Against — Mortgage Lender — Foreclosure Sale Purchaser — Benefit Received — Not Shown as Unjust — Dismissal Proper. Where mechanic's lien claimant sought to recover a personal judgment on unjust enrichment theory against mortgage lender, which lender had purchased the subject property at a foreclosure sale, it is true that the property in question was benefited by the incorporation of the doors furnished by the claimant, and that perhaps the lender benefited by receiving this part of the loan security for which it paid, but there is nothing to show that retention of that benefit was unjust or that restitution is required; thus, dismissal of the unjust enrichment claim was proper.
Appeal from the District Court of Larimer County, Honorable John A. Price, Judge.
Grant, McHendrie, Haines Crouse, P.C., Peter J. Crouse, James E. Brown, for defendant-appellee.
Thomas Esperti, P.C., Don R. Teasley, for intervenor-appellant.
Taylor Building Products of Denver, Incorporated (Taylor), appeals from a judgment dismissing its crossclaim for unjust enrichment against B-A Mortgage Company of Denver, Inc. (the mortgage lender). We affirm.
This matter was tried to the court on stipulated facts and exhibits. It was stipulated that in January 1974, Lone Pines, Ltd. (the owner), owned a tract of land in Estes Park on which it sought to erect a motel. The mortgage lender made a construction loan to the owner, secured by a deed of trust on the property. All of the loan proceeds, $2,100,000, were disbursed for the construction of the motel.
Taylor's claim was for the $5,797 agreed value of doors delivered to and incorporated into the project. At the time, the general contractor (at whose request the doors were furnished) and the owner knew these doors were being incorporated into the motel and knew that Taylor expected payment for them. Not being paid, Taylor filed a mechanic's lien statement, but this was done too late to be in compliance with § 38-22-109(5), C.R.S. 1973.
Subsequently, the construction loan went into default and at the conclusion of foreclosure proceedings initiated by the mortgage lender, it purchased the property at sheriff's sale for $2,211,638.65.
At the time the mortgage lender purchased the property, it knew that various mechanics' liens had been filed against the property and that a suit had been filed to foreclose some of these liens, including that of Taylor for the doors. However, the lender understood that Taylor's lien statement was not timely.
There was no dispute that, because of its late filing, Taylor did not have a valid mechanic's lien against the property. In November 1975, subsequent to the foreclosure sale, Taylor amended its pleadings to include, for the first time, a crossclaim of unjust enrichment against the owner and against the mortgage lender.
On these facts, the trial court entered a judgment for unjust enrichment in the amount of the value of the doors plus interest against the owner, but dismissed the crossclaim against the mortgage lender. The owner did not appeal, so the propriety of the judgment against it is not an issue here.
On appeal, Taylor contends that it was also entitled to a personal judgment against the mortgage lender, based on the claim that it, as the purchaser at the foreclosure sale, accepted the property with knowledge that the doors had not been paid for. We do not agree.
[1,2] A purchaser at a foreclosure sale takes the property subject only to valid liens — and these liens are enforceable only against the property and are not personal obligations. Brannan Sand Gravel Co. v. Santa Fe Land Improvement Co., 138 Colo. 314, 332 P.2d 892 (1958). If a lien is invalid, a claimant entitled thereto may proceed in a personal action as in an action on contract, § 38-22-117, C.R.S. 1973, and it is not prevented from enforcing any other remedy which it otherwise would have had. See Hayutin v. Gibbons, 139 Colo. 262, 338 P.2d 1032 (1959); § 38-22-124, C.R.S. 1973. However, as in any other action, the claimant must establish that it is entitled to the relief sought.
[3] To recover for unjust enrichment, Taylor had the burden of proving (1) that it conferred a benefit, (2) that the benefit was appreciated, and (3) that the benefit was accepted under circumstances such that it would be inequitable for it to be retained without payment of its reasonable value. Dass v. Epplen, 162 Colo. 60, 424 P.2d 779 (1967). Taylor failed to prove its case.
The property was benefited by the incorporation of the doors, and the lender could perhaps be said to have benefited by receiving this part of the loan security for which it had paid. See Restatement of Restitution § 1, Comment b. Also, it knew the doors had been put in. However, there is nothing to show that retention of that benefit was unjust or that restitution is required. See Restatement of Restitution § 1, Comment c. In consideration of its lending $2,100,000 to the owner, the lender was to have a first security interest in the finished motel, which included the doors. It paid in full for that security interest. It paid in excess of that amount when it purchased the property at the foreclosure sale. There is no injustice in holding that the lender, who has paid once, need not pay a second time. Taylor could have protected itself if it had exercised its lien rights against the property.
Judgment affirmed.
JUDGE ENOCH concurs.
JUDGE BERMAN specially concurs.