Opinion
No. 72-096
Decided April 3, 1973.
Action alleging unjust enrichment. In prior action plaintiff was determined to have been an inferior secured creditor as regards certain collateral, and plaintiff was ordered to pay the value of that collateral to defendant's creditor. From judgment for the defendant, plaintiff appealed.
Affirmed
1. SECURED TRANSAIONS — Plaintiff — Converted — Tractor — Payment — Secured Creditor — Debtor — Not — Unjustly Enriched. Where, in prior action, defendant held an interest in a tractor and owed a debt against that interest, and where it was there determined that plaintiff had converted the tractor and was therefore ordered to pay the value of the tractor to defendant's secured creditor, after such payment defendant had neither an interest in the tractor nor a debt against that interest; and thus, he was not unjustly enriched by plaintiff's payment.
2. Secondary Creditor — Converted — Collateral — No Right of Action — Against — Primary Creditor's Debtor. In situation where secondary creditor on certain collateral was determined, in prior litigation, to have converted the collateral and was ordered to make payment for that conversion to the primary creditor, such secondary creditor has no right of action against the primary creditor's debtor if the collateral on the primary debt is insufficient to cover its secondary debt; its only action is against its own debtor, and the fact that prior litigation essentially established it to be an unsecured creditor, as regards its own debtor, does not place any liability on the primary creditor's debtor.
Appeal from the District Court of the City and County of Denver, Honorable George M. McNamara, Judge.
Dawson, Nagel, Sherman Howard, Arthur K. Underwood, Jr., John W. Low, David R. Johnson, for plaintiff-appellant.
Richard M. Huckeby, Jerry W. Uhrlaub, for defendant-appellee.
Division I.
This case initially involved a dispute between two secured creditors over a tractor which served as collateral for loans by each creditor to two different debtors. In a prior decision of this court, we determined that one of the creditors, General Electric Credit Corporation (G.E.) had a prior security interest over the other, The American National Bank of Denver (Bank). American National Bank v. Etter, 28 Colo. App. 511, 476 P.2d 287. In that case, the Bank had converted the collateral, and we ordered it to pay the value of the tractor to G.E.
We also determined in that case that G.E.'s debtor, K. L. Etter Construction Company (Etter), had an inferior interest in the collateral as against the Bank, pursuant to the terms of C.R.S. 1963, 155-2-326. See American National Bank v. Tina Marie Homes, Inc., 28 Colo. App. 477, 476 P.2d 573; American National Bank v. Christensen, 28 Colo. App. 501, 476 P.2d 281.
[1] Following payment to G.E., the Bank filed this action against Etter, contending that its payment to G.E. released Etter form its debt, and, therefore, Etter was unjustly enriched at the expense of the Bank. The Bank's contention is wholly without merit. Prior to the conversion, Etter had an interest in the tractor and a debt against that interest. After the conversion by the Bank and the decision in American National Bank v. Etter, supra, he had neither, and thus, he was nt enriched by the Bank's action.
There is no dispute that G.E., as holder of the prior security interest, had the right to repossess the collateral and sell it. The proceeds of such a sale would have been credited to its debtor's account, and of course, if sufficient to release the debt, the debtor would have been released entirely. On the facts before us, the Bank's conversion of this property does not change these relationships, rights or duties. The judgment against the Bank in the initial proceeding in this matter amounts to a determination by the trial court that the Bank had to pay to G.E. what G.E. would have received had it foreclosed its collateral.
[2] By this suit, the Bank is contending that it, as secondary creditor, has the right to go against the primary creditor's debtor if the collateral on the primary debt is insufficient to cover its secondary debt. We find no basis in law or equity for such an action. The Bank, in order to recoup losses resultant from its own conversion, has no standing to sue G.E.'s debtor. Its only action is against its own debtor, and the fact that prior litigation has essentially established the Bank to be an unsecured creditor, as regards its own debtor, does not place any liability on Etter.
Judgment affirmed.
JUDGE COYTE and JUDGE ENOCH concur.