Colorado has a Trust Fund Statute, which provides:
All funds disbursed to any contractor or subcontractor under any building, construction, or remodeling contract or on any construction project shall be held in trust for the payment of subcontractors, laborer or material suppliers, or laborers who have furnished laborers, materials, services, or labor, who have…or may have a lien…or who claim, or may claim against the principal and surety….
Colo. Rev. Stat. § 38-22-127(1). While the statute states that a contractor must hold in trust all funds received for the benefit of subcontractors, the statute does not properly address which parties have standing to enforce the trust or the process for doing so.
In Syfrett v. Pullen, a December 2008 opinion, the Colorado Court of Appeals addressed both of these issues. A homeowner brought actions against a construction contracting firm for breach of contract, breach of fiduciary duty and non-compliance with the Colorado Trust Fund Statute. The contractor argued that the homeowner did not have standing with respect to the Trust Fund Statute claims because an owner does not have a legally protected interest with respect to the Trust Fund Statute. The Colorado Court of Appeals disagreed, holding that the “property owner of a construction project, as well as the subcontractors, material suppliers, and laborers, has a legally protected interest to enforce the trust created” by the Trust Fund Statute. The court then held that a constructive trust was the appropriate mechanism by which an owner can enforce the Trust Fund Statute.
Syfrett v. Pullen , No. 08CA0243, 2008 WL 5352682 (Colo. App. Dec. 24, 2008)