2013 CO 10
Colo.2013Background
- AC Excavating sued Yale, LLC, and others alleging a violation of Colorado's construction trust fund statute for funds not held in trust.
- Yale, a member and manager of the LLC, deposited $157,500 of his personal funds into the LLC's bank account to shore up the financially strapped project.
- Trial court held the $157,500 were not trust funds under 38-22-127(1) because they were a survival loan, not disbursements on a construction project.
- Court of Appeals reversed, holding the funds fell within the statute since they were disbursed to the contractor (the LLC) on a construction project, regardless of intent.
- Colorado Supreme Court granted certiorari to resolve whether owner loans capitalizing a single-project LLC are subject to the trust fund statute and whether the theft claim could attach if funds were not held in trust.
- The court held that the $157,500 injections were not disbursed on a construction project and thus not subject to the trust fund statute; the theft claim could not be maintained on those funds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does a capital contribution/owner loan to an LLC count as funds disbursed on a construction project under 38-22-127(1)? | AC Excavating argued all funds disbursed to a contractor on a construction project fall under the statute, regardless of source or intent. | Yale/LLC argued such injections are capital contributions, not disbursements on a construction project, so not within the statute. | No; not disbursed on a construction project. |
| Does the statute apply when the recipient is an LLC with a single project and funds are used for general operations? | Disbursements to a contractor on a construction project trigger the trust; intent not required. | Capital injections to fund general operations are not disbursements on a construction project. | No; injections not on a construction project are excluded. |
| Should the court consider the disburser's intent when determining applicability of the trust fund statute? | Intent should not be controlling; the statute applies based on disbursement on a project. | Intent and earmarking are relevant to whether funds were disbursed on a construction project. | Intent may be considered, but it does not change the outcome here; funds were not on a construction project. |
| If funds are not trust funds under 38-22-127(1), can the recipient be liable for civil theft under 38-22-127(5) and 18-4-401/18-4-405? | The use of funds to pay other obligations could constitute theft if not held in trust. | Since funds were not trust funds, theft claims fail. | Yale cannot be civilly liable for theft for using those funds. |
Key Cases Cited
- In re Regan, 151 P.3d 1283 (Colo. 2007) (trust fund purpose protects homeowners and subcontractors)
- Flooring Design Associates, Inc. v. Novick, 923 P.2d 216 (Colo. App. 1995) (no requirement of settlor intent to create a trust, but distinguish construction context)
- AC Excavating, Inc. v. Yale, 297 P.3d 937 (Colo. App. 2010) (courts may consider disburser's intent to determine construction-project disbursement)
- People v. Anderson, 773 P.2d 542 (Colo. 1989) (theft statutes and elements governing proceedings)
- Crissey Fowler Lumber Co. v. First Cmty. Indus. Bank, 8 P.3d 531 (Colo. App. 2000) (construction loan mechanics and disbursement considerations)
- Syfrett v. Pullen, 209 P.3d 1167 (Colo. App. 2008) (homeowner disbursements under construction contracts)