Construction Law

Owner Can Pursue Trust-Fund Claim Against General Without First Paying Subcontractors

By Tim Gordon

Syfrett v. Pullen (Colo. App. Dec. 24, 2008).

A division of the Court of Appeals held that a project owner has standing to sue a general contractor for violation of the trust fund statute due to the general contractor's failure to pay its subcontractors, even though the owner had not paid any of the unpaid subcontractors, laborers, or suppliers.

But the Court of Appeals also held that when an owner recovers against a general contractor for violation of the trust fund statute, and the subcontractors and suppliers remain unpaid, then the owner is only entitled to judgment for a constructive trust on the funds.  Thus, the owner becomes the constructive trustee of any funds collected, and must hold the funds for the benefit of the subcontractors, laborers, and suppliers who are unpaid and have claims on those funds.  This includes any treble damages awarded.

Download the opinion

Contact the author

Full post as published by Colorado Construction Law on December 24, 2008 (boomark / email).