Opinion ID: 2638092
Heading Depth: 2
Heading Rank: 2

Heading: Trust Fund Statute

Text: We turn now to the language of the Trust Fund Statute. The Trust Fund Statute contains five subsections, each addressing different aspects and obligations of claimants and contractors. At issue before us today is subsection one. [5] Subsection one defines who is entitled to the protection of the statute. Trust fund claims, according to the plain language of the statute, can be made by two groups: subcontractors, laborers, or material suppliers who either (1) have a lien or may have a lien against property or (2) claim or may claim against a principal or surety. § 38-22-127(1). The similarity of the language used in the Trust Fund Statute in subsection one and the language in section 38-22-101(1) indicates that the General Assembly meant for these two sections to be read together. In other words, those who have a lien under section 38-22-127(1) are defined by section 38-22-101(1): an interest laborers and material suppliers have in a property to which they added value at the request of the owner or the owner's agent, such as the contractor. This is distinct from those who have a perfected lien as defined by sections 38-22-109 and 110: those who have met the timing requirements necessary to enforce a lien. By its plain language, the Trust Fund Statute allows subcontractors, laborers, and material suppliers to assert claims directly against contractors if they have a lien (i.e., added value to a property). In contrast, a perfected lien (a lien secured by following lien claim procedures) secures payment to subcontractors only indirectly, by encumbering the property and forcing the property owner to either pressure the contractor to pay the subcontractor, or make a double payment to the lien holder. The Trust Fund Statute is in this way both related to and separate from the lien claim statutes. Trust fund claims are separate from lien claims in part because of the different rights that property owners have under each procedure. A property owner cannot file a lien claim against his or her own property. Damrell v. Creagar, 42 Colo.App. 281, 599 P.2d 262 (1979). However, property owners are direct beneficiaries of the Trust Fund Statute to prevent the possibility of having to make double payments. In re Walker, 325 B.R. 598, 602 (D.Colo.2005). When an owner pays a contractor and then a subcontractor places a lien on the owner's property, the owner is faced with the possibility of having to also pay the subcontractor to clear the lien cloud from the property. Id. In contrast, the Trust Fund Statute assures property owners that they will not have to pay a second time to satisfy the subcontractor. In fact, the primary concern of the legislature, at the time the Trust Fund Statute was passed, was the protection of property owners against unscrupulous contractors. Transcript of Audio Tape: Hearing on H.B. 1510 Before the H. Bus. Affairs Comm., 1975 Leg., 50th Gen. Assem., 1st Reg. Sess. (Colo. Apr. 910, 1975) (on file with Colorado State Archives). As beneficiaries, property owners are able to enforce the Trust Fund Statute against a contractor separate from the lien claim laws. Id.; see People v. Collie, 682 P.2d 1208, 1210 (Colo. App.1983) (noting that the purpose of the Trust Fund Statute is to protect homeowners, laborers, and materialmen from dishonest or profligate contractors ) (emphasis added); First Commercial Corp., 572 F.Supp. at 1434 (noting that the statute creates a separate form of protection because any other interpretation would render either lien claims or trust fund claims superfluous). To further understand why lien claim procedures are not part of trust fund claims, we look to the third alternative provided by the mechanics' lien lawsbond claims. The General Assembly wrote the bond claim statutes at the same time as the Trust Fund Statute. 1975 Colo. Sess. Laws 1420, 1420-26. However, the General Assembly specifically imported the lien claim procedure into the bond claim procedure. Section 38-22-133 specifically says that the statute of limitations applicable to lien foreclosures shall apply to bond claims: When a bond or undertaking is filed . . . the person filing the original mechanic's [sic] lien may bring an action upon the said bond or undertaking. Such action shall be commenced within the time allowed for the commencement of an action upon foreclosure of the lien, and the statute of limitations applicable to a lien foreclosure shall apply to the action upon the bond or undertaking as it would had no bond or undertaking been filed. § 38-22-133, C.R.S. (2006) (emphasis added). If the General Assembly wanted lien claim procedures to apply to trust fund claims, it could have included lien claim procedures in the Trust Fund Statute at the same time, and in the same manner, as the bond claim statute. It did not. We cannot read the Trust Fund Statute to include lien claim procedures where no language supporting such a conclusion can be found. See People v. Cross, 127 P.3d 71, 73 (Colo.2006) (noting that it is improper for this Court to add language to a statute in contravention of legislative intent). Although the Trust Fund Statute could be read narrowly, as the district court did, such a reading cannot be reconciled with the General Assembly's intent to protect subcontractors, laborers, material suppliers, and homeowners from unscrupulous contractors. Further, the technical phrase have a lien or may have a lien must be read according to the technical meaning given by the mechanics' lien laws. § 2-4-101. A lien is defined by the General Assembly in section 38-22-101(1): a claim on property by a person who has added value to that property. Therefore, a trust fund claim may be made by a person who has added value to a property or may have added value to a property, as limited by section 38-22-101(1). A subcontractor, laborer, or material supplier's ability to make a claim under the Trust Fund Statute is thus no more or less broad than the ability to claim a lien at the time that the lien ariseswhen labor or materials are supplied. In this way, the Trust Fund Statute works harmoniously with the entire statutory scheme governing the General Mechanics' Lien laws.