You are not defined by what you do – nor is your LLC. An LLC created for the purpose of developing a property suffers major financial problems. The sole member and manager loaned his own funds to the company. The LLC fails anyway. An excavation company doing work for the LLC does not get paid in full and sues. By the time of trial, the member was the the last defendant standing. Excavator claimed the funds loaned to the LLC should have been held in trust under the Construction Trust Fund Statute – CRS 38-22-127. The Court disagreed. The loan was made for general operations, not specific construction activities. There is a distinction between the contractor (here, the LLC) and the project. Examining the totality of the circumstances, the Court concluded the loaned funds were not funds disbursed “on a construction project.” Thus, the manager was not liable for not holding the funds in trust.
Tag Archives: Trust
To trustee or not to trustee? That was the question facing a son, who was trustee for a trust benefiting his father. The trust, established in 2004, took a turn for the worse in 2008 and 2009. After a significant loss, the father sued his son, claiming he breached the trust agreement. The trial court found the son breached the agreement by purchasing stocks on margin and failing to diversify investments, which the trial court found to be “imprudent” under the uniform prudent investor rule, codified at CRS 15-1.1-102. The court of appeals reversed in part, finding it was error for the trial court to utilize the statutory rule because the trust documents expressly permitted the son to invest trust assets without regard to whether the investments would be permissible under law. Although a trust cannot contract away all fiduciary duties, it can reduce the threshold for imprudence.