Fowler & Peth, Inc. v. Regan (In re Regan), 151 P. 3d 1281 (Colo. 2007) In re Regan, 477 F. 3d 1209 (10th Cir. 2007)

Feb 05, 2007

OUTCOME:

This landmark Tenth Circuit Court of Appeals case determined whether the Colorado Mechanic's Trust Fund Statute (C.R.S. §38-22-127) provided a separate source of protection for laborers and materialmen ... in addition to a traditional mechanic's lien. In this case, the defendants (the Regans) were the sole shareholders and directors of Eagle Roofing. They opened a credit account with plaintiff Fowler & Peth, a Wyoming supplier of roofing materials. During the course of their business, the Regans misallocated the company's funds and used them to pay for their personal expenses. The result was that Fowler & Peth was not fully paid, however, Fowler & Peth did not file any liens against the Regans. The Regans filed for Chapter 7 Bankruptcy and argued that Fowler & Peth could not have a claim under the Trust Fund Statute since it failed to exercise its right to a mechanic's lien. The Bankruptcy Court held that the debt owed to Fowler & Peth was non-dischargeable because the Colorado Mechanic's Trust Fund Statute provided intended beneficiaries (i.e. laborers and materialmen) with a second source of protection and relief, separate and apart from a traditional mechanic's lien claim, does not require the filing of a mechanic's lien as a prerequisite to successfully asserting a claim. At the request of the Tenth Circuit Court of Appeals, in an en banc decision the Colorado Supreme Court confirmed the Bankruptcy Court's construction of the Colorado Trust Fund Statute and the appellate court remanded the case.