Chapter 10 - § 10.4 VERIFIED CLAIMS UNDER C.R.S. § 38-26-107

• Jurisdiction: Colorado

§ 10.4 VERIFIED CLAIMS UNDER C.R.S. § 38-26-107

§ 10.4.1—Overview

C.R.S. § 38-26-107 allows an unpaid subcontractor, materialman, or supplier to file a claim against any funds the public entity is holding on a public works project. Upon receiving the claim, the public entity is to hold enough funds from the undisbursed funds to the general contractor to cover the amount of the claim. This section provides suppliers to public works projects with a remedy independent of the remedies afforded under C.R.S. §§ 38-26-105 and -106.⁴⁴

The filing of claims by laborers and materialmen for services and material furnished is not mandatory, the only penalty for failure to file such claims being to release the body awarding the contract from all liability; also, such failure does not operate to discharge the surety on the bond of the contractor, given to secure performance of the contract, from liability thereunder.⁴⁵

The courts have held that once a verified claim is made it is not merely a claim on the funds being held but a lien on those funds. In Heinrichsdorff v. Raat, the court construed C.R.S. § 38-26-107 to mean that the law does not merely confer "a claim" upon the funds impounded by the city, but rather the statute confers an absolute "lien" upon those funds. The court went on to say that there is "the principle that suppliers of labor and of materials have preferred positions in terms of demands upon retained funds in the context of public works contracts."⁴⁶

§ 10.4.2—Process for Making the Claim

The statute requires that the unpaid party file a verified statement of claim with the public entity.⁴⁷ There is no standardized form, but the claimant must include the "amount due and unpaid on account of the claim."⁴⁸ The claim must be verified as to the amounts due and owing. Verified means that the claim must be sworn to and notarized. A form for making a verified claim and bond claim is included at Exhibit 10F. When making a verified claim as well as a claim on a bond, the practitioner should make sure to specify both the payment and performance bonds, if applicable. Again, notice is not required to perfect a bond claim according to the statute, but it is advisable.

The statute does not require that the claim be sent to the surety or the general contractor.

The case of White Construction Co. v. Sauter Construction Co.⁴⁹ dealt directly with the issue of whether a notice of the verified claim needed to be sent to the general contractor. The court of appeals ruled that C.R.S. § 38-26-107 did not require a party to give the statutory notice to the general contractor (as opposed to a government instrumentality).⁵⁰

The statute does not define what "file" means in the context of making the claim. These authors' practice is to send the claim first class and certified mail as well as electronically if an e-mail is available for the public entity's project manager or other person designated to receive the claims. If time is of the essence, personally serving the public entity with the claim is best practice. As a matter...