Colorado Statutes : TITLE 15 PROBATE, TRUSTS, …

1 Colorado Statutes : TITLE 15 PROBATE, TRUSTS, AND FIDUCIARIES : fiduciary : ARTICLE 1 fiduciary (source: ) 2001 Matthew Bender & Company, Inc., a member of the LexisNexis Group. All rights reserved. Portions copyright eHelp Corporation. All rights reserved 15-1-101. Short TITLE . Statute text This part 1 shall be known and may be cited as the "Uniform Fiduciaries Law". History Source: L. 23: p. 178, 14. CSA: C. 67, 14. CRS 53: 57-1-14. 1963: 57-1-13. Annotations ANNOTATION Annotations Law reviews. For article, "Uniform State Laws of Interest to Colorado Probate Lawyers", see 14 Colo. Law. 1961 (1985). For article, "Some Problems Arising in the Representation of a fiduciary ", see 32 Colo. Law. 11 (June 2003). The purpose of the Uniform Fiduciaries Act is that uniform and definite rules were found necessary to take the place of diverse and conflicting rules that had grown up concerning constructive notice of breach of fiduciary obligations in order that commerce might proceed with as little hindrance as possible.

2 Wysowatcky v. Denver-Willys, Inc., 131 Colo. 266, 281 165 (1955); Commercial Sav. Bank v. Baum, 137 Colo. 538, 327 743 (1958). Applied in Fry & Co. v. District Court, 653 1135 (Colo. 1982). Inizio modulo Fine modulo 15-1-102. Legislative declaration. Statute text This part 1 shall be interpreted and construed so as to effectuate its general purpose to make uniform the law of those states which enact it. History Source: L. 23: p. 178, 13. CSA: C. 67, 13. CRS 53: 57-1-13. 1963: 57-1-12. Inizio modulo Fine modulo 15-1-103. Definitions. Statute text As used in this part 1, unless the context otherwise requires: (1) "Bank" includes any person or association of persons, whether incorporated or not, carrying on the business of banking. (2) " fiduciary " includes a trustee under any trust , expressed, implied, resulting, or constructive, executor, administrator, personal representative, guardian, conservator, curator, receiver, trustee in bankruptcy, assignee for the benefit of creditors, partner, agent, officer of a corporation, public or private, public officer, or any other person acting in a fiduciary capacity for any person, trust , or estate.

3 (3) "Person" includes a corporation, partnership, or other association, or two or more persons having a joint or common interest. (4) "Principal" includes any person to whom a fiduciary as such owes an obligation. History Source: L. 23: p. 173, 1. CSA: C. 67, 1. CRS 53: 57-1-1. 1963: 57-1-1. L. 2002: (2) amended, p. 650, 1, effective July 1. Annotations ANNOTATION Annotations Law reviews. For article, "Conflict of Interest Transactions: fiduciary Duties of Corporate Directors Who Are Also Controlling Shareholders", see 57 Den. 609 (1980). Officers and directors of a corporation are fiduciaries as to its stockholders and owe all stockholders the obligation of good faith, candor, forthrightness, and fairness. Herald Co. v. Bonfils, 315 F. Supp. 497 (D. Colo. 1970). The existence of a fiduciary relationship between a customer and a stockbroker is a question of fact and is created if the relationship is accompanied by the customer's trust and confidence in the broker.

4 Adams v. Paine, Webber, Jackson & Curtis, Inc., 686 797 (Colo. App. 1983). Applied in Clibon Drilling Co. v. Wyoming Mineral Corp., 42 Colo. App. 41, 589 78 (1978). 15-1-104. Prior transactions. Statute text The provisions of this part 1 shall not apply to transactions taking place prior to April 16, 1923. History Source: L. 23: p. 178, 11. CSA: C. 67, 11. CRS 53: 57-1-11. 1963: 57-1-10. Inizio modulo Fine modulo 15-1-105. Application of payments to fiduciary . Statute text A person who in good faith pays or transfers to a fiduciary any money or other property which the fiduciary as such is authorized to receive is not responsible for the proper application thereof by the fiduciary ; and any right or TITLE acquired from the fiduciary in consideration of such payment or transfer is not invalid in consequence of a misapplication by the fiduciary . History Source: L. 23: p. 174, 2. CSA: C. 67, 2. CRS 53: 57-1-2.

5 1963: 57-1-2. Annotations ANNOTATION Annotations Applied in Clibon Drilling Co. v. Wyoming Mineral Corp., 42 Colo. App. 41, 589 78 (1978); Kaneco Oil & Gas v. Univ. Nat. Bank, 732 247 (Colo. App. 1986). 15-1-106. Transfer of negotiable instruments by fiduciary . Statute text If any negotiable instrument payable or indorsed to a fiduciary as such is indorsed by the fiduciary , or if any negotiable instrument payable or indorsed to his principal is indorsed by a fiduciary empowered to indorse such instrument on behalf of his principal, the indorsee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in indorsing or delivering the instrument and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of such breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith.

6 If, however, such instrument is transferred by the fiduciary in payment of or as security for a personal debt of the fiduciary to the actual knowledge of the creditor or is transferred in any transaction known by the transferee to be for the personal benefit of the fiduciary , the creditor or other transferee is liable to the principal if the fiduciary in fact commits a breach of his obligation as fiduciary in transferring the instrument. History Source: L. 23: p. 174, 4. CSA: C. 67, 4. CRS 53: 57-1-4. 1963: 57-1-3. Annotations ANNOTATION Annotations Am. See 11 Am. , Bills and Notes, 203-207. 15-1-107. Check drawn by fiduciary payable to third person, effect. Statute text If a check or other bill of exchange is drawn by a fiduciary as such or in the name of his principal by a fiduciary empowered to draw such instrument in the name of his principal, the payee is not bound to inquire whether the fiduciary is committing a breach of his obligations as fiduciary in drawing or delivering the instrument and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of such breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith.

7 If, however, such instrument is payable to a personal creditor of the fiduciary and delivered to the creditor in payment of or as security for a personal debt of the fiduciary to the actual knowledge of the creditor or is drawn and delivered in any transaction known by the payee to be for the personal benefit of the fiduciary , the creditor or other payee is liable to the principal if the fiduciary in fact commits a breach of his obligation as fiduciary in drawing or delivering the instrument. History Source: L. 23: p. 175, 5. CSA: C. 67, 5. CRS 53: 57-1-5. 1963: 57-1-4. Annotations ANNOTATION Annotations Am. See 11 Am. , Bills and Notes, 203, 204. See 10 , Bills and Notes, 234, 237. The Uniform Fiduciaries Act relaxes some of the harsher rules which require of a bank and of individuals the highest degree of vigilance in the detection of a fiduciary 's wrongdoing. Wysowatcky v. Denver-Willys, Inc., 131 Colo.

8 266, 281 165 (1955). Where an instrument is good on its face, there is no apparent reason for inquiry; it remains good until shown to have been taken in "bad faith" and the burden of proving that is on the plaintiff. Wysowatcky v. Denver-Willys, Inc., 131 Colo. 266, 281 165 (1955). The loss for breach of a fiduciary obligation should fall on the party directly responsible for the faithless agent and not on one who was a mere conduit to transmit the fund. Wysowatcky v. Denver-Willys, Inc., 131 Colo. 266, 281 165 (1955); Commercial Sav. Bank v. Baum, 137 Colo. 538, 327 743 (1958). 15-1-108. Check drawn by and payable to fiduciary , effect. Statute text If a check or other bill of exchange is drawn by a fiduciary as such or in the name of his principal by a fiduciary empowered to draw such instrument in the name of his principal, payable to the fiduciary personally or payable to a third person and by him transferred to the fiduciary , and is thereafter transferred by the fiduciary , whether in payment of a personal debt of the fiduciary or otherwise, the transferee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in transferring the instrument and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of such breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith.

9 History Source: L. 23: p. 175, 6. CSA: C. 67, 6. CRS 53: 57-1-6. 1963: 57-1-5. Annotations ANNOTATION Annotations Am. See 11 Am. , Bills and Notes, 203, 204. See 10 , Bills and Notes, 37. 15-1-109. Deposit in name of fiduciary . Statute text If a deposit is made in a bank to the credit of a fiduciary as such, the bank is authorized to pay the amount of the deposit or any part thereof upon the check of the fiduciary , signed with the name in which such deposit is entered, without being liable to the principal, unless the bank pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in drawing the check or with knowledge of such facts that its action in paying the check amounts to bad faith. If, however, such a check is payable to the drawee bank and is delivered to it in payment of or as security for a personal debt of the fiduciary to it, the bank is liable to the principal if the fiduciary in fact commits a breach of his obligation as fiduciary in drawing or delivering the check.

10 History Source: L. 23: p. 176, 7. CSA: C. 67, 7. CRS 53: 57-1-7. 1963: 57-1-6. Annotations ANNOTATION Annotations See 10 , Bills and Notes, 234. The mere failure of a bank to make inquiry, even though there are suspicious circumstances, does not constitute bad faith unless the facts and circumstances are so cogent and obvious that to remain passive would amount to deliberate desire to evade knowledge because of a belief or fear that inquiry would disclose a defect in the transaction. Richards v. Platte Valley Bank, 866 1576 (10th Cir. 1989); In re M & L Business Machine Co., 84 1330 (10th Cir. 1996). In order for bank to be liable to real estate purchaser for bank's paying money to escrow agent who then converted money to his own use, bank was required to either have had actual knowledge that escrow agent was committing a breach of his obligation as fiduciary when he took the money or have acted in bad faith in paying escrow agent.