The summaries of the Colorado Court of Appeals published opinions constitute no part of the opinion of the division but have been prepared by the division for the convenience of the reader. The summaries may not be cited or relied upon as they are not the official language of the division. Any discrepancy between the language in the summary and in the opinion should be resolved in favor of the language in the opinion.
SUMMARY May 21, 2026
2026 COA 38
No. 24CA2217, Bank of Colorado v. Lebsock — Trusts — Rights of Beneficiary’s Creditor or Assignee — Spendthrift Provisions; Creditors and Debtors — Judgments — Final Judgment on the Merits — Issue Preclusion — Claim Preclusion; Bankruptcy
A division of the court of appeals determines that creditors
cannot reach a beneficiary’s interest in a trust when the trust
contains a valid spendthrift provision. The division also concludes
that a federal bankruptcy proceeding did not bar, in a state replevin
action, the argument that a creditor could not reach the
beneficiary’s interest in the trust. COLORADO COURT OF APPEALS 2026 COA 38
Court of Appeals No. 24CA2217 Logan County District Court No. 20CV30064 Honorable Carl S. McGuire III, Judge
Bank of Colorado,
Plaintiff-Appellee,
v.
David Wade Lebsock, a/k/a David W. Lebsock, a/k/a David Lebsock,
Defendant-Appellant,
and
Sandra E. Kutz as trustee of the Janice M. Lebsock Irrevocable Income-Only Trust,
Intervenor-Appellant.
JUDGMENT REVERSED AND CASE REMANDED WITH DIRECTIONS
Division II Opinion by JUDGE FOX Kuhn and Sullivan, JJ., concur
Announced May 21, 2026
Spencer Fane LLP, John O’Brien, Scott C. Sandberg, Denver, Colorado, for Plaintiff-Appellee
Haddon, Morgan and Foreman, P.C., Adam Mueller, James E. Fogg, Denver, Colorado, for Defendant-Appellant
Wade Ash LLC, Jody J. Pilmer, Letitia M. Maxfield, Greenwood Village, Colorado, for Intervenor-Appellant Stinson LLP, Zane A. Gilmer, Denver, Colorado, for Amicus Curiae Colorado Bankers Association
McGraw Law PLLC, Caryn McGraw Turner, Denver, Colorado, for Amicus Curiae Colorado Bar Association Trust & Estate Section ¶1 Defendant, David Wade Lebsock, and intervenor, Sandra E.
Kutz, appeal several of the district court’s orders issued in a
replevin action brought by plaintiff, the Bank of Colorado (the
Bank), against David and other debtors.1 We reverse the portion of
the court’s order requiring the preferential transfer of David’s trust
proceeds to the Bank. We remand for the district court to give
effect to our decision.
I. Background
¶2 In 2019, Janice M. Lebsock settled the “Janice M. Lebsock
Irrevocable Income-Only Trust” (the Trust). Janice and Sandra
were the Trust’s cotrustees. During Janice’s lifetime, she was the
Trust’s sole beneficiary and was entitled to discretionary
distributions of the Trust’s income for her “care and well-being.”
After her death, section 2.2 of the Trust directed the trustees to
distribute the Trust’s remaining principal and income as follows:
(a) to or for the benefit of [Janice’s] children or their descendants, as [Janice] shall appoint by Will, which Will specifically refers to this power of appointment; and
1 Because several individuals discussed in this appeal share last
names, we use their first names in the interest of clarity and mean no disrespect thereby.
1 (b) to the extent that [Janice] ha[s] not exercised this power of appointment by [her] Will, the Trustees shall pay the remaining principal and undistributed income to [her] children in equal shares, per stirpes.
The Trust named Janice’s three living children as beneficiaries
upon her death: Gregory Lebsock, Sandra, and David. It also
included the following provision (at section 4.2): “All principal and
income shall, until actual distribution to the [b]eneficiary, be free of
debts, contracts, alienations, and anticipations of any beneficiary,
and the same shall not be liable to any levy, attachment, execution,
or sequestration while in the possession of the Trustees.”
¶3 In a 2020 replevin action that was initially unrelated to the
Trust, the Bank sued David and several other parties2 to foreclose
on collateral and collect on twenty-three commercial loans that
were in default. As relevant here, the Bank sought to foreclose on
David’s general intangibles in which he had granted the Bank a
security interest in an April 2020 forbearance agreement. In early
2021, the district court appointed a receiver and entered a
2 Although there were multiple debtors in the replevin and
bankruptcy proceedings, we discuss the proceedings only as they relate to David because the other debtors did not join this appeal.
2 stipulated order for possession, granting the receiver authority to
take and deliver David’s “Personal Property Collateral” — including
David’s “General Intangibles” — to the Bank.
¶4 In February 2022, David petitioned for bankruptcy in federal
bankruptcy court. The state court replevin action was stayed
pending the bankruptcy proceeding’s outcome. Ultimately, the
bankruptcy trustee and the Bank reached a settlement agreement
that permitted lifting the automatic stay imposed by the bankruptcy
court to allow the Bank to foreclose on its security interests in
David’s collateral, including “[a] beneficial interest in the [Trust],” in
the replevin action. David (acting independently of the bankruptcy
trustee) objected to lifting the bankruptcy stay, arguing that the
Bank lacked a valid security interest in the Trust. The Bank
responded that David lacked standing to oppose the stay relief
motion, and the bankruptcy court agreed.
¶5 The bankruptcy court held that David lacked prudential
bankruptcy standing to oppose lifting the stay, which — as the
court explained — differs from traditional standing in federal court.
See In re Cult Awareness Network, Inc., 151 F.3d 605, 607 (7th Cir.
1998); In re Reynolds, 470 B.R. 138, 147 (Bankr. D. Colo. 2012)
3 (“[A] debtor is a party in interest with standing to object to creditor
claims when successful claim objections may result in a return of
assets to the debtor.”). The bankruptcy court then concluded that
David’s only bases for standing were two objections that no longer
applied. The court did not address the parties’ arguments about
the Bank’s security interest in the Trust.
¶6 After concluding that David lacked standing, the bankruptcy
court lifted the stay and allowed the Bank to foreclose on David’s
collateral, which purportedly included “[a] beneficial interest in the
[Trust].” On the Bank’s motion, the district court then vacated its
order staying the replevin action. The parties seem to agree that
the Bank’s motion to vacate this order was the first time David’s
interest in the Trust was explicitly mentioned in the replevin action.
¶7 The Bank then moved for a “comfort order” and payment
instructions.3 It argued that David pledged his interest in the Trust
3 We use the term “comfort order” because that terminology appears
in the record. However, it is unclear from the record what the Bank meant by this. Bankruptcy cases suggest that a comfort order is an order confirming that an automatic stay has been lifted, which does not appear to be what the Bank was requesting. See In re Grossi, 365 B.R. 608, 610 (Bankr. E.D. Va. 2007).
4 as collateral via the forbearance agreement, so it asked the district
court to order Sandra (as trustee) to pay David’s distributions from
the Trust to the Bank or, upon Janice’s death, to the receiver
pursuant to the Trust’s terms. It also argued that David lacked
standing in the replevin action because his interest in the Trust
“was surrendered to [the bankruptcy] Trustee, subject to the Bank’s
lien.” David objected, arguing that bankruptcy standing does not
apply in state court actions and that the Bank’s lien could not
attach to the Trust because the Trust had a valid spendthrift
provision.4
¶8 Sandra, in her capacity as trustee of the Trust, then
intervened in the replevin action. She sought declaratory relief,
requesting the following declarations: (1) the Trust contained a valid
spendthrift provision; (2) David “could not and did not, validly
assign his future beneficial interest in the [Trust] to his creditors”;
4 Colorado has long defined a spendthrift trust as one “created to
provide a fund for the maintenance of the beneficiary, and at the same time to secure it against his improvidence or incapacity.” In re Nicholson’s Estate, 93 P.2d 880, 883-84 (Colo. 1939) (citation omitted). Spendthrift provisions prevent a beneficiary’s creditors from reaching trust assets and the beneficiary from alienating trust assets. Van Gundy v. Van Gundy, 2012 COA 194, ¶ 3.
5 and (3) David’s creditors could collect distributions from the Trust
only after he received them following Janice’s death.
¶9 In November 2024, the district court issued several orders.
First, it granted the Bank’s motion for a comfort order and payment
instructions. The court found that David pledged his interest in the
Trust “to secure his indebtedness to the Bank,” and the Bank’s
right to David’s interest in the Trust was “the law of this case”
because prior orders in the state and bankruptcy courts included it
as collateral upon which the Bank was entitled to foreclose.5 The
court then held that any distribution of the Trust’s assets to which
David was entitled was “res of this litigation” (assets) to be paid into
the court registry. Finally, it held that the bankruptcy stay relief
5 Although the prior state court orders did not specifically address
the Trust, the 2021 stipulated order allowed the Bank to foreclose on its interest in David’s general intangibles, which the Bank argued included his interest in the Trust. See § 4-9-309(13) & cmt. 7, C.R.S. 2025 (“[A]n assignment of a beneficial interest in a decedent’s estate” is a type of security interest that perfects upon attachment.).
6 order was “res judicata” and that David was “judicially estopped
from asserting any interest” in the Trust’s income and principal.6
¶ 10 Next, the district court granted the Bank and the receiver’s
motion for “findings under the doctrine of res judicata” and to strike
David’s response for lack of standing. It found that David had a
future beneficial interest in the Trust, which contained a valid
spendthrift provision pursuant to section 15-5-502, C.R.S. 2025.
Thus, it found that David “could not legally and, therefore, did not,
validly assign his future beneficial interest in the . . . Trust to his
creditors.” But the court then seemingly concluded that — because
David could not assign his interest in the Trust — he lacked
standing to object to the Bank’s requested relief. And it reiterated
that the bankruptcy court’s orders were “res judicata . . . for the
reasons stated in the Bank’s motion.”
¶ 11 Finally, the court granted Sandra’s motion for declaratory
relief, making the following relevant declarations: (1) the Trust had
6 The court also found that the “Lebsock Trustee and the Bank
agreed that the Bank” could foreclose on David’s interest in the Trust. However, the record does not support this finding. The settlement agreement was between the Bank and the bankruptcy trustee, not Sandra as trustee of the Trust. Sandra was not involved in the bankruptcy proceedings.
7 a valid spendthrift provision; (2) David could not and did not validly
assign his interest in the Trust to the Bank; and (3) the Bank could
collect Trust assets only from David directly and “only after a
payment [was] made to him under the terms of the Trust.”
However, the same order reiterated the instruction requiring Sandra
to pay David’s portion of Trust income and principal into the court
registry, and it restated the court’s conclusions about res judicata
and judicial estoppel.
¶ 12 Janice died in December 2024, triggering David’s entitlement
to one-third of the Trust’s principal and remaining income.7 The
parties do not cite Janice’s final will, but one of the district court’s
November 2024 orders stated that — pursuant to the will — David
was entitled to one-third of the Trust assets and that Janice lacked
capacity to change her will such that the Trust’s distributions upon
her death would be “fixed.”
7 Section 2.3 of the Trust required the trustee(s) to liquidate Trust
real estate within six months from Janice’s December 8, 2024, death.
8 ¶ 13 David and Sandra appealed.8 Although they filed separate
briefs, their arguments largely overlap. First, they argue that the
bankruptcy court’s orders did not have a preclusive effect on the
state replevin action. David also contends that the district court
erred by concluding that he lacked standing and that he was
judicially estopped from asserting an interest in the Trust’s
distributions. Finally, Sandra and David contend that the Trust’s
spendthrift clause prevented David from alienating his interest in
the Trust during Janice’s lifetime. Thus, they argue that the court
erred by ordering Sandra to pay David’s share of the Trust’s assets
into the court registry. The Colorado Bankers Association filed an
amicus brief in support of the Bank, and the Colorado Bar
Association’s Trust & Estate Section filed an amicus brief in
support of Sandra.
8 Sandra also argues that the Trust was not a res of the replevin
action. We need not address this argument to conclude that the district court reversibly erred.
9 II. Preliminary Analysis
A. Issue and Claim Preclusion
¶ 14 Sandra and David contend that the district court erroneously
applied res judicata to preclude David from asserting an interest in
the Trust’s assets.9 We agree. Although the district court did not
differentiate between issue and claim preclusion, the Bank raised
both doctrines, so we consider each in turn. See Foster v. Plock,
2017 CO 39, ¶ 14 (explaining that “res judicata” has been used to
describe claim and issue preclusion). Both types of preclusion
present questions of law that we review de novo. Id. at ¶ 10; Bristol
Bay Prods., LLC v. Lampack, 2013 CO 60, ¶ 17.
1. Issue Preclusion
¶ 15 The doctrine of issue preclusion provides that — once an issue
has been finally determined in one proceeding — “parties to this
proceeding are barred from re-litigating that particular issue again
in a second proceeding.” Foster, ¶ 13. A party asserting issue
preclusion must establish four elements:
9 The Bank contends that Sandra did not preserve this argument,
but David argued that res judicata did not apply, so we conclude we may consider the issue.
10 (1) the prior proceeding was decided on a final judgment on the merits; (2) the issue in the current proceeding is identical to the issue actually adjudicated in a prior proceeding; (3) the party against whom issue preclusion is asserted had a full and fair opportunity to litigate the issue in the prior proceeding; and (4) the party against whom issue preclusion is asserted is a party or in privity with a party in the prior proceeding.
Id. We conclude that issue preclusion does not apply here.
¶ 16 In bankruptcy cases, relief from the “automatic stay is not a
final adjudication of a party’s ownership interest in property
because it requires a party to show only a colorable claim of a lien
on estate property.” Garrett v. BNC Mortg., Inc., 929 F. Supp. 2d
1120, 1124 (D. Colo. 2013); see also In re Fog Cap Retail Invs. LLC,
No. 22-1297, 2024 WL 659559, at *4 (10th Cir. Feb. 16, 2024)
(unpublished opinion) (granting a stay relief order based on a
settlement agreement is not an adjudication on the merits).
Because the bankruptcy court “did not, and indeed, could not
adjudicate the substantive merits” of the Bank’s claim or David’s
defenses, its order was not a final judgment on the merits. Grella v.
Salem Five Cent Sav. Bank, 42 F.3d 26, 35 (1st Cir. 1994).
11 ¶ 17 Moreover, the bankruptcy stay relief order was premised
largely on David’s lack of standing to object. See Batterman v. Wells
Fargo Ag Credit Corp., 802 P.2d 1112, 1118 (Colo. App. 1990) (an
order dismissing a suit for lack of standing is not a judgment on the
merits). And the bankruptcy court never addressed whether
Colorado law prevented David from validly assigning his interest in
the Trust to the Bank. See Reynolds v. Cotten, 2012 CO 27, ¶ 10
(“If the identical issue has not actually been determined in a prior
action, the analysis need proceed no further.”). So the stay relief
order was not a final judgment on the merits, and it did not
adjudicate whether David validly assigned his interest (if any) in the
Trust. See Foster, ¶ 13. Therefore, issue preclusion does not apply.
2. Claim Preclusion
¶ 18 The doctrine of claim preclusion seeks to prevent “perpetual
re-litigation of the same claim or cause of action,” and it bars “a
claim litigated in a prior proceeding from being litigated again in a
second proceeding.” Id. at ¶ 12. Claim preclusion applies if the
following elements are met: “(1) finality of the first judgment;
(2) identity of subject matter; (3) identity of claims for relief; and
(4) identity or privity between parties to the actions.” Id. at ¶ 26.
12 Claim preclusion also bars parties from relitigating claims that were
or could have been brought in the first proceeding. Id. at ¶ 29.
¶ 19 Our cases are unclear as to whether claim preclusion requires
a final judgment on the merits. Compare id. at ¶¶ 13, 26 (omitting
the merits requirement from the first element of claim preclusion
without discussion), with O’Neill v. Simpson, 958 P.2d 1121, 1123
n.4 (Colo. 1998) (“[C]laim preclusion[] bars subsequent claims by
identical parties based on the same claim for relief after there has
been a final judgment on the merits.”), and Calvert v. Mayberry,
2016 COA 60, ¶ 15 (same), aff’d in part and rev’d in part on other
grounds, 2019 CO 23.
¶ 20 Even if our case law does not require a final judgment on the
merits such that the bankruptcy court’s stay relief order satisfies
the first element of claim preclusion, we conclude that there is no
identity of subject matter in the two cases. See Foster, ¶ 26. When
assessing whether claims share identical subject matter, we
consider “whether the same evidence would sustain both” even if
“the two actions are different in form.” Id. at ¶ 28 (citation omitted).
¶ 21 To understand whether the two proceedings share identical
subject matter, we must consider the scope of a proceeding to lift a
13 bankruptcy stay. When a bankruptcy court lifts the automatic
stay, the parties may “proceed to seek a determination of their
substantive rights in the state court.” In re Roberts, 367 B.R. 677,
687 (Bankr. D. Colo. 2007). The question of whether a creditor can
foreclose on collateral is a “matter[] of Colorado state law,” and an
order lifting a stay in a bankruptcy proceeding does not alter “the
legal rights and obligations that either the [creditor] or the [d]ebtor
have under state law.” Id. Rather, relief from stay in a bankruptcy
proceeding “frees the parties to enforce their rights in the state
court.” Id.
¶ 22 Thus, “stay proceedings only determine whether the party
seeking relief has a ‘colorable claim,’ which is then fully adjudicated
in the state court.” In re Thomas, 469 B.R. 915, 922–23 (B.A.P.
10th Cir. 2012) (citation omitted). And whether a creditor may
foreclose on collateral is a “question[] of state law beyond the scope
of whether [the] Bank had a ‘colorable claim’ of a lien on the
property.” Garrett, 929 F. Supp. 2d at 1125 (concluding that a
bankruptcy court’s order lifting the automatic stay did not preclude
litigation of a bank’s standing to foreclose on real property).
14 ¶ 23 When the bankruptcy court lifted the stay, it implicitly
determined that the Bank had a “colorable claim of a lien” on
David’s interest in the Trust. Id. at 1124. This was not the same
question as how the Trust’s spendthrift provision — under Colorado
law — affected the Bank’s purported security interest in David’s
interest. And the “appropriate place for a full and final adjudication
of the parties’ respective interests in the [Trust] [was] the [Colorado]
courts.” Thomas, 469 B.R. at 923.
¶ 24 These cases establish that there is a difference between the
evidence necessary to show a colorable claim of a lien and the
evidence necessary to show a valid, enforceable security interest.
See Foster, ¶ 28. And the state court generally considers the latter
question. See Roberts, 367 B.R. at 687; Thomas, 469 B.R. at 923.
Thus, the ultimate validity of the Bank’s security interest in the
15 Trust’s assets was not before the bankruptcy court in the stay relief
proceeding.10 Therefore, claim preclusion does not apply.
¶ 25 For the foregoing reasons, the district court erred by
concluding that the bankruptcy court’s stay relief order precluded
David from arguing that the Trust’s spendthrift provision
invalidated the Bank’s security interest in the Trust’s assets.
B. Standing
¶ 26 The district court did not explain why it found that David
lacked standing to object to the Bank’s motion for a comfort order
and payment instructions. The court seems to have generally
accepted the Bank’s arguments without further analysis, so we
presume it accepted the Bank’s contentions that the bankruptcy
court’s standing analysis applied to the replevin action and that
David surrendered his interest in the Trust to the bankruptcy
trustee.
10 The Bank also argues that claim preclusion applies because
David could have raised the spendthrift provision issue in bankruptcy court. There, David argued that the Bank’s security interest was invalid because any such interest was contingent on Janice’s will. He thus questioned the validity of the Bank’s security interest in the Trust, but the bankruptcy court did not address his challenge.
16 ¶ 27 Standing is a question of law that we review de novo. Roane v.
Elizabeth Sch. Dist., 2024 COA 59, ¶ 23. In Colorado, we broadly
construe standing. Id. at ¶ 25. “To establish standing, the plaintiff
must have (1) suffered an injury in fact (2) to a legally protected
interest.” Id. (emphasis added). Federal Article III standing is
narrower than standing under Colorado law. See Grossman v.
Dean, 80 P.3d 952, 959 (Colo. App. 2003). And as explained above,
prudential bankruptcy standing is even narrower than Article III
standing. Cult Awareness Network, Inc., 151 F.3d at 607.
¶ 28 But regardless of the scope of each type of standing,
“traditional standing principles do not apply to defendants.” Mortg.
Invs. Corp. v. Battle Mountain Corp., 70 P.3d 1176, 1182 (Colo.
2003). “[O]nce the plaintiff has established standing and the
defendants have been haled into court . . . , the only role for the
defendants is to defend against the suit.” People ex rel. Simpson v.
Highland Irrigation Co., 893 P.2d 122, 127 (Colo. 1995).
¶ 29 We are unaware of any authority requiring defendant-debtors
in Colorado replevin actions to have standing similar to that
required of state court plaintiffs or federal bankruptcy debtors. And
the cases the Bank cites are distinguishable. First, a division of
17 this court held that a plaintiff-creditor lacked standing to sue
shareholders, officers, and directors of a bankrupt corporation.
First Horizon Merch. Servs., Inc. v. Wellspring Cap. Mgmt., LLC, 166
P.3d 166, 172, 179 (Colo. App. 2007). The division explained that
when a creditor alleges only indirect harm — an injury deriving
from harm to the debtor — “and the debtor could have raised a
claim for its direct injury . . . , then the cause of action belongs to
the [bankruptcy] estate.” Id. at 180. Because the creditor brought
claims that “directly injured the [debtor] corporation, but only
indirectly injured the creditor,” the creditor lacked standing. Id. at
179-82 (citation omitted).
¶ 30 Similarly, in Summers v. Perkins, 81 P.3d 1141, 1142-43 (Colo.
App. 2003), a division of this court concluded that only the
bankruptcy trustee, not a plaintiff-creditor, had standing to bring a
fraudulent conveyance claim once the debtor filed for bankruptcy.
Neither case required the defendant-debtor to show standing.
¶ 31 The Bank also relies heavily on the principle that “[o]nly the
bankruptcy trustee has standing to assert claims that are the
property of the bankruptcy estate.” Id. at 1142. But “[u]nder [11
U.S.C.] § 541(c)(2), an anti-alienation provision in a valid
18 spendthrift trust . . . is an enforceable ‘restriction on the transfer of
a beneficial interest of the debtor,’ thereby excluding the trust
assets from the bankruptcy estate.” In re Coumbe, 304 B.R. 378,
382 (B.A.P. 9th Cir. 2003); see In re Amerson, 839 F.3d 1290, 1300
(10th Cir. 2016) (recognizing that valid spendthrift trust funds are
not property of the bankruptcy estate); In re Alagna, 107 B.R. 301,
307 (Bankr. D. Colo. 1989) (same). Therefore, even if we accepted
the Bank’s argument that defendant-debtors must establish
standing (which we do not), the spendthrift provision excluded the
Trust from the bankruptcy estate.
¶ 32 Finally, because bankruptcy standing principles do not apply
to defendant-debtors in state court, we reject the Bank’s argument
that the bankruptcy standing order had a preclusive effect in the
replevin action.
C. Judicial Estoppel
¶ 33 Without analysis or citation, the district court held that David
was “judicially estopped from asserting an interest in . . . principal
and net income allocated for distribution to [him] or to those who
would take per stirpes if” he predeceased Janice. The court
apparently accepted the Bank’s argument that David could not
19 claim an interest in the Trust because, in the 2021 stipulated order,
he agreed to the Bank’s possession of his general intangibles, which
the Bank argued included his interest in the Trust. We conclude
that the court erred by invoking judicial estoppel.
¶ 34 Judicial estoppel is an equitable doctrine, Est. of Burford v.
Burford, 935 P.2d 943, 947 (Colo. 1997), so we review the district
court’s application of judicial estoppel for an abuse of discretion,
see Lewis v. Lewis, 189 P.3d 1134, 1140-41 (Colo. 2008).
¶ 35 “Judicial estoppel is a narrow doctrine that precludes a party
from taking a position in a proceeding that is totally inconsistent
with a position the party took earlier in the same or related
proceeding in an intentional effort to mislead the court.” Tuscany
Custom Homes, LLC v. Westover, 2020 COA 178, ¶ 35. The doctrine
applies only when (1) two positions are taken by the same party or
parties in privity with each other; (2) the two positions are taken “in
the same or related proceedings”; (3) the party was “successful in
maintaining the first position and . . . received some benefit in the
first proceeding”; (4) the inconsistency is “part of an intentional
effort to mislead the court”; and (5) the two positions are “totally
inconsistent — that is, the truth of one position must necessarily
20 preclude the truth of the other.” Burford, 935 P.2d at 948. Finally,
judicial estoppel “normally applies to inconsistent factual positions
rather than legal positions.” Arko v. People, 183 P.3d 555, 560
(Colo. 2008).
¶ 36 Here, even assuming the first three elements are met, the
Bank failed to establish the final two elements. See Burford, 935
P.2d at 948. First, in the 2021 stipulated order, David conceded
that the Bank had a security interest in his general intangibles, but
his interest in the Trust had not been raised at that point in the
proceedings. So there was no evidence that David sought to
mislead the court by initially agreeing that he validly assigned his
interest in the Trust and then later arguing that any such
assignment was invalid.
¶ 37 Additionally, David’s stipulation to the Bank’s interest in his
general intangibles did not necessarily preclude his argument that
the spendthrift clause prevented him from assigning his future
interest in the Trust. See id. David did not first agree to the Bank’s
taking possession of his interest in the Trust and later argue that
he never made such an agreement; he contended that, despite his
stipulation, the agreement was invalid under the Trust’s spendthrift
21 provision. And David never argued that he could (or did) validly
alienate his interest in the Trust. Finally, the argument that he
could not validly assign his interest was a legal position to which
judicial estoppel does not usually apply. See Arko, 183 P.3d at 560.
¶ 38 For these reasons, the district court abused its discretion by
applying judicial estoppel to prevent David from asserting an
interest in the Trust.
III. Trust Analysis
¶ 39 We now address the parties’ arguments about whether David
could validly assign his interest in the Trust to the Bank. We
conclude that the spendthrift provision prevented him from
alienating his interest in the Trust before Janice’s death. Therefore,
the district court erred by ordering Sandra to pay any portion of the
Trust assets into the court registry.
A. Standard of Review
¶ 40 We interpret de novo the language of a trust and the law
governing it. See In re Marriage of Blaine, 2021 CO 13, ¶ 14.
Likewise, whether a valid spendthrift provision protects trust funds
from garnishment is a question of law subject to de novo review.
See Casey v. Colo. Higher Educ. Ins. Benefits All. Tr., 2012 COA 134,
22 ¶ 20, abrogated on other grounds by, City of Aspen v. Burlingame
Ranch II Condo. Owners Ass’n, 2024 CO 46; see also In re Maxwell,
2026 COA 10, ¶ 25 (When the controlling facts are undisputed, the
“legal effect of those facts constitutes a question of law.” (citation
omitted)).
B. Trust Law
1. Protection Afforded by Spendthrift Provisions
¶ 41 Except as provided in section 15-5-504, C.R.S. 2025, and to
the extent a beneficiary’s interest is not subject to a spendthrift
provision, the court may authorize a creditor or assignee of the
beneficiary to attach present or future trust distributions to or for
the benefit of the beneficiary. § 15-5-501, C.R.S. 2025. The court
may limit the award to such relief as appropriate. Id.
¶ 42 But Colorado law recognizes an exception for valid and
enforceable spendthrift trusts.11 Under section 15-5-502(3), “[a]
beneficiary may not transfer an interest in a trust in violation of a
valid spendthrift provision and, except as otherwise provided [by
11 A settlor cannot create a valid spendthrift trust for his or her own
benefit. § 38-10-111, C.R.S. 2025; see In re Cohen, 8 P.3d 429, 432-33 (Colo. 1999).
23 statute], a creditor or assignee of the beneficiary may not reach the
interest or a distribution by the trustee before its receipt by the
beneficiary.”
¶ 43 A spendthrift provision is created when a trust provides that
the beneficiary’s interest is held subject to a “spendthrift trust” or
uses similar language sufficient to restrain voluntary and
involuntary transfers. § 15-5-502(1)-(2). And funds under the
discretionary control of a trustee subject to a spendthrift provision
cannot be garnished. In re Estate of Beren, 2013 COA 166, ¶ 31.
The trustee necessarily decides how much, if any, of the trust
assets are used to benefit the beneficiaries.
2. Limited Exceptions Allowing Creditor Access
¶ 44 Although they are not at issue here, there are specific and
limited exceptions to Colorado’s spendthrift protection. Section 15-
5-503(2), C.R.S. 2025, makes spendthrift provisions unenforceable
against (1) a child who is an obligee pursuant to a child support
order for which the beneficiary is the obligor and (2) a judgment
24 creditor who has provided essential services for the protection of a
beneficiary’s interest in the trust.12
3. Distributions Received or Overdue
¶ 45 But once trust funds have been distributed to the beneficiary,
they are within the reach of creditors. Beren, ¶ 31; see Restatement
(Third) of Trs. § 58 cmt. d(2) (A.L.I. 2003). Relatedly, section 15-5-
506(2), C.R.S. 2025, provides that even if a trust contains a
spendthrift provision, a creditor or assignee may reach a mandatory
distribution of income or principal — including a distribution upon
the trust’s termination — if the trustee has not made the
distribution within a reasonable time after the designated
distribution date.
C. The Trust Contained a Valid Spendthrift Provision
¶ 46 Recall that Janice specified in section 4.2 of the Trust that all
“principal and income shall, until actual distribution to the
[b]eneficiary, be free of debts, contracts, alienations, and
anticipations of any beneficiary, and the same shall not be liable to
12 Claimants may obtain a court order attaching present or future
distributions to or for the benefit of the beneficiary, with the court having discretion to limit relief as appropriate under the circumstances. § 15-5-503(3), C.R.S. 2025.
25 any levy, attachment, execution, or sequestration while in the
possession of the Trustees.”
¶ 47 Given this key provision, we agree with the district court that
David “could not legally and, therefore, did not, validly assign his
future beneficial interest” in the Trust to his creditors. We cannot,
however, endorse the district court’s conclusion that the
bankruptcy court’s orders operated as res judicata in the state
court replevin action and allowed the Bank preferential access to
David’s “beneficial interest” in the Trust. The district court’s
conflicting conclusions about the Bank’s ability to reach David’s
purported interest in the Trust are irreconcilable and do not
comport with Colorado law. See § 15-5-502; § 15-5-504; In re
Marriage of Smith, 2024 COA 95, ¶¶ 19-29.
¶ 48 In allowing the Bank to access David’s purported “interest” in
the Trust to satisfy David’s indebtedness to the Bank, the district
court disregarded the dictates of sections 15-5-504(2) and 15-5-
502. Indeed, nowhere in the court’s order does it acknowledge
either section of the Colorado Uniform Trust Code.
¶ 49 Nor did the district court explain how it could find the Trust’s
spendthrift provision valid while simultaneously allowing the Bank
26 to preferentially invade the Trust’s funds contingently reserved for
David. See People v. D.F., 933 P.2d 9, 15 (Colo. 1997) (recognizing
that appellate courts are not bound by lower courts’ legal
conclusions); Maxwell, ¶ 25. An appellate court decides de novo
“whether the trial court’s legal conclusions are supported by
sufficient evidence and whether the trial court applied” the correct
legal framework. People v. Kazmierski, 25 P.3d 1207, 1210 (Colo.
2001); see Carousel Farms Metro. Dist. v. Woodcrest Homes, Inc.,
2019 CO 51, ¶ 5; Maxwell, ¶ 25.
¶ 50 That David may have broadly agreed that his general
intangibles included his purported interest in the Trust does not
allow the Bank to bypass trust law. The spendthrift provision
prevented David from alienating his interest in the Trust to his
creditors during Janice’s life.
¶ 51 Thus, to the extent the bankruptcy court purported to allow
the bankruptcy trustee to pursue all sources of security the Bank
thought it had, the bankruptcy court’s orders had no effect on
nonparties, including Janice (while she was alive) and the trustees
she designated under the Trust and her will (after Janice’s death).
See § 13-51-115, C.R.S. 2025 (“[N]o declaration shall prejudice the
27 rights of persons not parties to the proceeding.”); In re People in the
Interest of S.A. v. B.A., 2022 CO 27, ¶ 30 (without personal
jurisdiction over an individual or entity, a court cannot issue legally
binding and enforceable orders); Constr. Assocs. v. N.H. Ins. Co.,
930 P.2d 556, 562 (Colo. 1996) (a declaratory judgment action
cannot bind nonparties).
¶ 52 Moreover, and as previously explained, had the issue been
litigated in the bankruptcy case — and it was not — the bankruptcy
court would have had to honor state law restrictions on the transfer
of a claimed beneficial interests in a trust.13 See 11 U.S.C.
§ 541(c)(2); §§ 15-5-502(3), -504; Amerson, 839 F.3d at 1300;
Alagna, 107 B.R. at 307; see also § 15-5-501 (a creditor may attach
to present or future distributions owed to a beneficiary, but only to
13 The Bank invokes provisions of the Uniform Commercial Code —
Secured Transactions (UCC), §§ 4-9-101 to -809, C.R.S. 2025, to claim a superior interest in David’s expectancy, but we apply the Colorado Uniform Trust Code (not the UCC) to determine the legal effect of a trust instrument. See Casey v. Colo. Higher Educ. Ins. Benefits All. Tr., 2012 COA 134, ¶ 20, abrogated on other grounds by, City of Aspen v. Burlingame Ranch II Condo. Owners Ass’n, 2024 CO 46, ¶ 20; see also Delta Sales Yard v. Patten, 892 P.2d 297, 298 (Colo. 1995) (a specific statute controls over a general statute if there is a conflict).
28 the extent that the beneficiary’s interest is not subject to a
spendthrift provision).
D. The Bank’s (and Other Creditors’) Remedy
¶ 53 In remanding the case for the district court to give effect to our
decision, we reiterate that the Bank cannot preferentially stake a
claim in David’s share of the Trust. However, once the trustee
distributes David’s share of Trust funds, the Bank and other
creditors are similarly situated. If the Bank’s (or the creditors’) debt
was not discharged in bankruptcy, they may hold claims that they
can pursue against David individually once his distribution is
made. See Beren, ¶ 31.
IV. Disposition
¶ 54 We reverse and remand for the district court to give effect to
our decision.
JUDGE KUHN and JUDGE SULLIVAN concur.