190 A.3d 271
Md.2018Background
- C&B Construction (subcontractor) completed work on six private construction contracts for general contractor Temco Builders but was unpaid; Temco later consented to a $225,607 judgment in favor of C&B.
- C&B sued Temco’s co-owners (Dashiell and Maguire) under the Maryland Construction Trust Statute (Real Prop. §§ 9-201–9-204), alleging misappropriation/diversion of funds and personal liability of officers.
- At trial the court granted defendants’ motion for judgment, concluding C&B failed to show the contracts were subject to either the Maryland Little Miller Act or the Maryland Mechanics’ Lien Statute as required by § 9-204(a).
- The Court of Special Appeals affirmed; the Court of Appeals granted certiorari to decide (1) whether § 9-204(a) limits the Construction Trust Statute to contracts subject to the Little Miller Act or mechanics’ lien law and (2) whether the trial court erred regarding earmarking evidence.
- The Court of Appeals held § 9-204(a) does limit the statute: the Construction Trust Statute applies only where the underlying contract is subject to the Maryland Little Miller Act or the Maryland Mechanics’ Lien Statute; C&B failed to show either applied and thus its claim failed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Real Prop. § 9-204(a) limits the Construction Trust Statute to contracts subject to the Little Miller Act or mechanics’ lien law | § 9-204 should not impose that prerequisite; the subtitle otherwise creates a general trust remedy for unpaid subcontractors | § 9-204(a)’s plain text and cross-references limit the statute to contracts subject to the Little Miller Act or Real Prop. § 9-102 | Held: § 9-204(a) requires the contract be subject to the Little Miller Act or the mechanics’ lien statute before the Construction Trust Statute applies |
| Whether C&B demonstrated the underlying contracts were subject to the Little Miller Act (public contracts) | C&B argued the trust statute applies regardless of Miller Act mechanics; earmarking evidence showed funds were intended for C&B | Defendants: no evidence contracts were public/state projects or otherwise subject to the Little Miller Act | Held: C&B failed to show the contracts were public or met Miller Act requirements; Little Miller Act not satisfied |
| Whether C&B showed the contracts met the mechanics’ lien statute (15% improvement threshold, statutory procedures) | C&B relied on alleged earmarking/misappropriation to trigger trustee liability under the Construction Trust Statute | Defendants: no proof that each project met the 15% value-improvement test or that lien procedures applied | Held: C&B did not prove the § 9-102 mechanics’ lien prerequisites (including 15% rule); mechanics’ lien statute not satisfied |
| Whether trial court erred in denying relief based on alleged earmarking/misappropriation evidence | C&B argued evidence of earmarking and diversion established personal liability of corporate officers under § 9-202 | Defendants argued even if misappropriation occurred, the Construction Trust Statute does not apply absent satisfaction of § 9-204(a) prerequisites | Held: Court did not reach merits of earmarking because statutory prerequisite not shown; judgment for defendants affirmed |
Key Cases Cited
- Ferguson Trenching Co. v. Kiehne, 329 Md. 169 (1993) (explains purpose of Construction Trust Statute and limits on imposing personal liability)
- Freeform Pools, Inc. v. Strawbridge Home for Boys, Inc., 228 Md. 297 (1962) (mechanics’ lien law is statutory and cannot be judicially extended beyond its plain requirements)
- Walter v. Atlantic Builders Group, Inc., 180 Md. App. 347 (2008) (Court of Special Appeals treated Construction Trust Statute as tied to Little Miller Act applicability)
- U.S. for Use & Benefit of Allied Bldg. Prod. Corp. v. Fed. Ins. Co., 729 F. Supp. 477 (D. Md. 1990) (Construction Trust Statute applies only to state‑financed buildings and property subject to mechanics’ lien law)
- Jaguar Technologies, Inc. v. Cable‑LA, Inc., 229 F. Supp. 2d 453 (D. Md. 2002) (confines Construction Trust Statute to contracts subject to § 9-102 or the Little Miller Act)