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C&B Construction Inc. v. Dashiell

Court of Appeals of Maryland

July 30, 2018

C&B CONSTRUCTION, INC.
v.
JEFFREY DASHIELL, ET AL.

          Circuit Court for Wicomico County Case No. 22-C-15-001518.

          Barbera, C.J., Greene, McDonald, Watts, Hotten, Getty, Rodowsky, Lawrence F., (Senior Judge, Specially Assigned) JJ.

          OPINION

          HOTTEN, J.

         This case concerns a breach of contract dispute before the Circuit Court for Wicomico County, stemming from the failure to pay for labor and materials provided by a construction subcontractor, C&B Construction Inc. (hereinafter "Petitioner"), to a general contractor, Temco Builders Inc. (hereinafter "Temco"), through six construction contracts. Temco failed to pay the amounts due to Petitioner for the labor and materials expended, which ultimately resulted in a consent judgment agreed to by Temco in the amount of $225, 607. At all relevant periods, Temco was co-owned by Jeffrey Dashiell and Edward J. Maguire (hereinafter "Respondents"). At trial, Petitioner alleged that Respondents had either diverted or misappropriated funds received by Temco from the owners of the construction projects, and that the funds received were supposed to be held in trust pursuant to Md. Code (1974, Repl. Vol. 2015), §§ 9-201, 9-202, and 9-204 of the Real Property Article (hereinafter "Real Prop.") also known as the Maryland Construction Trust Statute discussed infra. The circuit court entered judgment for the Respondents.

         Following the entry of the circuit court judgment on July 19, 2016, Petitioner noted a timely appeal to the Court of Special Appeals of Maryland. The Court affirmed the judgment of the circuit court. Thereafter, we granted certiorari to review the following questions:

1. Does Section 9-204(a) of the Maryland Construction Trust Statute limit its application to projects covered by the Maryland Mechanic's Lien Law and Maryland Little Miller Act even though the plain language of the statute as a whole and Section 9-204(a) specifically contain no such limitation?
2. Did the trial court err in granting judgment to Respondents despite evidence showing that funds received by the general contractor were earmarked for payment to Petitioner[?]

         For the reasons discussed infra, we shall affirm the judgment of the Court of Special Appeals.

         BACKGROUND

         Petitioner was engaged as a subcontractor by Temco to perform related construction work, including the installation of drywall and ductwork. Petitioner completed its subcontract work for the six construction projects. Temco received payment from the project owners, but failed to pay Petitioner for the work performed. Petitioner contends that instead of paying it for the work performed, Respondents either misappropriated those funds, diverted the funds to themselves individually, or paid other expenses.

         On October 1, 2015, Petitioner filed a breach of contract complaint in the Circuit Court for Wicomico County against Temco, and Respondents individually, pursuant to the Maryland Construction Trust Statute. On May 3, 2016, Temco entered into a consent judgment with Petitioner for $225, 607, leaving the remaining claims against Respondents outstanding. At the close of Petitioner's case, Respondents moved for judgment arguing that the Maryland Construction Trust Statute was not applicable, because the subcontracts at issue were not subject to the Maryland Little Miller Act[1] or the Maryland Mechanics' Lien Statute, [2] as required by the plain language of Real Prop. § 9-204. In granting Respondents' motion, the circuit court noted:

[I]t seems to me really looking at the Statute and Section 9-204(a) ..., it applies to contracts under the Maryland Little Miller Act, and there is no contention that any of the contracts in this case would be subject to the Maryland Little Miller Act as well as properties subject to 9-102 of this Article which is the Mechanics Lien Statute.
And the only way to know whether the property is subject to 9-102 is for evidence to be provided that it is subject to 9-102, which I am just going to shorten it up and say that it's either basically new construction or every building repaired, rebuilt or improved to the extent of 15 percent of its value.
And in this case, I have looked at the contracts, and there is nothing to indicate that the contracts are for any of the other exceptions. . . .
There is no way for the Court to make any judgment as to whether or not that improvement is to the extent of 15 percent of the value of the project.
And as I said, there is no way for the Court to infer that[, ] because there is no evidence that would permit a finding, a direct finding from the evidence. And it does seem to me that a basic proposition is that one cannot proceed under the Construction Trust Statute without first establishing that the ... contract for which that construction trust is sought to be imposed is one which would be lienable.
So I think sort of the basic proposition is that [Petitioner] must first establish that the property is I will say lienable under Section 9-102 as a predicate for anything under Section 9-201 [et seq.], and there is really no evidence in this case that would permit me to make that finding directly from the evidence or by any inference from the evidence that has been submitted.
So I don't think -- the question is a closer one as to whether or not there is adequate evidence of earmarking, but I don't think I need to get to that point really, because I don't believe that the evidence as submitted is sufficient for me to, even if I looked at it in the light most favorable to the [Petitioner], which I'm not required to do, but even if I did do that, I don't think the evidence is sufficient.

         So I'm going to grant the motion for judgment on behalf of [Respondents]. Following the circuit court's denial of Petitioner's motion for new trial, a timely appeal was noted to the Court of Special Appeals.

         The Court of Special Appeals issued its reported opinion on November 1, 2017. See C & B Constr., Inc. v. Dashiell, 234 Md.App. 424, 430-31, 172 A.3d 960, 964 (2017), cert. granted, 457 Md. 137, 177 A.3d 72 (2018). In affirming the circuit court, the Court interpreted Real Prop. § 9-204 narrowly, focusing on four primary determinations. First, the Court reasoned that the plain language of Real Prop. § 9-204 explicitly states that its intended purpose was to limit its application to contracts subject to the Maryland Little Miller Act or the mechanics' lien statute. Second, the Court determined that the context surrounding the enactment of the statute, including its reliance on definitions established under the mechanics' lien statute, suggested that the General Assembly intended a connected and limited application of the statute. Third, the Court determined that the consequences of adopting Petitioner's proposed application "would impose unprecedented liability upon officers and directors of contractor corporations." Id. at 437, 172 A.3d at 968. Finally, the Court noted that the previous interpretations of the Maryland Construction Trust Statute in Walter v. Atl. Builders Group, Inc., 180 Md.App. 347, 351 n. 3, 951 A.2d 94 (2008), U.S. for the use of DMI, Inc. v. Darwin Const. Co., 750 F.Supp. 536, 541 (D.D.C. 1990), and Jaguar Techs., Inc. v. Cable-LA, Inc., 229 F.Supp.2d 453 (D. Md. 2002) unanimously interpret the Maryland Construction Trust Statute as requiring a demonstration that the Maryland Little Miller Act or mechanics' lien statute apply to the contracts in dispute.

          STAND ...


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