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Maryland's Construction Trust Laws Limited by Court of Special Appeals

May 21, 2008  |  from Bowie & Jensen, LLC Construction Law Forum

Maryland's Court of Special Appeals limited the breadth of Maryland's Construction Trust laws. This Statute states in relevant part:



"Any officer, director, or managing agent of any contractor or subcontractor, who knowingly retains or uses the moneys held in trust under §§ 9-201 of this subtitle, or any part thereof, for
any purpose other than to pay those subcontractors for whom the moneys are held in trust, shall be personally liable to any person damaged by the action."



Thus, this statute imposes personal liability on someone who uses money held for the benefit of subcontractors for some other purpose.



The Court of Special Appeals reversed a finding of personal liability on behalf of a managing agent who received money from a general contractor but failed to pay his supplier. The Court reasoned that the Construction Trust laws were not drafted to impose a higher standard or degree of liability upon officers of a construction company than those of any other type of business. Furthermore, the court concluded that because the contractor's payment requisitions did not identify for which sub-contractor or supplier payment was sought, then money was never ear-marked or held in trust for the benefit of any other party. Further, the mere insufficiency of funds is not a sufficient basis to impose liability under the Trust. Instead, "Where funds paid by contractors to subcontractors are earmarked for payment to a specific payee, but payment is not made, and those funds can be tracked, personal liability may be imposed."



For further questions, contact Matt Hjortsberg at 410-583-2400 or at hjortsberg@bowie-jensen.com

Filed: Construction-Law