News

Using the Maryland Construction Trust Statute as a Tool for Payment by Subcontractors

The Maryland Construction Trust statute protects subcontractors from dishonest practices by general and higher tiered subcontractors by making officers, directors, and managing agents personally liable when such agents knowingly use monies held in trust improperly.  A recent case by the Maryland Court of Special Appeals clarified the applicability of the Maryland Construction Trust statute, limiting the reach of the statute to projects subject to either the Maryland Mechanic’s Lien statute or Maryland Little Miller Act.  

In C&B Constr. V. Dashiell, Maryland Court of Special Appeals, No. 1307, September 2016, the subcontractor, C&B Construction, Inc. (“C&B”) attempted to find the president and vice-president of Temco Builders, Inc. (“Temco”) personally liable for monies due and owing on six separate construction projects.  C&B, however, failed to provide any evidence that the projects were subject to either the Maryland Mechanic’s Lien statute or the Little Miller Act.  As a result, the trial court held Temco’s President, Edward Maguire and Vice-President, Jeffrey Dashiell were not subject to the Maryland Construction Trust statute and could not be personally liable.  The Court dismissed C&B’s argument that the Maryland Constructive Trust Statute could be expanded to other types of projects, expressly stating that personally liable can only exist when the project is subject to the Maryland Mechanic’s Lien statute or Maryland Little Miller Act.

From a practicable standpoint, the Maryland Construction Trust statute remains a powerful tool to assist subcontractors in Maryland get paid for construction projects by placing personal liability on the agents of general or higher tiered subcontractors.  To impose personal liability, however, the subcontractor must prove that the project is either a public project subject to the Little Miller Act or a private commercial project, which is either new construction or renovations that improved the value of the property by at least 15%.  Conversely, general or higher tiered contractors in Maryland must understand that they can be personally liable for knowingly misappropriating monies received and earmarked for one of its subcontractors.

For additional information related to the Maryland Construction Trust statute, Maryland Mechanic’s Lien, or construction law in Maryland, contact Michael W. Siri at siri@bowie-jensen.com or by phone at 410-583-2400.  

icon-location

210 W. Pennsylvania Avenue, Suite 400
Towson, Maryland 21204