Relating to Real Estate

In C&B Construction, Inc. v. Dashiell, 234 Md. App. 424 (2017), the Court of Special Appeals held that the Maryland Construction Trust Statute only applies to contracts that are subject to either the Maryland Mechanics’ Lien Law or the Maryland “Little Miller Act.”

The Maryland Construction Trust Statute provides an extraordinary remedy for certain subcontractors that are not paid from funds received by the contractors for which they do work: they can hold the officers, directors, and managing agents of the contractor corporation personally liable if those individuals knowingly use monies held in trust improperly.  In C&B Construction, C&B Construction, Inc., sought to use the provisions of the Construction Trust Statute after it served as a subcontractor to the general contractor Temco Builders, Inc., on a number of projects in Wicomico County.  Temco received payments exceeding $200,000 for work performed by C&B without paying C&B for that work.

C&B brought suit in the Circuit Court for Wicomico County and obtained a judgment against Temco for $225,607.  However, the circuit court found that the officers of Temco were not liable under the Construction Trust Statute.  On appeal, the Court of Special Appeals affirmed.

Section 9-204 of the Real Property Article (“RP”) provides that the Construction Trust Act applies to contracts that are subject to the mechanics’ lien law as well as to the “Little Miller Act,” which essentially applies the mechanics’ lien law to state-owned projects.  RP § 9-204 also provides that it does not apply to contracts for construction of single-family residences or to a home improvement contract by a licensed contractor.

C&B argued that the statement of the kinds of contracts that are subject to the Construction Trust Statute did not preclude application of the law to other contracts as well, but the Court of Special Appeals disagreed.  The court held that based on the context of the statute, its purpose, and its legislative history, the listing of the contracts that are subject to the Construction Trust Act is exclusive: if a claim under a contract cannot proceed under the Maryland Mechanics’ Lien Law or the Maryland Little Miller Act, it cannot proceed under the Maryland Construction Trust Act.

For questions, please contact Ed Levin (410) 576-1900.