C & B Constr., Inc. v. Dashiell

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. STANDARD OF REVIEW "We review, without deference, the trial court's grant of a motion for judgment in a civil case." D.C. v. Singleton , 425 Md. 398 , 406, 41 A.3d 717 , 721 (2012) (quoting Thomas v. Panco Mgmt. of Md., LLC , 423 Md. 387 , 393-94, 31 A.3d 583 , 587-88 (2011) ). In doing so "[w]e conduct the same analysis that a trial court should make when considering the motion for judgment." Id. at 406-07 , 41 A.3d at 721 -22 . This review requires this Court to evaluate "all evidence and reasonable evidentiary inferences, viewed in a light most favorable to [the non-moving party]." Thomas , 423 Md. at 394 , 31 A.3d at 588 .

In the case at bar, we are asked to interpret the Maryland Construction Trust Statute. We have stated "where an order involves an interpretation and application of Maryland constitutional, statutory or case law, our Court must determine whether the trial court's conclusions are 'legally correct' under a de novo standard of review." Schisler v. State , 394 Md. 519 , 535, 907 A.2d 175 , 184 (2006). Accordingly, we will evaluate the applicability of the Maryland Construction Trust Statute and the grant of Respondents' motion for judgment by applying a de novo standard of review. DISCUSSION In Washington Suburban Sanitary Commission v. Phillips , 413 Md. 606 , 994 A.2d 411 (2010), we outlined the sound principles of statutory interpretation: The cardinal rule of statutory interpretation is to ascertain and effectuate the real and actual intent of the Legislature.

A court's primary goal in interpreting statutory language is to discern the legislative purpose, the ends to be accomplished, or the evils to be remedied by the statutory provision under scrutiny. To ascertain the intent of the General Assembly, we begin with the normal, plain meaning of the language of the statute. If the language of the statute is unambiguous and clearly consistent with the statute's apparent purpose, our inquiry as to legislative intent ends ordinarily and we apply the statute as written, without resort to other rules of construction. We neither add nor delete language so as to reflect an intent not evidenced in the plain and unambiguous language of the statute, and we do not construe a statute with "forced or subtle interpretations" that limit or extend its application.

We, however, do not read statutory language in a vacuum, nor do we confine strictly our interpretation of a statute's plain language to the isolated section alone. Rather, the plain language must be viewed within the context of the statutory scheme to which it belongs, considering the purpose, aim, or policy of the Legislature in enacting the statute. We presume that the Legislature intends its enactments to operate together as a consistent and harmonious body of law, and, thus, we seek to reconcile and harmonize the parts of a statute, to the extent possible[,] consistent with the statute's object and scope. Where the words of a statute are ambiguous and subject to more than one reasonable interpretation, or where the words are clear and unambiguous when viewed in isolation, but become ambiguous when read as part of a larger statutory scheme, a court must resolve the ambiguity by searching for legislative intent in other indicia, including the history of the legislation or other relevant sources intrinsic and extrinsic to the legislative process.

In resolving ambiguities, a court considers the structure of the statute, how it relates to other laws, its general purpose, and the relative rationality and legal effect of various competing constructions. In every case, the statute must be given a reasonable interpretation, not one that is absurd, illogical, or incompatible with common sense. Id. at 618-20 , 994 A.2d at 419 (quoting Lockshin v. Semsker , 412 Md. 257 , 274-75, 987 A.2d 18 , 28-29 (2010) ). The Applicability of the Maryland Construction Trust Statute In Ferguson Trenching Co., Inc. v. Kiehne , 329 Md. 169 , 618 A.2d 735 (1993), we indicated that the purpose of the Construction Trust Statute was to "protect subcontractors from dishonest practices by general contractors and other subcontractors for whom they might work." Id. at 174-75 , 618 A.2d at 737 .

In keeping with the purpose "to ensure that funds disbursed by an owner or contractor for payment to a subcontractor for work done are actually paid to the subcontractor," the statute imposed personal liability on the directors, officers, and managing agents of a contractor corporation when they improperly use the funds held in trust, for purposes beyond the payment of subcontractors. C & B Constr., Inc. , 234 Md. App. at 431 , 172 A.3d at 964 ; see also S.B. 374, 1987 General Assembly of Maryland, Summary of Committee Report , 2. The establishment of a trust relationship is reflected in the following language from Real Prop. § 9-201(b) : (1) Any money paid under a contract by an owner to a contractor, or by the owner or contractor to a subcontractor for work done or materials furnished, or both, for or about a building by any subcontractor, shall be held in trust by the contractor or subcontractor, as trustee, for those subcontractors who did work or furnished materials, or both, for or about the building, for purposes of paying those subcontractors. (2) An officer, director, or managing agent of a contractor or subcontractor who has direction over or control of money held in trust by a contractor or subcontractor under paragraph (1) of this subsection is a trustee for the purpose of paying the money to the subcontractors who are entitled to it.

The imposition of personal liability for the misappropriation of funds held in trust is reflected in Real Prop. § 9-202 : Any officer, director, or managing agent of any contractor or subcontractor, who knowingly retains or uses the money 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 money is held in trust, shall be personally liable to any person damaged by the action. Most significant to the case at bar is Real Prop. § 9-204(a), which defines the applicability of the subtitle and states: This subtitle applies to contracts subject to Title 17, Subtitle 1 of the State Finance and Procurement Article, known as the "Maryland Little Miller Act", as well as property subject to § 9-102 of this title. Contained in the plain language of Real Prop. § 9-204(a) is a cross reference to the Maryland Little Miller Act, Md. Code (1985, 2015 Repl. Vol.), § 17-101 et seq. of the State Finance and Procurement Article, and Real Prop. § 9-102 of the Maryland Mechanics' Lien Statute.

This cross reference suggests that the statutes are interconnected and is discussed in detail infra. Petitioner argues that it is not required to demonstrate that the contracts at issue are applicable to the Maryland Little Miller Act or the Maryland Mechanics' Lien Statute, because Real Prop. § 9-204(b) does not limit the applicability of the Maryland Construction Trust Statute generally. Instead, Petitioner asserts that Real Prop. § 9-204 simply ensures that subcontractors have the ability to pursue personal liability against parties such as the Respondents, because subcontractors would be left without recourse if they are not paid. We disagree and determine that the plain language of Real Prop. § 9-204 describes the proper application of the Maryland Construction Trust Statute.

An interpretation of a statute begins with the examination of its text. See Blue v. Prince George's Cty. , 434 Md. 681 , 689, 76 A.3d 1129 , 1133 (2013). Real Prop. § 9-204(a) contains a straightforward requirement, which provides that "[t]his subtitle applies to contracts subject to Title 17, Subtitle 1 of the State Finance and Procurement Article, known as the 'Maryland Little Miller Act', as well as property subject to § 9-102 of this title." The subtitle goes on to describe what it does not apply to and states unequivocally that it is not applicable to projects for the construction of single or family residential properties or home improvement contracts covered under the Maryland Home Improvement Law. 3 This language requires exclusivity and indicates both what the Maryland Construction Trust Statute covers and what is excluded. By listing both, the General Assembly limited the statute's application.

The context of Real Prop. § 9-204 provides a greater understanding of the legislative intent surrounding its enactment, particularly considering the provision's incorporation of the Maryland Mechanics' Lien Statute. Specifically, Real Prop. § 9-204 not only references the Maryland Mechanics' Lien Statute, it incorporates the definitions used in that statute to define relevant terms. This interdependence suggests that the drafters of the Maryland Construction Trust Statute created it with the Maryland Mechanics' Lien Statute in mind. Relative to the Maryland Mechanics' Lien Statute, the General Assembly intended to limit its application and protections.

The Maryland Mechanics' Lien Statute, codified in Real Prop. § 9-101 et seq. , provides that it applies to: Every building erected and every building repaired, rebuilt, or improved to the extent of 15 percent of its value is subject to establishment of a lien in accordance with this subtitle for the payment of all debts, without regard to the amount, contracted for work done for or about the building and