People v. Miller

• Decision Date: 20 September 1977
• Docket Number: Docket No. 26184
• Citation: 259 N.W.2d 877,78 Mich.App. 336
• Parties: PEOPLE of the State of Michigan, Plaintiff-Appellee, v. Tracy A. MILLER, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 877

259 N.W.2d 877

78 Mich.App. 336

PEOPLE of the State of Michigan, Plaintiff-Appellee, v. Tracy A. MILLER, Defendant-Appellant.

Docket No. 26184.

Court of Appeals of Michigan.

Sept. 20, 1977.

Released for Publication Dec. 8, 1977.

William P. Ward, Mount Clemens, for defendant-appellant.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., George N. Parris, Pros. Atty., Alice F. Sage, Asst. Pros. Atty., for plaintiff-appellee.

Before D. E. HOLBROOK, Jr., P. J., ALLEN and FREEMAN, ^* JJ.

D. E. HOLBROOK, Jr., Presiding Judge.

Defendant was convicted of violating the Building Contract Fund Act, M.C.L.A. § 570.151 et seq.; M.S.A. § 26.331 et seq. Essentially this act creates a trust fund for the benefit of customers, subcontractors, laborers, and materialmen as to monies paid the building contractor to ensure the funds are actually used for construction purposes.

The prosecution arose from the aborted sale of a swimming pool to the complaining witness, Mrs. Bundy, and her husband. Primarily the prosecution based its case on bank records which showed the deposit of the Bundy downpayment check in an overdrawn Miller account and the use of the funds the very next day, before any work was done on the Bundy pool. In addition, to counter defendant's claim that he had no intent to defraud the Bundy's, the prosecutor called six other unsatisfied Miller customers as rebuttal witnesses.

After a two-day trial a jury convicted defendant and he was sentenced to from two to three years imprisonment. Defendant appeals as of right, raising numerous allegations of error, and requests a new trial. We find several of defendant's contentions merit discussion but not reversal.

Although the Building Contract Fund Act is primarily a penal statute, the only reported decisions deal with various applications in the civil context. The instant case represents the first criminal prosecution to reach the appellate level.

As noted earlier the basic thrust of the statute is to protect certain persons from unscrupulous or underfinanced building contractors. The purpose of the statute is set forth in the title:

"An act to protect the people of the state from imposition and fraud in the building construction industry and to provide penalties for the violation of this act."

The first section of the Act, M.C.L.A. § 570.151; M.S.A. § 26.331, imposes a trust as to monies paid a contractor a trust in favor of the person making the payment, laborers, subcontractors or materialmen. The contractor is considered the trustee of all funds paid him for building construction purposes.

The next section, M.C.L.A. § 570.152; M.S.A. § 26.332, makes it a felony for the trustee-contractor to retain or use, with intent to defraud, any payments made to him for any other purpose than to first pay laborers, subcontractors and materialmen. This section continues by prohibiting the appropriation of trust funds to the contractor's own use, "while any amount for which he may be liable or become liable under the terms of his contract for such labor or material remains unpaid".

The final section of the Act, M.C.L.A. § 570.153; M.S.A. § 26.333, provides that the appropriation of monies paid the contractor for building operations, "before the payment by him of all moneys due or to become due laborers, subcontractors, materialmen or others entitled to payment, shall be evidence of intent to defraud".

Specifically defendant contends that technically he did not violate the statute and consequently should have been granted a directed verdict and, secondly, that the statute is unconstitutionally vague since it does not sufficiently specify what is and is not prohibited.

Defendant's first argument is that since: 1) there was no evidence that any laborers or materialmen were "unpaid", 2) there was no evidence that the defendant was liable to any laborer or materialman, and 3) there was no evidence that defendant appropriated the Bundy's downpayment to his own use, that there was no evidence of any violation of the statute and that he should have been granted a directed verdict.

There was ample evidence to show the deposit of the Bundy check in an overdrawn Miller general account and that the account was again overdrawn the next day. As the trial court concluded in denying defendant's motion for a directed verdict:

"I think there has been evidence that this money was not used for the purpose for which it was supposed to be used, namely to pay for material for the particular job."

A directed verdict of acquittal may be granted only where "there is no evidence at all, either direct or circumstantial, on each material element of the offense charged". People v. Hodo, 51 Mich.App. 628, 639, 215 N.W.2d 733, 739 (1974), People v. Brewer, 60 Mich.App. 517, 521, 231 N.W.2d 375 (1975). Clearly the bank records indicated the use of the Bundy funds by defendant.

The more important question centers on defendant's interpretation that there can be no violation of the Act where no materialmen or laborers are "unpaid". Essentially defendant's interpretation would allow a contractor to do anything he wished with a customer's money so long as the contractor was not legally obligated to pay any laborers, subcontractors or materialmen. Such an interpretation would undermine both the purpose and express language of the statute.

A Sixth Circuit opinion involving the application of the statute to municipal construction projects indicates the history of the statute is "obscure". General Insurance Co. of America v. Lamar Corp., 482 F.2d 856, 860 (C.A. 6, 1973). It was originally passed in 1931 as a depression-era measure to afford additional protection to subcontractors and materialmen.

"During the boom period in the 1920's speculative builders often undertook to construct projects too large for their available capital to finance, and they frequently paid suppliers and materialmen on older projects with funds received as payments on more current operations.

With the advent of the crash of 1929 and the consequent widespread insolvency of many building contractors, these pyramided empires also collapsed and many subcontractors and suppliers were never paid. Subcontractors and materialmen on private projects were left only with mechanics' liens as remedies, and these were often ineffective." General Ins. Co. at 860. Citing Grossman, Trust and Penal Provisions of the New York State Mechanics' Lien Law, 5 Brooklyn L.Rev. 14, 16-22 (1935).

See National Bank of Detroit v. Eames & Brown, Inc., 396 Mich. 611, 619-620, 242 N.W.2d 412 (1976). In light of this history, it is clear that the design of the act is to prevent contractors from juggling funds between unrelated projects. By imposing a trust as to monies paid the contractor, the statute ensures that funds for a particular project will be used for that project alone.

The statutory language also indicates that the trust is imposed as to anticipated future costs of a particular project. In M.C.L.A. § 570.152; M.S.A. § 26.332 the language clearly states that the trust funds must be used to "first " pay laborers, subcontractors and materialmen. Further that section specifically contemplates future obligations by the use of the "become liable " language. In M.C.L.A. § 570.153; M.S.A. 26.333, evidence of intent to defraud is shown by the appropriation of funds paid to the contractor "before the payment by him of all moneys due or so to become due ". (Emphasis supplied.)

Defendant hinges his argument on the fact that technically no one was "unpaid" at the time the Bundy downpayment was used. This is because no one was under contract to do any work on the Bundy pool. In construing an arguably ambiguous statute, we look to the spirit and purpose of the legislation to give it a reasonable construction. Lincoln Park Detention Officers v. Lincoln Park, 76 Mich.App. 358, 256 N.W.2d 593 (1977), Royal Oak School District v. Schulman, 68 Mich.App. 589, 593, 243 N.W.2d 673 (1976). Because the Building Contract Fund Act is a remedial statute, designed to protect people of the state from fraud in the construction industry, we construe it liberally for the advancement of the remedy. People v. Bandy, 35 Mich.App. 53, 57, 192 N.W.2d 115 (1971). In light of the statutory purpose and the statutory language referring to future obligations of the contractor, we hold that a trust is imposed as to funds which will be needed to pay laborers, subcontractors or materialmen who will have to be hired to complete the particular construction project. In this sense the laborers or materialmen necessary to complete the Bundy pool were "unpaid". To rule any other way would allow only the most unscrupulous offenders to escape the statutory prohibition allowing those who have done no work or ordered no materials whatever to claim the statute was not violated since no one was "unpaid".

We find that since the prosecution presented evidence on every element of the statutory violation, defendant's motion for a directed verdict was properly denied.

Defendant's second attack is on the constitutionality of the Act. Primarily defendant claims that because the statute does not inform a person of which actions are permitted and which are prohibited, the statute is void for vagueness. The constitutionality of the statute was never raised by defendant at the trial court level and this generally precludes appellate review. See People v. Penn, 70 Mich.App. 638, 642, 247 N.W.2d 575 (1976). Because this is the first time the constitutionality of the 1931 statute has been challenged we address it now.

Defendant complains that the statute creating a trust fund does not dictate how the contractor is to deal with such funds; specifically, defendant contends that the statute does not prohibit co-mingling of funds, does not require establishment of a trust account for deposited funds, and does not require separate trust accounts for each job.

The standard for determining...