Blanton v. Com.

• Decision Date: 10 February 1978
• Citation: 562 S.W.2d 90
• Parties: Terry R. BLANTON, Appellant, v. COMMONWEALTH of Kentucky, Appellee.
• Court: Kentucky Court of Appeals

Page 90

562 S.W.2d 90

Terry R. BLANTON, Appellant, v. COMMONWEALTH of Kentucky, Appellee.

Court of Appeals of Kentucky.

Feb. 10, 1978.

Robert E. Cato, London, for appellant.

Robert F. Stephens, Atty. Gen., Carl T. Miller, Jr., Asst. Atty. Gen., Frankfort, for appellee.

Before LESTER, PARK and WILHOIT, JJ.

PARK, Judge.

The appellant, Terry R. Blanton, is a building contractor engaged in the construction of single family residences. Blanton was indicted and convicted in the Laurel Circuit Court of theft by failure to make required disposition of property (KRS 514.070), receiving a sentence of two years imprisonment.

Blanton had entered into a contract to construct a residence for Allen Scharf for the sum of $27,000.00. Scharf paid Blanton the sum of $22,000.00 on the contract. Scharf, who is a Kentucky State Policeman, arrested Blanton for theft by failure to make required disposition of property when he discovered that Blanton had failed to pay certain claims for labor and material used in construction of the residence. On this appeal, Blanton asserts two grounds for reversing the judgment of the circuit court: (1) that he was entitled to a directed verdict of acquittal; and (2) that he was entitled an instruction on a lesser included misdemeanor offense.

I

KRS 514.070(1) provides:

A person is guilty of theft by failure to make required disposition of property received when:

(a) He obtains property upon agreement or subject to a known legal obligation to make specified payment or other disposition whether from such property or its proceeds or from his own property to be reserved in equivalent amount; and

(b) He intentionally deals with the property as his own and fails to make the required payment or disposition.

In the brief filed on behalf of the Commonwealth, the Attorney General concedes error. The Attorney General's brief suggests that a building contractor is under no legal duty to pay claims for labor and material furnished on the job out of proceeds of any payment received from the owner of the property. ¹ We disagree.

KRS 376.070(1) provides Any contractor, architect, or other person, who builds, repairs, or improves the property of another under such circumstances that a mechanics' or materialman's lien may be imposed on the property shall, from the proceeds of any payment received from the owner, pay in full all persons who have furnished material or performed labor on the property.

Blanton clearly had a legal obligation to pay in full all claims for material and labor furnished on the Scharf residence out of the sum of $22,000.00 received on the contract from Scharf. If the amount paid by the owner was not sufficient to pay all such bills, then it was Blanton's duty to pay all bills for material and labor on a pro rata basis. KRS 376.070(2).

KRS 514.070 is identical with section 1530 of the final draft of the Kentucky Penal Code published in November 1971. Consequently, the commentary accompanying section 1530 of the final draft of the Kentucky Penal Code may be used as an aid in construing KRS 514.070(1). See Kennedy v. Commonwealth, Ky., 544 S.W.2d 219 (1976); KRS 500.100. The commentary to section 1530 of the final draft stated:

An example of property obtained "subject to a known legal obligation" is a contractor or architect who fails to apply payments to claims of mechanic's or materialman's liens presently an offense under KRS 376.070.

The drafters of the penal code clearly intended KRS 514.070(1) to apply to contractors who failed to apply payments received from the owner to claims for labor and material furnished on the job.

KRS 514.070(1) is based upon section 223.8 of the American Law Institute's Model Penal Code. The commentary to an earlier draft of that section stated:

The section applies also where statutes require certain classes of persons who receive funds to reserve such funds for particular purposes. Examples of this legislation are the building contractor statutes requiring payments received on the building contract to be used to pay laborers and materialmen, statutes requiring factors and commission merchants to remit the net proceeds of sale of agricultural products to the consignor, and statutes requiring retailers to collect sales taxes to be paid over to the state.

ALI Model Penal Code (Tentative Draft # 2, 1954) 81 (emphasis added). There is no merit to the Attorney General's suggestion that a building contractor has no duty to apply amounts received from the owner to the payment of claims for labor and material used on the job. Unless the contractor pays the claims for labor and material, mechanics' liens may be asserted against the owner's property, and the owner may be required to pay twice for his home.

The Commonwealth introduced evidence of three unpaid claims for labor and material furnished on the Scharf residence. Hoover Neeley testified that he performed the plumbing work on the Scharf residence. Neeley testified that Blanton had paid him only $500.00 on his bill for $1,750.00, leaving a balance of $1,250.00 due for his work. Roger Rush testified that he was a carpenter on the Scharf job and that Blanton had failed to pay him $260.00 for labor performed by him. The credit manager for Central Kentucky Supply Co., Inc., testified that Blanton owed the sum of $8,129.73 for materials furnished to the Scharf job. He further testified that Blanton had made no payment for any of the materials furnished to the Scharf residence. The invoices from Central Kentucky Supply were dated between February 17 and March 26, 1976.

Scharf testified that he paid Blanton $22,000.00 on the contract between January 6 and March 29, 1976. According to Scharf, Blanton had asked for an advance on the final payment on March 29 so that he could pay bricklayers. Scharf testified that he asked Blanton whether he was behind on his bills and that Blanton assured him that all materials used in the residence had been paid to date. Having introduced evidence of payment by the owner and nonpayment of the claims for labor and material, the Commonwealth had made out a prima facie case that Blanton had intentionally dealt with the Scharf money as his own. Such an intention is the natural inference to be drawn from that evidence.

Blanton claimed that he did not owe the three claims for labor and material on the Scharf job. He testified that on February 10, 1976, he had paid Central Kentucky Supply the sum of $15,000.00 borrowed from a savings and loan association. However, it should be noted that this was seven days before the date of the first invoice for materials for the Scharf job. Blanton testified that he usually owed around $10,000.00 to Central Kentucky Supply at all times. There is nothing to indicate that the $15,000.00 payment to Central Kentucky Supply was for the Scharf job. As Blanton testified:

Well, they put it wherever they wanted to. Central Kentucky Supply did. It was just a running account that I had with them and I paid on it. I told them where to put it, which ones to apply to, but generally they didn't list, you know. They just put it wherever they wanted to apply, the oldest bill or whatever.

He also testified that he owed nothing to Neeley or Rush. As to Neeley, Blanton claimed that the bill was inflated and included work not performed on the Scharf job. As to Rush, Blanton claimed that he was entitled to an offset for the value of labor performed by him for the benefit of Rush.

In their written contract, Scharf and Blanton clearly contemplated that the progress payments would be applied to the bills for labor and materials for which liens could be asserted against the property. On cross-examination, Blanton admitted that it was his responsibility to pay for all labor...