James Lumber Co., Inc. v. J & S Const., Inc.
| Decision Date | 23 July 1981 |
| Docket Number | Docket No. 50481 |
| Citation | 309 N.W.2d 925,107 Mich.App. 793 |
| Parties | JAMES LUMBER COMPANY, INC., a Michigan Corporation, Plaintiff-Appellant, v. J & S CONSTRUCTION, INC., and Steve Serges, jointly and individually, Defendants-Appellees. |
| Court | Court of Appeal of Michigan — District of US |
John P. Siler, Flint, for plaintiff-appellant.
Robert J. White, Flint, for defendants-appellees.
Before MAHER, P.J., and ALLEN and CYNAR, JJ.
Plaintiff, James Lumber Company, Inc., (hereinafter James Lumber), furnished materials to defendant J & S Construction, Inc., (hereinafter J & S), which were used in several Michigan construction projects. On September 1, 1976, plaintiff initiated this action pursuant to the Michigan building contract fund act, M.C.L. § 570.151, et seq., M.S.A. § 26.331 et seq., against defendant J & S and defendant Steve Serges as a director of defendant J & S. On March 15, 1977, default judgment was entered against defendant J & S only in the amount of $19,832.19. Defendant J & S is insolvent. The present action proceeded to trial on December 13, 1977, against defendant Serges only. The trial without jury was held in Genesee County Circuit Court. On April 4, 1978, the trial court entered its findings of fact and conclusions of law granting judgment in favor of plaintiff against defendant Serges in the amount of $14,100. Defendant Serges then moved for a judgment n.o.v. On November 29, 1978, the trial court granted Serges' motion and vacated the judgment against him. Plaintiff appeals as of right.
The trial court made the following findings of fact. Defendant Serges was a director of J & S. James Lumber was owed $15,729.53 by J & S for materials furnished on several projects. J & S was paid at least $14,000 on these projects. In its initial opinion, issued April 4, 1978, the trial court held that defendant Serges had the burden of proof on the issue of whether the money which J & S received on the projects was properly paid over to the laborers, subcontractors, and materialmen and that defendant Serges had not met this burden. The trial court's opinion granting defendant Serges' motion for a judgment n.o.v. indicated that it was not found that defendant Serges personally received or misapplied the money received or that he knew or approved of any conversion of this money. The trial court concluded that the director of a construction company could not be held personally liable under M.C.L. § 570.151 et seq.; M.S.A. § 26.331 et seq., without proof of knowledge or approval of the misuse of the money received by the construction company.
This issue is one of first impression in Michigan. We agree with the trial court that the plaintiff in this case has the burden of proof with regard to his claim that defendant Serges, director of J & S, should be held liable under the Michigan building contract fund act and that plaintiff has not met this burden. The purpose of M.C.L. § 570.151 et seq.; M.S.A. § 26.331 et seq. (hereinafter the act), is to create a trust fund for the benefit of materialmen and others under private construction contracts. The act provides a civil remedy as well as a criminal penalty. National Bank of Detroit v. Eames & Brown, Inc., 396 Mich. 611, 621-622, 242 N.W.2d 412 (1976); B. F. Farnell Co. v. Monahan, 377 Mich. 552, 141 N.W.2d 58 (1966). If the money received by the contractor in fact was used to pay laborers, subcontractors, or materialmen on the specific job in question, the purpose of the act is carried out and no remedies under the act, civil or criminal, are available to the other, unpaid laborers, subcontractors, or materialmen. National Bank of Detroit, supra, 396 Mich. 622, 242 N.W.2d 412.
Although plaintiff was able to produce during trial the J & S articles of incorporation (showing defendant Serges as a director) and several cancelled checks signed or co-signed by defenda...
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