People v. Brown, Docket No. 208355.

• Decision Date: 04 May 2000
• Docket Number: Docket No. 208355.
• Citation: 610 N.W.2d 234,239 Mich. App. 735
• Parties: PEOPLE of the State of Michigan, Plaintiff-Appellee, v. Deborah Susan BROWN, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

610 N.W.2d 234

239 Mich. App. 735

PEOPLE of the State of Michigan, Plaintiff-Appellee, v. Deborah Susan BROWN, Defendant-Appellant.

Docket No. 208355.

Court of Appeals of Michigan.

Submitted September 13, 1999, at Grand Rapids.

Decided February 25, 2000, at 9:05 a.m.

Released for Publication May 4, 2000.

Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, Dennis LaBelle, Prosecuting Attorney, and Alan Schneider, Chief Assistant Prosecuting Attorney, for the people.

Lewis & Schuknecht, P.C. (by Michael D. Lewis), Traverse City, for the defendant.

Before: BANDSTRA, C.J., and MARKMAN and METER, JJ.

METER, J.

Defendant Deborah S. Brown appeals as of right from her conviction by a jury of fraudulent retention or use of building contract funds, M.C.L. § 570.152; MSA 26.332. The trial court sentenced her to five years' probation, with the first year to be served in jail. We affirm.

Factual Background

Defendant was a corporate officer for Home Port Construction Services, Inc. (HPCS), a construction company that contracted with Joyce Fredrickson in October 1995 to build a single family dwelling for $88,380. Defendant, as the qualifying officer¹ for HPCS, signed the construction contract on the corporation's behalf. From October 1995 through May 1996, Fredrickson made payments to HPCS, eventually transferring the entire contract amount. Despite Fredrickson's timely payments, however, several subcontractors of HPCS who worked on the Fredrickson project were not paid for their work. Furthermore, defendant withdrew funds from the HPCS account for personal use while these subcontractors remained unpaid. As a result, she was charged with and convicted of violating the Michigan builders' trust fund act (MBTFA), M.C.L. § 570.151 et seq.; MSA 26.331 et seq., which prohibits a building contractor from retaining or using construction payments from a particular project until all laborers, subcontractors, and materialmen who worked on the project have been paid.

The Bindover

Defendant first argues that she should not have been bound over for trial because she was not a "contractor" within the meaning of the MBTFA, which states, in relevant part:

Any contractor or sub contractor[²] engaged in the building construction business, who, with intent to defraud, shall retain or use the proceeds or any part therefor, of any payment made to him, for any other purpose than to first pay laborers, subcontractors and materialmen, engaged by him to perform labor or furnish material for the specific improvement, shall be guilty of a felony in appropriating such funds to his 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, and may be prosecuted upon the complaint of any persons so defrauded[³].... [MCL 570.152; MSA 26.332.]

Defendant contends that because Fredrickson contracted with HPCS for the construction of the dwelling, only HPCS— as the "contractor"—could be held criminally accountable for the misappropriation of Fredrickson's funds under the MBTFA. We disagree. Whether the MBTFA encompasses officers of a corporate contractor who personally misappropriate funds is a question of statutory construction. We review questions of statutory construction de novo, People v. Sheets, 223 Mich.App. 651, 655, 567 N.W.2d 478 (1997), and we review bindover challenges, in general, to determine whether the district court abused its discretion in finding probable cause that the defendant committed the charged offense. People v. Whipple, 202 Mich.App. 428, 431, 509 N.W.2d 837 (1993).

In Whipple, id. at 429, n. 1, 435-436, 509 N.W.2d 837, this Court held that the principal of a sole proprietorship that acted as a building contractor could be held criminally responsible under the MBTFA. The Court then observed that "[its] analysis may not be applicable to officers of a corporate contractor" (emphasis added). Id. at 429, n. 1, 509 N.W.2d 837. However, "[i]t is beyond question that a corporate employee or official is personally liable for all tortious or criminal acts in which he participates, regardless of whether he was acting on his own behalf or on behalf of the corporation." Attorney General v. Ankersen, 148 Mich.App. 524, 557, 385 N.W.2d 658 (1986). This rule of law has been used by this Court to extend criminal liability to corporate employees when they, personally, caused their corporation to act unlawfully.

In Joy Management Co. v. Detroit, 183 Mich.App. 334, 340, 455 N.W.2d 55 (1990), two individuals argued that they could not be convicted under a city of Detroit ordinance punishing certain acts by a "purchaser or transferee" of property because their corporation was the actual "purchaser or transferee" of the property in question. This Court stated:

It is well established that corporate employees and officials are personally liable for all tortious and criminal acts in which they participate, regardless of whether they are acting on their own behalf or on behalf of a corporation.... Accordingly, since [the individual] plaintiffs... allegedly participated in violating the ordinance, they may be prosecuted under it. [Id.]

The present case is analogous to Joy Management. Defendant contends that because HPCS was the actual "contractor" for the Fredrickson project, she cannot be held criminally responsible under the MBTFA. However, because she was a corporate officer of HPCS and because she "allegedly participated in violating" the MBTFA by allegedly misappropriating Fredrickson's funds, she "may be prosecuted under it."⁴ Id. This conclusion accords with People v. Miller, 78 Mich.App. 336, 343, 259 N.W.2d 877 (1977), in which this Court held that because the MBTFA "is a remedial statute, designed to protect people of the state from fraud in the construction industry," it should be "construe[d] ... liberally for the advancement of the remedy." It also accords with Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (C.A.2, 1981), a diversity suit in which the court held that an officer of a corporate contractor could be held civilly liable under the MBTFA.

Defendant challenges the bindover on alternate grounds, arguing that there was no evidence that she misappropriated Fredrickson's funds or that she did so with the intent to defraud. However, as this Court stated in Whipple, supra at 431-432, 509 N.W.2d 837:

At the preliminary examination, the prosecutor is not required to prove each element of the crime beyond a reasonable doubt. Circumstantial evidence and reasonable inferences arising from the evidence are sufficient to support the bindover of the defendant if such evidence establishes probable cause.

Here, the evidence presented at the preliminary examination showed that although Fredrickson made timely payments to HPCS under the contract and although certain subcontractors were owed money, defendant took money from the HPCS account and deposited it in her personal account, after which the subcontractors remained unpaid. This evidence was sufficient to establish probable cause that defendant fraudulently retained or used construction funds under the MBTFA, especially because § 3 of the MBTFA, M.C.L. § 570.153; MSA 26.333, indicates that the appropriation of money by a contractor before the payment of subcontractors "shall be evidence of intent to defraud." See generally Whipple, supra at 435-436, 509 N.W.2d 837. Accordingly, the district court did not abuse its discretion in binding over defendant for trial. Id. at 431, 509 N.W.2d 837.

The Sufficiency of the Evidence at Trial

Next, defendant argues that the prosecution presented insufficient evidence to support her conviction because (1) there was no evidence that defendant withdrew Fredrickson's money, as opposed to money unrelated to the Fredrickson project, from the HPCS account; (2) only the "contractor" could be held responsible for the misappropriation of Fredrickson's funds under the MBTFA, and defendant could not be deemed the "contractor" for the Fredrickson project because she did not actively participate in the day-to-day operations of HPCS, the entity that contracted with Fredrickson; (3) none of Fredrickson's payments were made to defendant as an individual; and (4) there was no evidence that defendant acted with the intent to defraud anyone. In determining whether sufficient evidence existed to support a conviction, this Court views the evidence in the light most favorable to the prosecution and determines whether a rational trier of fact could have found that the essential elements of the crime were proved beyond a reasonable doubt. People v. Jaffray, 445 Mich. 287, 296, 519 N.W.2d 108 (1994). We disagree that the prosecution presented insufficient evidence to support defendant's conviction. Regarding defendant's first argument (that her conviction was inappropriate because there was no evidence that she withdrew Fredrickson's money, specifically, from the HPCS account), the evidence showed that (1) in October 1995, Fredrickson paid $15,000 to HPCS; (2) in January 1996, the balance in the HPCS account was as low as $98; (3) in December 1995, defendant withdrew at least $2,000 from the HPCS account as "profit;" and (4) at least one subcontractor for the Fredrickson project was owed over $1,000 beginning in mid-November 1995 and lasting at least until March 1996. In this Court's opinion, this evidence was sufficient to show that defendant misappropriated money that HPCS received from Fredrickson for the construction of her house. See Whipple, supra at 433-435, 509 N.W.2d 837. See also People v. Nelson, 234 Mich.App. 454, 459, 594 N.W.2d 114 (1999) ("Circumstantial evidence and reasonable inferences arising therefrom may be sufficient to prove the elements of a crime.")

With regard to defendant's second argument (that she should not have been prosecuted under the MBTFA because she was not the "contractor" for the Fredrickson project), she could,...