It’s a typical scenario- a subcontractor or supplier is owed money from a contractor but hasn’t perfected a right to a construction lien. The subcontractor or supplier think they are out of luck and are stuck with an uncollectable breach of contract claim against an empty corporation. However, the Builders Trust Fund Act (“BTFA”), MCLA 570.151 et. seq. can provide an extremely powerful remedy for the unpaid client.
In general, the BTFA makes it illegal for a contractor to take money from an owner of a project and use it for other purposes than first paying subcontractors, suppliers and laborers on the project. In addition to potential criminal liability, a civil claim under the BTFA can provide for:
1. Individual liability of participating corporate officers;
2. A debt that is non-dischargeable in bankruptcy; and
3. At least a decent argument for treble damages under Michigan’s conversion statute.
A very good discussion of individual liability and non-dischargeability is set forth in the recent case of In re Patel, 565 F3d 963 (CA 6 2009).