A contractor was convicted of misapplying fiduciary property for failing to pay subcontractors, but the Texas Court of Appeals reversed the conviction. The court ruled the prosecution failed to prove that the contractor's non-payment created substantial risk of loss to the owners, since the owners' liability was protected by a 10% statutory retainage fund. This decision protects subcontractors by clarifying that retainage funds exist specifically to cover unpaid subcontractor claims.
Retainage funds (typically 10%) are legally designated to protect subcontractors if the general contractor fails to pay them—don't assume you're unsecured.
If a contractor doesn't pay you, the owner's retainage obligation is separate from the contractor's criminal liability, giving you a direct claim against held funds.