Ferguson Trenching Co. Inc. v. Kiehne
618 A.2d 735 | Court of Appeals of Maryland | 1993
What This Case Means for Subcontractors
Ferguson Trenching sued Advanced Excavation's president Kiehne after Advanced failed to pay for trenching work on a construction project. Advanced had received funds from the main contractor but used them for other projects and operating expenses instead of paying subcontractors like Ferguson. Maryland's Court of Appeals ruled that a corporate officer can be held personally liable for misusing trust funds only if they acted with intent to defraud—simply diverting funds is strong evidence of fraud but not automatic proof.
Key Takeaways
- •If a contractor diverts your payment to other projects or operating expenses, you have grounds to pursue the corporate officer personally, not just the company
- •Document everything: when you completed work, when you invoiced, and when payment was due. This evidence helps prove the contractor received funds meant for you
- •The contractor must have intentionally misused your funds to be liable—accidental mismanagement or poor cash flow alone may not be enough, so gather proof of deliberate diversion
Proof of diversion of trust funds does not provide an irrebuttable presumption of intent to defraud.
Frequently Asked Question
Can I sue a contractor's owner personally if they don't pay me for my work?
Yes, under Maryland law, you can pursue the owner personally if they intentionally diverted funds meant to pay you toward other projects or expenses. Proof that funds were diverted is strong evidence of intent to defraud, but you should document the diversion clearly to support your claim.
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