Individual Owner of a Corporate Contractor may be Liable for Violations of the Michigan Builders’ Trust Fund Act
The Michigan Court of Appeals recently clarified when a corporate officer may be held personally liable for his company’s violation of the Michigan Builders’ Trust Fund Act, M.C.L. § 570.151 et seq. Under the Act, a contractor is required to pay its laborers, subcontractors, and suppliers prior to keeping the funds received for a project as profit or using the funds for unrelated matters. Further, officers of the contractor may be held civilly and criminally liable for the company’s violations.
In Windrush Inc. v. Lee VanPopering, et al., the court considered when an individual could be held civilly liable for his company’s violation of the Act. The court confirmed that, “it is participation in the decision to act in violation of the [Act] that controls, not whether there was a subjective intent to defraud or obtain personal financial benefit.” Because the individual had managed the relevant transactions and accounts, the court concluded that he was personally liable for his company’s violations of the Act.
Windrush is an important reminder that a corporate officer’s best intentions will not excuse his company’s violations of the Act. Faced with the risk of civil and criminal penalties, contractors may be best served by seeking legal counsel to navigate the payment process if a financially troubled project fails to yield enough money to pay itself and its laborers, subcontractors, and suppliers.