TEXAS CONSTRUCTION FUND ACT IMPOSES FIDUCIARY DUTIES
The Texas Construction Fund Act is found
in chapter 162 of the Texas Property Code. See TEX. PROP. CODE ANN. §§
162.001-.033 (West, Westlaw through 2013 3d C.S.). This act "imposes
fiduciary responsibilities on contractors to ensure that Texas subcontractors,
mechanics, and materialmen are paid for work completed." In re Waterpoint
Int'l LLC, 330 F.3d 339, 345 (5th Cir. 2003). This statute provides that
construction payments are trust funds if the payments are made to a contractor
or to an officer of the contractor for the improvement of specific real
property. Id. § 162.001(a); see also Kelly v. Gen'l Interior Const. Inc., 262
S.W.3d 79, 85 (Tex. App.-Houston [14th Dist.]), overruled on other grounds, 301
S.W.3d 653 (Tex. 2010).
The contractor or officer who receives the trust funds
is considered a trustee of the funds. TEX. PROP. CODE ANN. § 162.002. The
artisan, laborer, mechanic, contractor, subcontractor, or materialman who
furnished labor or material for the construction or repair on the real property
is considered the beneficiary of any trust funds. Id. § 162.003. A trustee who
intentionally, knowingly, or with the intent to defraud, directly or indirectly
retains, uses, disburses, or otherwise diverts the funds without first fully
paying current or past due obligations has misapplied the trust funds. See id.
§ 162.031(a). "Thus, a party who misapplies these trust funds is subject
to civil liability if (1) the party breaches the duty imposed by chapter 162,
(2) with the requisite scienter, and (3) the claimants are within the class of
people chapter 162 was designed to protect and have asserted the type of injury
chapter 162 was intended to prohibit." C & G, Inc. v. Jones, 165
S.W.3d 450, 453 (Tex. App.-Dallas 2005, pet. denied). Any officer or director
who has control or direction over the funds is also a trustee of the funds and
is personally liable. Id. at 453-54.
SOURCE: CORPUS CHRISTI COURT OF APPEALS
- No. 13-13-00118-CV - 5/29/2014
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