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§§ 779.02(5), 943.20(1)(b), Theft by Contractor – Elements – Claims Against Money in Trust Fund Must Be Paid Proportionately

State v. Angela A. Keyes / Matthew E. Keyes, 2008 WI 54, affirming in part and reversing in part, 2007 WI App 163
For both Keyes: Michael J. Devanie

Issue/Holding1:

¶21 The Keyes were charged with theft by contractor under Wis. Stat. § 779.02(5), part of Wisconsin’s construction lien law. … The statute prohibits the use of the money in the trust fund for any purpose other than paying claims until such time as the claims have been paid in full. In case of deficiency, the claims are to be paid proportionately. Violation of the payment provisions constitutes theft by contractor….…

¶24 Like the court of appeals, we will assume without deciding that Angela was acting as a subcontractor on the project. …

¶25 The uncontroverted evidence in this case is that Angela received payments of $75,241.12 …. Thus, Angela was fully compensated.

¶26 In contrast, Jones testified that there were subcontractors who had claims due ….

¶28 The Keyes’ actions therefore conflict with the language of § 779.02(5). Assuming that Angela had a claim to the payments she received, taking full payment when third-party subcontractors remained unpaid violates the proportionality requirement of the statute.

Issue/Holding2:

¶39 Even if it turns out that the money was profit, that alone is neither here nor there. Rather, the issue is whether payment was proportional as required by § 779.02(5).

¶46 It is not clear whether the unaccounted for $36,036.28 was merely profit. Further, the court of appeals’ approach fails to explain how to construe “profit,” implies that contractors or subcontractors may not receive profit on a project until the project ends, and is not required under Sobokowiak. We therefore disagree with the court of appeals that § 779.02(5) prohibits prime contractors acting as subcontractors from receiving profit prior to paying other subcontractors for their labor and materials.

The supreme court decision leaves undisturbed the court of appeals’ recitation of the offense elements, as follows, 2007 WI App 163, ¶26, as follows:

[t]he elements of the offense of criminal theft by contractor are: “(1) the defendant acted as a prime contractor; (2) the defendant received money for the improvement of land from the owner or a mortgagee; (3) the defendant intentionally used the money for purposes other than the payment of bona fide claims for labor or materials prior to the payment of such claims; (4) the use was without the owner or mortgagee’s consent, and contrary to the defendant’s authority; (5) the defendant knew the use was without consent and contrary to his authority; and (6) the defendant used the money with the intent to convert it to his own use or the use of another.”

(Quoting, Tri-Tech Corp. of Am. v. Americomp Servs., Inc., 2002 WI 88, ¶26, 254 Wis. 2d 418, 646 N.W.2d 822 (2002).)

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