the michigan builders trust fund act the central issue on appeal is whether the trust fund act applies to this case we have a foreign contractor dynasty deal in this case with the foreign subcontractor performance contracting but in the circumstances here we argue are such that the act should apply to the defendants and that point of performance contracting is a proper beneficiary under the act you can therefore bring a civil claim as a statute permits in the case of michigan case law interpret in that statute allows the circumstances here are that the contractor and statutory trustee under the act that's dynasty  have a construction contract with the michigan owner your consumers energy to provide work on a project located in michigan and the work that foreman is contracting provided to dynasty and there's no dispute was incorporated into the michigan project this project was located north of bay city the d e current j c we dock generating complex and hip in township michigan the construction contract between consumers energy and dynasty deal expressly states that it is a michigan contract to be governed by michigan law and dynasty a was paid over thirteen million dollars on this project by consumers all of those funds case jim russell and ronald russell so that's the importance of the client trying to go outside the corporate body outside the court box correct and a claim against individuals under the trust fund that sounds and fraud and therefore is not the in bankruptcy so it's couple reasons why that claim is important and why we're here today so i think this is this case is interesting for a lot of reasons not the least of which is that we're now in a global economy and people in michigan order lots of things that are fabricated in both other states and arguably other countries correct right michigan project to a company dynasty all that contracted with the michigan owner and received funds from the michigan homeowner to provide work on a michigan project the relationship we argue that's to apply extraterritorial when you're trying to apply it to a company that's located outside of michigan and and misapplied the funds outside of michigan and that was a softball for you i misconstrued it then extraterritorial lee in terms of like chek case deals with the extraterritorial application of the act and that case what i was focusing on was the location of the project territorially you say the act applies to territorially outside of michigan so it could apply anywhere in the world technically if you can danny it the money is sent to to to japan to make some part that's going to go in this  generating plant could arguably apply that if you can establish yes that the trip that the relationship between the owner person paying the farms and the trustee under the statute the person receiving the  trustee has a sufficient connection with the state of michigan that's what i want to get to so now we have to figure out whether in connection with typical long arm questions there's sufficient contacts with the state of michigan right yes so what are the contacts between the state of michigan involving p c i and dynasty deal other than the fact that the equipment was eventually going to end up in michigan and be installed there by somebody else and that the money to pay for it was apparently sent by consumers to dynasties i would submit that the relationship between dynasty eland p c i is not relevant for purposes of stablish ing whether the trust fund act applies to dynasty oh it's relevant in terms of p c i've been becomes a beneficiary under the statute of the trust spawns paid by the owner to dynasty and you would concede that because p c i really didn't have any connection mission right other than the fact that its work got incorporated into michigan project that's correct so you're focusing on  the dyna steel consumer energy relationship that's what the statutory language so what's directed at i'm not sure that i understand why there's really any difference in dynasty versus p c i in connection with the contacts with the state of michigan because the trust because both companies are located out of state their headquarters are out of state them we work was performed out of state but dynasty hill is the company that contracted with the michigan owner for work on a michigan project and received money from the michigan owner to provide work that was incorporated into that project under the statute if you read the language the statute is directed at the conduct of the trustee it's the conduct of the person receiving the funds from the owner that's regulated by the act in the and the clear language of the access if you receive trust funds from the owner or funds on the owner on a building construction project you've have to use those funds to first pay the laborer subcontractors and material man that you engage on that project and if you don't want or hold those funds in trust that's a violation and if the violation of people the miller case is very clear on this address a specific issue it's not just that the act is violated once the money isn't paid the act also goes to funds that not only are due but that can become do so under that language and under that holding if you receive advance payment of funds for work provided by one of your sub contractors like dynasty all did here it got paid you know nearly all of its money before poor performance contracting completed its work and was paid only three hundred thousand dollars earmarked for this project they had an obligation to keep those funds in trust but that as a choice of law  applies to the choice of law provision we would argue is not applicable for a couple of reasons one case law is clear that a claim under the builder's trust fund that does not sound in contract  pony case very clear on that dealt with the issue of what statute of limitations controls for a builder's trust one question one of the parties was trying to argue that it was the breach of contract statute of limitations the court said no that's not right because you have to be owed money that's correct as the other right but this that leads into the second point as to why the choice the law doesn't apply the choice a lot provision in the purchase order if that's the controlling contract here is very narrow and limited it only applies to the contract in performance here under we cited cases in our in our brief in a reply brief to show that the choice of law clauses that the defendant cite in the bannock and moses cases are much broader than what was and distinct from the contract the point of case is very clear on that and then performance here under what the defendants will try to argue that nonpayment of these funds is performance you're under but again the the law is clear that an element it's not a required element under the n p t have failed to prove nonpayment the claim under the n p t if a is that the diff the trustee violated the statutorily imposed duties which is you you took payment trust funds and then keep them in trust for the benefit of the persons providing work on the project it's not that you at that point failed to make the payment it's that you he took them and use them for purposes other than to first pay people that provided work on the project in the statute goes back to in one thousand nine hundred thirty one it was inactive after the great depression to prevent you know builders from using f on one robbing peter to pay paul and his sons is in this case the owner is not affected by this correct in this case the owners are not affected because there weren't any construction wins filed on the project yes correct is the movie they got release is right or the parties decided not to record liens on the project ok are situation where the owner is that yes and that's one of the stated purposes and of the act the case law is very clear is that one of the purposes is to protect owners from contractors that take their money and don't use it to pay bills on the job and that concern exists no matter if you have foreign or in state subcontractors and contractors the statute does not make any distinction between in state and out of state beneficiaries under the under the act the beneficiaries are defined as any person who is so defrauded there's there's no distinction or statement in the act that there has to be a a jurisdictional nexus in order to claim the benefits of the statute once it's established that the trustee of the act receives the fons and there's a sufficient connection that the trustee has with michigan and here again michigan project michigan owner contract that they sign saying michigan law applies he purposely availed themselves of doing business in michigan ok the choice of luck or vision had been more broadly stated would you have a problem i think they'd have a stronger argument yes if it's stated that the choice of law governs all of the rights and obligations of the parties have and not just this contract in performance you're under i mean the duties that are imposed by the statute aren't spelled out in the contract it's not a case or they can say that this contract involves the same type of duties  the statute imposes that's not there's no overlap there at all all right thank you you'll have your bottle thank you ok i mean that doesn't say that only the law of tennessee applies it says the contract and your performance meaning you know what are the duties o and that's not what's in dispute here what's in dispute is that instead of holding that money in trust the it was comingled and spent the contract the purchase order specifies the work to be done by p c i that's not in it and end it requires payment if if if the purchase order doesn't require dynasty to make payment then then we're done because we have no obligation to pay these guys in the first place the purchase or the contract requires that they do a body work and that we pay them for the michigan builders trust fund act is in method for enforcing performance under the act and or the contract so just like the michigan builders construction lien act is a method for in forcing performance under the contract so that if the in this case dinah's do doesn't pay layering a lien no i'm not suggesting that ok well then why not why wouldn't the rock would allow them to file a lien assuming that they their issues i think as to this separate remedy i would say that the difference is that the builders trust fund act creates a trust and funds that are in the hands in this case of dynasty and hands of the contractor and in this case the contractor is not in michigan and so what we're what we're suggesting and let's say somehow or other the owner was left holding the bag here would you be making the same ar owner were left holding the bag here the owner would presumably have a claim mover against dine and steal under the trust fund under the contract between dinah's steel and the would they also have a claim under the trust fund that i would say not but i would say that that's a better case i would say it's a closer case then in this case because well i understood the contract with the michigan entity and michigan legislature intended that a michigan owner would have a claim against any contractor whether from japan or timbuktu under that under that act if they are supplying if they are a general contractor in a michigan project and i would not holding that money intros my answer to you dynasty has a contract with the michigan owner which provides the michigan law applies so as between the owner and dynasty it's a much better case for the application machine bilis trust fund act dynasty deal has a contract with with p c i which provides in tennessee law applies the whole relationship between dynasty p c i e exists outside of the state of michigan there's no tie and the parties agreed and i come back to that because i think it's critical that the parties agreed to tennessee law will apply judge reddington did the analysis of the conflict of laws and concluded that that provision is in forcible and the parties ought it's not a matter of a breach of a contract is based upon a trust that's dependent i agree it is not a breach of contract claim it is a claim that is based however on the contract as you said before the contract there's an amount if there's nothing other we have nothing to talk about here so both this statute the statute itself speaks about about amounts do quote under the terms of the funds to his own use well any amount for which he may be liable or become liable under the terms of his contract for such labor remains unpaid i go back to a stored it's not a breach of contract claim the michigan builds trust fund that is a device to enforce obligations arising under the contract in this case the obligations from dynasty deal to p three cases did discuss the application of the michigan building trust fund in these kinds of context accu chek the casino case which is a bankruptcy case that it will hire and then the more recent  is the only cases there are and they all this is the second to follow judge or news analysis inaccurate and that's what we'd be left with it would make the analysis that she makes an inaccurate tick and what she said is an accurate tech number one for our purposes that the location of the project is irrelevant and and second she says the analysis or to focus on what the act is aimed at solving the act is aimed at solving payment problems so we're  money allegedly mishandled if the money was allegedly mishandled in michigan as an accurate tick then she says the actual plot if the money was allegedly mishandled in ten c the act would not apply but why why could the party in tennessee and the party in michigan not choose to have the michigan act apply to that transaction if they if they wanted to could choose to act i think they could choose to and then we have the question if they can choose to then why does not the choice provision in the contract between consumers and dynasty elipse says that michigan law applies and then impose the builders trust fund act even though all the things that you're pointing out under accu steel and under the ok we're not talking about p c are consumers enters into a deal with dynasty they say michigan law applies so why would that not then include the application of the builder's trust fund act at least with respect to those parties i applies because the money was coming from consumers done and that's really the issue right now what mr jane argues today although only very briefly and what i can only find one sentence in the initial so what's your response to the fact that they are a beneficiary under the contractual agreement that says the michigan statute applies to d ways first we'll have the purchase order between dynasty and p c i incorporated the contract between diamond stealing consumers they would have a much better origin that's not uncommon in the industry and it's not done here if you look at the the purchase order it does not incorporate the the consumer's contract with dimes why do you have to have a separate contract would make their case stronger in connection with whatever the effect is of their beneficiary status so it seems to me you've got to address yourself to are they a beneficiary under the statute and if so then did they essentially contract that purpose of the act is don't screw subcontractor so why are they not a beneficiary under the and from that point of view your honor you could take that act and you could you could go to timbuktu as they said in my brief or japan and you could say we want to take advantage of michigan steal and p c i e enter into this this purchase agreement to supply this insulation something goes south so they enter into this payment agreement that basically says you'll pay chaos but w apply it to the oldest invoice first it just seems that something seems wrong but i'm having trouble putting my fingers on it why they can agree that the monies that came from consumers gets applied to the other projects first leaving that which is why there's a deficiency on this particular contract and then say oh by the way you still owe us more money under the under the builders trust fund that's your sort of the gotcha principle so your words not mine i agree so let's of so what's wrong with that so so if you take the position that they understood all along that they were going to argue that the blues trust from their suppliers then they clearly let us down t because had we understood that you're big boys you're not going to get anywhere without one or just a judge aside from your primrose path argument what's what's your basic claim that says entering into the purchase agreement doesn't bail you out the had a clue that we were going to be governed by the bill distrust for an act who never signed that agreement is it is it safe to say the way this really works in the real world that they agreed with you to use the money from consumers in a way other than what the builders trust fund act would otherwise require i would say due to their greed to use the proceeds not only the consumers but then the jobs that we had to pay these jobs some of that money was clearly consumers money and i let me ask another way because i just want to make sure i get the straight the money the consumers phases in connection with the carnes project now that money then got applied to other projects yes not the current not not what p c i did in connection with the current project so have they not essentially waived their builder's trust fund at claim even assuming that it applies by they received from the consumer's money at least as much as they were entitle to receive under the consumer's contract to be insulation until we stop making payments we received undersea roughly several million dollars out of the consumer's job and paid them well over two million dollars which is more than they would have been  title to for the consumers drop so to answer judgments question more precisely have they use the money that came from consumers on the carnes job to pay p c i for the carnes work it would have fully pa that off yes the only reason it didn't is you each have mutual agreement to use the money to pay off all their invoices and other projects that it has not envisioned by the builders trust fund and first yes you get that yes ok that's what i need thank you  so how do you reach an agreement with them to do something other than what the builders trucks and act applies contractually and then say oh by the way bill this trust fund act says you screwed us first of all when we entered into the payment agreement we had no idea they out dynasty all had been paid for all of our work and it received payment of all of those fines to the this change order that subject here so what what is it what  payment agreement doesn't specify where the funds are coming from ok first of all second of all the payment agreement says that there's a no waiver clause in there and that there are express ers expressly reserving all the rights and remedies and claims that they have under under the contract statutory case law third the evidence in the record and this wasn't part of the district court's decision but we briefed it on summary judgment we submit that the evidence in the record shows that during the period that dynasty paid roughly two point one million dollars to performance contracting under the payment agreement which is between november seventeenth two thousand and nine wimmer sixteen two thousand and nine and june tenth two thousand and ten dynasty only received approximately seven hundred sixty five thousand dollars from consumers the project contract amount was up one point eight million we contend that we only received one payment earmark from karn which was three hundred thousand dollars so there's still a deficiency even assuming says yet you say no dispute in the record in the court did reach it below our contention is that ag but you claim it doesn't matter anyway because of the anti we were close anti waiver clause in the fact that the defendants themselves testified that they took all of the funds that they got in any project and dump them into one account and commingled them the defendants are never going to be able to establish that they paid the two point one million dollars came from consumers what we did is we went through the payment records and there's an affidavit from constance gatewood ward from consumers it's a record entry thirty three dash twelve which she lays out all the payments that consumers account that dynasty all had and based on those documents shows that during that time only seven hundred sixty thousand came from consumers the majority of the money that dinah still got during that time was from a four million dollar capital trust funds and doesn't hold those funds in trust and here we had specific invoices that nine is still sent that included payment for p c r as work and those funds were specifically paid all right thank you case will be submitted