Franklin Drilling & Blasting Inc. v. Lawrence Constr. Co.

463 P.3d 883

FRANKLIN DRILLING AND BLASTING INC., Plaintiff-Appellant,

v.LAWRENCE CONSTRUCTION COMPANY, Defendant-Appellee.

Court of Appeals No. 17CA0634

Colorado Court of Appeals, Division VII.

Announced April 19, 2018

Law Office of John C. Seibert, LLC, John Seibert, Durango, Colorado, for Plaintiff-Appellant

Miller & Law P.C., Curtis R. Henry, Littleton, Colorado, for Defendant-Appellee

Opinion by JUDGE BERGER

¶ 1 Plaintiff-Appellant, Franklin Drilling and Blasting Inc. (Franklin), was a subcontractor on a Colorado Department of Transportation (CDOT) road project. Defendant-Appellee, Lawrence Construction Company (Lawrence), was the general contractor. Although Lawrence was paid in full by CDOT, Lawrence refused to pay Franklin. That failure led Franklin to sue Lawrence on a variety of claims. All but one of Franklin's claims—a claim for civil theft—were arbitrated in favor of Franklin.

¶ 2 After the arbitration, the parties tried Franklin's civil theft claim to the court. That claim was premised on Lawrence's violation of the Public Works Trust Fund statute (Trust Fund statute), section 38-26-109, C.R.S. 2017. At the conclusion of Franklin's case-in-chief, the trial court granted Lawrence's motion for directed verdict, finding that Franklin had not proved that Lawrence intended to permanently deprive Franklin of the monies it was owed.

¶ 3 The theft statute, section 18-4-401(1), C.R.S. 2017, provides, as relevant here, two separate ways that Lawrence could possess the culpable mental state required for civil liability under the theft statute: intent to deprive or knowing use. Because the trial court's findings and conclusions either addressed only the first of the two alternatives, or the trial court misconstrued the second, we must reverse that portion of the judgment and remand for the court to address the second alternative. We affirm that portion of the judgment that rests on the trial court's finding regarding intent to permanently deprive.

I. Relevant Facts and Procedural History

¶ 4 The facts, as found by the arbitrator, tell us that this dispute began when Lawrence was hired by CDOT to reconstruct the Leopard Creek Bridge on State Highway 145 near Telluride. Lawrence hired Franklin as its subcontractor to provide drilling and blasting services on the project. As relevant here, the subcontract required Lawrence to pay Franklin within seven days of receipt of payment from CDOT.

¶ 5 Franklin completed its work on the project, and, after various delays, the project was finished. CDOT paid Lawrence the full contract price for the work. Lawrence, however, did not pay Franklin. Instead, it notified Franklin that it planned to withhold all payments because Franklin allegedly failed to meet the contractually promised production rates.

¶ 6 Franklin sued in the trial court, alleging that Lawrence wrongfully withheld those payments in violation of section 38-26-109. That statute provides as follows:

(1) All funds disbursed to any contractor or subcontractor under any contract or project subject to the provisions of this article shall be held in trust for the payment of any person that has furnished labor, materials, sustenance, or other supplies used or consumed by the contractor in or about the performance of the work contracted to be done or that supplies laborers, rental machinery, tools, or equipment to the extent used in the prosecution of the work where the person has:

(a) Filed or may file a verified statement of a claim arising from the project; or

(b) Asserted or may assert a claim against a principal or surety under the provisions of this article and for whom or which such disbursement was made.

Id. (emphasis added).

¶ 7 Importantly, the statute also provides that "[a]ny person who violates the provisions of subsections (1) and (2) of this section commits theft within the meaning of section 18-4-401, C.R.S." ¹ § 38-26-109(4). Section 18-4-405, C.R.S. 2017, provides a civil remedy for the owner of stolen property:

The owner may maintain an action not only against the taker thereof but also against any person in whose possession he finds the property. In any such action, the owner may recover two hundred dollars or three times the amount of the actual damages sustained by him, whichever is greater, and may also recover costs of the action and reasonable attorney fees....

¶ 8 Franklin pleaded a claim for civil theft under section 18-4-405 based on Lawrence's violation of the Trust Fund statute. Lawrence countersued. The parties arbitrated all of their claims except for their respective claims for civil theft, which were stayed pending arbitration.²

¶ 9 The arbitrator found that Lawrence breached its subcontract with Franklin, that Lawrence had no good faith defenses to its failure to pay, and that Lawrence had failed to prove its counterclaims against Franklin.³ The arbitrator awarded Franklin $80,099.62 in damages, which Lawrence immediately paid.

¶ 10 The parties then proceeded in court with their respective claims for civil theft. The court dismissed Lawrence's claim for civil theft on Franklin's C.R.C.P. 12(b)(5) motion. (Lawrence does not appeal that dismissal.) Franklin also moved for summary judgment on its civil theft claim, which the court granted in part and denied in part. Based on the arbitrator's findings, the court held that Lawrence violated the Trust Fund statute, meaning Lawrence "knowingly obtain[ed], retain[ed], or exercise[ed] control over" the trust funds without authorization, thus satisfying the first element of theft under section 18-4-401(1). But the court denied summary judgment because it concluded there was a disputed issue of material fact as to whether Lawrence had the requisite intent under section 18-4-401(1)(a)-(e).

¶ 11 At a bench trial limited to determining Lawrence's intent, Franklin presented evidence that CDOT paid Lawrence in full; that Lawrence used those monies for other projects; and that, at various relevant times, Lawrence's bank account into which the CDOT funds were deposited had either a zero or negative balance.

¶ 12 At the conclusion of Franklin's case-in-chief, Lawrence moved for a directed verdict, claiming that Franklin had failed to make a prima facie case. The trial court granted Lawrence's motion, finding that Franklin had failed to prove that Lawrence intended to permanently deprive Franklin of the trust monies owed to Franklin. The court entered judgment in favor of Lawrence on the civil theft claim and awarded costs to Lawrence. Franklin appeals.

II. Lawrence's Motion for Directed Verdict

¶ 13 We first conclude that a motion for directed verdict under C.R.C.P. 50 is unavailable when the trial is to the court. Instead, the governing rule is C.R.C.P. 41(b). People v. Shifrin , 2014 COA 14, ¶ 131, 342 P.3d 506.

¶ 14 The question presented on a C.R.C.P. 41(b)(1) motion is not—as in the case of a motion for a directed verdict—whether the evidence, when viewed in the light most favorable to the plaintiff, is such that no reasonable jury could find in the plaintiff's favor. Shifrin , ¶ 132. Instead, after the plaintiff has completed the presentation of its evidence, under C.R.C.P. 41(b)(1),

the defendant ... may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. The court as trier of the facts may then determine them and render judgment against the plaintiff or may decline to render judgment until the close of all the evidence.

¶ 15 Accordingly, we analyze the court's ruling under C.R.C.P 41(b)(1).

III. The Trial Court Erred by Not Addressing the "Knowingly Uses" Element of Franklin's Civil Theft Claim

¶ 16 The dispositive question is this: When does a violation of the Trust Fund statute result in civil theft liability under section 18-4-405 ?

¶ 17 The Trust Fund statute is clear in at least two respects. First, funds paid to a contractor must be "held in trust" for the benefit of the subcontractors and material suppliers who have performed work on that project. § 38-26-109(1). Second, a contractor is not required to segregate those funds by project. § 38-26-109(3). But how do these two requirements work together in determining when a contractor commits civil theft?

¶ 18 To prove civil theft a plaintiff must prove that the defendant "knowingly obtains, retains, or exercises control over anything of value of another without authorization" and must prove one of five alternative culpable mental states, the first two of which are relevant here. § 18-4-401(1)(a)-(e).⁴ The plaintiff must show that the defendant either:

(a) Intends to deprive the other person permanently of the use or benefit of the thing of value;

(b) Knowingly uses, conceals, or abandons the thing of value in such manner as to deprive the other person permanently of its use or benefit;

(c) Uses, conceals, or abandons the thing of value intending that such use, concealment, or abandonment will deprive the other person permanently of its use or benefit;

(d) Demands any consideration to which he or she is not legally entitled as a condition of restoring the thing of value to the other person; or

(e) Knowingly retains the thing of value more than seventy-two hours after the agreed-upon time of return in any lease or hire agreement.

Id. (emphasis added).

¶ 19 After hearing Franklin's evidence, the trial court found that Franklin had not proved that Lawrence intended to permanently deprive Franklin of the use of the monies paid to Lawrence in trust by CDOT.

¶ 20 In ruling against Franklin, the trial court made extensive findings regarding Lawrence's intent to permanently deprive. For the reasons discussed below, the evidence is sufficient to require us to affirm the court's conclusion that Franklin did not prove civil theft under section 18-4-401(1)(a).

¶ 21 But the court's findings do not resolve the "[k]nowingly uses" alternative mental state in section 18-4-401(1)(b).

¶ 22 In People v. Anderson , a criminal case, the supreme court held that the government's burden...