What happens in Wisconsin if the contractor above us takes the owner's money and does not pay us?
It is theft. Wis. Stat. § 779.02(5) makes the proceeds of a mortgage paid to a prime contractor or subcontractor for improvements, and all moneys paid to a prime contractor or subcontractor by an owner for improvements, a trust fund in the hands of that contractor to the amount of all claims due or to become due for labour, services, materials, plans and specifications used for the improvements, until all the claims have been paid, and not a trust fund in the hands of any other person. Using those moneys for any other purpose before the claims are paid in full, or proportionally in cases of a deficiency, is theft punishable under s. 943.20, and where the contractor is a corporation, limited liability company or other entity the misappropriation is also deemed theft by the officers, directors, members, partners or agents responsible for it.
The trap
The trust is not a payment deadline and it does not follow the money. It attaches only in the hands of the prime contractor or subcontractor who received it, and the statute says so expressly, so a claim against the owner or the lender is not this claim. The statute carves out amounts that are the subject of a bona fide dispute, and only to the extent of the amount actually in dispute, which is the answer a contractor will give. And the lien machinery has its own preconditions and its own exceptions, which matter more than the precondition on most jobs: under § 779.02(2)(b) a person other than a prime contractor has the lien and remedy under the subchapter only if, within 60 days after first performing or furnishing labour, services, materials, plans or specifications, that person serves a written notice in two signed copies on the owner or authorised agent. But § 779.02(1) takes that notice requirement off five classes of claimant altogether: among them a laborer or mechanic employed by a prime contractor or subcontractor, a claimant who contracted directly with the owner, and any claimant on a work of improvement providing more than 4 family living units or one that is partly or wholly nonresidential in character. On a commercial project the 60-day notice is not required at all. And the trust fund reaches further than the recipient in one direction the subsection states expressly: misappropriated moneys received as salary, dividend, loan repayment or capital distribution by a shareholder, member or partner who was not responsible for the misappropriation are that person's civil liability and may be recovered and restored to the trust fund by any interested party.
6 authorities
- statuteWis. Stat. § 779.02enactment date not established
The words that state the rule
The proceeds of any mortgage on land paid to any prime contractor or any subcontractor for improvements upon the mortgaged premises, and all moneys paid to any prime contractor or subcontractor by any owner for improvements, constitute a trust fund only in the hands of the prime contractor or subcontractor to the amount of all claims due or to become due or owing from the prime contractor or subcontractor for labor, services, materials, plans, and specifications used for the improvements, until all the claims have been paid, and shall not be a trust fund in the hands of any other person.
- statuteWis. Stat. § 779.02enactment date not established
The words that state the rule
The use of any such moneys by any prime contractor or subcontractor for any other purpose until all claims, except those which are the subject of a bona fide dispute and then only to the extent of the amount actually in dispute, have been paid in full or proportionally in cases of a deficiency, is theft by the prime contractor or subcontractor of moneys so misappropriated and is punishable under s. 943.20 .
- statuteWis. Stat. § 779.02enactment date not established
The words that state the rule
Every person other than a prime contractor who performs, furnishes, or procures labor, materials, plans, or specifications for an improvement shall have the lien and remedy under this subchapter only if within 60 days after performing, furnishing, or procuring the first labor, services, materials, plans, or specifications the person serves a written notice, in 2 signed copies, on the owner or authorized agent at the last-known post-office address.
- statuteWis. Stat. § 779.02enactment date not established
The words that state the rule
If the prime contractor or subcontractor is a corporation, limited liability company, or other legal entity other than a sole proprietorship, such misappropriation also shall be deemed theft by any officers, directors, members, partners, or agents responsible for the misappropriation.
- statuteWis. Stat. § 779.02enactment date not established
The words that state the rule
Any of such misappropriated moneys which have been received as salary, dividend, loan repayment, capital distribution or otherwise by any shareholder, member, or partner not responsible for the misappropriation shall be a civil liability of that person and may be recovered and restored to the trust fund specified in this subsection by action brought by any interested party for that purpose. Except as provided in this subsection, this section does not create a civil cause of action against any person other than the prime contractor or subcontractor to whom such moneys are paid.
- statuteWis. Stat. § 779.02enactment date not established
The words that state the rule
Exceptions to notice requirement. The notice required to be given by lien claimants under sub. (2) shall not be required to be given in the following cases only: 779.02(1)(a) (a) By any laborer or mechanic employed by any prime contractor or subcontractor. 779.02(1)(b) (b) By any lien claimant who has contracted directly with the owner for the labor, services, materials, plans, or specifications performed, furnished, or procured, unless the claimant is a prime contractor subject to the notice requirement of sub. (2) (a) . 779.02(1)(c) (c) By any lien claimant performing, furnishing, or procuring labor, services, materials, plans, or specifications for an improvement in any case where more than 4 family living units are to be provided or added by such work of improvement, if the improvement is wholly residential in character, or in any case where the improvement is partly or wholly nonresidential in character. 779.02(1)(d) (d) By any prime contractor who is personally an owner of the land to be improved, by any corporate prime contractor of which an owner of the land is an officer or controlling shareholder, by any prime contractor who is an officer or controlling shareholder of a corporation which is an owner of the land or by any corporate prime contractor managed or controlled by substantially the same persons who manage or control a corporation which is an owner of the land.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.