Minnesota Session Laws - 2000, Regular Session

                            CHAPTER 430-H.F.No. 2563 
                  An act relating to liens; modifying mechanics' lien 
                  penalties; creating a civil cause of action; 
                  authorizing attorney fees; providing that proceeds are 
                  exempt from execution; imposing criminal penalties; 
                  amending Minnesota Statutes 1998, sections 514.02, 
                  subdivision 1, and by adding a subdivision; and 
                  550.37, by adding a subdivision. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1998, section 514.02, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [PROCEEDS OF PAYMENTS; ACTS CONSTITUTING 
        THEFT.] (a) Proceeds of payments received by a person 
        contributing to an improvement to real estate within the meaning 
        of section 514.01 shall be held in trust by that person for the 
        benefit of those persons who furnished the labor, skill, 
        material, or machinery contributing to the improvement.  
        Proceeds of the payment are not subject to garnishment, 
        execution, levy, or attachment.  Nothing contained in this 
        subdivision shall require money to be placed in a separate 
        account and not commingled with other money of the person 
        receiving payment or create a fiduciary liability or tort 
        liability on the part of any person receiving payment or entitle 
        any person to an award of punitive damages among persons 
        contributing to an improvement to real estate under section 
        514.01 for a violation of this subdivision.  
           (b) If a person, on any improvement to real estate within 
        the meaning of section 514.01, fails to use the proceeds of any 
        a payment made to that person on account of such for the 
        improvement by the owner of such real estate or person having 
        any improvement made, for the payment for labor, skill, 
        material, and machinery contributed to such the improvement, 
        knowing that the cost of any such the labor performed, or skill, 
        material, or machinery furnished for such improvement remains 
        unpaid, and who has not furnished to the person making such 
        payment either a valid lien waiver as to any unpaid labor 
        performed, or skill, material, or machinery furnished for such 
        improvement under section 514.07, or a payment bond in the basic 
        amount of the contract price for such the improvement, 
        conditioned for the prompt payment to any person or persons 
        entitled thereto for the performance of labor or the furnishing 
        of skill, material, or machinery for the improvement, shall be 
        guilty of theft of the proceeds of such the payment and upon 
        conviction shall be fined not more than $3,000 or imprisoned not 
        more than one year, or both. is punishable under section 
        609.52.  For an improvement to residential real estate made by a 
        person licensed, or who should be licensed, under section 
        326.84, a shareholder, officer, director, or agent of a 
        corporation who is responsible for the theft shall be guilty of 
        theft of the proceeds.  
           (c) The penalties and remedies provided in this section do 
        not apply to a third party who receives a payment in the 
        ordinary course of business.  
           (d) For purposes of this section, "residential real estate" 
        has the meaning given in section 326.83.  
           Sec. 2.  Minnesota Statutes 1998, section 514.02, is 
        amended by adding a subdivision to read: 
           Subd. 1a.  [CIVIL ACTION.] A person injured by a violation 
        of subdivision 1 may bring a civil action and recover damages, 
        together with costs and disbursements, including costs of 
        investigation and reasonable attorney fees, and receive other 
        relief as determined by the court, including, without 
        limitation, equitable tracing.  A civil action under this 
        subdivision may be brought: 
           (1) against the person who committed the theft under 
        subdivision 1; and 
           (2) for an improvement to residential real estate made by a 
        person licensed, or who should be licensed, under section 
        326.84, against a shareholder, officer, director, or agent of a 
        corporation who is not responsible for the theft but who 
        knowingly receives proceeds of the payment as salary, dividend, 
        loan repayment, capital distribution, or otherwise.  
           Sec. 3.  Minnesota Statutes 1998, section 550.37, is 
        amended by adding a subdivision to read: 
           Subd. 25.  [PROCEEDS FOR IMPROVEMENTS TO 
        PROPERTY.] Proceeds of payments received by a person for labor, 
        skill, material, or machinery contributing to an improvement to 
        real estate within the meaning of section 514.01. 
           Sec. 4.  [EFFECTIVE DATE.] 
           Sections 1 and 2 are effective August 1, 2000, and apply to 
        crimes committed on or after that date and civil claims for 
        causes of action arising on or after that date. 
           Presented to the governor April 17, 2000 
           Signed by the governor April 20, 2000, 10:20 a.m.