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Click here for the full text of this decision FACTS:Fox Rental sued C. N. Jones and Leonard Duncan for misapplication of construction trust funds pursuant to Property Code 162.031(a). The case was submitted to the trial court on an agreed statement of facts. The statement said that between Jan. 30, 1999, and April 13, 2000, Fox Rental contracted with CCG Commercial Construction Group Inc. to supply construction equipment for projects on which CCG was a contractor. CCG was wholly owned by American Eco Corp., whose principal offices were in Houston. Jones and Duncan were principal officers of CCG and had offices in Dallas. Fox Rental delivered its invoices to CCG at its principal offices in Dallas. CCG received payments from the construction projects’ owners at its lock box in Houston and individuals other than Jones and Duncan deposited them into CCG’s checking account. Pursuant to Property Code Ch. 162, these payments were trust funds, and Fox Rental was a beneficiary of these trust funds. CCG retained, used or disbursed these payments without paying the $27,556 owed to Fox Rental. At the time of trial, CCG was in bankruptcy. Jones and Duncan had signatory authority on CCG’s checking account. Neither of them personally received any trust funds, nor did they “independently” determine to whom the trust funds should be paid. Jones and Duncan disbursed such funds “in accordance with the instructions received from the officers of American Eco” in Houston. Jones and Duncan objected to this. In April 2000, Jones and Duncan were asked by American Eco officers to leave their employment with CCG, “in large part” because of their objections to the manner in which funds were being handled by American Eco and its officers. The trial court found in favor of Jones and Duncan and entered a take nothing judgment against Fox Rental. HOLDING:Affirmed in part; reversed and rendered in part. The court confirms that the case law is sparse respecting the meaning of “control or direction of trust funds” as used in 162.002. The court then finds that the key to determining “control or direction” was whether those who could exercise power actually diverted trust funds and failed to pay the materialman entitled to the funds. The court finds that even though the stipulated facts state that Jones and Duncan did not “independently” determine to whom the funds should be paid, the word “independently” does not exclude the participation of Jones and Duncan in the decision to divert funds. The court further finds that the stipulation that Jones and Duncan made the payments “in accordance with the instructions” of the parent company officers does not exclude Jones or Duncan from the “decision” to divert the funds. Finally, being asked to leave CCG “in large part” because of objections made respecting the handling of trust funds does not address the control or direction of the funds. The court concludes that the trial court improperly applied the law to the facts. Jones and Duncan are officers of CCG, the court rules, who had “control or direction” of trust funds, according to 162.002, and “directly or indirectly” used, disbursed or otherwise diverted the trust funds at issue, pursuant to 162.031(a). Therefore, they are personally liable, jointly and severally, to Fox Rental for the stipulated amount of $27,556. OPINION:Lang, J.; Wright, Moseley and Lang, JJ.

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