1.1                          A bill for an act 
  1.2             relating to liens; modifying mechanics' lien 
  1.3             penalties; creating a civil cause of action; 
  1.4             authorizing attorney fees; providing that proceeds are 
  1.5             exempt from execution; imposing penalties; amending 
  1.6             Minnesota Statutes 1998, sections 514.02, subdivision 
  1.7             1, and by adding a subdivision; and 550.37, by adding 
  1.8             a subdivision. 
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  Minnesota Statutes 1998, section 514.02, 
  1.11  subdivision 1, is amended to read: 
  1.12     Subdivision 1.  [ACTS CONSTITUTING THEFT.] Proceeds of 
  1.13  payments received by a person contributing to an improvement to 
  1.14  real property within the meaning of section 514.01 shall be held 
  1.15  by that person for the benefit of those persons who furnished 
  1.16  the labor, skill, material, or machinery contributing to the 
  1.17  improvement.  Nothing contained in this subdivision requires 
  1.18  money to be placed in a separate account and not commingled with 
  1.19  other money of the person receiving payment.  Nothing in this 
  1.20  subdivision shall create a fiduciary liability or tort liability 
  1.21  on the part of any person receiving payment or entitle any 
  1.22  person to an award of punitive damages in contradiction to a 
  1.23  contractual agreement between persons contributing to an 
  1.24  improvement to real estate under this subdivision.  If a person~~,~~ 
  1.25  ~~on any improvement to real estate within the meaning of section~~ 
  1.26  ~~514.01,~~ fails to use the proceeds of ~~any~~ a payment made to that 
  1.27  person ~~on account of such~~ for the improvement ~~by the owner of~~ 
  2.1   ~~such real estate or person having any improvement made~~, for the 
  2.2   payment for labor, skill, material, and machinery contributed to 
  2.3   ~~such~~ the improvement, knowing that the cost of ~~any such labor~~ 
  2.4   ~~performed, or skill, material, or machinery furnished for~~ 
  2.5   ~~such~~ the improvement remains unpaid, and who has not 
  2.6   furnished ~~to~~ the person making such payment either a valid lien 
  2.7   waiver ~~as to any unpaid labor performed, or skill, material, or~~ 
  2.8   ~~machinery furnished for such improvement~~ under section 514.07, 
  2.9   or a payment bond in the basic amount of the contract price 
  2.10  for ~~such~~ the improvement, conditioned for the prompt payment to 
  2.11  any person ~~or persons~~ entitled thereto for the performance of 
  2.12  labor or the furnishing of skill, material, or machinery for the 
  2.13  improvement, shall be guilty of theft of the proceeds of ~~such~~ 
  2.14  the payment and ~~upon conviction shall be fined not more than~~ 
  2.15  ~~$3,000 or imprisoned not more than one year, or both~~ is 
  2.16  punishable under section 609.52.  If the person is a 
  2.17  corporation, any officers, directors, or agents of the 
  2.18  corporation responsible for the theft shall be guilty of theft 
  2.19  of the proceeds.  Proceeds of the payment, received as salary, 
  2.20  dividend, loan repayment, capital distribution, or otherwise by 
  2.21  any shareholder not responsible for the theft shall be a civil 
  2.22  liability of the shareholder and may be recovered and restored 
  2.23  as provided in subdivision 1a.  Proceeds of the payment are not 
  2.24  subject to garnishment, execution, levy, or attachment. 
  2.25     Sec. 2.  Minnesota Statutes 1998, section 514.02, is 
  2.26  amended by adding a subdivision to read: 
  2.27     Subd. 1a.  [CIVIL ACTION.] A person injured by a violation 
  2.28  of subdivision 1 may bring a civil action against the person who 
  2.29  committed the theft or a shareholder who is liable under 
  2.30  subdivision 1 and recover damages, together with costs and 
  2.31  disbursements, including costs of investigation and reasonable 
  2.32  attorney fees, and receive other relief as determined by the 
  2.33  court, including, without limitation, equitable tracing. 
  2.34     Sec. 3.  Minnesota Statutes 1998, section 550.37, is 
  2.35  amended by adding a subdivision to read: 
  2.36     Subd. 25.  [PROCEEDS FOR IMPROVEMENTS TO 
  3.1   PROPERTY.] Proceeds of payments received by a person for labor, 
  3.2   skill, material, or machinery contributing to an improvement to 
  3.3   real property within the meaning of section 514.01. 
  3.4      Sec. 4.  [EFFECTIVE DATE.] 
  3.5      Sections 1 and 2 are effective August 1, 2000, and apply to 
  3.6   crimes committed on or after that date and civil claims for 
  3.7   causes of action arising on or after that date.