In breach of contract cases involving construction contracts, the Tennessee Trust Fund Statute, T.C.A. §66-11-138, may provide a subcontractor with a way to recover the attorneys’ fees and expenses incurred in collecting amounts owed to it, but not paid. To recover attorneys’ fees and expenses using that Statute, it is not enough to prove just a breach of the contract by the contractor or subcontractor with whom you contracted. You have to prove that you were not paid because the contractor or subcontractor who owed you money violated the Statute and did so with the intent to defraud.
The Statute also provides protection to project owners by allowing them to recover any attorneys’ fees and expenses, as well as any other damages, incurred as the result of the contractor using funds of the owner for improper purposes (purposes prohibited by the Statute).
Under the Tennessee Trust Fund Statute, any contractor or subcontractor who, with intent to defraud, uses monies paid to it for any purpose other than to pay for labor, materials, services, equipment, machinery or for related overhead or profit, while any subcontractor remains unpaid, has violated the Statute (subject to the exceptions discussed below). A violation of the Statute, besides amounting to a Class E felony, entitles the injured party to recover any damages caused to it as the result of the misuse of the funds, including attorneys’ fees and expenses.