Under the construction trust fund provisions of Penal Code Section 484b, which scenario would constitute a felony violation?
Correct Answer
C) Diverting $75,000 in construction funds to pay for another project
Penal Code Section 484b makes diversion of construction funds exceeding $65,000 a felony. The threshold distinguishes between misdemeanor (under $65,000) and felony violations. Any intentional diversion of construction trust funds for purposes other than the specific project constitutes a violation, but amounts over $65,000 carry more severe penalties.
Why This Is the Correct Answer
Penal Code Section 484b establishes a felony threshold when diverted construction funds exceed $65,000. Diverting $75,000 to pay for another project surpasses that threshold and constitutes a felony, regardless of the intent to repay or the nature of the other project.
Why the Other Options Are Wrong
Option A: Paying material suppliers before subcontractors from the same fund
Paying material suppliers before subcontractors from the same construction fund is a question of priority, not misappropriation. While improper prioritization can create civil disputes, it does not constitute criminal diversion under Penal Code 484b.
Option B: Diverting $5,000 in construction funds for personal use
Diverting $5,000 for personal use is a violation of Penal Code 484b, but the amount is well below the $65,000 felony threshold. It would be charged as a misdemeanor, not a felony.
Option D: Using construction loan proceeds to pay office rent instead of subcontractors
Using construction loan proceeds to pay office rent (rather than subcontractors) is a trust fund violation, but the amount is unspecified. Without exceeding $65,000, it would not automatically be a felony. Additionally, this option does not state an amount, making it less specific than the $75,000 felony scenario.
Memory Technique
Felony line = $65,000. Think '65 thousand = 65 mph speed limit — exceed it and you get a serious charge.' $75,000 blows past the $65K limit → felony.
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