Subcontractors and Suppliers Must Apply Funds to Specific Project Accounts, Not General Contractor Accounts

Craft v. Stevenson Lumber Yard, Inc., 843 A.2d 1076, 179 N.J. 56 (2004)

In this matter, a project owner filed a complaint demanding the dismissal of a construction lien claim filed by a supplier (Stevenson) after the contractor, who was responsible for paying Stevenson, walked off the job.  The contractor owed Stevenson for multiple past unrelated projects. Therefore, when the contractor provided payments to Stevenson from the plaintiff’s payments, without specifying the project, Stevenson automatically credited the payments to the oldest outstanding invoices, not to those associated with the plaintiff’s project.  The supplier subsequently filed a construction lien claim against the real property.  

The court found that the supplier could not arbitrarily assign the payments to different accounts, but rather must apply the contractor’s payments to the individual project account from which payments were derived.  Therefore, the supplier was precluded from filing the lien claim due to its failure to allocate the contractor’s payments to the proper accounts.