On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-5358-06.
The opinion of the court was delivered by: Ashrafi, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 20, 2012
Before Judges Fuentes, Grall and Ashrafi.
The opinion of the court was delivered by ASHRAFI, J.A.D.
This appeal requires our application of the Construction Lien Law, N.J.S.A. 2A:44A-1 to -38, where a subcontractor became insolvent and did not pay for all the materials it purchased for a building project. The Supreme Court held in Craft v. Stevenson Lumber Yard, Inc., 179 N.J. 56, 63 (2004), that a materials supplier that seeks to file a construction lien has a duty to apply payments correctly against several open accounts of a materials purchaser, such as a subcontractor, if the supplier has reason to know that the payment funds came from a particular building project. We now consider the obligation of the materials supplier "to ascertain the source of . . . payments and to apply them accordingly." Id. at 76.
Plaintiff L & W Supply Corporation sold building materials on credit to a now-bankrupt subcontractor, Detail Contractors, Inc. When Detail failed to pay the full balance due for the materials, L & W filed a construction lien against the project for which the materials were supplied. Defendant Patock Construction Co., Inc. was the prime or general contractor for the project; defendant Extended Medical Care Corp./Meridian Health/Meridian Nursing & Rehabilitation ("Meridian") was the owner of the property and of the construction project; and defendant Travelers Casualty and Surety Company of America was the surety. Defendants now appeal from summary judgment entered in favor of L & W on its lien claim. We reverse and remand for trial as to defendants Patock and Travelers, and we reverse the judgment outright as to defendant Meridian.
The Construction Lien Law allows a contractor or supplier who is owed payment for its work or materials to file a lien against the real property on which the improvements are constructed. N.J.S.A. 2A:44A-3a. The primary purpose of this law is to secure payment of monies due to contractors and suppliers of a construction project. Thomas Grp., Inc. v. Wharton Senior Citizen Hous., Inc., 163 N.J. 507, 517 (2000).
A secondary purpose is to "protect owners" against paying more than once for the same work or materials. Labov Mech., Inc. v. E. Coast Power, L.L.C., 377 N.J. Super. 240, 245 (App. Div. 2005). To effect the second purpose, the statute limits the lien to the amount available in the "lien fund," which "shall not exceed the unpaid portion of the contract price of the claimant's contract for the work, services, material or equipment provided." N.J.S.A. 2A:44A-9a.
In the case of a supplier, the lien fund is defined as the lesser of (1) the amount of the prime contract price earned minus amounts already paid by the owner to the prime contractor, or (2) the amount the subcontractor has earned on the subcontract price minus amounts already paid by the prime contractor to the subcontractor. N.J.S.A. 2A:44A-9b(2).
When a lien claim is filed, the owner or prime contractor may pay the amount of a valid claim directly to the claimant and credit that payment against the subcontract price. N.J.S.A. 2A:44A-12. Alternatively, the owner or prime contractor may post a surety bond for 110% of the lien amount ...