GETTING TO YES WHEN YOU WANT TO SAY NO - JOINT PAYMENT ARRANGEMENTS

GETTING TO YES WHEN YOU WANT TO SAY NO

JOINT PAYMENT ARRANGEMENTS

Jean C. Arnold, Esq.

Whether selling materials, renting equipment, or providing labor, consider whether your customer has the financial ability to pay without funds from the project.  Perhaps, establish a "joint payment" arrangement with either the owner or general contractor when you want to say “no” to the customer, but “yes” to the project.  Beware, however, of some pitfalls.

Joint Check Agreements.  First, analyze your customer’s contract.  Check the contract for “pay-when” and “pay-if” paid terms that could impact when and if payment will occur. 

Second,  understand the joint payment agreement is a contract creating rights and obligations.  In White Construction Company, Inc. v. Sauter Construction Company, Inc., 731 P.2d 734 (Colo. App. 1986), a sub-subcontractor was held liable to the general contractor for work not performed in a workmanlike manner because the general contractor and the sub-subcontractor had entered into a joint check agreement.  In Buttermore v. Firestone Tire and Rubber Company, 721 P.2d 701 (Colo. App. 1986), the owner was held to be personally liable to subcontractors because of a joint check arrangement on a project.

Finally, employ caution when using the owner’s or general contractor’s joint payment agreement form.  Many owners and general contractors, in order to limit liability to suppliers, will include such language as: "This arrangement is made merely as an accommodation to the supplier and is not intended to be relied upon by the supplier or to prove any contractual obligations owing from contractor to supplier."  Others will include language:  (1) limiting their payment obligation to the amount due the subcontractor; (2) incorporating arbitration or other dispute resolution conditions stated in the subcontract agreement; and (3) language waiving mechanic’s lien rights or other supplier’s payment remedies.  If you are a supplier, beware of these limitations.   

Remitting joint payments to your customer.  Some material suppliers remit portions of the joint check proceeds to their customers even though they are still owed money for materials for the project.  A materialman can make loans to his customer, but not with the owner's or general contractor’s money intended to avoid liens against the property.  Section 38-22-127, C.R.S.  Additional language would need to be added to the joint payment form if you are planning to remit funds to your customer from joint payments received.  Be sure to keep the owner or general contractor apprised as to the amounts remitted.

Payment application.  Often suppliers will apply joint payments received to oldest invoices rather than to the invoices for the project – even knowing the source of funds.  In the case of Jackson v. A.B.Z. Lumber Co., 155 Colo. 33, 392 P.2d 288 (1964),  the Colorado Supreme Court found that a lumber supplier could not maintain its mechanic’s lien against the property because the lumber company knew the source of funds used by the subcontractor to pay the delinquent material bill even though the subcontractor never directed the lumber company how to apply the payment.

Submitted June 16, 2011.

Copyright 2011.  Jean C. Arnold.  All rights reserved.  No portions of this textual material may be reproduced without the prior written permission of Jean C. Arnold, Arnold & Arnold, Attorneys at Law, LLP, 7691 Shaffer Parkway Suite A, Littleton, CO 80127 720-962-6010.

e-mail:  jeanarnold@arnoldarnold.com.

COLLECTION OF A JUDGMENT

COLLECTING THE JUDGMENT

A.                                       USE OF JUDGMENT LIENS ON REAL PROPERTY

RECORDING THE TRANSCRIPT OF JUDGMENT:  One of the easiest and most cost-effective collection tools in your arsenal is the transcript of judgment.  You can lien any real property owned by the judgment debtor. (See 13-52-102, C.R.S.) .  As soon as judgment is entered, you should obtain the transcript of judgment from the Clerk of the Court for a fee of $25.00 (as of July 1, 2008) and record it with the Clerk and Recorder of each county where the judgment debtor owns property.  The transcript of judgment only encumbers real property in the county that it is recorded in, so you need to verify the correct county prior to recording the lien.  You can record the transcript in multiple counties.  The recording of the transcript does not effectuate execution of the judgment. Recording the lien makes the judgment a lien against the property, which needs to be paid off if the property is sold or refinanced.  It may also make the judgment creditor a secured creditor in the event of a bankruptcy as long as the transcript is recorded at least 90 days prior to the filing of bankruptcy.  It also gives the creditor the right to redeem the property in the event of a foreclosure.

REVIVAL OF THE JUDGMENT LIEN:  Pursuant to Section 13-52-102(1), C.R.S. the lien expires 6 years from the judgment date, unless revived as set forth in Rule 54, C.R.C.P.  A Motion to Revive the lien must be filed and the Court will issue a Show Cause Order, ordering the judgment debtor to file cause, in writing, within 10 days as to why the judgment lien should not be revived.  The Order to Show Cause must be served upon the judgment debtor.  If the debtor files an answer, a hearing must be held.  If the Court finds no cause or no answer is filed, then the Court will enter an order reviving the judgment lien and the clerk will issue a revived transcript of judgment.  The revived transcript of judgment must be recorded in the same county to keep the same priority date.     

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