Under Utah Code Ann. § 58-55-601, a materialman or supplier is required to demand from the general contractor how the general contractor’s payment should be applied if the general contractor has more than one account with the materialman or the subcontractor.
If the materialman or supplier is pursuing a mechanic’s lien and has failed to demand such instruction, the owner has a defense to the lien. But what is an owner or a general contractor?
Can the owner of a subdivision, for example, develop the property through its principal agent, and is the subcontractor who is dealing then with the agent dealing with the owner or a general contractor? If the so-called subcontractor is dealing directly with the owner, the subcontractor is really a general contractor and Utah Code Ann. § 58-55-601 does not apply. If the principal of the owner is acting as a general contractor, especially if the owner is a corporation, then it is more complicated.
The subcontractor has the burden to establish that the so-called general contractor is not the general contractor at all but an agent of the owner, thus making the subcontractor actually a general contractor. This, then, would be a defense to the so-called subcontractor’s failure to demand allocation of the payment from the general because the general really is the owner and the subcontractor really is the general.
In that situation, the failure to demand where allocation of the payment is should be made is not a defense to the so-called subcontractor’s failure to demand allocation of payment.
Lewis P. Reece