Sub-Subcontractor’s Claim Has Priority Over State’s Garnishment
Kegler Brown Construction Newsletter August 1, 1994
Judge Crawford of the Franklin County Common Pleas Court has ruled that a general contractor need not pay a subcontractor's creditor, in this case the State of Ohio, pursuant to a garnishment order, before paying an unpaid sub-subcontractor on an ODOT project. The general contractor was holding money belonging to an insolvent subcontractor when a garnishment order arrived seeking to have these funds paid to the subcontractor's creditor —the State of Ohio.
While the general contractor did not place the funds in a separate account, it argued that it was holding them in trust and that it could be forced to pay twice if the funds were seized in that the sub-subcontractor was still owed money. The Court agreed with the general contractor's argument that the money in effect belonged to the sub-subcontractor rather than the insolvent subcontractor and allowed the sub-subcontractor to be paid in full ahead of the State of Ohio.