A. Payment by the owner or his successor in interest to any person entitled to payment of all and any amounts due and owing for any labor or materials furnished or other actions the performance of which could give rise to a lien pursuant to Section 48-2-2 NMSA 1978 to be performed upon a residential site shall discharge all such liens unless prior to payment any person who is entitled to such lien has filed for record his lien pursuant to Section 48-2-6 NMSA 1978. For the purposes of this section, the original contractor shall not be the agent of the owner.

B. Any contractor or subcontractor justly indebted to a supplier of material or labor who accepts payment for construction described in Subsection A of this section and knowingly and intentionally applies the proceeds to a use other than paying those persons with whom he contracted is guilty of a fourth degree felony and shall be sentenced pursuant to the provisions of Section 31-18-15 NMSA 1978.

History: Laws 1989, ch. 301, § 11.

Technical trust. — Section 48-2A-11B NMSA 1978 of the New Mexico Stop Notice Act does not constitute a technical trust imposed by law within the meaning of 11 U.S.C. § 523(a)(4). Foxworth Gailbraith Lumber Co., Inc. v. Manelos, 337 B.R. 409 (Bankr. D.N.M. 2006).

Applicability of section to owners. — Where final payment was not made, the owners cannot avail themselves of this section. Pyburn v. Kirkpatrick, 1987-NMSC-076, 106 N.M. 247, 741 P.2d 1368.

Subsection A of this section discharges mechanics' and materialmen's liens recorded after the owner has made full payment for construction work performed when the owner has not been given the written notice of potential lien claims prescribed by Subsection B. Sundance Mech. & Util. Corp. v. Armijo, 1987-NMSC-078, 106 N.M. 249, 741 P.2d 1370 (decided under prior law).

This section imposes no duty upon the owner of a residential building containing four or fewer units to obtain from the original contractor notice or an affidavit as described in Subsection B in order to enjoy the protection from liens provided by Subsection A. Sundance Mech. & Util. Corp. v. Armijo, 1987-NMSC-078, 106 N.M. 249, 741 P.2d 1370 (decided under prior law).

This section applies to innocent owners only, i.e., owners who had no notice, actual or constructive, of intervening claims by unpaid materialmen. C & D Plumbing, Inc. v. Armstrong, 1987-NMSC-068, 106 N.M. 155, 740 P.2d 705.

Application to innocent owners. — Where owners had notice that a subcontractor had not been paid by the contractor, the owners are not innocent as to subcontractor's claim of debt, and thus the subcontractor is entitled to recover against the owner for the remaining amount of his claim. Pyburn v. Kirkpatrick, 1987-NMSC-076, 106 N.M. 247, 741 P.2d 1368.

The words "all amounts due and owing" in this section mean final payment, not partial payment. C & D Plumbing, Inc. v. Armstrong, 1987-NMSC-068, 106 N.M. 155, 740 P.2d 705.

Partial payment not sufficient. — The legislature intended to emphasize the rule of C & D Plumbing, Inc. v. Armstrong, 106 N.M. 155, 740 P.2d 705 (1987) when, in 1989, it amended the language of this section to read "all and any amounts due and owing"; that language means payment of all amounts still owing under the original contract is the only way to discharge liens that are subsequently imposed upon the property. Partial payment to the contractor is not sufficient to do so. Wade v. Farnsworth, 1996-NMCA-053, 121 N.M. 698, 917 P.2d 967, cert. denied, 121 N.M. 676, 916 P.2d 1343.

Effect of section on filing deadlines. — Since this section is more specific and more recently enacted than Section 48-2-6 NMSA 1978, it controls to reduce the filing time, where the original contractor has presented his bill for final payment, from 90 to 20 days; and where the owner has paid the original contractor, no subcontractor of whom the owner had no notice of an amount owed may file a lien because of Subsection A of this section. Aztec Wood Interiors, Inc. v. Andrade Homes, Inc., 1986-NMSC-020, 104 N.M. 45, 716 P.2d 236 (decided under prior law).

Abbreviated filing period contingent on notice to subcontractor. — Where no notice was given by the contractor to the subcontractor as required in Subsection B, the 20-day notice requirement of that subsection is not applicable, and a subcontractor is entitled to rely on the 90-day notice provision of Section 48-2-6 NMSA 1978. Pyburn v. Kirkpatrick, 1987-NMSC-076, 106 N.M. 247, 741 P.2d 1368 (decided under prior law).

Effect of escrow account on final payment. — An escrow account set up after the total contract price was paid as a device to ensure the general contractor completed certain punchlist items that did not concern the subcontractor's lien at all did not prevent final payment from occurring under the Stop Notice Act. Tabet Lumber Co. v. Romero, 1994-NMSC-033, 117 N.M. 429, 872 P.2d 847.

Law reviews. — For annual survey of New Mexico law relating to property, see 12 N.M.L. Rev. 459 (1982).

For survey of construction law in New Mexico, see 18 N.M.L. Rev. 331 (1988).