4.3.4.5.4 Other Limitations to Surety's Liability Under Bond

• Jurisdiction: Arizona

If the creditor has knowledge of the source of monies received from the contractor, he must apply the payment to the obligations arising from that source. In, Webb v. Crane Co., a material supplier to Langston, on Webb’s Taylor Hall project, knew or had reason to know that the monies it had received came from the Taylor Hall job. Crane credited the payments against other non-bonded obligations owed by Langston and then brought suit against Webb and its surety on the performance bond. Webb contended the monies received by Crane should have been credited to the obligations due Crane on the Taylor Hall job. The court, agreeing with Webb, stated:

It is utterly unthinkable that appellee...