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Lender Beats Surety To Contract Balance Retainage

Friday, March 03, 2006 05:24 pm

Lender Beats Surety To Contract Balance Retainage

In a case involving retained contract funds, a federal court has ruled that the contractor's secured creditor took priority over the contractor's performance surety on a separate contract.

Jesco Construction Corp. borrowed $2 million from GE Capital Corp. The lender perfected a security interest in Jesco's accounts receivable. At that time, Jesco held a contract with the Army Corps of Engineers for work along the Mississippi River.

When Jesco completed the work, the Corps acknowledged that the $230,000 contract balance was due. GE Capital demanded that it receive the funds pursuant to i [...]

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