Washington Construction Law Blog

This Division 3 case is a nice summary of the "joint check rule" and how it operates in the context where the general contractor who writes the joint check then attempts to sue a subcontractor on an cause of action assigned to it by a lower-tier subcontractor.

Confusing? Yes. But if you read the details, it is also a good lesson in how to avoid the trap evidently presented by the "joint check rule", which in short provides:

Many jurisdictions (including Washington; see Dauphin, 42 Wn. App. at 496) have adopted the "joint check rule" to this purpose: "{w}hen a subcontractor and his materialman are joint payees, and no agreement exists with the owner or general contractor as to allocation of proceeds, the materialman by endorsing the check will be deemed to have received the money due him.

As applied to the facts of this case, the "joint check rule" created a presumption that the subcontractor had already paid the lower-tier subcontractor -- and therefore the assignment made by the lower-tier back to the general contractor (which the general contractor in turn used as the basis for its foreclosure claim against the RCW 18.27 registration bond of the subcontractor) was a useless act because, well, the lower-tier guy had already been presumably "paid."

In the end, Division 3 concluded that factual issues (not legal ones) prevented entry of summary judgment in favor of the general contractor and remanded for trial. But the tea leaves do not seem to favor the assignee/GC in this context as it may be difficult to overcome the presumption contained in the "joint check rule."