New Mexico Statutes Chapter 48. Liens and Mortgages § 48-2A-8. Distribution of construction funds; liability

A. Upon receipt of a claim stated in a stop notice, the construction lender, if any, or the owner, if applicable, shall withhold an amount of construction funds equal to the amount claimed in the stop notice from the original contractor until the claim has been satisfied or adjudicated by a court of competent jurisdiction, unless the remaining construction funds are insufficient to completely satisfy the claim due to the prior disbursement or prior amounts being withheld due to previously received stop notices. In these instances, only the remaining unclaimed portion of the construction loan shall be withheld.

B. All funds not disbursed or unclaimed by a stop notice may be disbursed by the construction lender to the original contractor without liability to the construction lender; provided, that if the construction lender disburses construction funds to the original contractor which are subject to an unsatisfied stop notice that is later adjudicated by a court of competent jurisdiction in favor of the claimant, the construction lender shall be liable for the amount of the claim stated in the stop notice. In any action adjudicating a claim stated in the stop notice or adjudicating a claim made pursuant to this section, the prevailing party may be awarded reasonable attorneys' fees.