Legal Question in Construction Law in California

Re: Bond process around mechanic lien

Where to start? How about with some possible good news? Unless the framer did $24K worth of work in the 20 days immediately preceding April 30, 2009, they have overstated the amount of the lien claim. A subcontractor's 20 day notice only "relates back" 20 days prior to service. That means the framers failed to perfect their lien for any moneys owed but not paid prior to 20 days before service of the preliminary notice. I would get with your general contractor immediately to find out what work the framers performed when, and how much they've been paid to date.

While you're talking with the general contractor, you should make sure he knows his obligations under Cal. Civil Code Sec. 3153. That section says:

"In all cases where a claim of lien is recorded for labor, services, equipment, or materials furnished to any contractor, he shall defend any action brought thereon at his own expense, and during the pendency of such action the owner may withhold from the original contractor the amount of money for which the claim of lien is recorded. In case of judgment in such action against the owner or his property upon the lien, the owner shall be entitled to deduct from any amount then or thereafter due from him to the original contractor the amount of such judgment and costs. If the amount of such judgment and costs exceeds the amount due from him to the original contractor, or if he has settled with the original contractor in full, he shall be entitled to recover back from the original contractor, or the sureties on any bond given by him for the faithful performance of his contract, any amount of such judgment and costs in excess of the contract price, and for which the original contractor was originally the party liable."

If you do have to bond around the lien, you'll need to contact a corporate surety. The amount of the bond, called the "penal sum" will be 1.5 times the amount of the lien claim. The bond must be recorded, and you must give written notice to the framers, sent via certified mail, return receipt requested. The framers will have 6 months from the date of recordation of the bond to file suit to recover from the bond.

You really want to work on the general to step up and handle this, as the bonding company will probably demand that the bond be fully collateralized. You want the general's assets tied up, not yours.

If the framers actually file suit on the bond and the bonding company pays, you will have a fight on your hands, as the bonding company will immediately look to you for reimbursement. There are a lot of issues surrounding the relationship between a surety and principal regarding their respective rights and responsibilities - more issues than can be dealt with in a quick response here.

I think you will definitely want to talk to local counsel well versed in both construction and surety law, BEFORE you purchase a bond.

Best of luck - let me know if you have further questions.

Tom Newton