Legal Question in Construction Law in California

Re: Breach of Contract

You leave out some important particulars. First, was this a construction or improvement project on real estate? If so, did you initiate any steps to give notice of a mechanic's lien? Are you a prime contractor, or sub? All this helps determine what law applies. Are you required to be licensed for this work? Were you? This will affect your ability to collect in a lawsuit.

More likely than not, you won't be concerned with the penal code, which (in general) deals with crimes and thus with matters where the district attorney will seek punishment on behalf of the state ..... you would get your recovery, if any, through a civil action.

The amount of money involved and the possibility of going unpaid, as well as the intricacies of bankruptcy law, make it important that you contact a local attorney who specializes in representing creditors in bankruptcies.

Re: Breach of Contract

I suspect your referring to Cal. Penal Code Sec 484b that makes diversion of funds from a construction project a public offense. But, as Mr. Whipple points out, the local prosecutor's office would be the entity to bring charges under that section if a criminal complaint were filed against the defaulting party, and the evidence showed diversion.

It sounds like you performed as a subcontractor or materials supplier to a general contractor on a public work of improvement. When you say you are suing the city, I suspect that means you want to file a stop notice, demanding that the city with hold funds due the contractor and pay those funds to you.

If I'm right, along with stop notice and the bankruptcy considerations, you also need to look at an action on the contractors payment bond. Absent extraordinary circumstances, the city involved would have required the contractor to post a payment bond. That's a statutory requirement. Assuming you gave the required 20 day notice under Cal. Civil Code Sec 3098, you will have perfected your rights to sue the bond. If you did not serve the 20 day notice, you must give written notice of the claim to the surety that issued the bond and the bond principal (contractor) within 15 days after a Notice of Completion is recorded. If no notice was filed you have 75 from the date the work was done to give written notice to the surety and the principal. Any complaint against the surety needs to be filed within 6 months after the period in which stop notices may be filed. That means, if a Notice of Completion was recorded, stop notices to the public entity must be filed within 30 days after recording, or 90 days after completion of the work if no Notice was recovered.

Keeping the time frames straight can be daunting. I'd strongly recommend you contact an attorney in your area who is familiar with construction litigation in general, and stop notice and bond claims in particular.

Best of luck.

Now the inevitable caveat:

The foregoing information is provided as an accommodation only, and does not constitute specific legal advice or a biding legal opinion based on a comprehensive review of all relevant facts, nor can provision of such information be construed as creating an attorney-client relationship.

Re: Breach of Contract

You may be referring to Penal Code section 484b. On public works jobs, funds are virtually always released based upon what has been completed and by whom. This means that it's easy to tell whether the contractor ever received funds that were supposed to go for your portion of the job. If he received the funds, but then didn't forward them to you, then there is a possibility of diversion. (I'm assuming that you're a listed subcontractor.)

Getting someone prosecuted for diversion of funds, however, can be daunting. The police tend to think of this as civil, not criminal, and the DA doesn't usually want to prosecute. If, however, there is evidence of some $50,000 being diverted, this might be enough to get their attention. Things are also complicated by the bankruptcy and there are a million deadlines in trying to sue on the payment bond or the stop notice (there are no mechanics liens on public works jobs).

It will likely be much easier to get payment out of the payment bond than trying to chase the contractor out of bankruptcy.

Don't delay on this thing or one of those deadlines might pass. Get to a lawyer that does construction law. Make sure he has handled public works claims before. These can get pretty messy.