Legal Question in Construction Law in California

First off do NOT pay the subcontractor directly. It can lead to ALL kinds of complications if there are any further problems or issues with the job. Tell the contractor that any claim for additional payment must be run through his contract as a change order request.

As for whether you owe the money, that's a little complicated, but from the information you provide, and if there isn't additional or different information, it sounds like you should not be responsible for it. The owner of a project is obligated to provide all known information on site conditions and give the contractor the opportunity to do any inspection and testing they need to do in order to accurately estimate the job. This also goes for contractors' obligations to subcontractors. Thereafter, the contractor and subcontractor are responsible to accurately estimate the job and bear the loss if they are wrong and it costs more to perform than they estimated. If differing site conditions are found that were unknown to everyone and result in such a material deviation from the expected conditions as to make adhering to the original bid onerous and completely unfair, then the contractor and/or subcontractor are entitled to what is called an "equitable adjustment" in the contract price, to make sharing the burden of the unexpected conditions fair. It sounds, however, that the conditions encountered were exactly as you represented them to the contractor. If he failed to pass that information on, and/or the subcontractor failed to consider that in his bid, that is between the contractor and the subcontractor as to who bears the loss.