SECTIONS 3235-3237 - California Statutes

CIVIL CODE

SECTION 3235-3237

3235. In case the original contract for a private work of
improvement is filed in the office of the county recorder of the
county where the property is situated before the work is commenced,
and the payment bond of the original contractor in an amount not less
than 50 percent of the contract price named in such contract is
recorded in such office, then the court must, where it would be
equitable so to do, restrict the recovery under lien claims to an
aggregate amount equal to the amount found to be due from the owner
to the original contractor and render judgment against the original
contractor and his sureties on such bond for any deficiency or
difference there may remain between such amount so found to be due to
the original contractor and the whole amount found to be due to
claimants.

3236. It is the intent and purpose of Section 3235 to limit the
owner's liability, in all cases, to the measure of the contract price
where he shall have filed or caused to be filed in good faith his
original contract and recorded a payment bond as therein provided. It
shall be lawful for the owner to protect himself against any failure
of the original contractor to perform his contract and make full
payment for all work done and materials furnished thereunder by
exacting such bond or other security as he may deem necessary.

3237. When a lending institution requires that a payment bond be
furnished as a condition of lending money to finance a private work
of improvement, and accepts in writing as sufficient a payment bond
posted in fulfillment of this requirement, it may thereafter object
to the borrower as to the validity of that payment bond or refuse to
make the loan based upon any objection to the payment bond only if
the bond underwriter was licensed by the Department of Insurance.
As used in this section, "lending institution" includes commercial
banks, savings and loan institutions, credit unions, and any other
organizations or persons that are engaged in the business of
financing loans.