2005 California Civil Code Sections 3161-3163 Article 4. Effect of Stop Notice and Bonded Stop Notice

CIVIL CODE
SECTION 3161-3163

3161.  It shall be the duty of the owner upon receipt of a stop
notice pursuant to Section 3158 to withhold from the original
contractor or from any person acting under his or her authority and
to whom labor or materials, or both, have been furnished, or agreed
to be furnished, sufficient money due or to become due to such
contractor to answer such claim and any claim of lien that may be
recorded therefor, unless a payment bond has been recorded pursuant
to the provisions of Section 3235, in which case the owner may, but
is not obligated to, withhold such money.
   If the owner elects not to withhold pursuant to a stop notice by
reason of a payment bond having been previously recorded, then the
owner shall, within 30 days after receipt of the stop notice, give a
written notice to the claimant at the address shown in the stop
notice that the bond has been recorded and furnish to the claimant a
copy of that bond.
3162.  (a) Upon receipt of a stop notice pursuant to Section 3159,
the construction lender may, and upon receipt of a bonded stop notice
the construction lender shall, except as provided in this section,
withhold from the borrower or other person to whom it or the owner
may be obligated to make payments or advancement out of the
construction fund, sufficient money to answer the claim and any claim
of lien that may be recorded therefor.  The construction  lender
shall be subject to the following:
   (1) The construction lender shall withhold funds pursuant to a
bonded stop notice filed by an original contractor, regardless of
whether a payment bond has previously been recorded in the office of
the county recorder where the site is located in accordance with
Section 3235.
   (2) The construction lender shall withhold funds pursuant to a
bonded stop notice filed by any other person named in Sections 3110,
3111, and 3112, unless a payment bond has previously been recorded in
the office of the county recorder where the site is located in
accordance with Section 3235.  If a payment bond has previously been
recorded, the construction lender may, at its option, withhold funds
pursuant to the bonded stop notice or stop notice, or may elect not
to withhold pursuant to the bonded stop notice or stop notice given
by anyone other than an original contractor.
   (3) If, when giving the construction lender the stop notice or
bonded stop notice, the claimant makes a written request for notice
of the election, accompanied by a preaddressed, stamped envelope, the
construction lender shall furnish the claimant a copy of the bond
within 30 days after making the election.  A lender shall not be
liable for a failure to furnish a copy of the bond if the failure was
not intentional and resulted from a bona fide error, if the lender
maintains reasonable procedures to avoid such an error, and if the
error was corrected not later than 20 days from the date on which the
violation was discovered.  The payment bond may be recorded at any
time prior to the serving of the first stop notice.
   (b) In the case of a stop notice or bonded stop notice filed by
the original contractor or by a subcontractor, the original
contractor or subcontractor shall only be entitled to recover on his
or her stop notice or bonded stop notice the net amount due the
original contractor or subcontractor after deducting the stop notice
claims of all subcontractors or material suppliers who have filed
bonded stop notices on account of work done on behalf of the original
contractor or the subcontractor.
   (c) In no event shall the construction lender be required to
withhold, pursuant to a bonded stop notice, more than the net amount
identified in subdivision (b).  Notwithstanding any other provision,
no construction lender shall have any liability for the failure to
withhold more than this net amount upon receipt of a bonded stop
notice.
3163.  If the construction lender objects to the sufficiency of the
sureties on the bond accompanying the bonded stop notice, he must
give notice in writing of such objection to the claimant within 20
days after the service of the bonded stop notice.  The claimant may
within 10 days after the receipt of such written objection substitute
for the initial bond a bond in like amount executed by a corporate
surety licensed to write such bonds in the State of California.  If
the claimant fails to do so, the construction lender may disregard
the bonded stop notice and release all funds withheld in response
thereto.


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