BILL NUMBER: AB 2036 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 14, 2010
AMENDED IN ASSEMBLY APRIL 27, 2010
INTRODUCED BY Assembly Member Bill Berryhill
FEBRUARY 17, 2010
An act to amend Section 3186 of the Civil Code, relating
to works of improvement. An act to amend Section
7071.11 of the Business and Professions Code, relating to
contractors.
LEGISLATIVE COUNSEL'S DIGEST
AB 2036, as amended, Bill Berryhill. Public works: stop
notices. Contractors.
Existing law, the Contractors State License Law, provides for the
licensing and regulation of contractors by the Contractors' State
License Board. Existing law requires the surety of a contractor to
notify the Registrar of Contractors of any payment on any claim
against the contractor's bond within 30 days of making the payment.
Existing law, with specified exceptions, provides that any judgment
or admitted claim against, or good faith payment from, a bond shall
constitute grounds for disciplinary action against a contractor by
the Contractors' State License Board.
This bill would require the surety of a contractor to notify the
registrar of any good faith payment made from the contractor's bond
pursuant to a court order or judgment within 30 days of making the
payment. The bill, with respect to that payment, would provide that
the contractor's license shall be suspended by operation of law if
proof of payment of the amount owed to the surety has not been made
by the contractor within 90 days after the contractor is notified to
that effect by the board. The bill would require a license suspension
under these provisions to be disclosed indefinitely.
Existing law provides that all persons and laborers of every
class, except for an original contractor, performing labor upon,
bestowing skill or other necessary services on, furnishing materials
or leasing equipment to be used or consumed in, or furnishing
appliances, teams, or power contributing to, a public work of
improvement may serve a stop notice upon the public entity
responsible for the public work, as specified. Existing law imposes a
duty on a public entity to withhold money or bonds due or to become
due to the original contractor in an amount sufficient to answer the
claim stated in the stop notice and to provide for the public entity'
s reasonable cost of any litigation on the matter, as specified.
This bill would qualify the requirement that the public entity
withhold money or bonds sufficient to provide for reasonable
litigation costs to make it applicable only if the original
contractor fails to promptly accept a tender of defense of the public
entity in the litigation.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 7071.11 of the
Business and Professions Code is amended to read:
7071.11. (a) The aggregate liability of a surety on a claim for
wages and fringe benefits brought against any bond required by this
article, other than a bond required by Section 7071.8, shall not
exceed the sum of four thousand dollars ($4,000). If any bond
required by this article is insufficient to pay all claims in full,
the sum of the bond shall be distributed to all claimants in
proportion to the amount of their respective claims.
(b) No license may be renewed, reissued, or reinstated while any
judgment or admitted claim in excess of the amount of the bond
remains unsatisfied.
(c) Except for claims covered by subdivision (d), any action
against a bond required under this article, excluding the judgment
bond specified under Section 7071.17, shall be brought in accordance
with the following:
(1) Within two years after the expiration of the license period
during which the act or omission occurred. The provisions of this
paragraph shall be applicable only if the license has not been
inactivated, canceled, or revoked during the license period for which
the bond was posted and accepted by the registrar as specified under
Section 7071.7.
(2) If the license has been inactivated, canceled, or revoked, an
action shall be brought within two years of the date the license of
the active licensee would have expired had the license not been
inactivated, canceled, or revoked. For the provisions of this
paragraph to be applicable, the act or omission for which the action
is filed must have occurred prior to the date the license was
inactivated, canceled, or revoked.
(3) An action against a disciplinary bond filed by an active
licensee pursuant to Section 7071.8 shall be brought in accordance
with the provisions of paragraph (1) or (2), as applicable, or within
two years after the last date for which a disciplinary bond filed
pursuant to Section 7071.8 was required, whichever date is first.
(d) A claim to recover wages or fringe benefits shall be brought
within six months from the date that the wage or fringe benefit
delinquencies were discovered, but in no event shall a civil action
thereon be brought later than two years from the date the wage or
fringe benefit contributions were due.
(e) Whenever the surety makes payment on any claim against a bond
required by this article, whether or not payment is made through a
court action or otherwise, the surety shall, within 30 days of the
payment, provide notice to the registrar. The notice required by this
subdivision shall provide the following information by declaration
on a form prescribed by the registrar:
(1) The name and license number of the contractor.
(2) The surety bond number.
(3) The amount of payment.
(4) The statutory basis upon which the claim is made.
(5) The names of the person or persons to whom payments have been
made.
(6) Whether or not the payments were the result of a good faith
action by the surety.
The notice shall also clearly indicate whether or not the licensee
filed a protest in accordance with this section.
(f) (1) If, after providing 30 days
notice to the licensee, a surety makes a good faith payment from the
bond pursuant to a court order or court judgment, the surety shall,
within 30 days after that payment, provide notice to the registrar.
The notice required by this paragraph shall provide the following
information by declaration on a form prescribed by the registrar:
(A) The name and license number of the contractor.
(B) The surety bond number.
(C) The amount of the court-ordered payment or judgment.
(D) The name of the claimant or claimants who were party to the
court action and the statutory basis for each claimant's claim.
(E) A copy of the court order or judgment.
(F) The date notice was sent to the licensee that the surety
intended to make payment pursuant to a court order or judgment.
(G) A clear indication whether or not the licensee, within the
30-day notice period provided in this paragraph, contested the
court-ordered payment or judgment.
(2) Any licensee that fails to contest the court-ordered payment
or judgment by the surety as specified in this subdivision shall have
90 days from the date of notification by the board to submit proof
of payment of the actual amount owed to the surety and, if
applicable, proof of payment of any judgment or admitted claim in
excess of the amount of the bond or, by operation of law, the license
shall be suspended at the end of the 90 days. A license suspension
pursuant to this subdivision shall be disclosed indefinitely as a
failure to settle outstanding final liabilities in violation of this
chapter.
(g) Prior to the settlement of a claim
through a good faith payment by the surety, a licensee shall have not
less than 15 days in which to provide a written protest. This
protest shall instruct the surety not to make payment from the bond
on the licensee's account upon the specific grounds that the claim is
opposed by the licensee, and provide the surety a specific and
reasonable basis for the licensee's opposition to payment.
(1) Whenever a licensee files a protest in accordance with this
subdivision, the board shall investigate the matter and file
disciplinary action as set forth under this chapter if there is
evidence that the surety has sustained a loss as the result of a good
faith payment made for the purpose of mitigating any damages
incurred by any person or entity covered under Section 7071.5.
(2) Any licensee that fails to file a protest as specified in this
subdivision shall have 90 days from the date of notification by the
board to submit proof of payment of the actual amount owed to the
surety and, if applicable, proof of payment of any judgment or
admitted claim in excess of the amount of the bond or, by operation
of law, the license shall be suspended at the end of the 90 days. A
license suspension pursuant to this subdivision shall be disclosed
indefinitely as a failure to settle outstanding final liabilities in
violation of this chapter. The disclosure specified by this
subdivision shall also be applicable to all licenses covered by the
provisions of subdivision (g) (h) .
(g)
(h) No license may be renewed, reissued, or reinstated
while any surety remains unreimbursed for any loss or expense
sustained on any bond issued for the licensee or for any entity of
which any officer, director, member, partner, or qualifying person
was an officer, director, member, partner, or qualifying person of
the licensee while the licensee was subject to suspension or
disciplinary action under this section.
(h)
(i) The licensee may provide the board with a notarized
copy of an accord, reached with the surety to satisfy the debt in
lieu of full payment. By operation of law, failure to abide by the
accord shall result in the automatic suspension of any license to
which this section applies. A license that is suspended for failure
to abide by the accord may only be renewed or reinstated when proof
of satisfaction of all debts is made.
(i)
(j) Legal fees may not be charged against the bond by
the board.
SECTION 1. Section 3186 of the Civil Code is
amended to read:
3186. It shall be the duty of the public entity, upon receipt of
a stop notice pursuant to this chapter, to withhold from the original
contractor, or from any person acting under his or her authority,
money or bonds, if bonds are to be issued in payment for the work of
improvement, that are due or to become due to that contractor in an
amount sufficient to (a) answer the claim stated in the stop notice
and (b) provide for the public entity's reasonable cost of any
litigation thereunder, if the original contractor fails to promptly
accept a tender of defense of the public entity in the litigation.
The public entity may satisfy this duty by refusing to release money
held in escrow pursuant to Section 10263 or 22300 of the Public
Contract Code.