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California Paving v. Lincoln General

May 21, 2012

CALIFORNIA PAVING & GRADING CO., INC., PLAINTIFF AND APPELLANT,
v.
LINCOLN GENERAL INSURANCE COMPANY, DEFENDANT AND RESPONDENT.



APPEAL from a judgment of the Superior Court of Los Angeles County, Laura Matz, Judge. (Los Angeles County Super. Ct. No. EC052459)

The opinion of the court was delivered by: Klein, P. J.

CERTIFIED FOR PUBLICATION

Affirmed.

Plaintiff and appellant California Paving & Grading Co., Inc. (hereafter, Paving or plaintiff), a subcontractor, appeals a judgment of dismissal following the sustaining without leave of a demurrer interposed by defendant and respondent Lincoln General Insurance Company (Lincoln) to Paving's second amended complaint seeking recovery on a payment bond.

The essential issue presented is whether the instant contract was for public work or for private work. The proper characterization of the nature of the contract determines whether this action is governed by Civil Code section 3097 (preliminary 20-day notice for private work)*fn1 or by section 3098 (preliminary 20-day notice for public work). The nature of the contract also determines whether Paving's lawsuit is governed by the limitations period applicable to an action on a public works payment bonds (§ 3249), or by a longer limitations period.

We conclude the instant subdivision improvement work constituted a "work of improvement contracted for by a public entity" and therefore amounted to a public work within the meaning of section 3100.

Paving failed to allege it served a preliminary notice in compliance with the statutory scheme applicable to payment bonds on public works. (§§ 3098, 3252.) Therefore, its action against Lincoln, the surety on the bond, is barred. Accordingly, the judgment of dismissal is affirmed.

FACTUAL AND PROCEDURAL BACKGROUND

1. Facts.*fn2

This matter arises out of a Subdivision Improvement Agreement and Contract (the Agreement) between a private developer, 26 Moorpark LLC (Moorpark) and the City of Los Angeles (the City). As a condition for approval of the final map for Tract No. 65651, the Agreement required the subdivider, Moorpark, at its "own cost and expense, to construct and install all public improvements required in and adjoining and covered by the final map." The Agreement estimated the cost of the improvements at $195,000, and required Moorpark to file or deposit "a good and sufficient PAYMENT SECURITY for labor and materials in an amount not less than fifty (50) percent)" of the estimated cost of the improvements.

In accordance with the Agreement, Moorpark obtained a "subdivision labor and material payment bond" in the amount of $97,500 from Lincoln, the surety.

Moorpark entered into a prime contract with Masada Development, Inc. (Masada), a licensed general contractor, for the construction of the public improvements.

Masada then entered into a subcontract with Paving, in the sum of $51,535, under which Paving agreed to perform street paving and asphalt work in connection with the public improvements, at the intersection of Wortser Street and Moorpark Street in Studio City.

On January 20, 2009, Paving completed its work but was not paid.

In June 2009, Paving filed suit against Moorpark and Masada to recover for the work it performed under the subcontract.

On October 29, 2009, Moorpark filed for bankruptcy. Masada likewise has filed for bankruptcy.

2. Proceedings.

a. Pleadings.

On March 12, 2010, Paving filed suit against Lincoln, the surety, to recover on the labor and material payment bond which Moorpark had filed with the City.

The operative second amended complaint pled a single cause of action. It alleged, inter alia, Paving was an intended beneficiary of the bond and was entitled to recover against Lincoln the sum of $55,958 plus interest thereon, from the completion date of January 20, 2009.

b. Lincoln's demurrer.

Lincoln demurred to the second amended complaint on the ground it was barred by the applicable statute of limitations and therefore failed to state facts sufficient to state a cause of action. Lincoln's arguments were two-fold:

First, Paving failed to make a timely claim on the bond in accordance with section 3252. Lincoln asserted that to make a claim on a payment bond, a claim must give written notice to the principal and surety on the bond within 15 days after recordation of a notice of completion, or if no notice of completion has been recorded, within 75 days after completion of the work of improvement. Here, there was no allegation as to whether a notice of completion had been filed. However, Paving pled it completed the work on January 20, 2009. Thus, Paving had 75 days, until April 6, 2009, to make a claim to the ...


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