California Paving & Grading Co., Inc. v. Lincoln General Ins. Co

In California Paving & Grading Co., Inc. v. Lincoln General Ins. Co. (2012) 206 Cal.App.4th 36, the developer entered into an SIA with a municipality that required, as a condition of its approval, the developer install all public improvements required by the final map. The City of Los Angeles required a 50 percent L&M bond for the public improvements. The developer contracted with a general contractor for construction of the improvements. (Id. at p. 38.) The general contractor subcontracted for the paving and asphalt work. The subcontractor performed the work but was never paid. The subcontractor filed suit against the developer and the general contractor, but both filed for bankruptcy. The subcontractor then filed suit against the surety. (Id. at p. 39.) The surety demurred contending the subcontractor had failed to file suit within the statutory timeframe. (California Paving, supra, 206 Cal.App.4th at pp. 39-40.) The subcontractor countered that, "the improvements for which the bond was issued are subdivision improvements, not a public work within the meaning of the Civil Code sections. Therefore, the payment bond is not a public works payment bond and the statute of limitations set forth in Civil Code former section 3249 does not apply to this action." The trial court sustained the demurrer. (Id. at p. 40.) The appellate court reversed, holding the "subdivision improvement work constituted a public work within the meaning of Civil Code section 3100 because it constituted a 'work of improvement contracted for by a public entity.'" (California Paving, supra, 206 Cal.App.4th at p. 43.) Indeed, the SIA and contract between the City and the developer "expressly required the developer, at its 'own cost and expense, to construct and install all public improvements required in and adjoining and covered by the final map.'" (Ibid.) The general contractor then contracted with the subcontractor "'to furnish labor, services, equipment and materials required pursuant to the prime contract for the construction of the PUBLIC IMPROVEMENTS.'" (Ibid.)