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Is bond company swindling us?

Discussion in 'Small Claims & Municipal Court' started by Lauren Harris, Oct 25, 2019.

  1. Lauren Harris

    Lauren Harris Law Topic Starter New Member

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    So this is our second terrible experience with a Palm Springs area contractor. Everything was going great with him until Christmas of last year, when suddenly he had "money problems." Long story short, he asked us to pay extra outside of the contract for flooring, painting, shelving, tiling, etc, then asked us to pay the last $5k on the contract (even though the work wasn't finished) so he could pay his guys, or he would have to take them off the job and start a new job so they could get paid. We were sick to death of everything he had pulled so far, and so stupidly we agreed.

    He still took the guys off the job, and didn't pay them the money we gave. Instead, he ghosted, and let his workman's comp lapse so legally he couldnt have people on site anyway. We're out about $10k, so we went to small claims court. He didn't show up, we pled our case, and were awarded $8250.

    This is the judgement we received from his bond company:

    We have reviewed the additional documents you provided to us – the 9/9/2019 Minute Order from the Court wherein the principal did not appear, and the Court entered a default judgment against Built 4 U Dream Homes Inc. for $8,250 plus costs of $165.

    Please note that a default judgment against the bond principal is not binding upon the surety. See, All Bay Mill & Lumber Co., Inc. v. Surety Co. of the Pacific, (1989) 208 Cal. App. 3d 11 (“In our view, it is irrelevant whether the judgment was obtained in a previous action or by default in the same action brought against the surety. In both cases, the surety must be given an opportunity to be heard in defense.”) See also, Western Heritage Ins. Co. v. Superior Court (2011) 199 Cal.App.4th 1196, 1211 (“A party's default does not bind non-defaulting codefendants, even when the basis for the action against the codefendants is vicarious liability arising from the acts of the defaulting defendant.”)

    Here, there was no finding by the Court that the principal violated any Section of Contractor’s License Law. Nonetheless, Hudson has elected to compromise your claim by paying the difference between the judgment in your favor and your claim demand - $1,585. Your original claim amount was $10,000. The Court awarded you a default judgment of $8,415.00 against the principal because the principal did not appear at the small claims hearing. Please execute and return the enclosed Final Release and W9. Upon receipt, Hudson will issue payment of $1,585 directly to you.


    Ok...so it's really weird they're offering to pay this difference. Why? On what grounds? We weren't awarded "by default." We had to plead our case, and the judge ruled in our favor. Also, it's definitely illegal to continue working after letting workmans comp lapse, so why don't they think he's in the wrong?

    Is there anything we can do here? Or should we just accept this payment? Feels like they're trying to buy us off with some arbitrary accounting instead of giving us what we're owed. I will also say, about 3 other claims are being filed against this $15000 bond of the contractor's, because he screwed over a lot of folks. So maybe that's why?
     
  2. adjusterjack

    adjusterjack Super Moderator

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    Here's what I think is happening. According to the court's decision, the surety has to be given the opportunity to defend against a claim on the bond.

    It was not given that opportunity for the $8415 but it was given the opportunity to raise a defense against the remaining $1585 and found that there was no defense so it's offering you the $1585 which is perfectly correct according to the court decision that was cited by the surety.

    Since you aren't likely to ever collect a nickel from the contractor here's an unorthodox suggestion. I don't know if it's even possible or potentially successful but you've got nothing to lose.

    Ask the court to set aside the judgment, then dismiss your case with prejudice so you can't file it again. Then go to the bonding company for the full $10,000. That will give the bonding company an opportunity to raise a defense on the $10,000 but since it has already determined that there is no defense for what the contractor did, you might actually get the $10,000 or most of it, or some of it, or more than the $1585 already offered.

    No guarantees, of course, and I have no idea if you can even accomplish it, but you really have nothing to lose. If you don't want to try it you can just accept the $1585 and learn this important life lesson:

    NEVER pay a contractor up front. Pay for the materials separately, pay the contractor for the work as he completes each phase satisfactorily and the balance on completion, and get everything in writing. That philosophy has worked for me for over 40 years and I've never lost a nickel to a contractor.
     
  3. Tax Counsel

    Tax Counsel Well-Known Member

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    And then get nothing.
     
  4. zddoodah

    zddoodah Well-Known Member

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    That might be one of the worst suggestions I've ever read on one of these boards.

    The quoted language in the original post is from the bonding company's determination letter, not the court's judgment (the OP misused the word when referring to "the judgement we received from his bond company").

    It appears that the OP sued the contractor but did not include the bonding company as part of the lawsuit and is now seeking to use the small claims judgment to establish a claim with the bonding company. Since small claims judgments rarely contain detailed findings, that will almost never be successful.

    And yes, it was a default judgment because the contractor didn't show up (although it's not denominated as such in small claims matters).

    In order for the bond to be liable, the claimant has to prove a violation of the Contractors' State License Law (Bus. & Prof. Code section 7000, et seq.).

    I can't understand the bonding company's rationale in offering the difference between the judgment and $10k.

    I think you should seriously consider declining the bonding company's offer and filing a small claims action against the bonding company. Be prepared to prove one or more violations of the CSLL that resulted in damage to you. Sounds like it shouldn't be difficult.
     
  5. adjusterjack

    adjusterjack Super Moderator

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    I concede to Z's suggestion.
     

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