Building Profit Corp. v. Mortgage & Realty Trust

In this case, we are called upon to interpret a construction lender’s obligation to an “original contractor" under the “stop notice” provisions of former Civil Code sections 3159 and 3162.1 The precise issue before us is whether the second, italicized sentence in each of the statutes conditions a construction lender’s obligation to withhold funds after service of a bonded stop notice by an original contractor on the recording of a payment bond by the contractor. Stated differently, and in the language of the parties: is the recording of a payment bond by an original contractor a condition precedent to the contractor’s right to recover on a bonded stop notice given to a construction lender?

In an action by Building Profit Corporation, an “original contractor” (plaintiff), against Mortgage and Realty Trust, a construction lender (defendant), to recover on a bonded stop notice, plaintiff has appealed from a judgment on the pleadings entered in favor of defendant. The trial court granted defendant’s motion for judgment on the pleadings on the ground that plaintiff did not and could not allege that it had recorded a payment bond, and, under sections 3159 and 3162, that such…