T&R Painting Construction Inc. v. St. Paul Fire & Marine Insurance

The question presented by this appeal is whether the surety on a construction bond is liable for attorney fees incurred by a bond beneficiary. The beneficiary’s contract with the surety’s principal calls for the payment of fees to the prevailing party in the event of any legal action.

Following the statutory mandate that a surety’s liability is commensurate with that of its principal (Civ. Code, § 2808), we conclude that the surety is liable for the attorney fees that its principal was ordered to pay to the beneficiary after a legal dispute was resolved in favor of the beneficiary.

Facts

A property owner, London Pacific Investors (LPI), hired a general contractor, Capitol Systems (Capitol), to construct a residential development called Sycamore Village. The contractor, Capitol, obtained performance and payment bonds from respondent St. Paul Fire and Marine Insurance Company (St. Paul). In the payment bond, St. Paul agreed to pay claims made by subcontractors in the event that Capitol failed to pay the subcontractors for labor and materials supplied. The payment bond does not have an attorney fees clause.

Appellant T&R Painting Construction, Inc. (T&R) entered into a…