Kalfountzos

A subcontractor on a public works project sued the general contractor for money claimed due. The subcontractor also sued the surety on the contractor’s payment- and stop-notice release bonds. At trial, the subcontractor asserted the surety could not raise the contractor’s defenses and setoffs because the contractor was in corporate suspense because of nonpayment of franchise fees and could not defend itself in court. We affirm the trial court’s judgment in favor of the surety. A surety, under these circumstances, can assert defenses and setoffs to the underlying obligation, even though the contractor who obtained the bond is disabled legally.

Facts and Procedure

We quote from the trial court’s statement of decision those portions relevant to this appeal:

The trial court decided Hartford could assert Hart’s defenses and setoffs. Applying those defenses and setoffs, the court concluded Engineered was not entitled to recover under the subcontract with Hart and that, therefore, Hartford was entitled to judgment against Engineered. Engineered appeals.

Discussion

The general rule is that a surety may raise all defenses that would be allowed the principal. (Flickinger v.…