As a subcontractor under contract with contractor on a city project, subcontractor completed a percentage of work required; subcontractor supplied 3 pay applications and never received payment from contractor as per the prompt pay act. The contractor received payment from the city. The contractor eventually defaulted and their surety company finished the job. The surety for the contractor is implying that by subrogation the subcontractor is entitled to materials and labor only, not the percentage of work completed per the contract.
"Every claimant who has furnished labor or material in the prosecution of the work provided for in such contract in respect of which a payment bond is furnished...and who has not been paid in full therefor ...shall have the right to sue on such payment bond for the amount, or the balance thereof, unpaid..."
You should be entitled to the amount you are entitled to as per the contract, as if the project had gone on as usual. I would ask the surety to send you the legal support for their position.
My Mechanics Lien Filing Service at www.zlien.com. Our number is 866-720-5436. Avvo's terms and conditions apply, answers on Avvo are general responses to hypothetical scenarios presented by questioner.
One of the keys for me here is your statement that the contractor was paid for your work. This often defeats many suretyship defenses, such as in many states if you have a pay-if-paid clause in your contract, and the contractor isn't paid, the surety will defend by saying that the contractor is not contractually obligated to pay you, so they are not obligated to stand in the contractor's shoes to pay you.
There are several other issues at play here, including the default and apparent replacement of the contractor. Sureties often don't step up to the plate to just send you a check. Often they want you to prove your case and will erect barriers to you completing that task. From their perspective, if they tell you that you are not entitled to your percentage.
I am not one to jump to tell you to go hire an attorney every time you have an issue, but when dealing with sureties, who, make no mistake are very sophisticated, often spending a few dollars on a construction attorney in your state is money well spent.
You don't say whether you have made an official bond claim or filed a "Mechanic's Lien" on this project (you will often hear mechanic's liens on public projects called "Little Miller Act Claims"). You haven't given us enough facts to be able to tell you whether you still have time to file the lien or serve the bond claim. I suggest that you use that same local construction law attorney to handle both of those procedures. Services are "iffy." A good local construction lawyer will be sure to know your law to get it done right. Again here, even if a service can do it for a few dollars less, you are not necessarily getting the same product. You can often tell this by looking at the service provider's agreement with you. Do they disclaim liability for any mistakes, even if THEY make them? A lawyer can't do that.
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