California Civil Code
If the original contractor or subcontractor disputes the correctness or validity or enforceability of any stop notice, the public entity may, in its discretion, permit the original contractor to file with the public entity a bond executed by a corporate surety, in an amount equal to 125 percent of the claim stated in the stop notice conditioned for the payment of any sum which the stop notice claimant may recover on the claim together with his costs of suit in the action, if he recovers therein. Upon the filing of such bond with the public entity, the public entity shall not withhold any money or bonds (where bonds are to be issued in payment for the work of improvement) from the original contractor on account of the stop notice. The surety or sureties upon such bond shall be jointly and severally liable to the stop notice claimant with the surety or sureties upon any payment bond furnished pursuant to Chapter 7 (commencing with Section 3247).
If the original contractor asserts (1) that the claim upon which the stop notice is based is not included within the types or classifications of claims referred to in this article, or (2) that the claimant is not one of the persons named in Section 3181, or (3) that the amount of the claim as specified in the stop notice is excessive, or (4) that there is no basis in law for the claim as referred to and set out in the stop notice, he may have the question determined in a summary proceedings in accordance with the provisions of Sections 3198 to 3205, inclusive.
The original contractor shall serve upon the public entity an affidavit and a copy thereof alleging the legal grounds upon which he bases his claim and the facts in support thereof, and demanding the release of all or such portion of such money or bonds as is alleged to be withheld improperly or in an excessive amount. Such affidavit shall also state the address of the original contractor within this state for the purpose of permitting service by mail upon him of any notice or legal document.
The public entity shall serve upon the claimant, either personally or by registered or certified mail, addressed to the last known address of the claimant, a copy of the affidavit and the demand for release together with a written notice stating that the public entity will release such money or bonds, or such portion of either as has been demanded, unless the claimant files with the public entity a counteraffidavit on or before a time designated in the notice, which shall not be less than 10, nor more than 20 days, after service upon the claimant of the copy of such affidavit. Proof of service shall be made by an affidavit.
If the claimant desires to contest the original contractor's affidavit and demand for release, he shall, within the time allowed, serve upon the public entity a counteraffidavit alleging the details of his claim and shall also set forth in detail the specific basis upon which he contests or rebuts the allegations of the original contractor's affidavit, together with proof of service of a copy of such counteraffidavit upon the original contractor. If no such counteraffidavit with proof of service is served upon the public entity within the time allowed, then the public entity shall forthwith release the money or bonds, or such portion thereof as has been demanded by such affidavit, without further notice to the claimant, and the public entity shall not be liable in any manner for making such release. The public entity shall not be responsible for the validity of the affidavit or counteraffidavit.
If such counteraffidavit, together with proof of service, is so filed, either the original contractor or the claimant may file an action in the appropriate superior court for a declaration of the respective rights of the parties. After the filing of such action, either the original contractor or the claimant shall be entitled to a hearing by the court for the purpose of determining his rights under the affidavit and demand for release and the counteraffidavit. Such hearing must be granted by the court within 15 days from the date of making of such motion, unless continued by the court for good cause.
The party making the motion for hearing must give not less than five days' notice in writing of such hearing to the public entity and to the other party.
At such hearing, the original contractor shall have the burden of proof. The affidavit and counteraffidavit shall be filed with the court by the public entity and they shall constitute the pleadings, subject to the power of the court to permit an amendment in the interest of justice. The affidavit of the original contractor shall be deemed controverted by the counteraffidavit, and both shall be received in evidence.
No findings shall be required in a summary proceeding under this article. When the hearing is before the court sitting without a jury and no evidence other than the affidavit and counteraffidavit is offered, if the court is satisfied that sufficient facts are shown thereby, it may make its determination thereon; otherwise, it shall order the hearing continued for the production of other evidence, oral or documentary, or the filing of other affidavits and counteraffidavits. At the conclusion of the hearing, the court shall make and enter its order determining whether the demand for release shall be allowed or not, which order shall be determinative as to the right of the claimant to have the money or bonds further withheld by the public entity. The original contractor shall serve a copy of such order on the public entity.
Nothing contained in this article shall be construed to deprive any party of the right to a trial by jury in any case where such right is given by the California Constitution, but a jury trial may be waived in like manner as in the trial of an action.
No determination in the summary proceedings under this article shall be res judicata with respect to any right of action by the claimant against either principal or surety on any labor and material bond or with respect to any right of action against any party personally liable to the claimant.