Liton General Engineering Contractor, Inc. v. United Pacific Insurance

Opinion KLINE, P. J. Introduction United Pacific Insurance (UPI) appeals from a judgment of the Contra Costa County Superior Court, ordering UPI as surety to pay attorney fees incurred by respondent subcontractor Liton General Engineering Contractor, Inc. (Liton), in its action against UPI on a public works payment bond, where the bulk of fees were incurred in arbitration of Liton’s contractual dispute with the general contractor, Bay Cities Paving & Grading, Inc. (Bay Cities). UPI contends the fee award must be reversed claiming: (1) The statutory right to attorney fees applies only to actions on the bond to which the surety is a party and the arbitration proceeding satisfied neither requirement; (2) because UPI was not a party to the arbitration, it was denied due process by the fee award; (3) full payment of the arbitration award by Bay Pacific exonerated UPI; (4) Liton waived its right to a fee award in its arbitration agreement with Bay Cities. We conclude that the strong policy of this state favoring mechanics, laborers and materialmen, as reflected in statutes mandating the award of attorney fees to the prevailing party in an action on a public works payment bond, requires award of fees in this case. To hold otherwise would undermine both the fee statutes and the policies underlying those statutes. Facts and Procedural History In 1983, Bay Cities entered into a contract with the California Department of Transportation (Caltrans) for bridge and highway construction in Hercules, California. UPI issued a payment bond in the sum of $1,600,440.45 on [583] behalf of Bay Cities as required by statute. (Civ. Code, § 3247.) Thereafter, as general contractor, Bay Cities entered into a subcontract with Liton, wherein Liton took responsibility for the bridge work portion of the project. The subcontract required Bay Cities and Liton to arbitrate any disputes between them arising out of the contract as “a condition precedent to any right of legal action.” It further provided that each would bear its own legal fees in connection with such arbitration. As the project neared completion, Caltrans assessed Bay Cities liquidated damages of $87,920 based on a delay of 157 calendar days. Bay Cities attributed the delay to Liton and another subcontractor and withheld $77,840 of its final payment to Liton. Subsequently, Caltrans released $26,880 to Bay Cities, which sum it passed through to Liton. Bay Cities pursued administrative proceedings before Caltrans’s board of Review. In 1986, prior to completion of the proceedings before Caltrans, Liton filed its action against Bay Cities for breach of contract and common counts and against UPI for recovery on the public works payment bond. The complaint prayed for recovery of attorney fees against UPI only. Bay Cities and UPI filed responsive pleadings. Bay Cities moved to stay the entire action and to require Liton to arbitrate its dispute with Bay Cities as part of the pending arbitration proceeding between Bay Cities and Caltrans. In its answer to Liton’s complaint, UPI raised an affirmative defense that the action was subject to abatement until completion of the arbitration. Over Liton’s opposition, the trial court ordered the action stayed and compelled Liton to arbitrate its claims against Bay Cities. Following a lengthy arbitration proceeding, the arbitrator awarded Liton the entire amount of its claim of $46,480 of the liquidated damages withheld, plus interest. Liton was also awarded $5,000 in settlement proceeds paid by Caltrans to Bay Cities for railroad flagging charges. Liton acknowledged that its subcontract with Bay Cities required each party to bear its own attorney fees and costs, and the arbitrator so ordered. An order confirming the arbitration award was entered, and the court ordered the stay of the action lifted. On October 8, 1990, judgment was entered against Bay Cities. Bay Cities paid Liton the entire amount of the judgment and an acknowledgement of full satisfaction thereof was filed on October 10, 1990. After the stay was lifted, Liton moved for summary judgment against UPI, claiming that there were no disputed issues of material fact and that as a matter of law UPI was liable for the attorney fees Liton incurred in the arbitration proceeding against Bay Cities. UPI filed a cross-motion for summary judgment, agreeing that there were no disputed issues of material [584] fact, but arguing that as a matter of law Bay Cities’ payment of the underlying award exonerated UPI from any liability for attorney fees. Following briefing and a hearing, the trial court granted Liton’s motion for summary judgment, denied UPI’s cross-motion, and ordered summary judgment in favor of Liton. Following hearing on UPI’s motion to tax costs, a judgment was entered awarding Liton total attorney fees and costs of $93,028.92. UPI filed a timely appeal. I. Under the principle of sovereign immunity, mechanics’ liens may not be asserted on government projects. (Cal. Mechanics’ Liens and Other Remedies (Cont.Ed.Bar 2d ed. 1988) §3.1, p. 118.) The only remedies available on public works are stop notices (Civ. Code, §§ 3179-3214) and actions on public works payment bonds (Civ. Code, §§ 3247-3252). Every original contractor to whom a public entity awards a contract in excess of $25,000 for any public work must, before beginning the work, file a payment bond with the public entity awarding the contract. (Civ. Code, § 3247.) The payment bond must be executed by “good and sufficient sureties.” (Civ. Code, § 3096.) It must also provide “in case suit is brought upon the bond, a reasonable attorney fee, to be fixed by the court.” (Civ. Code, § 3248, subd. (b).) In addition to protection of the public entity from liability for a defaulting contractor, the purpose of the surety bond is to provide a distinct remedy to public works subcontractors and suppliers of labor or materials to public works projects. “[T]he surety’s labor and materials bond (payment bond) has uniformly been held to constitute a primary and direct obligation of the surety to the subcontractors and materialmen without reference to the liability of the public works contractor—the principal on the bond. [Citations.]” (Sukut-Coulson, Inc. v. Allied Canon Co. (1978) 85 Cal.App.3d 648, 654 [149 Cal.Rptr. 711].) Hence, Civil Code section 2807 holds a surety liable immediately upon default of its principal. Moreover, an action against the surety on the payment bond may be maintained separately from and without the filing of an action against the public entity and without the filing of a stop notice. (Civ. Code, § 3250.) Finally, Civil Code section 3250 mandates the award of attorney fees to the prevailing party in any such action.1 This statutory right to attorney fees overrides the general rule that each party bears its own fees, unless otherwise provided by contract. (Code Civ. Proc., § 1021.) [585] II. We conclude Liton may recover fees incurred in its arbitration with Bay Cities because that proceeding was an integral aspect of its action on the bond. The award of fees does not, in our view, violate UPI’s right to due process of law. A. Liton filed its action in the superior court against both Bay Cities on the subcontract and UPI on the bond. At the urging of UPI, as well as Bay Cities, and over Liton’s strenuous objection, the trial court compelled Liton to complete the arbitration before it was permitted an opportunity to establish UPI’s liability on the bond. This compulsion, together with the fact that the arbitration agreement did not call for waiver of the statutory right to fees from the surety, is among the reasons we disagree with our dissenting colleague that Liton should be deemed to have “elected” a remedy foreclosing a cause of action against the surety in which fees could be awarded. (Dis. opn., post, at p. 601.) Under the circumstances, successful resolution of the arbitration action was a necessary precursor to and an integral component of a successful outcome in Liton’s action against UPI. The court correctly determined that the arbitration fees were incurred by Liton as part of its action on the bond. UPI contends that the case law supports its contention that fees are not recoverable for the arbitration between Liton and Bay Cities. We do not believe the cases relied upon by UPI assist in the determination whether the arbitration was part of Liton’s action on the bond. In Acoustics, Inc. v. Trepte Constr. Co. (1971) 14 Cal.App.3d 887 [92 Cal.Rptr. 723], subcontractor Acoustics sued the general contractor (Steiny) and the surety (General) in a consolidated action, alleging causes of action for breach of contract by the general contractor and on the payment bond. The general contractor prevailed in the contract action, and the surety prevailed in the action on the bond. The appellate court held that the surety having prevailed in the action on the bond, it was entitled to reasonable attorney fees under former Government Code section 4207, the precursor to Civil Code section 3250. (14 Cal.App.3d at p. 918.) However, the general contractor was not entitled to its attorney fees in defense of the contract [586] action. (Ibid.) The appellate court also held that the award of $100 attorney fees to the surety in the action on the payment bond was inadequate: “Even when it is considered that the work of preparation and trial in representing Steiny in action number 836618 and action number 837741 would be substantially the same as the work of preparation and trial in representing General in the action upon the bond, we are of the opinion, based upon the record before us, that the allowance of the sum of $100 as attorneys’ fees on the bond action is inadequate. Such an award appears to place substantially the entire obligation to pay the attorneys’ fees upon Steiny. If one firm of attorneys had represented Steiny on the contract action and another firm of attorneys had represented General upon the bond action, General would have been entitled to recover reasonable attorneys’ fees under section 4207 of the Government Code without regard to the allocation of the value of their services, part to the contract action and part to the bond action, as apparently was done by the trial court here. If such actions had been brought separately and different counsel had been employed in each action the same result would follow.” (Ibid.) Acoustics actually supports the judgment here by recognizing a statutory right to reasonable attorney fees by the prevailing party in an action on the bond even though work in preparing the contract action is substantially the same as work on the bond action. Moreover, in Acoustics, although the same attorneys represented the general contractor and the surety (as was also the case here), there was a clear division between those causes of action on contract and those on the bond. The general contractor unsuccessfully sought to recover fees from Acoustics for defending the contract action. Here, Liton seeks fees as against the surety (not from the general contractor) as the prevailing party in the action on the bond. Acoustics does not determine the question presented here: whether the arbitration, under the circumstances, was part of the action on the bond against UPI. Nor does Western Concrete Structures Co. v. James I. Barnes Constr. Co. (1962) 206 Cal.App.2d 1 [23 Cal.Rptr. 506], address this question. In Western, we affirmed a judgment awarding plaintiff subcontractor on a public works project (Western) damages against the general contractor (Barnes) on claims not covered by the surety bond and also awarding attorney fees to the surety (Seaboard) against the subcontractor on the ground that the statute of limitations had run on claims against the surety covered by the bond. Both Barnes and Western appealed, each contending it was the prevailing party within the meaning of Government Code section 4207. We held that substantial evidence supported the judgment and fee award, ruling that the “prevailing party” as used in former Government Code [587] section 4207, was intended to be either the claimant who is successful in the action as against the surety or the surety who is successful against a claimant bringing an action against it under that section. (206 Cal.App.2d at p. 10.) Seaboard became entitled to fees when it prevailed under the only two counts (the action on the bond) to which it was a party. Western’s fee entitlement depended upon its prevailing in the counts under Government Code section 4207 on the bond, and it did not prevail on those counts. (206 Cal.App.2d at p. 10.) Barnes, the general contractor, was not a “prevailing party” as used in the statute and was precluded from recovering its fees. (Id,., at p. 11.) Nothing in Western contradicts our conclusion that under the circumstances of the present case arbitration was an integral part of the action on the bond and that Liton was therefore statutorily entitled to its fees against UPI. B. UPI argues that the fee award violated its right to due process as it was never a party to the arbitration proceeding. At the time this action was proceeding, there was no California authority holding that UPI, which was not a party to the subcontract between Bay Cities and Liton, could be compelled to arbitrate.2 However, Liton did not seek to enforce the judgment obtained in the arbitration action against UPI. Rather, once the stay was lifted, Liton moved for summary judgment against UPI contending that as a matter of law, UPI was obligated under Civil Code section 3250, for attorney fees and costs incurred in the arbitration proceeding against Bay Cities. It is important to our analysis that UPI failed to raise any defenses of fact or law at an opportune time. In fact, UPI conceded there were no disputed issues of [588] material fact and vigorously argued in its cross-motion for summary judgment that as a matter of law it was exonerated from any liability to Liton for fees. Had any issues of fact existed involving any of the eight affirmative defenses asserted by UPI in its answer to Liton’s complaint prior to stay of the proceedings, UPI had ample opportunity to raise them in opposition to the summary judgment motion. UPI contends that the award of fees is unfair because had Liton lost in the arbitration proceeding, UPI would have had no right to collect fees, although the right to fees under Civil Code sections 3248 and 3250 is reciprocal. We reject UPI’s premise. Had Liton lost in the arbitration proceeding, UPI could have moved for summary judgment on the issue of its own liability and, assuming it prevailed, would have been entitled under Civil Code section 3250 to recover from Liton its attorney fees incurred in connection with the summary judgment. Because UPI was not a party to the arbitration proceedings, it incurred no fees in that portion of the action and its fee award would be far less than Liton’s. However, the disparity in incurable fees does not undermine the reciprocity provisions of Civil Code section 3250. We also reject UPI’s contention that Civil Code section 3250 requires an apportionment of fees spent by Liton in arbitrating with Bay Cities and in litigating with UPI. As earlier indicated, Liton was not permitted to establish UPI’s liability on the bond without first completing arbitration. The liability of Bay Cities and UPI were so factually interrelated that it would have been impossible to separate the activities involved in the arbitration into compensable and noncompensable time units. Allocation was not required. (Fed-Mart Corp. v. Pell Enterprises, Inc. (1980) 111 Cal.App.3d 215, 227 [168 Cal.Rptr. 525].) Having determined that the arbitration proceeding was part of the action on the bond under the circumstances here presented, and that Liton did not seek to execute upon the judgment received in the arbitration action against UPI, but rather obtained a separate summary judgment against UPI, affording ample opportunity for UPI to raise factual and legal defenses, we reject UPI’s contention that the award of fees contravened Civil Code section 2855.3 [589] III. UPI’s statutory liability for attorney fees in the bond action was not derivative of any fee liability of Bay Cities. The provision of the subcontract between Bay Cities and Liton that each party would bear its own attorney fees simply reiterated the general American rule that each party bears its own fees, except where specifically provided by statute or prior agreement. (Code Civ. Proc., § 1021.) Absent some agreement for fee shifting between Bay Cities and Liton, the general contractor ordinarily would not be liable for attorney fees. The provision in the subcontract acknowledging that Bay Cities and Liton will each bear its own fees in the arbitration was not designed to relieve UPI of its statutory fee liability as the nonprevailing party in the action on the bond and should not be given such an unanticipated effect. Nor do general statutes describing the relationship between the surety and its principal prevail over the more specific statutes concerning the attorney fees entitlement in litigation on a public works bond. Civil Code section 2808 provides in relevant part: “Where one assumes liability as surety upon a conditional obligation, his liability is commensurate with that of the principal . . . .” Civil Code section 2809 provides: “The obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; and if in its terms it exceeds it, it is reducible in proportion to the principal obligation.” These statutes relating to the position and liability of sureties in general must be harmonized, to the extent possible, with the more specific provisions of Civil Code sections 3248 and 3250. Civil Code section 3248 requires a public works payment bond to provide that, if the original contractor fails to pay any of the persons named in Civil Code section 3181 with respect to work or labor performed under the contract, that “the sureties will pay for the same, and also, in case suit is brought upon the bond, a reasonable attorney’s fee, to be fixed by the court.” (Civ. Code, § 3248, subd. (b), italics added.) Civil Code section 3250 directs that the “court shall award to the prevailing party a reasonable attorney’s fee” in any action on the payment bond in a public works context. The more specific provisions of Civil Code sections 3248 and 3250 establishing a right to recover attorney fees in public works payment bond [590] litigation govern. As our Supreme Court recently reiterated, “ ‘A specific provision relating to a particular subject will govern a general provision, even though the general provision standing alone would be broad enough to include the subject to which the specific provision relates.’ ’’ (Woods v. Young (1991) 53 Cal.3d 315, 325 [279 Cal.Rptr. 613, 807 P.2d 455], quoting People v. Tanner (1979) 24 Cal.3d 514, 521 [156 Cal.Rptr. 450, 596 P.2d 328]; Code Civ. Proc., § 1859.) The statutes specifically pertaining to the payment of attorney fees clearly contemplate that the surety may be liable for amounts owed by the original contractor and in addition for attorney fees beyond that sum, as its own direct liability. Moreover, any contention that fees may be awarded against the surety only when the principal is liable for fees would undermine the statutory scheme for shifting fees in public works actions, as it would preclude recovery of fees actually incurred in actions against the surety on the payment bond, except in those unlikely situations in which the general contractor has agreed to pay the attorney fees of a prevailing subcontractor. (It is because of this apparent legislative intent that we reject the view of our dissenting colleague that a subcontractor who arbitrates a dispute with a general contractor can be deemed to have “elected” to forego entitlement to fees under Civil Code section 3250.) Such an interpretation would eviscerate the fees provisions of Civil Code sections 3250 and 3248 and conflict with the explicit mandate of these statutes. Hence, in an action on the payment bond, it is clear that fees not only may be awarded, but must be awarded to the prevailing party regardless whether the principal would be liable for such fees either contractually or under some other statute. IV. Relying upon the general suretyship maxim that performance of the principal obligation exonerates a surety (Civ. Code, § 2839),4 UPI contends that Bay Cities’ payment in full of the judgment upon confirmation of the arbitration award discharged any obligation it may have had to pay attorney fees. The crux of UPI’s argument is that Bay Cities was never in default, as arbitration was a condition precedent to the accrual of Liton’s cause of action. Therefore, reasons UPI, because Bay Cities paid Liton the principal and interest due promptly after the arbitration award and before the stay was lifted, its performance exonerated UPI. This argument ignores the plain language of Civil Code section 2807, that “A surety who has assumed liability for payment or performance is liable to [591] the creditor immediately upon the default of the principal, and without demand or notice.” That arbitration may have been a condition precedent to Liton’s right to maintain its action against Bay Cities does not establish that there was no default by Bay Cities. The initial refusal of Bay Cities to pay the amount due triggered the surety’s obligation under the payment bond. At that point, UPI became liable to Liton not only for the amount wrongfully withheld but also, by statute and under the provisions of its bond, for any fees Liton might incur in pursuing its action on the payment bond, in the event Liton ultimately prevailed in that action. (Civ. Code, §§ 3248, subd. (b), 3250.) Cases cited by UPI to support its contention that there could be no default until and unless Bay Pacific refused to pay the arbitration award are clearly inapposite. For example, in Charles J. Rounds Co. v. Joint Council of Teamsters No. 42 (1971) 4 Cal.3d 888, 894 [95 Cal.Rptr. 53, 484P.2d 1397], the failure to pursue arbitration was raised by defendant labor unions as an affirmative defense to suit; Olson v. County of Sacramento (1974) 38 Cal.App.3d 958, 960-963 [113 Cal.Rptr. 664], involved a wrongful discharge action in which the issue was when plaintiff’s cause of action accrued for statute of limitations purposes. The Olson court relied upon the judicial policy underlying decisions tolling the statute of limitations during the pendency of interrelated administrative proceedings to hold the limitations period had not expired. Bay Cities defaulted when it wrongfully withheld the contract balance owed at the time it came due. The arbitrator recognized this when he awarded Liton prejudgment interest against Bay Cities in addition to the principal amount of its claim. The trial court also relied upon this fact in awarding Liton summary judgment. UPI cites language in section 3226 that a condition of recovery is that the claimant “has not been paid the full amount of his claim.” (Civ. Code, § 3226.) In so doing, UPI ignores other language of that section, which provides in its entirety: “Any bond given pursuant to the provisions of this title will be construed most strongly against the surety and in favor of all persons for whose benefit such bond is given, and under no circumstances shall a surety be released from liability to those for whose benefit such bond has been given, by reason of any breach of contract between the owner and original contractor or on the part of any obligee named in such bond, but the sole conditions of recovery shall be that [the] claimant is a person described in Section 3110, 3111, or 3112, and has not been paid the full amount of his claim.” (Civ. Code, § 3226, italics added.) [592] As previously discussed, UPI’s liability for attorney fees was statutorily based, and did not depend upon any contractual liability for attorney fees by Bay Cities as principal. To interpret the relevant statutes otherwise would undermine the mandatory fee shifting provisions of Civil Code sections 3248 and 3250. Similarly, to conclude that a surety may escape the statutory duty to pay fees in an action on a payment bond when the principal finally pays the amount due to the subcontractor, following protracted and expensive litigation-related proceedings, would also subvert the fee shifting statutes. Such result would make the statutory mandate dependent upon (1) whether the principal was contractually liable to the subcontractor for fees; and (2) whether the principal paid the underlying debt promptly following judgment, regardless of the time, energy and money expended by the subcontractor in obtaining judgment in its action on the bond. To condition application of section 3250 upon either occurrence as a practical matter would vitiate the strong public policy that informs the public works fee shifting statutes. The fee obligation under Civil Code section 3250 is a separate and primary obligation of the party (surety or claimant) who does not prevail in the action on the bond. Payment of the initial obligation does not exonerate the surety. For example, in Granite Rock Co. v. Freeman (1928) 93 Cal.App. 507 [269 P. 668], the plaintiff was a supplier to defendant contractors on a public work. A public works payment bond was issued pursuant to a predecessor statute to Civil Code section 3250 (Stats. 1919, ch. 303, pp. 487-488). After completion of construction, plaintiff sued the original contractors and the bonding company on the bond. While defendants’ demurrer was pending, the defendants paid plaintiff the principal of the sum due, but did not pay accrued interest or costs. Later, they tendered payment of interest and costs, but did not tender payment of plaintiffs attorney fees. At trial, the court awarded plaintiff judgment for a sum including attorney fees. The defendants appealed, arguing that before the date of trial, they had paid the principal sum claimed, that defendants were therefore “the prevailing party” under former chapter 303, Statutes 1919, and that for this reason fees should not be awarded plaintiff. The appellate court rejected this argument stating: “What with moneys paid to it before trial, and what with moneys obtained by virtue of the judgment, the plaintiff recovered every element it sued for. It had to fight for each element. It was ‘the prevailing party’ within the meaning of those words as used in the statute to the same extent and degree that it would have been if the principal sum had not been paid before answer filed but had been withheld and had been included as a part of the judgment itself. The difference between this and any other action was merely in the procedure, but nothing was obtained without a contest, in which it prevailed.” (Granite Rock Co. v. Freeman, supra, 93 Cal.App. at p. 508.) [593] So, too, Liton has recovered every element of its claim, but only after fighting for every element. Ultimate payment by Bay Cities does not deprive Liton of its right to attorney fees as the prevailing party in the action on the payment bond. V. UPI contends Liton waived any right to collect statutory attorney fees by agreeing in the subcontract to arbitrate disputes between itself and Bay Cities and by agreeing that each party would bear its own costs and attorney fees incurred in such arbitration. We reject this contention. “Waiver is the voluntary relinquishment of a known right. [Citation.] To constitute a waiver, it is essential that there be ... an actual intention to relinquish [the right] or conduct so inconsistent with the intent to enforce the right in question as to induce a reasonable belief that it has been relinquished.” (Outboard Marine Corp. v. Superior Court (1975) 52 Cal.App.3d 30, 41 [124 Cal.Rptr. 852].) Although Liton acknowledged the absence of any right to recover fees against Bay Cities in the arbitration, it neither expressly nor by implication waived its rights under Civil Code section 3250, as a “prevailing party” to recover its attorney fees from UPI. UPI was not a party to the subcontract. The statutory obligation of the surety to pay fees should it not prevail in an action on the bond is not affected by the terms of the contract between the subcontractor and the original contractor, be it an agreement to arbitrate (Pneucrete Corp. v. U. S. Fid. & G. Co. (1935) 7 Cal.App.2d 733, 739 [46 P.2d 1000]) or an agreement to waive attorney fees as between those two. Liton never acknowledged or agreed to any waiver as against UPI. Indeed, in seeking fees from UPI alone at the outset in its superior court action on the bond, Liton’s conduct was inconsistent with any implication of waiver of its right to recover fees against UPI. We refuse to infer that Liton understood this fee waiver provision, which, as we have explained, was in essence merely a restatement of the usual American rule, to also constitute a waiver of its statutory fee rights vis-á-vis UPI in its action on the public works bond. [594] We will not read into an arbitration agreement that is silent on the issue an “understanding” that a party is waiving a statutory right to fees.5 Enforcement of the statute imposes no responsibility on the surety or the general contractor of which they had any reasonable right to think they were relieved. On the contrary, relieving the surety or general contractor of the duty imposed by Civil Code section 3250 would be a windfall that cannot be reconciled with the policy reflected in that statute. The dissent claims the result we reach will result in a surety being forced to pay attorney fees to subcontractors that have made “inflated and legitimately disputed” claims against contractors, if the contractor and subcontractor ultimately settle their dispute following negotiation or arbitration. (Dis. opn., post, p. 602.) This fear misconstrues our views and is unfounded. Nothing in this opinion suggests a subcontractor is entitled to fees against the surety merely because it prevailed in an arbitration or otherwise settled its claim with the contractor. The subcontractor is entitled to recover fees reasonably incurred in satisfying its claim only when it prevails in its action on the bond. The surety cannot be deprived of its own defenses and those available to the contractor. Should the contractor settle a claim the surety considers defensible, the surety can raise its defenses in the action on the bond. If the surety prevails it can recover its fees from the subcontractor. (Winick Corp. v. Safeco Insurance Co. (1986) 187 Cal.App.3d 1502 [232 Cal.Rptr. 479].) The judgment is affirmed. Liton is awarded its costs and attorney fees on appeal. (Winick Corp. v. Safeco Insurance Co., supra, 187 Cal.App.3d at p. 1509.) Smith, J., concurred. Footnotes [1] ’“The filing of a stop notice is not a condition precedent to the maintenance of an action against the surety or sureties on the payment bond. An action on the payment bond may be maintained separately from and without the filing of an action against the public entity by [585] whom the contract was awarded or any officer thereof. In any action, the court shall award to the prevailing party a reasonable attorney’s fee, to be taxed as costs.” (Civ. Code, § 3250, italics added.) [2] Recently, the Court of Appeal in Boys Club of San Fernando Valley, Inc. v. Fidelity & Deposit Co. (1992) 6 Cal.App.4th 1266 [8 Cal.Rptr.2d 587], held that the surety in a performance bond is bound by an agreement to arbitrate contained in a construction contract or subcontract to which the surety was not a party, but which is incorporated into the bond by reference. (Id., at pp. 1272-1274.) That case is of questionable application here for several reasons: First, it postdates this action and recognizes the absence of prior California authority compelling the surety to arbitrate. (Id., at p. 1272.) Second, there is no indication in the present case that the bond incorporated the subcontract by reference or that Liton as the subcontractor could have forced UPI into the arbitration. Third, in the unlikely event Liton could have forced UPI into the arbitration with Bay Cities, there is no authority requiring Liton to do so. Finally, UPI was not prevented from participating in the arbitration. It could have submitted a declaration to the trial court agreeing to join in the arbitration proceeding and to have its rights determined in that forum pursuant to Public Contract Code section 10240.9. It could also have joined in Liton’s opposition to Bay Cities’ motion to compel arbitration. Instead, UPI consistently resisted any involvement in the arbitration, raising an affirmative defense that the action should be abated pending completion of the arbitration proceedings. [3] That section provides: “An arbitration award rendered against a principal alone shall not be, be deemed to be, or be utilized as, an award against his surety, [f] The intent of this legislation is to apply existing law to arbitration awards.” (See in. 2, ante.) The Legislature might at some point productively inquire whether arbitration is at all discouraged in the public works context by providing subcontractors a remedy on a surety bond or by any other mandate of Civil Code sections 3247-3250. [4] “Performance of the principal obligation, or an offer of such performance, duly made as provided in this Code, exonerates a surety.” (Civ. Code, § 2839.) [5] As we conclude Liton did not waive its right to recover attorney fees from UPI pursuant to Civil Code section 3250, we need not decide whether Civil Code section 3268 would apply to permit a waiver of such fee rights. We note, however, that a serious question arises as to whether such waiver would be ineffective as against public policy. (Civ. Code, § 3513; see Pneucrete Corp. v. U. S. Fid. & G. Co., supra, 7 Cal.App.2d 733, 740 [“The requirement of a bond in this case is a matter of public concern and any attempt to limit, nullify or render ineffectual the bond or any of its terms would be against public policy” (citations omitted).].)