California · Civil Code

CIV §8540: (a) Funds withheld pursuant to a stop payment notice shall be distributed in the following order of priority: (1) First, to pay claims of persons that have given a bonded stop payment notice.

What this law says, in plain English

This statute establishes the order in which funds held under a stop payment notice are distributed, prioritizing claims from persons who submitted a bonded stop payment notice first.

Read the full statutory text

(a) Funds withheld pursuant to a stop payment notice shall be distributed in the following order of priority: (1) First, to pay claims of persons that have given a bonded stop payment notice. If funds are insufficient to pay the claims of those persons in full, the funds shall be distributed pro rata among the claimants in the ratio that the claim of each bears to the aggregate of all claims for which a bonded stop payment notice is given. (2) Second, to pay claims of persons that have given an unbonded stop payment notice. If funds are insufficient to pay the claims of those persons in full, the funds shall be distributed among the claimants in the ratio that the claim of each bears to the aggregate of all claims for which an unbonded stop payment notice is given. (b) Pro rata distribution under this section shall be made among the persons entitled to share in the distribution without regard to the order in which the person has given a stop payment notice or commenced an enforcement action.

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