33-1004. Discharge of mechanic's liens; bond; limitations of actions; discharge of surety; judgment

A. After perfection of a lien pursuant to this article, an owner, including any person who has a legal or equitable interest in the land which is subject to the lien, a contractor, subcontractor, mortgagee or other lien creditor, may, either before or after the commencement of an action to foreclose such lien, cause to be recorded in the office of the county recorder, in the county in which the land is located, a surety bond in the form described in subsection B of this section, together with a power of attorney disclosing the authority of the person executing the same on behalf of the surety. Upon the recordation of such bond, the property shall be discharged of such lien whether or not a copy of the bond is served upon the claimant or he perfects his rights against the bond.

B. A surety bond to discharge a lien perfected under this section shall be executed by the person seeking to discharge such lien, as principal, and by a surety company or companies holding a certificate of authority to transact surety business in this state, issued by the director of the department of insurance pursuant to title 20, chapter 2, article 1. The bond shall be for the sole protection of the claimant who perfected such lien. Notwithstanding any other statute, the surety bond shall not be executed by individual surety or sureties, even if the requirements of section 7-101 are satisfied. The bond shall be in an amount equal to one hundred fifty per cent of the demand set forth in and secured by the notice and claim of lien and shall be conditioned for the payment of the judgment which would have been rendered against the property for the enforcement of the lien. The legal description of the property and the docket and page of the lien sought to be discharged shall be set forth in the bond.

C. The principal on such bond, upon recordation thereof with the county recorder, shall cause a copy of the bond to be served within a reasonable time upon the lien claimant, and if a suit is then pending to foreclose the lien the claimant, within ninety days after receipt thereof shall cause proceedings to be instituted to add the surety and the principal as parties to the lien foreclosure suit. In addition, on recording and service of the surety bond, any monies withheld in response to a stop notice or bonded stop notice that is served by the lien claimant pursuant to article 9 of this chapter with respect to the same labor and material described in the notice and claim of lien shall be released promptly.

D. The bond shall be discharged and the principal and sureties released upon any of the following:

1. The failure of the lien claimant to commence a suit within the time allowed pursuant to section 33-998.

2. Failure of the lien claimant to name the principal and sureties as parties to the action seeking foreclosure of the lien if a copy of the bond has been served upon claimant. If the bond is served upon the claimant within less than ninety days from the date claimant would be required to commence his action pursuant to section 33-998, the claimant shall have ninety days from the date he receives a copy of such bond to add the principal and the sureties as parties to the lien foreclosure suit.

3. The dismissal of the foreclosure suit with prejudice as to the claimant or the entry of judgment in such suit against claimant.

E. In an action to foreclose a lien under this article, where a bond has been filed and served as provided herein, a judgment for the claimant on the bond shall be against the principal and his sureties for the reasonable value of the labor and material furnished and shall not be against the property. A judgment for the claimant on the bond, including any recovery for interest, expenses, costs and attorney fees awarded by the court, shall not exceed the penal sum of the bond. If the amount the claimant recovers exceeds the penal sum of the bond, the claimant shall also be entitled to judgment against the principal for the excess amount.

F. In the event a copy of the bond is not served upon the claimant as provided in subsection C of this section, the claimant shall have six months after the discovery of such bond to commence an action thereon, except that no action may be commenced on such bond after two years from the date it was recorded as provided in this section.

G. The county recorder of the county in which the bond and contract are recorded shall index the bond and contract under the index classification in which mechanics' and materialmen's liens are recorded.