California Codes, Civil Code - CIV, Division 4 — General Provisions, Part 6 — Works of Improvement, Title 2 — Private Works of Improvement, Chapter 5 — Stop Payment Notice, Article 3 — Stop Payment Notice to Construction Lender, Section 8536

(a) Except as provided in subdivision (b), on receipt of a stop payment notice a construction lender shall withhold from the borrower or other person to whom the lender or the owner is obligated to make payments or advancement out of the construction fund sufficient funds to pay the claim stated in the notice.

(b) The construction lender may, at its option, elect not to withhold funds in any of the following circumstances:

(1) The stop payment notice is unbonded.

(2) The stop payment notice is given by a claimant other than a direct contractor, and a payment bond is recorded before the lender is given any stop payment notice.