Westamerica Bank v. City of Berkeley

The City of Berkeley (the City) and Amtz Builders entered into a construction contract. Under the contract, the City was entitled to retain a percentage of the moneys earned by Amtz to ensure satisfactory completion of the work (the retention funds). As permitted by law, Amtz placed securities into escrow as a substitute for the retention funds. The terms of the escrow agreement are dictated by statute; they provide, among other things, that the City has the right to draw upon the securities if the contractor defaults, and that the escrow agent (here, Westamerica Bank (the Bank)) must immediately convert the securities to cash and distribute it to the City “[u]pon seven (7) days written notice to Escrow Agent from the City of the default.” The escrow instructions also provide that the City and Amtz “shall hold the Escrow Agent harmless from Escrow Agent’s release and disbursement of the securities” in reliance on the written notification.

The City sent a written seven-day notice of default to the Bank and demanded immediate liquidation and distribution of the securities to the City. *601 Amtz objected to disbursement of the securities to the City on grounds that the City…