Pittsburg Unified School District v. S.J. Amoroso Construction Co.
181 Cal. Rptr. 3d 694
Cal. Ct. App.2014Background
- Pittsburg Unified School District and Amoroso entered a retention escrow under Public Contracts Code 22300 for a 2008 construction project.
- District sought to withdraw retention funds from escrow after declaring Amoroso in default and after hiring a replacement contractor.
- Escrow agreement allowed withdrawal of securities on default as determined solely by the District, with seven days’ notice to convert to cash.
- Exit and Demobilization Agreement pursued Amoroso’s orderly exit; litigation over breach continued concurrently.
- District sent a notice package and memorandum asserting default; preliminary injunction motion temporarily restrained disbursement, which the trial court denied.
- Appellate court affirmed denial of the preliminary injunction, holding the District could unilaterally declare default under the escrow framework.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May a public entity unilaterally declare default to withdraw escrow funds? | Amoroso argues default requires judicial determination. | Amoroso relies on facts of Westamerica/Opinski; district may declare default under 22300. | Yes; owner may unilaterally declare default to withdraw funds. |
| Does Civil Code 1670 conflict with 22300 regarding default determinations? | 1670 requires arbitration/litigation before final disposition of disputes. | 22300 provides independent mechanism; harmonizes with 1670; default withdrawal not a final dispute resolution. | No conflict; statutes harmonized; 22300 controls withdrawal upon notice of default. |
| Does the Exit Agreement preclude withdrawal of escrow funds upon default? | Exit Agreement may limit rights to terminate or declare default. | Exit Agreement does not negate escrow rights; default notice under Escrow Agreement suffices. | Exit Agreement does not prevent withdrawal under Escrow Agreement. |
| Are retention funds held in escrow a trust for subcontractors, affecting withdrawal rights? | Retention funds may be held in trust for subcontractors. | Retention funds are controlled by owner; not held in trust for subcontractors prior to completion. | Retention funds are under owner control; not a trust for subcontractors. |
Key Cases Cited
- Westamerica Bank v. City of Berkeley, 201 Cal.App.4th 598 (Cal. App. 2011) (owner may unilaterally declare default and withdraw escrowed funds)
- Opinski Construction, Inc. v. City of Oakdale, 199 Cal.App.4th 1107 (Cal. App. 2011) (owner may withdraw escrow funds upon default; no prejudgment interest when owner controls funds)
- Zurn Engineers v. State of California ex rel. Dept. of Water Resources, 69 Cal.App.3d 798 (Cal. App. 1977) (due process considerations when official decides disputes yielding final payment)