Unpublished Disposition, 867 F.2d 613 (9th Cir. 1989)

No. 88-1544.

United States Court of Appeals, Ninth Circuit.

Before CANBY and WILLIAM A. NORRIS, Circuit Judges, and JUDITH N. KEEP^*, District Judge.

MEMORANDUM^** 

The bankruptcy court's denial of a preliminary injunction is subject to a limited standard of review. Colorado River Indian Tribes v. Town of Parker, 776 F.2d 846, 849 (9th Cir. 1985). We reverse the denial of a preliminary injunction only when the trial court abused its discretion or based its decision on an erroneous legal standard or on clearly erroneous findings of fact. Id.

We agree with the Bankruptcy Appellate Panel that the bankruptcy court erred in its application of California trust law to the facts of this case. For the reasons set forth in the BAP's Memorandum Opinion, we agree that First Interstate Bank ("FIB") has demonstrated probable success on the merits that an express trust was created under California law when the District accepted funds from the Construction Fund to finance the litigation against Lahontan. We further conclude that FIB may suffer irreparable harm if the settlement funds are disbursed or commingled.

Accordingly, we affirm the BAP's decision reversing the bankruptcy court's denial of the preliminary injunction, including the BAP's restrictions on the use of the money pending a final disposition on the merits.

AFFIRMED.