Unpublished Disposition, 936 F.2d 581 (9th Cir. 1991)

MEMORANDUM^* 

This diversity suit was brought initially by University Savings Bank, alleging that Virginia Beach Savings & Loan breached a loan participation agreement. Virginia Beach counterclaimed to enforce a repurchase clause of that agreement, alleging University had materially breached the agreement. The district court entered judgment on the counterclaims for University. We affirm.

As lead lender, University had a number of obligations under the agreement, including approving construction plans for the hotel the borrower was building, disclosing material information to the other lenders and maintaining $100,000 of the borrower's money in a blocked escrow account. In the event of a material breach or misrepresentation by University, paragraph 14(a) of the agreement allowed the other participating lenders to demand that University repurchase their loan shares.

The district court found no breach by University and no causation between the breaches Virginia Beach alleged and the borrower's ultimate default on the loan. The specific findings of fact stated that University reasonably relied on the contractor's and architect's certification that the hotel was being built according to the plans and specifications, that University timely disclosed to Virginia Beach information about the status of the project, and that Virginia Beach knew of the cost overruns. Because the court's findings are supported by the record, we find no clear error. See Kittitas Reclamation Dist. v. Sunnyside Valley Irrigation Dist., 626 F.2d 95, 98 (9th Cir. 1980), cert. denied, 449 U.S. 1079 (1981); United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948).

When the borrower was allowed to withdraw the $100,000 deposited in the blocked escrow account, University breached the agreement. However, the court found that the money was returned to the bank and was spent in accordance with the purpose of the blocked account. Because this finding is not clearly erroneous, we agree that the repayment cured and made immaterial University's breach. See Baile Communications v. Trend Business Sys., 53 Wash. App. 77, 83, 765 P.2d 339, 343 (1988) (adopting Restatement (Second) Contracts Sec. 241 (1981)), review denied, 782 P.2d 1069 (Wash.1989).

We also agree with the district court that there was no trust arrangement in the contract and that University did not owe Virginia Beach a fiduciary duty. See First Citizens Fed. Sav. & Loan Ass'n v. Worthen Bank & Trust Co., 919 F.2d 510, 513-14 (9th Cir. 1990).

The findings of the district court are supported by the record. University did not breach the participation agreement by allowing a fast track construction method or by misrepresenting the status of the project to Virginia Beach. Although University did commit a breach by allowing the borrower to withdraw the $100,000, its cure rendered the breach immaterial.

AFFIRMED.