Thursday, December 12, 2013

First American Commerce Co. v. Washington Mutual Savings Bank case brief

First American Commerce Co. v. Washington Mutual Savings Bank case brief summary
743 P.2d 1193 (1987)

Appellant borrower sought review of the decision from a trial court (Utah), which granted summary judgment to respondents, lender and assignee, in the borrower's action to recover funds withheld from rents collected by the borrower. The trial court determined that only the borrower's claim for fraud against the lender survived summary judgment.

The borrower obtained a loan from the lender in order to make improvements to a building. The requirements of the loan included holding back some of the rental payments from new leases as security for completion of the improvements and final approval by the lender of all new leases. The lender, with the consent of the borrower, transferred the loan to the assignee. The lender and assignee failed to timely approve a lease or release the hold back-funds after completion of the improvements. The borrower filed an action for recovery of the funds, and the trial court granted summary judgment to the lender and assignee on all but the claim of fraud against the assignee. The borrower challenged the decision.


  • The court reversed and held that while the borrower assented to the assignment, it did not assent to a delegation of the duties under the contract. 
  • Without a novation, the delegation of the lender's duties under the contract did not relieve the lender of its obligations under the contract. 
  • Accordingly, summary judgment was inappropriate.

The court reversed the grant of summary judgment in favor of the lender and assignee in the breach of contract and fraud action brought by the borrower.

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