                      CORRECTED OPINION
                         UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT


In Re: PAVILION PROPERTIES LIMITED      
PARTNERSHIP,
                            Debtor.


PAVILION PROPERTIES LIMITED
PARTNERSHIP,                               No. 99-1871
                 Plaintiff-Appellant,
                 v.
BEAL BANK, S.S.B.,
               Defendant-Appellee.
                                        
In Re: PAVILION PROPERTIES LIMITED      
PARTNERSHIP,
                            Debtor.


PAVILION PROPERTIES LIMITED
PARTNERSHIP,                               No. 99-1872
                 Plaintiff-Appellant,
                 v.
BEAL BANK, S.S.B.,
               Defendant-Appellee.
                                        
2                      IN RE: PAVILION PROPERTIES



In Re: PAVILION PROPERTIES LIMITED      
PARTNERSHIP,
                            Debtor.


PAVILION PROPERTIES LIMITED
PARTNERSHIP,                                       No. 99-1947
                  Plaintiff-Appellee,
                 v.
BEAL BANK, S.S.B.,
              Defendant-Appellant.
                                        
In Re: PAVILION PROPERTIES LIMITED      
PARTNERSHIP,
                            Debtor.


PAVILION PROPERTIES LIMITED
PARTNERSHIP,                                       No. 99-1948
                  Plaintiff-Appellee,
                 v.
BEAL BANK, S.S.B.,
              Defendant-Appellant.
                                        
           Appeals from the United States District Court
          for the District of South Carolina, at Columbia.
                  Dennis W. Shedd, District Judge.
        (CA-98-3144-3-19, BK-97-2186-B, AP-97-80241-B,
                           AP-97-80242-B)
                       Argued: October 30, 2000
                      Decided: November 21, 2000
            Corrected Opinion Filed: January 12, 2001
                      IN RE: PAVILION PROPERTIES                     3
   Before WIDENER, WILLIAMS, and MOTZ, Circuit Judges.



Affirmed in part and vacated and remanded in part by unpublished
per curiam opinion. Judge Widener wrote a dissenting opinion.


                             COUNSEL

ARGUED: Stephen Jahue Moore, KIRKLAND, WILSON, MOORE,
ALLEN, TAYLOR & O’DAY, P.A., West Columbia, South Carolina,
for Appellant. John Goode McJunkin, JENKENS & GILCHRIST,
P.C., Washington, D.C., for Appellee. ON BRIEF: Frederick A.
Gertz, GERTZ & MOORE, Columbia, South Carolina, for Appellant.
Charles R. Gibbs, AKIN, GUMP, STRAUSS, HAUER & FELD, Dal-
las, Texas; James W. Sheedy, SPENCER & SPENCER, Rock Hill,
South Carolina, for Appellee.



Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).


                             OPINION

PER CURIAM:

   In this case involving the interpretation of a mortgage provision, a
mortgagor appeals a district court’s order granting the mortgagee
rights to an arbitration award. We affirm in part and vacate and
remand in part.

                                  I.

   Pavilion Properties Limited Partnership was formed for the purpose
of developing four, mid-rise apartment buildings and an office build-
4                     IN RE: PAVILION PROPERTIES
ing, in Columbia, South Carolina. To assist in financing the construc-
tion of the complex, Pavilion secured a mortgage loan from the
Department of Housing and Urban Development ("HUD"), and
signed an accompanying note. Paragraph 9 of the mortgage provides
in relevant part that the mortgagor covenants and agrees with the
mortgagee:

    That all awards of damages in connection with any condem-
    nation for public use of or injury to any of said property,
    shall be paid to the mortgagee to be applied to the amount
    due under the Note secured hereby in (1) amounts equal to
    the next maturing installment or installments of principal
    and (2) with any balance to be credited to the next payment
    due under the Note. . . .

Through an assignment of the mortgage from HUD to Beal Bank,
S.S.B. on December 30, 1996, Beal Bank became the mortgagee.

   During and after construction of the Pavilion complex, various con-
struction defects came to Pavilion’s attention. Pavilion expressed its
dissatisfaction to the contractor, regarding defects in the roof, the
exterior insulation and finish system, and the apartment balconies. At
various times, the contractor attempted to repair the construction
defects but failed to do so adequately.

   Pavilion filed a lawsuit in state court against the contractor, but
because of the complexity of the litigation, the parties consented to
arbitration. In arbitration, Pavilion claimed a sum of $6,987,218 in
damages. This total claim was comprised of various subclaims,
including approximately $1.6 million for damage to the exterior insu-
lation and finish system, approximately $2.4 million for damage to
the balconies, approximately $198,000 for prior lost rentals due to
water leakage, and approximately $850,000 for future lost rentals in
the course of future repairs. Pavilion prevailed in the arbitration and
obtained a net arbitration award of $2,486,997.62; the award was not
itemized to indicate how much was attributable to each kind of dam-
age claimed by Pavilion.

   On April 14, 1997, Pavilion filed for Chapter 11 bankruptcy. Dur-
ing bankruptcy proceedings, Beal Bank asserted entitlement to the
                      IN RE: PAVILION PROPERTIES                       5
proceeds of the arbitration award and moved for summary judgment,
arguing that the phrase "injury to property" in paragraph 9 of the
mortgage covered the arbitration award. The bankruptcy court
rejected Beal Bank’s argument. The court reasoned that Pavilion’s
claim "was against the contractor for breach of contract, and the Arbi-
tration Award was for breach of contract, not for injury to property"
and, therefore, paragraph 9 did not entitle Beal Bank to the proceeds
of the arbitration award.

  Beal Bank appealed the bankruptcy court’s decision to the district
court. That court rejected the bankruptcy court’s interpretation of
paragraph 9 of the mortgage. The district court held that "the whole
damage award is in connection with the injury to the property" under
paragraph 9. Pavilion appeals the district court’s judgment.

   At oral argument before this court, both Pavilion and Beal Bank
repeatedly stated in response to questions from the court that if
granted rights to the proceeds of the arbitration award, they would
reinvest those proceeds in the Pavilion Properties complex. Beal Bank
did qualify this statement in one respect — it would reinvest the arbi-
tration award proceeds in rehabilitation of the Pavilion complex pro-
vided the bankruptcy court adopted its proposed plan. However, Beal
Bank represented to us that as soon as the bankruptcy court did this,
it would promptly apply the proceeds from the arbitration award to
rehabilitation of the complex.

                                   II.

   We have reviewed the record, briefs, and applicable law, and con-
sidered the oral arguments of the parties, and we are persuaded that
the district court reached the correct result as to the interpretation of
the mortgage agreement. We therefore affirm the district court’s judg-
ment entered on July 15, 1999, directing that the proceeds of the arbi-
tration award be paid to Beal Bank.

   However, we vacate both the district court’s judgment entered on
May 28, 1999, concerning the valuation of Beal Bank’s secured
claim, and the bankruptcy court’s order entered on September 15,
1998, valuing Beal Bank’s secured claim at $6,340,000. This is neces-
sary because the bankruptcy court’s valuation of Beal Bank’s secured
6                       IN RE: PAVILION PROPERTIES
claim is based on two incorrect premises. First, the bankruptcy court
held that the proceeds of the arbitration award are the property of the
bankruptcy estate, i.e., the proceeds belong to Pavilion, not Beal
Bank. Second, when the bankruptcy court valued Beal Bank’s secured
claim at $6,340,000, it assumed that the debtor, Pavilion, would spend
$5,700,000 on repair of the construction defects and that the proceeds
of the arbitration award were, as part of the debtor’s (Pavilion’s)
estate, subject to the bankruptcy court’s order limiting their use "to
the correction of construction defects." Because we have now held
that the proceeds of the arbitration award are the property of Beal
Bank, not Pavilion, these bases for the bankruptcy court’s valuation
are no longer viable. Accordingly, Beal Bank’s secured claim must be
revalued in a manner consistent with this opinion, and with the reor-
ganization plan ultimately chosen by the bankruptcy court. We, of
course, expect Beal Bank to honor its commitment to apply the pro-
ceeds from the arbitration award to the revitalization of the Pavilion
complex, if the bankruptcy court accepts Beal Bank’s proposed reor-
ganization plan. In light of our ruling, we find it unnecessary to con-
sider Beal Bank’s cross claim.

                                       AFFIRMED IN PART AND
                              VACATED AND REMANDED IN PART

WIDENER, Circuit Judge, dissenting:

    I respectfully dissent.

    I would affirm the decision of the bankruptcy court on its opinion.

  The decision of the bankruptcy court appealed from provides in
part that:

      The Fund [arbitration proceeds] is property of the estate
      subject to further order of this court limiting its use to the
      correction of construction defects.

   By providing in its order that the money is property of the bank-
ruptcy estate, the bankruptcy court has assured its application, a con-
dition not obtaining under the majority decision.
                    IN RE: PAVILION PROPERTIES                   7
   This is not to suggest that the bankruptcy court was in error in
deciding that the bank had no interest in the money. In my opinion,
the bankruptcy court was also correct in that aspect of the case.
