Cape Haze Investments Ltd v. Richard Eilers

FILED
NOT FOR PUBLICATION
JAN 08 2010
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
CAPE HAZE INVESTMENTS, LTD; No. 09-35228
THOMAS C. SCOTT,
D.C. No. 2:08-cv-00809-RSL
Plaintiffs-Appellees,
*
MEMORANDUM
vs.
RICHARD D. EILERS, and his marital
community,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of Washington
Robert S. Lasnik, Chief District Judge, Presiding
Argued and Submitted December 10, 2009
Seattle, Washington
Before: GOULD and TALLMAN, Circuit Judges, and BENITEZ,** District Judge.
Richard D. Eilers (“Eilers”) appeals from the district court’s grant of
summary judgment in favor of Cape Haze Investments, Ltd. (“Cape Haze”) and
Thomas C. Scott (“Scott,” and together with Cape Haze, “Lenders”). Eilers is a
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Roger T. Benitez, United States District Judge for the
Southern District of California, sitting by designation.
guarantor under two guarantees (“Guarantees”) executed in favor of Lenders.
We vacate and remand because a triable issue of material fact exists
regarding (1) whether Lenders colluded with Eilers’ business partner, Chris
Allender (“Allender”); (2) whether Lenders were entitled to repossess assets not
secured by the parties’ original agreements of October 1999; and (3) if Lenders did
collude with Allender or if Lenders did impermissibly repossess certain assets,
whether such conduct materially increased Eilers’ risk as guarantor. We affirm the
district court’s ruling that, as a matter of law, Eilers was not entitled to receive
earlier notice of default from Lenders.
As the parties are familiar with the factual and procedural history in this
case, we will not recount it here.
A grant of summary judgment is reviewed de novo. Delta Sav. Bank v.
United States, 265 F.3d 1017, 1021 (9th Cir. 2001). Summary judgment is
appropriate where, when viewing the evidence in the light most favorable to the
nonmoving party, there are no genuine issues of material fact. Id. A factual
dispute is genuine where the evidence is such that a reasonable jury could return a
verdict for the nonmoving party, here Eilers. Long v. County of Los Angeles, 442
F.3d 1178, 1185 (9th Cir. 2006).
Eilers argues there is a triable issue of fact of whether Lenders’ collusion
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with Allender in repossessing certain assets and/or selling those assets to a third
party materially increased Eilers’ risk such that Eilers was discharged from liability
under the Guarantees. We agree.
Under Oregon law and Ninth Circuit authority, collusion is a question of
fact. United States v. Pena-Carrillo, 46 F.3d 879, 883 (9th Cir. 1995); Warner v.
Ellison, 276 P. 1108, 1110 (Or. 1929); Jennings v. Trummer, 96 P. 874, 875 (Or.
1908). Collusion is often proven, if at all, through circumstantial evidence. The
parties’ evidence in this case is no exception. The parties’ evidence here centers on
Lenders’ and Allender’s repossession of the company’s assets and the sale of those
assets to Clear Stream Technologies. We conclude that, when viewing this
evidence in the light most favorable to Eilers, a reasonable jury could find that
Lenders colluded with Allender. We, therefore, vacate the district court’s ruling
that, as a matter of law, Lenders did not collude with Allender.
Eilers further argues there is a triable issue of fact whether Lenders
impermissibly repossessed assets not covered by the parties’ original agreements in
October 1999 and, in doing so, materially increased Eilers’ risk as guarantor. We
agree.
Under Oregon law, Lenders had a valid, enforceable security interest in the
collateral listed in their original UCC-1 filing. Or. Rev. Stat. §§ 79.0201 and 79.0203(2).
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However, the record shows Eilers’ business partner, Allender, unilaterally granted
additional collateral to Lenders because Lenders “felt [they] needed additional
security.” The record does not show Lenders extended additional credit or other
value in consideration for this additional collateral. Although Eilers and Allender
are 50% shareholders of the company, Eilers was neither informed of, nor
consented to, this agreement. Eilers also did not cosign the revised UCC-1 that
Lenders filed covering the additional collateral.
As such, there is a triable issue of fact regarding whether Lenders had a valid
security interest in, and thus the right to repossess, this additional collateral. A
triable issue of fact also exists regarding whether Lenders acted alone or with the
assistance of Allender in repossessing these additional assets. We, therefore,
vacate the district court’s ruling that, as a matter of law, Lenders had a valid
security interest in all of the assets they repossessed in February 2006.
Eilers also argues a triable issue of material fact exists regarding whether the
above misconduct by Lenders materially increased Eilers’ risk as guarantor. We
agree.
Under Oregon law, nonconsensual, material changes to a contract may
discharge a guarantor’s obligations under that contract. Marc Nelson Oil Prods.,
Inc. v. Grim Logging Co., Inc., 110 P.3d 120, 124 (Or. Ct. App. 2005). Lenders
argue the assets were sold in a commercially reasonable manner and the proceeds
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were used to reduce Eilers’ debt as guarantor; therefore, Eilers’ risk as guarantor
was not increased. Eilers argues the company could have survived if Lenders had
not impermissibly taken the unsecured assets. Specifically, Eilers argues the
unsecured assets were capable of generating separate work product that would
have enabled the company to continue operating. Additionally, Eilers could have
used this time to market the company for sale, in order to obtain a higher sale price.
When viewing the evidence in the light most favorable to Eilers, we find a triable
issue of fact exists regarding whether, if Lenders did collude with Allender or if
Lenders did impermissibly repossess certain assets, such conduct materially
increased Eilers’ risk as guarantor.
VACATED AND REMANDED, in part; AFFIRMED, in part.
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