                                                                              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                              NOT FOR PUBLICATION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



                                            2
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).



                                             3
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

                                             4
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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