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Equipment Finance Partners v. Rose

United States District Court, D. Oregon, Portland Division

May 12, 2014

ROY ROSE and JOHN G.L. HOPKINS, Defendants.


MICHAEL W. MOSMAN, District Judge.

This lawsuit arises out of a series of leases, guaranties, and business dealings between Equipment Finance Partners ("Altec"), [1] Defendants Roy Rose and John Hopkins ("Defendants"), The Phoinix Group ("TPG"), and Phoinix Corporation ("PC"). In 2007, TPG was in negotiations to acquire PC, but PC carried a substantial amount of debt after falling behind on payments for a large amount of equipment. To help facilitate the acquisition, Altec agreed to satisfy PC's outstanding debt, essentially purchasing the equipment, and then leased the equipment back to TPG. TPG was to make monthly payments to Altec for sixty months, after which TPG would own the equipment free of Altec's security interest. This transaction was accomplished through a series of leases in mid-2007. Defendants-high-level executives at TPG-signed personal guaranties to cover TPG's debt to Altec.

The acquisition negotiations between TPG and PC fell through, and TPG was unable to keep up with its monthly payments to Altec. TPG ceased doing business in 2010, and in early 2011, Altec notified Defendants of the outstanding balance on the leases, demanding payment within fifteen days. When payment was not forthcoming, Altec filed this lawsuit, alleging that Defendants breached their personal guaranties by refusing to cover TPG's debt to Altec. (Compl. [1] at ¶¶ 29-34.) Altec now moves for summary judgment [26], and asks this Court for an entry of judgment finding Defendants jointly and severally liable in the amount of $617, 445.96. (Pl.'s Mem. in Supp. [27] at 14.) This Court has jurisdiction under 28 U.S.C. § 1332.

Because I find no genuine issue of material fact that could lead a rational jury to find in favor of Defendants, I GRANT Altec's motion for summary judgment.


In early 2007, TPG approached Altec and requested financing to purchase a number of pieces of heavy equipment from PC. (Griswold Decl. [28] at ¶ 7.) TPG was in discussions to acquire PC, a company that performed environmental remediation work. Id. at ¶ 8. Altec agreed to finance the purchase of the equipment, and entered into seven lease agreements with TPG ("the Leases"), executed between April and June of 2007. Id. at ¶ 11, Exs. A-G [XX-X-XX-X]. Under the terms of the Leases, Altec purchased the equipment from PC for $2, 286, 521.44, then leased the equipment to TPG for a period of sixty months. (Griswold Decl. [28] at ¶ 10. At the end of the lease period, TPG would take title to the equipment. Id. In the meantime, TPG took title subject to Altec's retaining a security interest in the equipment, perfected through UCC-1 financing statements. Id. at ¶ 15. TPG was to pay Altec $48, 801.02 per month, and Altec could collect a 10% late charge on any unpaid amount at the end of each year, as well as add a 12% per year interest rate to the unpaid balance. Id. at ¶¶ 13, 16.

At the time the Leases were signed, Defendant Hopkins was the Managing Director and CEO of TPG, and Defendant Rose was the Chairman of TPG. Id. at ¶¶ 19, 21. Each of Defendants signed an "Individual Personal Guaranty" for all indebtedness due to Altec by TPG under the terms of the Leases. Id. at ¶¶ 17, Exs. I-J [XX-X-XX-XX]. Defendant Hopkins signed his guaranty on June 1, 2007, and Defendant Rose signed his guaranty on June 4, 2007. Exs. I-J [XX-X-XX-XX]. The personal guaranties were signed in consideration of Altec's extension of credit to TPG.[2] Id.

TPG made sporadic payments to Altec, and by May of 2008, had fallen approximately $490, 000 in arrears. (Griswold Decl. Ex. K [28-11] at 2.) TPG sent a letter to Altec on May 30, 2008, asking Altec to consent to rewriting the Leases in the name of PC. (Griswold Decl. [28] at ¶ 22.) Altec refused. Id. at ¶ 23. Soon afterwards, the negotiations between TPG and PC fell through, and PC filed for bankruptcy on July 30, 2008, in the Western District of Washington. Id. at ¶¶ 25, 26. At the time the bankruptcy proceeding was filed, Altec had received $496, 309.20 for sums owing under the Leases. Id. at ¶ 27; Ex. H [28-8] at 1. Through the course of the bankruptcy proceedings, Altec learned that PC was in control of the leased equipment, as well as a project called the "BP contract." (Griswold Decl. [28] at ¶ 26.) TPG and PC disputed the proceeds of this contract, but the two companies settled their claims in June of 2009. Id. at ¶¶ 26, 30. According to the terms of the settlement agreement, the proceeds from the BP Contract were deposited in a third-party account. (Ex. L [28-12] at 3.). This account was then used to pay a number of TPG's creditors, including Altec; the payments to Altec were applied to "the arrearage through March 31, 2009 owed on the Leases, " as well as continuing monthly payments. Id. at 5. Altec agreed to waive fifty percent of the late fees on the outstanding debt, as well as attorney fees and costs. (Griswold Decl. [28] at ¶ 34.) Altec received a total of $597, 072.77 from the BP Contract proceeds. Id. at ¶ 36.

However, the proceeds from the BP Contract were insufficient to cover TPG's arrearage, and by September 1, 2009, TPG still owed Altec $221, 101.26. Id. at ¶ 37, Ex. N [28-14].) TPG took possession of the leased equipment from PC, and notified Altec that three pieces of the leased equipment were missing, and another tractor was severely damaged. (Griswold Decl. [28] at ¶¶ 39-40.) PC tendered an insurance claim on the damaged tractor, the proceeds of which were paid to Altec. Id. at ¶ 41. By November of 2009, TPG moved the leased equipment to Pendleton, Oregon, where the equipment was inspected by an Altec employee and a TPG employee. Id. at ¶¶ 43-44. Altec allowed TPG to rent the leased equipment to another company in Pendleton called Powers, and the income from the rental was applied to TPG's debt to Altec. Id. at ¶¶ 46-47. With Altec's approval, TPG sold various pieces of the leased equipment from December, 2009, through September, 2010, and applied the proceeds to its outstanding debt with Altec.[3] Id. at ¶¶ 48-53. In October of 2010, Altec advised TPG that the parties needed to reach a resolution on the outstanding debt, because TPG remained so far in arrears. Id. at ¶ 54. TPG proposed liquidating the remaining pieces of equipment. Altec agreed, and the remaining leased equipment was sold to Powers between October and December of 2010. Id. at ¶¶ 55-61, Ex. H [28-8].

Even after the remaining equipment was sold, TPG still owed Altec $1, 001, 270.36. (Griswold Decl. [28] at ¶ 62.) Altec arrived at this figure by calculating the amount TPG should have paid under the Leases ($2, 928, 061.20) and subtracting the amount actually paid ($1, 976, 760.84). (Ex. H [28-8].) Soon afterward, TPG ceased doing business, so Altec made a demand on Defendants (as guarantors) in the amount of $600, 182.00, plus accruing interest, attorney fees, and costs. (Griswold Decl. [28] at ¶ 65, Ex. O [28-15].) Altec arrived at this lower number by calculating the "actual net book value loss" of the leased equipment; that is, the net book value of the leased equipment at the time the equipment was sold less the amount paid for the leased equipment. (Griswold Decl. [28] at ¶ 66, Ex. P [28-16]. To date, Defendants have made no payments to Altec under the terms of the Leases or the personal guaranties. Id. at ¶ 72. In preparing for this suit, Altec recalculated its net book value loss to correct an error and now seeks $617, 445.96. Id. at ¶ 69.


Summary judgment is proper where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). On a motion for summary judgment, the initial burden lies with the moving party, who must inform the court of the basis of its motion and provide evidence to demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets its burden, the nonmoving party must then "present significant probative evidence tending to support its claim or defense." Intel Corp. v. Hartford Acc. & Indem. Co., 952 F.2d 1551, 1558 (9th Cir. 1991) (internal quotation marks omitted). The nonmoving party fails to meet its burden if "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Id. (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). The court must view the evidence in the light most favorable to the nonmoving party, drawing all reasonable factual inferences in the nonmoving party's favor. T.W. Elec. Serv. v. P. Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9th Cir. 1987).


Altec argues that Defendants breached the terms of the guaranties by failing to honor TPG's outstanding debt. Defendants make three counter-arguments: (1) the guaranties were not supported by consideration and are not binding contracts; (2) assuming the guaranties are binding contracts, the PC bankruptcy proceeding altered the underlying risk to the principal obligation, freeing ...

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