Unpublished Disposition, 933 F.2d 1016 (9th Cir. 1989)

MEMORANDUM^** 

Defendant-Appellants Clarence N. Chamberlain and Ann L. Chamberlain ("the Chamberlains") appeal a district court order granting summary judgment in favor of Plaintiff-Appellee, the United States of America (the Economic Development Administration, "EDA"), in an action seeking judgment on the Chamberlains' personal guaranties of two loans.

* Typically, security agreements provide that upon the occurrence of any default by the debtor the secured party may accelerate the maturity of the debt and cause all payments to become immediately due and payable, so that judgment can be obtained on the whole debt rather than upon each payment as it becomes due. J. White & R. Summers, Uniform Commercial Code 3d. Sec. 27-3 (1988). The Uniform Commercial Code does not define what constitutes default and therefore any breach by the debtor of the terms of the security agreement constitutes a default. R. Anderson, Uniform Commercial Code 3d Sec. 9-501:10 (1981). A guarantor, or surety, is liable for the primary debtor's debt in the event that the primary debtor fails to pay. See U.C.C. Secs. 3-415, 3-416; R. Anderson, Uniform Commercial Code Sec. 3-416:14--15.

On October 21, 1981 the Chamberlains guaranteed two loans totaling $1,200,000, made by the EDA, a federal agency, to Adams Industries, Inc. ("Adams") the previous year. The EDA agreed by letter to Adams that the Chamberlains' guaranty would not burden the assets of Ann Chamberlain derived from her father's estate. On April 16, 1982, EDA sent the initial default notice to Adams.¹  This letter provided in relevant part, "Default having occurred with respect to the terms of said Notes, EDA hereby declares the entire balance of principal and interest due and payable. Accordingly, demand is hereby made upon Adams Industries for $1,265,299 plus interest accruing from April 1, 1982." On January 28, 1983, after Adams had undergone Chapter 7 liquidation, the EDA sent letters to the Chamberlains demanding payment under the guaranty agreement.

The EDA filed its complaint in this action on January 25, 1989. After finding that there was no genuine issue of fact, the district court granted the government's motion for summary judgment against the Chamberlains. The Chamberlains appeal under 28 U.S.C. § 2415(a), which bars contract actions by the United States for money damages filed beyond six years after the right of action accrues.

II

The district court's grant of summary judgment is reviewed de novo. Mackey v. Pioneer National Bank, 867 F.2d 520, 524 (9th Cir. 1989).

The relevant statute, 28 U.S.C. § 2415(a), provides: " [E]very action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues." The leading case in this area of commercial law supports the contention that a cause of action generally accrues when the lender "could have first maintained the action to a successful conclusion." United States v. Cardinal, 452 F. Supp. 542, 545 (D. Vt. 1978). The guaranty agreements at issue in this case provide that the guarantor's liability begins only after the principal borrower fails to make payment according to the terms of the notes and upon the written demand of lenders to guarantors. Thus, the EDA's action did not "accrue" until that time and is therefore not barred by Section 2415(a).

III

Despite an amendment to the guaranty agreements, which the government contends it will abide by, that the EDA "shall not burden or encumber any assets (or proceeds and income derived therefrom) of Ann L. Chamberlain, the acquisition or purchase price of which can be traced to her share of the estate left by her father," the Chamberlains claim that the district court abused its discretion by failing to limit its judgment so as not to touch those assets.

Had the Chamberlains moved to amend the judgment in the district court, the grant or denial of their motion would have been reviewed for abuse of discretion. Transgo, Inc. v. Ajac Transmission Parts Corp. 768 F.2d 1001, 1014 (9th Cir. 1985), cert. denied, 474 U.S. 1059 (1986). However, since the Chamberlains give no indication that this issue was ever presented to the district court, we need not address it. See 28 U.S.C. § 1291 (appeal from final order). Moreover, the Chamberlains' contention fails on the merits. The EDA has given no indication that it will disregard this amendment and pursue collection beyond the community property assets of the Chamberlains. Thus, the Chamberlains seek to have the district court redefine its judgment based on a hypothetical, tangential issue, though the issue will probably never in fact arise. The district court would not have abused its discretion by declining to address the Chamberlains' hypothetical concern.

The district court's grant of summary judgment in favor of the EDA is AFFIRMED.