                      NOTICE: NOT FOR OFFICIAL PUBLICATION.
  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                  AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.




                                     IN THE
              ARIZONA COURT OF APPEALS
                                 DIVISION ONE


                    LA BORGATA APARTMENTS, L.L.C.,
                     an Arizona limited liability company,
                      Plaintiff/Counterdefendant-Appellant,

                                         v.

                       RETREAT AT WEST POINT
                 MULTI-FAMILY LIMITED PARTNERSHIP,
                     an Arizona limited partnership,
                    Defendant/Counterclaimant-Appellee.

                              No. 1 CA-CV 18-0763
                                FILED 10-22-2019


            Appeal from the Superior Court in Maricopa County
                           No. CV2017-012121
                 The Honorable Daniel G. Martin, Judge

                                   AFFIRMED


                                    COUNSEL

Aiken, Schenk, Ricciardi, PC, Phoenix
By Joseph A. Schenk, Heather A. Macre
Counsel for Plaintiff/Counterdefendant-Appellant

Ball, Santin & McLeran, PLC, Phoenix
By Jeffrey Messing
Counsel for Defendant/Counterclaimant-Appellee
                       LA BORGATA v. RETREAT
                          Decision of the Court



                      MEMORANDUM DECISION

Judge Joshua Rogers1 delivered the decision of the Court, in which
Presiding Judge Randall M. Howe and Judge David D. Weinzweig joined.


R O G E R S, Judge:

¶1           La Borgata Apartments, LLC ("La Borgata") sued Retreat at
West Point Multi-Family Limited Partnership ("Retreat"), who
counterclaimed, both alleging contractual claims based on the parties'
agreement that La Borgata would purchase an apartment complex from
Retreat. The superior court granted summary judgment in favor of Retreat
and dismissed La Borgata's complaint, and La Borgata appeals. For the
following reasons, we affirm.

             FACTS AND PROCEDURAL BACKGROUND

¶2            In 2012, Retreat borrowed $12,124,600 from Love Funding
Corporation ("Love Funding") to purchase an apartment complex (the
"Property"). Retreat and Love Funding memorialized the loan in a note
("Note") and secured the loan with a deed of trust ("Deed of Trust") on the
Property. The United States Department of Housing and Urban
Development ("HUD") insured the loan, and HUD and Retreat entered into
a regulatory agreement ("HUD Agreement") imposing certain limitations
on Retreat. In particular, Retreat needed HUD's approval before it could
transfer the Property.

¶3           La Borgata's predecessors-in-interest, Dr. Farhad and
Katheryn Shokoohi, and Retreat entered an Agreement for Purchase and
Sale ("Purchase Agreement") of the Property on November 10, 2016. The
purchase price was $18,815,000 minus, inter alia, the remaining "balance of
the [HUD-insured loan] as assumed by" the Shokoohis. The Purchase
Agreement directed La Borgata to secure both Love Funding's and HUD's
approval for La Borgata to assume the loan.



1      The Honorable Joshua Rogers, Judge of the Arizona Superior Court,
has been authorized to sit in this matter pursuant to Article 6, Section 3 of
the Arizona Constitution.



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                        LA BORGATA v. RETREAT
                           Decision of the Court

¶4            La Borgata had ten months to secure the approvals after the
deadline was twice extended to August 30, 2017.2 During that period, La
Borgata submitted, resubmitted, and supplemented their application to
assume the loan; paid $500,000 into escrow for earnest money and fees; and
paid Love Funding processing fees Love Funding and HUD required.
Nevertheless, on August 29, 2017, HUD rejected La Borgata's application as
"seriously deficient."

¶5            La Borgata then proposed the parties either agree to extend
the closing deadline for a third time or La Borgata would pay the rest of the
purchase price in cash so that the parties could timely close on August 30,
2017. Retreat rejected both proposals.

¶6             La Borgata sued, alleging Retreat breached the Purchase
Agreement and its implied covenant of good faith and fair dealing when
Retreat, inter alia, failed to accept La Borgata's offer of cash payment of the
purchase price. Retreat counterclaimed that La Borgata had breached the
Purchase Agreement and Retreat was entitled to the $500,000 held in
escrow as liquidated damages. Both parties eventually moved for
summary judgment. The superior court granted Retreat's motion, denied
La Borgata's motion, and dismissed La Borgata's complaint.

¶7             La Borgata timely appealed. We have jurisdiction pursuant
to Article 6, Section 9, of the Arizona Constitution, and Arizona Revised
Statutes ("A.R.S.") sections 12-120.21(A)(1) (2019) and -2101(A)(1) (2019).

                               DISCUSSION

A.     Summary Judgment Standard of Review.

¶8            "We review de novo a grant of summary judgment, viewing
the evidence and reasonable inferences in the light most favorable to the
party opposing the motion." Andrews v. Blake, 205 Ariz. 236, 240, ¶ 12 (2003).
"Summary judgment is appropriate only if no genuine issues of material
fact exist and the moving party is entitled to judgment as a matter of law."
Id. at ¶ 13. Thus, a court should grant summary judgment when "the facts
produced in support of the [opposing party's] claim or defense have so little
probative value, given the quantum of evidence required, that reasonable


2     Dr. Shokoohi is a principal for La Borgata, and the same attorney
represented the Shokoohis and La Borgata before the beginning of these
proceeding. For simplicity, we only refer to La Borgata, unless necessary.



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                         LA BORGATA v. RETREAT
                            Decision of the Court

people could not agree with the conclusion advanced by the proponent of
the claim or defense." Orme Sch. v. Reeves, 166 Ariz. 301, 309 (1990).

B.    The Purchase Agreement's Loan-Assumption Provision Does Not
Solely Benefit La Borgata.

¶9            La Borgata argues that the loan-assumption provision in the
Purchase Agreement only benefited La Borgata, and therefore La Borgata
could waive it; alternatively, La Borgata contends that a question of fact
exists over whether Retreat benefited from the loan-assumption provision.
"[O]ne party to a contract cannot by his own acts release or alter its
obligations," Demasse v. ITT Corp., 194 Ariz. 500, 508, ¶ 23 (1999) (quotation
omitted), but a party may waive a contractual provision that only benefits
him. Russo v. Barger, 239 Ariz. 100, 103, ¶ 12 (App. 2016).

¶10            La Borgata’s reliance on Nelson v. Cannon, 126 Ariz. 381 (App.
1980) is misplaced. Nevertheless, it is instructive. In that case, the parties
entered a contract to buy an apartment complex and the buyer agreed to
finance the deal by assuming an existing note secured by a first mortgage,
and creating three new promissory notes payable to the seller and two
brokers respectively. Nelson, 126 Ariz. at 382. The parties subsequently
learned that the first mortgage prohibited the method of financing and
seller cancelled the agreement. Id. The buyer then claimed the seller had
improperly cancelled the agreement because the financing terms benefitted
the buyer alone and the buyer waived them. Id. at 382-83. We agreed,
rejecting the seller's purported benefit that it would receive tax benefits
from the financing terms when the agreement neither described nor
envisioned such benefits. Id. at 384.

¶11             The Purchase Agreement here requires La Borgata to apply
for HUD approval to assume the existing loan and then actually assume the
loan. Retreat asserts that this requirement shields Retreat and its principal
from additional costs and penalties, which the Agreement confirms.
Retreat and its principal "remain personally liable under this Agreement . .
. for authorizing the conveyance . . . or other disposition of the . . . Property
. . . without the prior written approval of HUD[.]" The Note contains similar
language, and the Deed of Trust notes that both documents impose
personal liability. Although Retreat's obligations to HUD end with the
loan's repayment, the Note and Deed of Trust provide that Retreat (and its
principal) remain liable for violations before repayment:

       [N]othing contained in this [provision] shall . . . discharge
       [Retreat and its principal] from any obligations to HUD under



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                       LA BORGATA v. RETREAT
                          Decision of the Court

      the [HUD] Agreement . . . which occurred prior to termination
      ....

La Borgata cites other provisions of the Note, Deed of Trust and HUD
Agreement limiting Retreat’s liability, but ignores that those provisions
each allow for the personal liability stated above.

¶12           The Note also imposes a prepayment premium on Retreat for
early repayment of the loan.3 La Borgata argues the prepayment premium
is unenforceable, but this is unclear at best and challenging the
enforceability of the prepayment premium would require that Retreat
assume the risk and expense of the litigation and any adverse judgment.

¶13           In sum, the Agreement directed La Borgata to assume the
HUD loan because Retreat would otherwise incur additional costs and
penalties. Retreat would have to pay the prepayment premium or assume
the risk and expense of litigation to challenge its enforceability, and face
personal liability via sanctions for transferring the Property without HUD
approval. By eliminating this risk, the loan-assumption provision benefits
Retreat and Nelson does not apply.

C.    Retreat is Entitled to the Liquidated Damages.

¶14           La Borgata also contests the superior court's award of
$500,000 in liquidated damages to Retreat. Pursuant to the Purchase
Agreement, Retreat is entitled to the $500,000 in escrow as liquidated
damages when a "Purchaser Deficiency" occurs. If HUD rejected La
Borgata's application while issuing a "No Fault Disapproval," however, La
Borgata is entitled to a return of the money in escrow. The Purchase
Agreement further states that, if HUD does not clearly state whether a No
Fault Disapproval occurred, "a commercially reasonable interpretation of
the HUD Disapproval Letter may be required" and La Borgata may request
arbitration on that issue.

¶15          Here, HUD's disapproval letter          stated La Borgata’s
application was "seriously deficient" because:



3     La Borgata's previous attorney calculated the prepayment premium
would have been roughly $679,000. La Borgata's offers to pay the
remaining purchase price in cash did not include the additional cost of the
prepayment premium.



                                     5
                        LA BORGATA v. RETREAT
                           Decision of the Court

       [Love Funding's] consent to the transfer ha[d] not been
       obtained. [Love Funding] confirmed their review has not
       been completed and they have not issued consent.[4]

The day after the disapproval letter was issued, Retreat sent a letter to La
Borgata asserting that "no No-Fault Disapproval has been issued by HUD"
and Retreat was entitled to the payments in escrow. La Borgata first raised
its right to arbitration on January 31, 2018, in its response to Retreat's
summary judgment motion. Nevertheless, the superior court ruled La
Borgata had waived its right to arbitration and that Retreat was entitled to
the money in escrow.

       1.     La Borgata waived its right to arbitration.

¶16           Generally, arbitration agreements are enforceable. See A.R.S.
§ 12-1501 (2019). But a party can waive its right to enforce an arbitration
agreement "by conduct that 'warrants an inference of such an intentional
relinquishment.'" In re Estate of Cortez, 226 Ariz. 207, 210-11, ¶¶ 3-4 (App.
2010) (quoting Am Cont'l Life Ins. Co. v. Ranier Constr. Co., 125 Ariz. 53, 55
(1980)). Such waiver occurs when the party acts "inconsistent with the
utilization of the arbitration remedy—conduct showing an intent not to
arbitrate." In re Estate of Cortez, 226 Ariz. at 211, ¶ 4 (internal quotation
marks omitted). This may occur, for example, when a party "unreasonably
delay[s] the assertion of the right to arbitrate." Id. "Whether conduct
amounts to waiver of the right to arbitrate is a question of law we review
de novo." Id. at 210, ¶ 3.

¶17           La Borgata argues it did not waive its right to arbitrate
because it promptly sought arbitration after receiving notice of the
arbitrable issue. We disagree. Retreat's August 30, 2017 letter expressly
referenced itself as "Notice of Purchase Deficiency[,] Purchaser’s Default
and Termination of Escrow," specifically asserted that HUD did not issue a
No Fault Disapproval, made a demand that the funds in escrow be
immediately released to Retreat, and was attached by Retreat to its
counterclaim in which Retreat likewise requested an award of the funds in
escrow. At a minimum, La Borgata knew that Retreat believed it was




4      HUD's letter also states that it had not received fees associated with
La Borgata's application, but Retreat does not deny that La Borgata paid
these fees to Love Funding, who never forwarded the fees to HUD because
Love Funding never approved La Borgata's application.


                                      6
                          LA BORGATA v. RETREAT
                             Decision of the Court

entitled to the payments because of a "Purchaser Deficiency" when Retreat
filed its counterclaim.

¶18            Nevertheless, La Borgata did not raise its right to arbitration
when it answered the counterclaim and waited until responding to
Retreat's motion for summary judgment—four months later—before
mentioning it would seek arbitration. Even then, La Borgata planned to
seek arbitration only after the court had "refuse[d] to grant [its] request for
specific performance[.]" Arbitration at that point would have been
duplicative and contrary to the purpose of arbitration. See Goldsberry v.
Hohn, 120 Ariz. 40, 44 (App. 1978) ("[T]he object of arbitration is to finally
dispose of differences between parties in a speedier and less expensive
manner than normal court proceedings."). Thus, La Borgata waived its
right to arbitration by "unreasonably delaying the assertion of the right to
arbitrate." In re Estate of Cortez, 226 Ariz. at 211, ¶ 4.

       2.    HUD denied La Borgata's application to assume the loan
       because of a Purchaser Deficiency.

¶19              Retreat is entitled to the money in escrow as liquidated
damages because a Purchaser Deficiency occurred when La Borgata failed
to timely provide documents to Love Funding and HUD, which ultimately
caused HUD to reject La Borgata's application. La Borgata knew it needed
to timely resubmit and supplement its application. The Purchase
Agreement defines "Purchaser Deficiency" as "[La Borgata's] failure to
provide all requested items to HUD . . . or [Love Funding] . . . in a timely
manner[.]" The Purchase Agreement required that, on HUD's or Love
Funding's request, La Borgata was to revise and resubmit the application
"in no . . . later than fourteen . . . days," and also states that "[t]ime is of the
essence of this Agreement" and that "each date set forth herein and the
obligation to the Parties to be satisfied by such date have been the subject
of specific negotiations by the Parties."

¶20            La Borgata was also aware of the time necessary to process its
application. Not only did it warrant it was a "sophisticated purchaser
familiar with the . . . assumption and associated paperwork of HUD
Loans[,]" the Shokoohis had previously purchased an apartment complex
that, like the Property, was encumbered by a HUD-insured loan. Further,
in both this and the prior transaction, the same attorney represented the
Shokoohis (and later, La Borgata).

¶21          Despite this knowledge, La Borgata failed to timely provide
necessary documentation. HUD rejected the initial application on January



                                         7
                       LA BORGATA v. RETREAT
                          Decision of the Court

26, 2017, seven months before the final closing deadline. It electronically
resubmitted its application on June 1, 2017, more than four months after the
first rejection. Nevertheless, on June 26, 2017, HUD stopped processing the
application because La Borgata had failed to provide a requested hard copy
of its application. La Borgata finally provided the hard copy on August 23,
2017, less than a week before the closing deadline. On the day of the closing
deadline, however, La Borgata had failed to provide additional documents
that Love Funding needed to review before it could approve La Borgata’s
application.

¶22             Thus, La Borgata knew a Purchaser Deficiency would occur if
it failed to timely provide documentation to Love Funding and HUD. Even
so, La Borgata consistently failed to timely provide documentation, causing
repeated delays in the processing. With these facts, there is "so little
probative value, given the quantum of evidence required" to accept La
Borgata's argument that Love Funding independently caused the delay and
HUD's later rejection. See Orme Sch., 166 Ariz. at 309.5 La Borgata caused
HUD to reject La Borgata's application with its untimely submissions, a
Purchaser Deficiency occurred, and Retreat is entitled to the $500,000 in
escrow as liquidated damages.

                               CONCLUSION

¶23          For the above reasons, we affirm. Retreat is entitled to its
costs on appeal and, in the exercise of our discretion, we award Retreat its
reasonable attorney's fees pursuant to A.R.S. § 12-341.01(A) (2019),
contingent on its compliance with Arizona Rule of Civil Appellate
Procedure 21.




                        AMY M. WOOD • Clerk of the Court
                        FILED: AA




5      We need not address La Borgata's argument that Retreat should have
given terms on which La Borgata could have cured its breach. See Dawson
v. Withycombe, 216 Ariz. 84, 111, ¶ 91 (App. 2007) (court does not address
arguments made for the first time in reply brief).


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