Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_13-cv-01475/USCOURTS-azd-2_13-cv-01475-5/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Wells Fargo Bank NA, et al.,

Plaintiffs, 

v. 

Breakwater Equity Partners LLC, et al., 

Defendants.

No. CV-13-01475-PHX-DGC

ORDER 

 Plaintiff 4801 East Washington Street Holdings, Inc. filed an action against 

Defendants Breakwater Equity Partners, LLC and Thompson National Properties, LLC 

(“TNP”) alleging conversion, fraudulent transfer, and breach of contract arising out of 

Defendants’ transfer of Rents1

 generated from a commercial property. The parties filed 

cross-motions for summary judgment, and the Court granted Plaintiff’s motion on the 

conversion claim. Doc. 216. 

 In light of this ruling, the Court ordered the parties to submit a joint memorandum 

describing the issues remaining in the case. Id. at 16-17. The parties reported that 

several Defendants, referred to as the “Borrowers,” had been dismissed from the action 

by Plaintiff. Doc. 217 at 2. The parties agreed that the Court had found TNP and 

Breakwater liable for conversion, but disagreed on whether the Court had resolved the 

 

1

 Capitalized words have the same meaning as in the relevant documents and the Court’s prior orders. 

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amount of compensatory damages. Id. In addition, TNP filed a motion to determine the 

comparative fault among it, Breakwater, and the Borrowers. Doc. 222. 

 The Court directed the parties to file memoranda on these issues and, after further 

briefing, entered an order that supplemented its summary judgment ruling and awarded 

Plaintiff $605,000 in compensatory damages. Doc. 230. Because the comparative fault 

issue had arisen only recently, the Court directed the parties to submit briefs regarding 

whether comparative fault or joint and several liability applied in this case. Doc. 230. In 

response, Plaintiff filed a motion for summary judgment (Doc. 232) and Defendants filed 

briefs and responses. Breakwater also filed a motion to strike Plaintiff’s motion for 

summary judgment. Doc. 239. 

 The issues are fully briefed, and the Court finds that oral argument will not aid in 

the resolution of this matter. See LR Civ. 7.2(f). For the reasons stated below, the Court 

will grant Plaintiff’s motion, deny Breakwater’s motion, and terminate this case. 

I. Motion to Strike. 

 Breakwater argues that Plaintiff’s motion for summary judgment is untimely, 

prejudicial, infringes Defendants’ right to a jury trial, and constitutes improper lawyering 

by the Court. Doc. 239. The Court does not agree. 

 Rule 56(f) provides that, after giving notice and a reasonable time to respond, a 

court may grant summary judgment to a non-movant, grant summary judgment on a 

ground not raised by the parties, or consider summary judgment on its own after 

identifying for the parties the material facts that may not be genuinely in dispute. Fed. R. 

Civ. P. 56(f). The Ninth Circuit has recognized the power of district courts to enter 

summary judgment sua sponte. Gospel Missions of Am. v. City of Los Angeles, 328 F.3d 

548, 553 (9th Cir. 2003). The intent of Rule 56(f) and this Ninth Circuit holding, 

obviously, is to permit courts to resolve issues that do not require a trial – issues that can 

and should be resolved on the basis of the law and undisputed facts. 

 Thus, although it is true that the comparative fault issue was not raised in 

Plaintiff’s original motion for summary judgment, its was raised by TNP after the 

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summary judgment briefing (Doc. 222) and the Court has power to address it under 

Rule 56(f) if undisputed facts allow for its resolution short of trial. Rule 1 requires the 

Court to administer the Federal Rules of Civil Procedure to secure the just, speedy, and 

inexpensive determination of every action. Fed. R. Civ. P. 1. Holding a jury trial on an 

issue that can be resolved under Rule 56 would waste the time and money of the parties, 

the jurors, and the Court. 

 The parties have had a full and fair opportunity to address the issues decided in 

this order. The Court’s ruling is based on facts addressed in three rounds of briefing, and 

the parties have been afforded an opportunity to address the specific legal issues resolved 

here. Breakwater complains that the briefing has not filed the traditional motion, 

response, and reply format, but Breakwater has been given the opportunity to file a 

memorandum and a reply after the issue to be addressed was identified for all parties. 

Doc. 230 at 3-4. Breakwater’s motion to strike will be denied. 

II. Joint and Several Liability. 

A. Relevant Law. 

 The Arizona Revised Statutes provide that “[t]he liability of each defendant is 

several only and is not joint, except that a party is responsible for the fault of another 

person . . . if . . . [b]oth the party and the other person were acting in concert.” A.R.S. 

§ 12-2506(D)(1). “‘Acting in concert’ means entering into a conscious agreement to 

pursue a common plan or design to commit an intentional tort and actively taking part in 

that intentional tort.” § 12-2506(F)(1). Thus, joint and several liability applies, rather 

than comparative fault, if the parties “(a) knowingly agreed to commit an intentional tort 

that (b) they were certain or substantially certain would result in the consequences 

complained of, and (c) actively participated in the commission of the tort.” Chappell v. 

Wenholz, 247 P.3d 192, 194 (Ariz. Ct. App. 2011) (citing Mein ex rel. Mein v. Cook, 193 

P.3d 790, 793-94 (Ariz. Ct. App. 2008)). “If the actor knows that the consequences are 

certain, or substantially certain, to result from his act, and still goes ahead, he is treated 

by the law as if he had in fact desired to produce the result.” Mein, 193 P.3d at 794. 

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B. Analysis. 

 Plaintiff argues that Breakwater and TNP are jointly and severally liable for the 

$605,000 in damages because they acted in concert to convert the funds. Plaintiff asserts 

that emails sent between Defendants establish that they had knowledge that the Rents 

were Plaintiff’s property and that transferring the Rents out of the Operating Account 

would impair Plaintiff’s control of the Rents. The Court agrees. 

 The Court has already concluded that, on January 11, 2013, the date on which the 

Loan went into default, Plaintiff was immediately entitled to all of the Rents. Doc. 216 at 

4, 10. It is undisputed that Defendants were aware of this fact and discussed the impact 

of the default. Counsel for both Breakwater and TNP recognized that the Rents 

“represent proceeds of the real property which are technically the [Plaintiff’s] 

collateral.” Doc. 190-1 at 263, 267-68 (emphasis added). In fact, because of the 

potential legal consequences arising from Defendants’ plan to transfer the Rents to other 

accounts after the default, TNP required indemnification from Breakwater and TNP’s 

counsel recommended setting aside funds to pay for litigation likely to result from the 

“impending default, and the possibility [TNP] will get a notice from lender re no further 

use of rents[.]” Id. at 267. With full knowledge that the Rents were Plaintiff’s property 

and that a lawsuit could result, TNP transferred nearly $2 million in Rents to Breakwater. 

Doc. 216 at 4. 

 These undisputed facts show that Breakwater and TNP acted in concert to convert 

Plaintiff’s Rents within the meaning of § 12-2506(D). The emails between Defendants’ 

counsel show that Breakwater and TNP agreed to make the transfers. Both Defendants 

knew that the Rents were Plaintiff’s property, and both intended to exercise dominion and 

control over that property. TNP made the transfers to Breakwater and retained nearly 

$50,000 for its fee. Breakwater held the Rents in accounts over which it had control, 

made additional transfers to other parties, and retained over $500,000 as its fee. This 

conduct shows that Breakwater and TNP knowingly agreed to convert the Rents and 

actively participated in the commission of the tort. See Chappell, 247 P.3d at 194. 

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 Breakwater and TNP argue that the Borrowers directed them to make the transfers. 

They claim that the Borrowers are the real parties at fault and that they were merely 

acting as their agents. But the Court already rejected this defense in its prior order, 

noting that under Arizona law a party cannot escape liability for conversion merely 

because he was acting as an agent for his principal. Doc. 216 at 13. And this argument 

ignores the undisputed fact that Breakwater and TNP knew that Plaintiff was entitled to 

the Rents and nonetheless exercised control over them. 

 Defendants also argue that they did not intend to cause any injury to Plaintiff. The 

tort of conversion, however, does not require such intent. “Conversion is an intentional 

exercise of dominion or control over a chattel which so seriously interferes with the right 

of another to control it that the actor may justly be required to pay the other the full value 

of the chattel.” Miller v. Hehlen, 104 P.3d 193, 203 (Ariz. Ct. App. 2005) (citing 

Restatement (Second) of Torts § 222A(1) (1965)). “[T]he intent required is not 

necessarily a matter of conscious wrongdoing,” rather it is the “intent to exercise a 

dominion or control over the goods which is in fact inconsistent with plaintiff’s rights.” 

Matter of 1969 Chevrolet, 656 P.2d 646, 650 (Ariz. Ct. App. 1982). As the Court noted 

in its previous order after citing this authority, “TNP does not dispute that it intentionally 

made transfers of Rents from the Operating Account to Breakwater, and Breakwater does 

not dispute that it intentionally accepted such transfers and controlled the Rests in its 

accounts.” Doc. 216 at 13. Both parties had the intent to commit the tort of conversion. 

 Nor does § 12-2506 require an intent to harm. It applies if Defendants committed 

an act “they were certain or substantially certain would result in the consequences 

complained of” – the conversion. Chappell, 247 P.3d at 194. It is undisputed that 

Breakwater and TNP intended to transfer the Rents out of the Operating Account and 

exercise dominion and control over them. Defendants were certain that this would result 

in the conversion of Plaintiff’s funds – the intentional exercise of dominion or control 

over the Rents, which would seriously interfere with Plaintiff’s right to control the Rents. 

Nothing more is needed for the tort of conversion. Miller, 104 P.3d at 203. What is 

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more, both Defendants were substantially certain that Plaintiff would exercise its legal 

rights to the Rents. TNP even recommended setting aside funds to defend a potential 

lawsuit and demanded that Breakwater indemnify it. 

 This is not a close question. The undisputed facts show that Breakwater and TNP 

acted in concert to convert Plaintiff’s Rents. Under § 12-2506, Breakwater and TNP are 

jointly and severally liable for the $605,000 in damages awarded to Plaintiff. 

IT IS ORDERED: 

 1. Plaintiff’s motion for summary judgment (Doc. 232) is granted. 

 2. Breakwater’s motion to strike (Doc. 239) is denied. 

 3. The Clerk is directed to terminate this action. 

 Dated this 23rd day of September, 2015. 

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