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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL 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

FIRST UNITED FUNDING, L.L.C., Plaintiff/Appellee, 

v.

LA JOLLA HOLDINGS LIMITED PARTNERSHIP, a Nevada limited 

partnership; JEFF A. SHUMWAY, an individual, FOUR CORNERS 

DEVELOPMENT, LLC, a Nevada limited liability company, 

Defendants/Appellants. 

No. 1 CA-CV 14-0659 

Appeal from the Superior Court in Maricopa County 

No. CV2010-029732 

The Honorable J. Richard Gama, Judge 

AFFIRMED 

COUNSEL

Quarles & Brady, LLP, Phoenix 

By Michael S. Catlett, Julia J. Koestner 

Counsel for Plaintiff/Appellee 

Shumway Law Offices, Scottsdale 

By Jeff A. Shumway 

Counsel for Defendants/Appellants
FIRST UNITED v. LA JOLLA 

Decision of the Court 

2

MEMORANDUM DECISION 

Presiding Judge Jon W. Thompson delivered the decision of the Court, in 

which Judge Maurice Portley and Judge Patricia K. Norris joined. 

T H O M P S O N, Judge: 

¶1 Appellant defendants La Jolla Holding, LP and Jeff A. 

Shumway1 (collectively, here, La Jolla) appeal from the trial court’s grant of 

a deficiency judgment following First United Funding, LLC’s (FUF’s) 

motion for partial summary judgment. La Jolla further challenges the trial 

court’s dismissal of its counterclaims and the amount of the final judgment. 

Finding no error, we affirm. 

PROCEDURAL AND FACTUAL BACKGROUND 

¶2 The facts are largely undisputed. In 2008 FUF, a commercial 

lender now in receivership, received from La Jolla an executed promissory 

note in the principal amount of $1,200,000. Repayment was secured by a 

deed of trust on Arizona real property. On the same day, Shumway 

executed a guaranty pursuant to which Shumway unconditionally 

guaranteed repayment of all amounts due under the La Jolla note. The 

money was transferred and La Jolla defaulted. 

¶3 In January 2010, FUF formally noticed both La Jolla and 

Shumway of the default and demanded it be cured. Neither party cured 

the default. FUF accelerated the note demanding the unpaid principal 

balance and accrued interest immediately. As of August 11, 2010, the total 

amount due and owing through the date of the trustee’s sale was

$1,385,476.47. The property was sold at trustee’s sale on that date for a 

winning credit bid of $795,000. The balance due and owing after 

application of the proceeds of the sale was $590,476.47. Additional costs 

that accrued included additional property tax, costs of collection, and 

interest at the rate of five percent until the entry of final judgment. 

 

1 Shumway was also a guarantor to the Four Corners loans, which are not 

part of this appeal. 
FIRST UNITED v. LA JOLLA 

Decision of the Court 

3

¶4 FUF filed a verified complaint and then an amended verified 

complaint alleging breach of contract as to La Jolla and breach of guaranty 

against Shumway.2 FUF’s prayer for damages indicated no payments had 

been made on the loan principal of $1,200,000. In their original answer La 

Jolla admitted executing the contract and admitted Shumway executed the 

guaranty. It asserted affirmative defenses including, among others, the 

loan identified in the complaint was void due to fraud, unclean hands, 

violations of the truth in lending and consumer fraud laws. In its amended 

answer La Jolla again admitted executing the contract, but Shumway 

asserted he had “no independent recollection of executing” the guaranty. 

La Jolla brought counterclaims against FUF for licensing violations for 

acting as a commercial mortgage banker without an Arizona license, under 

Arizona Revised Statutes (A.R.S.) § 6-943, “Licensing of mortgage bankers 

required; qualifications; application; bond; fees; renewal,” and for unlawful 

activity under A.R.S. § 13-2314.04 (2010) “Racketeering; unlawful activity; 

civil remedies by private cause of action; definitions” (RICO). In its 

pleadings La Jolla did not assert any payments on the loan.3

¶5 Meanwhile, FUF was put into receivership in October 2009 

because its debts exceeded its assets. The receiver was charged with 

continuing to operate FUF’s business, including pursuing enforcement of 

payment obligations owed to FUF from promissory notes and mortgages. 

In September 2010, Corey N. Johnston, the president and principal of FUF, 

pled guilty in federal court to bank fraud and tax evasion. Johnston 

admitted overselling participation in commercial loans to various 

participant FDIC-insured banks and underreporting his taxable income. 

Johnston admitted that over the course of years he continued to oversell 

participation in order to keep paying on earlier loans. At the plea hearing 

the government alleged that the fraud may have cost over 79 million 

dollars. 

¶6 FUF filed a motion for partial summary judgment on the 

counts against La Jolla. Copies of the loan and guarantee documents were 

attached to FUF’s separate statement of facts. FUF’s receiver submitted a 

 

2 There are other defendants below which are not part of the current 

judgment or appeals. 

 

3 Notably, one of the issues on appeal is whether La Jolla was correctly 

credited with a $35,000 principal payment. La Jolla contends that payment 

should be credited to another party. 
FIRST UNITED v. LA JOLLA 

Decision of the Court 

4

declaration outlining La Jolla’s default, supporting the damages 

calculation, and detailing the facts surrounding the trustee’s sale.

¶7 La Jolla submitted a responsive brief asserting that FUF 

fraudulently induced it to enter into the contract by making material 

misrepresentations and it requested additional discovery pursuant to Ariz. 

R. Civil. P., Rule 56(f). The request for additional discovery was granted. 

Approximately three months later, La Jolla filed a supplemental response 

asserting FUF violated the duty of good faith and fair dealing by failing to 

disclose that FUF was “an insolvent Ponzi scheme” or induced it to make a 

mistake of fact as to the risks of doing business with FUF . Thus, it asserted, 

the loan and guarantee were void or voidable. It also filed a sur-response 

addressing the need for a fair market value determination.4

¶8 After consideration of the responsive briefs and controverting 

facts, the trial court granted FUF’s motion for summary judgment on the 

counts against La Jolla. The trial court found dispositive that it was 

undisputed that La Jolla received the loans sums, FUF complied with loan 

documents, and that La Jolla defaulted. The trial court found FUF did not 

have a duty to disclose its financial status to La Jolla. The court also found 

the loan and guarantee documents expressly waived any claim of fraud or 

damages based on representations made outside of the agreement. The trial 

court concluded: 

the Court concurs with Plaintiff that the Ponzi-scheme 

orchestrated by Plaintiff’s prior CEO did not result in these 

individual Defendants’ default, nor did this scheme increase 

the risk of default. These Defendants were not the victims of 

this scheme; those individual investors who purchased 

oversold participation in these loans were the victims. 

¶9 FUF next filed a motion to dismiss the counterclaims against 

it. The trial court granted that motion. In the final judgment, under Rule 

54(b), the court awarded FUF $539,296.82, prejudgment interest, and 

attorneys’ fees in the amount of $60,455. La Jolla filed a motion to amend 

the final judgment by $35,000 or, in the alternative, a motion for a new trial, 

which the trial court denied. La Jolla appeals from both of these rulings. 

 

4 The fair market value of the property was later determined by stipulation. 
FIRST UNITED v. LA JOLLA 

Decision of the Court 

5

ISSUES 

¶10 La Jolla raises four issues on appeal: 

a. Whether the trial court erred in considering loan and 

guaranty documents that were either not authentic or “are, or

may be, forgeries” in granting summary judgment to FUF; 

b. Whether the trial court erred when it found La Jolla had 

waived a fraud in the inducement claims in the loan and 

guaranty documents; 

c. Whether the trial court erred in granting La Jolla a $35,000 

credit in the final judgment for a principal payment; and 

d. Whether the trial court erred in dismissing La Jolla’s 

counterclaims. 

DISCUSSION 

¶11 FUF, through its receiver, asserts it loaned money to La Jolla 

that was never paid back, Shumway failed to perform under his duty as 

guarantor, and FUF suffered damages due to La Jolla’s default. FUF asserts 

that defendants were not victims of Johnston’s scheme and that La Jolla

received every penny that they were promised. The trial court agreed, 

finding no genuine issue of material fact and that FUF was entitled to 

judgment as a matter of law. 

¶12 We review the grant of summary judgment de novo. Lewis v. 

Debord, 236 Ariz. 57, 59, ¶ 5, 335 P.3d 1136, 1138 (App. 2014). Summary 

judgment is appropriate when no genuine issue of material fact exists and 

the moving party is entitled to judgment as a matter of law. Ariz. R. Civ. P. 

56; Johnson v. Earnhardt's Gilbert Dodge, Inc., 212 Ariz. 381, 385, ¶ 15, 132 P.3d 

825, 829 (2006). We view the evidence in the light most favorable to the 

party against whom summary judgment was granted. Estate of Hernandez 

v. Flavio, 187 Ariz. 506, 509, 930 P.2d 1309, 1312 (1997). Summary judgment 

may be granted where the facts produced in response to summary 

judgment have so little probative value, given the quantum of evidence 

required, that reasonable people could not agree with the conclusion. See 

Orme Sch. v. Reeves, 166 Ariz. 301, 309, 802 P.2d 1000, 1008 (1990). 

¶13 On appeal, La Jolla first asserts the trial court erred in relying 

on unauthenticated documents when granting summary judgment on 

FUF’s claims of breach of contract and breach of guaranty. In response, FUF 
FIRST UNITED v. LA JOLLA 

Decision of the Court 

6

maintains La Jolla did not contest the authenticity of the documents until 

after the ruling on the motion for summary judgment and, therefore, 

waived this issue.5, 6 We agree that this issue is waived because it was not 

timely raised below. This case was heavily litigated, yet nowhere in the 

prior two and a half years, and through summary judgment, did La Jolla 

challenge the documents as forged or the authentication by the receiver as 

insufficient.7 Failure to object or move to strike the proffered underlying 

documents on a motion for summary judgment, constitutes a waiver of that 

claim. See Airfreight Express, Ltd., v. Evergreen Air Ctr, 215 Ariz. 103, 112, ¶ 

26, 158 P.3d 232, 241 (App. 2007) (late allegations that the declaration 

supporting summary judgment was “suspect” were waived on appeal).8 

¶14 La Jolla next claims the trial court erred when it found La Jolla 

had waived its fraud in the inducement claims. We will reverse the trial 

court’s determination that a claim was waived only if it is clearly erroneous. 

Meineke v. Twin City Fire Ins. Co., 181 Ariz. 576, 580, 892 P.2d 1365, 1369 

(App. 1994), citing Goglia v. Bodnar, 156 Ariz. 12, 19, 749 P.2d 921, 928 (App. 

1987). The trial court's decision will be affirmed if it is correct for any 

reason. Cross v. Cross, 94 Ariz. 28, 31, 381 P.2d 573, 575 (1963). 

¶15 The trial court ruled that the documents integration clauses 

waived any claim for damages or rescission based on representations not 

 

5 FUF further notes that the documents submitted in support of the motion 

for summary judgment were authenticated as true and accurate copies by 

a representative of FUF’s receiver. 

 

6 Specifically, after the ruling on the motion for partial summary judgment 

FUF sought leave to amend its complaint to add another defendant and to 

add a claim of unjust enrichment against another party. Neither change 

effected La Jolla. La Jolla first made his unsubstantiated challenge to the 

veracity of the documents in his amended answer. 

7 On appeal La Jolla asserts that the documents should have been 

authenticated by Johnston. The receiver, it asserts, could not authenticate 

the documents because he was not present when they were signed. 

 

8 We note, although we need not discuss, that the Uniform Commercial 

Code on Negotiable Instruments, A.R.S. § 47-3308 (2005) requires any 

challenge to the authenticity of an instrument must be made in the 

pleadings or is deemed admitted. 
FIRST UNITED v. LA JOLLA 

Decision of the Court 

7

contained in the applicable agreements. The court also found La Jolla was 

not defrauded, suffered no actual damages9, and never offered to restore 

FUF to its prior position. A person who asserts they have been defrauded 

may litigate to rescind the contract or to affirm the contract and sue for 

damages. Jennings v. Lee, 105 Ariz. 167, 171, 461 P.2d 161, 165 (1969); 

Mahurin v. Schmeck, 95 Ariz. 333, 342, 390 P.2d 576 (1964). A party seeking 

to rescind a contract must restore or offer to restore to the other party 

anything received under the contract. Jennings, 105 Ariz. at 171, 461 P.2d at 

165. Because such has not happened here, and there are no damages, we 

cannot find error in the trial court’s ruling. 

¶16 La Jolla next argues the trial court erred in failing to revise 

the final judgment to credit another party with a payment of $35,000. We 

review the denial of a motion to amend judgment under an abuse of 

discretion standard. See Mullin v. Brown, 210 Ariz. 545, 547, ¶ 2, 115 P.3d 

139, 141 (App. 2005). Given the receiver submitted a declaration to the court 

stating the $35,000 was from La Jolla and Shumway admitted in his 

deposition that the money came from La Jolla, we cannot find the trial court 

abused its discretion in denying the motion to amend. 

¶17 Finally, La Jolla cursorily asserts the trial court erred in 

dismissing its counterclaims of violation of licensing regulations and RICO 

 

9 Additionally, we note that that any assertion of fraud must be pled with 

specificity. Ariz. R. Civ. P. 9(b). To establish fraud, a plaintiff must show 

that the defendant made a false material representation that he knew was 

false or was ignorant of its truth, with the intention that the hearer of the 

representation act on it in a manner reasonably contemplated, that the 

hearer was ignorant of the representations falsity, rightfully relied on the 

truth of the representation, and sustained consequent and proximate 

damage. See Echols v. Beauty Built Homes, Inc., 132 Ariz. 498, 500, 647 P.2d 

629, 631 (1982). However, bare allegations that a thing is “fraudulent” is

insufficient to comply with the rule. In re Cassidy's Estate, 77 Ariz. 288, 291, 

270 P.2d 1079, 1082 (1954). At the least, La Jolla has failed to show actual 

damages. It has been a long standing principal that a showing of actual 

damages is essential to making out a case of fraud and failure to prove this 

element is fatal to any claim of fraud. See Cullison v. Pride O'Texas Citrus 

Assoc., 88 Ariz. 257, 259, 355 P.2d 898, 889 (1960). Given this result we need 

not explore whether any of the alleged representations were material or 

whether La Jolla satisfied any other element in pleading fraud. 
FIRST UNITED v. LA JOLLA 

Decision of the Court 

8

as against FUF. 10 We will uphold a dismissal when it is certain that an 

appellant could not prove any set of facts entitling him or her to relief. 

Wallace v. Casa Grande Union High Sch. Dist. No. 82, 184 Ariz. 419, 424, 909 

P.2d 486, 491 (App. 1995). 

¶18 In ruling on the motion to dismiss, the trial court stated on the 

licensing claim: 

the Court notes that no authority has been provided that a 

party can assert a private cause of action under Arizona’s 

licensing statutes. That issue aside, this Court concurs with 

Plaintiff that the claim, if viable, is time barred. A.R.S. § 12-

541(5) requires this claim to be filed within one year of the 

date it accrued. It is undisputed it was not timely filed. 

¶19 Here, likewise, La Jolla has not provided any authority 

allowing a private right of action on the licensing of mortgage bankers. The 

plain language of the statute does not indicate such a right and we know of 

none. See, e.g., Napier v. Bertram, 191 Ariz. 238, 240, 954 P.2d 1389, 1391 

(1998) (addressing whether passenger had private right of action on taxi’s 

failure to comply with insurance coverage requirements). There being no 

legal basis for this claim, the trial court is affirmed. 

¶20 On the issue of the civil RICO11 claim the trial court stated: 

 

10 The appeal in this regard is also noncompliant with ARCAP 13(a)(7). 

11 Racketeering is defined in A.R.S. § 13–2301(D)(4) (Supp. 2015) as: 

[A]ny act, including any preparatory or completed offense, 

that is chargeable or indictable under the laws of the state or 

country in which the act occurred and, if the act occurred in a 

state or country other than this state, that would be 

chargeable or indictable under the laws of this state if the act 

had occurred in this state, and that would be punishable by 

imprisonment for more than one year under the laws of this 

state and, if the act occurred in a state or country other than 

this state, under the laws of the state or country in which the 

act occurred, regardless of whether the act is charged or 

indicted . . . . 
FIRST UNITED v. LA JOLLA 

Decision of the Court 

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Defendants Shumway claim that Plaintiff engaged in a 

scheme to defraud by failing to reveal Corey Johnston’s Ponzi 

scheme against Plaintiff’s participant banks. However, this 

Court has previously ruled that Plaintiff did not defraud these 

Defendants as they received all they bargained for in the 

context of the parties’ transaction. Further, the applicable 

statute places upon claimant a requirement that it plead at 

least two criminal acts of racketeering. In compliance with 

the statute, these Defendants allege that Plaintiff failed to 

disclose the existence of a Ponzi scheme and failed to provide 

information about its finances or source of funds. However, 

these positions were previously presented and rejected by 

this Court. . . . Finally, this Court concurs with Plaintiff that 

Defendants have also failed to satisfy RICO’s continuity 

requirement and further, failed to plead RICO’s causation 

requirements. 

¶21 We agree with the trial court that La Jolla received the benefit 

of its bargain. In order to sustain a RICO claim, La Jolla must have suffered 

damages. See Hannosh v. Segal, 235 Ariz. 108, 114, ¶¶ 17-19, 328 P.3d 1049, 

1055 (App. 2014) (holding internet gambler had no injury under RICO, 

where there was no allegation of cheating, because “Hannosh got what he 

 

Section 13-2314.04. Racketeering; unlawful activity; civil remedies by 

private cause of action; definitions 

A. A person who sustains reasonably foreseeable injury to his 

person, business or property by a pattern of racketeering 

activity, or by a violation of § 13-2312 involving a pattern of 

racketeering activity, may file an action in superior court for 

the recovery of up to treble damages and the costs of the suit, 

including reasonable attorney fees for trial and appellate 

representation. If the person against whom a racketeering 

claim has been asserted, including a lien, prevails on that 

claim, the person may be awarded costs and reasonable 

attorney fees incurred in defense of that claim. No person may 

rely on any conduct that would have been actionable as fraud 

in the purchase or sale of securities to establish an action 

under this section except an action against a person who is 

convicted of a crime in connection with the fraud, in which 

case the period to initiate a civil action starts to run on the date 

on which the conviction becomes final. 
FIRST UNITED v. LA JOLLA 

Decision of the Court 

10

bargained for: an opportunity to win”). That conclusion being sufficient, 

the trial court is affirmed. 

CONCLUSION 

¶22 For the above stated reasons, the trial court is affirmed. FUF 

is awarded its attorneys’ fees pursuant to A.R.S. § 12-341.01 (2008) and its 

costs pursuant to A.R.S § 12-341 (2008) after compliance with ARCAP 21.