Challenge v. Wholesale

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

CHALLENGE FINANCIAL SERVICES, INC., Plaintiff/Appellee,

v.

WHOLESALE INVESTMENTS, INC., et al., Defendants/Appellants.

No. 1 CA-CV 24-0833
FILED 07-29-2025

Appeal from the Superior Court in Maricopa County
No. CV2023-016264
The Honorable Randall H. Warner, Judge

AFFIRMED

COUNSEL

The Cavanagh Law Firm, P.A., Phoenix
By David Brnilovich, Karen Stafford
Counsel for Plaintiff/Appellee

The Collins Law Firm, PLLC, Mesa
By Ernest Collins Jr.
Counsel for Defendants/Appellants
 CHALLENGE v. WHOLESALE, et al.
Decision of the Court

MEMORANDUM DECISION

Presiding Judge Anni Hill Foster delivered the decision of the Court, in
which Judge Michael J. Brown and Judge Paul J. McMurdie joined.

F O S T E R, Judge:

¶1 Defendants Wholesale Investments, Inc., doing business as
Wii Auto Sales (“Wholesale” or “Guarantor”), its President Jorge
Fernandez and its Vice-President Howard Simsovits (both together,
“Dealer”) appeal the superior court’s grant of summary judgment in favor
of Plaintiff Challenge Financial Services, Inc. for breach of contract. For the
following reasons, the judgment is affirmed.

FACTS AND PROCEDURAL HISTORY

¶2 This Court “view[s] the evidence in the light most favorable
to the party against whom summary judgment was entered.” Gilmore v.
Gallego, 258 Ariz. 38, 42, ¶ 16 (2024) (quotations omitted).

¶3 Wholesale operates a motor vehicle dealership where
customers can purchase vehicles through monthly installment payment
plans. In August 2022, the parties entered a Dealer Agreement allowing
Challenge to purchase retail installment contracts and security agreements
that Wholesale entered into with its customers. It included a buyback
provision that allowed Challenge to demand that Wholesale repurchase a
retail installment sale contract if the purchaser defaulted on the contract.

¶4 A few months later, Edward Mendoza purchased a vehicle
from Wholesale through a retail installment sale contract (the “Mendoza
Contract”), agreeing to make monthly payments of $468.63, beginning on
November 18, 2022. Challenge purchased the Mendoza Contract pursuant
to the Dealer Agreement, and Mendoza failed to make his first monthly
payment. A month later, and for reasons that are not evident from the
record, a representative from Challenge sent the following text message:
“Need to grab a check for . . . Mendoza - $468.63[.] Need payment . . .
today.” Wholesale delivered the check as requested. In April 2023,
Challenge demanded that Wholesale repurchase the Mendoza Contract,
but Wholesale did not do so.

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Decision of the Court

¶5 Several months later, Challenge sued for breach of the Dealer
Agreement. Following discovery, Challenge moved for summary
judgment, and after considering briefs and oral argument, the court granted
it. Wholesale timely appealed.

¶6 This Court has jurisdiction pursuant to A.R.S. §§ 12-
120.21(A)(1) and 12-2101(A)(1).

DISCUSSION

¶7 Wholesale contends that the court erred in granting
summary judgment because Challenge “materially breached the Dealer
Agreement,” thereby discharging Wholesale’s obligation to perform by
repurchasing the Mendoza Contract. See Murphy Farrell Dev., LLLP v.
Sourant, 229 Ariz. 124, 133, ¶ 33 (App. 2012) (“[A]n uncured material breach
of contract relieves the non-breaching party from the duty to perform and
can discharge that party from the contract.”). Wholesale argues Challenge
breached the Dealer Agreement by demanding (1) same-day payment; (2)
payment on Mendoza’s behalf; and (3) that Wholesale perform under
“business compulsion.”

¶8 This Court reviews summary judgment rulings and contract
interpretations de novo. Gilmore, 258 Ariz. at 42, ¶ 16 (summary judgment);
Terrell v. Torres, 248 Ariz. 47, 49, ¶ 13 (2020) (contract interpretation). In a
breach of contract action, a plaintiff must establish “the existence of the
contract, its breach and the resulting damages.” Thomas v. Montelucia Villas,
LLC, 232 Ariz. 92, 96, ¶ 16 (2013) (quotation omitted). “Summary judgment
is appropriate if, from the pleadings, depositions, answers to
interrogatories, requests for admissions, and affidavits [there is] no genuine
issue of material fact and the movant is entitled to judgment as a matter of
law.” Angus Med. Co. v. Digit. Equip. Corp., 173 Ariz. 159, 162 (App. 1992);
see Ariz. R. Civ. P. 56(a).

¶9 When interpreting contracts, courts “seek to discover and
effectuate the parties’ expressed intent” based on the entirety of the
contract. Terrell, 248 Ariz. at 49–50, ¶ 14 (citation omitted). Courts “construe
the provisions according to their plain and ordinary meaning, unless it can
be shown that the parties intended a special meaning.” Id. at 50, ¶ 14
(cleaned up).

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 CHALLENGE v. WHOLESALE, et al.
Decision of the Court

I. The Dealer Agreement provided for acceleration of payment.

¶10 Wholesale argues that Challenge breached the Dealer
Agreement when it demanded a same-day payment.

¶11 Section 14 of the Dealer Agreement addresses customer
defaults and Challenge’s demands for Dealer to repurchase contracts:

A CONTRACT shall be deemed a payment default when the
payment or any part thereof or any obligation on the part of
the CUSTOMER has not been received or performed within
fifteen (15) days of the due date specified in the CONTRACT.
In the event of CUSTOMER default herein, DEALER at the
sole option of CHALLENGE shall repurchase the
CONTRACT from CHALLENGE for the current PAYOFF
BALANCE (heretofore defined) on the CONTRACT within
ten (10) days of written or verbal demand by CHALLENGE
upon DEALER.

Wholesale asserts that Challenge’s communication demanding a check
“today” violated the ten-day grace period in this section for payments after
a customer defaults. But the language in the agreement does not support
Wholesale’s argument.

¶12 The ten-day grace period only applies when “DEALER . . .
repurchase[s] the CONTRACT . . . for the current PAYOFF BALANCE.”
The Dealer Agreement specifies that the payoff balance includes “the
current principal balance” along with associated fees and costs. Thus,
although Challenge could have demanded the payoff balance, which was
around $19,000 at the time, it only demanded $468.63. Because the demand
was not for the Payoff Balance, the ten-day grace period did not apply.

¶13 Furthermore, Section 25 provides that:

CHALLENGE shall have the right to alter, accelerate or
change the time or manner of payments of any debt or any
part thereof, or to add or release any other GUARANTOR OR
GUARANTORS. Such action may be taken by CHALLENGE
with or without notice to GUARANTOR, and shall not affect
GUARANTOR’S liability in any manner, as long as this
guaranty is in effect.

Section 25 does not supersede Section 14’s right to repurchase but instead
supplements it. See C & T Land & Dev. Co. v. Bushnell, 106 Ariz. 21, 22 (1970)

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 CHALLENGE v. WHOLESALE, et al.
Decision of the Court

(“[I]t is axiomatic that any agreement must be construed as a whole, and
each part must be read in light of all the other parts.” (citation omitted)).
Under the plain language of Section 25, Challenge had every right to
demand same-day payment. Wholesale agreed to this term and should
have been aware of it. In re Henry’s Estate, 6 Ariz. App. 183, 186 (1967) (“[A]
person who is competent is held as a matter of law to know the contents of
an agreement he signs.”). The plain language of the Dealer Agreement
supports that no genuine issue of material fact exists as to whether
Challenge’s demand breached the agreement.

II. Section 8 of the Dealer Agreement solely benefited Challenge and
could be waived.

¶14 Wholesale also argues that it paid the amount Challenge
demanded on Mendoza’s behalf, which violated Section 8 of the Dealer
Agreement. Section 8 states that:

DEALER hereby covenants, warrants and represents that the
amount shown on the CONTRACT as received as “Down
Payment” was actually paid in cash by CUSTOMER, that
DEALER did not assist CUSTOMER in getting a loan for all
or part of the down payment or any other CONTRACT
payment, that DEALER gave at least the fair market value for
any trade-in on CONTRACT, and that none of the credits
shown for the trade-in value was paid by DEALER.

Citing Pruitt v. Pavelin, 141 Ariz. 195, 204 (App. 1984), Challenge counters
that Section 8 is a provision for the sole benefit of Challenge and therefore
it could choose not to enforce the provision. See Pruitt, 141 Ariz. at 204 (“[A]
party may waive any provision of a contract intended for his sole benefit.”).

¶15 Wholesale asserts that whether Challenge waived Section 8
by its conduct is a question of “fact for a jury to decide.” But even when
factual questions remain disputed, summary judgment is proper if the
ultimate question turns on the application of law. See Ariz. R. Civ. P. 56(a);
Northen v. Elledge, 72 Ariz. 166, 170 (1951) (summary judgment was proper
when “there were some issues and facts in dispute[ that] were in no sense
controlling and their resolution . . . could not possibly affect the final result
of the action”).

¶16 Here, the plain language of Section 8 confirms Wholesale’s
commitment that it would not financially assist Mendoza in purchasing the
vehicle. It does not confer any benefit or right to Wholesale, only an
obligation. In contrast, Section 8 benefits Challenge by safeguarding

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 CHALLENGE v. WHOLESALE, et al.
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Challenge’s collection of payment through Wholesale certifying the
customer’s ability to pay. Because Section 8 was for Challenge’s sole benefit,
Challenge could waive that provision without breaching the Dealer
Agreement. See Pruitt, 141 Ariz. at 204. But, as discussed, even if Challenge
did not waive Section 8, Section 25 still grants it “the right to alter, accelerate
or change the time or manner of payments.”

¶17 Although Wholesale attempts to create a genuine issue of a
disputed material fact regarding Challenge’s waiver of Section 8, the plain
language of the Dealer Agreement authorized its demand of $468.63.

III. The Dealer Agreement negates Wholesale’s business compulsion
argument.

¶18 Finally, Wholesale also suggests Challenge’s demand
constituted “‘business compulsion’ and duress.” But because the demand
was allowed under the Dealer Agreement as discussed herein, it was not
business compulsion. See Colvin v. Superior Equip. Co., 96 Ariz. 113, 120
(1964) (“The doctrine of ‘business compulsion’ is merely the modern form
of the common law doctrine of duress. It must be shown that the person
claiming ‘business compulsion’ agreed to an illegal exaction.”). Here, the
Dealer Agreement provided for collection of past-due amounts and
acceleration of payments. Wholesale failed to abide by the agreed-upon
terms. Because Wholesale did not provide any affirmative defenses to
overcome summary judgment, and the record presents no genuine issues
of material fact, the court did not err by granting summary judgment in
favor of Challenge.

IV. This Court awards Challenge its attorneys’ fees and taxable costs.

¶19 Challenge seeks its attorneys’ fees incurred on appeal
pursuant to the Dealer Agreement. Based on Sections 16 and 30 of the
Dealer Agreement, this Court awards Challenge its reasonable attorneys’
fees, plus taxable costs, upon compliance with Arizona Rule of Civil
Appellate Procedure 21. Ariz. R. Civ. App. P. 21; A.R.S. § 12-341.

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 CHALLENGE v. WHOLESALE, et al.
Decision of the Court

CONCLUSION

¶20 For the reasons above, the court’s order is affirmed.

MATTHEW J. MARTIN • Clerk of the Court
FILED: JR

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