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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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


     JP MORGAN CHASE BANK, N.A., a national association, in its
  independent capacity and as successor-in-interest to WASHINGTON
               MUTUAL BANK, F.A., Plaintiff/Appellee,

                                         v.

MGM IV, LLP, a limited liability partnership; LAS VEGAS INVESTMENT
   HOLDINGS, INC., a Nevada corporation, Defendants/Appellants.

                              No. 1 CA-CV 13-0145
                                FILED 8-11-2016


            Appeal from the Superior Court in Maricopa County
            No. CV2009-000258, CV2009-019233 (Consolidated)
                 The Honorable Katherine Cooper, Judge

                                   AFFIRMED


                                    COUNSEL

Dickinson Wright PLLC, Phoenix
By Timothy J. Thomason, Michael J. Plati, Anne L. Tiffen
Counsel for Plaintiff/Appellee

Burch & Cracchiolo, P.A., Phoenix
By Daryl Manhart, Andrew Abraham
Counsel for Defendant/Appellant MGM IV, LLP

Chester & Shein, P.C., Scottsdale
By David E. Shein, Sonia M. Phanse, Todd M. Adkins
Counsel for Defendant/Appellant Las Vegas Investment Holdings, Inc.
                        JP MORGAN v. MGM, et al.
                           Decision of the Court



                       MEMORANDUM DECISION

Presiding Judge Lawrence F. Winthrop delivered the decision of the Court,
in which Judge Maurice Portley and Judge Andrew W. Gould joined.


W I N T H R O P, Presiding Judge:

¶1            Defendants/Appellants, MGM IV, L.L.P. (“MGM”) and Las
Vegas Investment Holdings, Inc. (“LVIH”) (collectively, “Appellants”),
appeal the trial court’s judgment quieting title in favor of
Plaintiff/Appellee, JP Morgan Chase Bank, N.A. (“Chase”). The judgment
and this appeal arise from consolidated matters that required the trial court
to resolve a priority dispute between competing deeds of trust
encumbering a single-family residence located in Phoenix, Arizona (“the
Property”). Chase, as successor to Washington Mutual Bank, F.A.
(“WaMu”), was the beneficiary under one of the deeds of trust (“the WaMu
DOT”). LVIH, as the successor to Jane Popple, was the beneficiary under
the other deed of trust (“the Popple DOT”). MGM, whose principal is Gary
Shuster, purportedly purchased the Property at a trustee’s sale conducted
with respect to the Popple DOT.

¶2            Appellants raise numerous issues, arguing they were entitled
to judgment in their favor and the trial court committed various errors
warranting reversal. We agree with the trial court, however, that Chase
held the senior lien on the Property at the time of the trustee’s sale involving
the WaMu DOT because WaMu was equitably subrogated to the first lien
position when it paid off two prior senior liens. Furthermore, the first
priority lien status of the WaMu DOT was not changed by subsequent
events, and the trustee’s sale of the WaMu DOT extinguished the
subordinate lien of the Popple DOT. Finally, we find no error in the trial
court’s evidentiary rulings, including that MGM was precluded from
presenting a bona fide purchaser for value without notice defense at trial.
Consequently, we affirm.

                 FACTS AND PROCEDURAL HISTORY

¶3            Popple purchased the Property in August 2005. She
subsequently took out two loans on the Property: (1) a $2.475 million
refinance loan secured by a deed of trust recorded by AHM Mortgage (“the




                                       2
                        JP MORGAN v. MGM, et al.
                           Decision of the Court

AHM DOT”) in July 2006, and (2) a $1.35 million loan secured by a deed of
trust recorded by Compass Bank (“the Compass DOT”) in February 2007.

¶4            Popple decided to sell the Property, and purportedly sought
$6.2 million for it.1 In March 2007, Ken Berrydane offered to buy the
Property for $8.25 million, and Popple accepted his offer.2

¶5            The parties opened an escrow for the sale with Financial Title
Company (“Financial Title”) in Las Vegas. Berrydane applied for and
received a secured loan for $6.6 million from WaMu. WaMu’s closing
instructions to Financial Title conditioned the loan on ensuring WaMu’s
loan would be secured by a “first lien.”

¶6             On July 19, 2007, Berrydane executed both a DOT securing
WaMu’s $6.6 million purchase money loan and a “Uniform Residential
Loan Application.” That same day, Popple executed a Warranty Deed
conveying the Property to Berrydane and an “Affidavit of Property Value.”
In the Affidavit, Popple affirmed under oath that the sale to Berrydane was
for $8.25 million and was being financed with a conventional “[n]ew loan(s)
from [a] financial institution.”3

¶7            Before close of escrow, Berrydane and Popple made a side
agreement modifying the sale terms. At Berrydane’s request, Popple
agreed to assign $3.275 million of her net sale proceeds to R and R Affiliates,
Inc. (“R&R”), an entity controlled by Berrydane.4 In return, Berrydane


1      At trial, Popple testified she did not formally list the Property for
sale, but relied on “word of mouth” and “[s]ometimes” ran ads in the
newspaper.

2       Popple knew Berrydane before he offered to buy the Property. They
had owned homes next door to one another in Las Vegas, Nevada, and
Berrydane had purchased Popple’s Las Vegas home. Popple has been a
full-time property investor since 1998, and the record supports the
conclusion that Popple and Berrydane, as well as Shuster, are sophisticated
businesspersons with substantial experience in real estate matters.

3      At trial, however, Popple denied knowing about the WaMu loan
before closing and testified she understood Berrydane had been unable to
get a bank loan and was obtaining the funds from investor friends.

4     Popple testified she knew Berrydane controlled R&R, but denied
understanding why Berrydane wanted the deal structured with the


                                      3
                       JP MORGAN v. MGM, et al.
                          Decision of the Court

agreed to give Popple a $1 million seller carryback loan, which was to be
secured by a $1 million deed of trust (the Popple DOT). The net result of
the Berrydane-Popple side agreement was an actual purchase price of
$5.975 million (which was slightly less than Popple’s original $6.2 million
list price), not $8.25 million.

¶8             Popple instructed her attorney, Richard Tobler, to prepare the
documents she needed for the side deal with Berrydane. Tobler drafted an
indemnity agreement between Popple and Berrydane, which summarized
the $3.275 million purchase assignment and obligated Berrydane to
indemnify Popple if his lender sued her in connection with it.5 The
indemnity agreement specifically referenced a “purchase money loan” and
stated that “Popple has no privity or relationship with Indemnitor’s lender
to determine whether the request [by Berrydane for the $3.275 million
credit] is consistent with the loan documentation” and that she would “not
grant the Credit without having Indemnitor enter into this Agreement.”
Tobler also drafted (1) an escrow instruction directing Financial Title to
wire $3.275 million to R&R, (2) a $1 million promissory note reflecting
Popple’s carryback loan terms, and (3) a $1 million DOT to Popple (the
Popple DOT).

¶9          On July 26 and 27, 2007, Berrydane and Popple executed the
indemnity agreement, the Popple note, the Popple DOT, and the $3.275
million payment instruction outside of escrow.




assignment. Her attorney explained at trial, however, that “there w[ere]
ulterior motives behind this type of sale,” and the assignment was likely
part of a scheme commonly used in Nevada called “salting the purchase
price,” which allows a buyer to (1) misrepresent the purchase price to
subsequent buyers and (2) minimize or evade long-term capital gains taxes
on a subsequent sale.

5     Tobler testified that Popple was his sole source of information about
her deal with Berrydane. Tobler stated he did not know who was funding
Berrydane’s purchase, but when Berrydane sought the $3.275 million
assignment, Tobler drafted the indemnity agreement in an attempt to
provide legal protection to Popple from federal authorities, such as the IRS,
which might seek to treat Popple as having received the price differential
or otherwise be involved in a money laundering or other fraudulent
scheme.



                                     4
                        JP MORGAN v. MGM, et al.
                           Decision of the Court

¶10           On July 30, 2007, escrow closed at the Financial Title office in
Las Vegas. In exchange for its loan, WaMu received the WaMu DOT, and
Financial Title disbursed (1) $2,588,519.42 and $1,354,399.18 (a total of
$3,942,918.60) to pay off the AHM DOT and the Compass DOT,
respectively;6 (2) $3.275 million to R&R; and (3) approximately $1 million to
Popple.7 Although Financial Title was provided with the document
assigning the $3.275 million to R&R, neither Popple nor Berrydane advised
the escrow agent that R&R was controlled by Berrydane.8

¶11            On August 2, 2007, Popple recorded the Popple DOT. On
August 7, 2007, Financial Title recorded the WaMu DOT and the Warranty
Deed from Popple to Berrydane. Consequently, according to the order of
public recording (and unbeknownst to WaMu), the Popple DOT was listed
in a position superior to that of the WaMu DOT.

¶12          In 2008, Berrydane defaulted on the loan secured by the
WaMu DOT. WaMu obtained a Trustee Sale Guarantee (a title report
prepared in connection with a foreclosure), and on April 23, 2008, WaMu


6     On August 30, 2007, a Substitution of Trustee and Full Reconveyance
was prepared for the AHM DOT, and a release for the Compass DOT was
prepared on March 31, 2008.

7      The seller’s escrow Settlement Statement stated in part: “Name of
Borrower: Ken Berrydane,” followed by “Name of Lender: Washington
Mutual Home Loans.” At her deposition, Popple acknowledged receiving
estimated closing statements at closing, and when presented at trial with a
copy of the seller’s Settlement Statement and confronted with the fact it had
been provided as part of discovery by LVIH, Popple affirmed “this is the
kind of thing I got right here at closing.” Popple then changed her
testimony, stating that “the one I received didn’t have anything about
Washington Mutual on it. So there’s got to be another one.” Upon further
questioning, however, she admitted she “didn’t notice” whether the seller’s
Settlement Statement she received at closing included the name of the
lender because she “didn’t really look at it.” The trial court ultimately
found Popple had received a copy of the seller’s Settlement Statement at or
before closing.

8     The court is at this point reminded of a quote in a Scottish poem by
Sir Walter Scott (but often attributed to William Shakespeare): “O, what a
tangled web we weave, When first we practise to deceive!” Sir Walter Scott,
Marmion Canto VI, at XVII (1808).


                                      5
                        JP MORGAN v. MGM, et al.
                           Decision of the Court

issued a Notice of Trustee’s Sale to foreclose the WaMu DOT, see Ariz. Rev.
Stat. (“A.R.S.”) § 33-808,9 initially scheduling the sale for July 23, 2008.

¶13            WaMu also learned its first position priority was disputed,
and it sent a letter dated June 30, 2008, asking Popple to acknowledge the
Popple DOT was either invalid or subordinate to WaMu’s DOT, and that
WaMu’s DOT was equitably subrogated to the prior AHM and Compass
liens. In a letter from Tobler, Popple refused, and on July 21, 2008, she
assigned her beneficial interest in the Popple DOT to her newly formed
corporation, LVIH.

¶14            The trustee’s sale involving the WaMu DOT was postponed
until October 2008. Although Popple had notice of the scheduled trustee’s
sale, neither she nor LVIH attempted to stop the sale. On September 25,
2008, Chase formally acquired the WaMu DOT.

¶15           On October 21, 2008, Chase bought the Property as the
foreclosing beneficiary with a credit bid of $4,010,000 (“the 2008 Sale”).10 A

9      We cite the current version of the statutes throughout this decision,
unless changes material to our decision have occurred since the relevant
dates.

10     Pursuant to A.R.S. § 33-801(5), a “credit bid” is

       a bid made by the beneficiary in full or partial satisfaction of
       the contract or contracts which are secured by the trust deed.
       Such credit bid may only include an amount up to the full
       amount of the contract or contracts secured by the trust deed,
       less any amount owing on liens or encumbrances with
       interest which are superior in priority to the trust deed and
       which the beneficiary is obligated to pay under the contract
       or contracts or under the trust deed, together with the amount
       of other obligations provided in or secured by the trust deed
       and the costs and expenses of exercising the power of sale and
       the sale, including the trustee’s fees and reasonable attorney
       fees actually incurred.

A home lending research officer for Chase explained that, by submitting a
credit bid, Chase “opened the bid. We don’t pay ourselves any money
because the debt[‘]s owed to us, but if someone else wants to purchase it,
they have to bid at least a dollar over that.” She further explained that, with
accrued interest, the combined payoff amount for the AHM and Compass


                                      6
                        JP MORGAN v. MGM, et al.
                           Decision of the Court

Trustee’s Deed Upon Sale was issued to Chase and recorded on October 29,
2008.

¶16           As he had with the loan secured by the WaMu DOT,
Berrydane had also defaulted on the loan secured by the Popple DOT. In
November 2008—shortly after the 2008 Sale—LVIH scheduled a trustee’s
sale for February 20, 2009, to foreclose the Popple DOT.

¶17           On January 13, 2009, Chase filed a complaint (Maricopa
County Superior Court Cause No. CV2009-000258) seeking to quiet title to
the Property in favor of Chase. Chase sought a declaration that the WaMu
DOT held the first position on the Property and the Popple DOT was
extinguished by the 2008 Sale. Chase also asserted that, even if the Popple
DOT was in a priority position, the court should apply principles of
equitable subrogation and find Chase was entitled to a first position
equitable lien by paying off the previous senior liens of AHM and Compass.

¶18            On February 10, 2009, Chase filed a First Amended Complaint
and an application for an order to show cause, temporary restraining order
(“TRO”), and preliminary injunction, seeking to enjoin the scheduled
trustee’s sale under the Popple DOT. See Ariz. R. Civ. P. 65(a), (d).
However, in a minute entry dated February 18 and not filed until February
20, 2009, the trial judge presented with the application denied Chase’s TRO
request. Meanwhile, on February 19, 2009, Chase filed a notice of lis
pendens.11



loans would have been “well above $4,010,000” by the time Chase
purchased the Property at the 2008 Sale.

11      The lis pendens was ultimately not admitted into evidence, and the
trial court declined to take judicial notice of its indexing. See A.R.S. § 12-
1191(B). We nevertheless note that the notice of lis pendens was not
indexed until after the sale; however, the eventual buyer of the Property
(MGM’s principal, Shuster) testified he “never looked” to see if a lis
pendens had been filed. Instead, after learning the Property was listed for
sale (for $2.6 million), initially checking the title, and briefly walking the
Property, which was in his neighborhood, Shuster did nothing more to
investigate the Property’s status, despite thinking the listed price was
“unusual” in that it “was fairly low for the area,” and later being advised at
the sale that “there was a problem with the property” and a lawsuit had
been filed. (At the outset of the February 20, 2009 trustee’s sale, two
attorneys representing Chase announced that Chase claimed title to the


                                      7
                        JP MORGAN v. MGM, et al.
                           Decision of the Court

¶19           On February 20, 2009, the trustee’s sale for the Popple DOT
(“the 2009 Sale”) was held. The Property was sold to MGM (through
Shuster) for $1,080,000.12

¶20          In June 2009, Chase filed a second quiet title action (Maricopa
County Superior Court Cause No. CV2009-019233) against MGM. That
case was consolidated with Cause No. CV2009-000258.

¶21           In its answer, MGM did not assert as a defense that it was a
bona fide purchaser for value without notice, and did not affirmatively
raise that defense throughout the ensuing litigation. Instead, MGM raised
that defense for the first time in the parties’ joint pretrial statement filed
April 24, 2012, and Chase objected and moved to preclude the defense as
untimely. The trial court precluded MGM’s bona fide purchaser for value
without notice defense, stating that its ruling was “based on untimely
disclosure (Rule 26.1) and A.R.S. § 33-811(E). MGM stands in Popple’s
shoes. Evidence regarding notice and prejudice to MGM is not relevant and
is precluded.”

¶22           In response to cross-motions for summary judgment on
Chase’s equitable subrogation claim, the trial court ruled Chase had met
several necessary criteria for equitable subrogation because (1) WaMu had
paid off the existing AHM and Compass liens to protect its own interest in
the Property, with its closing instructions conditioning the $6.6 million loan
on the assurance that its loan would be secured by a first lien; (2) Popple,
the intervening lienholder, was not legally prejudiced; and (3) if equitable
subrogation were not applied, Popple would be unjustly enriched. The
court, however, denied summary judgment in favor of either side after
concluding issues of fact existed regarding whether Chase had “unclean
hands” that might preclude equitable subrogation.



Property and a lis pendens had been recorded.) Shuster gave this portion
of his testimony at trial out of the hearing of the jury as part of MGM’s offer
of proof that it was a bona fide purchaser for value without notice after the
trial court granted Chase’s motion to preclude that argument. See infra at
¶ 21.

12    Although Appellants decry the lack of “vigorous” bidding at the
2008 Sale, we note that Popple’s former neighbor, Shuster, was the sole
bidder at the 2009 Sale. MGM (Shuster) has maintained possession of the
Property since the 2009 Sale.



                                      8
                        JP MORGAN v. MGM, et al.
                           Decision of the Court

¶23           Between May 29 and June 5, 2012, the parties tried the case
with an advisory jury. At the close of trial, the advisory jury made two
findings: (1) Popple did not have notice of WaMu’s DOT at the time she
recorded the Popple DOT, and (2) WaMu had acted with unclean hands
with respect to the Property.13 On June 25, 2012, the parties filed separate
proposed Findings of Fact and Conclusions of Law.

¶24           Despite the advisory jury’s findings, the trial court ruled in a
minute entry filed July 27, 2012, that Chase was entitled to quiet title in its
favor.14 The court concluded Chase had the senior lien on the Property
because (1) Popple had recorded her DOT with notice of the WaMu DOT,
and (2) WaMu was equitably subrogated to the position of the AHM and
Compass senior liens when it paid off those loans. The court rejected
Appellants’ argument that Chase should be precluded from its subrogated
lien position on the basis of unclean hands, finding that Chase did not act
with unclean hands and, “[e]ven if Chase could be found to have acted
inequitably, Chase’s hands are pristine as compared to Popple’s.”

¶25            On November 14, 2012, the trial court issued a judgment
quieting title in the Property in favor of Chase, dismissing all other claims
between the parties, and awarding Chase its costs and attorneys’ fees. On
February 13, 2013, the trial court issued a signed order denying Appellants’
motions for new trial.

¶26           MGM and LVIH each filed a timely notice of appeal. We have
jurisdiction pursuant to A.R.S. § 12-2101(A)(1) and (5).

                                 ANALYSIS

       I.     Equitable Subrogation

¶27           “Equitable subrogation is ‘the substitution of another person
in the place of a creditor, so that the person in whose favor it is exercised
succeeds to the rights of the creditor in relation to the debt.’” Sourcecorp,
Inc. v. Norcutt, 229 Ariz. 270, 272, ¶ 5, 274 P.3d 1204, 1206 (2012) (quoting

13      The trial court rejected this finding by the jury, after concluding the
court had “erred in instructing the jury that Chase had the burden to prove
that it did not have unclean hands.”

14      A trial court is not bound by an advisory jury and is free to reach its
own factual conclusions if supported by substantial evidence. See, e.g.,
Wooldridge Constr. Co. v. First Nat’l Bank of Ariz., 130 Ariz. 86, 88, 634 P.2d
13, 15 (App. 1981).


                                      9
                         JP MORGAN v. MGM, et al.
                            Decision of the Court

Mosher v. Conway, 45 Ariz. 463, 468, 46 P.2d 110, 112 (1935)). As an equitable
remedy, it is designed to prevent the injustice that would occur if one
person receives a windfall at the expense of another. Id. (citations omitted).
In this context, application of the doctrine would allow a subsequent lender
(WaMu) who supplies funds used to pay off a primary and superior
encumbrance (the AHM and Compass liens) to be substituted into the
priority position of the primary lienholder (AHM and Compass), despite
the recording of an intervening lien (the Popple DOT).

¶28            Equitable subrogation may be applied when a party pays a
pre-existing debt to protect an interest in a property, irrespective of any
agreement that the party will succeed to the position of the prior lienholder.
Id. at 275, ¶ 21, 274 P.3d at 1209. The key concern underlying equitable
subrogation is the prevention of unjust enrichment to an intervening
lienholder. See id. at ¶ 23. Additionally, an over-arching legal principle
exists that a party seeking equitable relief must have “clean hands” to obtain
the relief sought. Smith v. Brimson, 52 Ariz. 360, 364-65, 80 P.2d 968, 969-70
(1938). To have “unclean hands,” a party must willfully engage in immoral
conduct. See Weiner v. Romley, 94 Ariz. 40, 42-43, 381 P.2d 581, 582-83 (1963).
Nonetheless, equitable relief may be warranted even for a party who acts
inequitably when the other party is more culpable for its actions. Coleman
v. Coleman, 48 Ariz. 337, 341, 61 P.2d 441, 443 (1936).

¶29            In general, we review the trial court’s factual findings for clear
error. See Harrington v. Pulte Home Corp., 211 Ariz. 241, 246-47, ¶ 16, 119
P.3d 1044, 1049-50 (App. 2005). We review de novo, however, the court’s
conclusions of law and the interpretation of statutes. See Town of Marana v.
Pima Cty., 230 Ariz. 142, 152, ¶ 46, 281 P.3d 1010, 1020 (App. 2012); Pelletier
v. Johnson, 188 Ariz. 478, 480, 937 P.2d 668, 670 (App. 1996). Determination
of a party’s entitlement to equitable subrogation is a question of law subject
to de novo review. See, e.g., Lamb Excavation, Inc. v. Chase Manhattan Mortg.
Corp., 208 Ariz. 478, 480, ¶ 5, 95 P.3d 542, 544 (App. 2004), declined to follow
in part by Sourcecorp, 229 Ariz. at 273-75, ¶¶ 9-21, 274 P.3d at 1207-09.

¶30           After reviewing the record, we find no error in the trial court’s
conclusion that the criteria for equitable subrogation were met and the
doctrine should be applied. During the close of escrow on July 30, 2007,
Financial Title disbursed the funds necessary to pay off the existing AHM
and Compass liens, and WaMu’s closing instructions conditioned its $6.6
million loan to Berrydane on Financial Title ensuring that WaMu’s loan
would be secured by a first lien. Therefore, WaMu paid those pre-existing
debts to protect its interest in the Property. Moreover, it expected that it
would have a priority lien position. See generally Sourcecorp, 229 Ariz. at 275,


                                       10
                         JP MORGAN v. MGM, et al.
                            Decision of the Court

¶ 21, 274 P.3d at 1209 (rejecting the necessity of an express or implied
agreement that the party paying a mortgage will succeed to the position of
the prior lienholder).

¶31             Additionally, as the trial court found, Popple, the intervening
lienholder, was not legally prejudiced because when she recorded the
Popple DOT, that DOT was junior to the still-existing AHM and Compass
liens. When WaMu stepped into the shoes of the prior lienholders, the
position of the Popple DOT did not change. Although Appellants contend
the position of the Popple DOT is changed if Chase is equitably subrogated
because the Popple DOT will not move into the superior lien position,
Sourcecorp makes clear that “preventing a junior lienholder from advancing
in priority is an intended consequence of equitable subrogation.” Id. at 276,
¶ 26, 274 P.3d at 1210 (citing Lamb Excavation, 208 Ariz. at 483, ¶ 18, 95 P.3d
at 547 (“We fail to comprehend the nature of the perceived prejudice or
inequity, as it appears the lienholders would remain in the same position
they occupied before subrogation . . . .”); Restatement (Third) of Property:
Mortgages (“Restatement”) § 7.6 cmt. e (1997) (“The holders of . . .
intervening interests can hardly complain [about subrogation]; their
position is not materially prejudiced, but is simply unchanged.”)).
Consequently, the inability of the Popple DOT to “move up” in priority
does not constitute legal prejudice to Popple precluding subrogation.
Prejudice would mean Popple’s position is made worse, not that her
position remains the same.

¶32           Moreover, if equitable subrogation is not applied, Popple
would be unjustly enriched. Equitable subrogation is intended to avoid an
unearned windfall for the intervening lien claimant at the expense of
another entity. See Id. at 275, ¶¶ 23-24, 274 P.3d at 1209. Without equitable
subrogation, the money provided by WaMu/Chase would pay off Popple’s
pre-August 2, 2007 liens, but Popple would reap the benefit of first priority
security, resulting in an unearned windfall.

¶33            Additionally, we find no evidence of “unclean hands” on the
part of WaMu or Chase that would preclude the application of equitable
subrogation. Although Appellants argue Chase was legally required to
seek a judicial declaration of lien priority before the 2008 Sale of the WaMu
DOT, we are unaware of any Arizona law imposing such a requirement,
and Appellants point to none. See generally Andreola v. Ariz. Bank, 26 Ariz.
App. 556, 559, 550 P.2d 110, 113 (1976) (recognizing that a major purpose of
the trustee’s sale statutes is “to provide relatively inexpensive and speedy
foreclosure proceedings”); cf. Pappas v. E. Sav. Bank, FSB, 911 A.2d 1230,
1236 (D.C. 2006) (“[T]here is no rule or practice in our jurisdiction that a lien


                                       11
                         JP MORGAN v. MGM, et al.
                            Decision of the Court

holder forfeits a claim to priority of its lien under equitable principles if it
forecloses without awaiting a judicial decree as to the priority of liens.”);
G.E. Capital Mortg. Servs., Inc. v. Levinson, 657 A.2d 1170, 1178 (Md. 1995)
(concluding there was no need to litigate the right to equitable subrogation
before advertising a sale).15 Moreover, Chase gave Popple notice of the 2008
Sale and Chase’s contention that it was in a first priority lien position. By
paying off the AHS and Compass loans on the Property, Chase positioned
itself to be equitably subrogated to a first priority lien position, a position
we conclude it equitably occupied when it went to the trustee’s sale of the
WaMu DOT.16 At the 2008 Sale, Chase lawfully acquired the Property by
purchasing it with a credit bid of $4,010,000. Finally, by seeking a
preliminary injunction of the 2009 Sale involving the Popple DOT, Chase
tried to prevent LVIH and Popple from involving and taking money from a
third party, MGM.

¶34            Even if we were to assume arguendo that Chase acted
inequitably, the trial court did not err in concluding that “Chase’s hands are
pristine as compared to Popple’s.” Overwhelming evidence in the record,
including Popple’s own internally contradictory testimony, supports the
trial court’s conclusion that “Popple was on notice of the WaMu DOT” at
the close of escrow.17 The record further supports that, by failing to disclose

15      We note too that, just as Chase could (and perhaps may have been
better advised to) have sought to clear up the issue of lien priority before
rather than after the 2008 Sale, Popple and LVIH also could (and perhaps
should) have done so. However, even after they were advised a dispute
existed and a trustee’s sale had been scheduled, neither Popple nor LVIH
sought a court order to enjoin the sale and challenge its validity or establish
the lien priority positions of the WaMu DOT and Popple DOT. See generally
A.R.S. § 33-811(C) (stating that all persons to whom a trustee mails a notice
of sale under a trust deed pursuant to A.R.S. § 33-809 shall waive all defenses
and objections to the sale not raised in an action resulting in injunctive relief
pursuant to Rule 65, Ariz. R. Civ. P.).

16     Cf. In re Farnsworth, 384 B.R. 842, 849-50 (Bankr. D. Ariz. 2008)
(recognizing that, when an agreement exists in which parties have indicated
an intent to charge or appropriate particular property as security for an
obligation, courts usually order an equitable lien to relate back to the time
of the agreement).

17    Because we conclude the trial court did not err in applying equitable
subrogation to the WaMu DOT, we need not decide the parties’ arguments
regarding whether the trial court erred in also applying A.R.S. § 33-412(B)


                                       12
                         JP MORGAN v. MGM, et al.
                            Decision of the Court

her side deal with Berrydane, Popple caused WaMu to loan substantially
more than the actual purchase price of the home. Although WaMu bears
some responsibility for incurring greater liability than it should have, its
culpability pales in comparison to that of Popple. See Coleman, 48 Ariz. at
341-42, 61 P.2d at 443. Neither before nor at the close of escrow did Popple
fully disclose her side deal with Berrydane to Financial Title or WaMu. In
the $3.275 million assignment to R&R, Popple did not disclose that
Berrydane controlled R&R or that the $3.275 million was a kickback of her
net purchase proceeds. Further, although Popple testified she informed the
escrow agent at closing of the $1 million carryback loan, substantial evidence
supports the trial court’s conclusion that she did not disclose the
information.18 Instead, Popple directly benefitted from the Berrydane-
Popple side deal and close of escrow by having her approximately


to determine the WaMu DOT was the senior lien on the Property. See A.R.S.
§ 33-412(B) (“Unrecorded instruments, as between the parties and their
heirs, and as to all subsequent purchasers with notice thereof, or without
valuable consideration, shall be valid and binding.”). Nonetheless, we
agree with the court’s conclusion that Popple was on notice of the WaMu
DOT. The record makes clear Popple had actual notice of the WaMu loan
and at least inquiry (if not actual) notice of the WaMu DOT. See Shalimar
Ass’n v. D.O.C. Enters., Ltd., 142 Ariz. 36, 44, 688 P.2d 682, 690 (App. 1984)
(recognizing that a person having actual notice of circumstances sufficient
to put a prudent person on inquiry as to a particular fact is deemed to have
notice of that fact if, by pursuing such inquiry, the person might have
learned that fact); see also Neal v. Hunt, 112 Ariz. 307, 311, 541 P.2d 559, 563
(1975) (“Constructive and actual notice have the same effect.” (citation
omitted)).

18     We also note that a trial court is not bound to accept as true even the
uncontroverted testimony of an interested party. Hamilton v. Mun. Court,
163 Ariz. 374, 377, 788 P.2d 107, 110 (App. 1989) (citing Aries v. Palmer
Johnson, Inc., 153 Ariz. 250, 261, 735 P.2d 1373, 1384 (App. 1987)). In its
“Conclusions of Law,” the trial court included a finding that Popple’s
testimony was wholly not credible. To the extent the court’s conclusion was
simply a credibility determination, we generally defer to the trial court’s
determination unless clearly erroneous. See W. Coach Corp. v. Kincheloe, 24
Ariz. App. 55, 58, 535 P.2d 1059, 1062 (1975); see also In re James P., 214 Ariz.
420, 425, ¶ 24, 153 P.3d 1049, 1054 (App. 2007) (recognizing the trial court is
in the best position to assess the credibility of a witness). In any event, the
record fully supports the court’s finding.



                                       13
                        JP MORGAN v. MGM, et al.
                           Decision of the Court

$4 million debt on the Property paid in full, receiving approximately $1
million in cash, and receiving the Popple DOT for the carryback loan. Later,
upon receipt of Chase’s June 30, 2008 letter, Popple attempted to insulate
herself from liability by assigning her interest in the Popple DOT to her
corporation, LVIH. Finally, through the 2009 Sale, Popple (through LVIH)
further entangled the situation by selling the Popple DOT to a third party
(MGM) and receiving approximately $1 million from MGM in return.

¶35            Given that (1) WaMu paid the pre-existing debts owed by
Popple to AHM and Compass to protect its interest in the Property (with
the expectation that it would have a priority lien position); (2) Popple, the
intervening lienholder, is not legally prejudiced by the application of
equitable subrogation; (3) Popple would be unjustly enriched if the WaMu
DOT was not equitably subrogated, and (4) no evidence of “unclean
hands” on the part of WaMu or Chase exists (at least compared to Popple)
that would preclude the application of equitable subrogation, we hold the
trial court did not err in applying equitable subrogation to the WaMu DOT.
To deny equitable subrogation in this case would give Popple a windfall
and reward her unscrupulous conduct, a result contrary to Sourcecorp and
the purpose of equitable subrogation under Arizona law. Accordingly,
when WaMu paid off the AHM and Compass liens, WaMu held a first
position lien on the Property by virtue of equitable subrogation, a position
it continued to hold at the time of the 2008 Sale.

      II.    Result of the 2008 Sale

¶36           At the 2008 Sale, Chase purchased the Property as the
foreclosing beneficiary with a credit bid of $4,010,000 and received a
trustee’s deed, which Chase recorded. With exceptions for liens, claims, or
interests having a priority senior to the deed of trust, a trustee’s deed
conveys to the purchaser all interest in the subject property:

              The trustee’s deed shall operate to convey to the
      purchaser the title, interest and claim of the trustee, the
      trustor, the beneficiary, their respective successors in interest
      and all persons claiming the trust property sold by or through
      them, including all interest or claim in the trust property
      acquired subsequent to the recording of the deed of trust and
      prior to delivery of the trustee’s deed. That conveyance shall be
      absolute without right of redemption and clear of all liens, claims or
      interests that have a priority subordinate to the deed of trust and
      shall be subject to all liens, claims or interests that have a
      priority senior to the deed of trust.


                                       14
                         JP MORGAN v. MGM, et al.
                            Decision of the Court

A.R.S. § 33-811(E) (emphasis added).

¶37             Thus, as a result of the 2008 Sale, the trustee’s deed operated
to convey to Chase “the title, interest and claim” in the Property that
WaMu/Chase held through its subrogated lien.19 A.R.S. § 33-811(E).
Further, the conveyance was “absolute without right of redemption and
clear of all liens, claims or interests that ha[d] a priority subordinate to the
deed of trust.” Id. Pursuant to A.R.S. § 33-811(E), the 2008 Sale extinguished
the subordinate Popple DOT, and Chase was entitled to a judgment
quieting title to the Property in favor of Chase and against LVIH, the
successor to Popple. None of the events that occurred thereafter could




19      Appellants argue Chase’s equitable subrogation claim was
eliminated by merger when Chase received the trustee’s deed at the 2008
Sale. See generally Mid Kansas Fed. Sav. & Loan Ass’n v. Dynamic Dev. Corp.,
167 Ariz. 122, 129, 804 P.2d 1310, 1317 (1991); see also Cardon v. Cotton Lane
Holdings, Inc., 173 Ariz. 203, 206, 841 P.2d 198, 201 (1992) (citing Mid Kansas
for the proposition that “if [a] deed of trust holder purchases property at [a]
trustee’s sale, its interest in [the] deed of trust merges in the fee and [the]
deed of trust no longer exists”). Appellants therefore suggest equitable
subrogation was no longer available for Chase to assert before the trial
court.     The doctrine of merger is, however, subject to equitable
considerations. See Mid Kansas, 167 Ariz. at 129, 804 P.2d at 1317 (“However,
even if a merger would otherwise occur at law, contrary intent or equitable
considerations may preclude this result under appropriate circumstances.”
(citation omitted)); cf. Pappas, 911 A.2d at 1236 (rejecting the proposition that
a lienholder who forecloses on a subordinate or unsubrogated lien forfeits
its right to subrogation under a deed of trust (citing Am. Century Mortg.
Inv’rs v. Unionam. Mortg. & Equity Tr., 355 A.2d 563, 565 (D.C. 1976))). We
reject Appellants’ suggestion because, as we have already concluded, the
WaMu DOT was equitably subrogated to the first priority lien position
before Chase went to the 2008 Sale. The first priority lien position of the
WaMu DOT could not be retroactively changed by later events, such as a
merger of the lien into the fee after the 2008 Sale or the trial court’s denial of
Chase’s application for injunctive relief. (Moreover, even if Chase’s first
priority lien did merge with its fee at that time, such merger would not have
the effect of “resurrecting” the Popple DOT that was extinguished by the
plain terms of A.R.S. § 33-811(E).)



                                       15
                        JP MORGAN v. MGM, et al.
                           Decision of the Court

retroactively change the first lien priority of the WaMu DOT or resurrect
the extinguished Popple DOT.20

¶38            Appellants argue that MGM was nonetheless entitled to
judgment in its favor based on the principles stated in BT Capital, LLC v. TD
Service Company of Arizona, 229 Ariz. 299, 275 P.3d 598 (2012). They
maintain that, because Chase sought but failed to obtain injunctive relief
before the 2009 Sale, Chase is precluded from challenging that sale. Chase
counters that the 2009 Sale proceeded under an extinguished lien interest,
and MGM cannot rely on the 2009 Sale and BT Capital to resurrect the
extinguished Popple DOT and retroactively alter the lien priority because
lien priority is not a defense or objection under A.R.S. § 33-811(C), but is
instead governed by § 33-811(E), and “[a] trustee’s sale does not and cannot
determine lien priority.” Further, Chase maintains that because MGM
failed to timely raise its bona fide purchaser for value without notice
defense, that defense was precluded, and MGM cannot rely on the statutory
presumption of regularity of the sale; instead, MGM must step into the
shoes of Popple and can have no greater rights than Popple, whose
subordinate lien was extinguished by the 2008 Sale.



20      Noting that, at the 2008 Sale, Chase submitted a credit bid of
$4,010,000, an amount slightly higher than the $3,942,918.60 Financial Title
disbursed to pay off the combined AHM and Compass DOTs at escrow,
Appellants suggest an irregularity occurred in the sale and maintain “Chase
is barred from asserting any equitable subrogation claim for a greater
amount than that which it already has received.” However, interest accrues
on an equitably subrogated lien at the rate of the loan underlying the paid-
off mortgage. See Lamb Excavation, 208 Ariz. at 483, ¶ 19, 95 P.3d at 547;
Restatement § 7.6, cmt. e. (“Subrogation should be granted only to the
extent of the debt balance that would have existed if the interest rate had
been unchanged.”). As previously noted, the amount of the paid-off senior
liens, including interest, was “well above” the amount of Chase’s credit bid.
See supra note 10, at ¶ 15.

        We also reject Appellants’ suggestion of an irregularity in the 2008
Sale on the basis that Chase did not publicly announce it was claiming a
first priority lien position. Nothing in A.R.S. § 33-808(C), which sets forth
the content requirements for a trustee’s notice of sale, requires an assertion
of the priority status of the lien being foreclosed upon. Moreover, nothing
in the record suggests the 2008 Sale was conducted in less than full
compliance with all applicable non-judicial foreclosure statutes.


                                     16
                         JP MORGAN v. MGM, et al.
                            Decision of the Court

¶39            Appellants’ argument is precluded and their reliance on BT
Capital is misplaced; as noted above, the 2008 Sale to Chase extinguished
Popple’s DOT. See A.R.S. § 33-811(E); BT Capital, 229 Ariz. at 301, ¶ 12, 275
P.3d at 600.21

       III.   The Trial Court’s Evidentiary Rulings

¶40           Appellants argue the trial court erred in two evidentiary
rulings: (1) precluding as untimely MGM’s bona fide purchaser for value
without notice defense, and (2) declining Appellants’ request for the court
to take judicial notice of when the lis pendens filed in connection with
Chase’s action against LVIH was indexed. See supra note 11, at ¶ 18.

¶41            We review the trial court’s rulings for an abuse of discretion.
See, e.g., Bryan v. Riddel, 178 Ariz. 472, 477, 875 P.2d 131, 136 (1994)
(reviewing rulings involving alleged discovery violations for an abuse of
discretion); Cal X-Tra v. W.V.S.V. Holdings, L.L.C., 229 Ariz. 377, 404, ¶ 89,
276 P.3d 11, 38 (App. 2012) (reviewing a trial court’s evidentiary rulings for
an abuse of discretion); Englert v. Carondelet Health Network, 199 Ariz. 21, 25,
¶ 5, 13 P.3d 763, 767 (App. 2000) (reviewing for an abuse of discretion a trial
court’s decision to grant a new trial based on the court’s finding that it
should have precluded an affirmative defense not disclosed before trial).

¶42            “A party is required to timely disclose its legal defenses and
the factual bases for them . . . .” Englert, 199 Ariz. at 25, ¶ 6, 13 P.3d at 767
(citing Ariz. R. Civ. P. 26.1(a)). A failure to do so shall result in sanctions,
including preclusion of the information at trial, absent specific extenuating
circumstances. Ariz. R. Civ. P. 37(c)(1).

              A. MGM’s BFP Defense

¶43          In this case, as we have noted, the trial court precluded
MGM’s bona fide purchaser for value without notice defense on the basis
of untimely disclosure, and therefore concluded that MGM stood “in
Popple’s shoes” with regard to the defenses it could bring. Accordingly,


21      In effect, in the 2009 Sale, LVIH foreclosed on an extinguished
second position interest (the Popple DOT). MGM’s purchase placed it in
Popple’s shoes, and MGM took only the same rights she had. Moreover,
MGM could not show it was a bona fide purchaser for value without notice.
See, e.g., Davis v. Kleindienst, 64 Ariz. 251, 257, 169 P.2d 78, 81-82 (1946).
MGM did not timely raise that argument, and as we have recognized, was
precluded from using it at trial.


                                       17
                        JP MORGAN v. MGM, et al.
                           Decision of the Court

the court concluded, “Evidence regarding notice and prejudice to MGM is
not relevant and is precluded.”

¶44            We find no abuse of the trial court’s discretion. In this case,
MGM failed in its answer to assert as a defense that it was a bona fide
purchaser for value without notice, and never filed a disclosure statement
raising that defense throughout the ensuing litigation. Instead, MGM
raised that defense for the first time in the parties’ joint pretrial statement
filed April 24, 2012. Chase objected and moved to preclude the defense as
untimely, arguing Chase had not pursued any discovery on the issue
because it had not been disclosed. During argument on the morning of the
first scheduled day of trial, the court directly asked counsel for MGM where
the defense had been disclosed. Counsel for MGM conceded that “we’re
not going to have a disclosure that says BFP bona fide purchaser.” Given
the extremely late disclosure of MGM’s bona fide purchaser for value
without notice defense and the potential prejudice to Chase at trial of
litigating against a defense for which it had not prepared, the trial court did
not abuse its discretion in precluding that defense.22 Consequently, MGM
stood in the shoes of Popple and LVIH, whose lien had been extinguished
by the October 2008 trustee’s sale.


22     Moreover, even given the undeveloped state of the record, it appears
unlikely MGM would have been able to establish a bona fide purchaser for
value without notice defense had it disclosed such a defense. Shuster’s
deposition testimony, as well as his testimony before the court as part of
MGM’s offer of proof that it was a bona fide purchaser for value without
notice, indicate he had been put on notice that problems existed with the
Property’s title. Shuster testified at his deposition that, after discovering
the Property was listed for only $2.6 million and had a first lien of $1
million, he “thought, gosh, there’s some problem here and I’m interested in
pursuing it,” but he did no further research on the problem he perceived.
After learning a trustee’s sale had been scheduled, he called the trustee to
obtain a copy of the Trustee Sale Guarantee, but the trustee refused to
provide him with one until the sale. At the sale, he learned from two
attorneys that there was “a problem with the title,” but he was willing to
proceed with the sale if he could obtain title insurance, despite the fact that
he had been advised “some type of problem” existed. See, e.g., Davis, 64
Ariz. at 258-59, 169 P.2d at 83 (“Thus a purchaser who has brought to his
attention circumstances which should have put him on inquiry which if
pursued with due diligence would have led to knowledge of an adverse
interest in the property, is not a bona fide purchaser.” (citation omitted)).



                                      18
                        JP MORGAN v. MGM, et al.
                           Decision of the Court

              B. Rejection of Judicial Notice of Indexing of Lis Pendens

¶45            At trial, the lis pendens filed in connection with Chase’s
action against LVIH was initially stipulated into evidence and included as
an exhibit in the advisory jurors’ notebooks. MGM asked the court to take
judicial notice of when the lis pendens was indexed, see Ariz. R. Evid.
201(c)(2), in furtherance of MGM’s argument that it did not have notice of
any WaMu/Chase lien priority. The trial court took the matter under
advisement, and before the court ruled on the motion, counsel for MGM
began to question the home lending research officer for Chase about the lis
pendens. The court sustained Chase’s objection to the questioning on the
basis of relevance and subsequently denied the motion for judicial notice,
concluding that notice to MGM was irrelevant due to the court’s earlier
ruling precluding MGM’s untimely-disclosed bona fide purchaser for value
without notice defense. At the same time, Chase agreed to withdraw the lis
pendens from evidence.

¶46           MGM argues the trial court erred in rejecting the motion to
take judicial notice of the indexing of the lis pendens. Even assuming
without deciding that MGM is correct, however, MGM’s argument is a non
sequitur. The lis pendens was withdrawn from evidence, clearly did not
affect the advisory jury’s verdict, and did not form any part of the basis for
the trial court’s ruling in Chase’s favor. Moreover, even if MGM had a
legitimate bona fide purchaser for value without notice defense—which the
later indexing of the lis pendens was intended to support—the court did
not commit reversible error in denying Appellants’ motion to take judicial
notice of information about a document withdrawn from evidence,
especially given Shuster’s testimony (given outside the presence of the jury
as part of MGM’s offer of proof regarding its bona fide purchaser for value
defense) that he never looked to see if a lis pendens had been filed. Further,
we disagree with MGM’s argument that the date of indexing of the lis
pendens establishes a lack of equity on the part of Chase such as to
constitute error requiring reversal.

       IV.    Attorneys’ Fees on Appeal

¶47          The parties each request an award of costs and attorneys’ fees
on appeal. MGM cites A.R.S. § 33-420, LVIH cites A.R.S. §§ 12-341.01 and
33-420, and Chase cites A.R.S. § 12-1103(B).23



23    Each of the parties also cites Arizona Rule of Civil Appellate
Procedure (“ARCAP”) 21. However, ARCAP 21 is a procedural rule that


                                      19
                        JP MORGAN v. MGM, et al.
                           Decision of the Court

¶48            “The exclusive basis for attorneys’ fees for quiet title actions
lies in A.R.S. § 12-1103,” which allows for an award of attorneys’ fees on
appeal. Lewis v. Pleasant Country, Ltd., 173 Ariz. 186, 195, 840 P.2d 1051, 1060
(App. 1992) (citation omitted). Chase is the prevailing party, and fulfilled
the requirements of § 12-1103(B) when, on December 3, 2008, Chase mailed
a letter to counsel for LVIH with a quitclaim deed to the Property and $5.00,
and on March 17, 2009, tendered $5.00 and a quitclaim deed to the Property
to MGM. Neither LVIH nor MGM executed and returned the quitclaim
deed. Therefore, in the exercise of our discretion, we grant Chase its taxable
costs and attorneys’ fees, in an amount to be determined upon compliance
with ARCAP 21.

                               CONCLUSION

¶49           The trial court’s judgment is affirmed.




                                 :AA




does not provide a substantive basis for an award of attorneys’ fees. See
Tilley v. Delci, 220 Ariz. 233, 239, ¶ 19, 204 P.3d 1082, 1088 (App. 2009)
(citation omitted).



                                       20
