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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

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

2

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 
JP MORGAN v. MGM, et al.

Decision of the Court

3

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 
JP MORGAN v. MGM, et al.

Decision of the Court

4

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.
JP MORGAN v. MGM, et al.

Decision of the Court

5

¶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).
JP MORGAN v. MGM, et al.

Decision of the Court

6

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 
JP MORGAN v. MGM, et al.

Decision of the Court

7

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 
JP MORGAN v. MGM, et al.

Decision of the Court

8

¶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.
JP MORGAN v. MGM, et al.

Decision of the Court

9

¶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).
JP MORGAN v. MGM, et al.

Decision of the Court

10

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, 
JP MORGAN v. MGM, et al.

Decision of the Court

11

¶ 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 
JP MORGAN v. MGM, et al.

Decision of the Court

12

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)
JP MORGAN v. MGM, et al.

Decision of the Court

13

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 BerrydanePopple 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.
JP MORGAN v. MGM, et al.

Decision of the Court

14

$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.
JP MORGAN v. MGM, et al.

Decision of the Court

15

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).)
JP MORGAN v. MGM, et al.

Decision of the Court

16

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 paidoff 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.
JP MORGAN v. MGM, et al.

Decision of the Court

17

¶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.
JP MORGAN v. MGM, et al.

Decision of the Court

18

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)).
JP MORGAN v. MGM, et al.

Decision of the Court

19

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 
JP MORGAN v. MGM, et al.

Decision of the Court

20

¶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.

 

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).