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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

KS STATEBANK, INC., Plaintiff, 

v.

DENNIS SABAN, Defendant. 

 ________________________________ 

HUNTER FINANCIAL, INC., Plaintiff/Appellee/Cross-Appellant, 

v.

KS STATEBANK, INC., Defendant/Appellant/Cross-Appellee. 

__________________________________ 

No. 1 CA-CV 22-0523 

Appeal from the Superior Court in Maricopa County

Nos. CV2018-014804 

 CV2020-011753 

 CV2020-015272 

The Honorable M. Scott McCoy, Judge

VACATED AND REMANDED

COUNSEL

Gammage & Burnham, PLC, Phoenix

By Cameron C. Artigue, Jacqueline Marzocca 

Counsel for Defendant/Appellant/Cross-Appellee KS StateBank, Inc.

FILED 01-16-2024
KS STATEBANK v. HUNTER

Decision of the Court

2

Broening Oberg Woods & Wilson, PC, Phoenix

By Brian Holohan, Kelley M. Jancaitis

Counsel for Plaintiff/Appellee/Cross-Appellant Hunter Financial, Inc.

MEMORANDUM DECISION

Chief Judge David B. Gass delivered the decision of the court, in which 

Presiding Judge Michael J. Brown and Judge Andrew M. Jacobs joined.

G A S S, Chief Judge:

¶1 This appeal requires us to resolve the priority of two lenders’ 

competing security interests arising from a series of commercial loans the 

lenders made to Dennis Saban DBA Saban Rent-A-Car (Saban). One lender, 

KS StateBank, Inc., appeals because the superior court limited the amount 

of the Bank’s first-priority lien based on maximum-lien terms in the Bank’s 

two deeds of trust. The other lender, Hunter Financial Inc., cross-appeals 

the superior court’s determining two 2017 loans were secured by the Bank’s 

first-priority lien based on future advances clauses in the Bank’s two deeds 

of trust.

¶2 Hunter does not dispute the superiority of the Bank’s lien 

interests arising out of the Bank’s deeds of trust up to their “maximum lien” 

amounts securing the Bank’s 2014 and 2016 loans. Hunter argues it was 

error to conclude Hunter subordinated its second-priority lien to the Bank’s 

2017 optional loans when Hunter executed a subordination agreement in 

2016. The issue, thus, is whether the Bank’s optional future advances after 

Hunter signed the subordination agreement are subject to the lien priority 

rule established in La Cholla Group, Inc. v. Timm, 173 Ariz. 490, 491–92 (App. 

1992). They are, meaning any lien of the Bank securing its 2017 optional 

loans is inferior to Hunter’s lien.

¶3 For that reason, we vacate the judgment and remand for the 

superior court to enter judgment for the Bank for any balance owing on its 

2016 loan on its first-priority lien, then in favor of Hunter for any balance 

owing on its loans as the second-priority lien, then in favor of the Bank, as 

the third-priority lienholder, for any residual amounts up to the balance 

owing on its 2017 loans.
KS STATEBANK v. HUNTER

Decision of the Court

3

FACTUAL AND PROCEDURAL HISTORY

I. The Bank’s March 2014 loan and 2014 deed of trust1

¶4 In March 2014, the Bank loaned Saban $912,000.00. Saban and 

the Bank signed a promissory note (which is not in the record) in the Bank’s 

favor and the Bank’s 2014 deed of trust securing the note with a lien on six 

of Saban’s properties.

¶5 The first line of the Bank’s 2014 deed of trust reads, 

“MAXIMUM LIEN. The lien of this Deed of Trust shall not exceed at any 

one time $912,000.00.” The Bank’s 2014 deed of trust also contains “crosscollateralization” and “future advances” clauses purporting to secure all 

Saban’s current and future debts to the Bank.

II. Hunter’s loan and deed of trust

¶6 Saban began borrowing money from Hunter in 2009. The

parties amended their original 2009 loan agreement whenever Hunter 

loaned Saban more money. Until 2014, Saban used personal property to 

secure his debts to Hunter. Starting in 2014, Saban used the same properties 

he used to secure the Bank’s loan to secure the Hunter loan. Between

October 2014 and October 1, 2015, Hunter advanced Saban a series of new 

sums memorialized as amendments to the 2009 loan agreement. In all, 

Hunter loaned Saban $605,000.00 using the properties as security.

¶7 Hunter’s deed of trust does not include “maximum lien” 

language. Instead, it refers to a $300,000.00 figure as “the indebtedness 

evidenced by promissory note or notes of 2/19/09 as amended, and an 

extension or renewal thereof of even date herewith” to identify the loan then 

being secured. Hunter’s deed of trust also contains a future advances

clause, which secures “[p]ayment of additional sums and interest thereon 

which may hereafter be loaned to [Saban], or his successors or assigns, 

when evidenced by a promissory note or notes reciting that they are 

secured by this Deed of Trust.” In all, Hunter loaned Saban $605,000.00

before it executed a subordination agreement. Hunter asks us to declare its 

1 The Bank and Hunter executed and recorded multiple deeds of trust 

and subsequent subordination agreements referencing each of the six 

properties. Because the same six properties were involved in and identically 

affected by every transaction, we refer in the singular to “the Bank’s 2014 

deed of trust,” “the Bank’s 2016 deed of trust,” “Hunter’s deed of trust,” 

and “the subordination agreement” for ease of reference.
KS STATEBANK v. HUNTER

Decision of the Court

4

lien priority for that amount is superior to any Bank lien beyond the amount 

securing the balance of the Bank’s 2016 loan.

III. The subordination agreement and the Bank’s 2016 and 2017 loans

¶8 In 2016, Saban sought a new loan from the Bank. The Bank

sought to secure this new loan using a deed of trust on the same six 

properties. Before the Bank finalized the 2016 loan, Hunter executed a 

subordination agreement in which Hunter agreed to subordinate its 

security interest in the six properties to the security interest arising out of 

the Bank’s 2016 loan to Saban. The subordination agreement identified the 

new interest to which Hunter would subordinate its own as one reflected 

in a “deed of trust and note in the sum of $256,000.00, dated 4-8-16, in favor 

of [the Bank].”

¶9 Several days later, the Bank and Saban executed the 2016 loan.

But the note memorializing the loan showed a principal amount of 

$1,168,000.00, not $256,000.00. Similarly, the Bank’s 2016 deed of trust on 

the six properties purported to secure a loan amount of $1,168,000.00,

though the same deed of trust showed it secured a maximum lien of 

$256,000.00. The superior court noted the maximum lien amounts in the

Bank’s 2014 and 2016 deeds of trust totaled the 2016 note’s $1,168,000.00. 

Hunter characterizes this discrepancy as reflecting a “consolidation” or 

“novation” of the Bank’s 2014 loan ($912,000.00) together with the new 

principal advanced in the 2016 loan ($256,000.00).

¶10 The Bank’s 2016 deed of trust recites the following in its first 

line: “MAXIMUM LIEN. The lien of this Deed of Trust shall not exceed at 

any one time $256,000.00.” Generally, the Bank’s 2016 deed of trust is 

identical to the Bank’s 2014 deed of trust other than several minor 

differences irrelevant to this appeal and cross-appeal. We note one 

difference we need not resolve because the parties did not address it. The 

Bank’s 2014 deed of trust has one future advances clause, but the Bank’s

2016 deed of trust contains two. The first future advances clause in the 

Bank’s 2016 deed of trust purports to render any future advance from the 

Bank to Saban obligatory. The second future advances clause, which is

identical to that of the Bank’s 2014 deed of trust, states nothing in the deed 

of trust shall constitute a commitment by the Bank to make any future 

advances. No party has asked us to interpret or resolve the differing future 

advances clauses. And the Bank has not argued it was obligated to make

any future advances, so we do no more than observe this difference.
KS STATEBANK v. HUNTER

Decision of the Court

5

¶11 In 2017, the Bank gave Saban a third loan for $1,650,000.00 and 

a fourth for $300,000.00, each memorialized in a new promissory note. 

Those 2017 notes do not reference the Bank’s 2014 or 2016 deeds of trust.

IV. Saban’s default and the ensuing litigation

¶12 By 2018, Saban defaulted on all the loans from the Bank and 

Hunter. Hunter sued to foreclose on the properties. The Bank filed a 

complaint for breach of contract against Saban and moved to appoint a 

receiver, and the superior court approved the sale of two of the six 

properties for $1.5 million in total. In 2020, Hunter filed a separate 

complaint for declaratory relief as to the existence, nature, scope, and 

priority of Hunter’s and the Bank’s lien rights to the properties and the sale 

proceeds. The superior court consolidated the three cases for further 

proceedings.

¶13 The Bank and Hunter cross-moved for partial summary 

judgment on the amounts and priority of the Bank’s and Hunter’s 

respective security interests in the properties. The superior court denied the 

Bank’s motion and granted Hunter’s motion “in part only, to the extent that 

[Hunter]’s lien has priority after the first $1.168 million in proceeds are 

disbursed to [the Bank].”

¶14 The Bank appeals, and Hunter cross-appeals. This court has

jurisdiction over the timely appeal and cross-appeal under article VI, 

section 9 of the Arizona Constitution, and A.R.S. §§ 12-2101.A.1 

and -120.21.A.1.

DISCUSSION

¶15 This court reviews a grant of summary judgment de novo, 

viewing the facts and reasonable inferences in the light most favorable to 

the party opposing the motion and affirms for any reason supported by the 

record. KB Home Tucson, Inc. v. Charter Oak Fire Ins. Co., 236 Ariz. 326, 329 

¶ 14 (App. 2014).

¶16 The Bank argues the superior court erred when it limited the 

Bank’s first-priority lien to $1,168,000.00. The Bank argues Hunter 

subordinated the priority of its security lien to any lien securing all future 

advances (whether obligatory or optional) the Bank made after the 

subordination agreement. Hunter cross-appeals and offers four arguments 

for why the Bank’s first-priority lien is less than $1,168,000.00.
KS STATEBANK v. HUNTER

Decision of the Court

6

¶17 The parties agree the subordination agreement and other 

instruments govern the relative priority of their security liens. Neither party 

challenges the propriety of the superior court interpreting the 

subordination agreement on summary judgment to determine the parties’ 

intent. But they both appeal the superior court’s interpretation. Their 

dispute, thus, arises out of alleged legal errors of contract interpretation and 

application of the law of future advances. Neither the Bank nor Hunter 

argues the superior court—or this court for that matter—must consider 

parol evidence to understand their intent, so we do not consider any. See

Taylor v. State Farm Mut. Auto. Ins., 175 Ariz. 148, 153 (1993) (reaffirming 

Arizona courts’ commitment to the Corbin rule of contract interpretation, 

permitting courts to consider parol evidence to construct contracts in 

accordance with the parties’ intent).

¶18 Because courts interpret contracts as a matter of law, this 

court reviews contract interpretations de novo, including whether a

contract’s terms are “reasonably susceptible to more than one 

interpretation.” Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588, 593 ¶ 9 

(App. 2009). When interpreting contract terms, this court seeks to identify 

and enforce the parties’ intent. Id. Even so, this court may not resort to other 

rules of construction when the parties express their intent in clear and 

unambiguous language. Id. As the Arizona Supreme Court has said, when 

the contractual terms “are plain and unambiguous upon their face, they 

must be applied as written, and the court will not pervert or do violence to 

the language used.” Emps. Mut. Cas. Co. v. DGG & CAR, Inc., 218 Ariz. 262, 

267 ¶ 24 (2008). As a result, even when a contract’s terms are unclear and 

ambiguous, this court must avoid interpreting the contract in a way leading

to an absurd result. Roe v. Austin, 246 Ariz. 21, 26–27 ¶ 17 (App. 2018).

¶19 These same rules apply when interpreting terms in a deed, 

including a deed of trust and a related subordination agreement. See A.R.S. 

§ 33-801(4) (a deed of trust is a contract). Indeed, “[w]hen a deed is 

unambiguous, the intent of the parties must be discerned from the four 

corners of the document.” Scalia v. Green, 229 Ariz. 100, 104 ¶ 19 (App. 2011).

I. The La Cholla Common-Law Rule Determines the Relative 

Priority of the Bank’s and Hunter’s Security Liens.

¶20 In La Cholla, this court adopted the common-law rule to 

determine the priority of different parties’ security liens in the same 

property. 173 Ariz. at 491–92. Under La Cholla’s common-law rule, recorded 

liens securing obligatory advances under a lender’s recorded obligation have 

priority over intervening liens. Id. at 492. But any recorded lien securing the 
KS STATEBANK v. HUNTER

Decision of the Court

7

original mortgagee’s later optional advances made with notice of an 

intervening lien loses priority to the intervening creditor’s interest. Id.

¶21 The Bank obtained a first-priority lien in the amount of its 

2014 loan as secured by its 2014 deed. The 2014 deed also contained a valid 

future advances clause, securing “all future advances made by [the Bank] 

to [Saban] whether or not the advances are made pursuant to a 

commitment” and in “unlimited amount.” But the same clause explicitly 

precluded any commitment to obligatory future advances secured by the 

deed: “Nothing in this Deed of Trust shall constitute a commitment to make 

additional or future advances or loans in any amount. Any such 

commitment must be agreed to in a separate writing signed by [Saban] and 

[the Bank].” Hunter later obtained a second-priority lien in the same

properties for $605,000.00.

¶22 At that point, Hunter’s lien on the properties was inferior to 

the Bank’s pre-existing, recorded security interest under the Bank’s 2014 

deed. According to the La Cholla rule, the Bank could not rely on its 2014 

deed to establish priority for any optional future advances from the Bank. 

And, by the deed’s own terms, any future advance from the Bank would be 

optional absent a separate written agreement otherwise with Saban. Thus,

any lien securing a future advance from the Bank would be inferior to

Hunter’s intervening lien. The Bank recognized this. So, before advancing 

its 2016 loan, the Bank induced Hunter to sign the subordination 

agreement, which “was aimed at avoiding [the rule of] La Cholla.”

A. The Effect of the Subordination Agreement

¶23 According to the Bank’s argument, when Hunter executed the 

subordination agreement, Hunter subordinated its security interest in the 

properties to the Bank’s interest securing the Bank’s 2016 note and, contrary 

to the La Cholla common-law rule, all the Bank’s optional future advances. 

The Bank argues the Bank intended this result. But the Bank is a beneficiary

of, not a party to, the subordination agreement. And nothing in the 

subordination agreement’s plain language suggests Hunter intended to 

subordinate its interest to the Bank’s interest beyond that securing the 

Bank’s 2016 note. As Hunter mentioned in oral argument, the 

subordination agreement could have included language to accomplish that 

intent but did not. For example, Hunter could have included the following 

language in the subordination agreement: “notwithstanding the commonlaw rule in La Cholla” or “notwithstanding any other law to the contrary.” 

But the subordination agreement includes no such disclaimer.
KS STATEBANK v. HUNTER

Decision of the Court

8

¶24 Further, even if, as the Bank argues, Hunter—through the 

subordination agreement—“expressly assented” to “all” terms in the 

Bank’s 2016 deed, nothing in the plain language of the Bank’s 2016 deed of 

trust shows the Bank intended to exempt its optional future advances from 

the rule of La Cholla.

¶25 Under La Cholla, liens securing obligatory future advances 

take priority over intervening liens only when the obligation to make those 

future advances has been recorded. La Cholla, 173 Ariz. at 492. Optional 

future advances are inferior to intervening liens. Id. Here, the Bank 

recorded no obligation to advance funds to Saban in the future. To the 

contrary, the Bank’s 2014 and 2016 deeds of trust explicitly said any future 

advances from the Bank would be optional absent a separate written 

agreement between Saban and the Bank. The Bank has not shown evidence 

of any such agreement or its recordation as La Cholla would require for 

enforcement against Hunter or any other third party. See id. On the other 

hand, the Bank had sufficient notice of Hunter’s intervening loan to render 

the Bank’s interest in the properties securing any optional future advance 

inferior to Hunter’s. Cf. id. (holding constructive notice alone is 

insufficient). 

¶26 A mortgagee may subordinate its security interest in a 

property to another existing or future interest in the same property by a 

declaration. Restatement (Third) of Property: Mortgages (“Restatement”)

§ 7.7. That declaration must describe “with reasonable specificity” the 

interest to which the mortgagee is subordinating its own interest. Id.

“[R]easonable specificity depends on the circumstances” but “at a 

minimum” requires “an identification of the new lender or the type of 

lender, an upper limit on the initial amount of that debt, and an upper limit 

on its interest rate.” Restatement § 7.7 cmt. b.

¶27 The subordination agreement identifies Hunter as the lender,

the upper limit on the initial amount of debt, and the lender’s subordination 

of its own security interest by referencing “a deed of trust and note in the 

sum of $256,000.00, dated 4-8-16, in favor of KSB StateBank.” The 

subordination agreement also declares “[t]hat said deed of trust . . . shall 

unconditionally be and remain at all times a lien or charge on the property

therein described, prior and superior to the lien or charge of [Hunter’s 

deed].” The Bank’s 2016 deed was notarized on April 8, 2016, and it set a 

maximum lien value of $256,000.00.

¶28 The Bank’s 2016 deed specifically says it secures the note the 

Bank and Saban executed on April 8, 2016. But that note shows a principal 
KS STATEBANK v. HUNTER

Decision of the Court

9

amount of $1,168,000.00, not $256,000.00. As discussed above, Hunter 

characterizes this transaction as a “consolidation” or “novation” of the 

Bank’s 2014 loan ($912,000.00) together with the new principal advanced in 

its 2016 loan ($256,000.00). Hunter’s characterization tracks with the 

superior court’s noting in its ruling the maximum lien provisions in the 

Bank’s 2014 and 2016 deeds of trust were for the same amounts and totaled 

$1,168,000.00. We accept Hunter’s unchallenged characterization as 

consistent with the principle of reading substantially contemporaneous 

instruments together to determine the nature of the transactions between 

the parties. See Pearll v. Williams, 146 Ariz. 203, 206 (App. 1985). The “deed 

of trust and note in the sum of $256,000.00, dated 4-8-16,” specified in the 

subordination agreement reasonably identifies the Bank’s 2016 deed dated 

April 8, 2016, with its $256,000.00 “maximum lien” and its associated note.

That note’s terms, in turn, specify the upper limit on the interest rate of the 

new debt.

¶29 Under these circumstances, the subordination agreement 

meets the requirement of reasonable specificity restated in the Restatement

as to the 2016 loan. When Hunter executed the subordination agreement 

and the Bank executed its 2016 note and deed, the Bank maintained its 

original first-priority security interest in the amount of any remaining 

balance on its first loan for $912,000.00. At that point, the Bank also added 

a new first-priority security interest in an amount of any new advance 

under its 2016 note up to $268,000.00, as established in the subordination 

agreement and the Bank’s 2016 note.

¶30 Based on the plain language in both the Bank’s 2016 deed and 

the subordination agreement, any new amount beyond $268,000.00 was 

outside Hunter’s subordination of its interest and subject to prioritization 

under the La Cholla rule. Nothing in the 2016 deed says the La Cholla rule 

will not apply to Hunter’s lien priority. The same is true of the 

subordination agreement. Even if we accept the superior court’s finding the 

2017 loans relate to and constitute future advances under the 2014 and 2016 

deeds, the 2017 loans were not obligatory, and the Bank was aware of 

Hunter’s intervening lien when it made them. Hunter’s lien, thus, has 

priority over any lien of the Bank’s securing its 2017 loans. To conclude 

otherwise would “pervert or do violence to the language used.” See Emps.

Mut. Cas. Co., 218 Ariz. at 267 ¶ 24. And to follow the Bank’s reasoning 

would lead to an absurd result: an interpretation of the 2016 deed for 

Hunter that differs from the interpretation of the same plain language for 

any other intervening lender. See Roe, 246 Ariz. at 26–27 ¶ 17.
KS STATEBANK v. HUNTER

Decision of the Court

10

¶31 In short, the Bank argues “the subordination agreement . . . 

aimed at avoiding La Cholla,” but the plain language of neither the 

subordination agreement nor the Bank’s 2016 deed of trust suggests, let 

alone realizes, this alleged aim. The Bank’s argument the maximum lien 

clause of its deed of trust has any effect on La Cholla security priority 

similarly fails.

B. The Maximum Lien Terms Do Not Alter the La Cholla

Priority Analysis.

¶32 The Bank argues the maximum-lien clauses are statements of 

“maximum obligation” that preserve the priority of future advances no 

matter whether those advances are optional or obligatory. Not so. Nothing 

in the plain language of the maximum-lien clauses suggests any effect on 

the relative priority of the security interests under the deed. The Bank 

simultaneously argues that, in any case, the future advances clauses render 

the maximum-lien clauses legally meaningless. But, as discussed above, the 

future advances clauses themselves have no bearing on the priority of the 

interests they secure, except for as far as they render any future advances 

based on the deed optional—because optional advances lose their lien 

priority to intervening liens.

¶33 The Bank’s first-priority interest does not exceed the 

maximum lien amounts in the Bank’s deeds. We, thus, need not resolve 

how the maximum-lien clauses otherwise might affect the validity of the 

Bank’s security interests.

ATTORNEY FEES AND COSTS

¶34 Both the Bank and Hunter request attorney fees under A.R.S. 

§ 12-341.01. In our discretion, we decline to award attorney fees because of 

the preliminary nature of this case on remand. On remand, 

the superior court may consider any request for attorney fees, including 

attorney fees incurred in this appeal, when this litigation concludes. 

See Eans-Snoderly v. Snoderly, 249 Ariz. 552, 559 ¶ 27 (App. 2020). We award 

Hunter its taxable costs on appeal as the prevailing party on compliance 

with ARCAP 21.
KS STATEBANK v. HUNTER

Decision of the Court

11

CONCLUSION

¶35 We vacate the superior court’s judgment and remand for the 

superior court to determine the balances Saban owes on his debts to the 

Bank and to Hunter and to enter judgment consistent with this decision.