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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

VAUGHN-LEAVITT LIMITED PARTNERSHIP,

Plaintiff/Appellant/Cross-Appellee,

v.

U.S. BANK NATIONAL ASSOCIATION,

Defendant/Appellee/Cross-Appellant.

No. 1 CA-CV 22-0040 

Appeal from the Superior Court in Maricopa County

No. CV2020-016171

The Honorable Bradley H. Astrowsky, Judge

AFFIRMED IN PART; REVERSED IN PART AND REMANDED

COUNSEL

Lane & Nach, P.C., Phoenix

By S. Gregory Jones

Counsel for Plaintiff/Appellant/Cross-Appellee

Fidelity National Law Group, Phoenix

By David M. LaSpaluto

Counsel for Defendant/Appellee/Cross-Appellant

FILED 3-7-2023
VAUGHN-LEAVITT v. U.S. BANK

Decision of the Court

2

MEMORANDUM DECISION

Judge Daniel J. Kiley delivered the decision of the Court, in which Presiding 

Judge Maria Elena Cruz and Judge James B. Morse Jr. joined.

K I L E Y, Judge:

¶1 Vaughn-Leavitt Limited Partnership (“Vaughn-Leavitt”) 

appeals the superior court’s dismissal of its first amended complaint (the 

“FAC”) seeking: (1) foreclosure of a deed of trust (the “2003 DOT”) against

certain real property (the “Property”) and (2) a declaration that the 2003 

DOT was superior in priority to another deed of trust against the Property 

in favor of U.S. Bank National Association (“U.S. Bank”).1 U.S. Bank crossappeals the superior court’s denial of its request for an award of attorney 

fees. For the following reasons, we affirm the court’s dismissal of VaughnLeavitt’s FAC but reverse and remand the court’s decision declining to 

award U.S. Bank attorney fees. 

FACTS AND PROCEDURAL HISTORY

¶2 We review de novo a dismissal for failure to state a claim, 

accepting as true the facts alleged in the operative complaint. Shepherd v. 

Costco Wholesale Corp., 250 Ariz. 511, 512, ¶ 3 n.1 (2021). As relevant to this 

appeal, Vaughn-Leavitt’s FAC alleges the following:

¶3 Anthony Anderson and his spouse are co-trustees of the 

AMA Trust. In late 2002, the AMA Trust entered into a revolving line of 

credit agreement with Vaughn-Leavitt as lender. On February 7, 2003, 

Anderson and his spouse conveyed the Property to the AMA Trust. That 

same day, the AMA Trust executed a deed of trust in favor of VaughnLeavitt as security for the debt incurred pursuant to the revolving line of 

credit. Shortly thereafter, the February 7, 2003 deed of trust was released 

and the 2003 DOT was recorded against the Property to secure the AMA 

Trust’s debt to Vaughn-Leavitt.

1 A related entity, 8723 E. Via de Commercio, LLC (“Commercio”), was also 

a plaintiff in this case, asserting claims arising out of its purported leasehold 

interest in the Property. Commercio’s claims were subsequently dismissed, 

and Commercio has not appealed.
VAUGHN-LEAVITT v. U.S. BANK

Decision of the Court

3

¶4 In 2005, Anderson sought a loan, to be secured by the 

Property, from Downey Savings and Loan Association (“Downey”). 

Anderson “made clear to [Downey’s] loan officer that he was only 

interested in a second mortgage” that would not impact the 2003 DOT’s 

first-position lien status. When the loan officer told Anderson that the 2003 

DOT “would need to subordinate so the Downey Loan could take first 

position,” Anderson refused. Downey then indicated it might reconsider its 

position.

¶5 In mid-May 2005, a title company contacted Anderson to 

schedule the closing for the Downey Loan. Under the impression that 

Downey had agreed that “the Downey Loan would be a second mortgage,” 

Anderson and his spouse went to the title company at the scheduled time 

and met with the title officer. When the title officer presented them with a 

release (the “Release”) for the 2003 DOT, Anderson replied that he was not

authorized to sign the release on behalf of Vaughn-Leavitt and, in any 

event, was unwilling to release the 2003 DOT. The title officer assured 

Anderson that the signing and recording of the Release “would be of no 

consequence” because the Release was “defective” since Vaughn-Leavitt 

had not authorized him to sign it. Anderson then signed the Release on the 

understanding that it was invalid and would not affect Vaughn-Leavitt’s 

first-position lien priority.

¶6 After the Downey Loan closed, the Release and a deed of trust 

against the Property securing the Downey Loan (the “2005 DOT”) were 

recorded.

¶7 In 2019, U.S. Bank, as Downey’s successor-in-interest, 

initiated a trustee’s sale on the 2005 DOT. U.S. Bank completed the sale in 

2020, obtaining a trustee’s deed to the Property.

¶8 Following U.S. Bank’s foreclosure on the 2005 DOT, VaughnLeavitt filed this action to foreclose on the 2003 DOT, asserting that the 

AMA Trust defaulted on its loan from Vaughn-Leavitt. Vaughn-Leavitt 

contested U.S. Bank’s ownership of the Property, asserting that, 

notwithstanding the recording of the Release in 2005, the 2003 DOT

remained in effect and was entitled to priority over the 2005 DOT.

¶9 U.S. Bank moved to dismiss the FAC pursuant to Arizona 

Rule of Civil Procedure (“Rule”) 12(b)(6), arguing, inter alia, that VaughnLeavitt’s claims were time-barred. Noting that Vaughn-Leavitt had notice

that the 2003 DOT had been released when Anderson “executed the Release 

and allowed it to be recorded,” U.S. Bank asserted that Vaughn-Leavitt’s 
VAUGHN-LEAVITT v. U.S. BANK

Decision of the Court

4

cause of action “accrued” when the Release was recorded in May 2005. U.S. 

Bank further maintained that Vaughn-Leavitt’s claims were governed by 

the four-year limitations period prescribed in A.R.S. § 12-550. By waiting

“until late 2020” to “assert the invalidity of the Release” recorded in 2005, 

the bank asserted, Vaughn-Leavitt “sat on its rights on its hidden priority 

claim” for “too long.”

¶10 In response, Vaughn-Leavitt took the position that its cause of 

action did not accrue when the Release was recorded because Downey, U.S. 

Bank’s predecessor-in-interest, was aware of Vaughn-Leavitt’s position that 

the 2003 DOT remained effective because the Release was signed by 

Anderson without authorization. According to Vaughn-Leavitt, its cause of 

action did not accrue until 2020, when U.S. Bank foreclosed on the Property

in disregard of Vaughn-Leavitt’s position as senior lienholder.

¶11 U.S. Bank also raised other arguments in support of its motion 

to dismiss, including its contention that principles of judicial and collateral 

estoppel barred Vaughn-Leavitt from asserting the continued validity of 

the 2003 DOT due to statements and admissions made by Anderson in 

unrelated litigation. U.S. Bank supported these arguments with exhibits 

consisting of filings in unrelated court proceedings and other matters 

outside the pleadings. In response, Vaughn-Leavitt asserted, inter alia, that

the superior court could not properly consider filings in other proceedings 

and other matters outside the pleadings in resolving U.S. Bank’s motion to 

dismiss for failure to state a claim.

¶12 The superior court granted U.S. Bank’s motion to dismiss, 

holding that 

Mr. Anderson, as owner of [Vaughn-Leavitt], executed 

the documents that led to the deed of trust that is in 

dispute in 2005. There is no dispute that Mr. Anderson, 

and [Vaughn-Leavitt], [were] aware of the deed of trust 

at the time. Accordingly, [any] dispute concerning [the] 

same should have been filed within the applicable 

statute of limitations, and not more than fifteen years 

later.

The court accepted U.S. Bank’s alternative arguments as well, holding that 

Vaughn-Leavitt was estopped from asserting that the 2003 DOT remained 

in effect due to positions taken by Anderson in unrelated litigation.
VAUGHN-LEAVITT v. U.S. BANK

Decision of the Court

5

¶13 U.S. Bank applied for an award of attorney fees and costs. The 

superior court awarded U.S. Bank its costs under A.R.S. §§ 12-349, -341, -

1103(B), 33-420(C), and Rule 68 but declined, “in [its] discretion,” to award 

any attorney fees, holding that “[s]uch fees are not mandatory in this 

action.”

¶14 Vaughn-Leavitt appeals the dismissal of the FAC. U.S. Bank 

cross-appeals the denial of its application for attorney fees. We have 

jurisdiction. See A.R.S. §§ 12-2101(A)(1), -120.21(A)(1).

DISCUSSION

I. The Superior Court did not err by dismissing Vaughn-Leavitt’s 

claims as time-barred.

¶15 Dismissal under Rule 12(b)(6) is only appropriate if, as a 

matter of law, the plaintiff “would not be entitled to relief under any 

interpretation of the facts susceptible of proof.” Coleman v. City of Mesa, 230 

Ariz. 352, 356, ¶ 8 (2012) (citation omitted). The superior court’s 

determination of when a cause of action accrued is reviewed de novo if it 

“hinges solely on a question of law rather than resolution of disputed facts.” 

Maricopa County v. Rovey, 250 Ariz. 419, 425, ¶ 16 (App. 2020) (citation 

omitted). 

¶16 Because a plaintiff is not entitled to relief on a time-barred 

claim, “[t]he affirmative defense of a statute of limitations may be raised in 

a motion to dismiss if it appears on the face of the complaint that the claim 

is barred.” France v. Ariz. Cntys. Ins. Pool, ___ Ariz. ___, ___, ¶ 6, 519 P.3d 

1029, 1031 (App. 2022) (citation omitted). In that event, “the burden is on 

the plaintiff to establish that the statute has been tolled.” Bailey v. Superior 

Court, 143 Ariz. 494, 498 (App. 1985). Vaughn-Leavitt does not dispute that 

its claims arising out of the purportedly wrongful release of the 2003 DOT 

are governed by A.R.S. § 12-550’s four-year limitations period. VaughnLeavitt does not deny that it was aware, in 2005, that the Release had been 

recorded, nor does it contend that the “discovery rule” or equitable tolling 

principles apply here to toll the accrual of its causes of action. Instead, 

Vaughn-Leavitt argues that the superior court erred in dismissing the FAC 

because, taken as true, the allegations in the FAC “establish that [its] causes 

of action accrued in 2020, not 2005.” Vaughn-Leavitt explains that the FAC 

alleges that, “from the outset,” Vaughn-Leavitt “consistently contended”

that the Release was ineffective because Anderson was not an authorized 

signer, and that Downey, U.S. Bank’s predecessor-in-interest, “was aware 

of [Vaughn-Leavitt’s] position at the time of closing.” Vaughn-Leavitt 
VAUGHN-LEAVITT v. U.S. BANK

Decision of the Court

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contends that, because the FAC alleges that Downey “was aware” that 

Vaughn-Leavitt “disavowed” the Release “at or near the time it was 

signed,” Vaughn-Leavitt’s causes of action did not accrue until U.S. Bank 

“actually challenged [Vaughn-Leavitt’s] long-held position” by instituting 

proceedings to foreclose on the 2005 DOT in disregard of Vaughn-Leavitt’s 

purported first-position lienholder status. “[A]t the very least,” VaughnLeavitt insists, the FAC’s allegations establish “a question of fact” about 

whether a dispute existed between Vaughn-Leavitt and U.S. Bank about the 

validity of the Release until U.S. Bank initiated proceedings to foreclose on 

the 2005 DOT in disregard of Vaughn-Leavitt’s purported first-position 

lienholder status.

¶17 If a potential priority dispute between current lienholders 

were the only harm caused by the wrongful recording of a lien release, then 

we might find merit in Vaughn-Leavitt’s contention that its cause of action 

for the wrongful recording of the Release did not accrue as long as Downey 

recognized (or, at least, failed to challenge) the continued validity of the 

2003 DOT. A potential priority dispute between current lienholders is not, 

however, the only harm caused by the wrongful recording of a lien release. 

¶18 A lien is an interest in property, Restatement (Third) of 

Property: Mortgages § 1.1 (1997), and so a lienholder whose lien has been 

wrongfully released has, by definition, been wrongfully deprived of a 

property interest. Moreover, the purpose of recording a lien is to protect the 

lienholder’s interests not only against those of property owners and other 

lienholders, but against claims by as-yet-unknown third parties such as 

judgment creditors, subsequent purchasers, and the like. Rowe v. Schultz, 

131 Ariz. 536, 539 (App. 1982) (noting “the desirability of encouraging 

recording and penalizing non-recording of property interests for the 

protection of all persons involved”); see also Thomas v. Lynx United Grp., LLC, 

159 P.3d 789, 793-94 (Colo. App. 2006) (“The purposes of the recording 

statutes are to protect purchasers of real property against the risk of prior 

secret conveyances by the seller and to permit a purchaser to rely on the 

condition of title as it appears of record.”) (cleaned up). The wrongful 

recording of an unauthorized lien release deprives the lienholder of the 

protection the lien had provided. See In re Haas, 31 F.3d 1081, 1086 (11th Cir. 

1994) (holding that bank’s lien was subordinate to tax liens that were filed 

after bank’s lien “had been released by mistake” and before bank’s lien was 

reinstated); Bank of N.Y. v. Langman, 986 N.E.2d 749, 753, ¶ 21 (Ill. App. Ct.

2013) (“[S]ubsequent purchasers, without notice or anything to put them on 

inquiry of an adverse title or lien, may rely on the recorded release” of a 

lien even if the release was “unauthorized,” and “will take priority of title 

over the original lienholder.”). Because “[c]ommencement of the statute of 
VAUGHN-LEAVITT v. U.S. BANK

Decision of the Court

7

limitations will not be put off until one learns the full extent of his 

damages,” Com. Union Ins. Co. v. Lewis & Roca, 183 Ariz. 250, 255 (App. 1995) 

(cleaned up), accrual of a lienholder’s claim for wrongful release of its lien 

is not delayed until the property is sold and the lienholder left emptyhanded. Instead, a lienholder’s cause of action for the wrongful release of 

its lien accrues once the lienholder learns that it has been wrongfully 

deprived of a security interest through the unauthorized release of its lien. 

See Humphrey v. State, 249 Ariz. 57, 64, ¶ 23 (App. 2020) (“[A] cause of action 

accrues when the plaintiff knows he or she has been injured and has a

reason to connect the injury to a particular cause . . . in such a way that a 

reasonable person would be on notice to investigate whether the injury 

might result from fault.”) (cleaned up). 

¶19 The allegations in the FAC, taken as true, establish that 

Vaughn-Leavitt knew, in May 2005, that an unauthorized release of the 

2003 DOT had been recorded. Vaughn-Leavitt was not entitled to simply sit 

on its hands after learning it no longer had the protection of the 2003 DOT. 

Cf. Hudler v. Guerdan, 113 S.W.2d 1039, 1041 (Mo. Ct. App. 1938) (stating 

that a lienholder must “act[] with promptness after discovering the 

existence of the false and fraudulent release” because courts “will not grant 

aid to a party who has negligently slept on his rights and allowed his 

demand to become stale”). Instead, the loss of the protection of the 2003 

DOT constitutes harm that triggered the accrual of Vaughn-Leavitt’s 

claims, even though the Property itself was not lost to foreclosure until 

2020. See CDT, Inc. v. Addison, Roberts & Ludwig, C.P.A., P.C., 198 Ariz. 173, 

176, ¶ 11 (App. 2000) (“[A]ccrual requires only actual or constructive 

knowledge of the fact of damage, rather than of the total extent or calculated 

amount of damage.”) (emphasis added).

¶20 Because the allegations of the FAC, accepted as true, establish 

that Vaughn-Leavitt knew that it had suffered the wrongful deprivation of 

an interest in property when the Release was recorded in May 2005, costing 

Vaughn-Leavitt the protection of its 2003 DOT, its claims arising out of the 

wrongful release of the 2003 DOT accrued at that time. Section 12-550 

therefore bars the claims Vaughn-Leavitt waited 15 years to assert. 

¶21 Because we affirm the dismissal of Vaughn-Leavitt’s claims as 

time-barred, we need not address Vaughn-Leavitt’s arguments that the 

superior court erred in finding Vaughn-Leavitt’s claims barred on

alternative grounds as well. 
VAUGHN-LEAVITT v. U.S. BANK

Decision of the Court

8

II. A finding of grounds for sanctions under A.R.S. § 12-349 mandates 

an award of reasonable attorney fees. 

¶22 On cross-appeal, U.S. Bank argues the superior court erred by

denying its request for an award of attorney fees under A.R.S. §§ 12-349, -

1103(B), and 33-420(C).

¶23 A.R.S. § 12-349(A) provides in part that a court “shall assess

reasonable attorney fees” and “expenses” against a party or attorney who 

(1) [b]rings or defends a claim without substantial 

justification[,] (2) [b]rings or defends a claim solely or 

primarily for delay or harassment[,] (3) [u]nreasonably 

expands or delays the proceeding[,] [or] (4) [e]ngages in 

abuse of discovery.

We review the superior court’s findings of fact in considering a request for 

fees pursuant to A.R.S. § 12-349 under a “clearly erroneous” standard, but 

a court’s application of the statute is a question of law we review de novo. 

City of Casa Grande v. Ariz. Water Co., 199 Ariz. 547, 555, ¶ 27 (App. 2001). 

¶24 Vaughn-Leavitt contends that the superior court could not 

properly consider U.S. Bank’s application for fees and costs on the merits 

because the application was served by email, an unauthorized method of 

service. But Vaughn-Leavitt does not identify any prejudice it suffered as a 

result of U.S. Bank’s use of email. Vaughn-Leavitt does not, for example, 

deny that its counsel received and responded to U.S. Bank’s application. 

Accordingly, we find that the superior court did not err in considering U.S. 

Bank’s application on the merits instead of denying it on grounds of

improper service. See Kline v. Kline, 221 Ariz. 564, 570, ¶ 21 (App. 2009) 

(noting that “strict technical compliance with rules governing service may 

be excused when the court has already acquired jurisdiction over the 

receiving party and that party receives actual, timely notice”).

¶25 U.S. Bank argues that the superior court erred by awarding 

costs under A.R.S. § 12-349 but then deciding, “in [its] discretion,” not to 

award attorney fees. U.S. Bank argues that the superior court’s award of 

costs pursuant to § 12-349 establishes that the court found statutory 

grounds for sanctions, and that such a finding required the court to award 

reasonable attorney fees as well as costs.

¶26 We agree. In awarding costs to U.S. Bank as a sanction under 

§ 12-349, the superior court necessarily, though implicitly, found at least 

one of the four statutory grounds for sanctions. See In re CVR 1997 
VAUGHN-LEAVITT v. U.S. BANK

Decision of the Court

9

Irrevocable Tr., 202 Ariz. 174, 177, ¶ 16 (App. 2002) (in the absence of express 

factual findings, “we presume that the trial court found every fact necessary 

to sustain its ruling”). Having found grounds for sanctions under § 12-349, 

the superior court was required to award reasonable fees as well as costs. 

Democratic Party of Pima Cnty. v. Ford, 228 Ariz. 545, 548, ¶ 10 (App. 2012) 

(once party seeking sanctions makes showing required by § 12-349, “the 

award of attorney fees becomes mandatory”). 

¶27 Vaughn-Leavitt contends that attorney fees cannot be 

awarded under § 12-349 because the superior court failed to make specific 

findings to support the award. Although A.R.S. § 12-350 requires a court to 

set forth “specific reasons” for the imposition of sanctions under § 12-349, 

the lack of such findings is not grounds for relief on appeal absent an

objection in the trial court. See Trantor v. Fredrikson, 179 Ariz. 299, 301 (1994) 

(“[T]he failure of a party to object to the lack of findings of fact and 

conclusions of law in making awards of attorneys’ fees under . . . § 12-349 

precludes that party from raising the absence of findings as error on 

appeal.”); see also Francine C. v. Dep’t of Child Safety, 249 Ariz. 289, 296, ¶ 17 

(App. 2020) (“When a court fails to comply with a rule that mandates 

findings, a party who does not raise the issue in an authorized postjudgment motion may waive it on appeal.”) (emphasis omitted). Nothing 

in the record indicates that Vaughn-Leavitt made any objection, by postjudgment motion or otherwise, to the superior court’s failure to make 

specific factual findings to support its award of costs as a sanction under 

§ 12-349. Vaughn-Leavitt has thus waived this argument on appeal. 

¶28 Because the superior court’s award of costs under § 12-349

establishes that the court impliedly found that U.S. Bank had established at 

least one of the statutory grounds for sanctions, § 12-349 required the 

superior court to award reasonable attorney fees to U.S. Bank as well. See 

Ford, 228 Ariz. at 548, ¶ 10. We therefore reverse the court’s denial of U.S. 

Bank’s fee request and remand for a determination of the amount of a

reasonable fee award under § 12-349. We find it unnecessary to address U.S. 

Bank’s alternative arguments that it was entitled to an award of attorney 

fees under A.R.S. §§ 12-1103(B) and 33-420 as well.

CONCLUSION

¶29 We affirm the superior court’s dismissal of Vaughn-Leavitt’s 

FAC as time-barred. We reverse the court’s decision not to award attorney 

fees to U.S. Bank under A.R.S. § 12-349 and remand for a determination of 

the amount of a reasonable fee award. U.S. Bank is granted reasonable 
VAUGHN-LEAVITT v. U.S. BANK

Decision of the Court

10

attorney fees and costs on appeal and cross-appeal pursuant to A.R.S. § 12-

349, upon compliance with ARCAP 21.