Grennell et al v. EMC Mortgage Corporation et al

Filing 13

ORDER GRANTING EMC Mortgage LLC's motion to dismiss (doc. 5 ). IT IS FURTHER ORDERED GRANTING defendant Quality Loans motion to dismiss (doc. 6 ). Defendants' motion to strike is DENIED (doc. 12 ). Signed by Judge Frederick J Martone on 4/30/2012.(KMG)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 10 11 12 13 14 15 ) ) ) Plaintiffs, ) ) vs. ) ) EMC Mortgage Corporation; Quality Loan) ) Service Corporation, ) ) Defendants. ) ) Les Grennell; Robin Grennell, No. CV-12-0633-PHX-FJM ORDER 16 17 The court has before it defendant EMC Mortgage LLC’s motion to dismiss (doc. 5), 18 defendant Quality Loan Service Corporation’s motion to dismiss (doc. 6), plaintiffs’ 19 responses (docs. 7, 9), defendants’ replies (docs. 10, 11), and defendants’ motion to strike 20 (doc. 12). 21 On December 7, 2006, plaintiffs executed a Deed of Trust securing a Promissory Note 22 in the principal amount of $272,523 for the purchase of real property located in Phoenix, 23 Arizona. Plaintiffs became delinquent on their loan payments and on June 24, 2009, 24 defendant Quality Loan recorded a notice of trustee’s sale. 25 On February 19, 2010, plaintiffs filed a complaint in this court alleging state law 26 claims including breach of contract, negligent misrepresentation, and fraudulent 27 concealment, against various defendants, including EMC Mortgage and Quality Loan—the 28 1 same defendants in this case. See CV-09-2148-PHX-ROS (“2009 Complaint”). On June 9, 2 2010, pursuant to a stipulation by the parties, Judge Silver dismissed all claims against 3 Quality Loan without prejudice. On November 5, 2010, Judge Silver dismissed with 4 prejudice all claims asserted in the 2009 Complaint against all remaining defendants, 5 including EMC Mortgage. Defendants now contend that the claims asserted in the 2009 6 Complaint arose out of the same operative facts, including the same Note and Deed of Trust 7 at issue in this case, and that therefore the claims asserted in this case are barred by res 8 judicata. We agree. 9 Res judicata bars relitigation of issues that were asserted or could have been asserted 10 in a previous action between the parties. The defense of res judicata requires (1) an identity 11 of claims, (2) final judgment on the merits in the previous litigation, and (3) identity of the 12 parties or their privies. Hall v. Lalli, 194 Ariz. 54, 57, 977 P.2d 776, 779 (1999). 13 In the 2009 Case, the plaintiffs litigated the validity of EMC’s standing as beneficiary 14 to commence a non-judicial foreclosure. Final judgment was entered in favor of EMC on the 15 merits of the claim. Plaintiffs again challenge EMC’s authority under the Deed of Trust and 16 Note, asserting in essence a “show me the note” argument. Because this claim has already 17 been finally adjudicated, the reassertion of the claim against EMC and Quality Loan, who 18 is in privity with EMC, is barred by res judicata. 19 Even if we considered the merits of plaintiffs’ claims, we would nevertheless dismiss 20 them with prejudice. In the present case, plaintiffs acknowledge that they defaulted on their 21 loan. They seek avoidance of a trustee’s sale by challenging whether Quality Loan, the 22 current trustee, was properly appointed by the beneficiary. They also claim that EMC lacked 23 appropriate authority to conduct the trustee’s sale because it was not the holder of the 24 underlying Note secured by the Deed of Trust and therefore it lacked authority to conduct 25 a trustee’s sale. Although they deny that they sue under a “show me the note” theory, they 26 argue that EMC must demonstrate that it holds rights under the Note before initiating 27 foreclosure proceedings. This argument has been consistently rejected by Arizona courts. 28 See, e.g., Hogan v. Washington Mut. Bank, 227 Ariz. 561, 564, 261 P.3d 445, 448 (Ct. App. -2- 1 2011) (rejecting the “show me the note” theory and holding that Arizona’s non-judicial 2 foreclosure statute does not require presentation of the original note before commencing 3 foreclosure proceedings). In addition, the record shows that Quality Loan was properly 4 appointed as trustee pursuant to a Substitution of Trustee recorded on June 25, 2009. 5 Compl., ex. B. Plaintiffs have again failed to assert a viable claim for relief. 6 For all of these reasons, IT IS ORDERED GRANTING EMC Mortgage LLC’s 7 motion to dismiss (doc. 5). IT IS FURTHER ORDERED GRANTING defendant Quality 8 Loan’s motion to dismiss (doc. 6). 9 10 Defendants’ motion to strike is DENIED (doc. 12). DATED this 30th day of April, 2012. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -3-

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