FREDERICK J. MARTONE, District Judge.
The court has before it defendant EMC Mortgage LLC's motion to dismiss (doc. 5), defendant Quality Loan Service Corporation's motion to dismiss (doc. 6), plaintiffs' responses (docs. 7, 9), defendants' replies (docs. 10, 11), and defendants' motion to strike (doc. 12).
On December 7, 2006, plaintiffs executed a Deed of Trust securing a Promissory Note in the principal amount of $272,523 for the purchase of real property located in Phoenix, Arizona. Plaintiffs became delinquent on their loan payments and on June 24, 2009, defendant Quality Loan recorded a notice of trustee's sale.
On February 19, 2010, plaintiffs filed a complaint in this court alleging state law claims including breach of contract, negligent misrepresentation, and fraudulent concealment, against various defendants, including EMC Mortgage and Quality Loan—the same defendants in this case.
Res judicata bars relitigation of issues that were asserted or could have been asserted in a previous action between the parties. The defense of res judicata requires (1) an identity of claims, (2) final judgment on the merits in the previous litigation, and (3) identity of the parties or their privies.
In the 2009 Case, the plaintiffs litigated the validity of EMC's standing as beneficiary to commence a non-judicial foreclosure. Final judgment was entered in favor of EMC on the merits of the claim. Plaintiffs again challenge EMC's authority under the Deed of Trust and Note, asserting in essence a "show me the note" argument. Because this claim has already been finally adjudicated, the reassertion of the claim against EMC and Quality Loan, who is in privity with EMC, is barred by res judicata.
Even if we considered the merits of plaintiffs' claims, we would nevertheless dismiss them with prejudice. In the present case, plaintiffs acknowledge that they defaulted on their loan. They seek avoidance of a trustee's sale by challenging whether Quality Loan, the current trustee, was properly appointed by the beneficiary. They also claim that EMC lacked appropriate authority to conduct the trustee's sale because it was not the holder of the underlying Note secured by the Deed of Trust and therefore it lacked authority to conduct a trustee's sale. Although they deny that they sue under a "show me the note" theory, they argue that EMC must demonstrate that it holds rights under the Note before initiating foreclosure proceedings. This argument has been consistently rejected by Arizona courts.
For all of these reasons,
Defendants' motion to strike is