Bishara v. US Bank
1 CA-CV 16-0176
| Ariz. Ct. App. | Aug 15, 2017Background
- In April 2008 Bishara obtained a mortgage from U.S. Bank; a deed of trust was recorded. He defaulted and a trustee’s sale was noticed in 2010.
- In May 2011 Bishara sued to stop the trustee’s sale, later amending to allege his signature on the deed was forged and seeking rescission, return of payments, statutory damages under A.R.S. § 33–420(A), and emotional distress damages.
- The federal district court dismissed Bishara’s amended complaint with prejudice and denied leave to amend, concluding the proposed quiet title and § 33–420 claims were time-barred and the emotional distress claim insufficient; the Ninth Circuit affirmed denial of leave to amend as futile.
- After the Ninth Circuit decision, Bishara quitclaimed the property to his mother Aziz; Bishara and Aziz then filed a new state-court action asserting the same causes of action previously litigated.
- U.S. Bank moved to dismiss in state court on claim-preclusion and issue-preclusion grounds; trustee defendants were dismissed for insufficient service after plaintiffs failed to re-serve; the trial court dismissed all claims and awarded U.S. Bank attorneys’ fees.
- The Court of Appeals affirmed, holding claim preclusion applied, the trustee defendants were properly dismissed for lack of service, and the attorneys’ fee award was not an abuse of discretion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether claim preclusion bars the new state suit | Bishara/Aziz: prior federal judgment does not preclude their state claims; Ninth Circuit’s language limited preclusive effect | U.S. Bank: prior dismissal with denial of leave to amend is a final judgment on the merits and precludes the same claims | Court: claim preclusion applies — identity of claims, final federal judgment on merits, and party/privity satisfied |
| Identity of claims for res judicata | Plaintiffs: state action differs or raises new issues (Aziz was not in prior suit) | U.S. Bank: state complaint mirrors proposed federal amended complaint; no additional evidence needed | Court: same-evidence test met; claims are identical |
| Whether Aziz’s later acquisition defeats preclusion | Plaintiffs: Aziz was not party to federal case; quitclaim timing contested | U.S. Bank: privity exists because Aziz acquired interest through Bishara after judgment | Court: privity applies where property transferred after judgment; plaintiffs’ late assertion of earlier transfer waived |
| Attorneys’ fees award to U.S. Bank | Plaintiffs: fee amount unreasonable; wrong statutory basis argued | U.S. Bank: fees properly requested under A.R.S. § 12‑341.01 and supported by billing | Court: fee award not an abuse of discretion; request under § 12‑341.01 was proper |
Key Cases Cited
- Coleman v. City of Mesa, 230 Ariz. 352 (Ariz. 2012) (standard of review for Rule 12(b)(6) dismissal)
- In re Gen. Adjudication of All Rights to Use Water in Gila River Sys. & Source, 212 Ariz. 64 (Ariz. 2006) (elements for claim preclusion)
- Stearns v. Ariz. Dep’t of Revenue, 231 Ariz. 172 (App. 2012) (res judicata bars subsequent suits based on same causes of action)
- Pettit v. Pettit, 218 Ariz. 529 (App. 2008) (same-evidence test for identity of claims)
- Phx. Newspapers, Inc. v. Dep’t of Corr., 188 Ariz. 237 (App. 1997) (same-evidence approach explained)
- Mpoyo v. Litton Electro-Optical Sys., 430 F.3d 985 (9th Cir. 2005) (denial of leave to amend can have preclusive effect)