The opinion of the court was delivered by: Amy Berman Jackson United States District Judge
In this civil action transferred from the Northern District of California, plaintiffs Steven and Aster Thompson, proceeding pro se, seek monetary damages from the Federal Deposit Insurance Corporation ("FDIC") in its capacity as receiver for Washington Mutual Bank. The complaint arises from the Bank's foreclosure on plaintiffs' property in Castroville, California in 2007. FDIC moves to dismiss plaintiffs' first amended complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and Rule 12(b)(6) for failure to state a claim upon which relief can be granted. It argues that this action is barred by res judicata since plaintiffs have already unsuccessfully challenged the same foreclosure in state court in California. Upon consideration of the parties' submissions, the court agrees that the complaint is procedurally barred and, thus, it will grant defendant's motion to dismiss under Rule 12(b)(6).*fn1
Plaintiffs allege that they purchased property in Castroville, California, in 1994 for $345,000. According to the amended complaint, "for several years," plaintiffs paid their monthly mortgage on time. Am. Compl. [Dkt. # 15] at 2. The initial monthly mortgage was $1,500, but "the mortgage payments started to climb up to . . . $4,500 per month." Id. In 2007, plaintiffs could no longer meet their monthly mortgage obligation, and they filed for bankruptcy. Plaintiffs allege: "[i]t was determined by the Court that [plaintiffs'] Homestead was a protected interest and Washington Mutual was barred (via stay) from foreclosing on several occasions." Id. "After much wrangling and motions to sell without excessive liens and encumbrances . . . the liens were removed and the property was to be sold for $770,000.00.." Id. Plaintiffs state that they found a willing buyer for that amount and an escrow account was opened. Meanwhile, they claim, the stay issued by the bankruptcy court "lapsed and Washington Mutual foreclosed on the property without notice and in violation of California law." Id. "[I]n the ensuing weeks, Washington Mutual did not respond to several calls[,] [which] caused the buyers to back out of the deal." Id. "The Bankruptcy Court then decided that this was a State Court issue and dismissed the claimant's case without prejudice so the Claimants could seek relief in the Monterey County Superior Court." Id. at 3.
Plaintiffs allege that they filed a complaint in the Superior Court against Washington Mutual, "but the FDIC stepped in and halted the proceedings since Washington Mutual was in receivership." Id. They state that the "FDIC disallowed the claim and sent the plaintiffs a letter stating . . . that [p]ursuant to 12 U.S.C. [§] 1821, [the] U.S. District Court was the proper Court to file any lawsuit." Id. Plaintiffs seek $770,000 in monetary damages "to compensate them for their loss which the Defendants directly caused." Am. Compl. ¶ 5.
The court records supplied by FDIC in support of its motion to dismiss add more detail to this account. As they allege, plaintiffs filed for bankruptcy under Chapter 7 on February 5, 2007, in the United States Bankruptcy Court for the Northern District of California. See Req. for Judicial Notice in Supp. of Mot. for J. on the Pleadings, or in the Alternative, Mot. to Dismiss First Am. Compl. [Dkt. # 32], Def's Ex. 1.*fn2 But on July 18, 2007, Washington Mutual was granted relief from the automatic stay entered by the bankruptcy court pursuant to 11 U.S.C. § 362, and it was expressly permitted to enforce its rights in the real property under the note and deed of trust. See Def.'s Ex. 5 (Reply Brief Re: Compl. to Determine Validity of Foreclosure, Mot. to Void Foreclosure, and Mot. for TRO ¶¶ 4-5). Indeed, on June 26, 2007, plaintiffs filed a "Conditional Non-Opposition" to the bank's request for relief "[a]s long as [they] receive[d] $75,000 from the proceeds of the sale to satisfy their Homestead Exemption . . . ." Def.'s Ex. 2. Pursuant to the bankruptcy court's order, the automatic stay as to Washington Mutual terminated on September 27, 2007, and Washington Mutual was then authorized to foreclose on the property, which it did on October 22, 2007. Def.'s Ex. 5 (Reply Brief ¶¶ 5-6).
After the foreclosure, plaintiffs filed an adversary proceeding in the bankruptcy court, seeking to void the foreclosure for lack of notice. Def.'s Ex. 4 (Compl. to Determine Validity of Foreclosure, Mot. to Void Foreclosure and Mot. for TRO). During those proceedings, the parties engaged in settlement discussions, and Washington Mutual gave plaintiffs additional time to sell their home, all to no avail. See Def.'s Ex. 5 (Reply Brief ¶¶ 9-11). On July 10, 2008, the bankruptcy court issued plaintiffs a full discharge and closed their case. Def's Ex. 7. On December 9, 2008, the bankruptcy court dismissed the adversary proceeding without prejudice based on plaintiffs' failure to comply with an order to show cause why the case should not be dismissed. Def.'s Ex. 8.
Meanwhile, in May 2008, plaintiffs filed an action in Monterey County Superior Court, seeking to set aside the foreclosure based on Washington Mutual's alleged "malicious" and "prejudicial" actions and its failure to comply with state law by providing notice prior to the foreclosure sale. Def.'s Ex. 6 (Pet. to Set Aside Foreclosure at 2-3). On September 25, 2008, the Office of Thrift Supervision declared Washington Mutual insolvent and appointed FDIC as its Receiver. Def.'s Ex. 10 (Ex. 10.A Letter). FDIC accepted the appointment and, on January 22, 2009, was substituted as the real party in interest in the Superior Court case.
By Order of March 6, 2009, Superior Court Judge Susan M. Dauphine granted FDIC's motion for judgment on the pleadings after "having reviewed the materials submitted and considered the oral arguments," Def.'s Ex. 11, at which plaintiffs did not appear. See Def.'s Ex. 13 (Final Judgment). In its motion, FDIC had argued that: (1) the complaint failed to state a claim against it, (2) the foreclosure was not reversible, it was authorized by the bankruptcy court, and it complied with state law, and (3) plaintiffs had failed to name the then mortgage holder, JP Morgan Chase, as an indispensable party. See generally Def.'s Ex. 9 (Mem. of P. & A. in Supp. of Mot. for J. on the Pleadings, or in the Alternative, Mot. to Dismiss Compl.).
Plaintiffs moved to vacate the order granting FDIC's motion for judgment, and this time, they participated in a hearing by telephone on April 17, 2009. But Judge Dauphine entered final judgment for FDIC on April 23, 2009. See Def.'s Ex. 13.
On November 23, 2009, plaintiffs filed the instant action in the Northern District of California, again challenging the foreclosure on notice grounds. The court determined that it lacked jurisdiction under the Financial Institutions Reform and Recovery Enforcement Act of 1989, and it transferred the case to this judicial district. See Order Transferring Case to the District of Columbia [Dkt. # 35].
Under the doctrine of res judicata, a claim previously adjudicated on the merits by a court of competent jurisdiction is foreclosed from being relitigated in a new action. Specifically, "a subsequent lawsuit will be barred if there has been prior litigation (1) involving the same claims or cause of action, (2) between the same parties or their privies, and (3) there has been a final, valid judgment on the merits, (4) by ...