Mangaoang v. Special Default Services, Inc.

Background

Cecilia Mangaoang, proceeding without a lawyer, sued Trinity Financial Services, LLC; Newport Beach Holdings, LLC; Wilmington Trust; Select Portfolio Servicing, Inc.; and Special Default Services, Inc. The dispute concerned two loans secured by deeds of trust on property identified in the opinion as 2901 Capewood Lane, San Jose, California. The property was later sold to Trinity Financial Services at a public auction on November 5, 2018, according to a recorded trustee’s deed.

Mangaoang’s federal complaint asserted four causes of action against all defendants: quiet title, violations of the Fair Debt Collection Practices Act, two counts of replevin, and defamation. She also asserted wrongful foreclosure against Special Default Services, Trinity Financial Services, and Newport Beach Holdings, and cancellation of instruments against Special Default Services and Newport Beach Holdings. Shortly after filing the complaint, she asked to record a lis pendens, which is a recorded notice that a lawsuit may affect title to or possession of real property.

The defendants filed three motions to dismiss and requests for judicial notice. They argued, among other things, that Mangaoang’s claims were barred by judicial estoppel, a doctrine that can prevent a party from taking inconsistent positions in different court proceedings, and that the complaint failed to state legally sufficient claims. Mangaoang argued that she had been unaware of the claims during her 2017 and 2018 bankruptcy cases, that any omissions were mistakes, and that she should be allowed to amend the complaint.

Judicial Notice

The court granted the defendants’ requests for judicial notice. It determined that recorded property documents and publicly available records from Mangaoang’s bankruptcy cases, related adversary proceeding, unlawful-detainer action, and state-court action were proper subjects of judicial notice. The court also found that the recorded documents were incorporated into the complaint because Mangaoang repeatedly referred to them.

Judicial Estoppel

The court concluded that Mangaoang was judicially estopped from pursuing the federal claims. It found that the events underlying the lawsuit had occurred by January 6, 2017, when the first notice of trustee’s sale was recorded, giving Mangaoang knowledge of enough facts to know that a potential claim existed. She later filed two bankruptcy cases and answered “No” when asked whether she had claims against third parties or other contingent and unliquidated claims. The bankruptcy schedules also identified defendants’ interests in the property and did not state that those interests were disputed.

The court found that these bankruptcy filings took positions inconsistent with the claims later asserted in the federal lawsuit. It also found that the bankruptcy court had accepted those positions because Mangaoang received the benefit of the automatic bankruptcy stays, even though the bankruptcy cases were ultimately dismissed. Finally, the court found that failing to disclose the claims gave Mangaoang an unfair advantage and undermined the bankruptcy process.

Mangaoang argued that the omissions were mistakes and that she did not know about the claims. The court rejected that explanation. It noted that related complaints filed during the fourth bankruptcy included causes of action identical to those asserted in the federal case, giving Mangaoang opportunities to amend her bankruptcy schedules. Because she had not reopened the bankruptcy cases to correct the omissions, the court applied a presumption that the omissions reflected deliberate manipulation. The court found that she did not overcome that presumption.

Leave to Amend

The court denied leave to amend. It explained that amendment could not cure the problem because the judicially noticed documents established the inconsistent bankruptcy positions, the bankruptcy court’s acceptance of those positions, and the resulting unfair advantage. The court therefore determined that nothing Mangaoang could add to the complaint would restore the claims’ viability.

Lis Pendens Motion

The court denied Mangaoang’s motion to record a lis pendens. Because all of her claims were barred by judicial estoppel and could not be fixed by amendment, the court concluded that she had no active claims that could justify recording a notice affecting title to the property.

Disposition and Classification

The court granted the defendants’ respective motions to dismiss, granted the defendants’ requests for judicial notice, and denied Mangaoang’s motion to record a lis pendens. All claims in the complaint were dismissed without leave to amend, and the Clerk was directed to close the file. The court did not reach the defendants’ remaining arguments for dismissal. This is a procedural order because the court dismissed the claims on the threshold ground of judicial estoppel rather than deciding the underlying foreclosure, loan, or property claims on their merits.