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De La Torre v. Icenhower

October 28, 2009


The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge


Defendants Jerry L. Icenhower and Donna Lee Icenhower move to dismiss Plaintiffs Martha Margarita Barba De La Torre and Alejandro Diaz's First Amended Complaint ("FAC") for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). For the reasons discussed below, the Court GRANTS the Motion to Dismiss the first, second, and fourth causes of action, and DENIES the Motion to Dismiss Plaintiffs' third cause of action for equitable subrogation and indemnity.


On July 7, 2009, Plaintiffs filed their FAC. At that time, the original complaint, which was filed on May 29, 2009, had not been served on Defendants.

Plaintiffs allege that Defendants Jerry and Donna Icenhower (collectively "Defendants") defrauded them by indirectly selling to Plaintiffs a villa in Mexico that was subject to undisclosed encumbrances. The following are factual allegations of the Complaint and are not findings of the Court. In 1995, Defendants purchased a beneficial interest in the villa from the Lonie Family Trust.*fn1 (FAC ¶ 16-17.) But Defendants failed to pay the purchase price, and in 2000 the Lonie Trust sued Defendants in the United States District Court for the Southern District of California. (FAC ¶ 17.) The Lonie Trust ultimately prevailed, and in 2003 the court entered judgment against Defendants. The judgment required them either to pay nearly $1.5 million for breaching the purchase agreement, or to reconvey the villa to the Lonie Trust. (FAC ¶ 19). The court further ordered Defendants to re-register a lien against the villa, which Defendants failed to do. (FAC ¶ 19-20.)

Before that judgment was entered, however, Defendants had already transferred their interest in the villa to Defendant Howell & Gardner Investors, Inc. ("H&G"), a Nevada shell corporation. (FAC ¶ 18.) Defendants received virtually no consideration for the transfer because, Plaintiffs allege, H&G was the Defendants' alter ego. (FAC ¶ 12.) H&G was never capitalized, never issued shares, and never transacted any business other than to sell the villa to Plaintiffs. (FAC ¶¶ 12, 18.) H&G, therefore, purportedly owned the beneficial interest in the villa when the court entered the 2003 judgment against Defendants.

Shortly after the $1.5 million judgment was entered, on December 15, 2003 Defendants filed a Chapter 7 Petition for bankruptcy, staying enforcement of the judgment. (FAC ¶ 20.) The bankruptcy trustee eventually discovered that Defendants had transferred the villa to H&G, and in August of 2004 the trustee filed a fraudulent conveyance action to avoid the transfer and return the villa to the bankruptcy estate. (FAC ¶ 23.) Soon thereafter, Defendants caused H&G to transfer its interest in the villa once again-this time to Plaintiffs for about $1.5 million. (FAC ¶ 21-22.) Plaintiffs paid this sum to Defendants and their associated entities. (Id.)

Plaintiffs allege that the Defendants made several false representations to Plaintiffs during the negotiations and in the purchase agreement for the villa, including that the villa had marketable title. (FAC ¶¶ 21, 35-38.)

In February of 2005, the trustee learned of the villa's transfer to Plaintiffs and amended the adversary complaint to add them as defendants in the avoidance action. (FAC ¶ 24.) The court issued an injunction preventing Plaintiffs from transferring or encumbering the villa. (FAC ¶ 24.)

In June of 2008, the bankruptcy court issued Consolidated Findings of Fact and Conclusions of Law, which found, among other things, that H&G was Defendant's alter ego; that Defendant's bankruptcy estate and H&G should be consolidated nunc pro tunc to the petition date; that the transfer of the villa from Defendants to H&G was an avoidable, fraudulent transfer; and that the transfer of the villa from H&G to Plaintiffs was an avoidable, post-petition transfer. (FAC ¶ 28.) The court ordered Plaintiffs to reconvey the villa to a trust naming Kismet Acquisitions*fn2 the beneficiary, or, if Kismet preferred, to pay damages. (FAC ¶ 28.)

Plaintiffs appealed the bankruptcy court's order and did not immediately comply. (Id.) As a result, in November of 2008 the bankruptcy court held Plaintiffs in contempt and assessed nearly $1.5 million in coercive and remedial sanctions. (FAC ¶ 29.) Plaintiffs have appealed the contempt order. (Id.) Lastly, on November 25, 2008 Plaintiffs executed a form of agreement that the bankruptcy court deemed complied with its judgment. (FAC ¶ 29.)

Plaintiffs allege four causes of action against all Defendants: (1) fraud for misrepresentation in the sale of the villa from H&G to Plaintiffs; (2) imposition of a constructive trust on the purchase money Plaintiffs paid to Defendants; (3) equitable subrogation and indemnification for costs and penalties arising from the bankruptcy action; and (4) negligence per se for failing to comply with the 2003 order to re-register a lien on the villa and for failure to disclose timely the villa transaction in Defendants' bankruptcy case (against Defendants Jerry Icenhower and Donna Icenhower only).

Defendants Jerry and Donna Icenhower have moved to dismiss the FAC in its entirety under Fed. R. Civ. P. 12(b)(6), arguing that the ...

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