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Johnston v. Irontown Housing Company, Inc.

United States District Court, S.D. California

April 18, 2014



THOMAS J. WHELAN, District Judge.

Pending before the Court is Plaintiffs Heather Johnston's and David F. Dickens' motion to file a supplemental complaint to allege fraudulent transfers of Defendants' assets. Plaintiffs also seek to join Defendants' purported transferees.

The Court decides the matter on the papers submitted without oral argument pursuant to Civil Local Rule 7.1(d.1). For the reasons discussed below, the Court DENIES Plaintiffs' motion to file a supplemental complaint [Doc. 57].


Defendant IHC is a Utah corporation or other form of business entity which manufactures modular housing in Utah and does substantial business in California. ( Compl. [1], ¶ 2.) Plaintiffs are California residents who purchased a residential lot in La Jolla, California with plans to build a custom-designed modular home. ( Id., ¶¶ 1, 10.)

On April 12, 2012, Plaintiffs entered into a written Sales and Purchase Contract (the "Contract") with Defendants for the purchase of a modular home. ( Id., ¶ 15.) Under the Contract, Defendants are responsible for "build[ing] the Structure" according to specification, "arrang[ing] the delivery of the Structure modules to the Site, " "weatherproofing and protecting the Structure modules on-site, setting the modules on the foundation, stitching the modules together and [performing] on-site construction, as set forth in the Contract Documents." ( Contract [2], 30.) Defendants are also responsible for "trenching and installation of pipe, conduit and wiring unless said wiring, pipe or conduit must be installed by Utility Company." ( Id. )

Once Defendants' manufacture of the modules was completed, inspected, and approved, the modules were delivered to Plaintiffs' lot for assembly and installation. ( Compl., ¶ 19.) Plaintiffs contend that on or about September 2012, they noticed a problem with the roof installation and notified Defendants. ( Id., ¶ 21.) Subsequently, Defendants and their subcontractors made "multiple botched repair attempts" to the roof. ( Id., ¶ 22.) Plaintiffs also allege that, upon removing and replacing the roof, they discovered additional defects and discrepancies with the manufacture and assembly of the modules and that Defendants had failed to make "critical repairs" to the electrical system that they claimed to have made. ( Id., ¶ 24.) Moreover, Plaintiffs allege that incorrect hangar hardware was used, doors and windows were out of plumb, electrical fire hazards resulted from improper wiring, a major support beam was installed upside down, and HVAC vents and ducts were damaged. ( Id., ¶ 26.)

On or about January 8, 2013, Plaintiffs filed a lawsuit in the San Diego Superior Court alleging causes of action for recovery of compensation paid to an unlicensed contractor under California Business and Professions Code § 7031(b), breach of contract, fraud, negligent misrepresentation, unfair trade practices, and unjust enrichment. ( Compl., ¶¶ 27-54.) Defendants then removed the action to this Court on March 6, 2013, pursuant to 28 U.S.C. § 1441(b). ( Notice of Removal, 1-5.)

Plaintiffs now move to file a supplemental complaint in order to allege that Defendants Irontown Housing and Richard Valgardson have fraudulently transferred assets in order to deprive Plaintiffs of recovery in this lawsuit. ( See Mt. [Doc. 57], 3:7-13.) Plaintiffs also seek to join as transferee defendants Novatek, Inc., KEB Enterprises, KEB Homes, and Star Trust. ( Id. )


A. Supplemental Pleading

A motion to file a supplemental pleading is governed by Federal Rule of Civil Procedure 15(d), which provides:

On motion and reasonable notice, the court may, on just terms, permit a party to serve a supplemental pleading setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented. The court may permit supplementation even though the original pleading is defective in stating a claim or defense. The court may order that the opposing party plead to the supplemental pleading within a specified time.

This rule is "intended to give district courts broad discretion in allowing supplemental pleadings... The rule is a tool of judicial economy and convenience. Its use is therefore favored." Keith v. Volpe , 858 ...

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