SHELLEY JENSEN vs BARRY STERN

City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) A general demurrer admits the truth of all factual, material allegations properly pled in the challenged pleading, regardless of possible difficulties of proof. (Blank, supra, 39 Cal.3d at p. 318.) Thus, no matter how unlikely or improbable, the allegations must be accepted as true for the purpose of the demurrer. (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604.) But this rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken. (Vance v.

Villa Park Mobilehome Estates (1995) 36 Cal.App.4th 698, 709.) A general demurrer does not admit contentions, deductions, or conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take

2025CUBC036991: SHELLEY JENSEN vs BARRY STERN

judicial notice. (Blank, supra, 39 Cal.3d at p. 318.) “‘Where written documents are the foundation of an action and are attached to the complaint and incorporated therein by reference, they become a part of the complaint and may be considered on demurrer.’ [Citations.]” (County of San Bernardino v. Sup. Ct. (2022) 77 Cal.App.5th 1100, 1107.) “[W]e give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.) “The rules of pleading [generally] require only general allegations of ultimate fact. [Citations.]

The plaintiff need not plead evidentiary facts supporting the allegation of ultimate fact. [Citation.] A pleading is adequate so long as it apprises the defendant of the factual basis for the plaintiff's claim.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1469-1470.) Application

As a preliminary matter the Court notes that Cross-Defendant chose to file the demurrer despite Cross-Complainant’s offer to file a Third Amended Cross Complaint (TACC) to clarify the allegations in response to the issues raised. (See Wester dec. ¶¶ 6-7.) As a result, the Opposition and Reply spend a significant amount of time arguing about the potential sufficiency of the TACC, instead of the operative Second Amended Cross Complaint (SACC). That is not appropriate for the consideration of the instant motion, and the Court will only consider the allegations made in the TACC if the demurrer is sustained, and when determining whether or not to grant leave to amend.

1. Second Cause of Action for Fraudulent Inducement, SACC ¶¶29-40 Cross-Defendant argues that the 3-year statute of limitations facially bars this claim. (See Code of Civil Procedure, section 338, subdivision (d).) Jensen filed the Complaint on January 5, 2025, and Stern filed their Cross-Complaint on April 30, 2025. Stern does not argue that some other limitations period applies; it is undisputed. “It has also been repeatedly held that where a complaint, challenged by general demurrer charging failure to comply with the applicable statute of limitations, does not on its face disclose that the action was necessarily barred, courts should overrule the demurrer and permit the defense to be raised by answer. [Citation].

Conversely, when a complaint shows on its face that it is barred by a statute of limitations, a general demurrer may be sustained and a judgment of dismissal entered. [Citation] Another distinction is this, noted in Valvo v. University of Southern California (1977) 67 Cal.App.3d 887, at page 895, 136 Cal.Rptr. 865: ‘ “ [A] demurrer on the ground of the bar of the statute of limitations does not lie where the complaint merely shows that the action may have been barred. It must appear affirmatively that, upon the facts stated, the right of action is necessarily barred.” ’ [Citation].” (Childs v.

State of California (1983) 144 Cal.App.3d 155, 160- 162.) Here, the SACC alleges that “[b]eginning in or around 2006-2007” Jensen solicited Stern to invest in the real estate venture by preparing and circulating written materials, including a Limited Partnership Agreement, and making oral representations, stating: the “venture was structured as a limited partnership,” “[i]nvestors would be limited partners, and that “[i]nvestor liability would be limited to capital contributions.” (SACC ¶¶ 6-7). “For years” Jensen made the representations that the investors were limited partners in a limited partnership, bearing no personal liability beyond their investment, and “[o]nly after the venture failed” and Jensen faced personal exposure, did he change position and claim that the venture was not a limited partnership, but rather a general

2025CUBC036991: SHELLEY JENSEN vs BARRY STERN

partnership. (SACC ¶¶8, 35 – alleging that Jensen took directly contrary position “[i]n subsequent years”). It is alleged that the underlying debt was actually structured in Jensen’s personal capacity, and that he failed to maintain the limited partnership structure. (SACC ¶9). Specifically, “Jensen failed to properly form, register, or maintain the venture as a limited partnership and instead structured the underlying debt obligations in his personal capacity.” (SACC ¶¶ 32-33). “By 2013, the venture ceased making mortgage payments and ceased operating as a legitimate business enterprise.” (SACC ¶10, see also ¶37 alleging that the “true facts were not apparent until years later, including no earlier than 2013, when the venture ceased operating as a going concern.”) ¶37 of the SACC asserts that as a result of Jensen continuing to demand payments “despite the absence of any legitimate business activity,” it “became apparent that the underlying liabilities were personal to Jensen rather than obligations of a limited partnership.” Accordingly, “Stern did not discover the falsity of Jensen’s representations until no earlier than 2013, when it became apparent that: a.

The venture was no longer functioning; b. Payments were not being used for any legitimate venture purpose; and c. The liabilities were personal to Jensen.” (SACC ¶13, emphasis added). Stern provided written notice of withdrawal from the venture on January 5, 2021. (SACC ¶14). Here the moving-party has the more persuasive argument, and on that basis the Court SUSTAINS the demurrer to this cause of action with leave to amend one final time. While Stern attempts to carve out a narrow fraud claim for purposes of the discovery rule and application of the statute of limitations, based on the formalities of formation, registration, and maintenance of the limited partnership structure which were allegedly misrepresented, it simply makes no sense that Stern would have knowledge that that venture itself ceased functioning in 2013 but then not be on notice of the facts constituting fraud as to the structure and scope of the non-functional venture for another nine years.

Given the significant amount of time, at least some explanation for this substantial amount of time should be set forth in the pleading. (See Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808.) Moreover, the arguments made in the Opposition are not supported by the facts actually alleged in the operative SACC. The allegations are that in 2013 it “became apparent” that liability were personal to Jensen (¶13), and that he continued demanding payment even when it was “apparent that the underlying liabilities were personal to Jensen.” (¶37).

The face of the SACC alleges that there was notice as to the non-functioning nature of the venture as of 2013, Jensen continued to request payment, and that Stern gave notice of withdrawal as of January 5, 2021. ¶37 of the SACC claims that it “became apparent [no earlier than 2013] that the underlying liabilities were personal to Jensen rather than obligations of a limited partnership.” Damages are claimed as of 2013. Those events are all well outside of the applicable limitations period by at least a year, which results in the cause of action being time-barred on the face of the pleading.

Stern needs to specifically explain when he learned that Jensen’s representations about the partnership structure were false, in order to plead around the clear application of the statute of limitations here. In order to be timely asserted, Cross-Complainant would need to allege facts showing the lack of knowledge or tolling the limitations period until 2023 – three years before the First Cross-Complaint was filed with this fraud claim included on March 6, 2026. The SACC uses broad terms like “for years”, “subsequent years” and “years later” (¶¶8, 35, 37) which lack the required specificity. The SACC allegations state that Stern became aware of facts by 2013 that

2025CUBC036991: SHELLEY JENSEN vs BARRY STERN

would make a reasonably prudent person suspicious, which on the face of the pleading bar the fraud cause of action under the application of the three-year statute of limitation. At best, the allegations are ambiguous and confusing, and require clarification regarding Stern’s inability to have made earlier discovery despite reasonable diligence. (See Fox, supra, at p. 808.)

For those reasons, the Court SUSTAINS Cross-Defendant’s Jensen’s demurrer to the second cause of action with leave to amend.

2. Fourth Cause of Action for Breach of Written Contract

Jensen argues that the allegation that Stern performed his obligations under the contract is contradicted by the express terms of the 2007 Agreement and Stern’s admission that he “provided written notice of his withdrawal from the venture” in January 2021 (SACC ¶ 14). The agreement required investors to remain in the group until sale of the lots and did not allow for withdrawal as Stern admitted he attempted. Jensen also argues that the claim fails to identify the contractual language allegedly breached and instead pleads only generalized conclusions about “structure” and “expectations.” The Court finds that the allegations are sufficient to state a breach of contract claim, and factual arguments about the content and meaning of the underlying agreement will need to wait for dispositive motion(s) or trial.

The resolution of whether the contractual provisions highlighted by Jensen are controlling and bar this claim is not appropriate at the demurrer stage. Since the Court finds the alleged breach of contractual terms is adequate under the notice pleading standard, it OVERRULES the demurrer as to this cause of action.

3. Fifth Cause of Action for Breach of Implied Covenant of Good Faith and Fair Dealing

Jensen’s argument that the claim is duplicative of the contract claims is rejected because alternative pleading is permissible. The Court finds that this cause of action is adequately pled and thus OVERRULES the demurrer.

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