Cross-defendants John Sheputis and Sheputis DC Investments, LLC’s Demurrer to Additional Cross-complaint
JULY 22, 2026 LAW AND MOTION CALENDAR Judge NICOLE S. HEALY, DEPARTMENT 28 ________________________________________________________________________
02:00 PM LINE 2 23-CIV-04242 ZABALLA SQUARE INVESTMENTS L.P. VS. JOHN SHEPUTIS, ET AL.
ZABALLA SQUARE INVESTMENTS L.P ROBERT R. CROSS JOHN SHEPUTIS ADRIAN J. SAWYER
Cross-defendants John Sheputis and Sheputis DC Investments, LLC’s Demurrer to Additional Cross-complaint
TENTATIVE RULING:
Additional Cross-Defendants John Sheputis and Sheputis DC Investments, LLC’s Demurrer to each cause of action in the Additional Cross-complaint of George Cresson is SUSTAINED with leave to amend as to the first cause of action for fraud, second cause of action for breach of fiduciary duty, fourth cause of action for professional negligence, fifth cause of action for waste, and sixth cause of action for defamation, and SUSTAINED without leave to amend as to the third cause of action for conspiracy, pursuant to Code of Civil Procedure, section 430.10, subdivision (e).
A. Legal Standard
“[I]t is well settled that a general demurrer admits the truth of all material factual allegations in the complaint [citation]; that the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court [citations]; and that plaintiff need only plead facts showing that he may be entitled to some relief [citation].” (John’s Grill, Inc. v. The Hartford Financial Services Group, Inc. (2024) 16 Cal.5th 1003, 1013 (John’s Grill), quoting Alcorn v.
Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496 (Alcorn).) A court reviewing a demurrer accepts as true the facts alleged in the complaint as well as those of which it may take judicial notice (John’s Grill, supra, 16 Cal.5th at p. 1008, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318), but does not “assume the truth of contentions, deductions or conclusions of law.” (
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“[I]t is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Aubry, supra, 2 Cal.4th at p. 967.) Leave to amend should not be granted where, in all probability, amendment would be futile. (Foroudi, supra, 57 Cal.App.5th at p. 1001.) The party seeking leave to amend has the burden of demonstrating the possibility that amendment can cure the legal defects of the pleading. (A.J. Fistes, supra, 38 Cal.App.5th at p. 687.)
B. Fraud
The elements of a cause of action for fraud are: (1) a misrepresentation, which can be a false representation, concealment, or nondisclosure of a material fact; (2) knowledge of falsity or scienter; (3) intent to defraud or induce reliance; (4) actual and justifiable reliance by the
JULY 22, 2026 LAW AND MOTION CALENDAR Judge NICOLE S. HEALY, DEPARTMENT 28 ________________________________________________________________________ plaintiff; and (5) resulting damages. (Berry v. Frazier (2023) 90 Cal.App.5th 1258.) Each of the elements must be pled with specificity. (Lazar v. Superior Court (1996) 12 Cal.4th 631.)
Cross-defendants demur on the grounds that the Additional Cross-complaint does not allege when false statements were made, by what means, or the nexus between any misrepresentation and harm to Cross-complainant Cresson. The Additional Cross-complaint does not allege with the requisite specificity that the statements were false when made. The nexus between misrepresentations and damages is also insufficiently pled.
The Additional Cross-complainant alleges that “Cross-Defendants made false statements, concealed facts, and failed to disclose other facts to CRESSON.” (Additional Cross-complaint, ¶ 34.) However, the pleading does not contain allegations regarding when the statements were made, or by what means, or what facts were purportedly omitted. For example, Cresson alleges that: “SHEPUTIS DC INVESTMENTS and SHEPUTIS promised to acknowledge that a $975,000 investment made by SHEPUTIS DC INVESTMENTS would constitute payment for control of DANVILLE PROPERTY [sic] and that he would take any and all steps would to make clear that ZABALLA was not liable for any part of the $975,000 including the step marking a note payable by ZABALLA in the amount of $975,000 (which note was in SHEPUTIS’ possession but never funded to ZABALLA) ‘superseded and replaced’ and returning the original of the note to CRESSON.” (Id., ¶ 4.)
Cresson does not allege to whom the purported promise was allegedly made, or when, or how.
The allegations are particularly murky as to when any false representations were allegedly made, and when Cresson learned that they were allegedly untruthful. Cresson further does not make clear what the “true facts” were that Sheputis purportedly concealed, nor the specific promises made, nor how, when, and to whom. (See Additional Cross-complaint, ¶¶ 9-10.) Counsel’s efforts to expand the allegations by offering new facts and explanations in his opposition to the demurrer is inappropriate and the court has disregarded those arguments.
The demurrer is accordingly SUSTAINED as to this cause of action with leave to amend.
The court further questions whether the claims are time-barred. Cresson does not adequately explain what appears to be a long delay between the events concerning the alleged fraud as to the Danville Property and the $975,000 note (all of which appear to have occurred some time before 2015), and the fact that he waited until now to bring this cross-complaint. Cresson contends that he learned during Sheputis’s deposition in the underlying action that Sheputis never intended to honor any agreements regarding the Danville Property or the note. (See Additional Cross-complaint, ¶¶ 9-10.)
However, it also appears that information regarding Sheputis that Cresson claims was concealed has been publicly available for some time. That is, Cresson alleges that he recently learned that Sheputis falsely claimed to have been exonerated in a lawsuit brought in San Mateo County Superior Court, CIV480548. (Additional Cross-complaint, ¶¶ 20-23, 27-28.) The court’s docket indicates that judgment was entered against Sheputis on December 14, 2015 and Cresson
JULY 22, 2026 LAW AND MOTION CALENDAR Judge NICOLE S. HEALY, DEPARTMENT 28 ________________________________________________________________________ does not allege when he purportedly learned that Sheputis’s claims regarding that lawsuit were false.
This case is set for trial as to the underlying action on October 26, 2026. The parties are to appear at a case management conference on August 19, 2026 to discuss the effect of the Additional Cross-complaint on the trial date.
C. Breach of Fiduciary Duty
The elements of a cause of action for breach of fiduciary duty are: (1) the existence of a fiduciary duty; (2) breach of that duty; and (3) damage proximately caused by the breach. The absence of any one of these elements is fatal to the claim. (See CACI No. 4100 (2026); Williamson v. Brooks (2017) 7 Cal. App.5th 1294, 1300; Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 932.)
Cross-defendants assert that Cresson fails to allege facts showing that they owed him a fiduciary duty. Cresson argues that he has done so by pleading the existence of a joint venture and the ultimate facts required to support the cause of action, citing paragraphs 2-3 and 39-42 of the Additional Cross-Complaint. (Opp., at p. 11:17-18.) The Additional Cross-complaint does not allege a joint venture at the cited paragraphs or anywhere else, and does not otherwise allege facts showing that he was owed a fiduciary duty.
The demurrer is accordingly SUSTAINED as to this cause of action with leave to amend.
D. Conspiracy
Cross-defendants argue that the demurrer should be sustained without leave to amend as to this cause of action because conspiracy is not a cause of action, but merely a theory of liability. “Conspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration. [Citation.]” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd (1994) 7 Cal.4th 503, 510-511.) Cross-complainant does not address this cause of action in the Opposition.
The demurrer is therefore SUSTAINED without leave to amend as to this cause of action.
E. Professional Negligence
The elements of a cause of action for professional negligence are (1) a professional having a duty to use such skill, prudence, and diligence as other members of the profession commonly possess and exercise, (2) breach of that duty, (3) a proximate causal connection must exist between the negligent conduct and the resulting injury, and (4) actual loss or damage resulting from the professional’s negligence. (Hasso v. Hapke (2014) 227 Cal.App.4th 107.)
JULY 22, 2026 LAW AND MOTION CALENDAR Judge NICOLE S. HEALY, DEPARTMENT 28 ________________________________________________________________________ Sheputis is alleged to be a real estate developer, with no facts supporting a professional relationship of the kind supporting the cause of action, or of a duty of care.
The demurrer is accordingly SUSTAINED as to this cause of action with leave to amend.
F. Waste
A cause of action for waste must be supported by allegations of acts which injuriously affect the market value of the property at issue, since evidence of those actions is required to prove the claim. (See Rowe v. Wells Fargo Realty Services, Inc. (1985) 166 Cal. App. 3d 310, 319.) Cross-defendants argue that this cause of action is subject to demurrer because Cresson does not plead the facts that injuriously affected the market value of the property and does not plead facts showing standing. The Additional Cross-complaint alleges that Cross-defendants “mismanaged and caused waste to the DANVILLE PROPERTY in ways that harmed CRESSON.” (Additional Cross-Complaint, ¶ 30.)
These allegations are conclusory. Cresson argues that he can “add specific allegations of the Joint Venture to develop the Danville Property, Sheputis’s failure to pay real estate taxes and other financial obligations fundamental and assumed to be undertaken as part and parcel to real property ownership.”
The demurrer is accordingly SUSTAINED as to this cause of action with leave to amend.
G. Defamation
Cross-defendants demur on the grounds that the Additional Cross-complaint does not allege the substance of any defamatory statements. Cresson concedes that he has not sufficiently pled a cause of action for defamation, asserting that “Cresson can amend his defamation cause of action to satisfy the pleading requirements identified by Sheputis” by alleging that “Sheputis undertook a campaign to ostracize Cresson and his wife by communicating to mutual friends that Cresson had refused to repay debts allegedly owed to Sheputis.” (Opp. at p. 13:17-19.)
The demurrer is accordingly SUSTAINED as to this cause of action with leave to amend.
Cresson may file a First Amended Additional Cross-Complaint within ten (10) days of notice of entry of the formal order.
If the tentative ruling is uncontested, it shall become the order of the court. Thereafter, additional cross-defendants’ counsel shall prepare a written order consistent with the court’s ruling for the court’s signature, pursuant to California Rules of Court, Rule 3.1312 and Local Rule 3.403(b)(iv), and provide written notice of the ruling to all parties who have appeared in this action. The order should be e-filed only, do not email or mail a hard copy to the court.