Filed 12/16/13 Kronk v. Landwin Group CA2/7
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.


              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                DIVISION SEVEN


MICHAEL KRONK,
                                                                     B244238
         Plaintiff and Appellant,
                                                                     (Los Angeles County
         v.                                                          Super. Ct. No. BC470901)

LANDWIN GROUP LLC et al.,

         Defendants and Respondents.


MICHAEL KRONK,                                                       B244267

         Plaintiff and Appellant,                                    (Los Angeles County
                                                                     Super. Ct. No. BC470904)
         v.

LANDWIN GROUP LLC et al.,

         Defendants and Respondents.



         APPEALS from orders of the Superior Court of Los Angeles County, Elihu M.
Berle, Judge. Affirmed.
         Law Offices of Andrew M. Wyatt and Andrew M. Wyatt for Plaintiff and
Appellant, Michael Kronk.
       Quinn Emanuel Urquhart & Sullivan, Richard A. Schirtzer and Molly Stephens for
Defendants and Respondents, Landwin Group, LLC, Sylvia, Inc. and Martin Landis.
       Stone Cha & Dean, Kristi W. Dean and Amy W. Lewis for Defendant and
Respondent, Marshall Reddick.
       Sigelman Law Corp. and Paul Sigelman for Defendant and Respondent, Tom
Casault.
       Law Offices of Stanton Lee Phillips and Stanton Lee Phillips for Defendant and
Respondent, Landwin Management LLC.
       Law Offices of Stanton Lee Phillips and Stanton Lee Phillips for Defendants and
Respondents, Landwin Management, LLC, and Landwin Partners Fund I, LLC.
                            ____________________________


       Michael Kronk purchased one membership unit in Landwin Management, LLC
(Landwin Management) in a private offering on March 6, 2005. Kronk purchased a
membership unit in Landwin Partners Fund I, LLC (Landwin Fund) in a private offering
on February 17, 2007. In October 2011, after unsuccessfully pursuing actions under the
federal securities laws relating to the two investments, Kronk filed separate, putative
class action lawsuits against Landwin Group, LLC and others involved in the issuance
and promotion of the two securities, alleging they had been unlawfully sold by non-
                                                                               1
registered broker-dealers in violation of Corporations Code section 25501.5. The
superior court sustained demurrers without leave to amend and dismissed both lawsuits
on the ground they were barred by the statute of limitations. We affirm.

1
        Corporations Code section 25501.5, subdivision (a), provides in part, “A person
who purchases a security from or sells a security to a broker-dealer that is required to be
licensed and has not, at the time of the sale or purchase, applied for and secured from the
commissioner a certificate under Part 3 (commencing with Section 25200), that is in
effect at the time of the sale or purchase authorizing that broker-dealer to act in that
capacity, may bring an action for rescission of the sale or purchase or, if the plaintiff or
the defendant no longer owns the security, for damages.”
       Statutory references are to the Corporations Code unless otherwise indicated.
                                             2
                 FACTUAL AND PROCEDURAL BACKGROUND
       1. The Landwin Management Investment and the Federal and State Lawsuits
       Landwin Management, a Delaware limited liability company located in Encino,
California, was formed in December 2004 to acquire, hold and manage real estate assets.
It conducted a private offering of membership units between February and August 2005;
the offering raised approximately $13.8 million.
       SmithDennison Capital, LLC (SDC) and Sylvia, Inc. advised and managed
                                                              2
Landwin Management. According to the offering materials, Landwin Management was
to acquire the asset management business from Sylvia, Inc. and certain pools of real
estate assets from Landwin Group for $5.8 million in cash and 199 units (valued at
$9.95 million) to be issued by Landwin Management at the initial closing. SDC and
Sylvia, Inc. were the majority owners and managers of Landwin Group. Martin Landis
has an ownership interest in and is the chief executive officer of Sylvia, Inc. Tom Casault
and Marshall Reddick were officers of Landwin Group.
       Kronk purchased one unit in March 6, 2005 for $50,000 after being introduced to
the investment opportunity by Reddick, who also brought the venture to the attention of

2
        The superior court granted judicial notice of the private placement memorandum
dated February 1, 2005 “because it is a document relied on by Plaintiff in his First
Amended Class Action Complaint.” The court also took judicial notice of five
documents from the related federal securities litigation “because they are the official acts
or records of the federal court for the Central District of California.” The record does not
reflect any objection by Kronk to the Landwin Group’s request for judicial notice of this
material. (Kronk did object to the request for judicial notice of the two subscription
agreements he had signed; the trial court did not judicially notice those documents.)
Nonetheless, without specifying which documents or citing any authority to support his
argument, in a single sentence in each opening brief Kronk contends the court “took
judicial notice of documents [it] should not have done so.” Any issue regarding the
propriety of judicial notice has been forfeited. (See Cal. Rules of Court, rule
8.204(a)(1)(B) [appellate brief must “[s]tate each point under a separate heading or
subheading summarizing the point and support each point by argument and, if possible,
by citation of authority”]; Kaufman v. Goldman (2011) 195 Cal.App.4th 734, 743
[appellate court may treat as forfeited any argument not “supported by both coherent
argument and pertinent legal authority”].)
                                             3
other investors with whom he had previously dealt through the Marshall Reddick Real
Estate Network. In his first amended complaint in Los Angeles Superior Court case
                                                           3
No. BC470901 (LASC BC470901), filed April 17, 2012, Kronk alleged he was unaware
at that time he was purchasing an unregistered security from unlicensed broker-dealers
and contended he did not learn this fact until he was given a copy of the private
placement memorandum, dated February 1, 2005, by another investor in October 2008.
       The first amended complaint for violation of section 25501.5 and negligent
referral, a putative class action filed by Kronk on behalf of himself and all other similarly
situated investors who had purchased units in Landwin Management between February 1
and August 15, 2005, named as defendants, among others, Landwin Group, SDC, Sylvia,
Inc., Landis, Casault and Reddick. Landwin Management itself was named only as a
nominal defendant. In addition to the unlicensed broker-seller claim, Kronk alleged
secret and/or illegal commissions were paid to several individuals including Landis,
Casault and Reddick. Kronk also alleged Reddick owed the investors who participated in
the Marshall Reddick Real Estate Network a duty of reasonable care when
recommending they purchase units in Landwin Management and had breached that duty
by negligently and unreasonably making false statements regarding the quality of the
investment and the good standing of its promoters.
       Prior to filing his state court complaint Kronk had sued Landwin Group, SDC,
Sylvia, Inc., Landis, Casault and Reddick and various other entities and individuals, as
well as Landwin Management as a nominal defendant, in a federal securities class action
lawsuit with pendent state law claims. In the federal action Kronk alleged in deciding to
invest in Landwin Management he had relied on misrepresentations made at a seminar
hosted by Reddick at which Landis and Casault were also present. According to the
operative second amended complaint, the defendants had violated federal securities laws
by offering for sale unregistered securities through a private offering that did not satisfy
the governing regulatory “safe harbor” requirements, and there were material
3
       The original complaint was filed October 5, 2011.
                                              4
misrepresentations and omissions in the PowerPoint presentation made by the president
of SDC (Sean Dennison) at the investment seminar. In addition, Kronk alleged the
various managers and top officers engaged in a fraudulent scheme to deplete the assets of
Landwin Management through high fees and salaries notwithstanding the entity’s lack of
success and negative cash flow.
       The district court granted in substantial part the defendants’ motions to dismiss the
                                             4
case in a 22-page order dated June 7, 2011. Initially, the court noted Kronk had alleged
for the first time in his second amended complaint that the defendants had failed to
provide him with a copy of the private placement memorandum prior to his February
2005 purchase of a Landwin Management unit. However, the court explained, in his first
amendment complaint Kronk had alleged the private placement memorandum was
materially false and misleading and was an essential link in the accomplishment of the
defendants’ unlawful scheme. Moreover, Kronk acknowledged in the subscription
agreement he signed in connection with the unit’s purchase that he had received and read
the private placement memorandum; and the PowerPoint presentation attached to the
second amended complaint stated investors must receive and read the private placement
memorandum. Accordingly, the court ruled, “Mr. Kronk cannot now allege that neither
he nor any of the other claim members received the [private placement memorandum] or
that it was reasonable for him to rely on statements in the power point presentation
without considering the [private placement memorandum].”
       The court dismissed the securities fraud claims, finding that Kronk had not
adequately alleged an actionable false or misleading misrepresentation or omission by
any of the defendants in either the PowerPoint presentation or the private placement
memorandum or that his reliance on any of the information in the seminar presentation,
rather than the private placement memorandum, was reasonable. Although dismissing all
of Kronk’s other federal securities claims and most of his related state law claims,

4
       The superior court granted the request to take judicial notice of the district court’s
orders. See footnote 2, above.
                                                 5
including alleged violations of sections 25501 and 25504, the court ruled Kronk had
adequately alleged he purchased his unit of Landwin Management from an unlicensed
broker-dealer in violation of section 25501.5. It denied the motion to dismiss as to that
cause of action against Landis, Casault, Reddick and two other individuals, but not as to
any of the defendant entities; it also denied the motion to dismiss the claim for negligent
referral against Reddick. After granting Kronk an opportunity to show cause regarding
an appropriate ground for continued federal jurisdiction over the remaining state law
claims, on June 27, 2011 the court dismissed those two claims, declining to exercise its
                                                                                  5
supplemental jurisdiction under title 28 United States Code section 1367(c)(3).
       2. The Landwin Fund Investment and the Federal and State Lawsuits
       Landwin Fund, a Delaware limited liability company located in Encino, was
formed in March 2006 to engage in real estate and real estate-related investments.
Landwin Management was Landwin Fund’s asset and property manager, supervising
day-to-day operations and selecting its real estate and real-estate related investments.
Landwin Group, now the 41.98 percent owner of Landwin Management, was Landwin
Fund’s “sponsor,” assisting with its formation and organization and the development of
Landwin Fund’s business plan. Landwin Fund conducted a private offering of
membership units between January 16, 2006 and May 1, 2007. The offering raised more
than $20 million.
       Kronk purchased one unit for $50,000 on February 17, 2007. In his first amended
complaint in Los Angeles Superior Court case No. BC470904 (LASC BC470904), filed
April 17, 2012, which is in substantial part a nearly verbatim copy of the first amended
complaint filed in LASC BC470901, Kronk alleged he was unaware he was purchasing
an unregistered security from unlicensed broker-dealers at the time of the investment. He
again contended he did not learn this fact until he was given a copy of the private


5
      The Ninth Circuit affirmed the district court’s decision on May 8, 2013 in a
nonpublished memorandum decision. (Kronk v. Landwin Group, LLC (9th Cir., No. 11-
56191) 2013 U.S.App.Lexis 9345.)
                                             6
placement memorandum, dated May 1, 2006, by another investor in October 2008 (the
same investor who was identified in the related complaint as having provided Kronk a
copy of the Landwin Management private placement memorandum).
       The Landwin Fund first amended complaint for violation of section 25501.5, also
a putative class action, named as defendants, among others, Landwin Group, Sylvia, Inc.,
Landis, Casault and Reddick. Landwin Fund and Landwin Management were both
named as nominal defendants. Once again, in addition to the unlicensed broker-dealer
claim, Kronk alleged the five partners of Landwin Group (Landis, Casault, Reddick and
two others) had received hidden, illegal commissions.
       Kronk’s state court complaint concerning the Landwin Fund investment was
preceded, as was the Landwin Management complaint, by a federal securities class action
lawsuit with pendent state law claims. On June 7, 2011—the same day it granted in
substantial part the various motions to dismiss the Landwin Management action—the
district court in a 21-page order that closely tracks the language in the Landwin
Management order granted the defendants’ motions to dismiss all federal and state law
causes of action in the Landwin Fund lawsuit except for the section 25501.5 claim
                                   6
against the Landwin Group itself. With respect to Kronk’s allegation concerning his
delayed receipt of the private placement memorandum, the court ruled, “[I]n light of
Mr. Kronk’s prior allegations in his First Amended complaint [citation], as well as other
allegations in the Second Amended Complaint admitting that he previously represented
that he had received and read the [private placement memorandum] [citation], Mr. Kronk
cannot now allege that neither he nor any of the other class members received the [private
placement memorandum] or that it was reasonable for him to rely on statements in the

6
       Unlike the decision in the Landwin Management federal action, in the Landwin
Fund action the district court dismissed with prejudice the negligent referral cause of
action against Reddick, finding Kronk had not alleged any facts to show that Reddick
referred him to this investment opportunity.
       The trial court granted the request to take judicial notice of the district court’s
orders. See footnote 2, above.
                                               7
power point presentation without considering the [private placement memorandum].”
The court thereafter declined to exercise its supplemental jurisdiction over that remaining
                   7
state law claim.
       3. The Demurrers to the State Court Complaints; the Trial Court’s Orders
       On May 8, 2012 Landwin Group, Sylvia, Inc. and Landis demurred to the first
amended complaint in LASC BC470901 and filed a separate (but basically identical)
demurrer to the first amended complaint filed by Kronk in LASC BC470904. Reddick
filed his own demurrers to the two pleadings on the same date. Casault and Landwin
Management filed joinders in the Landwin Group demurrer in LASC BC470901, and
Casault, Landwin Management and Landwin Fund joined the Landwin Group demurrer
                       8
in LASC BC470904.
       The Landwin Group, Sylvia, Inc. and Landis demurrers argued (1) the cause of
action for violation of section 25501.5 claim was barred by res judicata as to several of
the defendants (Landwin Group and Sylvia, Inc. in LASC BC470901; Sylvia, Inc. and
Landis in LASC BC470904) because the federal district court had dismissed that claim
with prejudice as to them; (2) the section 25501.5 claim was time-barred under either a
one-year or three-year statute of limitations; (3) Landwin Group, Sylvia, Inc. and Landis
were not broker-dealers within the meaning of section 25501.5, and Kronk did not
purchase his unit from them in any event. Reddick additionally argued that as a licensed
real estate broker, he was exempt from the requirement he register as a broker-dealer and,
as such, was entitled to recover a finder’s fee for his alleged solicitation of Kronk’s
investment. In addition, because he was not regularly engaged in the business of buying
and selling securities, he was also exempted from the definition of broker-dealer.

7
      The Ninth Circuit affirmed the district court’s decision on May 8, 2013 in a
nonpublished memorandum decision. (Kronk v. Landwin Group, LLC (9th Cir., No. 11-
56258) 2013 U.S.App.Lexis 9342.)
8
        Motions to strike certain requests for relief in the first amended complaints and
joinders in those motions were also filed. These were ultimately denied as moot by the
trial court.
                                              8
Reddick also argued, as had the other demurring defendants, that Kronk did not purchase
his unit directly from him and his section 25501.5 claim was barred by the governing
one- or three-year statute of limitations. Finally, he asserted the section 25501.5 claim in
the Landwin Fund action was barred by res judicata and collateral estoppel based on the
district court’s order allowing that claim to proceed only as to Landwin Group. As to the
negligent referral cause of action in LASC BC470901, Reddick argued a real estate
broker has no duty in making recommendations or referrals with regard to real estate
investments and also asserted the negligent referral claim was barred because it was
brought more than two years after the claim accrued.
       In his opposition papers Kronk argued, in part, a four-year statute of limitations
should apply to a section 25501.5 rescission claim and, applying that limitations period
and the appropriate doctrines of equitable tolling, his claims were timely in each lawsuit.
He conceded he had purchased his units from nominal defendants Landwin Management
and Landwin Fund, the issuers of the securities, not any of the defendants identified as
unregistered broker-dealers, but insisted in the context of private placements of this type,
section 255015.5 properly applied to broker-dealers who controlled the issuers. Kronk
also argued the omission of certain of the defendants from the district court’s order
concluding he had pleaded a viable cause of action under section 25501.5 was not fatal to
his state court claim under res judicata or collateral estoppel because the entire claim in
each action had been dismissed without prejudice when the court declined to exercise its
supplemental jurisdiction.
       The court heard arguments on the demurrers in both cases on July 16, 2012.
(Apparently no court reporter was present at the hearing, and no reporter’s transcript has
been prepared as part of either record on appeal.) Based on the allegations in Kronk’s
first amended class action complaints and judicially noticed documents, the court
dismissed the cause of action in each case based on section 25501.5 (sales by unlicensed
broker-dealers) as barred by the statute of limitations whether measured by a one- or
three-year period (that is, either Code Civ. Proc., §§ 340, subd. (a) [one year for an action

                                              9
upon a statute for a penalty or forfeiture], or 338, subd. (a) [three years for an action upon
a liability created by statute other than a penalty or forfeiture].) The court found the
section 25501.5 claim in each case accrued when Kronk purchased his unit from
allegedly unlicensed broker-dealers, concluding Kronk was collaterally estopped from
contending he did not receive the private placement memorandum until October 2008 by
the contrary finding of the federal district court. The court also sustained the demurrer by
Reddick to the negligent referral claim in LASC BC470901 on statute of limitations
grounds.
       Although no signed dismissal or other appealable order had yet been entered,
Kronk filed notices of appeal in each case on September 26, 2012. (See Vibert v. Berger
(1966) 64 Cal.2d 65, 67 [“our courts have held it to be ‘hornbook law that [an] order
sustaining a demurrer is interlocutory, is not appealable, and that the appeal must be
taken from the subsequently entered judgment’”]; see generally Code Civ. Proc., § 581d
[all dismissals ordered by the court “shall be in the form of a written order signed by the
court and filed in the action”].) However, according to the Los Angeles Superior Court’s
civil case summary, judgments were entered in LASC BC470901 and LASC BC470904
on November 14, 2012. Accordingly, pursuant to rule 8.104(d)(1) of the California Rules
of Court, we treat the premature notices of appeal as filed immediately after entry of the
judgments.
                                       DISCUSSION
       1. Standard of Review
       A demurrer tests the legal sufficiency of the factual allegations in a complaint.
We independently review the superior court’s ruling on a demurrer and determine de
novo whether the complaint alleges facts sufficient to state a cause of action or discloses
a complete defense. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415;
Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) We assume the truth of the
properly pleaded factual allegations, facts that reasonably can be inferred from those
expressly pleaded and matters of which judicial notice has been taken. (Evans v. City of

                                             10
Berkeley (2006) 38 Cal.4th 1, 20; Schifando v. City of Los Angeles (2003) 31 Cal.4th
1074, 1081.) We liberally construe the pleading with a view to substantial justice
between the parties. (Code Civ. Proc., § 452; Schifando, at p. 1081.) We also review
de novo issues of statutory construction. (In re Tobacco II Cases (2009) 46 Cal.4th 298,
311; People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 432.)
       Although a general demurrer does not ordinarily reach affirmative defenses, it
“will lie where the complaint ‘has included allegations that clearly disclose some defense
or bar to recovery.’” (Casterson v. Superior Court (2002) 101 Cal.App.4th 177, 183;
accord, Holiday Matinee, Inc. v. Rambus, Inc. (2004) 118 Cal.App.4th 1413, 1421;
Favila v. Katten Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, 224.) “Thus, a
demurrer based on an affirmative defense will be sustained only where the face of the
complaint discloses that the action is necessarily barred by the defense.” (Casterson, at
p. 183; accord, Favila, at p. 224.)
       2. Kronk’s Section 25501.5 Claims Are Barred by the Statute of Limitations
           a. Section 25501.5 claims are subject to a three-year limitations period under
              Code of Civil Procedure section 338, subdivision (a)
       Unlike actions for violations of sections 25500, 25501 and 25502—security
transactions involving misrepresentations, material omissions or unlawful use of insider
            9
information —the Corporations Code does not specify a limitations period for a
rescission action against an unlicensed broker-dealer under section 25501.5.
Accordingly, because liability under section 25501.5 for the sale of a security by an
unlicensed individual is entirely a creature of statute, an action to enforce that liability is
governed by either Code of Civil Procedure sections 338, subdivision (a), which provides
for a three-year limitations period for “[a]n action upon a liability created by statute,

9
       Section 25506 provides actions to enforce any liability created under section
25500, 25501 or 25502 (or section 25504 or 25504.1 insofar as they are related to one of
those three sections) must be brought “before the expiration of five years after the act or
transaction constituting the violation or the expiration of two years after the discovery by
the plaintiff of the facts constituting the violation, whichever shall first expire.”
                                               11
other than a penalty or forfeiture,” or 340, subdivision (a), which establishes a one-year
limitations period for “[a]n action under a statute for a penalty or forfeiture.” (See
County Sanitation Dist. v. Superior Court (1990) 218 Cal.App.3d 98, 106 [“[a]n
obligation is ‘a liability created by statute’ within the meaning of Code of Civil Procedure
section 338, ‘[w]here a statutory scheme has been adopted that gives rise to newly
created rights’ [citation], if the liability was created by law in the absence of an
                                                                          10
agreement [citation], or if the duty is fixed by the statute itself”].)
       Quoting from Goehring v. Chapman University (2004) 121 Cal.App.4th 353, 386-
387, which involved an action for the refund of tuition fees from an unaccredited law
school that had violated statutory disclosure requirements, Landwin Group argues when,
as here, a plaintiff’s actual damage is not an element of the cause of action, the claim
seeks a penalty. (Id. at p. 386 [“‘“‘[t]he California Supreme Court has characterized as a
penalty “any law compelling a defendant to pay a plaintiff other than what is necessary to
compensate him [or her] for a legal damage done him [or her] by the former”’”’”]; see
also Hypertouch, Inc. v. ValueClick, Inc. (2011) 192 Cal.App.4th 805, 843-844
[liquidated damages unrelated to the injury suffered by plaintiff are in the nature of a
penalty].) Because the purchaser of a security from an unlicensed broker-dealer is
entitled to rescind the transaction without proving any actual damage, Landwin Group



10
        Because a claim under section 25501.5 is unquestionably based on a liability
created solely by statute, we reject Kronk’s argument for application of the four-year
limitations period under Code of Civil Procedure section 343, which applies only to
actions for which no other limitations period has been specified. Kronk’s contention his
rescission claim under section 25501.5 is akin to a claim for breach of fiduciary duty,
even were it accurate, does not justify use of a four-year limitations period here.
(Cf. Fuller v. First Franklin Financial Corp. (2013) 216 Cal.App.4th 955, 963
[limitations period for cause of action for breach of fiduciary duty depends on the
gravamen of the claim; if deceit, period is three years rather than catchall four-year
limitations period]; William L. Lyon & Associates, Inc. v. Superior Court (2012) 204
Cal.App.4th 1294, 1313 [breach of fiduciary duty constituting fraud or constructive fraud
is subject to a three-year statute of limitations under Code Civ. Proc., § 338].)
                                               12
contends rescission under section 25011.5 is a penalty or forfeiture and the one-year
limitations period applies.
       Landwin Group’s reliance on this limited case law is misplaced. Addressing a
restitution claim in a private action brought under the UCL, the Supreme Court in Clark
v. Superior Court (2010) 50 Cal.4th 605; explained the return of money or property
obtained through an improper means to the person from whom the property was taken is
“not a punitive remedy”: “‘The object of restitution is to restore the status quo by
returning to the plaintiff funds in which he or she has an ownership interest. [Citation.]
In contrast, a penalty is a recovery ‘“without reference to the actual damage sustained.”’”
(Id. at p. 614.) Accordingly, although it may be that in some other circumstances
rescission is properly characterized as a penalty, an action under section 25501.5 to
rescind an unlawful sale of securities by an unlicensed broker-dealer seeks only to restore
the status quo. The three-year limitations period of section 338, subdivision (a), applies.
           b. The doctrines of equitable tolling, delayed discovery and continuous
              accrual do not save Kronk’s section 25501.5 claims
       Generally, a cause of action accrues “‘when, under the substantive law, the
wrongful act is done,’ or the wrongful result occurs, and the consequent ‘liability arises’”
(Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397.) Kronk could have filed his claims
for rescission under section 25501.5—that is, the causes of action accrued—on the date
his investments in Landwin Management (March 6, 2005) and Landwin Fund
(February 17, 2007) were complete. (See Aryeh v. Canon Business Solutions, Inc. (2013)
55 Cal.4th 1185, 1191 [“at common law, a ‘cause of action accrues “when [it] is
complete with all of its elements”—those elements being wrongdoing, harm, and
causation’”].) Under this last-element accrual rule the statute of limitations ordinarily
runs from “‘the occurrence of the last element essential to the cause of action.’” (Ibid.;
see Quarry v. Doe I (2012) 53 Cal.4th 945, 960 [“[a] cause of action accrues, and the
limitations period begins to run, when ‘“the cause of action is complete with all of its
elements”’”]; Pooshs v. Philip Morris USA, Inc. (2011) 51 Cal.4th 788, 797 [“Generally,
a plaintiff must file suit within a designated period after the cause of action accrues.
                                              13
[Citation.] A cause of action accrues ‘when [it] is complete with all of its
elements . . . .”].) Because he did not file his state court actions seeking rescission under
section 25501.5 until more than three years after the dates of his investments, Kronk
attempts to save his claims by invoking several different doctrines that, where applicable,
postpone the normal deadline for filing a cause of action. None is successful.
              i. Equitable tolling
       “The equitable tolling of statutes of limitations is a judicially created, nonstatutory
doctrine. [Citations.] It is ‘designed to prevent unjust and technical forfeitures of the
right to a trial on the merits when the purpose of the statute of limitations—timely notice
to the defendant of the plaintiff’s claims—has been satisfied.’ [Citation.] Where
applicable, the doctrine will ‘suspend or extend a statute of limitations as necessary to
ensure fundamental practicality and fairness.’” (McDonald v. Antelope Valley
Community College Dist. (2008) 45 Cal.4th 88, 99.) “Broadly speaking, the doctrine
applies ‘“[w]hen an injured person has several legal remedies and, reasonably and in
good faith, pursues one.”’ [Citations.] Thus, it may apply where one action stands to
lessen the harm that is the subject of a potential second action; where administrative
remedies must be exhausted before a second action can proceed; or where a first action,
embarked upon in good faith, is found to be defective for some reason. [Citation.] [¶]
Its application in such circumstances serves ‘the need for harmony and the avoidance of
chaos in the administration of justice.’” (Id. at p. 100.)
       Kronk contends the limitations period for his section 25501.5 claims was equitably
tolled during the pendency of his federal securities litigation. Yet he did not file the
federal lawsuits regarding his two investments until March 1, 2010 (Landwin
Management) and March 22, 2010 (Landwin Fund), more than three years after each of
the section 25501.5 claims had accrued. Accordingly, even the most generous
application of the doctrine of equitable tolling under title 28 United States Code




                                              14
                11
section 1367(d) is insufficient to save his subsequently filed state law claims absent
some other basis for delaying the running of the three-year limitations period.
              ii. Delayed discovery
       In addition to the doctrine of equitable tolling, Kronk argues, as he did in the trial
court, his claims are timely under the discovery rule, which, where applicable, postpones
accrual of a cause of action until the plaintiff discovers, or has reason to discover, the
cause of action. (Aryeh v. Canon Business Solutions, Inc., supra, 55 Cal.4th at p. 1192;
Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807.) To benefit from this rule,
in paragraph 85 of his first amended complaint in LASC BC470901, Kronk alleged he
“was unaware that he was purchasing from unlicensed broker-dealers an unregistered
security on March 6, 2005. Plaintiff did not learn of this fact until he was given a copy of
the Private Placement Memorandum by another investor, Yusze Yu, in October, 2008.”
Similarly, in paragraph 57 of the first amended complaint in LASC BC470904, Kronk
alleged he “was unaware that he was purchasing from unlicensed broker-dealers an
unregistered security on February 17, 2007. Plaintiff did not learn of this fact until he
was given a copy of the Private Placement Memorandum by another investor, Yusze Yu,
in October 2008.”
       Standing alone, these allegations might be sufficient to withstand the Landwin
Group’s demurrers on limitation grounds. (See Broberg v. The Guardian Life Ins. Co. of
America (2009) 171 Cal.App.4th 912, 921 [“[w]hen a plaintiff reasonably should have

11
        Section 1367(d) provides, “The period of limitations for any claim asserted under
[the federal court’s supplemental jurisdiction] . . . shall be tolled while the claim is
pending and for a period of 30 days after it is dismissed unless State law provides for a
longer tolling period.” The Courts of Appeal have disagreed on the proper interpretation
of this statute. In Kolani v. Gluska (1998) 64 Cal.App.4th 402, 411, this court held a
state cause of action filed more than 30 days after dismissal of the related federal action is
untimely. In Bonifield v. County of Nevada (2001) 94 Cal.App.4th 298, 303-304, the
Third District disagreed and held the running of the limitations period is suspended
during the pendency of the claim in federal court and for 30 days after its dismissal. In
light of our conclusion regarding the proper application of the delayed discovery rule in
these cases, we need not attempt to resolve that disagreement.
                                              15
discovered facts for purposes of the accrual of a cause of action or application of the
delayed discovery rule is generally a question of fact, properly decided as a matter of law
only if the evidence (or, in this case, the allegations in the complaint and facts properly
subject to judicial notice) can support only one reasonable conclusion”].) The trial court,
however, rejected Kronk’s allegations of post-investment receipt of the private placement
memoranda and, accordingly, of the applicability of the delayed discovery rule. The
court ruled the federal district court had necessarily found Kronk had obtained the
documents prior to his investments in Landwin Management and Landwin Fund in its
decision dismissing his securities fraud claims and, therefore, Kronk was barred by
collateral estoppel from relitigating that factual issue.
       California courts properly give preclusive effect to final decisions by federal
courts. (See Younger v. Jensen (1980) 26 Cal.3d 397, 411 [a “federal judgment ‘has the
same effect in the courts of this state as it would have in a federal court’”]; Johnson v.
GlaxoSmithKline, Inc. (2008) 166 Cal.App.4th 1497, 1508, fn. 6.) Although Kronk
disagreed with the district court’s finding, and the propriety of that court’s use of judicial
notice was apparently an issue in his now-concluded, unsuccessful appeals to the Ninth
Circuit, Kronk does not argue the threshold requirements for collateral estoppel were not
satisfied in the cases at bar (see, e.g., Lucido v. Superior Court (1990) 51 Cal.3d 335, 341
[articulating the five requirements for collateral estoppel to apply]), and does not
challenge the trial court’s application of the doctrine to conclude he had received the
private placement memoranda at the time of his investments in Landwin Management
and Landwin Fund. Instead, Kronk argues, as he did in the trial court, nothing in the
private placement memoranda disclosed the defendants were not licensed broker-dealers
and there is no language in those documents that would have put him on notice they were
not licensed: “In other words, the PPM is silent as to the status of the named defendants.
There was no way for Appellant to know in March 2005 that he was dealing with
unlicensed broker-dealers even if true (which it is not), that Appellant received the PPM



                                              16
in March 2005. . . . It was not until after March 1, 2010 that Appellant became aware of
         12
this.”
              In contrast to his current assertion of a belated, March 2010 discovery of the
defendant’s unlicensed status, however, Kronk alleged in the first amended complaint in
each state action that he had learned he purchased unregistered securities from unlicensed
broker-dealers when he was given copies of the two private placement memoranda.
Although Kronk alleged this occurred in October 2008, rather than at the time of, or
immediately preceding, the two investments—the allegations dismissed as not credible
by the federal district court—he unequivocally designated the event that provided the
requisite knowledge as receipt of the memoranda, not information obtained while
working with his attorney after the filing of the federal securities litigation. Kronk’s
attempt to defeat the demurrers by ignoring that fatal concession and replacing it with the
revised chronology he now advances is properly disregarded as a sham: “The well-
established rule is that a proposed amendment which contradicts allegations in an earlier
pleading will not be allowed in the absence of ‘very satisfactory evidence’ upon which it
is ‘clearly shown that the earlier pleading is the result of mistake or inadvertence.’”
(American Advertising & Sales Co. v. Mid-Western Transport (1984) 152 Cal.App.3d
875, 879; see Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 836 [“‘Where a verified
complaint contains allegations destructive of a cause of action, the defect cannot be cured
in subsequently filed pleadings by simply omitting such allegations without explanation.’
[Citations.] ‘In such a case the original defect infects the subsequent pleading so as to
render it vulnerable to a demurrer.’”]; Sanai v. Saltz (2009) 170 Cal.App.4th 746, 768-
769].) Whether or not the unregistered status of the named defendants can be determined
from the private placement memoranda, Kronk fails to offer any explanation, let alone a

12
       The language quoted is from Kronk’s opening brief in B244238, the appeal from
LASC BC470901 concerning his investment in Landwin Management. Except for the
relevant dates (the investment in Landwin Fund was made in February 2007), the
identical language appears in his opening brief in B244267, the appeal from LASC
BC470904.
                                                   17
compelling one, as to how the harmful facts previously pleaded, which he now
contradicts, were the result of mistake or inadvertence.
       In sum, the trial court properly concluded that Kronk received the private
placement memoranda at the time of his investments and, consistent with the allegations
in the first amended complaint, that he learned (or reasonably could have learned) he was
purchasing from unlicensed broker-dealers when he was given a copy of those
memoranda. Accordingly, the delayed discovery rule has no role in this case.
              iii. Continuous accrual
       Finally, Kronk also attempts to salvage his section 25501.5 claims under
continuing wrong accrual principles, reasoning that his investment decreased in value
over time, through at least October 2008. Aryeh v. Canon Business Solutions, Inc., supra,
55 Cal.4th 1185, upon which Kronk purports to rely, readily exposes the flaw in this
analysis. As the Aryeh Court explained, the continuing violation doctrine permits a
plaintiff to treat a pattern of reasonably frequent and similar acts as an indivisible course
of conduct actionable in its entirety, notwithstanding that the conduct occurred partially
outside and partially inside the limitations period. (Id. at pp. 1197-1198.) Under the
theory of continuous accrual, recurring invasions of the same right can each trigger their
own statute of limitations; because each new breach of a continuing or recurring
obligation provides all the elements of a claim—wrongdoing, harm and causation—each
may be treated as an independently actionable wrong with its own time limit for
recovery. (Id. at pp. 1198-1199.) Nothing in either operative first amended complaint
alleges the factors that would warrant application of these doctrines: Each pleading
concerns only a single sale of a security by allegedly unlicensed broker-dealers. The
causes of action under section 25501.5 accrued, and the three-year limitations period
began to run, at the time of each sale to Kronk.
       3. Kronk’s Negligent Referral Claim Against Reddick Is Barred by Code of Civil
          Procedure Section 339, Subdivision 1’s Two-year Limitations Period
       Kronk and Reddick agree Kronk’s cause of action for negligent referral alleged in
LASC BC470901 is governed by section 339, subdivision 1’s two-year limitations
                                       18
period. Invoking the delayed discovery rule and doctrine of equitable tolling, Kronk
contends the limitations period for this negligence claim did not commence until May 13,
2009 when the managers of the Landwin Management investment notified the investors
by email that the estimated value of a membership unit in Landwin Management,
originally purchased for $50,000, was only $382 as of April 30, 2009. Alternatively, he
argues the earliest date the limitations period started to run was March 1, 2008 when the
investment’s managers sent a letter to the investors stating they had all been irreparably
harmed by certain actions of Reddick, who had apparently withdrawn from his
relationship with Landwin Group and launched a competing business. Since both of
those dates are within two years of the March 1, 2010 filing of the federal lawsuit in
which the negligent referral claim was included, Kronk insists the claim is timely.
       In his first amended complaint, however, Kronk included a number of additional
allegations that compel the conclusion he had reason to suspect he had been harmed by
Reddick’s malfeasance well before October 2008. For instance, in paragraph 49 Kronk
alleged Landis and Sean Dennison of SDC in an August 2006 letter to investors
discussing Landwin Management’s activities to date indicated only $2.5 million of the
initial capital raised in the private offering had been set aside for direct investment in real
estate or related investments—in contrast to the statement in an October 2005 regulatory
filing that $5 million would be used to purchase real estate assets. Moreover, “In this
same letter, Plaintiff and the other class members learned for the first time that the entire
investment was based on the Company’s ability to raise money. The letter states ‘The
returns projected in the Private Placement Memorandum (‘PPM’) of Landwin
Management, LLC, last year were based upon the assumption that our company must
take under management $20,000,000 in new capital (meaning money invested in our fund
entities) each year for the first 4 years of the 10 year life span of Landwin Management,
LLC.’” (Boldface omitted.) Kronk then alleged, had he known that $20 million of new
capital had to be raised each of the first four years of the venture, he would not have
invested in the offering.

                                              19
       According to the first amended complaint, the August 2006 letter also advised the
investors Landwin Management was operating on a negative cash flow while making
significant investments in “our human resources, our communications and information
management technology infrastructures, and marketing efforts.” The negative cash flow,
the letter explained, would continue until “sufficient new capital has been taken under our
management.” Kronk then repeated, had he known this information, he would not have
invested in the offering.
       As the Supreme Court explained in Fox v. Ethicon Endo-Surgery, Inc., supra,
35 Cal.4th at pages 808 to 809, “[A] potential plaintiff who suspects that an injury has
been wrongfully caused must conduct a reasonable investigation of all potential causes of
that injury. If such an investigation would have disclosed a factual basis for a cause of
action, the statute of limitations begins to run on that cause of action when the
investigation would have brought such information to light.” “[U]nder the delayed
discovery rule, a cause of action accrues and the statute of limitations begins to run when
the plaintiff has reason to suspect an injury and some wrongful cause, unless the plaintiff
pleads and proves that a reasonable investigation at that time would not have revealed a
factual basis for that particular cause of action.” (Id. at p. 803.)
       Based on the allegations in the first amended complaint, by August 2006 Kronk
unquestionably knew, or at the very least had reason to suspect, his investment in
Landwin Management had been procured by misrepresentations or material omissions
and Reddick’s purported recommendation of that investment was seriously defective.
Kronk did not plead—and has never suggested he could allege—that a reasonable
investigation at that time would not have revealed additional facts to support his claim for
negligent referral. (See Norgart v. Upjohn Co., supra, 21 Cal.4th 383 at pp. 397-398 &
fn. 2 [“plaintiff discovers the cause of action when he at least suspects a factual basis, as
opposed to a legal theory, for its elements”; “‘It is irrelevant that the plaintiff is ignorant
of . . . the legal theories underlying his cause of action. Thus, if one has suffered
appreciable harm and knows or suspects that . . . blundering is its cause, the fact that an

                                               20
attorney has not yet advised him does not postpone commencement of the limitations
period’”].) Accordingly, as the trial court ruled, the two-year limitations period for this
claim began no later than August 2006 and had expired well before the filing of the
federal litigation.
                                      DISPOSITION
       The orders of dismissal in B244238 (LASC BC470901) and B244267 (LASC
BC470904) are affirmed. Respondents are to recover their costs on appeal.




                                                  PERLUSS, P. J.

       We concur:


               WOODS, J.



               SEGAL, J. *




*       Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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