Filed 9/16/15 Cabot Ashtabula 22 v. Jones Lang LaSalle Americas CA4/3




                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE


CABOT ASHTABULA 22, LLC et al.,

     Plaintiffs and Appellants,                                        G050627

         v.                                                            (Super. Ct. No. 30-2012-00593608)

JONES LANG LASALLE AMERICAS,                                           OPINION
INC., et al.,

     Defendants and Respondents.


                   Appeal from a judgment of the Superior Court of Orange County, Gail A.
Andler, Judge. Affirmed. Request for judicial notice is granted in part.
                   Catanzarite Law Corporation, Kenneth J. Catanzarite and Eric V. Anderton
for Plaintiffs and Appellants.
                   Gibson, Dunn & Crutcher, Kevin S. Rosen, James L. Zelenay, Jr., and
Bradley J. Hamburger for Defendant and Respondent Baker & McKenzie.
                   Morgan, Lewis & Bockius, Robert E. Gooding, Jr., and Todd W. Smith for
Defendant and Respondent Jones Lang LaSalle Americas, Inc.
              Pfeiffer Fitzgibbon & Ziontz, Thomas N. Fitzgibbon and Kendra E. Leghart
for Defendants and Respondents Clay H. Womak and Markel D. Petty.


                                   *          *          *


              Plaintiffs, on behalf of themselves and a putative class of similarly situated
investors, sued a group of defendants alleging they fraudulently induced plaintiffs into
purchasing ownership shares in a shopping mall located in Ashtabula, Ohio. Specifically,
plaintiffs allege defendants made intentionally misleading statements that: (1) Dillard’s
department store was committed to a long-term lease with the mall, even though
defendant knew Dillard’s immediate plan was to “go dark” and cease using the leased
space; and (2) the upfront cost of the investment (i.e., the “sales load”) was 11 percent,
when the real cost was more than 30 percent – an amount defendants knew exceeded the
entire value of the tax benefits plaintiffs hoped to realize from investing. The plaintiffs
purchased their investment shares between August 2007 and February 2008 and filed
their initial complaint nearly five years later, in August 2012. After a series of demurrers,
the trial court sustained defendants’ demurrers to the second amended complaint, without
leave to amend. The court sustained the demurrers on several grounds, including that all
claims alleged were barred by the applicable statutes of limitations.
              Plaintiffs argue the court’s ruling was incorrect because they alleged
sufficient facts to support application of the delayed discovery rule to their claims.
Specifically, plaintiffs argue (1) they did not suffer, and alternatively were not on notice
of, any “injury” flowing from defendants’ misrepresentation about the Dillard’s tenancy
as long as Dillard’s continued to pay rent to the mall and the mall continued to provide
the cash flow payments promised in connection with plaintiffs’ investment; and (2) they
were not on notice of the true “sales load” associated with their investment until one of



                                              2
the named plaintiffs consulted with plaintiffs’ own counsel regarding an unrelated tax
issue.
                We affirm. The gist of plaintiffs’ complaint is that defendants wrongfully
induced them into investing in the shopping mall by giving them incorrect, incomplete or
misleading information about the investment. They relied to their detriment on
defendants’ misrepresentations about the mall investment, by purchasing shares they
would not have chosen to purchase had they known the true state of facts. Thus,
plaintiffs’ actionable injury was the purchase of the mall shares, and any causes of action
arising out of defendants’ alleged misrepresentations accrued immediately upon
purchase. Moreover, plaintiffs were sufficiently on notice of the alleged Dillard’s
misrepresentation because the closure of the Dillard’s store at the Ashtabula mall was
publicly available information, and defendants allege no facts demonstrating that a
reasonably diligent investor would not have learned of it. Plaintiffs’ obligation to act
diligently was not fulfilled by simply accepting “[d]efendants’ ongoing representations
that the [mall’s] financial difficulties stemmed from the failing economy.”
                And with respect to defendants’ alleged misrepresentation about the size of
the sales load associated with their investment, plaintiffs concede they sustained injury at
the moment they purchased their shares. However, they allege they did not discover that
injury until a communication with their own counsel in August 2012. This amounts to a
concession that plaintiffs had the information necessary to reveal their cause of action
within their own possession and control, and belies their assertion they were unable to
discover the injury sooner because defendants “control[led] dissemination of
information.”
                The request for judicial notice filed by respondent Baker & McKenzie is
granted to the extent of the private placement memorandum, but otherwise denied.




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                                           FACTS


              Plaintiffs in this action are Cabot Ashtabula 22, LLC, acting on behalf of
itself and other similarly situated “special purpose entities” which were formed to own
shares in the Ashtabula mall, and Randall B. Lynch, acting in his capacity as trustee of
the Lynch Family Trust, who owns “all of the membership interests of” Cabot Ashtabula
22. Among the named defendants are respondents in this appeal: (1) Jones Lang LaSalle
Americas, Inc. (erroneously sued as “Jones Lang LaSalle”), which is identified as “a
consultant or advisor” that “solicited and agreed to represent Plaintiffs’ interest in the
[mall] as property manager to the Plaintiffs via the Master Lease”; (2) Clay H. Womack
and Markel D. Petty, who are identified as executives of Direct Capital Securities, Inc.,
the securities broker-dealer that sold the investment shares to plaintiffs; and (3) Baker &
McKenzie, LLP, the law firm that prepared the “tax opinion related to the Offering
itself.” Each of these defendants demurred to plaintiffs’ complaint, and ultimately the
trial court sustained their demurrers to plaintiffs’ second amended complaint, without
leave to amend.
              Although the second amended complaint contains 14 causes of action
which apply in various combinations to different defendants, plaintiffs acknowledge that
all causes of action arise out of the defendants’ alleged “material concealment,
misrepresentation and omission” designed to induce plaintiffs to invest funds toward the
purchase of the Ashtabula Mall. According to the complaint, the putative class of
plaintiffs invested a combined $15.1 million toward the overall $44 million acquisition
price of the shopping mall. In exchange for their funds, plaintiffs would receive “tenant-
in-common” shares in the mall. Plaintiffs allege these shares were specifically marketed
to potential investors looking to defer otherwise taxable long-term capital gains through
the purchase of “like-kind” real property under 26 United States Code section 1031



                                              4
(section 1031). Plaintiffs’ purchase of the shares took place between August 2007 and
February 2008.
              Among the documents that plaintiffs were allegedly required to sign as part
of their investment in the mall was a “master lease” which provided plaintiffs would be
paid an “‘absolute net’ return” equivalent to 8 percent of their combined $15.1 million
investment in the first year, and increasing thereafter during a 20-year lease term.
However, although defendants initially made those payments as promised, they
subsequently made “lesser distributions [beginning in October, 2010], then suspended
distributions [until] the [mall] was lost to foreclosure.” Plaintiffs allege they “reasonably
believed [defendants’] ongoing representations that the [mall’s] financial difficulties
stemmed from the failing economy, thus evading suspicion.” Consequently, it was not
until August 2012, when the mall’s foreclosure was “imminent,” that plaintiffs allegedly
had reason to commence an investigation into the truth of statements made by defendants
in connection with their purchase of the shares.
              According to the second amended complaint, defendants allegedly made
two separate materially misleading statements as a means of inducing plaintiffs’ ill-fated
purchase of ownership shares in the mall. First, plaintiffs allege defendants misleadingly
touted the high percentage of occupied space in the mall as evidence of its financial
success, including a specification that Dillard’s, one of the mall’s five “major tenants,”
had a lease term extending into 2014, with an option to extend its tenancy for an
additional five years. These major tenants were identified as “key traffic generators in
the mall.” Of those five major tenants, Dillard’s was identified as having the longest
remaining lease term.
              However, unbeknownst to the plaintiff investors, by the time they
purchased their shares, defendants were allegedly aware that Dillard’s had made the
decision to “go dark, i.e., vacate the property but continue making lease payments.” And
although plaintiffs acknowledge Dillard’s plan to “go dark” did not affect its obligation to

                                              5
continue paying rent throughout the initial term of its lease, they allege its decision to do
so was nonetheless a material fact that was required to be disclosed to potential mall
investors because Dillard’s was an “active traffic driver” for the mall. Thus, as plaintiffs
allege, the closure of Dillard’s “would both indirectly and directly impact the remaining
tenants and make the [mall] less attractive to prospective tenants.”
               Second, plaintiffs allege defendants engaged in fraud and deceit by
representing the sales load associated with the purchase of investment shares in the mall
was 11 percent, a rate lower than the 15 percent in capital gains taxes the targeted
investors were looking to defer under section 1031 if they invested. However, defendants
allegedly structured the documents in such a way as to conceal the existence of additional
costs which would be borne by plaintiff investors – characterizing those additional costs
as part of the plaintiffs’ “equity” in the mall. And when those additional costs were
combined with the 11 percent in costs already disclosed, they brought plaintiffs’ effective
sales load to more than 30 percent of their total invested funds – far exceeding the
potential value of any tax advantage plaintiffs hoped to achieve.
               Plaintiffs acknowledge their injury from this misrepresentation occurred
when they purchased their shares (“had they known the total aggregate costs to acquire
[their shares] were more than 30% . . . they would not have acquired the [shares]”). But
they allege they did not discover defendants’ concealment – and thus their injury – until
August 2012, when plaintiff Lynch contacted plaintiffs’ own counsel regarding an
unrelated tax issue. Further, plaintiffs allege they “could not with due diligence discover
the fraud and deceit of the defendants earlier because the plaintiffs had no way of
knowing and could not determine the true facts because the same were known only to
defendants who held the Master Lease and were in sole and exclusive control of the
Property and the accounting of the transactions described [in the second amended
complaint].”



                                              6
              Respondents all demurred to the second amended complaint, asserting
various deficiencies in the pleading. They all argued that each of the claims alleged
against them were barred by the applicable statutes of limitations and that plaintiffs had
failed to allege sufficient facts to demonstrate the delayed discovery rule would have
adequately postponed accrual of the limitations periods.
              The trial court sustained the demurrers without leave to amend. With
respect to the statutes of limitations, the court noted “each demurrer challenged the
timeliness of filing the complaint and its specific causes of action. Plaintiffs in their
pleadings concede that on its face, the causes of action are barred by the statute of
limitations, which therefore places the burden on plaintiffs to sufficiently plead ‘delayed
discovery.’ [¶] The discovery rule only delays accrual until plaintiff has, or should have,
inquiry notice of the [cause of action]. [¶] Plaintiffs, notwithstanding several
opportunities and comments by the court, ha[ve] failed to meet the specific pleading
requirements, particularly as to their ‘reasonable diligence’ in seeking court involvement
five years after the [share] transaction was completed.”


                                       DISCUSSION


1. The Standard of Review
              On appeal from a judgment following the trial court’s order sustaining
demurrers without leave to amend, “we examine the complaint de novo to determine
whether it alleges facts sufficient to state a cause of action under any legal theory.”
(McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) “We treat the demurrer
as admitting all material facts properly pleaded, but not contentions, deductions or
conclusions of fact or law.” (Blank v. Kirwin (1985) 39 Cal.3d 311, 318.)
              Appellant “bears the burden of demonstrating that the trial court
erroneously sustained the demurrer as a matter of law” and “must show the complaint

                                              7
alleges facts sufficient to establish every element of [the] cause of action.” (Rakestraw v.
California Physicians’ Service (2000) 81 Cal.App.4th 39, 43.)


2. The Delayed Discovery Rule
              Plaintiffs contend the statute of limitation applicable to their causes of
action is three years, as all claims are grounded on allegations of fraud or mistake. (Code
Civ. Proc., § 338, subd. (d).) They acknowledge the general rule is that “‘“[a] cause of
action accrues ‘upon the occurrence of the last element essential to the cause of
action.’”’” (Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809,
815, italics added.)
              However, plaintiffs rely on the discovery rule, which “postpones accrual of
a cause of action until the plaintiff discovers, or has reason to discover, the cause of
action.” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397; Fox v. Ethicon Endo-
Surgery, Inc. (2005) 35 Cal.4th 797, 807 [“until the plaintiff has, or should have, inquiry
notice of the cause of action”].) A plaintiff “has reason to discover the cause of action
when he has reason at least to suspect a factual basis for its elements,” meaning he has
“‘“‘“notice or information of circumstances to put a reasonable person on inquiry.”’”’”
Norgart v. Upjohn Co., supra, 21 Cal.4th at p. 398.) Once a plaintiff has inquiry notice,
the limitations period commences, and “within the applicable limitations period, he must
indeed seek to learn the facts necessary to bring the cause of action in the first place – he
‘cannot wait for’ them ‘to find’ him and ‘sit on’ his ‘rights’; he ‘must go find’ them
himself if he can and ‘file suit’ if he does.” (Ibid., fn. omitted.)
              As plaintiffs themselves acknowledge in their brief, the delayed discovery
rule requires a plaintiff to plead facts showing “(1) the time and manner of discovery and
(2) the inability to have made earlier discovery despite reasonable diligence.” (Fox v.
Ethicon Endo-Surgery, Inc., supra, 35 Cal.4th at p. 808, italics added.) Thus, a plaintiff
relying on the delayed discovery rule has the burden of alleging facts demonstrating he

                                               8
would have been unable to discover the cause of action earlier despite reasonable
diligence.
              “The discovery rule does not encourage dilatory tactics because plaintiffs
are charged with presumptive knowledge of an injury if they have ‘“‘information of
circumstances to put [them] on inquiry’”’ or if they have ‘“‘the opportunity to obtain
knowledge from sources open to [their] investigation.’”’” (Fox v. Ethicon Endo-Surgery,
Inc., supra, 35 Cal.4th at pp. 807-808, fn. omitted.)


3. The Dillard’s Misrepresentation
              Plaintiffs assert their claim of misrepresentation based on the Dillard’s
tenancy was timely for two reasons. First, they contend no cause of action even accrued
based on this misrepresentation until October 2010, which is the date their promised cash
flow under the terms of the mall’s Master Lease was first disrupted. Until then, plaintiffs
claim they suffered no “appreciable harm” as a result of Dillard’s “going dark.” (See
Marin Healthcare Dist. v. Sutter Health (2002) 103 Cal.App.4th 861, 879 [statute of
limitations commences only after the plaintiff sustains actual and appreciable harm].)
And second, they contend that even if appreciable harm had been sustained before
October 2010, they were not on notice of it until their cash flow was interrupted. We find
neither claim persuasive.
              First, plaintiffs’ suffered their “appreciable harm” from the Dillard’s
misrepresentation when they purchased their shares in reliance on the information
provided by defendants. The very essence of a fraud or deceit claim is that the plaintiff
was induced into some act or omission – something he or she would not otherwise have
done – in reliance on the defendant’s allegedly false or misleading statement. It is the
falsely induced act which is itself the injury. By expressly alleging defendants’ failure to
disclose that Dillard’s would “go dark” was “material,” plaintiffs are necessarily
implying they would not have invested in the mall if they had known that fact. “‘[A]

                                             9
representation is considered material if it induced the consumer to alter his position to his
detriment.’” (Tucker v. Pacific Bell Mobile Services (2012) 208 Cal.App.4th 201, 222.)
Consequently, plaintiffs were harmed by the alleged Dillard’s misrepresentation at the
moment they handed over their money in exchange for shares in a shopping mall they
would not have chosen to purchase if they had known the whole truth.
              Plaintiffs’ reliance on Cleveland v. Internet Specialties West, Inc. (2009)
171 Cal.App.4th 24 (Cleveland) is misplaced. In Cleveland, the plaintiff did not allege
he was fraudulently induced into making an investment. Instead, his claim was that he
had been falsely told the company he previously invested in went out of business, when it
had instead been transformed into what later became a successful business under a
different name. The court reasoned the plaintiff’s cause of action did not accrue until the
renamed business began returning a profit. Until then, the plaintiff had not been deprived
of any financial benefit he would have shared in absent the fraud. We have no quibble
with that reasoning, but it has no application here.
              In this case, plaintiffs’ essential claim is that they would not have
purchased ownership shares in the Ashtabula Mall – at least not on the terms they did –
had they known the whole truth about the Dillard’s tenancy. Hence, whatever causes of
action plaintiffs had arising out of that allegedly deceitful omission, accrued upon their
purchase of the shares. According to their pleading, that was no later than February
2009.
              Plaintiffs’ alternative contention, that the statute of limitation did not
commence until July 2013, when they actually “discovered” Dillard’s had gone dark,
likewise fails. Initially, we reject plaintiffs’ assertion they had no duty to act with
reasonable diligence in discovering their cause of action until they actually knew of their
“injury.” Plaintiffs base their assertion on the statement in Fox v. Ethicon Endo Surgery,
Inc., supra, 35 Cal.4th at p. 808, that “plaintiffs are required to conduct a reasonable
investigation after becoming aware of an injury, and are charged with knowledge of the

                                              10
information that would have been revealed by such an investigation.” (Italics added.)
Plaintiffs infer from the statement’s focus on the period following discovery of the injury,
no diligence would be required before that point. But Fox is a personal injury case, not a
fraud case, and there was no contention in Fox the plaintiff might not have been diligent
in discovering her injury. Thus, Fox cannot be read as relieving a plaintiff from any
responsibility to act diligently in the management of his or her affairs even before
becoming aware of an injury. “‘“It is axiomatic that cases are not authority for
propositions not considered.”’” (McWilliams v. City of Long Beach (2013) 56 Cal.4th
613, 626.)
              In any event, as we have already noted, Fox otherwise makes clear that a
plaintiff wishing to rely on the delayed discovery rule must allege facts showing not only
“the time and manner of discovery” but also “the inability to have made earlier discovery
despite reasonable diligence.” (Fox v. Ethicon Endo-Surgery, Inc., supra, 35 Cal.4th at
p. 808, italics added.) Moreover, it states that plaintiffs “are charged with
presumptive knowledge of an injury if . . . they have ‘“‘the opportunity to obtain
knowledge from sources open to [their] investigation.’”’” (Id. at pp. 807-808, some
italics added, fn. omitted.)
              And here, plaintiffs have failed to allege facts demonstrating that in the
exercise of reasonable diligence, they would not have had the opportunity to learn that
Dillard’s had gone dark at the Ashtabula Mall. Plaintiffs’ allegation is they “could not
have known about the Dillard’s misrepresentation” because “they were geographically
disbursed, they relied on the representations of their fiduciaries, and could not be
expected to know of local news that existed in relative obscurity at the time of
investment.” But that allegation merely describes why plaintiffs would not have learned
about the Dillard’s store closure in the absence of diligence: essentially, their claim is
that, because they did not live in the Ashtabula area, news of the store’s closure would
not have reached them in the ordinary course of their lives. However, the allegation says

                                             11
nothing about why plaintiffs, who each invested over $1 million to own a share of this
particular shopping mall in Ashtabula, Ohio, could not have kept abreast of significant
public events surrounding that mall in the exercise of reasonable diligence.
               Nor were plaintiffs limited to asking defendants about mall business, or
accepting whatever information defendants chose to disclose. With access to both
telephones and the internet, plaintiffs could have easily found out about the Dillard’s
store closure. Consequently, they are charged with presumptive knowledge of that
closure, at or around the time it occurred in December 2007. And at that point, they were
on inquiry notice that defendants had engaged in misleading statements about the
Dillard’s tenancy.
               In any event, plaintiffs themselves acknowledge they were on notice of the
mall’s financial difficulties. And while they claim in conclusory fashion they
“reasonably believed [defendants’] ongoing representations that the [mall’s] financial
difficulties stemmed from the failing economy,” that conclusory assertion is entitled to no
credence. (Carter v. Prime Healthcare Paradise Valley LLC (2011) 198 Cal.App.4th
396, 410 [“Facts, not conclusions, must be pleaded”].) What plaintiffs do not allege are
any facts suggesting they made a diligent effort either to confirm the truth of that
representation, or to discover whether there might be other reasons for the mall’s
financial difficulties.
               As explained in Haley v. Santa Fe Land Imp. Co. (1935) 5 Cal.App.2d 415,
a plaintiff who is on notice that his investment is not performing as expected cannot
simply wait until the evidence of fraud is undeniable before asserting a claim. In Haley,
the court reversed a fraud judgment entered in favor of the purchaser of an orchard
property who claimed the defendant had fraudulently misrepresented the condition of the
soil. Although the plaintiff alleged he did not actually discover the fraud until six years
after purchase, when he hired an expert to evaluate the soil, the court concluded his claim
accrued when he first noticed a significant number of his trees were withering and dying.

                                             12
“When plaintiff observed the continual withering and dying of his avocado trees from the
spring of 1927 and thereafter, natural curiosity as well as business prudence would have
compelled him to make inquiry as to the cause thereof, and his failure to make it would
be inexcusable negligence. If he did make inquiry, then he must have discovered the
cause of his trees withering and dying. He must be presumed to have known whatever
with reasonable diligence he might have ascertained concerning the fraud of which he
complains.” (Id. at pp. 424-425.)
                 In this case, plaintiffs likewise had an obligation to pay attention to the
performance of their mall investment, and to engage in reasonable inquiry at the point
when they knew, or should have known, that circumstances surrounding their investment
were not as portrayed by defendants in connection with the sale of plaintiffs’ ownership
shares. And just as in Haley, they are “presumed to have known whatever with
reasonable diligence [they] might have ascertained concerning the fraud.” (Haley v.
Santa Fe Land Imp. Co., supra, 5 Cal.App.2d at p. 425.)
                 Finally, plaintiffs also allege in their second amended complaint that, even
if they incurred injury when Dillard’s vacated the mall, they were not on notice of the
fraud because the mere fact Dillards vacated the premises did not establish defendants
willfully concealed their knowledge that Dillards planned to do so. But when plaintiffs
became aware that Dillards had vacated the premises – at or around the same time they
purchased their investment shares – that was sufficient to prompt a reasonable person to
inquire whether defendants already knew of Dillard’s plan at the time they sold the shares
to plaintiffs.


4. The Sales Load Misrepresentation
                 Plaintiffs’ second misrepresentation claim centers on defendants’ portrayal
of the costs they would incur in making their investment in the shopping mall. They
allege defendants represented the costs added up to 11 percent of the total investment,

                                                13
which meant that plaintiffs would receive net equity in the property equal to 89 percent of
the money they invested. However, plaintiffs allege there were other costs disguised in
the transaction, which when taken together with the 11 percent disclosed, exceeded 30
percent of the invested funds.
              With respect to this alleged misrepresentation, plaintiffs acknowledge their
injury was the investment itself because “they would not have invested . . . if they had
known that costs of investment negated their 1030 tax deferral objective.” Thus, with
respect to this claim of fraud and deceit, plaintiffs concede their cause of action was
complete as soon as each investment transaction closed. However, they claim they did
not discover defendants’ fraud and deceit – and thus their injury – until August 2012,
when plaintiff Lynch contacted plaintiffs’ own counsel regarding an unrelated tax issue.
              Moreover, they allege they “could not with due diligence discover the fraud
and deceit of the defendants earlier because the plaintiffs had no way of knowing and
could not determine the true facts because the same were known only to defendants who
held the Master Lease and were in sole and exclusive control of the Property and the
accounting of the transactions described [in the second amended complaint].”
              The latter factual allegation is not only conclusory, but it cannot be
reconciled with plaintiffs’ acknowledgment that they learned of those “true facts”
through a communication with their own counsel. If “the true facts [concerning the
costs] were known only to defendants,” then plaintiffs’ counsel would not have known
them either. Significantly, plaintiffs do not allege any facts suggesting their counsel was
suddenly given access to previously secret facts in August 2012, and it was that
revelation which first put plaintiffs on notice of the alleged fraud.
              When taken together, the only reasonable interpretation of these allegations
is that, while the facts necessary to reveal the true costs of the investment were available
to plaintiffs, they either failed to pay attention to them or failed to appreciate their
significance until consultation with counsel. But it is well-settled a plaintiff’s inability to

                                               14
appreciate the legal significance of the facts comprising his or her cause of action does
not delay accrual of the statute of limitations. “[T]he uniform California rule is that a
limitations period dependent on discovery of the cause of action begins to run no later
than the time the plaintiff learns, or should have learned, the facts essential to his claim.
[Citations.] It is irrelevant that the plaintiff is ignorant of his legal remedy or the legal
theories underlying his cause of action.” (Guiterrez v. Mofid (1985) 39 Cal.3d. 892, 897-
898.)
              Moreover, as defendant Baker & McKenzie points out, the private
placement memorandum given to plaintiffs in connection with the solicitation of their
investments provided them with the facts necessary to understand the total costs
associated with their mall investment. The memorandum incorporated a chart outlining
the “Estimated Use of Funds” invested in the mall shares. It disclosed that of the 89
percent of the investors’ money considered “Available for Investment” – referring to the
amount left after deducting an initial 11 percent for costs and commissions associated
with the investment offering – an additional 22 percent would be spent on “Mortgage
Loan Fees and Costs” (5.26 percent), “Acquisition Fee” (8.61 percent) and “Closing and
Carrying Costs” (7.66 percent). The chart also disclosed that only 67.47 percent of the
invested funds would be used for “Down Payment for Purchase of Property.”
              Although plaintiffs’ contend this chart did not “clearly disclose[]” their
aggregate costs, and note it was not identified as “an accounting of [their] costs,” that
contention is not sufficient to stave off the statute of limitations. Even assuming the
disclosure was not crystal clear, it was that very lack of clarity which should have
prompted a reasonably diligent investor to inquire about a perceived discrepancy between
the chart’s representation that 89 percent of the invested funds would be “Available for
Investment,” and its representation that only 67 percent of the funds would actually be
paid toward purchase of the property. A reasonably diligent investor would have
inquired about the missing 22 percent and had the matter clarified. Because the facts

                                               15
necessary to an understanding of the total cost of the mall investment were at all times
available to plaintiffs, they are not entitled to rely on the delayed discovery rule to toll the
applicable statute of limitations.
              Finally, plaintiffs’ allegation they “held no suspicion as to a possible fraud
because they received the described tenant in common interest in the property, the
represented percentage cash flow therefrom and ostensibly were able to report a deferral
of the capital gains taxes” changes nothing. Nor does plaintiffs’ allegation they “had no
cause to review the bona fides of the 1031 deferred capital gains until the Property was to
be foreclosed upon and plaintiffs were about to receive a tax reporting for a discharge of
indebtedness for the tax year of the foreclosure.” Plaintiffs’ claim of misrepresentation
pertaining to the costs of the investment is unrelated to their apparent satisfaction with
other aspects of the investment. Moreover, plaintiffs do not allege any injury relating to
the bona fides of the section 1031 deferred capital gains. Specifically, they do not allege
they were denied the tax deferral they sought as part of their investment. Instead, their
allegation is they were misled as to the total cost of the investment, which exceeded the
value of the deferred tax benefit they apparently did receive. As we have already
explained, plaintiffs were at least on inquiry notice of those costs at the time they
invested. Consequently, the statute of limitations applicable to any cause of action
arising out of that misrepresentation began running at that point.


5. Leave to Amend
              Plaintiffs do not argue the trial court abused its discretion in denying them
leave to amend their second amended complaint. Nor do they offer any suggestion as to
how their complaint might be amended to cure its defects. As they bear the burden on
that issue, we need not consider it further. (Maxton v. Western States Metals (2012) 203
Cal.App.4th 81, 95 [A plaintiff seeking to amend “‘“must show in what manner he can



                                              16
amend his complaint and how that amendment will change the legal effect of his
pleading”’”].)
                                    DISPOSITION


             The judgment is affirmed. Respondents are entitled to their costs on
appeal.




                                               RYLAARSDAM, ACTING P. J.

WE CONCUR:



MOORE, J.



THOMPSON, J.




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