Ms and Sons Hospitality, LLC v. Db Insurance Co., Ltd.

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAY 31 2023
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
MS & SONS HOSPITALITY, LLC, a No. 22-55440
California Limited Liability Company;
MUKESH K. PATEL, D.C. No.
2:20-cv-01994-JGB-SHK
Plaintiffs-Appellants,
v. MEMORANDUM*
DB INSURANCE CO., LTD.; DOES 1
THROUGH 10 INCLUSIVE,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Jesus G. Bernal, District Judge, Presiding
Argued and Submitted March 9, 2023
Pasadena, California
Before: WATFORD and COLLINS, Circuit Judges, and S. MURPHY,** District
Judge.
Appellants MS & Sons Hospitality and Mukesh Patel (MS) appealed the
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Stephen Joseph Murphy, III, United States District
Judge for the Eastern District of Michigan, sitting by designation.
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district court’s grant of summary judgment to Appellee DB Insurance Co. (DB)
based on appellants’ lack of standing. “We review a grant of summary judgment
de novo.” Rodriquez v. Bowhead Transp. Co., 270 F.3d 1283, 1286 (9th Cir.
2001) (citation omitted). We must “[v]iew[] the evidence in the light most
favorable to the nonmoving party[] [and] determine whether there are any genuine
issues of material fact.” Id. (citation omitted).
The district court properly found that MS lacked standing to sue on the
insurance contract. MS argued that it has a legally protected interest in the
proceeds of DB and Pinnacle Hospitality Inc.’s insurance contract. But MS was
not a party to the insurance contract. Whether MS has standing therefore hinges on
whether it was validly assigned rights under the contract.
First, MS claimed the district court erred because DB was judicially
estopped from arguing that MS lacked standing, and that even if judicial estoppel
did not apply, DB was barred by its actions under the doctrines of waiver and
estoppel. MS finally maintained that there was a triable issue of fact about whether
Pinnacle validly assigned its contractual rights to MS.
MS’s first argument is that, by treating Chris Choi as the insured for
purposes of an examination under oath, DB is now judicially estopped from
contending that he is not the insured for purposes of his ability to assign the policy.
We apply the federal law of judicial estoppel in federal court. Rissetto v. Plumbers
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& Steamfitters Loc. 343, 94 F.3d 597, 603 (9th Cir. 1996). Judicial estoppel
attaches where a party makes assertions that are “clearly inconsistent,” the party
induces a court to rely on its first statement, and allowing the change in position
would produce “an unfair advantage or impose an unfair detriment on the opposing
party.” New Hampshire v. Maine, 532 U.S. 742, 750–51 (2001).
Judicial estoppel does not apply here because DB did not “persuad[e] a court
to accept [its] earlier position.” Id. The examination under oath occurred out of
court, and the representations made in securing Choi’s attendance were
representations to the parties, not the court. Without a “risk of inconsistent court
determinations,” there is “little threat to judicial integrity,” and no basis for
application of judicial estoppel. Id. at 750–51.
MS’s argument that DB’s defense is barred by the doctrines of waiver and
estoppel also fails. Under California law, waiver requires “an actual intention to
relinquish” “an existing right.” Silva v. Nat’l Am. Life Ins. Co., 58 Cal. App. 3d
609, 615 (Ct. App. 1976). But MS has provided no evidence that DB has
intentionally relinquished any right. Nor was any of DB’s “conduct so inconsistent
with the intent to enforce the right as to induce a reasonable belief that it has been
relinquished.” Id. Likewise, the California law of equitable estoppel requires a
showing that “[t]he party relying upon the doctrine of equitable
estoppel . . . rel[ied] upon the [other party’s] conduct to his injury.” Id. And MS
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has provided no evidence that it relied on any representations by DB. Waiver and
equitable estoppel are therefore inapplicable.
Turning to the merits, a federal court sitting in diversity generally must
“apply the substantive law of the [S]tate in which it sits[.]” Harmsen v. Smith, 693
F.2d 932, 946–47 (9th Cir. 1982). We therefore apply California substantive law.
Under California law, “an assignment[] . . . must be a manifestation to another
person by the owner of the right indicating his intention to transfer the right to such
other person, or to a third person.” Dameron Hosp. Assn. v. AAA N. California,
Nevada & Utah Ins. Exch., 77 Cal. App. 5th 971, 989 (2022) (cleaned up). There
is not a genuine issue of material fact over whether Pinnacle assigned its
contractual rights to MS. The only evidence in the record related to assignment is
a February 2018 letter to DB from Mr. Chris Choi, who was the secretary of the
company that owned the property subject to the insurance contract. Mr. Choi is
not named as a beneficiary on the insurance policy, and he is not “the owner of the
right.” Dameron Hosp. Assn., 77 Cal. App. 5th at 990 (quotation omitted). Thus,
he could assign the contractual rights only if he acted with actual or ostensible
authority vested in him by the principal.
No evidence suggests that Mr. Choi had actual authority. Mr. Choi’s
February 2018 letter cannot establish actual agency because actual agency must
arise from the “conduct of the principal.” Tomerlin v. Canadian Indem. Co., 61
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Cal. 2d 638, 643 (1964). And Mr. Choi could not recall any conduct of the
principal that gave him the power to transfer assets of the corporation. In all, MS
offered no evidence that the principal took any action to make Mr. Choi its agent
with authority to assign corporate assets.
Likewise, ostensible agency authority is formed only by “some intentional
conduct or neglect on the part of the alleged principal creating a belief in the
minds of third persons that an agency exists, and a reasonable reliance thereon by
such third persons.” Lovetro v. Steers, 234 Cal. App. 2d 461, 475 (1965)
(emphasis added) (citation omitted). And MS failed to show any act of the
principle that “creat[ed] a belief in the minds of third persons that an agency
[relationship] exist[ed].” Id. Mr. Choi’s February 2018 letter cannot establish
ostensible agency because, again, it is not an act by the principal. Besides, no
evidence in the record showed that Pinnacle ever actually or negligently held Mr.
Choi out as one of its agents with the power to transfer corporate assets. Because
Mr. Choi was neither the actual nor ostensible agent of Pinnacle, his purported
assignment of the insurance contract is invalid. Thus, MS has failed to show that it
was validly assigned an interest in the insurance contract, and it therefore lacks any
cause of action based on that contract.
MS nevertheless argued that California Corporations Code § 313 created a
“conclusive . . . evidentiary presumption of [Mr. Choi’s] authority” “to sign the
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contract on behalf of [Pinnacle]” unless DB had “actual knowledge” that Mr. Choi
lacked such authority. But the statute is inapplicable here. Section 313 “appl[ies]
only in the situation when at least two officers—one from each of the two series or
categories of officers designated—execute the instrument.” Snukal v. Flightways
Mfg., Inc., 23 Cal. 4th 754, 785 (2000). Although that extends to situations where
“one individual who in fact holds two of the specified corporate offices executes
the instrument,” id. at 310, nothing in the record suggested that Choi held two
corporate offices or signed in two capacities. To the extent that MS contends that
Choi served in two distinct capacities as a “Secretary” and “Officer,” it is mistaken
because a “Secretary” is simply the specific form of “Officer” that Choi was.
In sum, Pinnacle did not validly assign its contractual rights to MS under
California law. MS therefore lacked standing, and the district court’s grant of
summary judgment was proper.
The district court’s order is AFFIRMED.
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