Opinion
F074773
12-05-2017
MOOSIOS FARMS, INC., Plaintiff, Cross-defendant and Respondent, v. MOOSIOS RIVER RANCH et al., Defendants and Appellants; LOUIS R. MOOSIOS II et al., Defendants, Cross-complainants and Appellants.
Campagne & Campagne, Thomas E. Campagne, Eric M. Kapigian; Baker Manock & Jensen and James A. Ardaiz for Defendants, Cross-complainants and Appellants. Helon & Manfredo and Donald R. Forbes for Plaintiff, Cross-defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. MCV067634)
OPINION
APPEAL from a judgment of the Superior Court of Madera County. James E. Oakley, Judge. Campagne & Campagne, Thomas E. Campagne, Eric M. Kapigian; Baker Manock & Jensen and James A. Ardaiz for Defendants, Cross-complainants and Appellants. Helon & Manfredo and Donald R. Forbes for Plaintiff, Cross-defendant and Respondent.
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Moosios Farms, Inc. (MFI), held title to an approximately 300-acre ranch along the San Joaquin River. Four siblings, Louis Moosios, Sr., Alice Voth, Frank Moosios, and David Moosios, owned MFI.
In March 2004, MFI entered into a contract to sell approximately 36 acres of the ranch to Moosios River Ranch (MRR), a partnership owned by Louis, Sr.'s children, Louis Moosios II (Louis II) and Kristi Keiffer. The contract conditioned the sale on a lot line adjustment including any easements required for ingress and egress to the balance of the ranch. However, when the parties completed the lot line adjustment, the deed they recorded made no mention of an easement across MRR's property.
We use first names to avoid confusion and intend no disrespect.
In 2014, plaintiff and respondent, MFI, filed the underlying complaint against defendants and appellants, MRR, Louis II, Kristi Keiffer, and Louis Moosios Enterprises (LM Enterprises), seeking to declare, and quiet title to, an easement across an existing roadway on MRR's parcel. MFI further sought to declare invalid a lease granting LM Enterprises a leasehold interest in the entire ranch that Louis, Sr. allegedly signed on behalf of MFI shortly before his death. Following a bench trial, the court entered judgment in MFI's favor granting an easement across MRR's parcel along the existing roadway and declaring LM Enterprises' lease invalid.
Appellants contend the trial court erred in construing the easement as an implied easement instead of an express easement by necessity. Appellants further argue the trial court erred in declaring the lease invalid. According to appellants, Corporations Code section 313 provides a conclusive presumption that the lease is valid because Louis, Sr., the president and treasurer of MFI, signed it.
The trial court did not err as alleged. Therefore, we affirm the judgment.
BACKGROUND
After Louis, Sr., Alice, Frank, and David inherited the ranch property from their mother, they transferred the entire 300 acres to MFI. Each heir then held 25 percent of the MFI shares and was a director of the corporation.
Due to litigation with a former tenant and a judgment against it, MFI found itself in considerable debt. MFI attempted to sell the entire ranch in 2003 but was unsuccessful. MRR then offered to purchase the "western most part" of the 300-acre parcel containing approximately 36 acres for $400,000 and MFI accepted.
In March 2004, MFI and MRR executed a contract of sale for real property. Through a written consent of its directors, MFI authorized Louis, Sr. to sign the contract and any other documents necessary to complete the transaction.
The contract of sale included a provision requiring a lot line adjustment to create the new parcel. This provision further provided:
"The lot line adjustment shall provide for any easements required for ingress and egress to the balance of the ranch property to be retained by Seller, with such easements to be wide enough to allow for future development of the property retained by Seller, as either subdivision land or for other commercial purposes."
The deed conveying the new parcel to MRR was recorded in November 2006. Neither the grant deed nor the attached legal description refers to an easement.
At the time of the sale to MRR, there were two homes on the 36-acre parcel. Louis, Sr. and Louis II lived in one and Frank lived in the other. Between the homes is a dirt roadway that provides access to MFI's property from an unmaintained county road. This is the main road across the entire ranch and has been in use for over 80 years. Various vehicles use this road including cars, harvesters, tractors, gravel trucks, and water trucks.
From time to time, various aquaculture businesses leased portions of MFI's property. As a result, when the last lessee left around 2010, there were a number of empty ponds or basins on the property.
In 2011, Louis II approached David about trying to restart an aquaculture business. According to David, he told Louis II he could experiment with a fish farm with one pond. According to Louis II, David told him to "go ahead and get the fish farm going again." In early 2012, Louis II started the operation with four ponds.
Because he lived on the property, Frank knew that Louis II was using the ponds. Frank helped Louis II scrape out the bottom of one or two ponds to prepare them for fish. David was also aware of Louis II's activities and that he was creating a larger operation than the one pond that David gave him permission to use.
In 2011, Louis II prepared the first of two proposals to lease the MFI property. This first lease provided a five-year term that the lessee could extend for an unlimited number of additional five-year terms. The rent was to be five percent of the gross revenue made from the leased property. This proposal required the signatures of Louis, Sr., David, and Frank.
There is conflicting evidence regarding David and Frank's reaction to this lease proposal. Louis II recalled that all David and Frank said was that they needed to think about it. However, David testified that, although he did not remember a conversation, he would never sign the lease because the price was too low. Similarly, Frank testified he told Louis II that he did not like the proposal and that they wanted $500 per acre. Frank also told Louis II that they were going to sell the property.
Louis II prepared the second lease proposal in 2012. This proposal added a minimum rent provision starting at $20,000 per year for 2013 but did not otherwise change the basic terms. Instead of Louis II, the lessee was Louis II's company, LM Enterprises. This lease only required the signatures of Louis, Sr. and David. David testified that he also rejected this proposal.
In February 2013, Louis II prepared a third lease agreement that superseded the previous proposals. Again, LM Enterprises was the lessee. This lease was on the same terms as the first proposal, i.e., the rent was to be five percent of the gross revenue without any minimum payments. This lease only required Louis, Sr. to sign on behalf of MFI. Louis II testified he dropped the other signature requirements because Louis, Sr. told him his signature was all that was necessary on a contract.
On March 5, 2013, Louis, Sr. signed the third lease on behalf of MFI as MFI's president. At the time, Louis, Sr. also held the office of treasurer. When he signed the lease, Louis, Sr. was terminally ill.
On March 29, 2013, Louis, Sr. and Louis II deposited $10,000 in MFI's checking account. Louis II testified that, after hearing from Louis, Sr. that MFI needed money to pay some bills, he deposited the $10,000 as an advance on his rent under the March 5, 2013 lease.
Robert Garibay is MFI's accountant and keeps track of MFI's expenses and income. After receiving MFI's bank statement in late March 2013, Garibay noticed a $10,000 deposit. Not knowing what that money was for, he contacted David who also did not know what this deposit was. Thereafter, Garibay received a message from Louis II stating "$10,000 deposited 3/29/13, rent." Garibay then contacted David again and told him that the $10,000 was a rent deposit. However, Garibay did not know the source of this payment.
Louis, Sr. died on April 25, 2013, and Louis II and Kristi Keiffer inherited his shares in MFI.
In the summer of 2013, Louis II talked to David about farming organic vegetables on MFI property. David told Louis II to "hold off" on putting "a bunch of money in on planting vegetables or doing anything else while they are looking into feasibility of possibly selling the property." Louis II did not tell David he had a lease on the property or show him the signed lease.
In August 2013, David and Frank listed the MFI property for sale. Thereafter, they realized there would need to be an easement across the MRR parcel in order to sell the otherwise landlocked property. Ernie Moosios, David's son, asked Louis II for an easement across MRR property to access MFI land. Louis II responded that he could not give MFI an easement because he did not have access to his property without going over a neighbor's property.
Ernie then obtained a map from the county showing that the access road to MRR was a county right-of-way, not a private road. Ernie showed this map to Louis II but Louis II still insisted that it was a private road.
Louis II never gave a signed copy of the March 5, 2013 lease to David or Frank. Frank testified he first learned of the lease in January 2014. Frank discovered men on MFI property doing soil work. He confronted the men and they told Frank they had a sublease from Louis II. Frank told them to stop and chased them off the property.
Shortly thereafter, MFI sought legal counsel and, in May 2014, filed the underlying complaint. MFI sought an easement and a declaration that the March 5, 2013, lease is invalid.
A few weeks before trial was to begin, Louis II cut a new access road running along the border of MRR and recorded an easement over that road in favor of MFI. Nevertheless, the trial court granted an easement to MFI along the road historically used by the parties. The trial court further declared the March 5, 2013, lease to be invalid and unenforceable.
DISCUSSION
1. Substantial evidence supports the trial court's finding of an implied easement.
The trial court concluded that the evidence established an easement by implication over the path known as the "main road." The court found that there was "open and obvious use of the 'main road' at the time of severance" and thus, under Civil Code section 1104, MFI had an implied easement to use this road in the same manner, and to the same extent, as it had before the severance. On review, we must uphold this finding if it is supported by substantial evidence. (Thorstrom v. Thorstrom (2011) 196 Cal.App.4th 1406, 1417.)
If certain conditions exist at the time of conveyance of property, an easement will be implied. First, the owner of the property must convey or transfer a portion of that property. Second, the owner's prior existing use of the property either must have been known to the grantor and the grantee, or have been so obviously and apparently permanent that the parties should have known of the use. In other words, the prior use of the property was of a nature that the parties must have intended or believed that the use would continue. Finally, the easement must be reasonably necessary to the use and benefit of the dominant tenement. (Tusher v. Gabrielsen (1998) 68 Cal.App.4th 131, 141 (Tusher).)
Civil Code section 1104 codifies the implied easement elements. (Tusher, supra, 68 Cal.App.4th at p. 141, fn. 12.) That section provides:
"A transfer of real property passes all easements attached thereto, and creates in favor thereof an easement to use other real property of the person whose estate is transferred in the same manner and to the same extent as such property was obviously and permanently used by the person whose estate is transferred, for the benefit thereof, at the time when the transfer was agreed upon or completed."
The purpose of the implied easements doctrine is to give effect to the actual intent of the parties as shown by all the facts and circumstances. (Tusher, supra, 68 Cal.App.4th at p. 141.) To determine this intent, the court takes into consideration the circumstances attending the transaction, the particular situation of the parties, and the state of the thing granted. (Kytasty v. Godwin (1980) 102 Cal.App.3d 762, 769.) However, such intent must clearly appear. (Ibid.)
Here, the record supports the trial court's conclusion that the elements of an implied easement were present. MFI conveyed a portion of its property to MRR. The parties knew about the road that crossed MRR's parcel, referred to it as the "main road," and had been using it all their lives. Thus, the road was permanent and obvious. Moreover, the contract of sale provides clear evidence that the parties intended an easement. Finally, the easement was reasonably necessary for the beneficial use and enjoyment of MFI's property. At the time of severance, this main road was the only access to MFI's property and has served the property for over 80 years. The map prepared for the lot line adjustment labels this easement as MFI's access road.
MRR argues the trial court erred as a matter of law when it found an implied easement. MRR first notes that, in general, "easements can only be created by an express writing or by prescription." (Horowitz v. Noble (1978) 79 Cal.App.3d 120, 131.) According to MRR, because MFI expressly reserved "any easements required for ingress and egress to the balance of the ranch property," in the contract of sale, this agreement "'manifested the express intent of the parties and [left] nothing for implication.'" (Quoting Warfield v. Basich (1958) 161 Cal.App.2d 493, 499.) Therefore, MRR contends, the court could not imply an easement. Rather, MMR concludes, the only easement that can arise is one by necessity and, unlike an implied easement, an easement by necessity can be relocated or extinguished.
First, contrary to MRR's position, an easement created by grant and an implied easement are not entirely separate subsets within the set of easements. (Mikels v. Rager (1991) 232 Cal.App.3d 334, 355.) Rather, "[t]he set of easements created by grant fall into two subsets: easements created by express grant, and easements created by implied grant." (Id. at pp. 355-356.)
The contract of sale expressed the parties' intent that MFI would retain an easement for access to its property. However, the parties did not specify any particular location for the easement. Thus, the reservation was incomplete. Further, MRR's deed was silent as to the easement and thus did not create an easement by express grant. Considering the permanent and obvious "main road" and its historical use, substantial evidence supports the trial court's finding that an easement along the road was created by implied grant. The parties did not express a contrary intent.
MRR reads the contract of sale as expressing the intent that any easement be by necessity only because the contract refers to any easements required, i.e., necessary, for ingress and egress. However, one element of an implied easement is that it be necessary for the use of the dominant tenement; it just does not need to be "strictly necessary." Further, unlike an implied easement, an easement by necessity does not rest on a pre-existing use. Thus, questions regarding the permanence and continuity of the easement, which are important in connection with implied easements because the servitude is obvious and apparently permanent, are not applicable to easements by necessity. (Lichty v. Sickels (1983) 149 Cal.App.3d 696, 699-700.) Moreover, the parties' intent at the time of the conveyance is immaterial to the existence of an easement by necessity. In fact, such an easement often thwarts the intent of the grantor or grantee. (Id. at p. 700.)
In sum, the parties' use of the word "required" in the contract of sale does not demonstrate an intent that the particular easement be strictly necessary. Rather, as discussed above, the circumstances demonstrate that, at the time of conveyance, the parties intended an easement along the historically used road. MRR's last minute grant of an easement over a newly cut road does not alter this conclusion. 2. Substantial evidence supports the trial court's finding that the lease was invalid.
The trial court concluded that the March 5, 2013, lease between MFI and LM Enterprises was invalid. The court found that Louis, Sr. alone did not have authority to lease MFI's property. The court further held that Corporations Code section 313 was inapplicable and that Louis II knew his father did not have the authority to bind MFI to the lease.
a. The bylaws and shareholder agreement.
MFI produced its corporate records, including the bylaws and a shareholder agreement. The bylaws and the shareholder agreement both prohibited Louis, Sr. from executing the lease without authorization from a majority of the board of directors. The bylaws provide in section 4.01:
"Unless expressly so authorized, no officer, agent, or employee shall have any power of authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable monetarily for any purpose [or] in any amount."Similarly, the shareholder agreement provides:
"The President shall not be authorized to perform any of the following acts without the consent of a majority of the Directors, which majority shall consist of all the Directors, less one (1) Director:
An example of MFI acting under these provisions is the action taken by the board of directors authorizing Louis, Sr. to negotiate and execute the agreement for Louis II's purchase of the MRR property."A. The sale or lease of all or substantially all of the assets of the Corporation;"
However, the bylaws and shareholder agreement produced by MFI were all unsigned copies. Accordingly, during trial, they were marked for identification only and the trial court reserved ruling on their admissibility pending further briefing from the parties. In its statement of decision, the trial court concluded other evidence sufficiently authenticated the copies of the bylaws and shareholder agreement and admitted them into evidence.
Before reaching this conclusion, the trial court stated, "For the reasons outlined above, the Court does not and need not rely on the Bylaws or the Shareholders Agreement of MFI to find that the Lease required the approval on behalf of MFI of persons other than Louis, Sr. ...." At oral argument, appellants' counsel argued that this statement precluded us from considering the bylaws and shareholder agreement in reaching our decision. Counsel's position lacks merit for two reasons.
First, appellants did not raise this issue in their opening brief. Therefore, the issue is waived. (Employers Mutual Casualty Co. v. Philadelphia Indemnity Ins. Co. (2008) 169 Cal.App.4th 340, 349-350.) Second, counsel's argument is incorrect. We can consider evidence admitted at trial to find that substantial evidence supports the trial court's ruling even though the trial court did not base its ruling on that evidence. (Scott v. City of Del Mar (1997) 58 Cal.App.4th 1296, 1305.)
MRR contends that the trial court erred in admitting the unsigned bylaws and shareholder agreement into evidence. MRR argues there was no evidence MFI adopted the bylaws and therefore Louis, Sr.'s authority to enter into the lease was not limited.
Bylaws may be adopted either by approval of the outstanding shares or by approval by the board of directors. (Corp. Code, § 211.) Here, MFI produced a copy of the minutes adopting the bylaws but those minutes were also unsigned.
Nevertheless, a court may rely on indirect and circumstantial evidence to establish the authenticity of copies of documents. (Evid. Code, § 1410; Young v. Sorenson (1975) 47 Cal.App.3d 911, 915.) As to corporate records, in the absence of duly authenticated records, the court may admit any competent secondary evidence to show what the board's actions were. Thus, witness testimony can establish that the board passed a particular resolution. (Boggs v. Lakeport A. P. Assn. (1896) 111 Cal. 354, 356-357.)
Here, substantial evidence supports the trial court's finding that the copies of the bylaws and the shareholder agreement were authentic and that MFI's board had adopted both.
Ernie testified that, during the litigation, he copied all of the corporate documents in David's possession. These included the unsigned bylaws and the unsigned shareholder's agreement. David testified that Louis, Sr. took and maintained the original documents and that he did not know where the original documents were. When the original shareholders formed MFI, Louis II lived with his father and continued to do so until Louis, Sr.'s death.
David testified that the copy of the bylaws produced at trial was an accurate copy of the original bylaws and that MFI adopted those bylaws. David also testified that the shareholder agreement produced was a true and correct copy of the original. David stated he signed the shareholder agreement and he believed his three siblings also signed it. According to David, the bylaws and shareholder agreement provided the rules by which they ran MFI.
Further, when Steven Mortimer took over the role as MFI's attorney from Michael Milnes and asked Milnes to send him MFI's corporate documents, Milnes sent Mortimer the bylaws and shareholder agreement produced at trial. Milnes was the attorney who drafted the bylaws and shareholder agreement. Receipt of documents from the author in response to a request is another way to authenticate those documents. (Evid. Code, § 1420.)
Viewing the evidence in the light most favorable to MFI, giving MFI the benefit of every reasonable inference and resolving all conflicts in its favor, substantial evidence supports the trial court's finding that the bylaws and shareholder agreement were sufficiently authenticated. (Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660 (Jessup Farms).) Accordingly, the trial court correctly concluded that Louis, Sr. did not have the authority to lease the MFI property to LM Enterprises.
b. Corporations Code section 313.
Under Corporations Code section 313, a written instrument, including a lease, "entered into by a corporation is not invalidated by any lack of authority on the part of the officers executing the instrument if (1) it has been executed by the designated officers, and (2) the other party does not have actual knowledge that the signing officers lacked authority to execute the instrument." (Snukal v. Flightways Manufacturing, Inc. (2000) 23 Cal.4th 754, 782 (Snukal).) The "designated officers" include the chairperson of the board or the president and the chief financial officer. (Corp. Code, § 313.)
Corporations Code section 313 provides a conclusive evidentiary presumption that the specified corporate officers have authority to enter into the agreement. (Snukal, supra, 23 Cal.4th at p. 783.) Moreover, one person alone can bind the corporation as long as he or she holds corporate offices in each of the two categories described in the statute. (Id. at pp. 787-788.) "[T]he purpose of the statute is 'to allow third parties to rely upon the assertive authority of various senior executive officers of the corporation concerning the execution of any instrument on behalf of the corporation.... Such extra protection for third parties who deal with corporations is warranted since corporations necessarily act through agents.'" (Snukal, supra, 23 Cal.4th at p. 782.)
LM Enterprises contends that, because Louis, Sr. was the president and treasurer of MFI, Corporations Code section 313's conclusive presumption that Louis, Sr. had authority to bind MFI applies. However, the trial court found this presumption was inapplicable on two grounds. The trial court first concluded that upholding the lease would "result in an 'injustice unsupported by law.'" The court further found the evidence supported the inference that Louis II knew his father lacked authority to bind MFI to the lease.
The trial court relied on Saks v. Charity Mission Baptist Church (2001) 90 Cal.App.4th 1116 (Saks) to find that upholding the lease would "result in an injustice." In Saks, a real estate developer, an investor, and the pastor and president of Charity Mission Baptist Church (Church), entered into a real estate transaction. The plan was for the pastor and the Church to purchase the property with the investor, Saks, providing the funds. The Church took title for the sole purpose of obtaining public funds. After the Church received the funds, the pastor planned to transfer title to a private partnership. The Church would not benefit in any way. (Saks, supra, 90 Cal.App.4th at pp. 1123, 1138-1139.) However, the plan did not succeed. Saks foreclosed on the property and then sued the Church to collect on the promissory notes signed by the pastor.
The Saks court held that, "where an officer of a corporation is openly using the corporation to obtain a benefit for himself and his cohorts in a transaction, in which the corporation will ultimately not benefit, the other parties to the transaction cannot later seek to hold the corporation liable for his actions." (Saks, supra, 90 Cal.App.4th at p. 1121.) In so finding, the court considered whether Saks was entitled to a conclusive presumption that the promissory notes were valid under Corporations Code section 313. Saks asserted he had no actual knowledge that, under the Church's bylaws, the pastor did not have authority to enter into real estate transactions or sign notes on behalf of the Church. Nevertheless, the court held Corporations Code section 313 did not apply. (Id. at p. 1141.)
The Saks court observed that the "actual knowledge" referred to in the statute is not limited to knowledge of the contents of a corporation's files. Rather, a third party's knowing participation in the perpetration of a fraud or an abuse of authority denies that party the protection of Corporations Code section 313. (Saks, supra, 90 Cal.App.4th at p. 1141.) The court concluded that, "Saks knowingly participated in a scheme to obtain money from a public agency and real property for himself and his cohorts through use of the Church's good name. To permit him to rest on his lack of actual knowledge of the contents of the Church's bylaws to support a recovery against the Church would result in an injustice unsupported by any law." (Id. at p. 1142.)
LM Enterprises argues Saks does not apply because it analyzed Corporations Code section 313 in the context of fraud and there is no evidence of fraud here. However, contrary to LM Enterprises' position, the evidence supports the trial court's conclusion that Louis, Sr. abused his position of authority and that Louis II was a knowing participant in that abuse.
As discussed above, under the bylaws and the shareholder agreement, Louis, Sr. did not have authority to execute the lease without approval from a majority of the directors. Further, the record supports finding Louis, Sr. knew he did not have such authority. There was testimony that MFI had always operated under the bylaws and shareholder agreement. Additionally, Louis, Sr. had received authorization from the directors to execute documents in the past, i.e., the sale to MRR. Nevertheless, despite David and Frank's refusal to sign the first lease presented to them and David's refusal to sign the second lease proposal, Louis, Sr. had Louis II prepare a third lease for his signature alone. Based on this sequence of events, it is reasonable to infer that Louis, Sr. knowingly acted against the will of the majority of MFI's directors in favor of his son and in doing so, knowingly failed to comply with MFI's bylaws and shareholder agreement.
The evidence also supports the trial court's conclusion that Louis II was a knowing participant in Louis, Sr.'s abuse of his position as president and treasurer of MFI. Louis II was living with his father on the ranch and had been since the inception of MFI. The first lease Louis II prepared included space for the signatures of the three remaining MFI directors, Louis, Sr., David and Frank. Louis II was aware that both David and Frank rejected this proposal. The second lease proposal still included a signature block for David. David also rejected this proposal. Additionally, both David and Frank told Louis II that they wanted to sell the property. Louis II's proposed lease was incompatible with such a sale because Louis II had complete control over the lease term. Thus, it is reasonable to infer that Louis II was aware that the majority of MFI's directors did not agree to the lease and that Louis, Sr. was intentionally acting against the wishes of that majority. Under the Saks rationale, the trial court reasonably found it would be unjust to apply the Corporations Code section 313 presumption to uphold this lease.
The trial court's finding that Louis II actually knew his father lacked authority to bind MFI to the lease is also supported by the evidence. It is reasonable to infer from the diminishing signature blocks on the three leases that Louis II had actual knowledge of MFI's requirement that the directors authorize any lease of the property. Additionally, Louis II failed to inform David and Frank for months that he had leased the property despite being told that MFI was putting the property up for sale. In fact, David and Frank did not learn about the lease until Frank chased off people claiming to have sublet property from Louis II. Additionally, Louis II had the opportunity to reveal the lease before his father's death but did not do so. After the accountant asked David about a $10,000 deposit to MFI's account, the accountant received a message from Louis II. The message merely stated the deposit was "rent" but did not explain that it was an advance on rent under Louis II's lease. Such secrecy indicates Louis II did not believe his father had the authority to bind MFI. Thus, viewing the evidence in the light most favorable to MFI, giving MFI the benefit of every reasonable inference and resolving all conflicts in its favor, substantial evidence supports the trial court's finding that Louis II actually knew that Louis, Sr. did not have authority to bind MFI to the lease. (Jessup Farms, supra, 33 Cal.3d at p. 660.) Accordingly, Corporations Code section 313's presumption does not apply. 3. MFI is not estopped from denying the validity of the lease.
LM Enterprises contends that, because MFI received and accepted a rent payment under the March 5, 2013 lease, MFI is estopped to deny the lease's validity and binding effect. LM Enterprises further notes that David and Frank were aware that Louis II was using up to 12 ponds in 2013, which was more than an "experiment." Louis II argues the increasing size of his aquaculture operation demonstrates his reliance on the lease.
Estoppel applies where one side's conduct induces the other to take a position that will cause injury if the first side is permitted to repudiate its acts. (DRG/Beverly Hills Ltd. v. Chopstix Dim Sum Cafe & Takeout III, Ltd. (1994) 30 Cal.App.4th 54, 59.) Proof of four elements is required. First, the party to be estopped must know the facts. Second, that party must intend that its conduct shall be acted upon, or act in such a way that the party asserting the estoppel had the right to believe it was so intended. Third, the party asserting the estoppel must be ignorant of the true state of facts. Finally, the party asserting the estoppel must rely upon the conduct to its injury. (Ibid.)
In general, the knowledge necessary to support an estoppel must be actual knowledge. (La Mancha Dev. Corp. v. Sheegog (1978) 78 Cal.App.3d 9, 17.) Although knowledge may be imputed in certain circumstances, where, as here, the conduct allegedly creating the estoppel consists of silence or acquiescence, the actual knowledge requirement applies. (Feduniak v. California Coastal Com. (2007) 148 Cal.App.4th 1346, 1361.) Whether an estoppel exists is a factual question and thus the trial court's ruling is reviewed in the light most favorable to the judgment to determine whether it is supported by substantial evidence. (Id. at p. 1360.)
Here, the trial court found MFI did not have actual knowledge that Louis II made the $10,000 payment and that the payment was "rent" under the March 5, 2013 lease. As discussed above, in response to the accountant's inquiry about the unexplained $10,000 deposit, Louis left a message saying it was "rent" but did not specify the source of this "rent." The accountant testified he did not know the source of this payment and had no evidence that Louis II made the deposit. David testified the accountant told him this payment was rent but he did not know for what. Viewing this evidence in the light most favorable to MFI, giving MFI the benefit of every reasonable inference and resolving all conflicts in its favor, substantial evidence supports the trial court's "actual knowledge" finding. (Jessup Farms, supra, 33 Cal.3d at p. 660.)
Substantial evidence also supports the trial court's finding that Louis II did not justifiably rely on his lease. As noted by the trial court, a few months after Louis, Sr. executed the lease, David told Louis II to hold off on putting "a bunch of money in on planting vegetables or doing anything else while they are looking into feasibility of possibly selling the property." Moreover, during that conversation, Louis II did not tell David about the lease. Thus, any acquiescence on the part of MFI ended then.
In sum, Louis II did not meet his burden of proving the elements required for equitable estoppel. Therefore, the trial court properly concluded that MFI was not estopped from denying the validity of the lease.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondent.
/s/_________
BLACK, J. WE CONCUR: /s/_________
HILL, P.J. /s/_________
SMITH, J.
Judge of the Fresno Superior Court assigned by the Chief Justice pursuant to article VI section 6 of the California Constitution.