LLC Bound By Agreement Signed By Manager’s Manager
Monday, February 6, 2017

Justice Kenneth R. Yegan clearly and concisely frames the question in Western Surety Co. v. La Cumbre Office Partners, LLC, 2017 Cal. App. LEXIS 77 (2017):

” natural person is the managing member of a limited liability company (LLC 1) that is the sole manager of another limited liability company (LLC 2). The person signs an agreement on behalf of LLC 2, but misstates his position as the managing member of LLC 2 instead of the managing member of LLC 1, LLC 2’s manager. LLC 1 does not have actual authority to execute the agreement on behalf of LLC 2.  In these circumstances, does the person’s signature bind LLC 2?”

The Court’s answer is “yes”.  The Court based its conclusion on former Corporations Code Section 17157(d), which provides:

“[A]ny … contract … or other instrument in writing … executed or entered into between any limited liability company and any other person, when signed by at least two managers (or by one manager in the case of a limited liability company whose articles of organization state that it is managed by only one manager), is not invalidated as to the limited liability company by any lack of authority of the signing managers or manager in the absence of actual knowledge on the part of the other person that the signing managers or manager had no authority to execute the same.”

Here, the LLC, which had only one manager, argued that its manager did not sign on its behalf.  However, the individual who signed the agreement was the manager’s manager.  The Court of Appeal reasoned that the individual’s signature bound the manager and thus the LLC was itself bound.

The Court applied the former Beverly-Killea Limited Liability Company Act, because the case was filed before January 1, 2014.  Cal. Corp. Code § 17713.03 (“This title does not affect an action commenced, proceeding brought, or right accrued or accruing before this title takes effect.”).  The case should be of more than historical interest, however, for current Corporations Code Section 17703.01 contains identical language.

Did Dante Alighieri actually comment on the SEC’s review of the definition of “accredited investor”?

Dante Alighieri died in the 14th century in the city of Ravenna.  Thus, it was with some surprise to see this comment on the Securities and Exchange Commission’s website.  The comment consists of an English translation of the third canzone, “Le dolci rime d’amor, ch’i’ solìa” in Book IV of Dante’s Convivio (Banquet). Even though Dante indubitably penned this canzone, the SEC wasn’t prepared to acknowledge that it was Dante who submitted the comment.  The SEC instead attributes the comment to “anonymous”.  The canzone is nonetheless apropos, particularly these lines:

I’ll speak about the quality

Which makes a person truly noble,

By refuting the false and base beliefs

Of those who claim that riches

Are the source of true nobility.

(translated by Richard Lansing).

 

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