W. Sur. Co. v. LA Cumbre Office Partners, LLC
213 Cal. Rptr. 3d 460
| Cal. Ct. App. | 2017Background
- La Cumbre Office Partners, LLC (appellant) was managed by Melchiori Investment Companies, LLC (MIC); MIC’s managing member was Mark J. Melchiori. Melchiori was not a member of La Cumbre.
- In 2008 Melchiori signed a General Agreement of Indemnity that named La Cumbre as an indemnitor and signed under the line “La Cumbre Office Partners, LLC [by] Mark J. Melchiori, Managing Member.” He correctly signed for MIC as MIC’s "Managing Member."
- MIC did not have actual authority (no member vote or written consent) to bind La Cumbre to the indemnity agreement; La Cumbre’s members never authorized execution.
- Western Surety (plaintiff) issued bonds on behalf of Melchiori’s construction company and paid claims after defaults; it sued La Cumbre in 2012 for breach of the indemnity agreement seeking about $6.07 million.
- The trial court granted summary judgment for Western Surety, concluding La Cumbre was bound by Melchiori’s signature under former Corporations Code §17157(d); La Cumbre appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether La Cumbre is bound by the indemnity agreement signed by Melchiori despite his lack of actual authority to sign for La Cumbre | Western: §17157(d) protects third parties when a written instrument is signed by the manager (or sole manager) and the other party lacks actual knowledge of lack of authority; Melchiori’s signature binds La Cumbre because he signed as MIC’s authorized natural person | La Cumbre: The signer was not its manager; MIC (the manager) did not sign on La Cumbre’s behalf, so §17157(d) safe harbor does not apply and La Cumbre is not bound | Court: Affirmed — §17157(d) applies. A written instrument signed by the natural person who in fact is the manager of the manager (here Melchiori signing for MIC) binds the LLC in the absence of the other party’s actual knowledge of lack of authority |
| Whether third party’s lack of due diligence defeats the statutory safe harbor | Western: Due diligence not required; statute protects third parties absent actual knowledge of lack of authority | La Cumbre: Western should have verified authority; lack of inquiry means agreement shouldn’t bind La Cumbre | Court: Rejected La Cumbre’s due-diligence argument; statute requires only absence of actual knowledge, not affirmative investigation |
Key Cases Cited
- Greve v. Taft Realty Co., 101 Cal.App. 343 (1929) (officers’ proper execution binds corporation even if official title not shown on instrument)
- Snukal v. Flightways Mfg., Inc., 23 Cal.4th 754 (2000) (statutory safe harbor for corporate officers is satisfied when one individual holds and signs in multiple required offices; absence of title on instrument does not defeat statute)