Mistaken Identity of Capacity Does Not Eliminate Ability to Bind LLC

Mistaken Identity of Capacity Does Not Eliminate Ability to Bind LLC

      In a decision from California, the court consider whether the failure to correctly identify the role in which a person signed a document rendered the agreement unenforceable. In this instance, the court answered “no.” Western Surety Co. v. La. Cumbre Office Partners, LLC, 2017 Cal. App. LEXIS 77 (2017).

      In this instance, there was an LLC (“Manager LLC”) that itself was the manager of another LLC (“Managed LLC”). The Manager LLC was in turn managed by a natural person (“Person”). When, however, Person signed a document on behalf of the Managed LLC, he incorrectly identified himself as its managing member rather than the managing member of its manager. The question under consideration is whether Managed LLC on whose behalf the document had been executed was bound.

A      pplying language from California's prior LLC Act (although it is worth noting that the same language appears in the current Act), the court found that Managed LLC was properly bound notwithstanding the fact that Person had incorrectly indicated that he was the manager of the LLC.