The “President” of LLC Is Not Personally Liable on the LLC's Promissory Note

The “President” of LLC Is Not Personally Liable on the LLC's Promissory Note

      In a recent decision from the Federal District Court for the Western District of Kentucky (Judge Stivers), it was held that an officer of an LLC who on its behalf executed a promissory note did not undertake personal liability on that obligation. Haynes v. Lankford, Civ. Act. No. 1:17-CV-00091-GNS, 2017 WL 4322434 (W.D. Ky. September 28, 2017).

      Lankford, as President of Rural Physician Partners, LLC, executed a pair of promissory notes. The notes were not satisfied, and the holders thereof brought suit against Rural Physician Partners, LLC and, as well, Lankford in his individual capacity. Lankford defended, filing a motion to dismiss on the basis that he, as an individual, is not personally liable on those notes. Reasoning as follows, the Court granted the motion to dismiss:

The Kentucky Supreme Court has held “that if the body of the contract states that the agreement is with a corporation or other entity, then the officer or agent signing the agreement has not signed in her individual capacity and cannot be held personally liable solely because of her signature.” Pannell v. Shannon, 425 S.W.3d 58, 65 (Ky. 2014). See also Griffin v. Jones, 170 F. Supp. 3d 956, 968 n.6 (W.D. Ky. 2016) (“Jones did sign the SE Book operating agreement and the management agreement between CA Jones Management and College Book Rental. However, Jones signed these agreements in his representative capacity as an officer of one of the signatories, not in his individual capacity, and therefore cannot enforce these agreements in his individual capacity.” (citing Pannell, 425 S.W.3d at 65)). Thus, execution of a document on behalf a limited liability company does not render a member or its officers liable for a promissory note executed on behalf of the company unless expressly contemplated by the terms of the contract.

It is uncontroverted that Lankford signed the promissory note in his capacity as President of Rural Physician Partners, LLC, which is reflected by the notation below his signature on the document. (Verified Compl. Ex. A, at 5, 10, DN 1-2). In addition, Plaintiffs have specifically alleged that “[a] secured Promissory Note was executed by Monty J. Lankford in the name of Rural Physicians [sic] Partners, LLC, as its President....” (Verified Compl. ¶ 5 (emphasis added)). Accordingly, Plaintiffs have failed to state a claim against Lankford in his individual capacity.