Since plaintiff lacked actual knowledge of limitations on his authority, the signature by the manager of a limited liability company that was itself the manager of a second limited liability company was sufficient to bind the latter company to a contract. Under Corp. Code 17703.01(d), a contract signed by two managers of a limited liability company—or by one manager, if the company’s articles state that it is managed by a single manager—is not invalidated by the signers’ lack of actual authority to sign for the company unless the other contracting party had actual knowledge of their lack of authority. Here, X, the sole managing agent of LLC 1, which was the sole managing agent of LLC2 signed a contract for LLC2, wrongly stating that X was LLC2’s managing agent. Despite this error, the contract was enforceable against LLC2 since the other contracting party had no knowledge that X lacked authority to sign for LLC2, and he had actual authority to sign for LLC1, LLC2’s managing agent.
California Court of Appeal, Second District, Division 6 (Yegan, J.); February 2, 2017; 2017 WL 445408