Zions Gate R.V. Resort, LLC v. Oliphant, 2014 UT App 98 (May 1, 2014)
May 1, 2014
Clarifying the doctrine of apparent authority in the context of LLCs, the Utah Court of Appeals determined that regardless of whether an individual has actual knowledge of an LLC manager’s authority to bind the LLC, notice is presumed if limitations on a manager’s authority are contained in the LLC’s articles of organization on file with the State. As applied, one manager of an LLC purported to enter into a long-term lease with a tenant, but the other manager did not sign the lease. The LLC’s articles of organization required the approval of both managers to bind the LLC, thus limiting the authority of a manager to act unilaterally. The LLC later sought to invalidate the lease because it was only signed by one manager. At trial, the tenant moved for summary judgment on the grounds of apparent authority, or alternatively, ratification. The trial court agreed with the tenant. The Court of Appeals reversed. The Court noted that, pursuant to Utah Code § 48-2c-121(1), articles of organization filed with the state “constitute notice to third persons…of all statements set forth in the articles of organization.” Thus, regardless of whether the tenant actually knew of the limitations on the manager’s authority, such knowledge was presumed by statute, and there could be no apparent authority. Moreover, because material issues of fact existed on the issue of ratification, the Court reversed the grant of summary judgment.