Granting an LLC manager the power to "execute" instruments (for example, a promissory note) does not mean without more that the manager has discretionary authority to borrow money on behalf of the LLC, so says the Kansas Court of Appeals in Sunflower Bank v. Airport Red Coach Inn of Wichita LLC, 175 P 3d 883 (Kan. App. 2008).
The court also concluded that the bank had "knowledge" of the fact that the operating agreement did not grant the manager such authority because it had a copy of the operating agreement in its possession.
The bank bungled this one in two ways. It didn't require the manager to provide evidence of his authority (by resolution or written consent) and apparently didn't read the operating agreement or at least the loan officer did not understand what he or she read.
-Marc Ward
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