Filed 2/2/17

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

WESTERN SURETY COMPANY,

 Plaintiff and Respondent,

v.

LA CUMBRE OFFICE 

PARTNERS, LLC,

 Defendant and Appellant.

2d Civil No. B269276

(Super. Ct. No. 1414261)

(Santa Barbara County)

A natural person is the managing member of a 

limited liability company (LLC 1) that is the sole manager of 

another limited liability company (LLC 2). The person signs an 

agreement on behalf of LLC 2, but misstates his position as the 

managing member of LLC 2 instead of the managing member of 

LLC 1, LLC 2’s manager. LLC 1 does not have actual authority 

to execute the agreement on behalf of LLC 2. In these 

circumstances, does the person’s signature bind LLC 2? We 

conclude that it does pursuant to former Corporations Code

section 17157, subdivision (d) (now section 17703.01, subdivision 

(d)), provided that the other party to the agreement does not have 
2

actual knowledge of the person’s lack of authority to execute the 

agreement on behalf of LLC 2.

Western Surety Company (respondent) filed an action 

against La Cumbre Office Partners, LLC, (appellant) for breach 

of an indemnity agreement. Mark J. Melchiori (Melchiori) signed 

the agreement on appellant’s behalf as its managing member. 

But he was actually the managing member of appellant’s

manager, Melchiori Investment Companies, LLC (MIC). MIC did 

not have actual authority to execute the indemnity agreement on 

appellant’s behalf.

Appellant contends that the trial court erroneously 

granted respondent’s motion for summary judgment requiring it 

to pay respondent approximately $6.07 million pursuant to the 

indemnity agreement. Appellant contends, as a matter of law,

that it is not bound by the agreement because its actual manager, 

MIC, did not sign the agreement on its behalf. We affirm.

Factual and Procedural Background

Appellant was a limited liability company with nine 

members. The members’ capital contributions totaled $3.65 

million. Appellant’s articles of organization were filed in 2006. 

They provide that the company will be managed by “one

manager.” MIC, the sole manager, was a member of appellant

with an ownership interest of 9.5891 percent. Melchiori was the 

managing member of MIC and owned half of that company. 

Melchiori was also part owner of Crespano del Grappa, LLC, a 

member of appellant with an ownership interest of 17.8082 

percent. Melchiori personally was not a member of appellant. 

Appellant’s articles of organization provide that “the 

purpose of the limited liability company is to engage in any 

lawful act or activity for which a limited liability company may be 
3

organized under the Beverly-Killea Limited Liability Act.” But 

appellant’s operating agreement provides that “the initial 

purpose of the Company shall be to acquire, hold, operate and, 

perhaps, redevelop” the real property at 200 N. La Cumbre Road 

in the City of Santa Barbara (the property). The property 

consists of a medical office building with surface parking. The 

operating agreement states that appellant’s manager, MIC, “shall 

have full, complete and exclusive authority, power, and discretion 

to manage and control the business, property and affairs of the 

Company, to make all decisions regarding those matters and to 

perform any and all other acts or activities customary or incident 

to the management of the Company’s business, property and 

affairs.” But without the “vote or written consent of a Majority 

Interest of the Members,” the manager shall not engage in “[a]ny 

act which would make it impossible to carry on the ordinary 

business of the Company.” 

Melchiori was the president of Melchiori 

Construction Company, Inc. (MCC). In 2008 he had been in the 

construction business for 22 years. In February 2008 Melchiori 

signed a “General Agreement of Indemnity” (Indemnity 

Agreement) on his own behalf and on behalf of appellant, MCC, 

and MIC. Seven other individuals or entities also signed. The 

Indemnity Agreement required the signers, referred to as 

“indemnitors,” to indemnify respondent against liability incurred

as a result of surety bonds to be issued by respondent on behalf of 

any of the indemnitors. The agreement stated that the 

indemnitors “do hereby affirm to have a substantial material or 

beneficial interest” in the bonds. 

On behalf of indemnitor MIC, Melchiori correctly 

signed the Indemnity Agreement as MIC’s “Managing Member.” 
4

On behalf of appellant, Melchiori wrongly signed, “La Cumbre 

Office Partners, LLC [by] Mark J. Melchiori, Managing Member.” 

MIC, not Melchiori, was appellant’s manager. Melchiori was not 

a member of appellant, although MIC was a member.

1 

Daniel Z. Majam, Jr., was an underwriter manager 

for respondent’s parent company, CNA Insurance. He prepared 

the Indemnity Agreement. On the signature pages, he directed 

his assistant to type, “La Cumbre Office Partners, LLC [by] Mark 

J. Melchiori, Managing Member.” Majam testified that Melchiori 

had said he was the managing member of appellant and could 

“bind the company.” He “indicated he had controlling interests” 

in appellant. Majam did not verify Melchiori’s representations 

with the California Secretary of State because he “believe[d] 

Mark Melchiori.” Respondent did not “do any due diligence to 

determine whether or not Mr. Melchiori was authorized by 

[appellant] to sign the indemnity agreement.” 

Melchiori, on the other hand, testified that he had 

never told anyone that he was appellant’s managing member. No

one connected to respondent had inquired about the identity of

appellant’s manager. When Melchiori signed the agreement, he 

did not notice that he was signing on behalf of appellant as its

 

1 Melchiori should have signed as follows: 

La Cumbre Office Partners, LLC

by Melchiori Investment Companies, LLC, Manager

by Mark J. Melchiori, Managing Member of Melchiori 

Investment Companies, LLC

During appellate oral argument, appellant’s counsel conceded 

that his client would have been “on the hook” if Melchiori had 

signed the Indemnity Agreement in this manner.
5

managing member. He did not even “notice that [appellant] was 

listed as an indemnitor.” 

Melchiori further testified that he had no idea why 

appellant was named as an indemnitor or who had put its name 

on the Indemnity Agreement. He did not know how respondent

had learned that appellant “even existed.” But pursuant to 

appellant’s statement of additional material facts and 

respondent’s responses thereto, it is undisputed that Majam “first 

learned of [appellant’s] existence in or around April 2007 when 

he reviewed an April 2007 personal financial statement of Mark 

Melchiori that identified [appellant] as an asset valued at $5.6 

million.” 

C. Norman Borgatello was a member of appellant

with a 52.0548 percent ownership interest. He declared: “The 

only business [appellant] has ever engaged in has been the 

ownership of an office building located at 200 N. La Cumbre 

Road, Santa Barbara.” Six of appellant’s nine members “had no 

ownership, economic, beneficial or other interest in [MCC].” 

Appellant “has no business, economic or other connection to 

[MCC].”2 “No affirmative vote or written consent of a majority 

interest of [appellant’s] members was obtained before the 

Indemnity Agreement . . . was signed. In fact the issue was never 

raised.” “[N]o manager of [appellant] was ever authorized to sign 

the Indemnity Agreement.” Borgatello did not know that 

respondent “was claiming [appellant] signed the Indemnity 

Agreement until [appellant] was served the complaint in this 

matter.”

 

2 However, Melchiori testified that appellant had hired 

MCC to make “fixes and improvements that needed to be made 

post purchase” of the property. 
6

In 2009 and 2010, respondent issued bonds to 

guarantee the performance of MCC’s contractual obligations in

several construction projects. MCC defaulted on the contracts, 

and respondent paid claims guaranteed under the bonds. 

Respondent alleged that “the net amount of [its] losses and 

expenses” was $6,069,998.50. Appellant refused to reimburse 

respondent for any of its losses or expenses. 

In November 2012 respondent filed a complaint 

against appellant for breach of the Indemnity Agreement. It is 

undisputed that “[n]ot one of the bonds [respondent] lists in its 

complaint had any relation to [appellant’s] business of operating 

the [p]roperty.” It is also undisputed that appellant “did not 

engage in any business requiring bonds.” 

The trial court issued a five-page ruling granting 

respondent’s motion for summary judgment. Based on two 

appellate opinions, it concluded that appellant was bound by 

Melchiori’s signature on the Indemnity Agreement. The opinions 

are Greve v. Taft Realty Co. (1929) 101 Cal.App. 343 (Greve), and 

Snukal v. Flightways Manufacturing, Inc. (2000) 23 Cal.4th 754

(Snukal). 

3

Controlling Legislative Act

Both parties agree that the instant case is governed 

by the Beverly-Killea Limited Liability Company Act (BeverlyKillea Act), former Corporations Code section 17000 et seq. 

Effective January 1, 2014, the Beverly-Killea Act was repealed 

and replaced by the California Revised Uniform Limited Liability 

 

3 The standard of review on appeal from the granting of 

summary judgment is well known and need not be repeated. (See 

Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843; 

Martinez v. Combs (2010) 49 Cal.4th 35, 68.)
7

Company Act (Revised Act), Corporations Code section 17701.01 

et seq. (Stats. 2012, ch. 419, §§ 19-20; see Kennedy v. Kennedy

(2015) 235 Cal.App.4th 1474, 1490-1491.) 

Section 17713.03 of the Revised Act provides, “This 

title does not affect an action commenced, proceeding brought, or 

right accrued or accruing before this title takes effect.” The 

complaint in the instant case was filed in November 2012, more 

than one year before the Revised Act became effective. Thus, the 

Beverly-Killea Act applies here. (Kennedy v. Kennedy, supra, 235 

Cal.App.4th at p. 1491 [Revised Act does not apply to complaint 

filed prior to January 1, 2014].)

Unless otherwise stated, all further statutory 

references concerning limited liability companies are to former 

Corporations Code sections of the Beverly-Killea Act.

Management of Limited Liability Companies

“‘A limited liability company is a hybrid business 

entity formed under the Corporations Code and consisting of at 

least two “members” [citation] who own membership interests 

[citation]. The company has a legal existence separate from its 

members. Its form provides members with limited liability to the 

same extent enjoyed by corporate shareholders [citation] . . . .’ 

[Citation.]” (PacLink Communications International, Inc. v. 

Superior Court (2001) 90 Cal.App.4th 958, 963.)

The management of a limited liability company may 

be vested in the company’s members. (§ 17150.) Where such 

vesting occurs, “every member is an agent of the limited liability 

company for the purpose of its business or affairs, and the act of 

any member . . . binds the limited liability company, unless the 

member so acting has, in fact, no authority to act for the limited 

liability company in the particular matter, and the person with 
8

whom the member is dealing has actual knowledge of the fact 

that the member has no such authority.” (§ 17157, subd. (a).)

On the other hand, “[t]he articles of organization 

may provide [and do provide in appellant’s situation] that the 

business and affairs of the limited liability company shall be 

managed by or under the authority of one or more managers who 

may, but need not, be members.” (§ 17151, subd. (a).) Where, as 

here, the articles of organization so provide, “[n]o member, acting 

solely in the capacity of a member, is an agent of the limited 

liability company nor can any member bind, nor execute any 

instrument on behalf of, the limited liability company.” (§ 17157, 

subd. (b)(1).) 

The key statute here is section 17157, subdivision (d) 

(section 17157(d)). It provides: “[A]ny . . . contract . . . or other 

instrument in writing . . . executed or entered into between any 

limited liability company and any other person, when signed by 

at least two managers (or [as here] by one manager in the case of 

a limited liability company whose articles of organization state 

that it is managed by only one manager), is not invalidated as to 

the limited liability company by any lack of authority of the 

signing managers or manager in the absence of actual knowledge 

on the part of the other person that the signing managers or 

manager had no authority to execute the same.” Current 

Corporations Code section 17703.01, subdivision (d) of the 

Revised Act contains the identical language.

Discussion

In its opening brief, appellant correctly states the

rule of section 17157(d): “Third parties who enter into a written 

agreement signed by the manager of an LLC [limited liability 

company] enjoy a statutory ‘safe harbor’: the agreement is 
9

binding on the LLC even if the manager had no authority to sign, 

as long as the third party was without actual knowledge of the 

manager’s lack of authority.” “The words of former § 17157(d)

are plain and clear: a written contract signed by an LLC’s 

manager is valid even if the manager - without the knowledge of 

the third party - was without authority.” 

A similar rule applies to corporations. Corporations 

Code section 313 (section 313) provides “that an instrument 

entered into by a corporation is not invalidated by any lack of 

authority on the part of the officers executing the instrument if 

(1) it has been executed by the [statutorily] designated officers, 

and (2) the other party does not have actual knowledge that the 

signing officers lacked authority to execute the instrument.” 

(Snukal, supra, 23 Cal.4th at p. 782.)4 In Snukal our Supreme 

Court concluded that, if the statutory criteria are met, “section

313 precludes the invalidation of an instrument entered into by a 

corporation, despite the presentation of evidence demonstrating 

that the signing officers lacked authority to execute the 

instrument on its behalf. Thus, the statute provides a conclusive, 

 

4 When Snukal was decided, the text of section 313 was as 

follows: “[A]ny . . . contract . . . or other instrument in writing . . . 

executed or entered into between any corporation and any other 

person, when signed by the chairman of the board, the president 

or any vice president and the secretary, any assistant secretary, 

the chief financial officer or any assistant treasurer of such 

corporation, is not invalidated as to the corporation by any lack of 

authority of the signing officers in the absence of actual 

knowledge on the part of the other person that the signing 

officers had no authority to execute the same.” Effective January 

1, 2016, section 313 was amended to substitute “chairperson” for 

“chairman.” (Stats. 2015, ch. 98, § 6.)
10

rather than a merely rebuttable, evidentiary presumption of 

authority to enter into the agreement on the part of the 

specified . . . officers.” (Ibid.) The court continued, “Because the 

statute applies even when the other party should have, but does 

not have, actual knowledge of the officers’ lack of authority, that 

party is relieved of the burden of establishing justifiable reliance 

upon the authority of the executing officers.” (Id., at p. 783.) 

Appellant does not claim that respondent had actual 

knowledge that Melchiori lacked authority to sign the Indemnity 

Agreement on appellant’s behalf.

5 Thus, pursuant to section 

17157(d), appellant is bound by the agreement if it is deemed to 

have been signed by appellant’s manager, MIC. Appellant argues

that, as a result of the mistaken designation of Melchiori’s 

position as appellant’s managing member, MIC did not sign the 

agreement on appellant’s behalf.

6 We are guided by the two cases 

relied upon by the trial court: Greve and Snukal.

In Greve the defendant was a corporation that had 

entered into a commission agreement. Various officers of the 

corporation signed the agreement “without any designation as to 

their official characters [i.e., positions].” (Greve, supra, 101 

Cal.App. at p. 349.) The corporation contended “that the affixing 

of [its] name . . . to the commission agreement by the officers 

without setting forth their official designation is insufficient to 

 

5 During appellate oral argument, appellant’s counsel 

stated that “actual knowledge of the lack of authority [is] a 

defense that is not really at issue here.”

6 MIC signed the Indemnity Agreement on its own behalf. 

The signature page lists MIC as a separate indemnitor. Under 

MIC’s name, Melchiori correctly signed as its “Managing 

Member.” 
11

constitute the agreement an obligation of the corporation.” (Ibid.) 

The appellate court held to the contrary: “[W]hen the name of a 

corporation is attached to an agreement by its proper officers, it 

is unnecessary to attach to the names of the persons executing 

the agreement for the corporation the official designation of the 

one who signs his name, but . . . such official designation may be 

otherwise established.” (Id., at p. 350; see also Snukal, supra, 23 

Cal.4th at p. 780, fn. 8 [citing Greve as supporting authority, 

Supreme Court noted, “At common law, when the corporate 

officer’s actual authority to execute the agreement has been 

established or is not in doubt, the circumstance that he or she 

does not specify the office held does not invalidate the agreement 

as to the corporation”].) 

Pursuant to the reasoning of Greve, appellant would 

have been bound by the Indemnity Agreement if Melchiori had 

signed his name without indicating his official position -

managing member of appellant’s manager, MIC. It follows that 

appellant is bound even though the agreement’s signature page 

mistakenly showed that Melchiori was appellant’s managing 

member. Appellant’s signature bound MIC and, therefore, also 

bound appellant. 

In Snukal a corporate official, Lyle, executed a lease 

on behalf of the corporation, Flightways. Lyle was president, 

chief financial officer, and secretary of Flightways. He signed the 

lease only as president. To fall within the safe harbor of section 

313, the statute required that the lease be signed by a person 

holding at least one corporate office in each of two separate 

categories of offices. (See fn. 4, ante.) The office of president is in 

one category, while the offices of chief financial officer and 

secretary are in another category. Thus, for Flightways to be 
12

bound under section 313, both the president and chief financial 

officer or secretary, were required to sign the lease. 

Our Supreme Court rejected Flightways’s claim that 

section 313 “applies only when two officers holding the offices 

specified in the statute execute an instrument and name the 

corporate offices held - whether the requisite offices are held by 

the same person or by two persons.” (Snukal, supra, 23 Cal.4th 

at p. 777.) The court held: “Corporations Code section 313 does 

not contain any language directing that the signing officers be 

separate individuals, or that the signing officers specify the office 

or offices they hold. Accordingly, although Corporations Code 

section 313 applies only where corporate officers in each of the 

two designated series or categories execute the instrument, that 

statute . . . is satisfied when one individual who in fact holds two 

of the specified corporate offices executes the instrument. 

[Citation.]” (Id., at p. 786, fn. omitted, italics added.) “In the 

present case, therefore, because Lyle served both as Flightways’s 

president and as its chief financial officer (and secretary), and 

because plaintiff did not have actual knowledge of any lack of 

authority on Lyle’s part, the lease agreement was not invalidated 

by Lyle’s lack of authority to enter into such an agreement on 

behalf of Flightways.” (Id., at p. 787, fn. omitted.)

In Snukal the lease correctly designated Lyle as the 

corporation’s president. Here, on the other hand, the Indemnity 

Agreement mistakenly designated Melchiori as appellant’s 

managing member. But this is a distinction without a difference. 

Snukal makes clear that, to bind the corporation under section 

313, the signer’s offices need not be set forth in the instrument 

signed. What matters is whether the signer is the person he is 

statutorily required to be: in Snukal the president and chief 
13

financial officer or secretary of the corporation; in the instant 

case the managing member of appellant’s manager, MIC. Like 

section 313, section 17157(d) “does not contain any language 

directing that the signing [manager] . . . specify the [position he] 

hold[s].” (Snukal, supra, 23 Cal.4th at p. 786.) Thus, pursuant to 

the reasoning of Snukal, Melchiori’s signature bound appellant 

under section 17157(d). 

Appellant argues that Snukal “requires that 

[respondent] prove liability based on common law theories 

instead of a statutory safe harbor” pursuant to section 17157(d). 

Snukal concluded, “If . . . an agreement is not entered into on 

behalf of the corporation by the [statutorily] specified officers, the 

third party still may seek its validation by invoking traditional 

common law theories, thereby incurring an increased burden of 

proof.” (Snukal, supra, 23 Cal.4th at p. 784.) Because the 

Indemnity Agreement was entered into on behalf of appellant by 

the statutorily specified person - the managing member of 

appellant’s manager, MIC - respondent need not invoke 

traditional common law theories. Like section 313, section 

17157(d) “absolves [respondent] of having to prove, as [it] would 

be required to at common law, that [Melchiori] had actual or 

ostensible authority to bind [appellant] to the instrument at 

issue . . . .” (Id., at p. 785.)

Appellant claims: “The statutory scheme . . . does

not . . . protect a third party when the person signing the contract 

[Melchiori] is not actually the manager [MIC]” of the LLC. “The 

statute does not provide a safe harbor to the third party if the 

contract is signed by . . . the manager [Melchiori] of the LLC’s 

manager [MIC].” Appellant’s claims are untenable because MIC 

was a legal entity and therefore could sign the Indemnity 
14

Agreement only through the signature of a natural person. The 

natural person authorized to sign on MIC’s behalf was its

managing member, Melchiori. During appellate oral argument, 

appellant’s counsel conceded that Melchiori was “the only living 

person in the world” who could sign on MIC’s behalf.

We reject appellant’s argument that it is not bound 

by the Indemnity Agreement because respondent failed to 

exercise due diligence to assure that Melchiori was in fact 

appellant’s managing member. Irrespective of whether 

respondent exercised due diligence, Melchiori’s signature bound 

appellant under section 17157(d).

Disposition

The judgment is affirmed. Respondent shall recover 

its costs on appeal.

CERTIFIED FOR PUBLICATION.

YEGAN, J.

We concur:

GILBERT, P. J.

TANGEMAN, J.
Donna D. Geck, Judge

Superior Court County of Santa Barbara

______________________________

Law Offices of Herb Fox, Herb Fox; Reicker, Pfau, 

Pyle & McRoy, Timothy J. Trager, for Defendant and Appellant.

Solan, Park & Robello, Kevin M. Solan; Rosenbaum 

& Associates, Neil Rosenbaum, for Plaintiff and Respondent.