Opinion ID: 2302698
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Heading: The Defendant's Direct Liability

Text: We begin with the plaintiff's argument that the trial court erred when it granted the motion to dismiss the actions against the defendant, individually. In reviewing the grant of a motion to dismiss, we assume the truth of the facts as alleged in the plaintiff's pleadings and construe all reasonable inferences in the light most favorable to the plaintiff. Beane v. Dana S. Beane & Co., 160 N.H. 708, 711, 7 A.3d 1284 (2010). We will uphold the granting of the motion if the facts pleaded do not constitute a basis for legal relief. Id. Resolution of the issues in this case requires statutory construction. We review the trial court's interpretation of a statute de novo. In re Guardianship of Nicholas P., 162 N.H. 199, 203, 27 A.3d 653 (2011). When construing New Hampshire statutes, we are the final arbiter of the intent of the legislature as expressed in the words of the statute considered as a whole. Id. We first examine the language of the statute, and, where possible, we ascribe the plain and ordinary meanings to the words used. Id. When the language of a statute is clear on its face, its meaning is not subject to modification. Id. We will neither consider what the legislature might have said nor add words that it did not see fit to include. Id. The controlling statute here, RSA 304-C:25 (2005), governs the liability of LLC members to third-parties and provides as follows: Except as otherwise provided by this chapter, the debts, obligations and liabilities of a limited liability company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the limited liability company; and no member or manager of a limited liability company shall be obligated personally for any such debt, obligation or liability of the limited liability company solely by reason of being a member or acting as a manager of the limited liability company. The defendant argues that this provision insulates him from liability. The plaintiff counters that the defendant owed her family duties grounded in common law negligence and, therefore, the claims against him are not solely by reason of his status within the LLC. We begin with first principles. A member of an LLC generally is not liable for torts committed by, or contractual obligations acquired by, the LLC. Allen v. Dackman, 413 Md. 132, 991 A.2d 1216, 1228 (2010). When, however, a member or manager commits or participates in the commission of a tort, whether or not he acts on behalf of his LLC, he is liable to third persons injured thereby. See Sturm v. Harb Development, LLC, 298 Conn. 124, 2 A.3d 859, 866 (2010). A member remains personally liable for his own acts because RSA 304-C:25 governs a member's vicarious liability for an LLC's debts or obligations. See Smith v. Isaacs, 777 S.W.2d 912, 913 (Ky.1989) (discussing Kentucky corporations statute). The statute has nothing to do with a manager's personal liability, including liability for his own negligence. See id. Therefore, [a]n LLC member is liable for torts he or she personally commits... because he or she personally committed a wrong, not `solely' because he or she is a member of the LLC. Allen, 991 A.2d at 1229. The Connecticut Supreme Court, construing the phrase solely by reason of being a member or manager, noted that, although being a member or manager does not impose liability, the statute's use of the term `solely' opens the door to other types of liability, such as common-law liability. Sturm, 2 A.3d at 868-69 (quotations and emphasis omitted). The court, therefore, construed the statute to mean that a member must do more than merely be a member in order to be liable personally for an obligation of the limited liability company. The statute ... does not preclude individual liability for members of a limited liability company if that liability is not based simply on the member's affiliation with the company. Id. at 869 (quotation omitted). This distinction has been characterized as black letter, hornbook law. Smith, 777 S.W.2d at 914. By contrast, a manager or member, acting as an agent of [an LLC], is ... protected from personal liability for making a contract where acting within his authority to bind the [LLC]. Id. at 913 (discussing corporations). Thus, [w]here [an LLC] enters into a contract, the [manager's] signature on the contract, with or without a designation as to his representative capacity, does not render him personally liable under the contract. Redmon v. Griffith, 202 S.W.3d 225, 239 (Tex.App. 2006) (discussing corporations). LLC members and managers who disclose that they are contracting on an LLC's behalf are not liable for a breach because they are not parties to the contractonly the LLC itself is. See Restatement (Second) of Agency § 328, at 80 (1958) (An agent, by making a contract only on behalf of a competent disclosed or partially disclosed principal whom he has the power so to bind, does not thereby become liable for its nonperformance.). As a result, the issue of whether a manager, member, shareholder or officer can be liable for actions taken on a business entity's behalf is sometimes framed as whether the duty arises solely from contract. Greg Allen Const. Co., Inc. v. Estelle, 798 N.E.2d 171, 174 (Ind. 2003). With these principles in mind, we turn to the plaintiff's claims. Although the plaintiff's writ alleges multiple theories of liability, her brief addresses only the defendant's personal liability for negligence. As a result, any objections to the trial court's dismissal of the plaintiff's other claims have been waived, and we affirm the trial court's order insofar as it dismissed them. See Progressive N. Ins. Co. v. Argonaut Ins. Co., 161 N.H. 778, 785, 20 A.3d 977 (2011). The negligence count of the plaintiff's writ states the following: The defendant[s] and their property manager owed a duty to maintain and rent the premises ... in a habitable condition. Peeling and flaking paint, which contains lead in an apartment where children under six years old will reside, constitutes such a hazard as to make the apartment uninhabitable. Said duty extends to the Plaintiff[s] as lawful tenants of Defendant. The Defendants also owed a duty to plaintiffs to investigate, remedy, make safe and/or warn Plaintiffs of the dangers of peeling and flaking lead paint present in the rental unit. We construe the quoted paragraph to allege that the defendant had an individual duty sounding in tort to investigate, remedy, make safe and/or warn the plaintiff about the dangers of flaking lead paint. The defendant argues that he had no such duty. He contends that although Biren Properties contractually delegated duties to his LLC, he himself assumed no duty to the plaintiff and, therefore, cannot be individually liable for a breach. We disagree. In Sargent v. Ross, 113 N.H. 388, 391, 308 A.2d 528 (1973), we abolished specialized tests for landlord negligence because they immunized individuals occupying the position of landlord from the simple rules of reasonable conduct which govern other persons in their daily activities. We noted that [t]he ground of liability upon the part of a landlord when he demises dangerous property has nothing special to do with the relation of landlord and tenant. It is the ordinary case of liability for personal misfeasance, which runs through all the relations of individuals to each other. Sargent, 113 N.H. at 392, 308 A.2d 528 (quotation omitted). Therefore, whether or not one technically assumes the role of property manager, property owner, or landlord, [g]eneral principles of tort law ordinarily impose liability upon persons for injuries caused by their failure to exercise reasonable care under all the circumstances. Id. at 391, 308 A.2d 528. Sargent thus clarified that what could be termed landlord negligence is simply an application of the common law principle that [a] person is generally negligent for exposing another to an unreasonable risk of harm that foreseeably results in an injury. Id. Certainly, a property owner, like Biren Properties, upon leasing property assumes a duty not to expose its tenants to an unreasonable risk of harm. Cf. Sturm, 298 Conn. 124, 2 A.3d at 871 (There is no question that a duty of care may arise out of a contract.... (quotation omitted)). Similarly, as the defendant appears to concede, his LLC assumed a duty to maintain the property in a safe condition when it entered into the management agreement with Biren Properties. Contrary to the defendant's argument, however, the property owner's duty does not arise solely by virtue of its contractual relationship to the tenant and neither the LLC's duty nor the defendant's duty arises solely from the property management agreement. See Stoiber v. Honeychuck, 101 Cal.App.3d 903, 162 Cal.Rptr. 194, 208-09 (1980) (imposing tort duty on agents of landlords). Rather, as we made clear in Sargent, 113 N.H. at 393-94, 308 A.2d 528, a tort duty exists, independent of any contractual obligation, because, under these circumstances, a reasonable person would exercise a certain degree of care for the protection of a vulnerable tenant. Indeed, the negligence that Sargent addressed stems from a landlord's ability to anticipate and avoid risks during the tenancy, not purely from the contractual relationship. See Sargent, 113 N.H. at 394, 308 A.2d 528 ([T]he landlord is best able to remedy dangerous conditions.); Kline v. Burns, 111 N.H. 87, 92, 276 A.2d 248 (1971) (Common experience demonstrates that the landlord has a much better knowledge of the conditions of the premises than the tenant.). As the allegations in this case demonstrate, a party without a direct contractual duty who nonetheless possesses the knowledge and authority of a landlord may be held liable for his own negligence. Under Sargent, such a person cannot immunize himself from the liability for personal misfeasance, which runs through all relations of individuals to each other, by abstaining from a contractual relationship with the party to whom he owes a duty of care. Sargent, 113 N.H. at 392, 308 A.2d 528 (quotation omitted). Here, the plaintiff alleges circumstances under which a reasonable person may be held to a greater degree of care than the defendant exercised. Specifically, she alleges that: (1) the defendant, personally, managed the property; (2) he had prior knowledge of lead paint dangers; and (3) he had actual knowledge of the fact that the rental ... had peeling and flaking paint ... that probably contained lead. She further alleges that the defendant [i]gnor[ed] this prior knowledge, and ... wholly fail[ed] to further investigate ... and make safe the rental, or at least warn the plaintiff[]. The defendant's management of the apartment and his superior knowledge of its hazardous condition suffice to establish an individual tort duty to avoid exposing [the plaintiff] to an unreasonable risk of harm. Id. at 391, 308 A.2d 528. Thus, because these allegations state facts entitling the plaintiff to relief, her negligence claim survives the defendant's motion to dismiss.