Business Associations, Pages 958–964

Water, Waste & Land, Inc. v. Lanham

Supreme Court of Colorado, 1998

Facts:

Water, Waste & Land was a land development company doing business as "Westec." P.I.I. was an LLC with two manager-members, Lanham and Clark. Clark contacted Westec to develop a Taco Cabana and gave its representative his business card, which referred to P.I.I., but did not indicate what that initialism meant.

They eventually came to an oral agreement and Clark told Westec to send a written proposal to Lanham. Lanham was to execute and return it. He did not, but Clark told Westec to begin work anyway. Westec completed the work and sent a bill for $9,183.40 to Lanham. This bill was not paid and Westec sued Clark, Lanham, and P.I.I.

Procedural History:

  • The county court found that Westec was unaware that members were acting as agents of an LLC but that Clark was Lanham's agent. It therefore dismissed Clark from the suit and entered a judgment of $9,183 against Lanham and the Company.

  • The district court reversed, concluding that the business card saying "P.I.I." was enough to give notice that Clark was the agent of an LLC as it filed its articles of organization publicly.

Issue:

Was Lanham personally liable for his LLC's contract?

Reasoning:

The act cited by the district court only applies when one seeks to hold an LLC's members or managers liable because they are members or managers. It does not apply when the liability is based on agency theory. An agent is liable for his principal unless the principal's existence and identity are not disclosed.

The district court declined to exercise its power to find new facts, so it erred in substituting its own factual determinations for those of the county court. Instead the county court's finding that Westec did not know Clark was acting as an agent for P.I.I. or what "P.I.I." stood for are binding. Because of the partially disclosed principal doctrine, this is dispositive in not holding the LLC liable.

There is nothing that prevents Lanham from being held liable. His statutory interpretations are too broad to be adopted. P.I.I.'s name did not identify it as an LLC even. Westec did not know Lanham had a principal and he did not tell it otherwise.

Holding:

Yes, Lanham was personally liable for his LLC's contract. Reversed and remanded for the county court's judgment to be reinstated.

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