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Taghipour v. Jerez7/30/2002
f they are executed by the manager," that the complaint alleges that Jerez is the manager of the LLC, and that therefore the loan documents Jerez executed are valid and binding on the LLC.
Taghipour appealed to the Utah Court of Appeals. Taghipour argued that the trial court's interpretation of section 48-2b-127(2) was in error, inasmuch as it failed to read it in conjunction with Utah Code section 48-2b-125(2)(b), which provides that a manager's authority to bind a limited liability company can be limited by the operating agreement. That section provides in relevant part:
If the management of the limited liability company is vested in a manager or managers, any manager has authority to bind the limited liability company, unless otherwise provided in the articles of organization or operating agreement. Id. ยง 48-2b-125(2)(b).
The Utah Court of Appeals affirmed the trial court, concluding that the plain language of section 48-2b-127(2) provided no limitation on a manager's authority to execute certain documents and bind a limited liability company, and specifically stated such documents shall be valid and binding upon the limited liability company if executed by one or more managers. Taghipour v. Jerez, 2001 UT App 139, 12, 26 P.3d 885. Further, the court of appeals concluded that this specific statute prevailed over the general statute, section 48-2b-125(2)(b), and that the loan documents executed by Jerez were therefore binding upon the LLC in this case. Id. at 13. It also held that Mt. Olympus did all that it was required to do under section 48-2b-127(2) and that Taghipour waived the right to appeal the dismissal of the partition claim by failing to object to the dismissal of that claim. Id. at 12, 17-18. Taghipour petitioned this court for certiorari, which we granted.
Taghipour asks this court to reverse the court of appeals, arguing that (1) sections 48-2b-125(2)(b) and 48-2b-127(2) should be read in harmony to require that managers "be properly authorized to bind the limited liability company in all situations," and therefore Jerez lacked authority to bind the LLC under the operating agreement, and (2) a commercial lender has a due diligence obligation to determine the authority of a manager of a limited liability company before that manager can encumber the assets of the company, which Mt. Olympus failed to do by neglecting to determine whether Jerez had the authority to bind the LLC. In reply, Mt. Olympus contends that under Utah Code section 48-2b-127(2), Mt. Olympus could properly rely on Jerez's execution of the loan agreement as the manager of the LLC without further inquiry.
STANDARD OF REVIEW
On certiorari, we review the decision of the court of appeals rather than that of the trial court, Grand County v. Rogers, 2002 UT 25, 6, 44 P.3d 734, and we review the decision of the court of appeals for correctness, Brookside Mobile Home Park, Ltd. v. Peebles, 2002 UT 48, 11, 48 P.3d 968. Additionally, because the paramount issue in this case is a question of statutory construction, it is a question of law that we review for correctness. State v. Lusk, 2001 UT 102, 11, 19, 37 P.3d 1103.
ANALYSIS
The issue in this case is whether the loan agreement documents executed by Jerez, as manager of the LLC, are valid and binding on the LLC under section 48-2b-127(2) of the Utah Limited Liability Company Act (the "Act"), as the statute existed at the time Jerez executed the loan agreement, see supra note 1, or whether the documents were not binding on the LLC because, consistent with section 48-2b-125(2)(b) of the Act, the operating agreement effectively denied Jerez the necessary authority to bin
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