Member Consents Defeat Claim of Lack of Authorization
In a commercial foreclosure action against a limited liability company (LLC), the defendant LLC asserted that the LLC was not authorized to execute the mortgage. The LLC relied upon a term sheet that had been executed in connection with the formation of the LLC years earlier, which reflected a lower loan amount. Based on this term sheet, the LLC argued that the originating lender and any subsequent assignee should have been on notice of an issue as to whether the mortgage was duly authorized. The lender responded that it relied upon later consents signed by the LLC members at the time the loan was funded, and cited long-established precedent holding that a lender does not have a duty of care to ascertain the validity of the documentation presented by an individual who claims to have the authority to act on behalf of a borrower corporation or entity. The court agreed with the lender and dismissed the affirmative defense of lack of authority. Atlantic Washington Funding, LLC v. Atlantic Upreal, Index No. 500538/2019 (Sup. Ct. Kings Co. Oct. 23, 2019). Ganfer Shore Leeds and Zauderer LLP represented the lender on this successful motion.