## Facts

- Studio City Lofts, LLC owned real property in Arizona.
- John Lupypciw served as Studio City’s sole manager until July 17, 2012, when the members removed him; the change was filed with the Arizona Corporation Commission the next day.
- On February 4, 2013, Lupypciw signed a one-year exclusive listing agreement with Arizona Land Advisors, LLC, purportedly on Studio City’s behalf, providing for a 6% commission on any sale during the term, even if Land Advisors did not procure the buyer.
- Two days later, Studio City entered involuntary bankruptcy.
- A July 1, 2013 bankruptcy settlement (to which Land Advisors was not a party) stated that Lupypciw would have authority, subject to bankruptcy-court approval, to sell or refinance the property for 60 days.
- During the listing term, Studio City sold the property without Land Advisors’ involvement.
- Land Advisors sued for the contractual commission; the superior court granted summary judgment to Studio City and awarded Studio City only part of its requested attorney’s fees.
- Land Advisors appealed the merits; Studio City cross-appealed the limited fee award.

## Issues

1. Whether Studio City was bound to the listing agreement on a theory that Lupypciw had actual or apparent authority when he signed it.
2. Whether Studio City ratified Lupypciw’s execution of the listing agreement through the bankruptcy settlement or later conduct.
3. Whether the superior court abused its discretion by awarding Studio City only a portion of its attorney’s fees.

## Decision

- The Court of Appeals affirmed summary judgment for Studio City on Land Advisors’ commission claim.
- The court held Lupypciw lacked authority to bind Studio City when he signed the listing agreement after his removal as manager.
- The court rejected Land Advisors’ argument that the bankruptcy settlement ratified the earlier listing agreement.
- The court affirmed the superior court’s partial attorney’s-fee award, finding no abuse of discretion.

## Legal Principles

- An LLC is not bound by a contract executed by a purported agent who lacked actual authority at the time of execution.
- Apparent authority requires conduct by the principal that would reasonably cause a third party to believe the agent had authority; public filings showing removal of a manager weigh against reasonable reliance.
- Ratification requires a principal’s manifestation of assent to the specific unauthorized transaction or knowing acceptance of its benefits; a later, limited authorization to act (especially one that is prospective and conditional) does not, without more, ratify an earlier unauthorized contract.
- Awards of attorney’s fees under A.R.S. § 12-341.01 and contractual fee provisions are reviewed for abuse of discretion; a trial court may reasonably reduce a requested fee award.

## Conclusion

The court concluded Studio City was not liable for a commission under an exclusive listing signed by a former manager lacking authority, and that the bankruptcy settlement’s limited, court-approved authorization to sell or refinance did not ratify the prior listing agreement; it also upheld the trial court’s reduced attorney’s-fee award.


Ariz. Land Advisors, LLC v. Studio City Lofts, LLC, No. 1 CA-CV 15-0402 (Ariz. Ct. App. July 12, 2016)