THERE WAS NO PROOF PLAINTIFFS HAD NOTICE DEFENDANT WAS ACTING AS AN AGENT FOR A LIMITED LIABILITY COMPANY WHEN HE SIGNED THE CONSTRUCTION-LOAN CONTRACT; THE BREACH OF CONTRACT ACTION SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that defendant, the principal in a limited liability company (LLC), told plaintiffs he was the “owner of the property” at the time the construction-loan contract was signed and did not disclose the loan was for the company (the LLC). Therefore defendant’s argument he was acting as an agent for the LLPC when the contract was signed was rejected:

“An agent who enters into a contract on behalf of a disclosed principal is not personally liable unless there is clear and explicit evidence of the agent’s intention to be personally bound” … . However, “[t]he party claiming, as an affirmative defense to liability for breach of contract, that an agency relationship existed must demonstrate that the agency relationship and the identity of the principal were disclosed” … . “A principal is considered to be ‘disclosed’ if, at the time of a transaction conducted by an agent, the other party to the contract had notice that the agent was acting for the principal and of the principal’s identity” … .

… [T]here was no evidence that the existence of 1719 Hylan, LLC, was disclosed to the plaintiffs at the time of the loan. The plaintiffs’ principal testified that the defendant told her that he was the owner of the property, that there was no discussion that the construction project was on behalf of a company, and that the defendant never told her that the loan was for a company. The defendant presented no evidence to the contrary. Therefore, the defendant failed to meet his burden of demonstrating that the plaintiffs knew that he was acting on behalf of 1719 Hylan, LLC. 710 E Elizabeth Ave, LLC v Jhong Kim, 2026 NY Slip Op 05756, Second Department 10-7-26

Practice Point: In this breach of contract action, defendant argued he signed the contract as an agent for a limited liability company and was not personally liable. But defendant did not submit any proof the plaintiff was given notice he was signing as an agent for a company. Therefore the agency defense was rejected.