Caseflicks

District Court of Appeal of Florida • 2002

Rnr Invest. Ltd. Partnership v. Peoples First Com. Bank

812 So. 2d 561 | 2002 Fla. App. LEXIS 4061

Full access

Unlock the video and quiz

The written brief is free to read below. Subscribe to watch the video explainer and take the quiz.

Create an account Log in

Takeaway

In short, this case places the risk of an undisclosed restriction on a general partner’s authority on the partnership, not on a lender that receives no actual knowledge or notice of the restriction.

Background

RNR Investments Limited Partnership was formed to buy land in Destin and build a house for resale. Its general partner, Bernard Roeger, executed a $990,000 construction loan, note, and mortgage with Peoples First Community Bank. RNR’s partnership agreement restricted the general partner’s borrowing authority by tying expenditures and debt to an approved budget unless the limited partners gave prior written consent. The limited partners say they expected financing of about $650,000 and never consented to the larger loan.

The Bank disbursed $952,699 into RNR’s bank account. An architect approved each draw as corresponding to construction progress, and no RNR representative objected to the disbursements. After RNR failed to make payments beginning in July 2000, the Bank filed a foreclosure action.

RNR defended by asserting that the Bank negligently failed to investigate the limits on Roeger’s authority and therefore should be estopped from foreclosing. The trial court entered summary judgment of foreclosure for the Bank. RNR appealed, arguing that factual disputes remained about the Bank’s knowledge of the contractual restrictions on its general partner’s authority.

Issues

Issue #1

Whether the Florida Revised Uniform Partnership Act’s apparent-authority rule applies to a Florida limited partnership.

Holding

Yes. The apparent-authority rule in section 620.8301 applies where the limited-partnership statute does not otherwise provide a governing rule.

Reasoning

RNR argued that section 620.8301 did not apply because it appears in the Florida Revised Uniform Partnership Act rather than the limited-partnership act. The court rejected that argument because section 620.186 directs courts to apply the Uniform Partnership Act or Revised Uniform Partnership Act, as applicable, in matters not addressed by the limited-partnership statute. Thus, section 620.8301 supplied the governing rule for the general partner’s authority to bind RNR.

Issue #2

Whether summary judgment was proper when RNR alleged that its general partner lacked actual authority to obtain a $990,000 construction loan.

Holding

Yes. The Bank could rely on the general partner’s apparent authority because the loan was in the ordinary course of RNR’s business and no evidence showed that the Bank had actual knowledge or notice of the contractual limits on that authority.

Reasoning

Under section 620.8301(1), each partner is an agent of the partnership. A partner’s act binds the partnership when it apparently carries on the partnership’s ordinary business, unless the partner lacked actual authority and the third party knew or had received notification of that limitation. Obtaining construction financing for a partnership created to buy land and construct a home was undisputedly an ordinary act within RNR’s business.

The partnership agreement may have restricted Roeger’s actual authority, but internal restrictions do not themselves defeat apparent authority as to an outside lender. Under the statute, the critical question was whether the Bank actually knew of, received notification of, or otherwise had statutory notice of the restriction. The law does not impose a general duty on a third party to inspect a partnership agreement or investigate a partner’s authority merely because the transaction might raise questions.

RNR offered no evidence that it gave the Bank its partnership agreement, an approved budget, or notice of the specific borrowing restrictions. Nor had RNR filed a statement of partnership authority under section 620.8303, a statutory mechanism through which a partnership may publicize restrictions on a partner’s authority. Waltz’s affidavit established that the limited partners had not consented to the loan, but it did not establish that the Bank knew of their lack of consent or of the underlying restrictions.

RNR’s reliance on Green River Associates was unpersuasive. In that case, the bank knew that the partnership agreement required loan proceeds to go into the partnership’s account but instead transferred them to a different entity’s account. Here, by contrast, the Bank deposited all advances into RNR’s account, and nothing showed that the Bank knew of any restriction on Roeger’s authority. Because no genuine dispute existed on the Bank’s knowledge or notice, foreclosure summary judgment was proper.