Lexplug logoLexplug

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

District Court of Appeal of Florida
812 So. 2d 561 (2002)
ELI5:

Rule of Law:

Under the Florida Revised Uniform Partnership Act, a partner possesses apparent authority to bind the partnership in the ordinary course of business, and a third party may rely on this authority unless the third party has actual knowledge or has received notification of restrictions on the partner's authority.


Facts:

  • RNR Investments Limited Partnership (RNR) was formed by general partner Bernard Roeger and several limited partners to construct a house for resale.
  • RNR's limited partnership agreement restricted the general partner's authority to obtain financing, requiring consent from limited partners for borrowing that exceeded an 'Approved Budget' by specified percentages.
  • The limited partners orally agreed among themselves that Roeger would seek financing of approximately $650,000.
  • Acting on behalf of RNR, Roeger entered into a construction loan agreement with Peoples First Community Bank (the Bank) for the principal amount of $990,000.
  • There is no evidence that the Bank was ever given a copy of RNR's partnership agreement or was otherwise notified of the internal restrictions on Roeger's borrowing authority.
  • The Bank disbursed over $952,000 into RNR's bank account, and no RNR representative objected to the disbursements as they occurred.
  • RNR subsequently defaulted on the loan by failing to make its monthly payments.

Procedural Posture:

  • Peoples First Community Bank filed a foreclosure complaint against RNR Investments Limited Partnership in the trial court.
  • RNR filed an answer and an affirmative defense, alleging the Bank was negligent in lending funds without reviewing the limitations on the general partner's authority in the partnership agreement.
  • The Bank filed a motion for summary judgment.
  • The trial court granted a summary final judgment of foreclosure in favor of the Bank.
  • RNR, as the appellant, appealed the summary judgment to the District Court of Appeal of Florida, First District; the Bank is the appellee.

Locked

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Does a general partner have apparent authority to bind the partnership to a loan that exceeds internal partnership borrowing limits when the lender has no actual knowledge or notice of those limits?


Opinions:

Majority - Van Nortwick, J.

Yes. A general partner has apparent authority to bind the partnership in such a transaction. Under section 620.8301(1) of the Florida Revised Uniform Partnership Act, an act of a partner for apparently carrying on the ordinary business of the partnership binds the partnership unless the person dealing with the partner knew or had received notification that the partner lacked authority. The court applied a two-step analysis: first, it determined that obtaining a construction loan was part of the ordinary business for a partnership formed to build a house. Second, it found no evidence that the Bank had actual knowledge or received notification of the internal restrictions on the general partner's authority. The statute protects third parties who rely on a partner's apparent authority and does not impose a duty on them to inspect internal partnership agreements. The risk of loss from a partner exceeding their actual authority falls on the partnership, which could have protected itself by providing notice to the bank or filing a public statement of partnership authority.



Analysis:

This decision clarifies the scope of a partner's apparent authority under the Florida Revised Uniform Partnership Act (FRUPA), reinforcing that the risk of a partner's unauthorized actions lies with the partnership, not with third parties who are unaware of internal restrictions. The ruling establishes that 'constructive knowledge' is insufficient to defeat apparent authority; a third party must have 'actual knowledge' or have received 'notification.' This strengthens the position of lenders and other third parties in transactions with partnerships, as it removes any affirmative duty to inquire into the internal governance of the partnership, thereby promoting commercial certainty and efficiency.

G

Gunnerbot

AI-powered case assistant

Loaded: Rnr Invest. Ltd. Partnership v. Peoples First Com. Bank (2002)

Try: "What was the holding?" or "Explain the dissent"