I need a case brief on RNR.Bank v. Peoples First Community Bank

RNR Investments Limited Partnership v. Peoples First Community Bank Court of Appeal of Florida, First District, 2002 FACTS RNR Investments is a Florida limited partnership formed binds the partnership unless the partner had no authority to purchase land In Destin, Florida, and to construct a house on to act for the partnership in the particular manner and the the land for resale. Bernard Roeger was RNR's general partner person with whom the partner was dealing knew or had and Heinz Rapp, Claus North, and S.E. Waltz, Inc. were limited received notification that the partner lacked authority. partners. The limited partnership agreement provided for various restrictions on the authority of the general partner: (1) It required Thus, even If a general partner's actual authority is restricted by the general partner to prepare a budget covering the cost of acqui- the terms of the partnership agreement, the general partner pos- sition and construction of the project (Approved Budget): (2) it sesses the apparent authority to bind the partnership In the ordi- restricted the general partner's ability to borrow or spend partner- hary course of partnership business, unless the third party "knew ship funds If not specifically provided for In the Approved Budget; or had received a notification that the partner lacked authority." and (3) It restricted the general partner's ability to exceed any line "Absent actual knowledge. third parties have no duty to Inspect the Item In the Approved Budget by more than 10 percent or the total partnership agreement or Inquire otherwise ascertain the extent budget by more than 5 percent. of a partner's actual authority in the ordinary course of business ... In June 1998, RNR, through its general partner, entered Into even If they have some reason to question it" The apparent author- a construction loan agreement, note, and mortgage in the princi- ty provisions of FRUPA reflect a policy by the drafters that "the pal amount of $990,000. From June 25, 1998, through March 13, risk of loss from partner misconduct more appropriately belongs 2000, the Bank disbursed the aggregate sum of $952,699. All draws on the partnership than on third parties who do not knowingly were approved by an architect, who certified that the work had pro- participate In or take advantage of the m gressed as Indicated and that the quality of the work was in accor- The determination of whether a partner is acting with authority dance with the construction contract. to bind the partnership involves a two-step analysis. The first step is RNR defaulted under the terms of the note and mortgage In July to determine whether the partner pu porting to bind the partner- 2000 and did not make payments after that date. The Bank sought to ship apparently is carrying on the partnership business In the usual foreclose RNR defended by alleging that the Bank had negligently way or a business of the kind carried on by the partnership. An failed to review the limitations on the general partner's authority in affirmative ams wer on this step ends the Inquiry, unless it is shown RNR's limited partnership agreen hat the general partner did that the pe on with whom the partner is dealing actually knew or not have the authority to execute notes, a mortgage, and a construct had received a notification that the partner lacked authority. Here. tion loan agreement. Stephen E. Waltz alleged that the limited part- It is clear that, In entering Into the loan, the general partner was ners understood and orally agreed that the general partner wo carrying on the business of RNR In the usual way. Thus, the ques- financing In the approximate am rted tion In this appeal is whether there are Issues of material fact as to that a copy of the limited partnership agre Ined at its whether the Bank had actual kno offices. However, the record contains no copy of an Approved Bud- the general partner's authority. get of the partnership or any evidence that would show that a copy of While the RNR partners may have agreed upon restrictions RNR's partnership agreen ent or any was given to that would limit the general partner to borrowing no more than the Bank or that any notice of the general partner's restricted authority $650,000 on behalf of the partnership, RNR does not contend and was provided to the Bank. there is no evidence that would show that the Bank had actual The trial court entered a summary judgment of foreclosure In knowledge or notice of any restrictions on the general partner's favor of the Bank. RNR appealed. authority. Here, the partnership could have protected itself by filing statement pursuant or by providing notice to the Bank of the spe- DECISION Summary Judgment is affirmed cific rest on the authority of the general partner. OPINION The Florida Revised Uniform Limited Partnership INTERPRETATION A general partner has the apparent author- Act states that any case not provided for by that statute shall be Ity to bind the partnership in the ordinary course of partnership governed by the provisions of the Florida Revised Uniform Part- business or in the business of the kind carried on by the partner- nership Act (FRUPA). The FRUPA provides that ship, unless the third party knew or had received a notification that Each partner is an agent of the partnership for the purpose the partner lacked authority. of its business. An act of a partner, Including the execution CRITICAL THINKING QUESTION Do you agree with the of an Instrument In the partnership name, for apparently RUPA's policy that "the risk of loss from partner misconduct more carrying on in the ordinary scope of partnership business appropriately belongs on the partnership than on third parties who or business of the kind carried on by the partnership, In do not knowingly participate in or take advantage of the miscon- the geographic area in which the partnership operates, duct"? Explain