## Facts

- Laurence Kelly and Stephen MacKenzie entered a joint venture (a partnership) connected to acquiring a Portland, Maine parking lot, including an option to purchase the lot while they raised funds.
- In 1993, QAD Investors, Inc. (QAD) considered financing the venture and met repeatedly with Kelly and MacKenzie; MacKenzie described Kelly as his joint venturer, and Kelly did not object.
- QAD reviewed Kelly’s personal financial statement as part of the financing discussions.
- QAD advanced $20,000 to the venture; MacKenzie provided a receipt stating the funds related to a one-third interest in the lot and would be repaid pursuant to a promissory note.
- The $20,000 check was deposited into a bank account under Kelly’s exclusive control.
- A promissory note was prepared naming MacKenzie and Kelly as borrowers/makers and stating joint and several liability, including language pledging collateral; MacKenzie signed the note, but Kelly did not.
- Kelly did not see the note until 1995, though he knew a note existed.
- MacKenzie made the first several payments; later, Kelly made payments from an account he exclusively controlled.
- Kelly had multiple personal and written communications with QAD about repayment difficulties, including after MacKenzie left the venture, and Kelly never told QAD that he (or the venture) was not obligated on the note.
- In January 1997, QAD sued Kelly and MacKenzie for repayment and sought attorney’s fees under the note. After a bench trial, the Superior Court found Kelly liable and awarded attorney’s fees. Kelly appealed.

## Issues

1. Whether a partner who did not sign a promissory note can be held liable when a co-partner signed the note in connection with partnership business and the evidence supports findings of partner authority and/or ratification by the partnership.
2. Whether the trial court erred in awarding attorney’s fees under the note, including an award greater than QAD’s out-of-pocket costs of collection.

## Decision

- The Supreme Judicial Court of Maine affirmed the judgment for QAD.
- The court upheld the trial court’s finding that MacKenzie had authority to bind the partnership to the note and that Kelly could be held liable as a partner even though he did not sign.
- The court also upheld the finding that the partnership ratified the note through acceptance of the loan proceeds, subsequent payments (including by Kelly), and Kelly’s communications about repayment without any timely disclaimer of liability.
- The court affirmed the attorney’s-fee award as authorized by the note and supported by the record, rejecting the argument that fees were limited to QAD’s actual collection costs.

## Legal Principles

- Under Maine partnership law (Uniform Partnership Act), each partner is an agent of the partnership for partnership business; acts in the ordinary course (or acts that appear to carry on partnership business) bind the partnership unless the partner lacked authority and the third party knew of that lack.
- A partner may be liable for partnership obligations even without personally signing an instrument when another partner signs with actual or apparent authority on behalf of the partnership.
- Ratification may bind a partnership (and partners) when, with knowledge of the material facts, the partnership accepts the benefits of the transaction, performs under it, or otherwise manifests assent; making payments and failing to disclaim liability can support ratification.
- Contractual attorney’s-fee provisions in promissory notes are generally enforceable; a court may award reasonable attorney’s fees as provided by the contract, and the award is not automatically capped at the creditor’s out-of-pocket collection expenses.
- On appeal after a bench trial, factual findings on authority, ratification, and the fee award are reviewed for clear error.

## Conclusion

QAD Investors, Inc. v. Kelly holds that a partner may be bound on a promissory note signed only by a co-partner when the signing partner acted with partnership authority and the non-signing partner’s conduct—accepting the loan proceeds, making payments, and communicating about repayment without denying liability—supports ratification; the court also enforced the note’s attorney’s-fee clause and affirmed a reasonable fee award even when it exceeded the lender’s direct collection costs.


QAD Investors, Inc. v. Kelly, 776 A.2d 1244 (2001)