## Facts

- RNR Investments Limited Partnership (RNR) was formed to buy vacant land in Destin, Florida, construct a house, and resell it.
- RNR’s limited partnership agreement required an approved budget and restricted the general partner’s ability to exceed budget limits or borrow/encumber partnership assets beyond what the budget authorized without limited partner consent.
- Limited partners anticipated financing of about $650,000 under the partnership agreement’s internal limits.
- In June 1998, RNR’s general partner executed a construction loan agreement, note, and mortgage with Peoples First Community Bank in the principal amount of $990,000.
- The bank was not provided RNR’s partnership agreement and was not otherwise notified of internal restrictions on the general partner’s borrowing authority.
- From June 1998 to March 2000, the bank disbursed about $952,699 to RNR’s account based on draw requests approved by an architect certifying progress and quality.
- No RNR representative objected to the draws or asserted the disbursements were unrelated to construction.
- RNR later defaulted by failing to make required monthly payments beginning in July 2000.
- The bank sued to foreclose the mortgage; RNR raised affirmative defenses asserting the loan exceeded the general partner’s authority and that the bank was negligent for not discovering the internal limits.

## Issues

1. Whether, under § 620.8301(1)(a), Florida Statutes (2000), the bank could rely on the general partner’s apparent authority to bind the limited partnership absent the bank’s actual knowledge or notice of internal restrictions.
2. Whether RNR’s negligence-based affirmative defense created a genuine issue of material fact precluding summary judgment of foreclosure.

## Decision

- The First District Court of Appeal affirmed the summary final judgment of foreclosure for the bank.
- The court held that the bank could rely on the general partner’s apparent authority unless the bank had actual knowledge or notice of restrictions on that authority.
- RNR produced no evidence that the bank had actual knowledge or notice of the partnership agreement’s internal limits.
- Because the dispositive facts regarding the bank’s lack of knowledge or notice were undisputed, summary judgment was proper.

## Legal Principles

- Under § 620.8301(1)(a), Florida Statutes (2000), a partner’s act in the ordinary course of partnership business binds the partnership unless the third party has actual knowledge or notice that the partner lacks authority.
- Internal restrictions in a partnership agreement do not limit a third party’s right to enforce a transaction when the third party lacks actual knowledge or notice of those restrictions.
- A lender generally has no duty to investigate undisclosed internal limits on a general partner’s authority; the partnership bears the risk of undisclosed limitations when dealing with third parties.
- To make internal authority limits effective against third parties, the partnership must take steps that provide notice (for example, communicating the limits directly or using statutory mechanisms that give notice).

## Conclusion

The court affirmed foreclosure because the bank was entitled to rely on the general partner’s apparent authority in an ordinary-course construction loan transaction, and RNR failed to show any evidence that the bank had actual knowledge or notice of internal borrowing limits that would defeat enforcement.


RNR Invs. Ltd. P'ship v. Peoples First Cmty. Bank, 812 So. 2d 561 (Fla. 1st DCA 2002)