Opinion ID: 1946241
Heading Depth: 2
Heading Rank: 1

Heading: Kelly's Liability

Text: [¶ 11] Kelly contends that he cannot be personally liable on the note because he did not sign it in compliance with the Uniform Commercial Code, 11 M.R.S.A. § 3-1401 to -1402 (1995), and did not authorize MacKenzie to sign the note on his behalf. According to Kelly, the note was not binding on the partnership because it was not signed in the partnership name, nor was it executed in the ordinary course of business as required by the Uniform Partnership Act, 31 M.R.S.A. §§ 288 and 289 (1996). According to Kelly, he did not ratify the note either, because the note was not executed on his account, he conferred with an attorney to confirm that he was not liable on the note when he discovered there was a signature line for him on it, and his actions did not constitute an affirmance of MacKenzie's execution of the note on his behalf. [¶ 12] According to QAD, the plain language of the note indicates that the parties understood that Kelly was to be bound as a partner because a signature line is present on the note and the note pledges as collateral an interest in the property for which the partnership was formed. QAD contends, in the alternative, that MacKenzie had apparent authority to act for Kelly both personally and as a partner. Finally, it contends that Kelly ratified the note by making payments on it and failing to communicate that he did not believe he was liable. [¶ 13] A promissory note is a contract. See Briggs v. Briggs, 1998 ME 120, ¶ 6, 711 A.2d 1286, 1288. Whether a contract is ambiguous is a question of law for the Court. Resolution of any ambiguity is a question of fact for the trial court. Schindler v. Nilsen, 2001 ME 58, ¶ 15, 770 A.2d 638, 643 (citation omitted). If a contract is unambiguous, the interpretation of that contract is a question of law. Acadia Ins. Co. v. Buck Constr. Co., 2000 ME 154, ¶ 8, 756 A.2d 515, 517. We review questions of fact for clear error and questions of law de novo. Forrest Assocs. v. Passamaquoddy Tribe, 2000 ME 195, ¶ 9, 760 A.2d 1041, 1044; Blanchard v. Sawyer, 2001 ME 18, ¶ 5, 769 A.2d 841, 843. [¶ 14] We disagree with QAD that the language of the note unambiguously establishes Kelly's personal liability on the note. The blank signature line and the security of the note against partnership interests are inadequate to establish Kelly's personal liability; instead, they create an ambiguity. We therefore review the court's resolution of that ambiguity for clear error. Forrest Assocs., ¶ 9, 760 A.2d at 1044. [¶ 15] Kelly does not contest the existence of a partnership between himself and MacKenzie. The Uniform Partnership Act provides, in relevant part: Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority. An act of a partner which is not apparently for the carrying on of the business of the partnership in the usual way does not bind the partnership unless authorized by the other partners. 31 M.R.S.A. § 289. As is made clear by the use of the adverb apparently, the partner need not be engaged in the actual business of the partnership; his acts need only be apparently within the scope of the partnership business. Dayton Sec. Assocs. v. Morgan Guar. Trust Co. of New York (In re Securities Group), 926 F.2d 1051, 1054 (11th Cir.1991) (internal quotation marks omitted). The party seeking to enforce the agreement may rely on any apparent authority only to the extent that it was being exercised in pursuance of partnership business `in the usual way.' Luddington v. Bodenvest Ltd., 855 P.2d 204, 210 (Utah 1993). [¶ 16] A contract does not need to be signed by all partners or even mention the name of the partnership in order to bind the partners. Barnes v. McLendon, 128 Wash.2d 563, 910 P.2d 469, 474 (1996). Moreover, the note need not be in the partnership name if the partnership has no name. See First State Bank of Riesel v. Dyer, 248 S.W.2d 785, 788 (Tex.Civ.App.1952). [¶ 17] Kelly also cites the UCC, which provides instruction on the requirement of a signature on a negotiable instrument. (1) A person is not liable on an instrument unless: (a) The person signed the instrument; or (b) The person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under Section 3-1402. 11 M.R.S.A. § 3-1401 (emphasis added). Section 3-1402 provides that: (1) If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same extent the represented person would be bound if the signature were on a simple contract. If the represented person is bound, the signature of the representative is the authorized signature of the represented person and the represented person is liable on the instrument, whether or not identified in the instrument. Id. § 3-1402. [¶ 18] The law of partnership and the law of negotiable instruments direct us to determine whether MacKenzie had authority to sign the note for the partnership or for Kelly personally. Whether an agency relationship exists is generally a question of fact that we review for clear error. Steelstone Indus., Inc. v. North Ridge Ltd. P'ship, 1999 ME 132, ¶ 12, 735 A.2d 980, 983. The burden of proof as to the partner's authority is on the party seeking to enforce the transaction. Luddington, 855 P.2d at 207. Likewise, the party seeking to enforce bears the burden of proving that the transaction occurred in the usual way. Burns v. Gonzalez, 439 S.W.2d 128, 132 (Tex.Civ.App.1969). [¶ 19] Apparent authority is authority which, though not actually granted, the principal knowingly permits the agent to exercise or which he holds him out as possessing. Apparent authority exists only when the conduct of the principal leads a third party to believe that a given party is [its] agent. Steelstone Indus., ¶ 13, 735 A.2d at 983 (emphasis in original; internal quotation marks omitted); see RESTATEMENT (SECOND) OF AGENCY § 8 (1958). [T]he third person must believe the agent to be authorized. RESTATEMENT (SECOND) OF AGENCY § 8 cmt. c. [¶ 20] The court did not commit clear error in finding that MacKenzie's and Kelly's conduct would lead a reasonable third party to believe that MacKenzie was acting as the agent of the partnership and with the requisite authority. Kelly attended meetings with Glidden and MacKenzie during which they discussed the possibility of obtaining money from Glidden for the joint venture. MacKenzie gave Kelly's personal financial statement to Glidden before negotiating with him. The facts found by the court adequately support its legal conclusion that MacKenzie was authorized to bind the partnership. [2] [¶ 21] Even if MacKenzie's apparent authority to bind the partnership was in doubt, Kelly's subsequent conduct ratified that authority. For ratification of an agent's actions to occur, it is necessary that all material facts be known by the principal. Perkins v. Philbrick, 443 A.2d 73, 75 (Me.1982). When the principal receives the benefits of an unauthorized act of his agent, when he is apprised of the facts, if he has suffered no prejudice and can make restitution, he must elect whether to ratify or disaffirm and if he decides not to ratify he must return the fruits of the unauthorized act within a reasonable time. Id. [R]atification of an unauthorized signature may be found from the retention of benefits received in the transaction with knowledge of the unauthorized signature. Id. (emphasis in original; internal quotation marks omitted). [¶ 22] According to the RESTATEMENT (SECOND) OF AGENCY, [r]atification is the affirmance by a person of a prior act which did not bind him but which was done or professedly done on his account, whereby the act, as to some or all persons, is given effect as if originally authorized by him. RESTATEMENT (SECOND) OF AGENCY § 82. Affirmance is either (a) a manifestation of an election by one on whose account an unauthorized act has been done to treat the act as authorized, or (b) conduct by him justifiable only if there were such an election. Id. § 83. An affirmance of an unauthorized transaction can be inferred from a failure to repudiate it. Id. § 94. [¶ 23] The court did not commit clear error in finding that, even if MacKenzie's execution of the note was unauthorized, Kelly's behavior following the execution of the note ratified MacKenzie's authority to sign the note. Kelly made payments in the precise amount specified by the note, he met with Glidden repeatedly to renegotiate the payment schedule, he failed to indicate at any time before the commencement of this suit that he did not believe the partnership was bound by the note, and he made a payment even after he knew that his signature did not appear on the note. We affirm the judgment.