*1 ALASKA CONTINENTAL
BANK, Appellant, LAND COMMERCIAL ANCHORAGE ASSOCIATES, Appellee.
No. S-2644. Supreme Court of Alaska. 20, 1989.
Oct. Zahare, Bradbury,
Michael Bliss & Rior- dan, Anchorage, appellant. Timothy Byrnes, Thorsness, Hughes, R. Gantz, Brundin, Anchorage, Powell & appellee. MATTHEWS, C.J.,
Before RABINOWITZ, BURKE, COMPTON MOORE, JJ. RABINOWITZ, Justice. appeal governed by the law of dispute
Hawaii.1 The main concerns the liability of a for a loan negotiated by its former and Alaska Continental Bank. The issues presented are whether the limited ratified the bank and whether the deny is estopped validity of the loan. The counterclaim raises the whether the limited paid pursuant should have to an assignment executed in an unrelated transaction. The entered for the ship, ordering could not be held liable for the bank loan. The court also entered favor of the partnership on the bank’s counterclaim. We reverse and remand. partnership agreement governed exclusively by The limited states that shall be ment] its terms interpretation agree- "the the laws of the State of Hawaii.” [of *2 TCDC, nership subsequently Carrigan AND sued 1. FACTUAL PROCEDURAL others, disputing validity and the of the BACKGROUND. $400,000 loan and other transactions. Appellee Alaska Commercial Land Asso- partnership payments The made interest ciates is a limited which at the January, March, February, on the loan time of the transaction in owned April and superior of 1986. The adjoining Anchorage two tracts of land in pay- found Pike made all of these property known as the Costco and tract However, ments. contend- A1A.2 The was ed in a motion for reconsideration that Pike (TCDC), Development Corporation Clients only April payments, made the March and president Carrigan. whose was Van January and that the bank took the appel- was a board member of February payments directly part- out of the lant Alaska Continental Bank until March nership’s account. The 1985,at time he which became member of unnecessary found it to address this claim holding company, bank’s which owns reconsideration, of error on and the evi- percent July In bank’s stock. dence on this issue is inconclusive. $200,000 Carrigan applied for a March, approached Also in Pike on “working capital,” behalf of TCDC for proposing to increase existing loan to secured TCDC’s interest the limited $600,000, thereby paying $400,000 off the partnership. After the bank’s counsel re- giving pro- debt and net viewed the limited agreement, $200,000. rejected ceeds of The bank the bank turned down loan. The proposal. Thereafter, Pike’s partner- premised bank’s decision was on its under- ship defaulted on the note. The bank then standing that part- TCDC’s interest in the began to money directly collect rent from pledged could not be without the Costco, partnership’s tenant. In Au- consent of the limited which had gust paid $2,000 1986 Pike the bank a not been obtained. “fee” so the refrain from col- Within being two weeks of informed that lecting Costco’s rents. In October 1986 denied, his loan had been Carri- Swayne appointed William was gan applied for another loan. This time partner days Within Carrigan proposed that appointment, Swayne apprised his money, borrow the secured a deed of partnership might challenge the trust on A1A. approved tract The bank a validity loan. The $400,000. loan of This loan was made ship then sued the bank to obtain a declara- Carrigan’s agreement $167,- on based obligated tion that it was not repay 000 would be used to off existing liabil- loan. Additionally, partnership sought ities on a second deed of trust on tract enjoin proceedings foreclosure A1A. The court found that Carri- bank had commenced in relation to tract gan’s proceeds use of the part- violated the A1A. nership agreement. trial, Following court ruled Within three months after the loan was that the had ratified the approved, became con- duty repay thus had a it in full. The TCDC, through Carrigan, vinced was partnership then moved for reconsideration acting improperly general partner. as their ground on the the bank failed to November of 1985 the limited present evidence that all the limited general partner. voted to oust TCDC as required ners had ratified the loan as Pike, agent, Mitch a real estate was install- Hawaii granted law. The general partner. reconsideration, ed as interim the motion for and held Although challenged court entered detailed factual Alaska Continental Bank findings findings points challenged appeal. appeal, some of the which are not on on subsequent failure to brief these summary issues waives facts relies on the Wetzler, challenge. 570 P.2d Wetzler findings. court’s 1977). (Alaska 742 n. 2 business; therefore, ducting partnership not ratified had within his actu- bank’s denied the acts superior court loan. The apparent authority additional bind request subsequent al issue, en- instant case the ratification 425-109. ship. evidence on Id. § *3 partnership. the had found that tered court the authority to apparent actual nor neither followed. appeal the partnership on obligate the loan. II. RATIFICATION. that The contends au general partner if a lacks Even concluding that the unautho- court in erred transaction, particular thority to a enter rati- general partner may be rized of a act by general is bound a partner has had fied if each limited only or upon consent partner’s action “written object the rat- opportunity to to formal specific by act all ratification that contends ification. partners.” In limited HRS 425-29.3 § correctly resolved Inc., 2 Phillips Realty, v. KULA Wick legal issues. (1981), Haw.App. 629 122-23 P.2d is defense. Ratification an affirmative Appeals of the Hawaii Intermediate Court Homes, Inc., 548 Moon See Morrow New and examined HRS 425-29 concluded § 1976) (“An (Alaska P.2d affirma- 294 than purported that a fewer forth a matter not set tive defense is new partners preclude did not limited complete a complaint in the which serves as partnership against general a suit it.”) proving an defense to burden partner duty had to the breached the party is on assert- affirmative defense partnership: Therefore, ing it. bank had Id. percent Can 75.69 of the limited proving
burden of that the limited nership interests cause the limited $400,000 loan. ratified the ratify, forgive, or a waive reviewing questions apply of law we fiduciary duty claim for a owed breach “adopt the our independent general partners? it one of its We persuasive light is in rule of law that most they answer that cannot. reason, policy.” precedent, Guin (Alaska 1979). Ha, n. 6 591 P.2d appeal, the crucial is not
On this fact A. Express limited percent that 75.69 Ratification. ship expressly interests have consented Limited Hawaii has enacted Uniform alleged and ratified the acts unautho- (“ULPA”), Partnership Act Haw.Rev.Stat. Rather, self-dealing. it is rized that 24.- (“HRS”) provi- 425-52. The 425-21 to §§ percent percent have not. Until Partnership Act sions of the Uniform for, limited partner- are accounted 425-143, (“UPA"), also HRS 425-101 §§ ship directly derivatively is or entitled partnerships extent apply to the damages. maintain an action for they Id. not conflict ULPA. do 425-106(2). § at bar case the bank failed general partner agent
A evidence from is of con- lim- purpose every4 for the court could have concluded assign 3. HRS partnership property, is identical to AS 32.10.080. Possess or 425-29 part: provides rights specific partnership property statute in The Hawaii their partnership purpose.... rights partner other than have all the shall subject powers restric- and be all the 4. We requirement do note that of rat- partner and liabilities of a tions may partner ification each limited in certain partners, except ship without liability cases result in an unwarranted shield of without the written consent respect partners. it for limited pointed In this should be partners, a specific the general partner act all the limited unique aspect out that of limited or all of abrogated apparently been authority law has have no to: in the version of the Uniform Limit- most recent B.R. at 997. On Corp., 59 writing In re WPMK agreed in to be bound ited of no decision act. There- hand we are aware by Carrigan’s unauthorized the other fore, correctly held the i >c- courts of Hawaii which - expressly rati- ap- had not ratification has been implied trine of question. fied the loan in plied to to the con research has led us by Implication. B. Ratification may im clusion that a argues The bank pliedly ratify an unauthorized transaction concluding erred in 425-29. of a under HRS § the doctrine of ratification
not bound under
Although
requires
statute
writ
the Hawaii
by implication.
contends
*4
consent, we conclude that it does not
ten
express
statutory requirement
that the
of
call for written ratification as well.5 Oth
im-
possibility
eliminates the
of
ratification
erwise,
limited
would be allowed
plied ratification.
reap
tacitly agreed upon
of
the benefits
Ratification is a common law doc
being
“unauthorized” transactions without
by
principal may
affirm an
trine
particular
in the event a
transaction
bound
purportedly done on his or her behalf
act
turned sour.
by
agent.
Bruton Automatic Weld
Thus, it must be determined whether the
1122,
Corp., 513 P.2d
1126-
ing
Supply
&
impliedly
“by
bank’s loan was
ratified
(Alaska 1973).
common
27
Under Hawaii
partners.”
the limited
HRS 425-29.
§
law,
partnership accepts the
“[w]here
case,
argues
the instant
that each
benefits of the unauthorized acts of its
partner impliedly
limited
ratified the TCDC
partner, with actual or constructive knowl
by
repudiating
upon being
not
it
made
facts,
edge of all the material
it is deemed
aware of its existence.
to have ratified the act.” In re WPMK
study
persuades
of the record
us
991,
(D.Hawaii 1986)
Corp.,
B.R.
59
997
remaining
this
issue should be re-
(citation omitted.) Consistent with Hawaii
that in
manded for resolution. We note
principle, recognized by
law is the related
findings of fact the
court did not
Bruton,
principal
this court in
that where a
not each
address
whether or
learns of the transaction but
silent
remains
partner impliedly
ratified the trans-
principal
circumstances where the
would
Furthermore,
action.
when the
re-
bank
normally
expected
repudiate
be
or disaf-
firm,
quested
opportunity
addi-
principal may
by
be bound
issue,
tional evidence on the
implication.
doctrine of
ratification
Bruton,
court denied the motion
it
tion here is subsection which requires limited-partner approv- unanimous general partner assigns part-
al when the nership property “for other than a ship purpose.” (emphasis HRS 425-29 PROPERTY OWNERS ASSOCIATION added). exception applies Carrigan, OF THE HIGHLAND SUBDIVISION Carrigan granted but not to Pike. While *6 769, PORTION OF USMS KETCHI the deed of trust to the bank for “other KAN, ALASKA, Appellant, partnership purpose, than” a Pike ratified v. partnership purpose— the transaction for a to avoid foreclosure of the deed of trust. KETCHIKAN, CITY OF a Home Rule general sphere Pike thus acted within his Municipal Corporation, Alaska plenary power, and his ratification of the Appellee. loan transaction bound the No. S-2760. imply statute does not that a succes- Supreme Court of Alaska. authority sor lacks to rati- 20, Oct.
fy an unauthorized act a prior partner. partnerships Since limited can
have hundreds of limited
to so
effectively
construe the statute would
permitted by
syn-
1. HRS 425-29. The relevant text is set forth
real estate
majority opinion.
members).
in note 3 of the
dicate with several hundred
participation
To accommodate this increased
2. The Uniform Limited
Act defines
investors,
typically
part-
passive
as "a
formed
manage-
form of business centralizes
persons
provisions
two or more
under the
general partner(s), providing
ment in the
limit-
2, having
Section
as members one or more
corpo-
ed
with a role similar to that of
general partners
and one or more limited
Rager,
rate shareholders. See
Ruzicka
Thus,
statutory
ners.”
there is no
limit to the
(1953) ("statutes
N.Y.
111 N.E.2d
participate
number of limited
able to
permitting
partnerships
were intended
very large
ain
and some
encourage
enterprise
investment in business
See,
groups
e.g.,
have been assembled.
Sec. and
by affording
partner
position
to a
(9th
Murphy,
Exch. Comm'n v.
626 F.2d
shareholder").
analogous
corporate
(Investments
to that of a
Cir.1980)
in a limited
efficiency
management
achieved
persons "clearly suggest[ed]
public
unnecessarily disrupted
gen-
structure is
when a
offering
private placement"
rather than a
cannot,
regulation
eral
without unanimous limited
purposes); Lichtyg-
federal securities
Corp.,
partner approval,
act in the interest of the
er
Franchard
18 N.Y.2d
277 N.Y.
(1966) (class
nership.
S.2d