Edward A. Kemmler Memorial Foundation v. 691/733 East Dublin-Granville Road Co.

584 N.E.2d 695, 62 Ohio St. 3d 494, 17 U.C.C. Rep. Serv. 2d (West) 489, 1992 Ohio LEXIS 205
CourtOhio Supreme Court
DecidedFebruary 12, 1992
DocketNo. 90-2011
StatusPublished
Cited by35 cases

This text of 584 N.E.2d 695 (Edward A. Kemmler Memorial Foundation v. 691/733 East Dublin-Granville Road Co.) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Edward A. Kemmler Memorial Foundation v. 691/733 East Dublin-Granville Road Co., 584 N.E.2d 695, 62 Ohio St. 3d 494, 17 U.C.C. Rep. Serv. 2d (West) 489, 1992 Ohio LEXIS 205 (Ohio 1992).

Opinion

Herbert R. Brown, J.

We must determine whether, as between immediate parties to a promissory note, the agency relationship between a party executing the note and another alleged to be his partner can be established by other documents executed as a part of the same transaction. Specifically in this case, can the mortgage and other documents executed as part of closing on the building at 733 East Dublin-Granville Road be admitted to prove an agency relationship between Mitchell and Davis? The resolution of this case involves analysis of partnership and agency law, as well as contract law and the Uniform Commercial Code as adopted in Ohio. For the reasons which follow, we find that the mortgage and other documents are admissible, and that the partnership and Dr. Mitchell are liable for the debt on the note.

Our analysis begins with an examination of two sections of the Revised Code as pertinent to the inquiry in this case. R.C. 1775.08(A) defines the agency relationships of partners within a partnership:

“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.”

The liability of partners in this case is set out in former R.C. 1775.14:

“Subject to section 1339.65 of the Revised Code [relating to fiduciaries], all partners are liable as follows:
“(A) Jointly and severally for everything chargeable to the partnership under sections 1775.12 and 1775.13 of the Revised Code.
“(B) Jointly for all other debts and obligations of the partnership, but any partner may enter into a separate obligation to perform a partnership contract.” 1 140 Ohio Laws, Part II, 2850, 2854.

These two statutes must be construed together in order to determine the partnership liability and Dr. Mitchell’s potential liability as a partner. A [497]*497promissory note falls under R.C. 1775.14(B), which renders a partner “[j]ointly [liable] for all other debts and obligations * * Therefore, if the partnership in this case is held liable for the note, Dr. Mitchell would be jointly liable.

However, under R.C. 1775.14(B), a partner may also enter into a “separate obligation to perform a partnership contract.” The act of signing the promissory note could be seen as Davis’s assumption of a separate obligation to perform a partnership contract. Mitchell and Davis may well have intended that it be a separate obligation given the terms of the agreement between them. Moreover, under R.C. 1775.08(A), the act of a partner will generally not bind the partnership if he in fact has no authority to act in the particular matter. Davis arguably had no authority to act on behalf of the partnership in signing the note, because of his agreement with Dr. Mitchell.

However, R.C. 1775.08(A) goes on to provide that the act of a partner without authority will still bind the partnership unless the person with whom the partner is dealing has knowledge of the fact that the partner had no authority to act. Absent such knowledge, the “execution in the partnership name” of any instrument used for business purposes would bind the partnership. Thus, if a promissory note is executed in the name of the partnership, the partnership is bound, unless a contradictory agreement between the partners is known to the parties with whom they are dealing. The trial court found that the foundation had no knowledge of the agreement between Davis and Mitchell regarding Mitchell’s liability for the note.

Our analysis does not end there, however, because it is not clear that the instrument in question was executed “in the partnership name.” As the court of appeals recognized, certain provisions of Article 3 of the Uniform Commercial Code must be considered.

R.C. 1303.37 (UCC 3-401) is the section pertaining to liability on an instrument and signature:

“(A) No person is liable on an instrument unless his signature appears thereon.
“(B) A signature is made by use of any name, including any trade or assumed name, upon an instrument, or by any word or mark used in lieu of a written signature.”

R.C. 1303.39 (UCC 3-403) pertains to signatures by agents and other representatives, and provides in pertinent part:

“(A) A signature may be made by an agent or other representative, and his authority to make it may be established as in other cases of representation. No particular form of appointment is necessary to establish such authority.
[498]*498“(B) An authorized representative who signs his own name to an instrument:
“(1) is personally obligated if the instrument neither names the person represented nor shows that the representative signed in a representative capacity;
“(2) except as otherwise established between the immediate parties, is personally obligated if the instrument names the person represented but does not show that the representative signed in a representative capacity, or if the instrument does not name the person represented but does show that the representative signed in a representative capacity.”

The court of appeals, in applying these sections to the instant case, concluded that the note was not executed in the partnership name. The court held that “Davis executed the promissory note to plaintiff in his own name with the mere addition of the typed word ‘partner.’ Davis signed the note on the bottom, left side of the last page. No other signature appears on the note.

“ * * * Davis signed his own name to an instrument and is personally obligated because the instrument does not name the person represented, but does show that the representative signed in a representative capacity.”

Appellant foundation argues that even though it may be unclear from the face of the note that Davis was acting in a representative capacity, parol evidence proves that Davis signed as an agent for the partnership. Specifically, appellant contends that the mortgage and other documents that were executed at the same time as the note clearly identify the partnership and confirm Davis’s agency on behalf of the partnership.

Official Comment 3 to R.C. 1303.39 explains that in a case where the signature reads “Arthur Adams, Agent,” parol evidence is admissible in litigation between the immediate parties to prove signature by the agent in his representative capacity. The signature in this case, “Cliff W. Davis, Partner,” is in the same general form and indicates the same general relationship as “Arthur Adams, Agent.” Thus, R.C. 1303.39 would permit parol evidence to prove Davis’s agency.

But parol evidence as such is not necessary in this case. UCC 3-119 indicates the effect of other writings on an instrument. R.C. 1303.18 (UCC 3-119) provides:

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Cite This Page — Counsel Stack

Bluebook (online)
584 N.E.2d 695, 62 Ohio St. 3d 494, 17 U.C.C. Rep. Serv. 2d (West) 489, 1992 Ohio LEXIS 205, Counsel Stack Legal Research, https://law.counselstack.com/opinion/edward-a-kemmler-memorial-foundation-v-691733-east-dublin-granville-road-ohio-1992.