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Partner is not "apparent agent:" fraud does not bind his partners

Industrial Drive, LLC sued Richard Werner and his real estate partners.  Werner had pledged partnership land for his own personal debt.  Relying on affidavits of authority allegedly signed by Werner's partners, Industrial Drive took the property as collateral but when they attempted to seize it to pay the debt, the partners objected.  The Court of Appeals upheld the trial court's decision that Werner was not an "apparent" or "ostensible" agent of the partnership.  It noted that the only basis for reliance upon Werner's apparent authority to pledge the partnership property were the affidavits signed by his partners, and these turned out to be fraudulent.  The Court cited long-standing Michigan jurisprudence confirming that fraudulent documents cannot be used against the party defrauded:  "forged papers cannot be made the basis of a recovery...against the supposed maker."

Thompson O’Neil, P.C.
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Traverse City, Michigan 49684
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