Elmo Muñasque vs CA

Facts:
Elmo Muñasque, in behalf of “Galan and Muñasque” partnership as Contractor, entered into a written
contract with Tropical Commercial Co., through its branch manager Ramon Pons, for remodelling of
Tropical’s building in Cebu. The consideration for the entire services is P25,000 to be paid: 30% upon
signing of contract, and balance on 3 equal instalments of P6,000 every 15working days.

First payment of check worth P7,000 was payable to Muñasque, who indorsed it to Galan for purposes of
depositing the amount and paying the materials already used. But since Galan allegedly
misappropriated P6,183.37 of the check for personal use, Muñasque refused to indorse the second
check worth P6,000. Galan then informed Tropical of the “misunderstanding” between him and
Muñasque and this prompted Tropical to change the payee of the second check from Muñasque to
“Galan and Associates” (the duly registered name of Galan and Muñasque partnership). Despite the
misappropriation, Muñasque alone was able to finish the project. The two remaining checks were
properly issued to Muñasque.

Muñasque filed a complaint for payment of sum of money plus damages against Galan, Tropical and
Pons for the amount covered by the first and second checks. Cebu Southern Hardware Co and Blue
Diamond Glass Palace were allowed as intervenors having legal interest claiming against Muñasue and
Galan for materials used.

TC:
- Muñasque and Pons jointly and severally liable to intervenors
- Tropical and Pons absolved
CA affirmed with modification:
- Muñasque and Pons jointly liable to intervenors

Issue:
1. W/N Muñasque and Galan are partners?
2. W/N payment made by Tropical to Galan was “good payment”?
3. W/N Galan should shoulder exclusively the amounts payable to the intervenors (granting he
misappropriated the amount from the two checks)?

Held:
yes-yes-no!

1. YES. Tropical had every right to presume the existence of the partnership:
a. Contract states that agreement was entered into by “Galan and Muñasque”
b. The first check issue in the name of Muñasque was indorsed to Galan
The relationship was made to appear as a partnership.

2. YES. Muñasque and Galan were partners when the debts to the intervenors were incurred,
hence, they are also liable to third persons who extended credit to their partnership.

There is a general presumption that each individual partner is an authorized agent for the firm
and that he has authority to bind the firm in carrying on the partnership transactions. The
presumption is sufficient to permit third persons to hold the firm liable on transactions entered
 into by one of the members of the firm acting apparently in its behalf and within the scope of his
authority

3. NO. Article 1816 BUT construed together with Article 1824.

Art. 1816. “All partners, including industrial ones, shall be liable pro rata x x x for the contracts
which may be entered into the name and for the account of the partnership, under its signature
and by a person authorized x x x”

Art. 1824. “All partners are liable solidarily with the partnership for everything chargeable to the
partnership under Articles 1822 and 1823”

Art. 1822. “Where, by any wrongful act or omission of any partner acting in the ordinary course
of the business x x x or with the authority of his co-partners, loss or injury is caused to any
person x x x”

Art. 1823. “The partnership is bound to make good the loss:

(1) Where one partner acting within the scope of his apparent authority receives money
or property of a third person and misapplies it, and
(2) Where the partnership in the course of its business receives money or property of a
third person x x x is misapplied by any partner while it is in the custody of the
partnership.”

GR: In transactions entered into by the partnership, the liability of the partners is merely joint
Exception: In transactions involving third persons falling under Articles 1822 and 1823, such third
person may hold any partner solidarily liable for the whole obligation with the partnership.

Reason for exception: the law protects him, who in good faith relied upon the authority if a
partner, whether real or apparent.

However, as between Muñasque and Galan, justice also dictates reimbursement in favour of
Muñasque as Galan was proven to be in bad faith in his dealings with his partner.