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.