WEE

Case No. 85
Liable for Partnership Contracts
Muñasque v. CA ∣ G.R. No. L-39780, 11 November 1985

NATURE OF THE CASE: Petition for certiorari, the petitioner seeks to annul and set added the decision of the CA.
Affirmed with modifications.

FACTS: Petitioner Elmo Muñasque, in behalf of the partnership of "Galan and Muñasque", as Contractor entered
into a written contract with respondent Tropical for the remodelling of respondent's Cebu branch building. A
total amount of Php25,000.00 was to be paid under the contract for the entire services of the Contractor. (30% of
which was to be paid upon the signing of the contract and the balance thereof divided into three equal installments of Php6,000.00 every 15 working days)

The first payment made by Tropical was in the form of a check in the name of the petitioner. This was indorsed by
the same to respondent Celestino Galan to be deposited in the bank and for payment of materials and labor used
in the project. Petitioner alleged that Galan misappropriated a significant portion of the check for his personal use,
thus petitioner withheld the second check from Galan.

Galan then informed Tropical that there was a "misunderstanding" between him and petitioner, thereafter Tropical
changed the name of the payee in the second check from Muñ asque to "Galan and Associates" which enabled Galan
to encash the second check. Meanwhile, as alleged by the petitioner, the construction continued through his sole
efforts. He stated that he borrowed a significant amount from his friend for the payment of the expenses incurred for the construction work. The two
remaining checks were subsequently given to the petitioner alone with the last check being given pursuant to a court order.

Petitioner filed a complaint for payment of sum of money and damages against the respondents, seeking to recover
sum amount of money and damages. Both the trial and appellate courts absolved Tropical from any liability but
held the petitioner, together with Galan, liable to the intervenors Cebu Southern Hardware Company and Blue
Diamond Glass Palace for the credit which the intervenors extended to the partnership of petitioner and Galan.
Hence, this petition. Petitioner contends that Galan should be the only one held liable granting his acts of
misappropriation.

ISSUE: Whether or not the amounts payable to the intervenors should be shouldered exclusively by Galan.

RULING: NO. If there was a falling out or misunderstanding between the partners, such does not convert
the partnership into a sham organization. Article 1816 of the Civil Code should be construed together with
Article 1824. While the liability of the partners are merely joint in transactions entered into by the partnership, a
third person who transacted with said partnership can hold the partners solidarily liable for the whole obligation if
the case of the third person falls under Articles 1822 or 1823. The obligation is solidary, because the law protects
him, who in good faith relied upon the authority of a partner, whether such authority is real or apparent. That is
why under Article 1824 of the Civil Code all partners, whether innocent or guilty, as well as the legal entities which
is the partnership, are solidarily liable.

Thus, it is but fair that the consequences of any wrongful act committed by any of the partners therein should be
answered solidarily by all the partners and the partnership as a whole. However, as between the partners
Muñ asque and Galan, justice also dictates that Muñ asque be reimbursed by Galan for the payments made by the
former representing the liability of their partnership to herein intervenors, as it was satisfactorily established that
Galan acted in bad faith in his dealings with Muñ asque as a partner.