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G.R. No. L-39780 November 11, 1985

ELMO MUÑASQUE, petitioner, vs. COURT OF APPEALS,CELESTINO GALAN TROPICAL COMMERCIAL COMPANY and RAMON PONS, respondents.

GUTTIERREZ, JR., J.:

Facts:

Munasque (petitioner) entered into a partnership with Galan under the registered name “Galan and Associates” as Contractor. They entered into a written contract with respondent Tropical for remodeling the latter’s Cebu branch building. Under the contract, the project totaled 25,000 to be paid in installments; 7, 000 upon signing and 6, 000 every 15 working days.

Tropical made the first payment by check in the name of Munasque. Munasque indorsed the check in favor of Galan to enable Galan to deposit it in the bank and pay for the materials and labor used in the project. However, Galan allegedly spent P6, 183.37 for his personal use. When the second check came, Munasque refused to indorse it again to Galan.

Galan informed Tropical of the misunderstanding between him and Munasque as partners. Hence upon second payment, Tropical changed the name of the payee on the second check from Munasque to “Galan and Associates” which enabled Galan to encash the second check.

Meanwhile, the construction was continued through Munasque’s sole efforts by incurring debts from various suppliers. The construction work was finished ahead of schedule with the total expenditure reaching P 34, 000 (note yung contract nila 25k lang).

Munasque filed a complaint for payment of sum of money and damages against Galan, Tropical, and Tropical’s Cebu branch manager Pons. Cebu Southern Hardware Company and Blue Diamond Glass Palace intervened in the case for the credit which they extended to the partnership of Munasque and Galan for the construction project.

Both trial court and Court of Appeals absolved respondents Tropical and its Cebu manager, Pons, from any liability. TC held Galvan and Munasque “jointly and severally” liable to its creditors which decision was modified by CA and held them “jointly” liable.

Issues:

Whether the obligation of Munasque and Galan is joint or solidary?

Held:

Solidary.

While it is true that under Article 1816 of CC, “All partners, including industrial ones, shall be liable pro rate with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into the name and for account of the partnership, under its signature and by a person authorized to act for the partnership. xxx”, this provision should be construed together with Article 1824 which provides that:

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

Tropical had every reason to believe that a partnership existed between Munasque and Galan and no fault or error can be imputed against it for making payments to “Galan and Associates” because as far as it was concerned, Galan was a true partner with real authority to transact in behalf of the partnership it was dealing with (because in the first place they entered into a duly registered partnership name and secondly, Munasque endorsed the first check payment to Galan). This is even more true in the cases of the intervenors who supplied materials on credit to the partnership. 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 Munasque and Galan, Galan must reimburse Munasque for the payments made to the intervenors as it was satisfactorily established that Galan acted in bad faith in his dealings with Munasque as a partner.