Elmo Muasque vs CA Facts: Elmo Muasque, in behalf of Galan and Muasque partnership as Contractor, entered into a written contract

with Tropical Commercial Co., through its branch manager Ramon Pons, for remodelling of Tropicals 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 Muasque, 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, Muasque refused to indorse the second check worth P6,000. Galan then informed Tropical of the misunderstanding between him and Muasque and this prompted Tropical to change the payee of the second check from Muasque to Galan and Associates (the duly registered name of Galan and Muasque partnership). Despite the misappropriation, Muasque alone was able to finish the project. The two remaining checks were properly issued to Muasque. Muasque 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 Muasue and Galan for materials used. TC: - Muasque and Pons jointly and severally liable to intervenors - Tropical and Pons absolved CA affirmed with modification: - Muasque and Pons jointly liable to intervenors Issue: 1. W/N Muasque 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 Muasque b. The first check issue in the name of Muasque was indorsed to Galan The relationship was made to appear as a partnership. 2. YES. Muasque 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 copartners, 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 Muasque and Galan, justice also dictates reimbursement in favour of Muasque as Galan was proven to be in bad faith in his dealings with his partner.