3/31/2017 G.R.No.

L39780

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RepublicofthePhilippines
SUPREMECOURT
Manila

FIRSTDIVISION

G.R.No.L39780November11,1985

ELMOMUASQUE,petitioner,
vs.
COURTOFAPPEALS,CELESTINOGALANTROPICALCOMMERCIALCOMPANYandRAMONPONS,
respondents.

JohnT.Borromeoforpetitioner.

JuanD.AsteteforrespondentC.Galan.

PaulGornesforrespondentR.Pons.

ViuMontecilloforrespondentTropical.

PaternoP.NatingaforIntervenorBlueDiamondGlassPalace.

GUTTIERREZ,JR.,J.:

In this petition for certiorari, the petitioner seeks to annul and set added the decision of the Court of Appeals
affirming the existence of a partnership between petitioner and one of the respondents, Celestino Galan and
holdingbothofthemliabletothetwointervenorswhichextendedcredittotheirpartnership.Thepetitionerwants
tobeexcludedfromtheliabilitiesofthepartnership.

Petitioner Elmo Muasque filed a complaint for payment of sum of money and damages against respondents
CelestinoGalan,TropicalCommercial,Co.,Inc.(Tropical)andRamonPons,allegingthatthepetitionerentered
into a contract with respondent Tropical through its Cebu Branch Manager Pons for remodelling a portion of its
buildingwithoutexchangingorexpectinganyconsiderationfromGalanalthoughthelatterwascasuallynamedas
partnerinthecontractthatbyvirtueofhishavingintroducedthepetitionertotheemployingcompany(Tropical).
GalanwouldreceivesomekindofcompensationintheformofsomepercentagesorcommissionthatTropical,
under the terms of the contract, agreed to give petitioner the amount of P7,000.00 soon after the construction
began and thereafter, the amount of P6,000.00 every fifteen (15) days during the construction to make a total
sum of P25,000.00 that on January 9, 1967, Tropical and/or Pons delivered a check for P7,000.00 not to the
plaintiffbuttoastrangertothecontract,Galan,whosucceededingettingpetitioner'sindorsementonthesame
check persuading the latter that the same be deposited in a joint account that on January 26, 1967 when the
second check for P6,000.00 was due, petitioner refused to indorse said cheek presented to him by Galan but
throughlatermanipulations,respondentPonssucceededinchangingthepayee'snamefromElmoMuasqueto
Galan and Associates, thus enabling Galan to cash the same at the Cebu Branch of the Philippine Commercial
and Industrial Bank (PCIB) placing the petitioner in great financial difficulty in his construction business and
subjectinghimtodemandsofcreditorstopay'forconstructionmaterials,thepaymentofwhichshouldhavebeen
made from the P13,000.00 received by Galan that petitioner undertook the construction at his own expense
completingitpriortotheMarch16,1967deadlinethatbecauseoftheunauthorizeddisbursementbyrespondents
Tropical and Pons of the sum of P13,000.00 to Galan petitioner demanded that said amount be paid to him by
respondentsunderthetermsofthewrittencontractbetweenthepetitionerandrespondentcompany.

The respondents answered the complaint by denying some and admitting some of the material averments and
settingupcounterclaims.

Duringthepretrialconference,thepetitionersandrespondentsagreedthattheissuestoberesolvedare:

(1)WhetherornotthereexistedapartnersbetweenCelestinoGalanandElmoMuasqueand

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(2) Whether or not there existed a justifiable cause on the part of respondent Tropical to disburse
moneytorespondentGalan.

The business firms Cebu Southern Hardware Company and Blue Diamond Glass Palace were allowed to
intervene,bothhavinglegalinterestinthematterinlitigation.

Aftertrial,thecourtrenderedjudgment,thedispositiveportionofwhichstates:

INVIEWWHEREOF,Judgmentisherebyrendered:

(1) ordering plaintiff Muasque and defendant Galan to pay jointly and severally the intervenors
CebuandSouthernHardwareCompanyandBlueDiamondGlassPalacetheamountofP6,229.34
andP2,213.51,respectively

(2)absolvingthedefendantsTropicalCommercialCompanyandRamonPonsfromanyliability,

Nodamagesawardedwhatsoever.

The petitioner and intervenor Cebu Southern Company and its proprietor, Tan Siu filed motions for
reconsideration.

OnJanuary15,1971,thetrialcourtissued'anotherorderamendingitsjudgmenttomakeitreadasfollows:

INVIEWWHEREOF,Judgmentisherebyrendered:

(1) ordering plaintiff Muasque and defendant Galan to pay jointly and severally the intervenors
CebuSouthernHardwareCompanyandBlueDiamondGlassPalacetheamountofP6,229.34and
P2,213.51,respectively,

(2)orderingplaintiffanddefendantGalantopayIntervenorCebuSouthernHardwareCompanyand
TanSiujointlyandseverallyinterestat12%perannumofthesumofP6,229.34untiltheamountis
fullypaid

(3) ordering plaintiff and defendant Galan to pay P500.00 representing attorney's fees jointly and
severallytoIntervenorCebuSouthernHardwareCompany:

(4)absolvingthedefendantsTropicalCommercialCompanyandRamonPonsfromanyliability,

Nodamagesawardedwhatsoever.

Onappeal,theCourtofAppealsaffirmedthejudgmentofthetrialcourtwiththesolemodificationthattheliability
imposedinthedispositivepartofthedecisiononthecreditofCebuSouthernHardwareandBlueDiamondGlass
Palacewaschangedfrom"jointlyandseverally"to"jointly."

Notsatisfied,Mr.Muasquefiledthispetition.

ThepresentcontroversybeganwhenpetitionerMuasqueinbehalfofthepartnershipof"GalanandMuasque"
as Contractor entered into a written contract with respondent Tropical for remodelling the respondent's Cebu
branch building. A total amount of P25,000.00 was to be paid under the contract for the entire services of the
Contractor.Thetermsofpaymentwereasfollows:thirtypercent(30%)ofthewholeamountuponthesigningof
the contract and the balance thereof divided into three equal installments at the lute of Six Thousand Pesos
(P6,000.00)everyfifteen(15)workingdays.

The first payment made by respondent Tropical was in the form of a check for P7,000.00 in the name of the
petitioner.Petitioner,however,indorsedthecheckinfavorofrespondentGalantoenablethelattertodeposititin
thebankandpayforthematerialsandlaborusedintheproject.

PetitionerallegedthatGalanspentP6,183.37outoftheP7,000.00forhispersonalusesothatwhenthesecond
checkintheamountofP6,000.00cameandGalanaskedthepetitionertoindorseitagain,thepetitionerrefused.

The check was withheld from the petitioner. Since Galan informed the Cebu branch of Tropical that there was
a"misunderstanding" between him and petitioner, respondent Tropical changed the name of the payee in the
secondcheckfromMuasqueto"GalanandAssociates"whichwasthedulyregisterednameofthepartnership
between Galan and petitioner and under which name a permit to do construction business was issued by the
mayorofCebuCity.ThisenabledGalantoencashthesecondcheck.

Meanwhile, as alleged by the petitioner, the construction continued through his sole efforts. He stated that he
borrowed some P12,000.00 from his friend, Mr. Espina and although the expenses had reached the amount of

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P29,000.00 because of the failure of Galan to pay what was partly due the laborers and partly due for the
materials,theconstructionworkwasfinishedaheadofschedulewiththetotalexpenditurereachingP34,000.00.

Thetworemainingchecks,eachintheamountofP6,000.00,weresubsequentlygiventothepetitioneralonewith
thelastcheckbeinggivenpursuanttoacourtorder.

As stated earlier, the petitioner filed a complaint for payment of sum of money and damages against the
respondents,seekingtorecoverthefollowing:theamountscoveredbythefirstandsecondcheckswhichfellinto
thehandsofrespondentGalan,theadditionalexpensesthatthepetitionerincurredintheconstruction,moraland
exemplarydamages,andattorney'sfees.

BoththetrialandappellatecourtsnotonlyabsolvedrespondentsTropicalanditsCebuManager,Pons,fromany
liabilitybuttheyalsoheldthepetitionertogetherwithrespondentGalan,habletotheintervenorsCebuSouthern
Hardware Company and Blue Diamond Glass Palace for the credit which the intervenors extended to the
partnershipofpetitionerandGalan

Inthispetitionthelegalquestionsraisedbythepetitionerareasfollows:(1)Whetherornottheappellatecourt
erredinholdingthatapartnershipexistedbetweenpetitionerandrespondentGalan.(2)Assumingthattherewas
such a partnership, whether or not the court erred in not finding Galan guilty of malversing the P13,000.00
coveredbythefirstandsecondchecksandtherefore,accountabletothepetitionerforthesaidamountand(3)
Whether or not the court committed grave abuse of discretion in holding that the payment made by Tropical
throughitsmanagerPonstoGalanwas"goodpayment,"

Petitioner contends that the appellate court erred in holding that he and respondent Galan were partners, the
truthbeingthatGalanwasashamandaperfidiouspartnerwhomisappropriatedtheamountofP13,000.00due
tothepetitioner.Petitioneralsocontendsthattheappellatecourtcommittedgraveabuseofdiscretioninholding
thatthepaymentmadebyTropicaltoGalanwas"good"paymentwhenthesamegaveoccasionforthelatterto
misappropriatetheproceedsofsuchpayment.

Thecontentionsarewithoutmerit.

The records will show that the petitioner entered into a contract with Tropical for the renovation of the latter's
buildingonbehalfofthepartnershipof"GalanandMuasque."Thisisreadilyseeninthefirstparagraphofthe
contractwhereitstates:

This agreement made this 20th day of December in the year 1966 by Galan and Muasque
hereinaftercalledtheContractor,andTropicalCommercialCo.,Inc.,hereinaftercalledtheownerdo
herebyforandinconsiderationagreeonthefollowing:....

Thereisnothingintherecordstoindicatethatthepartnershiporganizedbythetwomenwasnotagenuineone.
Iftherewasafallingoutormisunderstandingbetweenthepartners,suchdoesnotconvertthepartnershipintoa
shamorganization.

Likewise,whenMuasquereceivedthefirstpaymentofTropicalintheamountofP7,000.00withacheckmade
out in his name, he indorsed the check in favor of Galan. Respondent Tropical therefore, had every right to
presumethatthepetitionerandGalanweretruepartners.Iftheywerenotpartnersaspetitionerclaims,thenhe
has only himself to blame for making the relationship appear otherwise, not only to Tropical but to their other
creditorsaswell.Thepaymentsmadetothepartnershipwere,therefore,validpayments.

InthecaseofSingsongv.IsabelaSawmill(88SCRA643),weruled:

AlthoughitmaybepresumedthatMargaritaG.Saldajenohadactedingoodfaith,theappelleesalso
actedingoodfaithinextendingcredittothepartnership.Whereoneoftwoinnocentpersonsmust
suffer,thatpersonwhogaveoccasionforthedamagestobecausedmustbeartheconsequences.

NoerrorwascommittedbytheappellatecourtinholdingthatthepaymentmadebyTropicaltoGalanwasagood
paymentwhichbindsbothGalanandthepetitioner.Sincethetwowerepartnerswhenthedebtswereincurred,
they,arealsobothliabletothirdpersonswhoextendedcredittotheirpartnership.InthecaseofGeorgeLittonv.
HillandCeron,etal,(67Phil.513,514),weruled:

Thereisageneralpresumptionthateachindividualpartnerisanauthorizedagentforthefirmand
thathehasauthoritytobindthefirmincarryingonthepartnershiptransactions.(Millsvs.Riggle,112
Pan,617).

The presumption is sufficient to permit third persons to hold the firm liable on transactions entered
into by one of members of the firm acting apparently in its behalf and within the scope of his
authority.(LeRoyvs.Johnson,7U.S.(Law.ed.),391.)

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PetitioneralsomaintainsthattheappellatecourtcommittedgraveabuseofdiscretioninnotholdingGalanliable
fortheamountswhichhe"malversed"totheprejudiceofthepetitioner.Headdsthatalthoughthiswasnotoneof
the issues agreed upon by the parties during the pretrial, he, nevertheless, alleged the same in his amended
complaintwhichwas,dulyadmittedbythecourt.

When the petitioner amended his complaint, it was only for the purpose of impleading Ramon Pons in his
personalcapacity.AlthoughthepetitionermadeallegationsastotheallegedmalversationsofGalan,thesewere
thesameallegationsinhisoriginalcomplaint.Themalversationbyonepartnerwasnotanissueactuallyraisedin
theamendedcomplaintbuttheallegedconnivanceofPonswithGalanasameanstoservethelatter'spersonal
purposes.

Thepetitioner,therefore,shouldbeboundbythedelimitationoftheissuesduringthepretrialbecausehehimself
agreedtothesame.InPermanentConcreteProducts,Inc.v.Teodoro,(26SCRA336),weruled:

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...Theappellantisboundbythedelimitationoftheissuescontainedinthetrialcourt'sorderissued
ontheverydaythepretrialconferencewasheld.Suchanordercontrolsthesubsequentcourseof
theaction,unlessmodifiedbeforetrialtopreventmanifestinjustice.Inthecaseatbar,modificationof
thepretrialorderwasneversoughtattheinstanceofanyparty.

Petitioner could have asked at least for a modification of the issues if he really wanted to include the
determinationofGalan'spersonalliabilitytotheirpartnershipbuthechosenottodoso,ashevehementlydenied
theexistenceofthepartnership.Atanyrate,theissueraisedinthispetitionisthecontentionofMuasquethat
theamountspayabletotheintervenorsshouldbeshoulderedexclusivelybyGalan.Wenotethatthepetitioneris
not solely burdened by the obligations of their illstarred partnership. The records show that there is an existing
judgment against respondent Galan, holding him liable for the total amount of P7,000.00 in favor of Eden
Hardware which extended credit to the partnership aside from the P2, 000. 00 he already paid to Universal
Lumber.

We,however,takeexceptiontotherulingoftheappellatecourtthatthetrialcourt'sorderingpetitionerandGalan
to pay the credits of Blue Diamond and Cebu Southern Hardware"jointly and severally" is plain error since the
liabilityofpartnersunderthelawtothirdpersonsforcontractsexecutedinconnectionwithpartnershipbusinessis
onlyprorataunderArt.1816,oftheCivilCode.

While it is true that under Article 1816 of the Civil Code,"All partners, including industrial ones, shall be liable
prorate with all their property and after all the partnership assets have been exhausted, for the contracts which
may be entered into the name and fm the account cd the partnership, under its signature and by a person
authorized to act for the partnership. ...". 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
underArticles1822and1823."Inshort,whiletheliabilityofthepartnersaremerelyjointintransactionsentered
intobythepartnership,athirdpersonwhotransactedwithsaidpartnershipcanholdthepartnerssolidarilyliable
forthewholeobligationifthecaseofthethirdpersonfallsunderArticles1822or1823.

Articles1822and1823oftheCivilCodeprovide:

Art.1822.Where,byanywrongfulactoromissionofanypartneractingintheordinarycourseofthe
business of the partnership or with the authority of his copartners, loss or injury is caused to any
person, not being a partner in the partnership or any penalty is incurred, the partnership is liable
therefortothesameextentasthepartnersoactingoromittingtoact.

Art.1823.Thepartnershipisboundtomakegood:

(1)Whereonepartneractingwithinthescopeofhisapparentauthorityreceivesmoneyorproperty
ofathirdpersonandmisappliesitand

(2)Wherethepartnershipinthecourseofitsbusinessreceivesmoneyorpropertyofathirdperson
andthemoneyorpropertysoreceivedismisappliedbyanypartnerwhileitisinthecustodyofthe
partnership.

Theobligationissolidary,becausethelawprotectshim,whoingoodfaithreliedupontheauthorityofapartner,
whethersuchauthorityisrealorapparent.ThatiswhyunderArticle1824oftheCivilCodeallpartners,whether
innocentorguilty,aswellasthelegalentitywhichisthepartnership,aresolidarilyliable.

In the case at bar the respondent Tropical had every reason to believe that a partnership existed between the
petitioner and Galan and no fault or error can be imputed against it for making payments to "Galan and
Associates"anddeliveringthesametoGalanbecauseasfarasitwasconcerned,Galanwasatruepartnerwith

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real authority to transact on behalf of the partnership with which it was dealing. This is even more true in the
cases of Cebu Southern Hardware and Blue Diamond Glass Palace 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
thereinshouldbeansweredsolidarilybyallthepartnersandthepartnershipasawhole

However. as between the partners Muasque and Galan,justice also dictates that Muasque be reimbursed by
Galanforthepaymentsmadebytheformerrepresentingtheliabilityoftheirpartnershiptohereinintervenors,as
itwassatisfactorilyestablishedthatGalanactedinbadfaithinhisdealingswithMuasqueasapartner.

WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION that the liability of
petitionerandrespondentGalantointervenorsBlueDiamondGlassandCebuSouthernHardwareisdeclaredto
bejointandsolidary.PetitionermayrecoverfromrespondentGalananyamountthathepays,inhiscapacityasa
partner,totheaboveintervenors,

SOORDERED.

Teehankee(Chairman),MelencioHerrera,DelaFuenteandPatajo,JJ.,concur.

Plana,J.,tooknopart.

Relova,J.,isonleave.

TheLawphilProjectArellanoLawFoundation

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