Business Associations, Pages 183โ€“187

Burns v. Gonzalez

Court of Civil Appeals of Texas, 1969

Facts:

Bosquez and Gonzalez each owned half of the stock of Radiodifusora, a Mexican radio company. They contracted with plaintiff, whereby they agreed to give a ministry he was representing two 15-minute segments every day for the life of the station in exchange for a payment of $100,000.

After five years, the radio station had some issues due to labor disputes and no longer offered the ministry its agreed air time. The ministry then assigned all of its rights to plaintiff, with the defendants' approval.

Later that year, Bosquez, purporting to act both on his own behalf and that of his partnership, executed a promissory note for $40,000, payable to plaintiff in exchange for the expected loss of two years of air time and a promise not to sue.

The next year however, plaintiff contracted again for his air time in exchange for $20,000 and another promise not to sue. This contract mentioned the original contract, but not the note from the year before.

Procedural History:

Trial court entered an interlocutory default judgment against Bosquez but denied any recovery against Gonzalez.

Issue:

Is Gonzalez liable for the promissory note Bosquez purportedly signed on their partnership's behalf?

Rule:

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"Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority."

Reasoning:

Bosquez had no actual authority to bind the partnership. However, since plaintiff did not know this, it would bind the partnership if it can be classified as an act "for apparently carrying on in the usual way the business of the partnership." Here, there was no evidence presented about whether borrowing money or executing negotiable instruments was incidental to the transaction of business of selling radio advertising "in the usual way."

The statute does not place the burden of proof for such a thing on the non-participating partner, as the legislature could have easily done. Instead, the person seeking to hold the non-participating partner liable bears the burden of proof. Thus, plaintiff had the burden of proving the "usual way" advertising agencies transact business.

Holding:

No, Gonzalez is not liable for the note Bosquez signed without authority to do so. Affirmed.

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