Burns v. Gonzalez
439 S.W.2d 128, 1969 Tex. App. LEXIS 2001 (1969)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A partner's act binds the partnership only if it is for the purpose of 'apparently carrying on in the usual way the business of the partnership.' The burden of proof is on the third party seeking to hold the partnership liable to demonstrate that the partner's act was within the usual and customary practices for that type of business.
Facts:
- Arturo C. Gonzalez and Ramon D. Bosquez were sole partners in Inter-American Advertising Agency, whose business was selling broadcast time on commission for a Mexican radio station, XERF.
- Both partners also co-owned the corporation that operated XERF.
- In 1957, the partnership contracted to provide daily broadcast time to William G. Burns and another party.
- Due to various disruptions, the radio station was frequently shut down after June 1962, and the partnership failed to provide the contracted broadcast time to Burns.
- On November 28, 1962, Bosquez, purporting to act for the partnership, executed a $40,000 promissory note payable to Burns as compensation for two years of anticipated lost income from the unavailable broadcast time.
- Gonzalez did not sign, authorize, or know about the execution of the promissory note.
Procedural Posture:
- William G. Burns sued Arturo C. Gonzalez and Ramon D. Bosquez, as partners, in a state trial court to recover on a promissory note.
- The trial court entered an interlocutory default judgment against Bosquez.
- Following a non-jury trial on the claim against Gonzalez, the trial court entered a final judgment denying Burns any recovery from Gonzalez.
- Burns, as appellant, appealed the trial court's judgment in favor of Gonzalez to the Court of Civil Appeals of Texas.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a partner's act of executing a promissory note on behalf of the partnership bind a non-consenting partner when the party seeking enforcement provides no evidence that issuing such notes is part of 'apparently carrying on in the usual way' the business of that type of partnership?
Opinions:
Majority - Cadena, Justice
No. The promissory note executed by one partner is not binding on the non-consenting partner because the creditor failed to prove the act was for 'apparently carrying on in the usual way the business of the partnership.' Under Section 9(1) of the Uniform Partnership Act, a partner acts as an agent of the partnership, and their actions bind the firm if they appear to be part of the normal course of business. The court rejected the old 'trading' versus 'non-trading' partnership distinction, holding that the modern test under the statute is a factual inquiry into the nature of the specific business and how it is usually conducted. The burden falls on the person seeking to hold the partnership liable—in this case, Burns—to present evidence showing that borrowing money and executing promissory notes is a usual and customary activity for an advertising agency. Since Burns provided no such evidence, he failed to meet his burden of proof, and therefore Bosquez's act of signing the note could not bind the partnership or Gonzalez.
Analysis:
This decision clarifies the application of apparent authority under the Uniform Partnership Act, moving away from the rigid 'trading' vs. 'non-trading' partnership distinction. It establishes that the key inquiry is a factual one: whether the partner's act was consistent with the usual way that specific type of business operates. By placing the burden of proof squarely on the third-party creditor, the ruling incentivizes those dealing with a partnership to conduct due diligence regarding a single partner's authority for unusual transactions. This precedent strengthens protections for non-participating partners against liability for unauthorized acts that fall outside the ordinary scope of the partnership's business.
Unlock the full brief for Burns v. Gonzalez