1.

Llpon, Petitioner Muñasque, in behalf of the partnership “Galan and Muñasque”

(contractor)  duly registered name is “Galan Associates” entered into a WRITTEN
CONTRACT with respondent Tropical Commercial Company.
a. Purpose of agreement: Tropical hired services of the partnership to remodel
their Cebu branch
b. Terms:
i. P25,000 – payment for entire service the contractor (30% would be paid
during the signing, the balance will be divided into 3 installments, rate of
6k/every 15 working days.
c. Payment:
i. 1st payment – form of a check for 7k in the name of Muñasque
1. Muñasque endorsed the check in favor of Galan to enable Galan
to deposit it in the bank and pay for the materials and labor to be
used in the project
nd
ii. 2 payment – form a check for P6k in the name of Muñasque
1. Galan wanted Muñasque to endorse it in his name again but
Muñasque refused this time, alleging that Galan spent 6,183.37 of
the first check for personal use
2. This 2nd check was withheld from petitioner.
2. Galan informed the Cebu branch of Tropical that there was a “misunderstanding”
between the Galan and Muñasque, so Tropical changed the name of the payee in the 2 nd
check from Muñasque to “Galan and Associates” (which is the duly registered name of
the partnership between Galan and Muñasque, and which is the name used in the
permit issued by the Mayor of Cebu so the partnership can do construction business)
a. Galan was able to encash the check.
3. Because of this, Muñasque faced financial difficulties, got demands from creditors to
pay for the construction materials (which should have been made from the 13k received
by Galan). So, Muñasque continued the construction through his sole efforts.
a. Borrowed 12k from his friend Mr. Espina.
b. The construction work was finished with the total expenditure reaching around
P34k, completing it prior to the deadline.
4. Thus, because of the unauthorized disbursements by Tropical to Galan, Muñasque filed
a complaint for the payment of a sum of money (1) amounts covered by the 1st and 2nd
check, (2) the additional expense for incurred by Muñasque and (3) damages against
Galan, Tropical Commercial Co., Inc. and Ramon Pons (Cebu branch manager)
a. Cebu Southern Hardware Company and Blue Diamond Glass Palace were allowed
to intervene who were claiming for the credit which they extended to the
partnership during construction.
5. RTC – ordered Muñasque and Galan to pay jointly and severally the Hardware Company
and Blue Diamond. Absolved Tropical and Pons.  amended to include to pay
attorney’s fees of Cebu Southern Hardware Company and proprietor Tan Siu.
6. CA – affirmed RTC but changed ‘jointly and severally’ to jointly only.
POINTS OF CONTENTION OF MUNASQUE:
1. Galan and Muñasque are not partners, that Galan was a sham and perfidious (deceitful)
partner who misappropriated the sum of 13k
2. CA committed GAD in holding that the payment made by Tropical to Galan was “good
payment” when it was what brought about the chance for Galan to misappropriate the
money.

ISSUES:
1. WON there was a partnership between Galan and Muñasque YES
2. WON the payment made is “good payment”

[It was a partnership]

1. Records show, through the written contract entered into by petitioner with Tropical. It
clearly states in the document that “Galan and Muñasque” herein called the
Contractor, and Tropical, entered into the contract
2. SC held that there was nothing in the records to indicate the partnership organized was
not a genuine one. If there was a falling out or misunderstanding between the partners,
such doesn’t convert the partnership into a sham organization.
a. Muñasque has himself to blame for making it appear to Tropical and their
creditors that Galan and Muñasque are partners based on the ff.:
i. Muñasque indorsed the 1st check to Galan even as it was already named
to him as payee
b. Thus, the payments made were valid payments.

[There is apparent authority –mutual agency]

Thus, since it’s established that Galan and Muñasque are partners when the debts were
incurred, Tropical’s payment to Galan is considered good payment and the they are both liable
to third persons who extended credit to the partnership (mutual agency: a partner is
presumed to be an authorized agent for the firm to bind it in carrying partnership
transactions).
c. This presumption is enough to permit third persons to hold the partnership
liable in transactions entered into by one of the members of the firm acting in
behalf and within the scope of his authority
3. This apparent authority allows a third person dealing with a juridical entity to rely upon
the validity and enforceability of contracts entered into with a member of the
partnership. In every partnership, there is a presumption of apparent authority which
binds the partnership in ALL ACTS THAT ARE FOR CARRYING ON THE BUSINESS OF THE
PARTNERSHIP in the usual way

[Liability]
1. SC held that CA is wrong in modifying “jointly and severally” liable to “jointly” only
a. SC said that Art. 1816 should be construed together with Art. 1824
i. 1816 – All partners, even industrial ones, are liable PRO RATA (per head)
with all their property, and after the partnership assets have been
 exhausted, for the contracts which may be entered into the name and for
the account of the partnership, under its signature and for the person
authorized to act for the partnership
ii. 1824 and 1822 and 1823  All partners are solidarily liable with the
partnership for everything chargeable to the partnership, including loss
or injury caused to a third person or penalties incurred due to any
wrongful act or omission of any partner acting in the ordinary course of
the business of the partnership OR with the authority of his co-partners.
b. In short, while the liability of the partners is merely JOINT in transactions
entered into by the partnership (pro rata), a third person who transacted with
the partnership CAN HOLD THE PARTNERS SOLIDARILY LIABLE for the whole
obligation if the case of the 3rd person falls under Art. 1822 (loss or injury
committed to third parties by partners) or 1823 (fraudulent acts of partners).
i. 1822 – any loss or injury caused by a partner acting in the ordinary course
of the business or with the authority of the co-partner (there is authority
given through the apparent authority) to a third person shall make the
WHOLE partnership liable
ii. 1823 – partnership is liable to the loss caused by the misapplication by a
partner acting within the scope of his apparent authority of money or
property belonging
2. Here, Tropical had every reason to believe that there was a partnership between Galan
and Muñasque (documents + indorsed + acts). Thus, they were within their rights to give
the check to Galan and make payments to Galan and Associates. More so with the
intervenors who extended credit to the partnership for the materials purchased.
a. Equity demands that the partnership answer solidarily by ALL partners and the
partnership as a whole to Tropical, and the intervenors.
3. But Muñasque is entitled to be reimbursed by Galan for Muñasque’s payment for the
liability of the partnership as to the intervenors since Galan was acting in bad faith in his
dealings as a partner.
a. He becomes a debtor of the partnership if he takes funds of the partnership for
himself.