MUASQUE v.

CA
G.R. No. L-39780; November 11, 1985
Ponente: J. Gutierrez. Jr
FACTS:

Elmo Muasque filed a complaint for payment of sum of money and damages against respondents
Celestino Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging that the
petitioner entered into a contract with respondent Tropical through its Cebu Branch Manager Pons for
remodeling a portion of its building without exchanging or expecting any consideration from Galan
although the latter was casually named as partner in the contract; that by virtue of his having
introduced the petitioner to the employing company (Tropical), Galan would receive some kind of
compensation in the form of some percentages or commission.

Tropical 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.
On January 9, 1967, Tropical and/or Pons delivered a check for P7,000.00 not to the plaintiff but to a
stranger to the contract, Galan, who succeeded in getting petitioner's indorsement on the same check
persuading the latter that the same be deposited in a joint account.

On January 26, 1967, when the second check for P6,000.00 was due, petitioner refused to indorse
said check presented to him by Galan but through later manipulations, respondent Pons succeeded
in changing the payee's name to 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 subjecting him to demands of creditors to pay for
construction materials, the payment of which should have been made from the P13,000.00 received
by Galan.

Due to the unauthorized disbursement by respondents Tropical and Pons of the sum of P13,000.00 to
Galan, petitioner demanded that said amount be paid to him by respondents under the terms of the
written contract between the petitioner and respondent company.

ISSUE:
Whether there was a breach of trust when Tropical disbursed the money to Galan instead of
Muasque

HELD:
No, there was no breach of trust when Tropical disbursed the money to Galan instead of Muasque.

The Supreme Court held that there is nothing in the records to indicate that the partnership organized
by the two men was not a genuine one. A falling out or misunderstanding between the partners does
not convert the partnership into a sham organization.

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" and delivering the same to Galan because as far as it was concerned,
Galan was a true partner with real authority to transact on behalf of the partnership with which it was
dealing.
 PNB v. LO
G.R. No. 26937; October 5, 1927
Ponente: J. Villamor
FACTS:

The appellants Severo Eugenio Lo and Ng Khey Ling, together with J. A. Say Lian Ping, Ko
Tiao Hun, On Yem Ke Lam and Co Sieng Peng formed a commercial partnership under the name of
"Tai Sing & Co.," with a capital of P40,000 contributed by said partners. In the articles of partnership,
it appears that the partnership was to last for five years from and after the date of its organization,
and that its purpose was to do business in the City of Iloilo, Province of Iloilo, or in any other part of
the Philippine Islands the partners might desire, under the name of "Tai Sing & Co.," for the purchase
and sale of merchandise, goods, and native, as well as Chinese and Japanese, products, and to
carry on such business and speculations as they might consider profitable

General manager A. Say Lian Ping executed a power of attorney in favor of A. Y. Kelam, authorizing
him to act in his stead as manager and administrator of "Tai Sing & Co." A. Y. Kelam, acting under
such power of attorney, applied for, and obtained a loan of P8,000 in current account from the
plaintiff. As security for said loan, he mortgaged certain personal property of Tai Sing & Co.This credit
was renewed several times.

This mortgage was again renewed on April 16, 1920, and A. Y. Kelam, as attorney-in-fact of Tai Sing
& Co., executed another chattel mortgage for the said sum of P20,000 in favor of the plaintiff bank.

On April 20, 1920, Yap Seng, Severo Eugenio Lo, A. Y. Kelam and Ng Khey Ling, the latter
represented by M. Pineda Tayenko, executed a power of attorney in favor of Sy Tit by virtue of which
Sy Tit, representing Tai Sing & Co. obtained a credit of P20,000 from plaintiff bank on January 7,
1921, executing a chattel mortgage on certain personal property belonging to Tai Sing & Co.

Defendant Eugenio Lo sets up, as a general defense, that Tai Sing & Co., was not a general
partnership, and that the commercial credit in current account which Tai Sing & Co. obtained from the
plaintiff bank had not been authorized by the board of directors of the company, nor was the person
who subscribed said contract authorized to make the same, under the articles of copartnership.

ISSUE:
Whether anomalous adoption of a firm name affect the liability of the general partners to third
persons

HELD:
No, anomalous adoption of a firm name does not affect the liability of the general partners to
third persons

The Supreme Court held that the object of the Code of Commerce in requiring a general partnership
to transact business under the name of all its members, of several of them, or of one only, is to
protect the public from imposition and fraud; it is for the protection of the creditors rather than of the
partners themselves. It is unenforceable as between the partners and at the instance of the violating
party, but not in the sense of depriving innocent parties of their rights who may have dealt with the
offenders in ignorance of the latter having violated the law; and that contracts entered into by a
partnership firm defectively organized are valid when voluntarily executed by the parties, and the only
question is whether or not they complied with the agreement.

Therefore, Lo cannot invoke in his defense the anomaly in the firm name which they themselves
adopted