Lim Tong Lim v. Philippine Fishing Gear Industries, Inc.
REITERATIONFacts
The Antecedents: Antonio Chua and Peter Yao, on behalf of "Ocean Quest Fishing Corporation," entered into a Contract dated February 7, 1990, to purchase fishing nets worth P532,045.00 from Philippine Fishing Gear Industries, Inc. (respondent). They claimed to be engaged in a business venture with petitioner Lim Tong Lim, who was not a signatory to the agreement. Four hundred pieces of floats worth P68,000.00 were also sold to the Corporation. Procedural History: The buyers failed to pay, prompting respondent to file a collection suit against Chua, Yao, and Lim Tong Lim as general partners, alleging that "Ocean Quest Fishing Corporation" was a non-existent corporation. A Writ of Preliminary Attachment was issued and enforced by sheriff, attaching the fishing nets. Chua admitted liability, Yao failed to appear, and Lim Tong Lim filed an Answer with Counterclaim and Crossclaim, moving for the lifting of the Writ. The trial court maintained the Writ and ordered the sale of the nets at public auction, with respondent winning the bid for P900,000.00. The RTC ruled that a partnership existed among Lim, Chua, and Yao, holding them jointly liable. The Court of Appeals affirmed this decision. The Petition: Lim Tong Lim assails the Court of Appeals' decision, arguing that no partnership existed among them, that he should not be held liable as he did not directly transact with respondent, and that the Writ of Attachment was improperly issued.
Issue(s)
Whether a partnership existed among Lim Tong Lim, Antonio Chua, and Peter Yao. Whether Lim Tong Lim is liable for the unpaid purchase price of the fishing nets and floats. Whether the Writ of Preliminary Attachment was improperly issued against the nets.
Ruling
The Petition is denied, and the assailed Decision of the Court of Appeals is affirmed. Lim Tong Lim is held jointly liable with Chua and Yao for the unpaid purchase price of the fishing nets and floats.
Ratio Decidendi
On the existence of a partnership: The Court affirmed the findings of the lower courts that a partnership existed among Lim Tong Lim, Chua, and Yao. This was based on several factual findings, including their agreement to acquire fishing boats, borrowing money to finance the venture, and the subsequent Compromise Agreement where they agreed to divide any excess or loss from the sale of the boats. The Court emphasized that a partnership requires an agreement to contribute money, property, or industry to a common fund with the intention of dividing profits, as provided in Article 1767 of the Civil Code. The contribution need not be cash; it can be credit or industry. The Court found that the purchase of the nets and floats was in furtherance of their established fishing business, making Lim Tong Lim liable as a partner. On Lim Tong Lim's liability: The Court rejected Lim Tong Lim's argument that he was merely a lessor of the boats and not a partner. The Court found it illogical for a lessor to consent to the sale of his own property to pay a debt of others, with the excess proceeds to be divided among them. His consent to the sale demonstrated a preexisting partnership. Furthermore, the Court applied the doctrine of corporation by estoppel, stating that even if the ostensible corporation "Ocean Quest Fishing Corporation" was legally nonexistent, those who acted on its behalf and those who benefited from its transactions, knowing its legal defects, are held liable as general partners. Lim Tong Lim benefited from the use of the nets and the fishing vessel, thus he is covered by this doctrine. On the validity of the attachment: The Court deemed the issue of the validity of the Writ of Attachment moot and academic. The Court reiterated that the fishing vessel F/B Lourdes was an asset of the partnership, registered in Lim Tong Lim's name to assure payment of the debt. The nets were essential to the fishing venture and were specifically manufactured for them. The issuance of the Writ to assure payment was proper, especially since ownership of the nets remained with the respondent until full payment.
Main Doctrine
A partnership may be deemed to exist among parties who agree to borrow money to pursue a business and to divide the profits or losses that may arise therefrom, even if they have not contributed capital to a common fund, as their contribution may be in the form of credit or industry. Partners are liable for debts incurred on behalf of the partnership, and the doctrine of corporation by estoppel may hold liable those who act on behalf of a non-existent corporation and those who benefit from its transactions.