COMMERCIAL LAW (partnership, corporation by estoppel) LIM TONG LIM V ! "#ILI""INE $I #ING GEAR IN%& TRIE , INC!

'() CRA )*+ $ACT , 1. On behalf of Ocean Quest Fishing Corporation, Antonio Chua and Peter Yao entered into a contract for the purchase of fishing nets from Philippine Fishing Gear Industries, Inc. . !he" claimed that the" #ere engaged in a business $enture #ith petitioner %im !ong %im, #ho #as ho#e$er not a signator" to the agreement. &. '(( floats #ere also sold to the Corporation. '. !he bu"ers failed to pa" for the fishing nets and floats hence, pri$ate respondent filed a collection suit against Chua, Yao and petitioner %im #ith a pra"er for a #rit of preliminar" attachment. ). !he suit #as brought against the three in their capacities as general partners, on the allegation that *Ocean Quest Fishing Corporation+ #as a non,e-istence corporation as sho#n b" a Certification from the ./C. 0. !he lo#er court issued a 1rit of Preliminar" Attachment, #hich the sheriff enforced b" attaching the fishing nets on board F23 %ourdes. 4. 5pon motion of pri$ate respondent, the trial court ordered the sale of the fishing nets at a public auction. 6. Pri$ate respondents #on the biding. 7. !he trial court ruled that pri$ate respondent #as entitled to the 1rit of Attachment and that Chua, Yao, and %im, as general partners, #ere 8ointl" liable to pa" pri$ate respondent. 1(. !he court ruled that a partnership among %ao, Chua, and Yao e-isted based on a9 testimonies of #itnesses presented and 9 on a Compromise Agreement e-ecuted b" the three 11. %im appealed to the CA contending that no partnership e-isted bet#een him and Chua. 1 . Petitioner li:e#ise argues that under the doctrine of corporation b" estoppel, liabilit" can be imputed onl" to Chua and Yao, and not to him. 1&. !he CA affirmed the trial court, holding that petitioner #as a partner of Chua and Yao in a fishing business and ma" thus be held liable for the fishing nets and floats purchased b" and for the use of the partnership. 1'. ;ence this petition. I &E , <oes a partnership e-ist bet#een Chua, Yao and %im= Is there a corporation b" estoppel in this case= Can liabilit" can be imputed on %im under the doctrine of corporation b" estoppel= #EL%, From the actual findings of both lo#er courts, it is clear that Chua, Yao and %im had decided to engage in a fishing business, #hich the" started b" securing boats #orth P &.&) million, financed b" a loan secured from >esus %im #ho #as petitioner?s brother. In their Compromise Agreement, the" subse@uentl" re$ealed their intention to pa" the loan #ith the proceeds of the sale of the boats, and to di$ide e@uall" among them the e-cess of loss. !hese boats, the purchase and the repair of #hich #ere financed #ith borro#ed mone", fell under the term *common fund+ under Article 1404. !he contribution to such fund need no be case of fi-ed assetsA it could be an intangible li:e credit or industr". !hat the parties agreed that an" loss or profits from the sale and operation of the boats #ould be di$ided earl" among them also sho#s that the" had indeed formed a partnership. /$en if the ostensible corporate entit" is pro$en to be legall" non,e-istent, a part" ma" be

estopped from den"ing its corporate e-istence. *!he reason behind this doctrine is ob$ious B an unincorporated association has no personalit" and #ould be incompetent to act and appropriate for itself the po#er and attributes of a corporation as pro$ided b" la#A it cannot create agents or confer authorit" on another to act in its behalfA thus, those #ho act or purport to act as its representati$es or agents do so #ithout authorit" and at their o#n ris:. And as it is an elementar" principle of la# that a person #ho acts as an agent #ithout authorit" oar #ithout a principal is himself regarded as the principal, possessed of all the rights and sub8ect to all the liabilities of a principal, a person acting or purporting to act on behalf of a corporation #hich has no $alid e-istence assumes such pri$ileges and obligations and becomes personall" liable for contracts entered into or for other acts performed as such agent. !he doctrine of corporation b" estoppel ma" appl" to the alleged corporation and to a third part". An unincorporated association, #hich represented itself to be a corporation, #ill be estopped from den"ing its corporate capacit" in a suit against it b" a third person #ho relied in good faith on such representation. It cannot allege lac: of personalit" to be sued to e$ade its responsibilit" for a contact it entered into and b" $irtue of #hich it recei$ed ad$antages and benefits. A third part" #ho, :no#ing an association to be unincorporated nonetheless treated it as a corporation and recei$ed benefits from it, ma" be barred from den"ing its corporate e-istence in a suit brought against the alleged corporation. In such case, all those #ho benefited from the transaction made the ostensible corporation, despite :no#ledge of its legal defects, ma" be held liable for contracts the" impliedl" assented to or too: ad$antage of. 5n@uestionabl", petitioner benefited from the nets found in F23 %ourdes, the boat #hich has earlier been pro$en to be an asset of the partnership. ;e in fact @uestions the attachment of the nets, because the 1rit has effecti$el" stopped his use of the fishing $essel. !echnicall", it is true that petitioner did not directl" act on behalf of the corporation. ;o#e$er, ha$ing reaped the benefits of the contract entered into b" person #ith #hom he pre$iousl" had an e-isting relationship, he is deemed to be part of said association and is co$ered b" the scope of the doctrine of corporation b" estoppel.

(ille-al .is/issal0reinstate/ent) %IMA1A2AO V ! NLRC '3' CRA 455 $ACT , 1. Pri$ate respondent Island 3iscuit is engaged in the manufacture of biscuits. . Pri$ate respondent Cheng .u" is its General Canager. &. Petitioner <anilo <imaba"ao #as emplo"ed #ith the specific tas: of operating the roller, cutting biscuits, sorting out re8ects, mashing flour and feeding the flour mass into thinning machine. '. 1hile petitioner #as assigned to sort out re8ects, #ith prior permission first obtained from his chec:er, he #ent to the comfort room to ans#er the call of nature and relie$e himself, after #hich he returned to his #or: place. ). Pri$ate respondent Cheng .u" #as unhapp" seeing petitioner a#a" from his #or:station and immediatel" demanded from him a #ritten e-planation allegedl" for abandoning his #or:. 0. As a matter of polic", respondent discourages its emplo"ees from going to the comfort room during #or:ing hours for sanitar" or h"gienic purposes as the compan" is engaged in the food business. 4. Despondents compan"?s personal manager handed petitioner a letter as:ing him to e-plain in #riting #h" he left his #or:station. 6. Petitioner $erball" e-plained that he ne$er left his stationA he onl" #ent to the comfort room for a short #hile to ans#er the call of nature. 7. 3elie$ing that this denial #as enough he did not an"more submit an" #ritten e-planation. 1(. For his inabilit" to submit a #ritten e-planation, petitioner #as suspended for 1) da"s. 11. !he incident of petitioner lea$ing his #or:station to ans#er the call of nature #as repeated. 1 . Despondent Cheng .u" notice petitioner?s brief absence and so, upon his return, his manager berated him and re@uired him to submit once more a #ritten e-planation for allegedl" abandoning his #or:. 1&. Petitioner complied. 1'. Despondent Cheng .u" #as unhapp" so the compan" through its Personnel Officer ser$ed petitioner a notice of termination, finding petitioner?s e-planation not satisfactor". 1). Petitioner filed a complaint for illegal dismissal. 10. !he %abor Arbiter declared the suspension of petitioner $alid and legal not because he left his production area to relie$e himself but for his utter disregard of the directi$e of the manager to submit his #ritten e-planation. 14. ;is dismissal #as found illegal, but because of strained relationship, the %abor Arbiter held that reinstatement #as no longer feasible and thereafter a#arded petitioner a limited bac: #ages for 0 months #ithout reinstatement. 16. !he E%DC re$ersed the decision of the %abor Arbiter but sustained the grant of separation pa". 17. Petitioner?s motion for reconsideration #as denied. (. ;ence this petition.

I &E , <id petitioner abandonhis #or:= Is reinstatement i an a$ailable remed"= #EL%, Petitioner?s act of lea$ing his #or: place to relie$e himself can hardl" be characteriFed as abandonment, much less a #illful or intentional disobedience of compan" rules since he #as merel" ans#ering the call of nature o$er #hich he had not control. Destraining one?s bo#el mo$ement can result in great discomfort and affect ad$ersel" the efficienc", and e$en the health, of the #or:er. Petitioner?s disobedience to his emplo"er?s orders can easil" be categoriFed as tri$ial and unimportant, and as such, does not merit a penalt" as harsh as dismissal. As a conse@uence, petitioner is entitled to reinstatement. !he postulate ad$anced b" the %abor Arbiter that there e-isted *strained relationship+ bet#een the parties thus baring reinstatement of petitioner, does not hold #ater. .trained relationship ma" be in$o:ed onl" against emplo"ees #hose positions demand trust and confidence, or #hose differences #ith their emplo"er are of such nature or degree as to preclude reinstatement. In the instant case, ho#e$er, the relationship bet#een petitioner, an ordinar" emplo"ee, and management #as clearl" on an impersonal le$el. Petitioner did not occup" a sensiti$e position as #ould re@uire complete trust and confidence, and #here personal ill #ill #ould foreclose reinstatement.