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G.R. No. 136448 - Lim Tong Lim v. Philippine Fishing Gear Industries, PDF
G.R. No. 136448 - Lim Tong Lim v. Philippine Fishing Gear Industries, PDF
SYNOPSIS
Antonio Chua and Peter Yao entered into a contract in behalf of Ocean Quest Fishing
Corporation for the purchase of shing nets from respondent Philippine Fishing Gear
Industries, Inc. Chua and Yao claimed that they were engaged in business venture with
petitioner Lim Tong Lim, who, however, was not a signatory to the contract. The buyers
failed to pay the shing nets. Respondent led a collection against Chua, Yao and
petitioner Lim in their capacities as general partners because it turned out that Ocean
Quest Fishing Corporation is a non-existent corporation. The trial court issued a Writ of
Preliminary Attachment, which the sheriff enforced by attaching the shing nets. The trial
court rendered its decision ruling that respondent was entitled to the Writ of Attachment
and that Chua, Yao and Lim, as general partners, were jointly liable to pay respondent. Lim
appealed to the Court of Appeals, but the appellate court a rmed the decision of the trial
court that petitioner Lim is a partner and may thus be held liable as such. Hence, the
present petition. Petitioner claimed that since his name did not appear on any of the
contracts and since he never directly transacted with the respondent corporation, ergo, he
cannot be held liable. cIaCTS
The Supreme Court denied the petition. The Court ruled that having reaped the
bene ts of the contract entered into by Chua and Yao, with whom he had an existing
relationship, petitioner Lim is deemed a part of said association and is covered by the
doctrine of corporation by estoppel. The Court also ruled that under the principle of
estoppel, those acting on behalf of a corporation and those bene ted by it, knowing it to
be without valid existence, are held liable as general partners.
SYLLABUS
PANGANIBAN , J : p
A partnership may be deemed to exist among parties who agree to borrow money
to pursue a business and to divide the pro ts or losses that may arise therefrom, even if it
is shown that they have not contributed any capital of their own to a "common fund." Their
contribution may be in the form of credit or industry, not necessarily cash or xed assets.
Being partners, they are all liable for debts incurred by or on behalf of the partnership. The
liability for a contract entered into on behalf of an unincorporated association or
ostensible corporation may lie in a person who may not have directly transacted on its
behalf, but reaped benefits from that contract. cda
The Case
In the Petition for Review on Certiorari before us, Lim Tong Lim assails the
November 26, 1998 Decision of the Court of Appeals in CA-GR CV 41477, 1 which
disposed as follows:
"WHEREFORE, [there being] no reversible error in the appealed decision, the
same is hereby affirmed." 2
The decretal portion of the Quezon City Regional Trial Court (RTC) ruling, which was
affirmed by the CA, reads as follows:
"WHEREFORE, the Court rules:
e. Cost of suit.
"With respect to the joint liability of defendants for the principal obligation
or for the unpaid price of nets and oats in the amount of P532,045.00 and
P68,000.00, respectively, or for the total amount of P600,045.00, this Court noted
that these items were attached to guarantee any judgment that may be rendered
in favor of the plaintiff but, upon agreement of the parties, and, to avoid further
deterioration of the nets during the pendency of this case, it was ordered sold at
public auction for not less than P900,000.00 for which the plaintiff was the sole
and winning bidder. The proceeds of the sale paid for by plaintiff was deposited
in court. In effect, the amount of P900,000.00 replaced the attached property as a
guaranty for any judgment that plaintiff may be able to secure in this case with
the ownership and possession of the nets and oats awarded and delivered by
the sheriff to plaintiff as the highest bidder in the public auction sale. It has also
been noted that ownership of the nets [was] retained by the plaintiff until full
payment [was] made as stipulated in the invoices; hence, in effect, the plaintiff
attached its own properties. It [was] for this reason also that this Court earlier
ordered the attachment bond led by plaintiff to guaranty damages to
defendants to be cancelled and for the P900,000.00 cash bidded and paid for by
plaintiff to serve as its bond in favor of defendants.
"From the foregoing, it would appear therefore that whatever judgment the
plaintiff may be entitled to in this case will have to be satis ed from the amount
of P900,000.00 as this amount replaced the attached nets and oats.
Considering, however, that the total judgment obligation as computed above
would amount to only P840,216.92, it would be inequitable, unfair and unjust to
award the excess to the defendants who are not entitled to damages and who did
not put up a single centavo to raise the amount of P900,000.00 aside from the
fact that they are not the owners of the nets and oats. For this reason, the
defendants are hereby relieved from any and all liabilities arising from the
monetary judgment obligation enumerated above and for plaintiff to retain
possession and ownership of the nets and oats and for the reimbursement of
the P900,000.00 deposited by it with the Clerk of Court.
SO ORDERED." 3 cdasia
The Facts
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered
into a Contract dated February 7, 1990, for the purchase of shing nets of various sizes
from the Philippine Fishing Gear Industries, Inc. (herein respondent). They claimed that
they were engaged in a business venture with Petitioner Lim Tong Lim, who however was
not a signatory to the agreement. The total price of the nets amounted to P532,045. Four
hundred pieces of floats worth P68,000 were also sold to the Corporation. 4
The buyers, however, failed to pay for the shing nets and the oats; hence, private
respondent led a collection suit against Chua, Yao and Petitioner Lim Tong Lim with a
prayer for a writ of preliminary attachment. The suit was brought against the three in their
capacities as general partners, on the allegation that "Ocean Quest Fishing Corporation"
was a nonexistent corporation as shown by a Certi cation from the Securities and
Exchange Commission. 5 On September 20, 1990, the lower court issued a Writ of
Preliminary Attachment, which the sheriff enforced by attaching the shing nets on board
F/B Lourdes which was then docked at the Fisheries Port, Navotas, Metro Manila. LLpr
"a) That the parties plaintiffs & Lim Tong Lim agree to have the four (4)
vessels sold in the amount of P5,750,000.00 including the shing net. This
P5,750,000.00 shall be applied as full payment for P3,250,000.00 in favor
of JL Holdings Corporation and/or Lim Tong Lim;
"b) If the four (4) vessel[s] and the shing net will be sold at a higher price
than P5,750,000.00 whatever will be the excess will be divided into 3: 1/3
Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao;
"c) If the proceeds of the sale the vessels will be less than P5,750,000.00
whatever the de ciency shall be shouldered and paid to JL Holding
Corporation by 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao." 11
The trial court noted that the Compromise Agreement was silent as to the nature of
their obligations, but that joint liability could be presumed from the equal distribution of
the profit and loss. 12
Lim appealed to the Court of Appeals (CA) which, as already stated, a rmed the
RTC.
Ruling of the Court of Appeals
In a rming the trial court, the CA held that petitioner was a partner of Chua and Yao
in a shing business and may thus be held liable as such for the shing nets and oats
purchased by and for the use of the partnership. The appellate court ruled:
"The evidence establishes that all the defendants including herein
appellant Lim Tong Lim undertook a partnership for a specific undertaking, that is
for commercial shing . . . . Obviously, the ultimate undertaking of the defendants
was to divide the pro ts among themselves which is what a partnership
essentially is . . . . By a contract of partnership, two or more persons bind
themselves to contribute money, property or industry to a common fund with the
intention of dividing the pro ts among themselves (Article 1767, New Civil Code)."
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13 cdtai
In determining whether petitioner may be held liable for the shing nets and oats
purchased from respondent, the Court must resolve this key issue: whether by their acts,
Lim, Chua and Yao could be deemed to have entered into a partnership. cdasia
Speci cally, both lower courts ruled that a partnership among the three existed
based on the following factual findings: 15
From the factual ndings of both lower courts, it is clear that Chua, Yao and Lim had
decided to engage in a shing business, which they started by buying boats worth P3.35
million, nanced by a loan secured from Jesus Lim who was petitioner's brother. In their
Compromise Agreement, they subsequently revealed their intention to pay the loan with
the proceeds of the sale of the boats, and to divide equally among them the excess or
loss. These boats, the purchase and the repair of which were nanced with borrowed
money, fell under the term "common fund" under Article 1767. The contribution to such
fund need not be cash or xed assets; it could be an intangible like credit or industry. That
the parties agreed that any loss or pro t from the sale and operation of the boats would
be divided equally among them also shows that they had indeed formed a partnership.
Moreover, it is clear that the partnership extended not only to the purchase of the
boat, but also to that of the nets and the oats. The shing nets and the oats, both
essential to shing, were obviously acquired in furtherance of their business. It would have
been inconceivable for Lim to involve himself so much in buying the boat but not in the
acquisition of the aforesaid equipment, without which the business could not have
proceeded. cdtai
Third Issue :
Validity of Attachment
Finally, petitioner claims that the Writ of Attachment was improperly issued against
the nets. We agree with the Court of Appeals that this issue is now moot and academic. As
previously discussed, F/B Lourdes was an asset of the partnership and that it was placed
in the name of petitioner, only to assure payment of the debt he and his partners owed. The
nets and the oats were speci cally manufactured and tailor-made according to their own
design, and were bought and used in the shing venture they agreed upon. Hence, the
issuance of the Writ to assure the payment of the price stipulated in the invoices is proper.
Besides, by speci c agreement, ownership of the nets remained with Respondent
Philippine Fishing Gear, until full payment thereof.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioner. Cdpr
SO ORDERED.
Melo, Purisima and Gonzaga-Reyes, JJ.,concur.
Vitug, J., pls. see concurring opinion.
Separate Opinions
VITUG, J., concurring :
Footnotes
1. Penned by J. Portia Alino-Hormachuelos; with the concurrence of JJ. Buenaventura J.
Guerrero, Division chairman, and Presbitero J. Velasco Jr., member.
15. Nos. 1-7 are from CA Decision, p. 9 (rollo, p. 33); No. 8 is from RTC Decision, p. 5 ( rollo,
p. 42); and No. 9 is from CA Decision, pp. 9-10 (rollo, pp. 33-34).
16. See Fuentes v. Court of Appeals, 268 SCRA 703, February 26, 1997.
17. Salvatierra v. Garlitos, 103 SCRA 757, May 23, 1958, per Felix, J.; citing Fay v. Noble, 7
Cushing [Mass.] 188.
18. "The liability is joint if it is not speci cally stated that it is solidary," Maramba v.
Lozano, 126 Phil 833, June 29, 1967, per Makalintal, J. See also Article 1207 of the Civil
Code, which provides: "The concurrence of two or more creditors or of two or more
debtors in one [and] the same obligation does not imply that each one of the former has
a right to demand, or that each one of the latter is bound to render, entire compliance
with the prestation. There is a solidary liability only when the obligation expressly so
states, or when the law or the nature of the obligation requires solidarity."
(2) When no partnership liability results, he is liable pro rata with the other
persons, if any, so consenting to the contract or representation as to incur liability,
otherwise separately.
When a person has been thus represented to be a partner in an existing
partnership, or with one or more persons not actual partners, he is an agent of the
persons consenting to such representation to bind them to the same extent and in the
same manner as though he were a partner in fact, with respect to persons who rely upon
the representation. When all the members of the existing partnership consent to the
representation, a partnership act or obligation results; but in all other cases it is the
joint act or obligation of the person acting and the persons consenting to the
representation .
2. All partners, including industrial ones, shall be liable pro rata with all their property and
after all the partnership assets have been exhausted, for the contracts which may be
entered into in the name and for the account of the partnership, under its signature and
by a person authorized to act for the partnership. However, any partner may enter into a
separate obligation to perform a partnership contract.
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3. Article 1824 in relation to Article 1822 and Article 1823, New Civil Code.