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Lim Tong Lim vs. Philippine Fishing Gear Industries

The Supreme Court ruled that there was a partnership between Chua, Yao, and Lim based on a compromise agreement. The agreement showed that the three decided to engage in a fishing business together by buying boats financed by a loan from Lim's brother, with the intention of paying off the loan from proceeds of boat sales and dividing any excess or loss equally. As partners agreeing to borrow money and divide profits/losses from a business, all were liable for debts incurred on behalf of the partnership under the Civil Code, even if one did not directly transact but benefited from the contract.

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133 views1 page

Lim Tong Lim vs. Philippine Fishing Gear Industries

The Supreme Court ruled that there was a partnership between Chua, Yao, and Lim based on a compromise agreement. The agreement showed that the three decided to engage in a fishing business together by buying boats financed by a loan from Lim's brother, with the intention of paying off the loan from proceeds of boat sales and dividing any excess or loss equally. As partners agreeing to borrow money and divide profits/losses from a business, all were liable for debts incurred on behalf of the partnership under the Civil Code, even if one did not directly transact but benefited from the contract.

Uploaded by

Valora France Miral Aranas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1. Lim Tong Lim vs.

Philippine Fishing Gear Industries


November 3, 1999, GR No. 136448

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 fishing nets of various sizes from the
Philippine Fishing Gear Industries, Inc. Chua and Yao claimed that they were engaged in a
business venture with Petitioner Lim Tong Lim, who however was not a signatory to the
agreement, financed by a loan secured from Jesus Lim who was petitioner's brother.

The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondent
filed a collection suit against the three: Chua, Yao and Petitioner Lim Tong Lim with a prayer for
a writ of preliminary attachment.

Respondent’s Argument: : 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 Certification from the Securities and Exchange Commission. Chua, Yao and Lim,
as general partners, were jointly liable to pay respondent.

Petitioner’s Argument: Lim controverts the CA finding that a partnership existed based on the
Compromise Agreement alone, disclaims any direct participation and argues that he was a lessor,
not a partner. Lim further argues that under the doctrine of corporation by estoppel, liability can
be imputed only to Chua and Yao, and not to him.

The RTC and CA lower ruled that evidence showed that there existed a partnership among Chua,
Yao and Lim, pursuant to Article 1767 of the Civil Code. Hence, this petition for review under
Rule 45.

Issue: WON there is partnership existed based based on a compromise agreement.

Ruling:

Yes. It is clear that Chua, Yao and Lim had decided to engage in a fishing business, which they
started by buying boats worth P3.35 million, financed by a loan secured from Jesus Lim who was
petitioner's brother.

The Agreement was but an embodiment of the relationship extant among the parties prior to its
execution.
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.

Art. 1767 — By the 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 profits among
themselves.
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 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 fixed 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.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.

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