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Case Digest - G.R. No. 136448 - Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc.

The Supreme Court affirmed the existence of a partnership among Lim, Chua, and Yao, holding them jointly liable for debts arising from the purchase of fishing nets and floats. Despite Lim not being a signatory to the contract, evidence showed his involvement in the partnership, leading to the conclusion that he benefited from the venture and was therefore liable. The court upheld the issuance of a writ of preliminary attachment against Lim's assets to secure the debt owed to Philippine Fishing Gear Industries.

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Janine Mae Heyasa Gabor
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16 views5 pages

Case Digest - G.R. No. 136448 - Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc.

The Supreme Court affirmed the existence of a partnership among Lim, Chua, and Yao, holding them jointly liable for debts arising from the purchase of fishing nets and floats. Despite Lim not being a signatory to the contract, evidence showed his involvement in the partnership, leading to the conclusion that he benefited from the venture and was therefore liable. The court upheld the issuance of a writ of preliminary attachment against Lim's assets to secure the debt owed to Philippine Fishing Gear Industries.

Uploaded by

Janine Mae Heyasa Gabor
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Title

Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc.

Case Decision Date


G.R. No. 136448 Nov 3, 1999

Lim, Chua, and Yao formed a fishing partnership; jointly liable for unpaid nets,
floats. Supreme Court affirmed partnership existence, enforced joint liability.

Jur.ph - Case Digest (G.R. No. 136448)


Reasoning Model - Advanced

Facts:

Parties and Transaction Background


On February 7, 1990, Antonio Chua and Peter Yao, representing "Ocean Quest
Fishing Corporation," entered into a contract with Philippine Fishing Gear
Industries, Inc. for the purchase of fishing nets at a price of P532,045 and 400
pieces of floats worth P68,000.
Although petitioner Lim Tong Lim was not a signatory to the contract,
evidence later showed that he was involved in the business venture with Chua
and Yao.

Proceedings and Lower Court Rulings


Non-payment by the buyers led to Philippine Fishing Gear Industries filing a
collection suit against Chua, Yao, and Lim, seeking a writ of preliminary
attachment.
On September 20, 1990, the lower court issued the writ, resulting in the
attachment of the fishing nets aboard F/B Lourdes at Fisheries Port, Navotas.
Subsequent pleadings showed differing responses:
Chua admitted his liability and requested more time to pay while turning over
some nets.
Peter Yao filed an answer but later waived his rights to cross-examination and
evidence by failing to attend further hearings.
Lim Tong Lim filed an answer with counterclaims and motions seeking the
lifting of the attachment.
The Quezon City Regional Trial Court ruled in favor of Philippine Fishing Gear
Industries, ordering that the attached nets be sold at public auction not below
P900,000, which was bid and paid by the plaintiff.
The Court of Appeals (CA) later affirmed the RTC decision, concluding that the
parties (Lim, Chua, and Yao) were in fact general partners and held jointly
liable for the contract obligations.

Formation of the Partnership and Business Undertaking


Evidence presented by the lower courts established that a partnership existed
among Lim, Chua, and Yao, supported by:
Multiple meetings and joint decisions to engage in a fishing business that
involved both the acquisition of boats and essential equipment (fishing nets
and floats).
Financing of the venture through loans — notably, a P3.25 million loan
extended by Jesus Lim (Lim’s brother) for the purchase of boats, and a
subsequent loan of P1 million secured by a check.
A Compromise Agreement executed in a separate civil case (Civil Case No.
1492-MN) which delineated the sharing of profits and losses among the three,
thereby evidencing their common fund and mutual interest.
The Compromise Agreement, although silent on the precise nature of
obligations, was interpreted by the courts as reflecting an agreement to share
both profits and losses, which is typical of a partnership arrangement.
Additionally, petitioner Lim’s involvement extended beyond any mere
financial or property interest; his participation in the constructive sale of the
boats and equipment confirmed his role as a partner in the fishing venture.

Petitioner’s Contentions and Arguments


Petitioner Lim contended that:
The CA erred in holding that a partnership existed solely on the basis of the
Compromise Agreement.
He was not involved in the negotiation or execution of the purchase of the
nets, arguing that only Chua had represented that he was acting for the Ocean
Quest Fishing Corporation.
His relationship with Chua and Yao was that of a lessor rather than a partner,
as evidenced by a separate Contract of Lease dated February 1, 1990, involving
the fishing boat F/B Lourdes.
The issuance of the writ of preliminary attachment was improper, particularly
considering that his assets were used solely as security.
The lower courts, after reviewing the entire history of transactions and
agreements, found these arguments unpersuasive and reaffirmed the
existence of an operational partnership.

Issue:

Whether a valid partnership existed among Lim, Chua, and Yao, thereby
imposing joint liability for the debts arising from the purchase of fishing nets
and floats.
Sub-issue: Whether the evidences—including the conduct of the parties and
the Compromise Agreement—sufficiently establish a partnership under
Article 1767 of the Civil Code.

Whether petitioner Lim’s status as a non-signatory or as a purported lessor


exempts him from the joint liability that arises from his involvement in the
contractual undertakings of the partnership.

Whether the doctrine of corporation by estoppel applies, thereby including Lim


in the liability even if the ostensible corporation (or unincorporated association)
was not legally formed.

Whether the issuance and enforcement of the writ of preliminary attachment


against the fishing nets (and by extension Lim’s assets) was proper under the
circumstances of the case.

Ruling:

The petition was denied, and the decision of the Court of Appeals was affirmed.
The factual findings of both the RTC and the CA, which established that Lim,
Chua, and Yao had entered into a partnership, were upheld.
Petitioner Lim was held jointly liable with his partners for the unpaid
purchase price of the fishing nets and floats.

The CA’s determination that the Compromise Agreement, taken together with the
other facts of the case, evidenced the existence of a partnership was supported.
The court noted that contributions to the common fund may be in cash or
such intangible forms as credit or industry.
The decision clarified that even though Lim did not directly transact with
Philippine Fishing Gear Industries, his benefit from and participation in the
partnership rendered him liable.

The issuance of the writ of preliminary attachment and the subsequent public
auction sale of the nets were found proper in securing the debt owed.

Ratio:

The crux of the Court’s reasoning is found in Article 1767 of the Civil Code, which
states that a partnership is formed when two or more persons agree to
contribute money, property, or industry to a common fund with the intention of
dividing profits or losses.
This definition does not require the contribution to be strictly cash; it may
include credit or even industry, as evidenced by the financing arrangements
in this case.

The equal sharing of profits and losses, as laid out in the Compromise
Agreement, corroborated the existence of a partnership, thus creating joint
liability among the partners.
The fact that the business venture involved borrowing money and using
partnership assets to secure loans further solidified the partnership nature of
the relationship.

Application of the doctrine of corporation by estoppel further reinforced that


those who benefit from and represent an unincorporated or ostensible entity are
bound by its obligations.
Even though petitioner Lim did not directly sign the contracts for the
purchase of the nets and floats, he reaped the benefits from the venture and is
thereby estopped from denying his liability.

The decision underlines that technicalities regarding formal incorporation or the


delineation between lessor and partner roles cannot be used to evade substantive
obligations arising from the actual business relationship and conduct of the
parties.

Doctrine:

Partnership Doctrine
Under Article 1767 of the Civil Code, a partnership is created when parties
agree to contribute to a common fund for the purpose of sharing both profits
and losses.
Contributions may take the form of money, property, credit, or industry,
underscoring that not all contributions are strictly financial.

Joint and Several Liability of Partners


In a general partnership, all members are liable for obligations incurred by
the partnership, including debts arising from contracts entered into in its
name.
This joint liability applies even if a partner is not a direct signatory to the
contract but has benefited from the partnership’s activities.

Doctrine of Corporation by Estoppel


The doctrine holds that even if an entity (such as an unincorporated
association) is not legally formed, those who represent it or benefit from its
operations cannot later deny its existence to avoid liability.
This principle ensures that parties acting on behalf of or in benefit of the
ostensible corporation are treated as having the responsibilities of a duly
incorporated entity.

Evidentiary and Public Policy Considerations


Courts are mandated to assess the totality of the circumstances, including the
conduct of the parties, the terms of agreements, and the nature of the
business venture, rather than relying solely on isolated contractual
documents.
The overarching public policy is that justice must prevail over rigid
formalities, ensuring that parties who benefit from the arrangement cannot
evade their obligations by resorting to technical defenses.

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