Case Summary (G.R. No. 162894)
Applicable Law
• 1987 Philippine Constitution
• New Civil Code, Article 1767 (Partnership)
• Corporation Code, Section 21 (Corporation by Estoppel)
• Rules of Court, Rule 45 (Scope of Petition for Review)
Transaction and Failure to Pay
On February 7, 1990, respondent sold fishing nets worth ₱532,045 and floats worth ₱68,000 to “Ocean Quest Fishing Corporation.” The buyers defaulted on payment, prompting respondent to file a collection suit against Chua, Yao, and Lim as general partners, and to secure a writ of preliminary attachment.
Issuance of Writ of Preliminary Attachment
The Quezon City RTC issued the writ on September 20, 1990, attaching the nets aboard F/B Lourdes at Navotas Fisheries Port. Chua admitted liability and surrendered some nets; Yao defaulted by nonappearance; Lim answered with counterclaim and sought lifting of the attachment.
Auction of Attached Assets
To prevent deterioration, the court ordered public auction of the attached nets. Respondent was the sole bidder at ₱900,000, which was deposited in court in lieu of the attachment bond.
Trial Court’s Decision
On November 18, 1992, the RTC:
- Declared Chua, Yao, and Lim jointly liable as partners.
- Awarded respondent ₱600,045 (principal), accrued interest, attorney’s fees, storage charges, and costs.
- Ordered satisfaction from the ₱900,000 deposit and directed refund of any excess to petitioner.
Court of Appeals Ruling
On November 26, 1998, the CA affirmed the RTC, holding that Lim, Chua, and Yao formed a partnership under Article 1767. The CA relied on:
– Oral agreements to acquire and operate boats financed by loans.
– A Compromise Agreement dividing equally any profit or loss from vessel sales.
– The joint purchase and use of nets and floats for the fishing business.
Issues for Supreme Court Review
I. Whether a partnership existed among Lim, Chua, and Yao based on the Compromise Agreement and related facts.
II. Whether Lim, not a signatory to the purchase invoices, could be held liable.
III. Whether the attachment of nets aboard F/B Lourdes was proper.
Analysis on Existence of Partnership
Under Rule 45, the CA’s factual findings are binding absent clear error. Both lower courts found:
- A verbal agreement among the three to engage in a fishing venture.
- Loans secured by petitioner’s brother to finance vessel acquisition.
- Equal sharing of profits or losses per the Compromise Agreement.
Contributions included industry and credit, not merely capital. These facts satisfy Article 1767’s definition of partnership.
Analysis on Petitioner’s Partner Liability
Lim’s status as lessor is contradicted by his consent to vessel sale, the equal sharing of proceeds, and the use of loan-secured assets. Registering boats in Lim’s name to secure financing does not negate partnership; rather, it reflects the common-fund character of the enterprise.
Application of Corporation by Estoppel
Section 21 of the Corporation Code bars denial of liability by those who act on behalf of or benefit from an ostensible corporation
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Facts
- On February 7, 1990, Antonio Chua and Peter Yao, representing “Ocean Quest Fishing Corporation” (a nonexistent entity), entered into an agreement with Philippine Fishing Gear Industries, Inc. for the purchase of fishing nets worth ₱532,045.00 and floats worth ₱68,000.00. Lim Tong Lim was not a signatory.
- Buyers failed to pay; respondent filed a collection suit against Chua, Yao, and Lim in their capacities as general partners and prayed for a writ of preliminary attachment, alleging the corporation did not exist per SEC certification.
- On September 20, 1990, the RTC issued a writ of preliminary attachment and the sheriff attached the nets aboard F/B Lourdes docked in Navotas.
- Chua admitted liability, surrendered some nets and requested time to pay; Yao answered then defaulted; Lim filed an answer with counterclaim and moved to lift the attachment.
- The RTC maintained the writ, ordered nets sold at public auction; respondent bid ₱900,000.00 and deposited proceeds with the court.
- On November 18, 1992, the RTC held Chua, Yao, and Lim jointly liable as general partners for unpaid purchase price, interest, attorney’s fees, storage charges, and costs; it relieved defendants from personal liability beyond the ₱900,000.00 deposit and cancelled the attachment bond.
- The Court of Appeals (CA) in CA-GR CV 41477 affirmed the RTC’s decision on November 26, 1998.
- Lim sought review before the Supreme Court under Rule 45, raising questions of law only.
Procedural Posture
- RTC, Quezon City Branch: Decision dated November 18, 1992, finding a partnership and ordering joint liability but limiting recovery to auction proceeds.
- CA, Third Division: Decision dated November 26, 1998, G.R. No. 136448-CA, affirming the RTC in toto.
- SC: Petition for Review on Certiorari filed by Lim; deemed submitted August 10, 1999; decision promulgated November 3, 1999.
Factual Findings of Partnership
- Lim recruited Yao (already partnered with