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

Case Summary (G.R. No. 136448)

Petitioner

Lim contested liability for unpaid nets and floats, denied direct participation in purchasing the goods, claimed to be a lessor (owner/lessor of F/B Lourdes) rather than a partner, and sought relief from the preliminary attachment of the nets.

Respondent

Philippine Fishing Gear Industries sued for collection of the unpaid purchase price for nets and floats, obtained a writ of preliminary attachment over the nets aboard F/B Lourdes, and eventually became the highest bidder at the public auction of the attached property.

Key Dates and Procedural Posture

Contract for nets dated February 7, 1990; writ of preliminary attachment issued September 20, 1990; trial court decision rendered November 18, 1992 finding joint liability; Court of Appeals decision affirmed on November 26, 1998; petition for review to the Supreme Court resolved by decision affirmed on November 3, 1999. The case proceeded under Rule 45 review to the Supreme Court.

Applicable Law

Governing constitutional framework: 1987 Philippine Constitution (decision date post-1990). Controlling statutory and civil law authorities cited: Article 1767 (contract of partnership), Article 1207 (solidary liability principles), Article 1816 and related partnership provisions (partner liability), Article 1825 (representation as partner), Section 21, Corporation Code (corporation by estoppel), Rule 45 (scope of petition for review). Precedents and authorities relied upon by the courts include Fuentes v. Court of Appeals, Salvatierra v. Garlitos, Maramba v. Lozano, and Alonso v. Villamor as cited in the record.

Essential Facts Found by the Lower Courts

The trial court and Court of Appeals made consistent factual findings: Lim invited Yao (a commercial fisherman) to join a venture in which Chua was already Yao’s partner; the three agreed verbally to acquire two fishing boats for P3.35 million; they borrowed P3.25 million (and later an additional P1 million) from Jesus Lim (petitioner’s brother) to finance the purchase and refurbishment; boats were purchased with title arrangements and used as security for the loans; refurbishing and operating expenses were to be borne by Chua and Yao; Yao and Chua purchased nets and floats from respondent on behalf of “Ocean Quest Fishing Corporation” (an ostensible but non-existent corporation); Chua and Yao later sued Lim in a separate case which produced a Compromise Agreement dividing proceeds or losses equally among the three; nets and floats remained the property of respondent until paid.

Procedural History and Trial Court Decretal Relief

Respondent obtained a writ of preliminary attachment which resulted in the shipping and attachment of the nets aboard F/B Lourdes. After refusal or failure to pay, the trial court ordered sale of the attached nets; respondent was the sole winning bidder and deposited P900,000 in court. The trial court found the three defendants jointly liable for the unpaid price and interest, but returned the proceeds to plaintiff and relieved defendants of monetary liability in view of the sale proceeds exceeding the computed monetary judgment; plaintiff retained ownership and possession of the nets.

Issues Presented to the Supreme Court

Whether a partnership existed among Lim, Chua and Yao such that Lim can be held liable for the nets and floats purchased by Chua and Yao; 2) Whether Lim’s status as non-signatory, alleged lessor, or non-participant bars imputation of liability; and 3) Whether the preliminary attachment of petitioner’s goods was proper.

Supreme Court Ruling on Existence of Partnership

The Supreme Court affirmed the lower courts’ factual findings under Article 1767 that Lim, Chua and Yao formed a partnership for a commercial fishing undertaking. The courts found contributions in the form of credit and industry (not exclusively cash or fixed assets), joint participation in acquisition and operation of the boats, shared financing and exposure to profit and loss, and the Compromise Agreement demonstrating agreement to divide excess or deficiency equally. Under Rule 45 standards, the factual findings of the RTC and CA are binding absent applicable exceptions; petitioner’s challenges improperly sought to relitigate factual findings beyond the scope of Rule 45.

Supreme Court Analysis on Petitioner’s Status as Lessor vs. Partner

The Court rejected Lim’s characterization of himself merely as lessor. The sale and agreed disposition of the boats to satisfy shared liabilities, the agreed division of proceeds and loss-sharing, and the manner in which titles were held as security for partnership debt were held to evidence a partnership. The Court reasoned that it is implausible for a true lessor to consent to sale of his registered vessels to satisfy liabilities he did not incur; such conduct supported the conclusion that the vessels were partnership assets notwithstanding registration in Lim’s name.

Corporation-by-Estoppel and Joint Liability

The Court applied Section 21 of the Corporation Code and the doctrine of corporation by estoppel. Because the parties represented themselves or acted as if operating under an ostensible corporation (“Ocean Quest Fishing Corporation”) and third parties (respondent) dealt with or were affected by that representation, those who acted for or benefited from the ostensible corporation could be held liable as partners. Although Lim did not sign the purchase contracts and did not directly transact with respondent, he benefited from the nets used by the vessel that formed part of the partnership assets; hence, liability was imputable under the doctrine and related partnership liability rules. The Court reiterated that those who receive benefits from such transactions, k

Case Syllabus (G.R. No. 136448)

Procedural History

Petition for Review on Certiorari filed by Lim Tong Lim assails the November 26, 1998 Decision of the Court of Appeals in CA‑GR CV 41477, which affirmed the Quezon City Regional Trial Court (RTC) decision.
RTC decretal portion (as affirmed) awarded: recognition of plaintiff’s writ of preliminary attachment (issued September 20, 1990); joint liability of defendants for unpaid purchase price and floats; 12% interest per annum computed on specified invoices; attorney’s fees (P50,000) and appearance fees (P8,500); storage/rental charges (P65,000) from attachment to date of auction sale; costs of suit.
RTC ordered public auction of attached nets to avoid deterioration; Philippine Fishing Gear Industries, Inc. (respondent) was the sole and highest bidder at P900,000 and deposited proceeds with the court; the P900,000 thus replaced the attached property as guarantee for any judgment.
Because the total computed judgment obligation (P840,216.92) was less than the P900,000 auction proceeds and because defendants (Chua and Yao) were not owners nor put up funds, RTC relieved defendants from monetary liability and allowed plaintiff to retain possession and ownership of nets and floats and to be reimbursed the P900,000.
Court of Appeals affirmed the RTC decision; petitioner brought the case to the Supreme Court under Rule 45. The petition was deemed submitted after memoranda were filed.

Facts

On February 7, 1990, Antonio Chua and Peter Yao, on behalf of “Ocean Quest Fishing Corporation,” entered into a Contract for the purchase of fishing nets of various sizes from Philippine Fishing Gear Industries, Inc.; total price of nets was P532,045 and 400 floats worth P68,000 were also sold.
The buyers failed to pay; respondent filed a collection suit against Chua, Yao and Lim Tong Lim, alleging Ocean Quest Fishing Corporation was nonexistent (supported by an SEC Certification) and sued the three as general partners with prayer for a writ of preliminary attachment.
On September 20, 1990, RTC issued a Writ of Preliminary Attachment; sheriff attached the nets on board F/B Lourdes docked at Fisheries Port, Navotas.
Chua filed a Manifestation admitting liability and requesting time to pay; he returned some nets. Yao filed an Answer but failed to appear later and waived rights to cross-examine and present evidence. Lim filed an Answer with Counterclaim and Crossclaim and moved to lift the writ.
RTC maintained the writ and ordered sale of the nets; respondent won the bidding (P900,000) and deposited proceeds.
On November 18, 1992, RTC ruled that Philippine Fishing Gear Industries was entitled to the writ and that Chua, Yao and Lim, as general partners, were jointly liable to pay respondent.
RTC based partnership finding on witness testimony and a Compromise Agreement executed by the three in Civil Case No. 1492‑MN (filed by Chua and Yao against Lim) which settled claims for nullity of documents, reformation of contracts, ownership of boats, injunction, and damages.
The Compromise Agreement provided: (a) sale of four vessels (including fishing nets) for P5,750,000 applied as full payment for P3,250,000 in favor of JL Holdings Corporation and/or Lim Tong Lim; (b) any excess over P5,750,000 to be divided equally (1/3 each) among Lim, Chua and Yao; (c) any deficiency below P5,750,000 to be shouldered equally (1/3 each).
Lower courts found additional facts (from CA and RTC): petitioner requested Yao (engaged in commercial fishing) to join him; after meetings Lim, Chua and Yao agreed verbally to acquire two fishing boats (F/B Lourdes and F/B Nelson) for P3.35 million; they borrowed P3.25 million from Jesus Lim (petitioner’s brother) to finance purchase; CMF Fishing Corporation executed Deed of Sale over the boats in favor of petitioner as security for the loan; refurbishing and related expenses to be shouldered by Chua and Yao; subsequent loan of P1 million from Jesus Lim secured by check and ownership papers of two other boats were entrusted to petitioner; Yao and Chua bought nets from respondent on behalf of “Ocean Quest Fishing Corporation”; Civil Case No. 1492‑MN was filed and later settled by the Compromise Agreement.

Issues Presented

Whether the Court of Appeals erred in holding, based on a Compromise Agreement in a separate case, that a partnership agreement existed among Chua, Yao and petitioner Lim.
Whether petitioner can be held liable given that only Chua represented that he was acting for Ocean Quest Fishing Corporation when the nets were purchased.
Whether the trial court improperly ordered seizure and attachment of petitioner Lim’s goods (the nets).

Questions for Resolution

Did the acts and agreements of Lim, Chua and Yao establish a partnership under Article 1767 of the Civil Code?
Can petitioner be imputed joint liability for debts incurred for the partnership even if he did not directly transact with respondent?
Was the issuance and enforcement of the Writ of Preliminary Attachment against the nets valid under the circumstances?

Supreme Court Ruling (Disposition)

The Petition for Review is DENIED; the Court of Appeals decision is AFFIRMED.
Costs assessed against petitioner.
The Court concluded that the factual findings of the RTC and CA supporting the existence of a partnership among Lim, Chua and Yao are binding under Rule 45 absent cogent proof of an exception.

Reasoning — Existence of Partnership; Petitioner’s Liability

Article 1767 (quoted by the Court): partnership arises where two or more persons bind themselves to contribute money, property or industry to a common fund with the intention of dividi