Title On appeal (CA-GR CV 41477), the Court of Appeals affirmed the RTC, holding that a

Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc. verbal partnership existed, profits and losses were to be shared equally (as
evidenced by a Compromise Agreement in Civil Case No. 1492-MN), and that all
Case Decision Date three were liable for partnership debts.
G.R. No. 136448 Nov 3, 1999 Petitioner sought certiorari in the Supreme Court to challenge (a) the existence of
partnership, (b) his liability for the nets and floats, and (c) the propriety of the
Lim, Chua, and Yao formed a fishing partnership; jointly liable for unpaid nets, floats. attachment.
Supreme Court affirmed partnership existence, enforced joint liability.
Issues:
Whether the Court of Appeals erred in finding a partnership among Lim, Chua and Yao
Jur.ph - Case Digest (G.R. No. 136448) based primarily on a Compromise Agreement executed in a separate case.
Expanded Legal Reasoning Model
Whether Lim may be held liable for the nets and floats purchased by Chua and Yao
Facts: when he did not directly transact with respondent and claimed only to be a lessor of
the fishing vessels.
Formation and Financing of the Fishing Venture
Whether the issuance and enforcement of the writ of preliminary attachment against
Lim Tong Lim, Antonio Chua and Peter Yao agreed to engage in a commercial the nets was improper.
fishing business under the name “Ocean Quest Fishing Corporation,” although no
corporation was ever validly formed. Ruling:
To finance the venture, they borrowed ₱3.25 million from Jesus Lim (petitioner’s The petition is DENIED. The Decision of the Court of Appeals is AFFIRMED, with costs
brother), using two fishing vessels (F/B Lourdes and F/B Nelson) as security; against petitioner.
petitioner’s name appeared on the titles at lender’s insistence.
Subsequent loans and vessel refurbishing expenses were likewise covered by credit Ratio:
from Jesus Lim, and additional vessels (F/B Lady Anne Mel and F/B Tracy) were Existence of Partnership
placed in petitioner’s name as security.
Under Article 1767, a partnership arises when two or more contribute money,
Purchase of Nets and Floats, Non-payment, and Attachment property or industry to a common fund with intent to share profits; contribution
need not be cash or assets but may be credit or industry.
On February 7, 1990, Chua and Yao (in the name of the nonexistent “Ocean Quest
Fishing Corporation”) ordered fishing nets totaling ₱532,045 and floats totaling RTC and CA factual findings—loan financing, vessel purchases, shared repair
₱68,000 from Philippine Fishing Gear Industries, Inc. expenses, equal sharing of profits and losses in the Compromise Agreement—are
binding under Rule 45 and establish a preexisting partnership among Lim, Chua
They failed to pay. On September 20, 1990, respondent secured a writ of
and Yao.
preliminary attachment over nets aboard F/B Lourdes, which was enforced by the
RTC sheriff. Petitioner’s Liability
The trial court later ordered the nets sold at public auction; respondent was the lone As a partner, petitioner is jointly liable for partnership obligations, including
bidder at ₱900,000, which sum was deposited with the court as substitute security. purchase of nets and floats, even if he did not sign the purchase invoices.
Trial Court Decision and Appeal Corporation-by-estoppel (Corp. Code, Sec. 21) further prevents a party who reaps
benefits from an ostensible corporation from denying liability. Lim enjoyed the use
RTC (Malabon, Branch 72) ruled that Lim, Chua and Yao were general partners
of the nets and vessel, knowing no valid corporation existed.
under Article 1767, jointly liable for the purchase price, interest, attorney’s fees,
rental and costs, but ordered petitioner to reimburse himself from the ₱900,000 Validity of Attachment
deposit.
The nets and floats were clearly partnership assets used in furtherance of the
fishing business and subject to attachment as security for the purchase price.
 Ownership remained with respondent until full payment; attachment was proper to
guarantee respondent’s claim.

Doctrine:
Partnership under the Civil Code
Article 1767: Partnership formed by contribution of money, property or industry to a
common fund for profit-sharing.
Article 1207: Joint liability arises unless solidarity is expressly stipulated.

Liability of Partners
Article 1816: All partners liable pro rata (and beyond partnership assets) for
contracts entered in partnership name by an authorized person.
Articles 1822–1825: Partners (and those representing themselves as partners) held
liable for partnership obligations and torts; apparent agents are treated as partners
vis-à-vis third parties who rely on the representation.

Corporation by Estoppel
Corp. Code Sec. 21: Persons acting as or dealing with an ostensible corporation are
liable as general partners.
Prevents escape from obligations by denying corporate existence when one has
assumed benefits or obligations of that entity.

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