LIM TONG LIM vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC.

G.R. No. 136448

November 3, 1999

FACTS:
It was established that Lim Tong Lim requested Peter Yao to engage in
commercial fishing with him and one Antonio Chua. The three agreed to
purchase two fishing boats but since they do not have the money they
borrowed from one Jesus Lim (brother of Lim Tong Lim). They again borrowed
money and they agreed to purchase fishing nets and other fishing
equipments. Now, Yao and Chua represented themselves as acting in behalf
of Ocean Quest Fishing Corporation (OQFC) they contracted with Philippine
Fishing Gear Industries (PFGI) for the purchase of fishing nets amounting to
more than P500k.
They were however unable to pay PFGI and so they were sued in their
own names because apparently OQFC is a non-existent corporation. Chua
admitted liability and asked for some time to pay. Yao waived his rights. Lim
Tong Lim however argued that hes not liable because he was not aware that
Chua and Yao represented themselves as a corporation; that the two acted
without his knowledge and consent.

ISSUE: Whether or not Lim Tong Lim is liable.

HELD:
Yes. From the factual findings of both lower courts, 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. 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. These boats, the purchase
and the repair of which were financed with borrowed money, fell under the

term common fund under Article 1767. The contribution to such fund need
not be cash or fixed assets; it could be an intangible like credit or industry.
That the parties agreed that any loss or profit from the sale and operation of
the boats would be divided equally among them also shows that they had
indeed formed a partnership.
Lim Tong Lim cannot argue that the principle of corporation by
estoppels can only be imputed to Yao and Chua. Unquestionably, Lim Tong
Lim benefited from the use of the nets found in his boats, the boat which has
earlier been proven to be an asset of the partnership. Lim, Chua and Yao
decided to form a corporation. Although it was never legally formed for
unknown reasons, this fact alone does not preclude the liabilities of the three
as contracting parties in representation of it. Clearly, under the law on
estoppel, those acting on behalf of a corporation and those benefited by it,
knowing it to be without valid existence, are held liable as general
partners.