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

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
Petitoner: Lim Tong Lim
indeed formed a partnership.
Respondent: Philippine Fishing Gear Industries, Inc.
- 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
DOCTRINE: Clearly, under the law on estoppel, those acting on behalf of a
earlier been proven to be an asset of the partnership. Lim, Chua and Yao
corporation and those benefited by it, knowing it to be without valid existence, are
decided to form a corporation. Although it was never legally formed for
held liable as general partners.
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
FACTS:
by it, knowing it to be without valid existence, are held liable as general
- It was established that Lim Tong Lim requested Peter Yao to engage in partners.
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.
- Contention of the petitioner: Lim Tong Lim however argued that he’s 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