Civil Law,  Legally Yours

Lim Tong Lim v. Philippine Fishing Gear Industries

Lim Tong Lim v. Philippine Fishing Gear Industries

G.R. No. 136448; November 3, 1999


Chua and Yao, on behalf of “Ocean Quest Fishing Corporation” entered into a contract with Philippine Fishing Gears Inc. for the purchase of various fishing nets, without Lim, to whom they were engaged in a business venture with, not being a signatory to the agreement. Ultimately, however, they were unable to fully pay for the fishing nets. Thus, the respondent filed for a writ of attachment against the three since Ocean Quest Fishing Corporation was a nonexistent corporation. Lim, however, contested that he should not be liable since there was no partnership formed. The court, however, averred that there was a partnership formed as revealed by a compromise agreement executed by the three which indicates that a loan was executed between the three and Lim’s brother to purchase boats and fishing nets with the intention to pay the loan with the proceeds of the sale of the boats and to divide equally the excess among the three.  Lim, nevertheless, maintains that he was in fact a lessor on the basis of a contract of lease executed between him and Chua and Yao, and that he was the owner of the boats as shown by the registration papers.


Was a partnership formed?


Yes. The Court held that a partnership was indeed formed on the basis of the compromise agreement because 1) the three are engaged in a fishing business, which they started by buying boats financed by a loan; 2) the purchase and repair of the boats were financed with borrowed money. The Court stresses that the contribution to such fund need not be cash or fixed assets, but may be intangible like credit or industry. Furthermore, the argument of Lim as being merely a lessor cannot be sustained for having defied logic since no lessor would sell his own property to pay a debt executed by another. Thus, the implication is that there was an existing partnership between the three, notwithstanding the fact that the boat was named only after Lim. The boat is said to be attributed to the partnership, since it is not uncommon to register properties acquired from the loan in the name of the person the lender trusts which, in this case, is the lender’s brother. 

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