G.R. No. 136448 , November 3, 1999
Lim Tong Lim, petitioner, vs. Philippine Fishing Gear Industries, Inc., respondent.

FACTS

Respondent Philippine Fishing Gear Industries, Inc. sold fishing nets and floats to Antonio Chua and Peter Yao, who claimed to be acting on behalf of “Ocean Quest Fishing Corporation.” The buyers failed to pay the total purchase price. Respondent filed a collection suit against Chua, Yao, and petitioner Lim Tong Lim, alleging they were general partners because “Ocean Quest Fishing Corporation” was a non-existent entity per SEC certification. The trial court issued a writ of preliminary attachment on the nets. At auction, respondent itself bought the nets for P900,000, which was deposited with the court.
The trial court found that Chua, Yao, and Lim Tong Lim had formed a partnership for a fishing venture, despite the absence of a formal partnership agreement or Lim’s direct signature on the supply contract. It held them jointly liable for the debt but ruled that the judgment award should be satisfied from the P900,000 auction deposit, relieving the partners of further personal monetary liability. Both the Court of Appeals and, ultimately, the Supreme Court affirmed the finding of partnership liability.

ISSUE

The core issue is whether Lim Tong Lim, who did not sign the contract for the purchase of fishing nets, can be held jointly liable with his co-venturers for the unpaid obligation.

RULING

Yes, Lim Tong Lim is jointly liable. The Supreme Court ruled that a partnership existed among Chua, Yao, and Lim based on their actions and objectives. The elements of a partnership—an agreement to contribute money, property, or industry to a common fund with the intention of dividing profits—were present. The parties had agreed to borrow money to purchase fishing boats and nets for a business venture, with an understanding to share profits or losses. A partnership can exist even if the partners contribute no capital to a common fund; their contribution can be in the form of credit or industry.
Since a partnership was constituted, the three individuals were considered general partners. Consequently, under the Civil Code, all partners are liable solidarily with the partnership for everything chargeable to the partnership. A partner who enters into a contract in the name and for the benefit of the partnership binds all the partners. Here, Chua and Yao acted on behalf of the partnership when they contracted with respondent. Lim Tong Lim cannot escape liability by claiming he was not a signatory, as he reaped the benefits of the contract—the nets were used in the partnership’s fishing venture. The law will not permit a partner to benefit from a partnership transaction while avoiding its concomitant liabilities. Therefore, Lim is jointly and severally liable with his partners for the partnership debt.