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

FACTS

The case originated from a transaction where Antonio Chua and Peter Yao, on behalf of a purported partnership, purchased fishing nets from respondent Philippine Fishing Gear Industries, Inc. (PFGI). Petitioner Lim Tong Lim, while not directly signing the contracts of purchase, was established to have been involved with Chua and Yao in a joint venture for the operation of fishing boats. This joint venture was deemed by the Court to constitute a de facto partnership. When the partnership failed to pay for the fishing nets, PFGI filed a complaint for a sum of money against Chua, Yao, and Lim Tong Lim.
The trial court held all three solidarily liable. On appeal, the Court of Appeals affirmed the decision. Lim Tong Lim elevated the case to the Supreme Court, contending that he should not be held liable for the contracts executed solely by Chua and Yao, as he was neither a signatory to the agreements nor a partner in the venture that contracted with PFGI.

ISSUE

Whether petitioner Lim Tong Lim can be held liable as a general partner for the obligations incurred by his associates, Antonio Chua and Peter Yao, in the course of the partnership’s business.

RULING

Yes, Lim Tong Lim is liable as a general partner. The ponencia, concurred with by Justice Vitug, ruled that the association among Chua, Yao, and Lim constituted a de facto partnership. Justice Vitug’s concurring opinion elucidates the legal basis for the liability of general partners. He explains that under Article 1825 of the Civil Code, a person who by words or conduct represents himself, or consents to being represented, as a partner in an existing partnership or with persons not actual partners, becomes liable as an agent of those consenting to the representation to third parties who rely on it. This makes him liable as though he were an actual partner.
Furthermore, the liability of general partners is governed by Article 1816, which states that all partners are liable pro rata with their private property after partnership assets are exhausted for contracts entered into in the partnership’s name and under its signature by an authorized person. Justice Vitug clarifies that this rule is construed alongside other provisions, such as Articles 1822 and 1823, which can impose solidary liability on partners under specific circumstances. These include instances where a partner, acting in the ordinary course of business or with authority, causes loss or injury to a third person, or where money or property received by the partnership or a partner is misapplied. The underlying principle is to protect innocent third persons who transact with the partnership. Since Chua and Yao acted within the scope of the partnership’s business in procuring the fishing nets, and Lim Tong Lim was part of the de facto partnership, all three incurred the liabilities of general partners for the unpaid obligation to PFGI.