Lim Tong Lim v. Phil. Fishing Gear Industries, Inc.

LIM TONG LIM vs. PHILIPPINE FISHING GEAR INDUSTRIES INC.

317 SCRA 728 (1999)

FACTS OF THE CASE

This case is petition for review on Certiorari. On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract dated 7 February 1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries, Inc. (PFGI). They claimed that they were engaged in a business venture with Lim Tong Lim, who however was not a signatory to the agreement. The total price of the nets amounted to P532,045. 400 pieces of floats worth P68, 000 were also sold to the Corporation.

The buyers, however, failed to pay for the fishing nets and the floats; hence, PFGI filed a collection suit against Chua, Yao and Lim Tong Lim with a prayer for a writ of preliminary attachment. The suit was brought against the three in their capacities as general partners, on the allegation that "Ocean Quest Fishing Corporation" was a nonexistent corporation as shown by a Certification from the Securities and Exchange Commission.

Instead of answering the Complaint, Chua filed a Manifestation admitting his liability and requesting a reasonable time within which to pay. He also turned over to PFGI some of the nets which were in his possession. Peter Yao filed an Answer, after which he was deemed to have waived his right to cross-examine witnesses and to present evidence on his behalf, because of his failure to appear in subsequent hearings. Lim Tong Lim, on the other hand, filed an Answer with Counterclaim and Cross claim and moved for the lifting of the Writ of Attachment. The trial court maintained the Writ, and upon motion of PFGI, ordered the sale of the fishing nets at a public auction. PFGI won the bidding and deposited with the said court the sales proceeds of P900, 000. 

On 18 November 1992, the trial court rendered its Decision, ruling in favor of PFGI and that Chua, Yao and Lim, as general partners, were jointly liable to pay PFGI. Lim appealed to the Court of Appeals (CA) which, affirmed the RTC. Hence, Lim filed the Petition for Review on Certiorari arguing that under the doctrine of corporation by estoppel, liability can be imputed only to Chua and Yao, and not to him.

ISSUE

Whether Lim should be held jointly liable with Chua and Yao under the Doctrine of Corporation by estoppel.

RULING

Yes. The Supreme Court held that although technically, it is true that petitioner did not directly act on behalf of the corporation. Still, a person who has reaped the benefits of a contract entered into by persons with whom he previously had an existing relationship is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel.