G.R. No. 136448, 3 November 1999

FACTS:

On behalf of “Ocean Quest Fishing Corporation,” Antonio Chua and Peter Yao entered into a Contract for the purchase of fishing nets of various sizes. They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim, who however was not a signatory to the agreement. The total price of the nets amounted to P532,045. Four hundred pieces of floats worth P68,000 were also sold to the Corporation.

The buyers failed to pay for the fishing nets and the floats; hence, private respondent filed a collection suit against Chua, Yao and Petitioner 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.

ISSUE:

Whether based on a compromise agreement that Chua, Yao and Lim entered into in a separate case, that a partnership agreement existed among them.

RULING:

“Article 1767 – By the contract of partnership, two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.”

From the factual findings of both lower courts, Chua, Yao and Lim had decided to engage in a fishing business, which they started by buying boats. 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 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 indeed formed a partnership.

Moreover, the partnership extended not only to the purchase of the boat, but also to that of the nets and the floats. The fishing nets and the floats, both essential to fishing, were obviously acquired in furtherance of their business. It would have been inconceivable for Lim to involve himself so much in buying the boat but not in the acquisition of the aforesaid equipment, without which the business could not have proceeded.

Given the preceding facts, there was, among petitioner, Chua and Yao, a partnership engaged in the fishing business. They purchased the boats, which constituted the main assets of the partnership, and they agreed that the proceeds from the sales and operations thereof would be divided among them.

*Case digest by Teonilo M. Bagalanon Jr., JD-IV, Andres Bonifacio Law School, SY 2019-2020