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FACTS:
(Illustration)
PHILIPPINE
LIM TONG PETER YAO, FISHING GEAR
LIM ANTONIO INDUSTRIES
(petitioner) requested Peter Yao CHUA Peter Yao and Antonio (PFGI)
and Antonio Chua to Chua purchased fishing
engage in commercial equipment to PFGI,
fishing with him under their so-called
corporation named
OCEAN FISHING
QUEST
Issue: Is Lim Tong Lim also liable for the debts incurred? Is Ocean Fishing Quest a corporation by
estoppel?
In this case, Ling Tong Lim, herein petitioner, requested Peter Yao and
Antonio Chua to engage in commercial fishing with him. They agreed to purchase two
fishing boats; but since they do not have the money, they borrowed from Lim Tong
Lims brother, Jesus Lim.
CASE DIGEST: CORPORATION LAW
Peter Yao and Antonio Chua then represented themselves in behalf of a so-
called corporation called Ocean Quest Fishing Corporation (Ocean Quest) and
contracted with respondent Philippine Fishing Gear Industries, Inc. (PFGI) for the
purchase of fishing nets and other fishing equipment amounting to more than
P500,000.00
Unable to pay PFGI, respondent PFGI sued Antonio Chua, Peter Yao and Lim
Tong Lim in their own names because as confirmed by the Securities and Exchange
Commission, it turned out that Ocean Quest is a non-existent corporation. Petitioner
Lim alleged that he is not liable for the debts because he was not even aware that Chua
and Yao represented themselves as a corporation, and the two acted without his
knowledge and consent.
ISSUE:
Is Lim Tong Lim liable for the debts incurred against respondent PFGI? Is the
Ocean Quest Fishing Corporation considered corporation by estoppel?
COURT RULING
The Court ruled that even if the ostensible corporate entity is proven to be
legally non-existent, a party may be estopped from denying its corporate existence.
In such case, all those who benefit from the transaction made by the
ostensible corporation, despite knowledge of its legal defects, may be held liable for
contracts they impliedly assented to or took advantage of. Clearly, under the law on
estoppel, those acting on behalf of a corporation and those benefited by it, knowing it to
be without valid existence, are still held liable as general partners.