FACTS:

In this case, Antonio Chua and Peter Yao entered into a contract with Philippine Fishing Gear Industries, Inc. for the purchase of fishing nets and floats on behalf of "Ocean Quest Fishing Corporation." Lim Tong Lim, although not a signatory to the agreement, was claimed to be engaged in a business venture with Chua and Yao. However, the buyers failed to pay for the fishing nets and floats. As a result, the respondent filed a collection suit against Chua, Yao, and Lim with a prayer for a writ of preliminary attachment. The lower court issued the writ, and the sheriff attached the fishing nets on board F/B Lourdes, which was docked at the Fisheries Port in Navotas, Metro Manila.

The case involved a dispute over the liability for fishing nets and floats purchased by the partnership composed of Lim, Chua, and Yao. Chua admitted liability and turned over some of the nets in his possession. Peter Yao filed an Answer but later waived his right to cross-examine witnesses and present evidence due to his failure to appear in subsequent hearings. Lim filed an Answer with Counterclaim and Crossclaim and moved for the lifting of the Writ of Attachment, but the trial court maintained the Writ. The trial court ruled that a partnership existed among Lim, Chua, and Yao based on witness testimonies and a Compromise Agreement executed by the three in a separate case. The Compromise Agreement provided for the sale of vessels and fishing nets, with the proceeds to be divided equally among them. The trial court ruled that the joint liability of the partners could be presumed from the equal distribution of profits and loss. Philippine Fishing Gear Industries won the bid for the fishing nets and deposited the sales proceeds with the court. Lim appealed to the Court of Appeals, which affirmed the decision of the trial court. Lim then filed a petition before the Supreme Court to reverse the decision.

ISSUES:

1. Existence of a Partnership Did a partnership exist among Lim, Chua, and Yao based on the compromise agreement and their subsequent actions?

2. Petitioner's Liability Should Lim be held liable for the fishing nets purchased by Chua and Yao?

3. Validity of Attachment Was the issuance of the Writ of Attachment against the nets proper?

RULING:

1. Existence of a Partnership Yes, a partnership existed among Lim, Chua, and Yao based on their actions and the factual findings by the lower courts, which satisfy the requirements under Article 1767 of the Civil Code.

2. Petitioner's Liability Yes, Lim is liable for the fishing nets. The partnership extended to the purchase of the necessary equipment, including the fishing nets and floats, as they were integral to the fishing business from which Lim benefitted.

3. Validity of Attachment The issuance of the Writ of Attachment was proper, given that the nets were part of the fishing venture's assets and remained under the ownership of the respondent until full payment was made.

PRINCIPLES:

1. Article 1767 of the Civil Code A partnership is established when two or more persons agree to contribute money, property, or industry to a common fund with the intention of dividing the profits among themselves.

2. Corporation by Estoppel (Section 21, Corporation Code of the Philippines) Persons acting as a corporation without authority shall be liable as general partners.

3. Binding Nature of Factual Findings Factual findings of lower courts are binding on the Supreme Court unless cogent proof shows the action falls within exceptions.

4. Importance of Agreement Agreements and compromise statements can solidify preexisting relationships and validate business arrangements.

5. Doctrine of Corporation by Estoppel Liability extends to those who act or benefit from an ostensible corporation despite knowing its lack of legal existence.

6. Concept of Partnership Assets Items essential to the business and for which debts are undertaken are considered assets of the partnership.