AGENCY TRUST AND PARTNERSHIP | PIONEER INSURANCE VS. COURT OF APPEALS, 175 SCRA 668, JULY 28, 1989

PIONEER INSURANCE VS. COURT OF APPEALS,

175 SCRA 668, JULY 28, 1989

 

TOPIC/DOCTRINE

Persons who attempt but fail to form a corporation and who carry on business under the corporate name occupy the position of partners inter se. Such a relation does not necessarily exist however for ordinarily persons cannot be made to assume the relation of partners as between themselves when their purpose is that no partnership shall exist.

 

FACTS

In 1965, Jacob S. Lim (petitioner in G.R. No. 84157) was engaged in the airline business as owner-operator of Southern Air Lines (SAL) a single proprietorship.

On May 17, 1965, at Tokyo, Japan, Japan Domestic Airlines (JDA) and Lim entered into and executed a sales contract (Exhibit A) for the sale and purchase of two (2) DC-3A Type aircrafts and one (1) set of necessary spare parts for the total agreed price of US $109,000.00 to be paid in installments.

On May 22, 1965, Pioneer Insurance and Surety Corporation (Pioneer, petitioner in G.R. No. 84197) as surety executed and issued its Surety Bond No. 6639 (Exhibit C) in favor of JDA, in behalf of its principal, Lim, for the balance price of the aircrafts and spare parts.

It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco and Modesto Cervantes (Cervanteses) and Constancio Maglana (respondents in both petitions) contributed some funds used in the purchase of the above aircrafts and spare parts. The funds were supposed to be their contributions to a new corporation proposed by Lim to expand his airline business.

On June 10, 1965, Lim doing business under the name and style of SAL executed in favor of Pioneer as deed of chattel mortgage as security for the latter’s suretyship in favor of the former. It was stipulated therein that Lim transfer and convey to the surety the two aircrafts.

Lim defaulted on his subsequent installment payments prompting JDA to request payments from the surety. Pioneer paid a total sum of P298,626.12.

Pioneer then filed a petition for the extrajudicial foreclosure of the said chattel mortgage before the Sheriff of Davao City. The Cervanteses and Maglana, however, filed a third party claim alleging that they are co-owners of the aircrafts. The petitioner, therefore, questions the appellate court’s findings ordering him to reimburse certain amounts given by the respondents to the petitioner as their contributions to the intended corporation. It is established in the records that defendant Lim had duly received the amount of P151,000.00 from defendants Bormaheco and Maglana representing the latter’s participation in the ownership of the subject airplanes and spare parts (Exhibit 58). In addition, the cross-party plaintiffs incurred additional expenses, hence, the total sum of P184,878.74.”

 

ISSUE

Whether Bormaheco and Maglana are partners of Lim.

 

RULING

No.

The court ruled that persons who attempt but fail to form a corporation and who carry on business under the corporate name occupy the position of partners inter se. Such a relation does not necessarily exist however for ordinarily persons cannot be made to assume the relation of partners as between themselves when their purpose is that no partnership shall exist.

Here, the court ruled that it is clear that the petitioner never had the intention to form a corporation with the respondents despite his representations to them. This gives credence to the cross-claims of the respondents to the effect that they were induced and lured by the petitioner to make contributions to a proposed corporation which was never formed because the petitioner reneged on their agreement. Applying therefore the principles of law earlier cited to the facts of the case, necessarily, no de facto partnership was created among the parties which would entitle the petitioner to a reimbursement of the supposed losses of the proposed corporation. The record shows that the petitioner was acting on his own and not in behalf of his other would-be incorporators in transacting the sale of the airplanes and spare parts.







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