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Corporate Law Case Digest: Pioneer Insurance v. CA (1989)

G.R. No. 84197 July 28, 1989
Lessons Applicable: Defective attempt to form a corp. does NOT result in at least a partnership absent intent to form one (Corporate Law)

  • 1965: Jacob S. Lim is an owner-operator of Southern Airlines (SAL), a single proprietorship
  • May 17 1965: Japan Domestic Airlines (JDA) and Lim entered into a sales contract regarding:
    • 2 DC-#A type aircrafts
    • 1 set of necessary spare parts
    • Total: $ 190,000 in installments
  • May 22 1965:  Pioneer Insurance and Surety Corp. as surety executed its surety bond in favor of JDA on behalf of its principal Lim
  • Border Machinery and Heacy Equipment Co, Inc. Francisco and Modesto Cervantes and Constancio Maglana contributed funds for the transaction based on the misrepresentation of Lim that they will form a new corp.. to expand his business
  • Jun 10 1965: Lim as SAL executed in favor of Pioneer a deed of chattel mortgage as security
    • Restructuring of obligation to change the maturity was done 2x w/o the knowledge of other defendants 
      • made the surety of JDA prescribed so not entitled to reimbursement
    • Upon default on the 2/8 payments, Pioneer paid for him and filed a petition for the foreclosure of chattel mortgage as security
  • CA affirmed Trial of Merits: Only Lim is liable to pay
ISSUE: W/N failure of respondents to incorporate = de facto partnership.

HELD: NO. CA affirmed.
  • Partnership inter se does NOT necessarily exist, for ordinarily CANNOT be made to assume the relation of partners as bet. themselves, when their purpose is that no partnership shall exists
  • Should be implied only when necessary to do justice bet. the parties (i.e. only pretend to make others liable)
  • Lim never intended to form a corp.