G.R. No. 84197 – 175 SCRA 668 – Civil Law – Partnership – When De Facto Partnership Does Not Exist
Jacob Lim was the owner of Southern Air Lines, a single proprietorship. In 1965, Lim convinced Constancio Maglana, Modesto Cervantes, Francisco Cervantes, and Border Machinery and Heavy Equipment Company (BORMAHECO) to contribute funds and to buy two aircrafts which would form part a corporation which will be the expansion of Southern Air Lines. Maglana et al then contributed and delivered money to Lim.
But instead of using the money given to him to pay in full the aircrafts, Lim, without the knowledge of Maglana et al, made an agreement with Pioneer Insurance for the latter to insure the two aircrafts which were brought in installment from Japan Domestic Airlines (JDA) using said aircrafts as security. So when Lim defaulted from paying JDA, the two aircrafts were foreclosed by Pioneer Insurance.
It was established that no corporation was formally formed between Lim and Maglana et al.
ISSUE: Whether or not Maglana et al must share in the loss as general partners.
HELD: No. There was no de facto partnership. Ordinarily, when co-investors agreed to do business through a corporation but failed to incorporate, a de facto partnership would have been formed, and as such, all must share in the losses and/or gains of the venture in proportion to their contribution. But in this case, it was shown that Lim did not have the intent to form a corporation with Maglana et al. This can be inferred from acts of unilaterally taking out a surety from Pioneer Insurance and not using the funds he got from Maglana et al. The record shows that Lim 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.
