668 VOL.

175, JULY 28, 1989

SUPREME COURT REPORTS ANNOTATED

Pioneer Insurance & Surety Corporation vs. Court of Appeals

G.R. No. 84197. July 28, 1989.*
PIONEER INSURANCE & SURETY CORPORATION, petitioner, vs. THE HON. COURT
OF APPEALS, BORDER MACHINERY & HEAVY EQUIPMENT, INC., (BORMAHECO),
CONSTANCIO M. MAGLANA and JACOB S. LIM, respondents.
G.R. No. 84157. July 28, 1989.*
JACOB S. LIM, petitioner, vs. COURT OF APPEALS, PIONEER INSURANCE AND
SURETY CORPORATION, BORDER MACHINERY and HEAVY EQUIPMENT CO.,
INC., FRANCISCO and MODESTO CERVANTES and CONSTANCIO MAGLANA,
respondents.
NATURE: PETITIONS to review the decision of the Court of Appeals.
FACTS: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.
WHEREFORE, the instant petitions are DISMISSED. The questioned decision of
the Court of Appeals is AFFIRMED.