CASE Quaker Hill, Inc. v.

Parr and Presba AUTHOR: Mendoza

[G.R. No. DATE] Colorado 19606 NOTES:
TOPIC: Liability of Promoter
PONENTE:
FACTS:
 1.This is an action to recover the sum of $14,503.56 by Quaker Hill from Parr and Presba.
 2.Quaker Hill is a New York Corporation with offices in Newark, New York, sold a large quantity of nursery stock to
the Denver Memorial Nursery, Inc.Both parties executed a contract wherein Denver Memorial was also the maker of
the promisory note having Parr's signature as its president.
 3. Prior to their transaction, it appears that Parr and Presba and others formed a corporation having the name "Denver
Memorial Gardens, Inc.".Its purpose was to operate a cemetery.
 4. During thr course of their negotiation to purchase the nursery stock, Parr and Presba organized a separate
corporation called "Denver Memorial Nursery". And an order was signed by Parr on behalf of Denver Memorial
Nursery, which, to the knowledge of Quaker Hill, was not yet formed as noted in their contract.
 5. Subsequently, another order was executed and was delivered to Quaker Hill, together with a downpayment of
$1,000. And that the remaining balance was not due until the end of the year. The nursery stock was shipped
immediately.
 6.However, it was temporarily planted with the assistance of Quaker Hill and then a substitute order was sent to the
latter. Different from the previous order, it contained the name of "Mountain View Nurseries" instead of "Denver
Memorial Nursery, Inc." as the purchaser. The nursery stock all died. The contract provided a guarantee providing for
replacement of stock which died.
 7.It has also been established that Denver Memorial was never formed. Because of name confusion, it was called
Mountain View Nurseries wihch its AOI were executed and filed to thr Secretary of State.
 8. This action seeks to subject Parr and Presba to personal liabilty because of the defunct financial condition of the
corporation which was not formed at the time the contract was made and their individual liability as promoters.
 9. Trial Court: That Parr and Presba did not represent themselves to be agents of a corporation by the name of
"Denver Memorial Nurseries, Inc." but as the Quaker Hill suggested that the said name be used for the purpose of
consummating the order othe nursery stock. And that no corporation was formed was well known to Quaker Hill. And
that Parr and Presba were not promoters of a corporation since none was formed. Finally, That Quaker Hill intended
to contract with a non-existent corporation and well knew that there was no such corporation at the time of ssid
contract.
 10. The contract imposed no obligation on Parr and Presba to form the corporation nor did it name then as obligors on
the note or as promisees in the contract.

ISSUE(S):
Whether or not Parr and Presba are Promoters and personally liable for the debt incurred.
HELD:
Parr and Presba won and trial court's decision is affirmed. And it was clearly established that there was intent on the part of
Quaker Hill to contract with thr (non existent) corporation and not with the indivudual defendants.

RATIO:
 The general principle which Quaker Hill urges as applicable here is that promoters are personally liable on their
contracts, though made on behalf of a corporation to be formed. An exception to this rules is that, if the contract is
made on behalf of the corporation and the other party agrees to look to the corporation and not to promoters for
payment, the promoters incur no personal liability.
 In the case, Quaker Hill, acting through its agent, was well aware of the fact that the corporation was not formed
and nevertheless urged that the contract be made in the name of the proposed corporation. And thath the entire
transaction contemplated the corporation as the contracting party.Personal liability does not arise under such
circumstances.
 It also noted that the exception that personal liability does not attach where the contracting party is shown to be
looking solely to the corporation for payment and not to the promoters or officers.

CASE LAW/ DOCTRINE:
DISSENTING/CONCURRING OPINION(S):