MACDONALD vs.

NATIONA CITY BANK OF NEW YORK L-7991 | may 21, 1956 | Paras | Pet for Review by Certiorari Petitioners: Paul MacDonald et al. Respondent: National City Bank of New York Quick Summary:
Facts: Stasikinocey is a partnership formed by da Costa, Gorcey, Kusik and Gavino. It was denied registration by the SEC due to a confusion between the partnership and Cardinal Rattan. Cardinal Rattan is the business name or style used by Stasikinocey. Da Costa and Gorcey are the general partners of Cardinal Rattan. Moreover, Da Costa is the managing partner of Cardinal Rattan. Stasikinocey had an overdaft account with Nationa City Bank, which was later converted into an ordinary loan due the partnerships failure in paying its obligation. The ordinary loan was secured by a chattel mortgage over 3 vehicles. During the subsistence of the loan, the vehicles were sold to MacDonald and later on, MacDonald sold 2 of the 3 vehicles to Gonzales. The bank brought an action for recovery of its credit and foreclosure of the chattel mortgage upon learning of these transactions. Held: While an unregistered commercial partnership has no juridical personality, nevertheless, where two or more persons attempt to create a partnership failing to comply with all the legal formalities, the law considers them as partners and the association is a partnership in so far as it is a favorable to third persons, by reason of the equitable principle of estoppel. Where a partnership not duly organized has been recognized as such in its dealings with certain persons, it shall be considered as partnership by estoppel and the persons dealing with it are estopped from denying its partnership existence.

1. Fargo truck with motor No.

Facts: Stasikinocey is a partnership formed by Alan Gorcey, Louis Da Costa Jr., William Kusik and Emma Badong Gavino. It was denied registration in the SEC due to the confusion between this partnership and the business Cardinal Rattan, which is treated as a co-partnership where Gorcey and Da Costa are the general partners. It appears that Cardinal Rattan is merely the business name or style used by the partnership, Stasikinocey. Prior to June 3, 1949 - Stasikinocey had an overdraft account with the National City Bank of New York, a foreign banking association duly licensed to do business in the Philippines. June 3, 1949 - said overdraft account has a P6,134.92 balance. Due to the failure of Stasikinocey to make the required payment, said balance was converted into an ordinary loan for which a promissory joint note, non-negotiable was executed on the same day by Da Costa for and in the name of Cardinal Rattan, himself and Gorcey. June 7, 1949 - said promissory note was secured by a chattel mortgage executed by Da Costa, general partner for and in the name of Stasikinocey. Said mortgage was constituted over the following:

T-118202839, Serial No. 81410206 and with plate No. T-7333 (1949) 2. Plymouth Sedan automobile motor No. T5638876, Serial No. 11872718 and with plate No. 10372 3. Fargo Pick-Up FKI-16, with motor No. T112800032, Serial No. 8869225 and with plate No. T-7222 (1949) The mortgage deed was duly registered with the Office of the Register of Deeds Pasig, Rizal. It has the following stipulations: 1. mortgagor shall not sell or otherwise dispose of the said chattels without the mortgagees written consent 2. mortgagee may foreclose the mortgage at any time, after breach of any condition thereof, the mortgagor waiving the 30day notice of foreclosure June 7, 1949 - Gorcey and Da Costa executed an agreement purporting to convey and transfer all their rights, title and participation in Stasikinocey to Shaeffer, allegedly in consideration of the cancellation of an indebtedness of P25,000 owed by them and Stasikinocey to the latter. Said agreement is said to be in violation of the Bulk Sales Law. June 24, 1949 - during the subsistence of the loan and chattel mortgage, Stasikinocey,, through Gorcey and Da Costa transferred to MacDonald the Fargo truck and Plymouth sedan June 28, 1949 - Shaeffer sold the Fargo pick-up to MacDonald July 19, 1944 [what the case stated but I guess it should be 1949] - Paul MacDonald sold the Fargo truck and Plymouth sedan to Benjamin Gonzales When the National City Bank learned of these transactions, it filed an action against Stasikinocey, Da Costa, Gorcey, MacDonald and Gonzales to recover its credit and to foreclose the chattel mortgage. CFI: annulled the sale of the vehicles to Gonzales; ordered Da Costa and Gorcey to pay the Bank jointly and severally P6,132.92 with legal interest; ordered Gonzales to deliver the vehicles to the Bank for sale at public auction if Da Costa and Gorcey fails to pay; ordered Da Costa, Gorcey and MacDonald to pay the Bank jointly and severally any deficiency that remains unpaid should the proceeds of the auction sale be insufficient MacDonald and Gonzales appealed to the CA.

CA: modified the CFI decision by ruling that MacDonald is not jointly and severally liable with Gorcey and Da Costa to pay any deficiency Issue: WON the partnership, Stasikinocey is estopped from asserting that it does not have juridical personality since it is an unregistered commercial partnership [YES] Ratio: While an unregistered commercial partnership has no juridical personality, nevertheless, where two or more persons attempt to create a partnership failing to comply with all the legal formalities, the law considers them as partners and the association is a partnership in so far as it is a favorable to third persons, by reason of the equitable principle of estoppel. Da Costa and Gorcey cannot deny that they are partners of the partnership Stasikinocey, because in all their transactions with the National City Bank they represented themselves as such. McDonald cannot disclaim knowledge of the partnership Stasikinocey because he dealt with said entity in purchasing two of the vehicles in question through Gorcey and Da Costa. The sale of the vehicles to MacDonald being void, the sale to Gonzales is also void since a buyer cannot have a better right than the seller. As was held in Behn Meyer & Co. vs. Rosatzin, where a partnership not duly organized has been recognized as such in its dealings with certain persons, it shall be considered as partnership by estoppel and the persons dealing with it are estopped from denying its partnership existence. If the law recognizes a defectively organized partnership as de facto as far as third persons are concerned, for purposes of its de facto existence it should have such attribute of a partnership as domicile.

letter of Gorcey to the National City Bank and in the promissory note executed by Da Costa, and that even the partners considered him as such1, the partner who executed the chattel mortgage in question must be deemed to be so fully authorized. Section 6 of the Chattel Mortgage Law provides that when a partnership is a party to the mortgage, the affidavit may be made and subscribed by one member thereof. In this case the affidavit was executed and subscribed by Da Costa, not only as a partner but as a managing partner. Dispositive: CA decision affirmed.

On the Validity of the Chattel Mortgage The chattel mortgage is in the form required by law, and there is therefore the presumption of its due execution which cannot be easily destroyed by the biased testimony of the one who executed it. The interested version of Da Costa that the affidavit of good faith appearing in the chattel mortgage was executed in Quezon City before a notary public for and in the City of Manila was correctly rejected by the trial court and the Court of Appeals. In view of the conclusion that Stasikinocey is a de facto partnership, and Da Costa appears as a co-manager in the

That we as the majority partners hereby agree to appoint Louis da Costa co-managing partner of Alan W. Gorcey, duly approved managing partner of the said firm