MACDONALD et al v. NATIONAL CITY BANK OF NEW YORK L-7991 May 21, 195 !a"a#, $.

SV:Stasikinocey is a partnership formed by da Costa, Gorcey, Kusik and Gavino. It was denied registration by the S C due to a confusion between the partnership and Cardina! "attan. Cardina! "attan is the business name or sty!e used by Stasikinocey. #a Costa and Gorcey are the genera! partners of Cardina! "attan. $oreover, #a Costa is the managing partner of Cardina! "attan. Stasikinocey had an overdaft account with %ationa City &ank, which was !ater converted into an ordinary !oan due the partnership's fai!ure in paying its ob!igation. (he ordinary !oan was secured by a chatte! mortgage over ) vehic!es. #uring the subsistence of the !oan, the vehic!es were so!d to $ac#ona!d and !ater on, $ac#ona!d so!d * of the ) vehic!es to Gon+a!es. (he bank brought an action for recovery of its credit and forec!osure of the chatte! mortgage upon !earning of these transactions. SC: ,hi!e an unregistered commercia! partnership has no -uridica! persona!ity, neverthe!ess, where two or more persons attempt to create a partnership fai!ing to comp!y with a!! the !ega! forma!ities, the !aw considers them as partners and the association is a partnership in so far as it is a favorab!e to third persons, by reason of the e.uitab!e princip!e of estoppe!. ,here a partnership not du!y organi+ed has been recogni+ed as such in its dea!ings with certain persons, it sha!! be considered as /partnership by estoppe!0 and the persons dea!ing with it are estopped from denying its partnership e1istence. 2. Stasikinocey is a partnership formed by 3!an Gorcey, 4ouis #a Costa 5r., ,i!!iam Kusik and mma &adong Gavino. *. It was denied registration in the S C due to the confusion between this partnership and the business Cardina! "attan, which is treated as a co6partnership where Gorcey and #a Costa are the genera! partners. It appears that Cardina! "attan is mere!y the business name or sty!e used by the partnership, Stasikinocey. ). 7rior to 5une ), 2898 6 Stasikinocey had an overdraft account with the %ationa! City &ank of %ew :ork, a foreign banking association du!y !icensed to do business in the 7hi!ippines. 9. 5une ), 2898 6 said overdraft account has a 7;,2)9.8* ba!ance. #ue to the fai!ure of Stasikinocey to make the re.uired payment, said ba!ance was converted into an ordinary !oan for which a promissory -oint note, non6 negotiab!e was e1ecuted on the same day by #a Costa for and in the name of Cardina! "attan, himse!f and Gorcey. <. 5une =, 2898 6 said promissory note was secured by a chatte! mortgage e1ecuted by #a Costa, genera! partner for and in the name of Stasikinocey. Said mortgage was constituted over the fo!!owing: a. >argo truck with motor %o. (622?6*@*?)8, Seria! %o. ?292@*@; and with p!ate %o. (6=))) A2898B b. 7!ymouth Sedan automobi!e motor %o. (6<;)??=;, Seria! %o. 22?=*=2? and with p!ate %o. 2@)=* c. >argo 7ick6Cp >KI62;, with motor %o. (622*?@@@)*, Seria! %o. ??;8**< and with p!ate %o. (6=*** A2898B ;. (he mortgage deed was du!y registered with the Dffice of the "egister of #eeds 7asig, "i+a!. It has the fo!!owing stipu!ations: a. mortgagor sha!! not se!! or otherwise dispose of the said chatte!s without the mortgagee's written consent b. mortgagee may forec!ose the mortgage at any time, after breach of any condition thereof, the mortgagor waiving the )@6 day notice of forec!osure =. 5une =, 2898 6 Gorcey and #a Costa e1ecuted an agreement purporting to convey and transfer a!! their rights, tit!e and participation in Stasikinocey to Shaeffer, a!!eged!y in consideration of the cance!!ation of an indebtedness of 7*<,@@@ owed by them and Stasikinocey to the !atter. Said agreement is said to be in vio!ation of the &u!k Sa!es 4aw. ?. 5une *9, 2898 6 during the subsistence of the !oan and chatte! mortgage, Stasikinocey,, through Gorcey and #a Costa transferred to $ac#ona!d the >argo truck and 7!ymouth sedan 8. 5une *?, 2898 6 Shaeffer so!d the >argo pick6up to $ac#ona!d 2@. 5u!y 28, 2899 Ewhat the case stated but I guess it shou!d be 2898F 6 7au! $ac#ona!d so!d the >argo truck and 7!ymouth sedan to &en-amin Gon+a!es 22. ,hen the %ationa! City &ank !earned of these transactions, it fi!ed an action against Stasikinocey, #a Costa, Gorcey, $ac#ona!d and Gon+a!es to recover its credit and to forec!ose the chatte! mortgage. 2*. C>I: annu!!ed the sa!e of the vehic!es to Gon+a!esG ordered #a Costa and Gorcey to pay the &ank -oint!y and severa!!y 7;,2)*.8* with !ega! interestG ordered Gon+a!es to de!iver the vehic!es to the &ank for sa!e at pub!ic

auction if #a Costa and Gorcey fai!s to payG ordered #a Costa, Gorcey and $ac#ona!d to pay the &ank -oint!y and severa!!y any deficiency that remains unpaid shou!d the proceeds of the auction sa!e be insufficient 2). $ac#ona!d and Gon+a!es appea!ed to the C3. 29. C3: modified the C>I decision by ru!ing that $ac#ona!d is not -oint!y and severa!!y !iab!e with Gorcey and #a Costa to pay any deficiency I##%e& ,D% the partnership, Stasikinocey is estopped from asserting that it does not have -uridica! persona!ity since it is an unregistered commercia! partnership EYE'( ,hi!e an unregistered commercia! partnership has no -uridica! persona!ity, neverthe!ess, where two or more persons attempt to create a partnership fai!ing to comp!y with a!! the !ega! forma!ities, the !aw considers them as partners and the association is a partnership in so far as it is a favorab!e to third persons, by reason of the e.uitab!e princip!e of estoppe!. #a Costa and Gorcey cannot deny that they are partners of the partnership Stasikinocey, because in a!! their transactions with the %ationa! City &ank they represented themse!ves as such. $c#ona!d cannot disc!aim know!edge of the partnership Stasikinocey because he dea!t with said entity in purchasing two of the vehic!es in .uestion through Gorcey and #a Costa. (he sa!e of the vehic!es to $ac#ona!d being void, the sa!e to Gon+a!es is a!so void since a buyer cannot have a better right than the se!!er. 3s was he!d in &ehn $eyer H Co. vs. "osat+in, where a partnership not du!y organi+ed has been recogni+ed as such in its dea!ings with certain persons, it sha!! be considered as /partnership by estoppe!0 and the persons dea!ing with it are estopped from denying its partnership e1istence. If the !aw recogni+es a defective!y organi+ed partnership as de facto as far as third persons are concerned, for purposes of its de facto e1istence it shou!d have such attribute of a partnership as domici!e.

On the Validity of the Chattel Mortgage (he chatte! mortgage is in the form re.uired by !aw, and there is therefore the presumption of its due e1ecution which cannot be easi!y destroyed by the biased testimony of the one who e1ecuted it. (he interested version of #a Costa that the affidavit of good faith appearing in the chatte! mortgage was e1ecuted in Iue+on City before a notary pub!ic for and in the City of $ani!a was correct!y re-ected by the tria! court and the Court of 3ppea!s. In view of the conc!usion that Stasikinocey is a de facto partnership, and #a Costa appears as a co6manager in the !etter of Gorcey to the %ationa! City &ank and in the promissory note e1ecuted by #a Costa, and that even the partners considered him as such 2, the /partner0 who e1ecuted the chatte! mortgage in .uestion must be deemed to be so fu!!y authori+ed. Section ; of the Chatte! $ortgage 4aw 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 e1ecuted and subscribed by #a Costa, not on!y as a partner but as a managing partner. C3 decision affirmed. Adigest taken fromt he internet.B

/(hat we as the ma-ority partners hereby agree to appoint 4ouis da Costa co6managing partner of 3!an ,. Gorcey, du!y approved managing partner of the said firm0