35.) [ G.R. No.

L-7991, May 21, 1956 ]

PAUL MACDONALD, ET AL., PETITIONERS, VS. THE NATIONAL CITY BANK OF NEW YORK,
RESPONDENT.

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.

Stasikinocey had an overdraft account with the National City Bank of New York. The 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. The 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: Fargo
truck, Plymouth Sedan and Fargo Pick-Up FKI-16.

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.

During the subsistence of the loan and chattel mortgage, Stasikinocey, through Gorcey and Da Costa
transferred to MacDonald the Fargo truck and Plymouth sedan. Thereafter, Shaeffer sold the Fargo
pick-up to MacDonald. 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.

The Court of First Instance annulled the sale of the vehicles to Gonzales; ordered Da Costa and
Gorcey to pay the Bank jointly and severally; 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 considering that it is an unregistered commercial partnership.

Held: YES

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. In Hung-Man Yoc vs. Kieng-Chiong-Seng, 6 Phil.., 498, it was held that although "it has no
legal standing, it is a partnership de facto and the general provisions of the Code applicable to all
partnerships apply to it." The registration of the chattel mortgage in question with the Office of the
Register of Deeds of Rizal, the residence or place of business of the partnership Stasikinocey being
San Juan, Rizal, was therefore in accordance with section 4 of the Chattel Mortgage Law. Thus, for
purposes of registration of chattel mortgage, its domicile is its place of business of partnership.