CASES UNDER ARTICLES 105-133 LIABILITIES OF CONJUGAL PARTNERSHIP

CASE Ayala Investments v. CA February 12, 1998 (286 SCRA 272) FACTS Philippine Blooming Mills (hereinafter referred to as PBM) obtained a P50,300,000.00 loan from petitioner Ayala Investment and Development Corporation (hereinafter referred to as AIDC). As added security for the credit line extended to PBM, respondent Alfredo Ching, Executive Vice President of PBM, executed security agreements on December 10, 1980 and on March 20, 1981 making himself jointly and severally answerable with PBM's indebtedness to AIDC. (In short, Ching signed as a SURETY.) PBM failed to pay the loan. Thus, on July 30, 1981, AIDC filed a case for sum of money against PBM and respondent-husband Alfredo Ching. After trial, the court rendered judgment ordering PBM and respondent-husband Alfredo Ching to jointly and severally pay AIDC the principal amount of P50,300,000.00 with interests. The lower court issued a writ of execution pending appeal. Upon AIDC's putting up of an P8,000,000.00 bond, a writ of execution dated May 12, 1982 was issued upon respondents-spouses of a notice of sheriff sale dated May 20, 1982 on three (3) of their conjugal properties. Respondent spouses filed injunction against petitioners on the ground that subject loan did not redound to the benefit of the said conjugal partnership. CA issued a TRO enjoining lower court from enforcing its order paving way for the scheduled auction sale of respondent spouses conjugal properties. A certificate of sale was issued to AIDC, being the only bidder and was registered on July 1982. ISSUE Under Article 161 of the Civil Code (NOW ARTICLE 121 of the FAMILY CODE), what debts and obligations contracted by the husband alone are considered "for the benefit of the conjugal partnership" which are chargeable against the conjugal partnership? Is a surety agreement or an accommodation contract entered into by the husband in favor of his employer within the contemplation of the said provision? RULING/DOCTRINE The obligations of PBM to AIDC cannot be charged against the conjugal properties of the Spouses Ching. RATIONALE: Art. 161. (now Article 121 of the Family Code) The conjugal partnership shall be liable for: (1) All debts and obligations contracted by the husband for the benefit of the conjugal partnership, and those contracted by the wife, also for the same purpose, in the cases where she may legally bind the partnership. To elaborate, the Court stated: A) If the husband himself is the principal obligor in the contract, i.e., he directly received the money and services to be used in or for his own business or his own profession, that contract falls within the term . . . . obligations for the benefit of the conjugal partnership." Here, no actual benefit may be proved. It is enough that the benefit to the family is apparent at the time of the signing of the contract. From the very nature of the contract of loan or services, the family stands to benefit from the loan facility or services to be rendered to the business or profession of the husband. It is immaterial, if in the end, his business or profession fails or does not succeed. Simply stated, where the husband contracts obligations on behalf of the family business, the law presumes, and rightly so, that such obligation will redound to the benefit of the conjugal partnership. B) On the other hand, if the money or services are given to another person or entity, and the husband acted only as a surety or guarantor, that contract cannot, by itself, alone be categorized as falling within the context of "obligations for the benefit of the conjugal partnership." The contract of loan or services is clearly for the benefit of the principal debtor and not for the surety or his family. No presumption can be inferred that, when a husband enters into a contract of surety or accommodation agreement, it is "for the benefit of the conjugal partnership." Proof must be presented to establish benefit redounding to the conjugal partnership.

CASES UNDER ARTICLES 105-133 LIABILITIES OF CONJUGAL PARTNERSHIP

As in the present case, B is applicable. The loan procured from respondent-appellant AIDC was for the advancement and benefit of Philippine Blooming Mills and not for the benefit of the conjugal partnership of petitioners-appellees. Philippine Blooming Mills has a personality distinct and separate from the family of petitioners-appellees this despite the fact that the members of the said family happened to be stockholders of said corporate entity. Signing as a surety is certainly not an exercise of an industry or profession. Signing as a surety is not embarking in a business.

Ching vs. CA G.R. No. 124642 February 23, 2004

On September 1978, Philippine Blooming Mills Company (PBMCI) obtained a 9-million peso loan from Allied Banking Corporation (ABC). Alfredo Ching together with two other persons executed a continuing guarantee with ABC binding themselves jointly and severally liable for the PBMCI obligations. The extent of their guarantee is up to 38 million pesos. PBMCI failed to settle the loans which amounted to P12,612,972.88 (exclusive of interests, penalties and other bank charges.) Together with the writ of preliminary attachment, the sheriff levied (seized) the 100,000 common shares of City Corporation stocks registered solely to Alfredo Ching. Mrs. Ching filed a petition to set aside the levy of the 100,000 common shares. According to her, the shares were purchased out of the conjugal funds. She also argued that the loan of PBMCI did not redound to the benefit of the conjugal partnership (or family).

Whether or not the ABC can charge PBMCIs obligation against the shares of Spouses Ching, which were purchased out of conjugal funds.

No. In this case, the petitioner-husband acted merely as a surety for the loan contracted by the PBMCI from the private respondent. RATIONALE: Article 161(1) of the New Civil Code (now Article 121[2 and 3] of the Family Code of the Philippines) provides: Art. 161. The conjugal partnership shall be liable for: (1) All debts and obligations contracted by the husband for the benefit of the conjugal partnership, and those contracted by the wife, also for the same purpose, in the cases where she may legally bind the partnership. For the conjugal partnership to be liable for a liability that should appertain to the husband alone, there must be a showing that some advantages accrued to the spouses. Certainly, to make a conjugal partnership responsible for a liability that should appertain alone to one of the spouses is to frustrate the objective of the New Civil Code to show the utmost concern for the solidarity and well being of the family as a unit. The husband, therefore, is denied the power to assume unnecessary and unwarranted risks to the financial stability of the conjugal partnership. In this case ABC failed to prove that the conjugal partnership of the petitioners was benefited by the petitioner-husbands act of executing a continuing guaranty and suretyship agreement with the private respondent for and in behalf of PBMCI. The contract of loan was between the private respondent and the PBMCI, solely for the benefit of the latter. No

CASES UNDER ARTICLES 105-133 LIABILITIES OF CONJUGAL PARTNERSHIP

presumption can be inferred from the fact that when the petitioner-husband entered into an accommodation agreement or a contract of surety, the conjugal partnership would thereby be benefited. The private respondent,ABC, was burdened to establish that such benefit redounded to the conjugal partnership. It could be argued that the petitioner-husband was a member of the Board of Directors of PBMCI and was one of its top twenty stockholders, and that the shares of stocks of the petitioner-husband and his family would appreciate if the PBMCI could be rehabilitated through the loans obtained; that the petitioner-husbands career would be enhanced should PBMCI survive because of the infusion of fresh capital. However, these are not the benefits contemplated by Article 161( Art. 121,FC) of the New Civil Code. The benefits must be those directly resulting from the loan. They cannot merely be a by-product or a spin-off of the loan itself. Francisco vs. Gonzales G.R. No. 177667 September 17, 2008 Cleodualdo M. Francisco (Cleodualdo) and Michele Uriarte Francisco (Michele) in accordance with their petition for nullity of marriage and in their desire to manifest their genuine concern for their children, Cleodia and Ceamantha, Cleodualdo and Michelle, have voluntarily agreed to herein set forth their obligations, rights and responsibilities on matters relating to their children's support, custody, visitation, as well as to the dissolution of their conjugal partnership of gains. Title and ownership of the conjugal property consisting of a house and lot located in Ayala Alabang, Muntinlupa, Metro Manila shall be transferred by way of a deed of donation to Cleodia and Ceamantha, as co-owners, when they reach nineteen (19) and eighteen (18) years old located in 410 Taal St., Ayala Alabang Village, Muntinlupa City. Michele, the minors mother, had a partner George Zoltan Matrai, and lived in 264 Lanka Drive,Ayala Alabang Village, Muntinlupa City, which she only rented with partner Matrai. Meanwhile, Spouses Gonzales (Respondents), owners of the rented house, filed a case against Michele and Matrai for Unlawful Detainer with Preliminary Attachment, Whether or not a spouses personal obligation may be held liable against the conjugal property? No. RATIONALE: Cleodualdo and Michele were married on June 12, 1986, prior to the effectivity of the Family Code on August 3, 1988. As such, their property relations are governed by the Civil Code on conjugal partnership of gains. Ownership of the subject property is conjugal in nature. A wife may bind the conjugal partnership only when she purchases things necessary for the support of the family, or when she borrows money for that purpose upon her husband's failure to deliver the needed sum; when administration of the conjugal partnership is transferred to the wife by the courts or by the husband; or when the wife gives moderate donations for charity. Failure to establish any of these circumstances means that the conjugal asset may not be bound to answer for the wife's personal obligation.[ Considering that the foregoing circumstances are evidently not present in this case as the liability incurred by Michele arose from a judgment rendered in an unlawful detainer case against her and her partner Matrai. It should be noted that the judgment debt for which the subject property was being made to answer was incurred by Michele and her partner, Matrai. Respondents allege that the lease of the property in Lanka

CASES UNDER ARTICLES 105-133 LIABILITIES OF CONJUGAL PARTNERSHIP

ordering Matrai and Michele to vacate the premises leased to them and to pay back rentals, unpaid telephone bills and attorney's fees. In effect, the RTC issued an execution against the already donated conjugal property of Michele and exhusband Cleoduado, as Micheles liability to the Spouse Gonzales. To counter, as the property was already donated to Cleodia and Ceamantha (minors), their grandmother, the guardian-in-fact, filed an affidavit of third-party claim and to stop the execution of sale of the property. The RTC denied the grandmothers petition. Pending appeal of the grandmother in the CA, the RTC issued a writ of possession and an issuance of a new certificate of title in favor of the Spouses Gonzales. The CA then upheld the RTCs decisions. On 30 April 1984, Spouses Roberto and Venus Buado (petitioners) filed a complaint for damages against Erlinda Nicol (Erlinda) with Branch 19 of the Regional Trial Court (RTC) of Bacoor, Cavite. Said action originated from Erlinda Nicols civil liability arising from the criminal offense of slander filed against her by petitioners. On 6 April 1987, the trial court rendered a decision ordering Erlinda to pay damages. Said decision was affirmed, successively, by the Court of Appeals and this Court. Finding Erlinda Nicols personal properties insufficient to satisfy the judgment, the Deputy Sheriff issued a notice of levy on real property on execution addressed to the Register of Deeds of Cavite. Two (2) days before the public auction sale on 28 January 1993, an affidavit of third-party claim from one Arnulfo F. Fulo was received by the deputy sheriff Drive redounded to the benefit of the family. By no stretch of one's imagination can it be concluded that said debt/obligation was incurred for the benefit of the conjugal partnership or that some advantage accrued to the welfare of the family. Michele, who was then already living separately from Cleodualdo, rented the house in Lanka Drive for her and Matrais own benefit. In fact, when they entered into the lease agreement, Michele and Matrai purported themselves to be husband and wife.

Furthermore, it is clear that both Michele and Cleodualdo have waived their title to and ownership of the house and lot in Taal St. in favor of petitioners, their minor children. The property should not have been levied and sold at execution sale, for lack of legal basis.

Buado vs. Nicol G.R. No. 145222 April 24, 2009

1. Whether or not the obligation of the wife arising from her criminal liability is chargeable to the conjugal partnership 2. Whether or not the husband of the judgment debtor may file an independent action to protect the conjugal property subject to execution.

1. No. The obligation of the wife arising from her criminal liability is NOT chargeable to the conjugal partnership.

RATIONALE: Article 122 of the Family Code explicitly provides that payment of personal debts contracted by the husband or the wife before or during the marriage shall not be charged to the conjugal partnership except insofar as they redounded to the benefit of the family. Unlike in the system of absolute community where liabilities incurred by either spouse by reason of a crime or quasi-delict is chargeable to the absolute community of property, in the absence or insufficiency of the exclusive property of the debtor-spouse, the same advantage is not accorded in the system of conjugal partnership of gains. The conjugal partnership of gains has no duty to make advance payments for the liability of the debtorspouse.

CASES UNDER ARTICLES 105-133 LIABILITIES OF CONJUGAL PARTNERSHIP

prompting petitioners to put up a sheriffs indemnity bond. The auction sale proceeded with petitioners as the highest bidder. On 4 February 1993, a certificate of sale was issued in favor of petitioners. Almost a year later on 2 February 1994, Romulo Nicol (respondent), the husband of Erlinda Nicol, filed a complaint for annulment of certificate of sale and damages with preliminary injunction against petitioners and the deputy sheriff. Respondent, as plaintiff therein, alleged that the defendants, now petitioners, connived and directly levied upon and execute his real property without exhausting the personal properties of Erlinda Nicol. Respondent averred that there was no proper publication and posting of the notice of sale. Furthermore, respondent claimed that his property which was valued at P500,000.00 was only sold at a very low price of P51,685.00, whereas the judgment obligation of Erlinda Nicol was only P40,000.00. Petitioners motion for reconsideration was denied on 23 August 2000. Hence, the instant petition attributing grave abuse of discretion on the part of the Court of Appeals. Parenthetically, by no stretch of imagination can it be concluded that the civil obligation arising from the crime of slander committed by Erlinda redounded to the benefit of the conjugal partnership. To reiterate, conjugal property cannot be held liable for the personal obligation contracted by one spouse, unless some advantage or benefit is shown to have accrued to the conjugal partnership. 2. Yes. In this case, the husband may file an independent action.

RATIONALE: A spouse may file an independent action provided that he is deemed as a stranger or a third-party claimant. A spouse may be considered as a stranger when an obligation that has NOT redounded to the benefit of the conjugal partnership. A spouse is deemed a stranger to the action wherein the writ of execution was issued and is therefore justified in bringing an independent action to vindicate his right of ownership over his exclusive or paraphernal property. Parenthetically, by no stretch of imagination can it be concluded that the civil obligation arising from the crime of slander committed by Erlinda redounded to the benefit of the conjugal partnership.

Pana vs. Heirs of Juanite G.R. No. 164201 December 10, 2012

The prosecution accused petitioner Efren Pana (Efren), his wife Melecia, and others of murder before the. Regional Trial Court (RTC) of Surigao City. Efren was acquitted, and Melecia and others were convicted. As a result, the guilty parties were ordered to pay the damages aside from their punishment of

Whether or not the conjugal properties of spouses Efren and Melecia can be levied and executed upon for the satisfaction of Melecias civil liability in the murder case.

Yes, provided that the conditions under Article 121 of the Family Code have been covered. RATIONALE: What is clear is that Efren and Melecia were married when the Civil Code was still the operative law on marriages. The presumption, absent any

CASES UNDER ARTICLES 105-133 LIABILITIES OF CONJUGAL PARTNERSHIP

imprisonment, as their civil liability. Upon motion for execution by the heirs of the deceased, the RTC ordered the issuance of the writ, resulting in the levy of real properties registered in the names of Efren and Melecia. Subsequently, a notice of levy and a notice of sale on execution were issued. The spouses filed MORs with RTC and CA, all denied. evidence to the contrary, is that they were married under the regime of the conjugal partnership of gains. Article 119 of the Civil Code thus provides: Art. 119. The future spouses may in the marriage settlements agree upon absolute or relative community of property, or upon complete separation of property, or upon any other regime. In the absence of marriage settlements, or when the same are void, the system of relative community or conjugal partnership of gains as established in this Code, shall govern the property relations between husband and wife. The Family Code contains terms governing conjugal partnership of gains that supersede the terms of the conjugal partnership of gains under the Civil Code. Article 105 of the Family Code states: x x x x The provisions of this Chapter [on the Conjugal Partnership of Gains] shall also apply to conjugal partnerships of gains already established between spouses before the effectivity of this Code, without prejudice to vested rights already acquired in accordance with the Civil Code or other laws, as provided in Article 256. Consequently, the Court must refer to the Family Code provisions in deciding whether or not the conjugal properties of Efren and Melecia may be held to answer for the civil liabilities imposed on Melecia in the murder case. Its Article 122 provides: Art. 122. The payment of personal debts contracted by the husband or the wife before or during the marriage shall not be charged to the conjugal properties partnership except insofar as they redounded to the benefit of the family. Neither shall the fines and pecuniary indemnities imposed upon them be charged to the partnership. However, the payment of personal debts contracted by either spouse before the marriage, that of fines and indemnities imposed upon them, as well as the support of illegitimate children of either spouse, may be enforced against the partnership assets after the responsibilities enumerated in the preceding Article have been covered, if the spouse

CASES UNDER ARTICLES 105-133 LIABILITIES OF CONJUGAL PARTNERSHIP

who is bound should have no exclusive property or if it should be insufficient; but at the time of the liquidation of the partnership, such spouse shall be charged for what has been paid for the purpose above-mentioned. Since Melecia has no exclusive property of her own, the above applies. The civil indemnity that the decision in the murder case imposed on her may be enforced against their conjugal assets after the responsibilities enumerated in Article 121 of the Family Code have been covered. Art. 121. The conjugal partnership shall be liable for: (1) The support of the spouse, their common children, and the legitimate children of either spouse; however, the support of illegitimate children shall be governed by the provisions of this Code on Support; (2) All debts and obligations contracted during the marriage by the designated administrator-spouse for the benefit of the conjugal partnership of gains, or by both spouses or by one of them with the consent of the other; (3) Debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have benefited; (4) All taxes, liens, charges, and expenses, including major or minor repairs upon the conjugal partnership property; (5) All taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse; (6) Expenses to enable either spouse to commence or complete a professional, vocational, or other activity for self-improvement; (7) Antenuptial debts of either spouse insofar as they have redounded to the benefit of the family; (8) The value of what is donated or promised by both spouses in favor of their common legitimate children for the exclusive purpose of commencing or completing a professional or vocational course or other activity for self-improvement; and (9) Expenses of litigation between the spouses unless the suit is

CASES UNDER ARTICLES 105-133 LIABILITIES OF CONJUGAL PARTNERSHIP

found to be groundless. If the conjugal partnership is insufficient to cover the foregoing liabilities, the spouses shall be solidarily liable for the unpaid balance with their separate properties. Contrary to Efrens contention, Article 121 above allows payment of the criminal indemnities imposed on his wife, Melecia, out of the partnership assets even before these are liquidated. Indeed, it states that such indemnities may be enforced against the partnership assets after the responsibilities enumerated in the preceding article have been covered.No prior liquidation of those assets is required. This is not altogether unfair since Article 122 states that at the time of liquidation of the partnership, such [offending] spouse shall be charged for what has been paid for the purposes above-mentioned.