Ayala Investments vs CA

GR No. 118305, February 12, 1998

FACTS:

Philippine Blooming Mills (PBM) obtained P50,300,000.00 loan from petitioner Ayala
Investment and Development Corporation (AIDC).  Respondent Alfredo Ching, EVP of
PBM, executed security agreements on December 1980 and March 1981 making him
jointly and severally answerable with PBM’s indebtedness to AIDC.  PBM failed to pay
the loan hence filing of complaint against PBM and Ching.  The RTC rendered judgment
ordering PBM and Ching to jointly and severally pay AIDC the principal amount with
interests.  Pending the appeal of the judgment, RTC issued writ of execution. 
Thereafter, Magsajo, appointed deputy sheriff, caused the issuance and service upon
respondent spouses of the notice of sheriff sale on 3 of their conjugal properties on May
1982.  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 TRP 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: Whether or not the debts and obligations contracted by the husband alone is
considered “for the benefit of the conjugal partnership” and is it chargeable.

HELD:

The loan procured from AIDC was for the advancement and benefit of PBM and not for
the benefit of the conjugal partnership of Ching.  Furthermore, AIDC failed to prove that
Ching contracted the debt for the benefit of the conjugal partnership of gains.  PBM has
a personality distinct and separate from the family of Ching despite the fact that they
happened to be stockholders of said corporate entity.  Clearly, the debt was a corporate
debt and right of recourse to Ching as surety is only to the extent of his corporate
stockholdings.

Based from the foregoing jurisprudential rulings of the court, “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.  Ching only signed as a surety for the loan contracted with AIDC in behalf of
PBM.  Signing as a surety is certainly not an exercise of an industry or profession, it is
not embarking in a business.  Hence, the conjugal partnership should not be made
liable for the surety agreement which was clearly for the benefit of PBM.

The court did not support the contention of the petitioner that a benefit for the family
may have resulted when the guarantee was in favor of Ching’s employment (prolonged
tenure, appreciation of shares of stocks, prestige enhanced) since the benefits
contemplated in Art. 161 of the Civil Code must be one directly resulting from the loan.  
It must not be a mere by product or a spin off of the loan itself.