Contributor: Saguin, Cheska Christiana

SECOND DIVISION

[G.R. No. 118305, February 12, 1998]

AYALA INVESTMENT & DEVELOPMENT CORP. and ABELARDO

MAGSAJO  v. COURT OF APPEALS and SPOUSES ALFREDO &
ENCARNACION CHING.

DECISION

MARTINEZ, J.
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DOCTRINE:
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.

QUESTION:

Philippine Blooming Mills (PMC) obtained a P50,300,000.00 loan from Ayala

Investment and Development Corporation (AIDC). Alfredo Ching, the Executive Vice
President of PBM, executed security agreements making himself jointly and severally
answerable with PBM's indebtedness to AIDC, as additional security for the credit line.
Since PBM failed to pay the loan, AIDC filed a case for sum of money against PBM and
Alfredo Ching.
The trial court ruled in favor of AIDC and thus ordered PBM and Alfredo Ching to
jointly and severally pay AIDC the principal amount of P50,300,000.00 with interests.
A writ of execution was then issued wherein three conjugal properties of the Spouses
Alfredo and Encarnacion Ching were levied and scheduled for auction sale. The
Spouses Ching filed a case of injunction to enjoin the auction sale. They alleged that
AIDC cannot enforce the judgment against the conjugal partnership levied on the
ground that, among others, the subject loan did not redound to the benefit of the said
conjugal partnership. 
During the pendency of said case, the auction sale took place wherein AIDC was
declared as winner. However, the trial court declared the sale on execution null and
void. Hence, AIDC appealed to the Court of Appeals which only affirmed the decision of
the regional trial court. It held that AIDC failed to prove that the debt was contracted
by Alfredo Ching for the benefit of the conjugal partnership of gains.
Since AIDC’s motion for reconsideration was denied by the Court of Appeals, it filed a
petition for review with the Supreme Court. It argued that there is no need to prove
that actual benefit redounded to the benefit of the partnership; all that is necessary is
that the transaction was entered into for the benefit of the conjugal partnership. It
averred that pursuant to Article 161 of the Civil Code, for the partnership to be held
liable, the husband must have contracted the debt 'for the benefit of' the partnership.
AIDC argued that there is a difference between the phrases: 'redounded to the benefit
of' or 'benefited from' (on the one hand) and 'for the benefit of' (on the other). The
former require that actual benefit must have been realized; the latter requires only
that the transaction should be one which normally would produce benefit to the
partnership, regardless of whether or not actual benefit accrued." 
Should the petition for review be granted?

SUGGESTED ANSWER:
No, the petition for review filed by AIDC should be denied.
Under Article 121of the Family Code, the conjugal partnership shall be liable for debts
and obligations contracted by either spouse without the consent of the other to the
extent that the family may have benefited.
A careful perusal of the facts of the case would reveal that Alfredo Ching’s act of
signing as surety is not an act of administration for the benefit of the family nor an
exercise of an industry or profession. The loan procured from AIDC was a corporate
loan for the advancement and benefit of Philippine Blooming Mills and not a personal
one for the benefit of the conjugal partnership of Spouses Ching. Consequently, the
conjugal partnership of the Spouses Ching should not be made liable for the obligation
contracted by Alfredo Ching as surety.
In view of the foregoing, the petition for review should be denied.