Ching v. Court of Appeals

G.R. No. 124642, 23 February 2004

FACTS:

The Philippine Blooming Mills Company, Inc. (PBMCI) obtained a loan of P9,000,000 from the Allied Banking Corporation (ABC). As an added security for the said loan, Alfredo Ching, together with Emilio Tadeo and Chung Kiat Hua, executed a continuing guaranty with the ABC binding them to jointly and severally guarantee the payment of all the PBMCI obligations owing to the ABC. The PBMCI defaulted in the payment of all its loans.

Hence, the ABC filed a complaint for sum of money with prayer for a writ of preliminary attachment. Citing as one of the grounds for the writ was the fraud defendants employed in incurring the obligations by representing themselves as having the financial capacity to pay the loan when in fact they did not have such capacity. In the meantime, on July 26, 1983, the deputy sheriff of the trial court levied on attachment the 100,000 common shares of Citycorp stocks in the name of Alfredo Ching.

On November 16, 1993, Encarnacion T. Ching, assisted by her husband Alfredo Ching, filed a Motion to Set Aside the levy on attachment. She alleged inter alia that the 100,000 shares of stocks levied on by the sheriff were acquired by her and her husband during their marriage out of conjugal funds after the Citycorp Investment Philippines was established in 1974. She, likewise, alleged that being the wife of Alfredo Ching, she was a third-party claimant entitled to file a motion for the release of the properties. She attached therewith a copy of her marriage contract with Alfredo Ching.

ISSUE:

Is the conjugal partnership liable for the payment of the liability?

RULING:

Article 160 of the New Civil Code provides that all the properties acquired during the marriage are presumed to belong to the conjugal partnership; unless it be proved that it pertains exclusively to the husband, or to the wife. In Tan v. Court of Appeals, the court held that it is not even necessary to prove that the properties were acquired with funds of the partnership. As long as the properties were acquired by the parties during the marriage, they are presumed to be conjugal in nature. In fact, even when the manner in which the properties were acquired does not appear, the presumption will still apply, and the properties will still be considered conjugal. The presumption of the conjugal nature of the properties acquired during the marriage subsists in the absence of clear, satisfactory and convincing evidence to overcome the same.

In this case, the evidence adduced by the petitioners in the RTC is that the 100,000 shares of stocks in the Citycorp Investment Philippines were issued to and registered in its corporate books in the name of the petitioner-husband when the said corporation was incorporated on May 14, 1979. This was done during the subsistence of the marriage of the petitioner-spouses. The shares of stocks are, thus, presumed to be the conjugal partnership property of the petitioners. The private respondent failed to adduce evidence that the petitioner-husband acquired the stocks with his exclusive money. The barefaced fact that the shares of stocks were registered in the corporate books of Citycorp Investment Philippines solely in the name of the petitioner-husband does not constitute proof that the petitioner-husband, not the conjugal partnership, owned the same.

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, the private respondent failed to prove that the conjugal partnership of the petitioners was benefited by the petitioner-husband’s 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 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 was burdened to establish that such benefit redounded to the conjugal partnership.

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. In this case, the petitioner-husband acted merely as a surety for the loan contracted by the PBMCI from the private respondent. The petition is GRANTED. The Decision and Resolution of the Court of Appeals are SET ASIDE AND REVERSED. The assailed orders of the RTC are AFFIRMED.

* Case digest by Paula Bianca B. Eguia, LLB-1, Andres Bonifacio Law School, SY 2017-2018

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