G.R. No. L-25659 October 31, 1969
LUZON SURETY CO., INC., petitioner, vs. JOSEFA AGUIRRE DE GARCIA, VICENTE GARCIA and the FOURTH DIVISION OF THE COURT OF APPEALS, respondents.

FACTS

Petitioner Luzon Surety Co., Inc. executed a surety bond in favor of the Philippine National Bank to guarantee a crop loan granted to Ladislao Chavez. On the same date, respondent Vicente Garcia, together with Ladislao Chavez and Ramon B. Lacson, signed an indemnity agreement wherein they bound themselves, jointly and severally, to indemnify Luzon Surety Co., Inc. for any liabilities it might incur under the surety bond. When the Philippine National Bank filed a complaint to recover the loan amount, Luzon Surety Co., Inc. filed a third-party complaint against the indemnitors, including Vicente Garcia. The court condemned the indemnitors to pay Luzon Surety Co., Inc. Pursuant to this decision, a writ of execution was issued against Vicente Garcia, and a writ of garnishment was levied on sugar quedans registered in the names of respondent-spouses Josefa Aguirre de Garcia and Vicente Garcia. The spouses filed a suit for injunction to enjoin the sale, arguing the conjugal partnership could not be held liable. The lower court and the Court of Appeals ruled in favor of the spouses, holding the conjugal partnership not liable under the indemnity agreement.

ISSUE

Whether a conjugal partnership can be held liable on an indemnity agreement executed by the husband to accommodate a third party in favor of a surety company, in the absence of any showing of benefits received by the partnership.

RULING

No. The conjugal partnership cannot be held liable. The Supreme Court affirmed the decision of the Court of Appeals. Under Article 161 of the Civil Code, the conjugal partnership is liable only for debts and obligations contracted by the husband for the benefit of the conjugal partnership. In this case, there was no proof that Vicente Garcia received any consideration for acting as guarantor which redounded to the benefit of the conjugal partnership. The benefit was clearly intended for the third party, Ladislao Chavez. While the husband may have enhanced his reputation or credit standing, such benefit is too remote and fanciful to satisfy the express requirement of the law. The provision is clear and must be applied as written. The law’s objective is to protect the financial stability of the conjugal partnership and the family unit, preventing the husband from saddling it with unnecessary liabilities that do not benefit it.