GR 118305; (February, 1998) (Digest)
G.R. No. 118305 February 12, 1998
AYALA INVESTMENT & DEVELOPMENT CORP. and ABELARDO MAGSAJO, petitioners, vs. COURT OF APPEALS and SPOUSES ALFREDO & ENCARNACION CHING, respondents.
FACTS
Philippine Blooming Mills (PBM) obtained a loan from petitioner Ayala Investment and Development Corporation (AIDC). Respondent Alfredo Ching, Executive Vice President of PBM, executed security agreements making himself jointly and severally answerable for PBM’s indebtedness. PBM failed to pay the loan, prompting AIDC to file a case for sum of money against PBM and Alfredo Ching. The court ordered them to pay jointly and severally. Pending appeal, a writ of execution was issued, and petitioner Deputy Sheriff Abelardo Magsajo levied on three conjugal properties of respondents-spouses Alfredo and Encarnacion Ching and scheduled an auction sale. The spouses filed an injunction case to stop the sale, arguing the loan did not redound to the benefit of the conjugal partnership. The auction proceeded, and AIDC was issued a Certificate of Sale. The trial court later declared the sale null and void, a decision affirmed by the Court of Appeals. The CA held that the loan was for the benefit of PBM, not the conjugal partnership, and AIDC failed to prove the debt was contracted by the husband for the benefit of the conjugal partnership.
ISSUE
Whether the conjugal partnership of gains of respondents-spouses is liable for the obligation secured by the husband under a surety agreement in favor of his employer.
RULING
No. The Supreme Court denied the petition and upheld the decision of the Court of Appeals. The Court ruled that the debt was not contracted for the benefit of the conjugal partnership. The husband’s act of signing as a surety for his employer’s corporate loan is not an exercise of an industry or profession, nor is it an act of administration for the benefit of the family. It is not part of his duties as an employee. The conjugal partnership is liable only for debts and obligations contracted by the husband for the benefit of the conjugal partnership. The burden of proving that the debt was contracted for such benefit lies with the creditor, and AIDC failed to discharge this burden. The Court distinguished this case from those where debts were incurred in the legitimate pursuit of a profession or business. Signing as a surety is not in itself a business or part of one’s profession. Therefore, the conjugal partnership, including the family home, is not liable for such an obligation.