AYALA INVESTMENT & DEVT. CORP.

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 PBMs indebtedness to AIDC. PBM failed to pay the loan hence
resulted to AIDCs 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 TRO enjoining lower court from enforcing its order
thus paving the 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 Chings 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.