3rd Exam Cases

8/11/2019 3rd Exam Cases

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ART 68-71: Rights and Obligations between Husband and Wife

ILUSORIO VS BILDNER

PARDO, J.:

May a wife secure a writ of habeas corpusto compel her husband to live with her in conjugal bliss? The answer is no.Marital rights including coverture and living in conjugal dwelling may not be enforced by the extra-ordinary writ of habeascorpus.

A writ of habeas corpusextends to all cases of illegal confinement or detention,[1]or by which the rightful custody of aperson is withheld from the one entitled thereto. [2]Slx

"Habeas corpusis a writ directed to the person detaining another, commanding him to produce the body of the prisoner ata designated time and place, with the day and cause of his capture and detention, to do, submit to, and receivewhatsoever the court or judge awarding the writ shall consider in that behalf."[3]

It is a high prerogative, common-law writ, of ancient origin, the great object of which is the liberation of those who may beimprisoned without sufficient cause.[4]It is issued when one is deprived of liberty or is wrongfully prevented fromexercising legal custody over another person.[5]

The petition of Erlinda K. Ilusorio

[6]

is to reverse the decision

[7]

of the Court of Appeals and its resolution

[8]

dismissing theapplication for habeas corpus to have the custody of her husband, lawyer Potenciano Ilusorio and enforce consortium asthe wife.

On the other hand, the petition of Potenciano Ilusorio [9]is to annul that portion of the decision of the Court of Appealsgiving Erlinda K. Ilusorio visitation rights to her husband and to enjoin Erlinda and the Court of Appeals from enforcing thevisitation rights.

The undisputed facts are as follows: Scslx

Erlinda Kalaw Ilusorio is the wife of lawyer Potenciano Ilusorio.

Potenciano Ilusorio is about 86 years of age possessed of extensive property valued at millions of pesos. For many years,

lawyer Potenciano Ilusorio was Chairman of the Board and President of Baguio Country Club.

On July 11, 1942, Erlinda Kalaw and Potenciano Ilusorio contracted matrimony and lived together for a period of thirty(30) years. In 1972, they separated from bed and board for undisclosed reasons. Potenciano lived at UrdanetaCondominium, Ayala Ave., Makati City when he was in Manila and at Ilusorio Penthouse, Baguio Country Club when hewas in Baguio City. On the other hand, Erlinda lived in Antipolo City.

Out of their marriage, the spouses had six (6) children, namely: Ramon Ilusorio (age 55); Erlinda Ilusorio Bildner (age 52);Maximo (age 50); Sylvia (age 49); Marietta (age 48); and Shereen (age 39).

On December 30, 1997, upon Potencianos arrival from the United States, he stayed with Erlinda for about five (5) monthsin Antipolo City. The children, Sylvia and Erlinda (Lin), alleged that during this time, their mother gave Potenciano an

overdose of 200 mg instead of 100 mg Zoloft, an antidepressant drug prescribed by his doctor in New York, U.S.A. As aconsequence, Potencianos health deteriorated.

On February 25, 1998, Erlinda filed with the Regional Trial Court, Antipolo City a petition[10]for guardianship over theperson and property of Potenciano Ilusorio due to the latters advanced age, frail health, poor eyesight and impaired

judgment.

On May 31, 1998, after attending a corporate meeting in Baguio City, Potenciano Ilusorio did not return to Antipolo Cityand instead lived at Cleveland Condominium, Makati. Slxsc


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On March 11, 1999, Erlinda filed with the Court of Appeals a petition for habeas corpusto have the custody of lawyerPotenciano Ilusorio. She alleged that respondents [11]refused petitioners demands to see and visit her husband andprohibited Potenciano from returning to Antipolo City.

After due hearing, on April 5, 1999, the Court of Appeals rendered decision the dispositive portion of which reads:

"WHEREFORE, in the light of the foregoing disquisitions, judgment is hereby rendered:

"(1) Ordering, for humanitarian consideration and upon petitioners manifestation, respondents Erlinda K.

Ilusorio Bildner and Sylvia Ilusorio-Yap, the administrator of Cleveland Condominium or anywhere in itsplace, his guards and Potenciano Ilusorios staff especially Ms. Aurora Montemayor to allow visitationrights to Potenciano Ilusorios wife, Erlinda Ilusorioand all her children, notwithstanding any list limitingvisitors thereof, under penalty of contempt in case of violation of refusal thereof; xxx

"(2) ORDERING that the writ of habeas corpus previously issued be recalled and the herein petition forhabeas corpus be DENIED DUE COURSE, as it is hereby DISMISSED for lack of unlawful restraint ordetention of the subject of the petition.

"SO ORDERED."[12]

Hence, the two petitions, which were consolidated and are herein jointly decided.

As heretofore stated, a writ of habeas corpus extends to all cases of illegal confinement or detention,[13]or by which therightful custody of a person is withheld from the one entitled thereto. It is available where a person continues to beunlawfully denied of one or more of his constitutional freedoms, where there is denial of due process, where the restraintsare not merely involuntary but are unnecessary, and where a deprivation of freedom originally valid has later becomearbitrary.[14]It is devised as a speedy and effectual remedy to relieve persons from unlawful restraint, as the best and onlysufficient defense of personal freedom.[15]Jksm

The essential object and purpose of the writ of habeas corpusis to inquire into all manner of involuntary restraint, and torelieve a person therefrom if such restraint is il legal.[16]

To justify the grant of the petition, the restraint of liberty must be an illegal and involuntary deprivation of freedom ofaction.[17]The illegal restraint of liberty must be actual and effective, not merely nominal or moral.[18]

The evidence shows that there was no actual and effective detention or deprivation of lawyer Potenciano Ilusorios libertythat would justify the issuance of the writ. The fact that lawyer Potenciano Ilusorio is about 86 years of age, or undermedication does not necessarily render him mentally incapacitated. Soundness of mind does not hinge on age or medicalcondition but on the capacity of the individual to discern his actions.

After due hearing, the Court of Appeals concluded that there was no unlawful restraint on his liberty.

The Court of Appeals also observed that lawyer Potenciano Ilusorio did not request the administrator of the ClevelandCondominium not to allow his wife and other children from seeing or visiting him. He made it clear that he did not object toseeing them.

As to lawyer Potenciano Ilusorios mental state, the Court of Appeals observed that he was of sound and alert mind,having answered all the relevant questions to the satisfaction of the court.

Being of sound mind, he is thus possessed with the capacity to make choices. In this case, the crucial choices revolve onhis residence and the people he opts to see or live with. The choices he made may not appeal to some of his familymembers but these are choices which exclusively belong to Potenciano. He made it clear before the Court of Appeals thathe was not prevented from leaving his house or seeing people. With that declaration, and absent any true restraint on hisliberty, we have no reason to reverse the findings of the Court of Appeals.

With his full mental capacity coupled with the right of choice, Potenciano Ilusorio may not be the subject of visitation rightsagainst his free choice. Otherwise, we will deprive him of his right to privacy. Needless to say, this will run against hisfundamental constitutional right. Es m


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The Court of Appeals exceeded its authority when it awarded visitation rights in a petition for habeas corpuswhere Erlindanever even prayed for such right. The ruling is not consistent with the finding of subjects sanity.

When the court ordered the grant of visitation rights, it also emphasized that the same shall be enforced under penalty ofcontempt in case of violation or refusal to comply. Such assertion of raw, naked power is unnecessary.

The Court of Appeals missed the fact that the case did not involve the right of a parent to visit a minor child but the right ofa wife to visit a husband. In case the husband refuses to see his wife for private reasons, he is at liberty to do so withoutthreat of any penalty attached to the exercise of his right.

No court is empowered as a judicial authority to compel a husband to live with his wife. Coverture cannot be enforced bycompulsion of a writ ofhabeas corpuscarried out by sheriffs or by any other mesne process. That is a matter beyondjudicial authority and is best left to the man and womans free choice.

WHEREFORE, in G. R. No. 139789, the Court DISMISSES the petition for lack of merit. No costs.

In G. R. No. 139808, the Court GRANTS the petition and nullifies the decision of the Court of Appeals insofar as it givesvisitation rights to respondent Erlinda K. Ilusorio. No costs.

SO ORDERED.

ART 87: Donation between Spouses during the Marriage

ARCABA VS TABANCURA

MENDOZA, J.:

Petitioner Cirila Arcaba seeks review on certiorari of the decision [1] of the Court of Appeals, which affirmed withmodification the decision[2]of the Regional Trial Court, Branch 10, Dipolog City, Zamboanga del Norte in Civil Case No.4593, declaring as void a deed of donation inter vivos (A contract which takes place by the mutual consent, of the giver,who divests himself of the thing given in order to transmit the title of it to the donee gratuitously, and the donee, whoaccepts the thing and acquires a legal title to it) executed by the late Francisco T. Comille in her favor and its subsequen

resolution[3]denying reconsideration.

The facts are as follows:

On January 16, 1956, Francisco Comille and his wife Zosima Montallana became the registered owners of Lot No437-A located at the corner of Calle Santa Rosa (now Balintawak Street) and Calle Rosario (now Rizal Avenue) in DipologCity, Zamboanga del Norte. The total area of the lot was 418 square meters.[4]After the death of Zosima on October 31980, Francisco and his mother-in-law, Juliana Bustalino Montallana, executed a deed of extrajudicial partition with waiverof rights, in which the latter waived her share consisting of one-fourth (1/4) of the property to Francisco.

[5]On June 271916, Francisco registered the lot in his name with the Registry of Deeds.[6]

Having no children to take care of him after his retirement, Francisco asked his niece Leticia Bellosillo, [7]the latterscousin, Luzviminda Paghacian,[8]and petitioner Cirila Arcaba, then a widow, to take care of his house, as well as the storeinside.[9]

Conflicting testimonies were offered as to the nature of the relationship between Cirila and Francisco. LeticiaBellosillo said Francisco and Cirila were lovers since they slept in the same room, [10]while Erlinda Tabancura,[11]anotheniece of Francisco, claimed that the latter had told her that Cirila was his mistress. [12]On the other hand, Cirila said shewas a mere helper who could enter the masters bedroom only when the old man asked her to and that Francisco in anycase was too old for her. She denied they ever had sexual intercourse.[13]

It appears that when Leticia and Luzviminda were married, only Cirila was left to take care of Francisco. [14]Cirilatestified that she was a 34-year old widow while Francisco was a 75-year old widower when she began working for thelatter; that he could still walk with her assistance at that time;[15]and that his health eventually deteriorated and he becamebedridden.[16]Erlinda Tabancura testified that Franciscos sole source of income consisted of rentals from his lot near thepublic streets.[17]He did not pay Cirila a regular cash wage as a househelper, though he provided her family with food andlodging.[18]


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On January 24, 1991, a few months before his death, Francisco executed an instrument denominated Deed oDonation Inter Vivos, in which he ceded a portion of Lot 437-A, consisting of 150 square meters, together with his houseto Cirila, who accepted the donation in the same instrument. Francisco left the larger portion of 268 square meters in hisname. The deed stated that the donation was being made in consideration of the faithful services [Cirila Arcaba] hadrendered over the past ten (10) years.The deed was notarized by Atty. Vic T. Lacaya, Sr. [19]and later registered by Cirilaas its absolute owner.[20]

On October 4, 1991, Francisco died without any children. In 1993, the lot which Cirila received from Francisco had amarket value of P57,105.00 and an assessed value of P28,550.00.[21]

On February 18, 1993, respondents filed a complaint against petitioner for declaration of nullity of a deed ofdonation inter vivos, recovery of possession, and damages. Respondents, who are the decedents nephews and niecesand his heirs by intestate succession, alleged that Cirila was the common-law wife of Francisco and the donation intevivosmade by Francisco in her favor is void under Article 87 of the Family Code, which provides:

Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shallbe void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. Theprohibition shall also apply to persons living together as husband and wife without a valid marriage.

On February 25, 1999, the trial court rendered judgment in favor of respondents, holding the donation void under thisprovision of the Family Code. The trial court reached this conclusion based on the testimony of Erlinda Tabancura andcertain documents bearing the signature of one Cirila Comille. The documents were (1) an application for a businesspermit to operate as real estate lessor, dated January 8, 1991, with a carbon copy of the signature Cirila Comille; [22](2) a

sanitary permit to operate as real estate lessor with a health certificate showing the signature Cirila Comille in blackink;[23] and (3) the death certificate of the decedent with the signature Cirila A. Comille written in black ink. [24]Thedispositive portion of the trial courts decision states:

WHEREFORE, in view of the foregoing, judgment is rendered:

1. Declaring the Deed of Donation Inter Vivos executed by the late Francisco Comille recorded as Doc. No. 7; Page No. 3Book No. V; Series of 1991 in the Notarial Register of Notary Public Vic T. Lacaya (Annex A to the Complaint) null andvoid;

2. Ordering the defendant to deliver possession of the house and lot subject of the deed unto the plaintiffs within thirty (30days after finality of this decision; and finally

3. Ordering the defendant to pay attorneys fees in the sum ofP10,000.00.

SO ORDERED.[25]

Petitioner appealed to the Court of Appeals, which rendered on June 19, 2000 the decision subject of this appeal. Asalready stated, the appeals court denied reconsideration. Its conclusion was based on (1) the testimonies of LeticiaErlinda, and Cirila; (2) the copies of documents purportedly showing Cirilas use of Franciscos surname; (3) a pleading inanother civil case mentioning payment of rentals to Cirila as Franciscos common-law wife; and (4) the fact that Cirila didnot receive a regular cash wage.

Petitioner assigns the following errors as having been committed by the Court of Appeals:

(a) The judgment of the Court of Appeals that petitioner was the common-law wife of the late Francisco Comille is notcorrect and is a reversible error because it is based on a misapprehension of facts, and unduly breaks the chain ofcircumstances detailed by the totality of the evidence, its findings being predicated on totally incompetent or hearsayevidence, and grounded on mere speculation, conjecture or possibility. (Salazar v. Gutierrez, 33 SCRA 243 and othercases; cited in Quiason, Philippine Courts and their Jurisdictions, 1993 ed., p. 604)

(b) The Court of Appeals erred in shifting the burden of evidence from the plaintiff to defendant. (Bunyi v. Reyes, 39SCRA 504; Quiason, id.)

(c) The Court of Appeals decided the case in a way probably not in accord with law or with the applicable jurisprudence inRodriguez v. Rodriguez, 20 SCRA 908, and Liguez v. CA, 102 Phil. 577, 584.[26]


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The issue in this case is whether the Court of Appeals correctly applied Art. 87 of the Family Code to thecircumstances of this case. After a review of the records, we rule in the affirmative.

The general rule is that only questions of law may be raised in a petition for review under Rule 45 of the Rules ofCourt, subject only to certain exceptions: (a) when the conclusion is a finding grounded entirely on speculations, surmisesor conjectures; (b) when the inference made is manifestly mistaken, absurd, or impossible; (c) where there is grave abuseof discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the findings of fact are conflicting(f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to theadmissions of both appellant and appellee; (g) when the findings of the Court of Appeals are contrary to those of the trialcourt; (h) when the findings of fact are conclusions without citation of specific evidence on which they are based; (i) when

the finding of fact of the Court of Appeals is premised on the supposed absence of evidence but is contradicted by theevidence on record; and (j) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by theparties and which, if properly considered, would justify a different conclusion. [27] It appearing that the Court of Appealsbased its findings on evidence presented by both parties, the general rule should apply.

In Bitangcor v. Tan,[28]we held that the term cohabitation or living together as husband and wife means not onlyresiding under one roof, but also having repeated sexual intercourse. Cohabitation, of course, means more than sexuaintercourse, especially when one of the parties is already old and may no longer be interested in sex. At the very leastcohabitation is thepublicassumption by a man and a woman of the marital relation, and dwelling together as man andwife, thereby holding themselves out to the public as such. Secret meetings or nights clandestinely spent together, even ioften repeated, do not constitute such kind of cohabitation; they are merely meretricious. [29]In this jurisdiction, this Courhas considered as sufficient proof of common-law relationship the stipulations between the parties, [30]a conviction oconcubinage,[31]or the existence of illegitimate children.[32]

Was Cirila Franciscos employee or his common-law wife? Cirila admitted that she and Francisco resided under oneroof for a long time. It is very possible that the two consummated their relationship, since Cirila gave Franciscotherapeutic massage and Leticia said they slept in the same bedroom. At the very least, their public conduct indicatedthat theirs was not just a relationship of caregiver and patient, but that of exclusive partners akin to husband and wife.

Aside from Erlinda Tabancuras testimony that her uncle told her that Cirila was his mistress, there are otherindications that Cirila and Francisco were common-law spouses. Seigfredo Tabancura presented documents apparentlysigned by Cirila using the surname Comille. As previously stated, these are an application for a business permit tooperate as a real estate lessor,[33]a sanitary permit to operate as real estate lessor with a health certificate, [34]and thedeath certificate of Francisco.[35]These documents show that Cirila saw herself as Franciscos common -law wifeotherwise, she would not have used his last name. Similarly, in the answer filed by Franciscos lessees(renter) in ErlindaTabancura, et al. vs. Gracia Adriatico Sy and Antonio Sy, RTC Civil Case No. 4719 (for collection of rentals), theselessees referred to Cirila as the common-law spouse of Francisco. Finally, the fact that Cirila did not demand fromFrancisco a regular cash wage is an indication that she was not simply a caregiver- employee, but Franciscos commonlaw spouse. She was, after all, entitled to a regular cash wage under the law.[36]It is difficult to believe that she stayedwith Francisco and served him out of pure beneficence. Human reason would thus lead to the conclusion that she wasFranciscos common-law spouse.

Respondents having proven by a preponderance of evidence that Cirila and Francisco lived together as husband andwife without a valid marriage, the inescapable conclusion is that the donation made by Francisco in favor of Cirila is voidunder Art. 87 of the Family Code.

WHEREFORE, the decision of the Court of Appeals affirming the decision of the trial court is hereby AFFIRMED.

SO ORDERED.

ART 105-133: Conjugal Partnership of Gains

A. Concept

MUNOZ, JR VS CARLOS

BRION, J.:We resolve the present petition for review on certiorari[1] filed by petitioner Francisco Muoz, Jr. (petitioner) to

challenge the decision[2]and the resolution[3]of the Court of Appeals (CA) in CA-G.R. CV No. 57126.[4]The CA decisionset aside the decision[5]of the Regional Trial Court (RTC), Branch 166, Pasig City, in Civil Case No. 63665. The CAresolution denied the petitioners subsequent motion for reconsideration.


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FACTUAL BACKGROUND

The facts of the case, gathered from the records, are briefly summarized below.

Subject of the present case is a seventy-seven (77)-square meter residential house and lot located at 170 A.Bonifacio Street, Mandaluyong City (subject property), covered by Transfer Certificate of Title (TCT) No. 7650 of theRegistry of Deeds of Mandaluyong City in the name of the petitioner.[6]

The residential lot in the subject property was previously covered by TCT No. 1427, in the name of ErlindaRamirez, married to Eliseo Carlos (respondents).[7]

On April 6, 1989, Eliseo, a Bureau of Internal Revenue employee, mortgaged TCT No. 1427, with Erlindasconsent, to the Government Service Insurance System (GSIS) to secure a P136,500.00 housing loan, payable withintwenty (20) years, through monthly salary deductions of P1,687.66. [8] The respondents then constructed a thirty-six (36)square meter, two-story residential house on the lot.

On July 14, 1993, the title to the subject property was transferred to the petitioner by virtue of a Deed of AbsoluteSale, dated April 30, 1992, executed by Erlinda, for herself and as attorney-in-fact of Eliseo, for a stated considerationof P602,000.00.[9]

On September 24, 1993, the respondents filed a complaint with the RTC for the nullification of the deed oabsolute sale, claiming that there was no sale but only a mortgage transaction, and the documents transferring the title tothe petitioners name were falsified.

The respondents alleged that in April 1992, the petitioner granted them a P600,000.00 loan, to be secured by afirst mortgage on TCT No. 1427; the petitioner gave Erlinda a P200,000.00 [10]advance to cancel the GSIS mortgage, andmade her sign a document purporting to be the mortgage contract; the petitioner promised to give the P402,000.00balance when Erlinda surrenders TCT No. 1427 with the GSIS mortgage cancelled, and submits an affidavit signed byEliseo stating that he waives all his rights to the subject property; with the P200,000.00 advance, Erlinda paidGSIS P176,445.27[11]to cancel the GSIS mortgage on TCT No. 1427;[12] in May 1992, Erlinda surrendered to thepetitioner the clean TCT No. 1427, but returned Eliseos affidavit, unsigned; since Eliseos affidavit was unsigned, thepetitioner refused to give the P402,000.00 balance and to cancel the mortgage, and demanded that Erlinda returnthe P200,000.00 advance; since Erlinda could not return the P200,000.00 advance because it had been used to pay theGSIS loan, the petitioner kept the title; and in 1993, they discovered that TCT No. 7650 had been issued in the petitionersname, cancelling TCT No.1427 in their name.

The petitioner countered that there was a valid contract of sale. He alleged that the respondents sold the subjecproperty to him after he refused their offer to mortgage the subject property because they lacked paying capacity andwere unwilling to pay the incidental charges; the sale was with the implied promise to repurchase within oneyear,[13]during which period (from May 1, 1992 to April 30, 1993), the respondents would lease the subject property for amonthly rental of P500.00;[14]when the respondents failed to repurchase the subject property within the one-year perioddespite notice, he caused the transfer of title in his name on July 14, 1993; [15]when the respondents failed to pay themonthly rentals despite demand, he filed an ejectment case[16]against them with the Metropolitan Trial Court (MeTC)Branch 60, Mandaluyong City, on September 8, 1993, or sixteen days before the filing of the RTC case for annulment ofthe deed of absolute sale.

During the pendency of the RTC case, or on March 29, 1995, the MeTC decided the ejectment case. It orderedErlinda and her family to vacate the subject property, to surrender its possession to the petitioner, and to pay the overduerentals.[17]

In the RTC, the respondents presented the results of the scientific examination[18] conducted by the NationaBureau of Investigation of Eliseos purported signatures in the Special Power of Attorney[19]dated April 29, 1992 and the

Affidavit of waiver of rights dated April 29, 1992,[20]showing that they were forgeries.

The petitioner, on the other hand, introduced evidence on the paraphernal nature of the subject property since itwas registered in Erlindas name; the residential lot was part of a large parcel of land owned by Pedro Ramirez andFructuosa Urcla, Erlindas parents;it was the subject of Civil Case No. 50141, a complaint for annulment of sale, beforethe RTC, Branch 158, Pasig City, filed by the surviving heirs of Pedro against another heir, Amado Ramirez, Erlindasbrother; and, as a result of a compromise agreement, Amado agreed to transfer to the other compulsory heirs of Pedro,including Erlinda, their rightful shares of the land.[21]

THE RTC RULING


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In a Decision dated January 23, 1997, the RTC dismissed the complaint. It found that the subject property was

Erlindas exclusive paraphernal property that was inherited from her father. It also upheld the sale to the petitioner, evenwithout Eliseos consent as the deed of absolute sale bore the genuine signatures of Erlinda and the petitioner as vendorand vendee, respectively. It concluded that the NBI finding that Eliseos signatures in the special power of attorney and inthe affidavit were forgeries was immaterial because Eliseos consent to the sale was not necessary.

[22]

The respondents elevated the case to the CA via an ordinary appeal under Rule 41 of the Revised Rules of Court

THE CA RULING

The CA decided the appeal on June 25, 2002. Applying the second paragraph of Article 158 [23]of the Civil Codeand Calimlim-Canullas v. Hon. Fortun,[24]the CA held that the subject property, originally Erlindas exclusive paraphernaproperty, became conjugal property when it was used as collateral for a housing loan that was paid through conjugalfunds Eliseos monthly salary deductions; the subject property, therefore, cannot be validly sold or mortgaged withoutEliseos consent, pursuant to Article 124[25]of the Family Code. Thus, the CA declared void the deed of absolute sale, andset aside the RTC decision.

When the CA denied[26]the subsequent motion for reconsideration,[27]the petitioner filed the present petition forreview oncertiorariunder Rule 45 of the Revised Rules of Court.

THE PETITIONThe petitioner argues that the CA misapplied the second paragraph of Article 158 of the Civil Code and Calimlim

Canullas[28]because the respondents admitted in the complaint that it was the petitioner who gave the money used tocancel the GSIS mortgage on TCT No. 1427; Article 120[29]of the Family Code is the applicable rule, and since the valueof the house is less than the value of the lot, then Erlinda retained ownership of the subject property. He also argues thatthe contract between the parties was a sale, not a mortgage, because (a) Erlinda did not deny her signature in thedocument;[30](b) Erlinda agreed to sign a contract of lease over the subject property; [31]and, (c) Erlinda executed a letterdated April 30, 1992, confirming the conversion of the loan application to a deed of sale.[32]

THE CASE FOR THE RESPONDENTS

The respondents submit that it is unnecessary to compare the respective values of the house and of the lot todetermine ownership of the subject property; it was acquired during their marriage and, therefore, considered conjugaproperty. They also submit that the transaction between the parties was not a sale, but an equitable mortgage because (athey remained in possession of the subject property even after the execution of the deed of absolute sale, (b) they paid

the 1993 real property taxes due on the subject property, and (c) they received P200,000.00 only of the total stated priceof P602,000.00.

THE ISSUE

The issues in the present case boil down to (1) whether the subject property is paraphernal or conjugal; and, (2whether the contract between the parties was a sale or an equitable mortgage.

OUR RULING

We deny the present Petition but for reasons other than those advanced by the CA.

This Court is not a trier of facts. However, if the inference, drawn by the CA, from the facts is manifestly mistakenas in the present case, we can review the evidence to allow us to arrive at the correct factual conclusions based on therecord.[33]

First Issue:

Paraphernal or Conjugal?

As a general rule, all property acquired during the marriage, whether the acquisition appears to have been madecontracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved. [34]

In the present case, clear evidence that Erlinda inherited the residential lot from her father has sufficientlyrebutted this presumption of conjugal ownership.[35] Pursuant to Articles 92[36]and 109[37]of the Family Code, propertiesacquired by gratuitous title by either spouse, during the marriage, shall be excluded from the community property and bethe exclusive property of each spouse.[38] The residential lot, therefore, is Erlindas exclusive paraphernal property.


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The CA, however, held that the residential lot became conjugal when the house was built thereon through

conjugal funds, applying the second paragraph of Article 158 of the Civil Code and Calimlim-Canullas.[39]Under thesecond paragraph of Article 158 of the Civil Code, a land that originally belonged to one spouse becomes conjugal uponthe construction of improvements thereon at the expense of the partnership. We applied this provision in Calimlim-Canullas,

[40]where we held that when the conjugal house is constructed on land belonging exclusively to the husband, theland ipso factobecomes conjugal, but the husband is entitled to reimbursement of the value of the land at the liquidationof the conjugal partnership.

The CA misappl ied A rticle 158 of theCivi l Code and Cal iml im -Canul las

We cannot subscribe to the CAs misplaced reliance on Article 158 of the Civil Code and Calimlim-Canullas.

As the respondents were married during the effectivity of the Civil Code, its provisions on conjugal partnership ogains (Articles 142 to 189) should have governed their property relations. However, with the enactment of the FamilyCode on August 3, 1989, the Civil Code provisions on conjugal partnership of gains, including Article 158, have beensuperseded by those found in the Family Code (Articles 105 to 133). Article 105 of the Family Code states:

x x x x

The provisions of this Chapter [on the Conjugal Partnership of Gains] shall also apply toconjugal partnerships of gains already established between spouses before the effectivity of this

Code,without prejudice to vested rights already acquired in accordance with the Civil Code or other laws,as provided in Article 256.

Thus, in determining the nature of the subject property, we refer to the provisions of the Family Code, and not the CiviCode, except with respect to rights then already vested.

Article 120 of the Family Code, which supersedes Article 158 of the Civil Code, provides the solution indetermining the ownership of the improvements that are made on the separate property of the spouses, at the expense othe partnership or through the acts or efforts of either or both spouses. Under this provision, when the cost of theimprovement and any resulting increase in value are more than the value of the property at the time of the improvementthe entire property of one of the spouses shall belong to the conjugal partnership, subject to reimbursement of the value othe property of the owner-spouse at the time of the improvement; otherwise, said property shall be retained in ownership

by the owner-spouse, likewise subject to reimbursement of the cost of the improvement.[41]

In the present case, we find that Eliseo paid a portion only of the GSIS loan through monthly salary deductionsFrom April 6, 1989[42] to April 30, 1992,[43] Eliseo paid about P60,755.76,[44]not the entire amount of the GSIS housingloan plus interest, since the petitioner advanced the P176,445.27 [45] paid by Erlinda to cancel the mortgage in 1992Considering the P136,500.00 amount of the GSIS housing loan, it is fairly reasonable to assume that the value of theresidential lot is considerably more than the P60,755.76 amount paid by Eliseo through monthly salary deductions.

Thus, the subject property remained the exclusive paraphernal property of Erlinda at the time she contracted withthe petitioner; the written consent of Eliseo to the transaction was not necessary. The NBI finding that Eliseos signaturesin the special power of attorney and affidavit were forgeries was immaterial.

Nonetheless, the RTC and the CA apparently failed to consider the real nature of the contract between theparties.

Second Issue:

Sale or Equitable Mortgage?Jurisprudence has defined an equitable mortgage "as one which although lacking in some formality, or form o

words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real propertyas security for a debt, there being no impossibility nor anything contrary to law in this intent."[46]

Article 1602 of the Civil Code enumerates the instances when a contract, regardless of its nomenclature, may bepresumed to be an equitable mortgage: (a) when the price of a sale with right to repurchase is unusually inadequate;(b)when the vendor remains in possession as lessee or otherwise; (c) when upon or after the expiration of the righto repurchase another instrument extending the period of redemption or granting a new period is executed; (d) when the


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purchaser retains for himself a part of the purchase price; (e) when the vendor binds himself to pay the taxes onthe thing sold; and,(f) in any other case where it may be fairly inferred that the real intention of the parties is thatthe transaction shall secure the payment of a debt or the performance of any other obligation . These instancesapply to a contract purporting to be an absolute sale.[47]

For the presumption of an equitable mortgage to arise under Article 1602 of the Civil Code, two (2) requisitesmust concur: (a) that the parties entered into a contract denominated as a contract of sale; and, (b) that their intention wasto secure an existing debt by way of a mortgage. Any of the circumstances laid out in Article 1602 of the Civil Code, notthe concurrence nor an overwhelming number of the enumerated circumstances, is sufficient to support the conclusionthat a contract of sale is in fact an equitable mortgage.[48]

Contract is an equi tab le mortgage

In the present case, there are four (4) telling circumstances pointing to the existence of an equitable mortgage.

First, the respondents remained in possession as lessees of the subject property; the parties, in fact, executed aone-year contract of lease, effective May 1, 1992 to April 30, 1993.[49]

Second, the petitioner retained part of the purchase price, the petitioner gave a P200,000.00 advance to settlethe GSIS housing loan, but refused to give the P402,000.00 balance when Erlinda failed to submit Eliseos signed affidavitof waiver of rights.

Third, respondents paid the real property taxes on July 8, 1993, despite the alleged sale on April 30

1992;[50]payment of real property taxes is a usual burden attaching to ownership and when, as here, such payment iscoupled with continuous possession of the property, it constitutes evidence of great weight that the person under whosename the realty taxes were declared has a valid and rightful claim over the land.[51]

Fourth, Erlinda secured the payment of the principal debt owed to the petitioner with the subject property. Therecords show that the petitioner, in fact, sent Erlinda a Statement of Account showing that as of February 20, 1993, sheowed P384,660.00, and the daily interest, starting February 21, 1993, was P641.10. [52]Thus, the parties clearly intendedan equitable mortgage and not a contract of sale.

That the petitioner advanced the sum of P200,000.00 to Erlinda is undisputed. This advance, in fact, promptedthe latter to transfer the subject property to the petitioner. Thus, before the respondents can recover the subject propertythey must first return the amount of P200,000.00 to the petitioner, plus legal interest of 12% per annum, computed from

April 30, 1992.

We cannot sustain the ballooned obligation of P384,660.00, claimed in the Statement of Account sent by thepetitioner,[53]sans any evidence of how this amount was arrived at. Additionally, a daily interest of P641.10 or P19,233.00per month for aP200,000.00 loan is patently unconscionable. While parties are free to stipulate on the interest to beimposed on monetary obligations, we can step in to temper the interest rates if they are unconsc ionable.[54]

In Lustan v. CA,[55]where we established the reciprocal obligations of the parties under an equitable mortgage, weordered the reconveyance of the property to the rightful owner therein upon the payment of the loan within ninety (90)days from the finality of the decision. [56]

WHEREFORE, in light of all the foregoing, we hereby DENY the present petition. The assailed decision andresolution of the Court of Appeals in CA-G.R. CV No. 57126 are AFFIRMEDwith the following MODIFICATIONS:

1. The Deed of Absolute Sale dated April 30, 1992 is hereby declared an equitable mortgage; and

2. The petitioner is obligated to RECONVEY to the respondents the property covered by Transfer Certificate oTitle No. 7650 of the Register of Deeds of Mandaluyong City, UPON THE PAYMENT OF P200,000.00, with 12% legainterest from April 30, 1992, by respondents within NINETY DAYS FROM THE FINALITY OF THIS DECISION.

Costs against the petitioner.

SO ORDERED.


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B. Liabilities of the Conjugal Partnership

AYALA INVESTMENTS VS CA

MARTINEZ, J.:

Under Article 161 of the Civil Code, what debts and obligations contracted by the husband alone are considered forthe benefit of the conjugal partnership which are chargeable against the conjugal partnership? Is a surety agreement oan accommodation contract entered into by the husband in favor of his employer within the contemplation of the saidprovision?

These are the issues which we will resolve in this petition for review.

The petitioner assails the decision dated April 14, 1994 of the respondent Court of Appeals in Spouses Alfredo andEncarnacion Ching vs. Ayala Investment and Development Corporation, et. al., docketed as CA-G.R. CV No29632,[1]upholding the decision of the Regional Trial Court of Pasig, Branch 168, which ruled that the conjugapartnership of gains of respondents-spouses Alfredo and Encarnacion Ching is not liable for the payment of the debtssecured by respondent-husband Alfredo Ching.

A chronology of the essential antecedent facts is necessary for a clear understanding of the case at bar.

Philippine Blooming Mills (hereinafter referred to as PBM) obtained a P50,300,000.00 loan from petitioner AyalaInvestment and Development Corporation (hereinafter referred to as AIDC). As added security for the credit line extendedto PBM, respondent Alfredo Ching, Executive Vice President of PBM, executed security agreements on December 101980 and on March 20, 1981 making himself jointly and severally answerable with PBMs indebtedness to AIDC.

PBM failed to pay the loan. Thus, on July 30, 1981, AIDC filed a case for sum of money against PBM andrespondent-husband Alfredo Ching with the then Court of First Instance of Rizal (Pasig), Branch VIII, entitled AyalaInvestment and Development Corporation vs.Philippine Blooming Mills and Alfredo Ching, docketed as Civil Case No42228.

After trial, the court rendered judgment ordering PBM and respondent-husband Alfredo Ching to jointly and severallypay AIDC the principal amount of P50,300,000.00 with interests.

Pending appeal of the judgment in Civil Case No. 42228, upon motion of AIDC, the lower court issued a writ ofexecution pending appeal. Upon AIDCs putting up of anP8,000,000.00 bond, a writ of execution dated May 12, 1982 wasissued. Thereafter, petitioner Abelardo Magsajo, Sr., Deputy Sheriff of Rizal and appointed sheriff in Civil Case No42228, caused the issuance and service upon respondents-spouses of a notice of sheriff sale dated May 20, 1982 onthree (3) of their conjugal properties. Petitioner Magsajo then scheduled the auction sale of the properties levied.

On June 9, 1982, private respondents filed a case of injunction against petitioners with the then Court of FirstInstance of Rizal (Pasig), Branch XIII, to enjoin the auction sale alleging that petitioners cannot enforce the judgmentagainst the conjugal partnership levied on the ground that, among others, the subject loan did not redound to the benefitof the said conjugal partnership.[2]Upon application of private respondents, the lower court issued a temporary restrainingorder to prevent petitioner Magsajo from proceeding with the enforcement of the writ of execution and with the sale of thesaid properties at public auction.

AIDC filed a petition for certioraribefore the Court of Appeals,[3]questioning the order of the lower court enjoining thesale. Respondent Court of Appeals issued a Temporary Restraining Order on June 25, 1982, enjoining the lowercourt[4] from enforcing its Order of June 14, 1982, thus paving the way for the scheduled auction sale of respondentsspouses conjugal properties.

On June 25, 1982, the auction sale took place. AIDC being the only bidder, was issued a Certificate of Sale bypetitioner Magsajo, which was registered on July 2, 1982. Upon expiration of the redemption period, petitioner sheriffissued the final deed of sale on August 4, 1982 which was registered on August 9, 1983.

In the meantime, the respondent court, on August 4, 1982, decided CA-G.R. SP No. 14404, in this manner:

WHEREFORE, the petition for certiorariin this case is granted and the challenged order of the respondentJudge dated June 14, 1982 in Civil Case No. 46309 is hereby set aside and nullified. The same petitioninsofar as it seeks to enjoin the respondent Judge from proceeding with Civil Case No. 46309 is, however,denied. No pronouncement is here made as to costs. x x x x.[5]

On September 3, 1983, AIDC filed a motion to dismiss the petition for injunction filed before Branch XIII of the CFI ofRizal (Pasig) on the ground that the same had become moot and academic with the consummation of thesale. Respondents filed their opposition to the motion arguing, among others, that where a third party who claims


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ownership of the property attached or levied upon, a different legal situation is presented; and that in this case, two (2) ofthe real properties are actually in the name of Encarnacion Ching, a non-party to Civil Case No. 42228.

The lower court denied the motion to dismiss. Hence, trial on the merits proceeded. Private respondents presentedseveral witnesses. On the other hand, petitioners did not present any evidence.

On September 18, 1991, the trial court promulgated its decision declaring the sale on execution null andvoid. Petitioners appealed to the respondent court, which was docketed as CA-G.R. CV No. 29632.

On April 14, 1994, the respondent court promulgated the assailed decision, affirming the decision of the regional trialcourt. It held that:

The loan procured from respondent-appellant AIDC was for the advancement and benefit of PhilippineBlooming Mills and not for the benefit of the conjugal partnership of petitioners-appellees.

x x x x x x x x x

As to the applicable law, whether it is Article 161 of the New Civil Code or Article 1211 of the Family Code-suffice it to say that the two provisions are substantially the same. Nevertheless, We agree with the trial courtthat the Family Code is the applicable law on the matter x x x x x x.

Article 121 of the Family Code provides that The conjugal partnership shall be liable for: x x x (2) All debtsand obligations contracted during the marriage by the designated Administrator-Spouse for the benefit of theconjugal partnership of gains x x x. The burden of proof that the debt was contracted for the benefit of theconjugal partnership of gains, lies with the creditor-party litigant claiming as such. In the case at bar,respondent-appellant AIDC failed to prove that the debt was contracted by appellee-husband, for the benefit ofthe conjugal partnership of gains.

The dispositive portion of the decision reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered DISMISSING the appeal. Thedecision of the Regional Trial Court is AFFIRMED in toto.[6]

Petitioner filed a Motion for Reconsideration which was denied by the respondent court in a Resolution datedNovember 28, 1994.[7]

Hence, this petition for review. Petitioner contends that the respondent court erred in ruling that the conjugapartnership of private respondents is not liable for the obligation by the respondent-husband.

Specifically, the errors allegedly committed by the respondent court are as follows:

I. RESPONDENT COURT ERRED IN RULING THAT THE OBLIGATION INCURRED BY RESPONDENTHUSBAND DID NOT REDOUND TO THE BENEFIT OF THE CONJUGAL PARTNERSHIP OF THEPRIVATE RESPONDENT.

II RESPONDENT COURT ERRED IN RULING THAT THE ACT OF RESPONDENT HUSBAND INSECURING THE SUBJECT LOAN IS NOT PART OF HIS INDUSTRY, BUSINESS OR CAREER FROMWHICH HE SUPPORTS HIS FAMILY.

Petitioners in their appeal point out that there is no need to prove that actual benefit redounded to the benefit of thepartnership; all that is necessary, they say, is that the transaction was entered into for the benefit of the conjugapartnership. Thus, petitioners aver that:

The wordings of Article 161 of the Civil Code is very clear: for the partnership to be held liable, the husbandmust have contracted the debt for thebenefit of the partnership, thus:

Art. 161. The conjugal partnership shall be liable for:

1) all debts and obligations contracted by the husband for the benefit of the conjugalpartnership x x x.

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 latterrequires only that the transaction should be one which normally would produce benefit to the partnership,regardless of whether or not actual benefit accrued.

[8]

We do not agree with petitioners that there is a difference between the terms redounded to the benefit of orbenefited from on the one hand; and for the benefit of on the other. They mean one and the same thing. Article 161


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(1) of the Civil Code and Article 121 (2) of the Family Code are similarly worded, i.e., both use the term for the benefitof. On the other hand, Article 122 of the Family Code provides that Th e payment of personal debts by the husband orthe wife before or during the marriage shall not be charged to the conjugal partnership except insofar as they redoundedto the benefit of the family. As can be seen, the terms are used interchangeably.

Petitioners further contend that the ruling of the respondent court runs counter to the pronouncement of this Court inthe case of Cobb-Perezvs. Lantin,[9]that the husband as head of the family and as administrator of the conjugapartnership is presumed to have contracted obligations for the benefit of the family or the conjugal partnership.

Contrary to the contention of the petitioners, the case of Cobb-Perez is not applicable in the case at bar. This Cour

has, on several instances, interpreted the term for the benefit of the conjugal partnership.In the cases of Javier vs.Osmea,[10]Abella de Diaz vs. Erlanger & Galinger, Inc.,[11]Cobb-Perez vs. Lantin[12]and

G-Tractors, Inc. vs. Court of Appeals,[13]cited by the petitioners, we held that:

The debtscontracted by the husband during the marriage relation, for and in the exercise of the industry orprofession by which he contributes toward the support of his family, are not his personal and private debts,and the products or income from the wifes own property, which, like those of her husbands, are liable for thepayment of the marriage expenses, cannot be excepted from the payment of such debts. (Javier)

The husband, as the manager of the partnership (Article 1412, Civil Code), has a right to embark thepartnership in an ordinary commercial enterprise for gain, and the fact that the wife may not approve of aventure does not make it a private and personal one of the husband. (Abella de Diaz)

Debts contracted by the husband for and in the exercise of the industry or profession by which he contributes

to the support of the family, cannot be deemed to be his exclusive and private debts. (Cobb -Perez)x x x if he incurs an indebtedness in the legitimate pursuit of his career or profession or suffers l osses in alegitimate business, the conjugal partnership must equally bear the indebtedness and the losses, unless hedeliberately acted to the prejudice of his family. (G-Tractors)

However, in the cases of Ansaldo vs. Sheriff of Manila, Fidelity Insurance & Luzon Insurance Co.,[14]LibertyInsurance Corporation vs. Banuelos,[15]and Luzon Surety Inc. vs. De Garcia,[16]cited by the respondents, we ruled that:

The fruits of the paraphernal property which form part of the assets of the conjugal partnership, are subject tothe payment of the debts and expenses of the spouses, but not to the payment of the personal obligations(guaranty agreements) of the husband, unless it be proved that such obligations were productive of somebenefit to the family. (Ansaldo; parenthetical phrase ours.)

When there is no showing that the execution of an indemnity agreement by the husband redounded to the

benefit of his family, the undertaking is not a conjugal debt but an obligation personal to him. (LibertyInsurance)

In the most categorical language, a conjugal partnership under Article 161 of the new Civil Code is liable onlyfor such debts and obligations contracted by the husband for the benefit of the conjugal partnership. Theremust be the requisite showing then of some advantage which clearly accrued to the welfare of thespouses. Certainly, to make a conjugal partnership respond for a liability that should appertain to the husbandalone is to defeat and frustrate the avowed objective of the new Civil Code to show the utmost concern for thesolidarity and well-being of the family as a unit. The husband, therefore, is denied the power to assumeunnecessary and unwarranted risks to the financial stability of the conjugal partnership. (Luzon Surety, Inc.)

From the foregoing jurisprudential rulings of this Court, we can derive the following conclusions:

(A) 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 x x x x obligations for the benefitof the conjugal partnership. Here, no actual benefit may be proved. It is enough that the benefit to the family is apparentat the time of the signing of the contract. From the very nature of the contract of loan or services, the family stands tobenefit from the loan facility or services to be rendered to the business or profession of the husband. It is immaterial, if inthe end, his business or profession fails or does not succeed. Simply stated, where the husband contracts obligations onbehalf of the family business, the law presumes, and rightly so, that such obligation will redound to the benefit of theconjugal partnership.

(B) On the other hand, if the money or services are given to another person or entity, and the husband acted only asa surety or guarantor, that contract cannot, by itself, alone be categorized as falling within the context of obligations forthe benefit of the conjugal partnership. The contract of loan or services is clearly for the benefit of the principal debtorand not for the surety or his family. No presumption can be inferred that, when a husband enters into a contract of surety


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or accommodation agreement, it is for the benefit of the conjugal partnership. Proof must be presented to establishbenefit redounding to the conjugal partnership.

Thus, the distinction between the Cobb-Perez case, and we add, that of the three other companion cases, on theone hand, and that of Ansaldo, Liberty Insurance and Luzon Surety, is that in the former, the husband contracted theobligation for his own business; while in the latter, the husband merely acted as a surety for the loan contracted byanother for the latters business.

The evidence of petitioner indubitably show that co-respondent Alfredo Ching signed as surety for the P50M loancontracted on behalf of PBM. Petitioner should have adduced evidence to prove that Alfredo Chings acting as surety

redounded to the benefit of the conjugal partnership. The reason for this is as lucidly explained by the respondent court:

The loan procured from respondent-appellant AIDC was for the advancement and benefit of PhilippineBlooming Mills and not for the benefit of the conjugal partnership of petitioners-appellees. PhilippineBlooming Mills has a personality distinct and separate from the family of petitioners-appellees - this despitethe fact that the members of the said family happened to be stockholders of said corporate entity.

x x x x x x x x x

x x x. The burden of proof that the debt was contracted for the benefit of the conjugal partnership of gains, lieswith the creditor-party litigant claiming as such. In the case at bar, respondent-appellant AIDC failed to provethat the debt was contracted by appellee-husband, for the benefit of the conjugal partnership of gains. What isapparent from the facts of the case is that the judgment debt was contracted by or in the name of theCorporation Philippine Blooming Mills and appellee-husband only signed as surety thereof. The debt is clearly

a corporate debt and respondent-appellants right of recourse against appellee-husband as surety is only tothe extent of his corporate stockholdings. It does not extend to the conjugal partnership of gains of the familyof petitioners-appellees. x x x x x x.[17]

Petitioners contend that no actual benefit need accrue to the conjugal partnership. To support this contention, theycite Justice J.B.L. Reyes authoritative opinion in the Luzon Surety Company case:

I concur in the result, but would like to make of record that, in my opinion, the words all debts and obligationscontracted by the husband for the benefit of the conjugal partnership used in Article 161 of the Civil Code ofthe Philippines in describing the charges and obligations for which the conjugal partnership is liable do notrequire that actual profit or benefit must accrue to the conjugal partnership from the husbands transaction; butit suffices that the transaction should be one that normally would produce such benefit for thepartnership. This is the ratio behind our ruling in Javier vs. Osmea, 34 Phil. 336, that obligations incurred bythe husband in the practice of his profession are collectible from the conjugal partnership.

The aforequoted concurring opinion agreed with the majority decision that the conjugal partnership should not bemade liable for the surety agreement which was clearly for the benefit of a third party. Such opinion merely registered anexception to what may be construed as a sweeping statement that in all cases actual profit or benefit must accrue to theconjugal partnership. The opinion merely made it clear that no actual benefits to the family need be proved in some casessuch as in the Javier case. There, the husband was the principal obligor himself. Thus, said transaction was found to beone that would normally produce x x x benefit for the partnership. In the later case of G-Tractors, Inc., the husband wasalso the principal obligor - not merely the surety. This latter case, therefore, did not create any precedent. It did not alsosupersede the Luzon Surety Company case, nor any of the previous accommodation contract cases, where this Courtruled that they were for the benefit of third parties.

But it could be argued, as the petitioner suggests, that even in such kind of contract of accommodation, a benefit forthe family may also result, when the guarantee is in favor of the husbands employer.

In the case at bar, petitioner claims that the benefits the respondent family would reasonably anticipate were thefollowing:

(a) The employment of co-respondent Alfredo Ching would be prolonged and he would be entitled to hismonthly salary ofP20,000.00 for an extended length of time because of the loan he guaranteed;

(b) The shares of stock of the members of his family would appreciate if the PBM could be rehabilitatedthrough the loan obtained;

(c) His prestige in the corporation would be enhanced and his career would be boosted should PBMsurvive because of the loan.

However, these are not the benefits contemplated by Article 161 of the Civil Code. The benefits must be one directlyresulting from the loan. It cannot merely be a by-product or a spin-off of the loan itself.


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In all our decisions involving accommodation contracts of the husband,[18]we underscored the requirementhat: there must be the requisite showing x x x of some advantage which clearly accrued to the welfare of the spousesor benefits to his family or that such obligations are productive of some benefit to the family. Unfortunately, the petitiondid not present any proof to show: (a) Whether or not the corporate existence of PBM was prolonged and for how manymonths or years; and/or (b) Whether or not the PBM was saved by the loan and its shares of stock appreciated, if so, howmuch and how substantial was the holdings of the Ching family.

Such benefits (prospects of longer employment and probable increase in the value of stocks) might have beenalready apparent or could be anticipated at the time the accommodation agreement was entered into. But would thosebenefits qualify the transaction as one of the obligations x x x for the benefit of the conjugal partnership? Are indirect

and remote probable benefits, the ones referred to in Article 161 of the Civil Code? The Court of Appeals in denying themotion for reconsideration, disposed of these questions in the following manner:

No matter how one looks at it, the debt/credit extended by respondents-appellants is purely a corporate debtgranted to PBM, with petitioner-appellee-husband merely signing as surety. While such petitioner-appellee-husband, as such surety, is solidarily liable with the principal debtor AIDC, such liability under the Civil Codeprovisions is specifically restricted by Article 122 (par. 1) of the Family Code, so that debts for which thehusband is liable may not be charged against conjugal partnership properties. Article 122 of the Family Codeis explicitThe payment of personal debts contracted by the husband or the wife before or during themarriage shall not be charged to the conjugal partnership except insofar as they redounded to the benefit ofthe family.

Respondents-appellants insist that the corporate debt in question falls under the exception laid down in saidArticle 122 (par. one). We do not agree. The loan procured from respondent-appellant AIDC was for the sole

advancement and benefit of Philippine Blooming Mills and not for the benefit of the conjugal partnership ofpetitioners-appellees.

x x x appellee-husband derives salaries, dividends benefits from Philippine Blooming Mills (the debtorcorporation), only because said husband is an employee of said PBM. These salaries and benefits, are notthe benefits contemplated by Articles 121 and 122 of the Family Code. The benefits contemplated by theexception in Article 122 (Family Code) is that benefit derived directly from the use of the loan. In the case atbar, the loan is a corporate loan extended to PBM and used by PBM itself, not by petitioner-appellee-husbandor his family. The alleged benefit, if any, continuously harped by respondents-appellants, are not onlyincidental but also speculative.[19]

We agree with the respondent court. Indeed, considering the odds involved in guaranteeing a large amoun(P50,000,000.00) of loan, the probable prolongation of employment in PBM and increase in value of its stocks, would betoo small to qualify the transaction as one for the benefit of the suretys family. Verily, no one could say, with a degree o

certainty, that the said contract is even productive of some benefits to the conjugal partnership.We likewise agree with the respondent court (and this view is not contested by the petitioners) that the provisions of

the Family Code is applicable in this case. These provisions highlight the underlying concern of the law for theconservation of the conjugal partnership; for the husbands duty to protect and safeguard, if not augment, not to dissipateit.

This is the underlying reason why the Family Code clarifies that the obligations entered into by one of the spousesmust be those that redounded to the benefit of the family and that the measure of the partnerships liability is to the extentthat the family is benefited.

[20]

These are all in keeping with the spirit and intent of the other provisions of the Civil Code which prohibits any of thespouses to donate or convey gratuitously any part of the conjugal property. [21]Thus, when co-respondent Alfredo Chingentered into a surety agreement he, from then on, definitely put in peril the conjugal property (in this case, including thefamily home) and placed it in danger of being taken gratuitously as in cases of donation.

In the second assignment of error, the petitioner advances the view that acting as surety is part of the business orprofession of the respondent-husband.

This theory is new as it is novel.

The respondent court correctly observed that:

Signing as a surety is certainly not an exercise of an industry or profession, hence the cited cases of Cobb-Perez vs. Lantin; Abella de Diaz vs. Erlanger & Galinger; G-Tractors, Inc. vs. CA do not apply in the instantcase. Signing as a surety is not embarking in a business. [22]

We are likewise of the view that no matter how often an executive acted or was persuaded to act, as a surety for his ownemployer, this should not be taken to mean that he had thereby embarked in the business of suretyship or guaranty.


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This is not to say, however, that we are unaware that executives are often asked to stand as surety for theicompanys loan obligations. This is especially true if the corporate officials have sufficient property of their own;otherwise, their spouses signatures are required in order to bind the conjugal partnerships.

The fact that on several occasions the lending institutions did not require the signature of the wife and the husbandsigned alone does not mean that being a surety became part of his profession. Neither could he be presumed to haveacted for the conjugal partnership.

Article 121, paragraph 3, of the Family Code is emphatic that the payment of personal debts contracted by thehusband or the wife before or during the marriage shall not be charged to the conjugal partnership except to the exten

that they redounded to the benefit of the family.Here, the property in dispute also involves the family home. The loan is a corporate loan not a personal

one. Signing as a surety is certainly not an exercise of an industry or profession nor an act of administration for thebenefit of the family.

On the basis of the facts, the rules, the law and equity, the assailed decision should be upheld as we now upholdit. This is, of course, without prejudice to petitioners right to enforce the obligation in its favor against the PBM receiver inaccordance with the rehabilitation program and payment schedule approved or to be approved by the Securities &Exchange Commission.

WHEREFORE, the petition for review should be, as it is hereby, DENIED for lack of merit.

SO ORDERED.

CHING VS CA

CALLEJO, SR., J .:

This petition for review, under Rule 45 of the Revised Rules of Court, assails the Decision1of the Court of Appeals (CA)dated November 27, 1995 in CA-G.R. SP No. 33585, as well as the Resolution2on April 2, 1996 denying the petitionersmotion for reconsideration. The impugned decision granted the private respondents petition forcertiorariand set aside theOrders of the trial court dated December 15, 19933and February 17, 19944nullifying the attachment of 100,000 shares ofstocks of the Citycorp Investment Philippines under the name of petitioner Alfredo Ching.

The following facts are undisputed:

On September 26, 1978, the Philippine Blooming Mills Company, Inc. (PBMCI) obtained a loan of P9,000,000.00 from theAllied Banking Corporation (ABC). By virtue of this loan, the PBMCI, through its Executive Vice-President Alfredo Ching,executed a promissory note for the said amount promising to pay on December 22, 1978 at an interest rate of 14% perannum.5As added security for the said loan, on September 28, 1978, Alfredo Ching, together with Emilio Taedo andChung Kiat Hua, executed a continuing guaranty with the ABC binding themselves to jointly and severally guarantee thepayment of all the PBMCI obligations owing the ABC to the extent of P38,000,000.00.6The loan was subsequentlyrenewed on various dates, the last renewal having been made on December 4, 1980.7

Earlier, on December 28, 1979, the ABC extended another loan to the PBMCI in the amount of P13,000,000.00 payable ineighteen months at 16% interest per annum. As in the previous loan, the PBMCI, through Alfredo Ching, executed apromissory note to evidence the loan maturing on June 29, 1981.8This was renewed once for a period of one month.9

The PBMCI defaulted in the payment of all its loans. Hence, on August 21, 1981, the ABC filed a complaint for sum ofmoney with prayer for a writ of preliminary attachment against the PBMCI to collect the P12,612,972.88 exclusive ofinterests, penalties and other bank charges. Impleaded as co-defendants in the complaint were Alfredo Ching, EmilioTaedo and Chung Kiat Hua in their capacity as sureties of the PBMCI.

The case was docketed as Civil Case No. 142729 in the Regional Trial Court of Manila, Branch XVIII.10In its applicationfor a writ of preliminary attachment, the ABC averred that the "defendants are guilty of fraud in incurring the obligationsupon which the present action is brought11in that they falsely represented themselves to be in a financial position to paytheir obligation upon maturity thereof."12Its supporting affidavit stated, inter alia, that the "[d]efendants have removed ordisposed of their properties, or [are] ABOUT to do so, with intent to defraud their creditors."13


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On August 26, 1981, after an ex-parte hearing, the trial court issued an Order denying the ABCs application for a writ ofpreliminary attachment. The trial court decreed that the grounds alleged in the application and that of its supportingaffidavit "are all conclusions of fact and of law" which do not warrant the issuance of the writ prayed for.14On motion forreconsideration, however, the trial court, in an Order dated September 14, 1981, reconsidered its previous order andgranted the ABCs application for a writ of preliminary attachment on a bond ofP12,700,000. The order, in relevant part,stated:

With respect to the second ground relied upon for the grant of the writ of preliminary attachment ex-parte, which is thealleged disposal of properties by the defendants with intent to defraud creditors as provided in Sec. 1(e) of Rule 57 of the

Rules of Court, the affidavits can only barely justify the issuance of said writ as against the defendant Alfredo Ching whohas allegedly bound himself jointly and severally to pay plaintiff the defendant corporations obligation to the plaintiff as asurety thereof.

WHEREFORE, let a writ of preliminary attachment issue as against the defendant Alfredo Ching requiring the sheriff ofthis Court to attach all the properties of said Alfredo Ching not exceeding P12,612,972.82 in value, which are within the

jurisdiction of this Court and not exempt from execution upon, the filing by plaintiff of a bond duly approved by this Court inthe sum of Twelve Million Seven Hundred Thousand Pesos (P12,700,000.00) executed in favor of the defendant AlfredoChing to secure the payment by plaintiff to him of all the costs which may be adjudged in his favor and all damages hemay sustain by reason of the attachment if the court shall finally adjudge that the plaintiff was not entitled thereto.

SO ORDERED.15

Upon the ABCs posting of the requisite bond, the trial court issued a writ of preliminary attachment. Subsequently,summonses were served on the defendants,16save Chung Kiat Hua who could not be found.

Meanwhile, on April 1, 1982, the PBMCI and Alfredo Ching jointly filed a petition for suspension of payments with theSecurities and Exchange Commission (SEC), docketed as SEC Case No. 2250, at the same time seeking the PBMCIsrehabilitation.17

On July 9, 1982, the SEC issued an Order placing the PBMCIs business, including its assets and liabilities, underrehabilitation receivership, and ordered that "all actions for claims listed in Schedule "A" of the petition pending before anycourt or tribunal are hereby suspended in whatever stage the same may be until further orders from theCommission."18The ABC was among the PBMCIs creditors named in the said schedule.

Subsequently, on January 31, 1983, the PBMCI and Alfredo Ching jointly filed a Motion to Dismiss and/or motion tosuspend the proceedings in Civil Case No. 142729 invoking the PBMCIs pending application for suspension of payments(which Ching co-signed) and over which the SEC had already assumed jurisdiction.19On February 4, 1983, the ABC filedits Opposition thereto.20

In the meantime, on July 26, 1983, the deputy sheriff of the trial court levied on attachment the 100,000 common sharesof Citycorp stocks in the name of Alfredo Ching.21

Thereafter, in an Order dated September 16, 1983, the trial court partially granted the aforementioned motion bysuspending the proceedings only with respect to the PBMCI. It denied Chings motion to dismiss the complaint/or suspendthe proceedings and pointed out that P.D. No. 1758 only concerns the activities of corporations, partnerships andassociations and was never intended to regulate and/or control activities of individuals. Thus, it directed the individualdefendants to file their answers.22

Instead of filing an answer, Ching filed on January 14, 1984 a Motion to Suspend Proceedings on the same ground of thependency of SEC Case No. 2250. This motion met the opposition from the ABC.23

On January 20, 1984, Taedo filed his Answer with counterclaim and cross-claim.24Ching eventually filed his Answer onJuly 12, 1984.25

On October 25, 1984, long after submitting their answers, Ching filed an Omnibus Motion,26again praying for thedismissal of the complaint or suspension of the proceedings on the ground of the July 9, 1982 Injunctive Order issued inSEC Case No. 2250. He averred that as a surety of the PBMCI, he must also necessarily benefit from the defenses of hisprincipal. The ABC opposed Chings omnibus motion.


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Emilio Y. Taedo, thereafter, filed his own Omnibus Motion27praying for the dismissal of the complaint, arguing that theABC had "abandoned and waived" its right to proceed against the continuing guaranty by its act of resorting to preliminaryattachment.

On December 17, 1986, the ABC filed a Motion to Reduce the amount of his preliminary attachment bondfromP12,700,000 to P6,350,000.28Alfredo Ching opposed the motion,29but on April 2, 1987, the court issued an Ordersetting the incident for further hearing on May 28, 1987 at 8:30 a.m. for the parties to adduce evidence on the actual valueof the properties of Alfredo Ching levied on by the sheriff.30

On March 2, 1988, the trial court issued an Order granting the motion of the ABC and rendered the attachment bondof P6,350,000.31

On November 16, 1993, Encarnacion T. Ching, assisted by her husband Alfredo Ching, filed a Motion to Set Aside thelevy on attachment. She alleged inter alia that the 100,000 shares of stocks levied on by the sheriff were acquired by herand her husband during their marriage out of conjugal funds after the Citycorp Investment Philippines was established in1974. Furthermore, the indebtedness covered by the continuing guaranty/comprehensive suretyship contract executed bypetitioner Alfredo Ching for the account of PBMCI did not redound to the benefit of the conjugal partnership. 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 theproperties.32She attached therewith a copy of her marriage contract with Alfredo Ching.33

The ABC filed a comment on the motion to quash preliminary attachment and/or motion to expunge records, contendingthat:

2.1 The supposed movant, Encarnacion T. Ching, is not a party to this present case; thus, she has no personalityto file any motion before this Honorable Court;

2.2 Said supposed movant did not fi le any Motion for Intervention pursuant to Section 2, Rule 12 of the Rules ofCourt;

2.3 Said Motion cannot even be construed to be in the nature of a Third-Party Claim conformably with Sec. 14,Rule 57 of the Rules of Court.

3. Furthermore, assuming in gracia argumenti that the supposed movant has the required personality, her Motion cannotbe acted upon by this Honorable Court as the above-entitled case is still in the archives and the proceedings thereon stillremains suspended. And there is no previous Motion to revive the same.34

The ABC also alleged that the motion was barred by prescription or by laches because the shares of stocks were incustodia legis.

During the hearing of the motion, Encarnacion T. Ching adduced in evidence her marriage contract to Alfredo Ching toprove that they were married on January 8, 1960;35the articles of incorporation of Citycorp Investment Philippines datedMay 14, 1979;36and, the General Information Sheet of the corporation showing that petitioner Alfredo Ching was amember of the Board of Directors of the said corporation and was one of its top twenty stockholders.

On December 10, 1993, the Spouses Ching filed their Reply/Opposition to the motion to expunge records.

Acting on the aforementioned motion, the trial court issued on December 15, 1993 an Order37lifting the writ of preliminary

attachment on the shares of stocks and ordering the sheriff to return the said stocks to the petitioners. The dispositiveportion reads:

WHEREFORE, the instant Motion to Quash Preliminary Attachment, dated November 9, 1993, is hereby granted. Let thewrit of preliminary attachment subject matter of said motion, be quashed and lifted with respect to the attached 100,000common shares of stock of Citycorp Investment Philippines in the name of the defendant Alfredo Ching, the said shares ofstock to be returned to him and his movant-spouse by Deputy Sheriff Apolonio A. Golfo who effected the levy thereon onJuly 26, 1983, or by whoever may be presently in possession thereof.

SO ORDERED.38


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The plaintiff Allied Banking Corporation filed a motion for the reconsideration of the order but denied the same onFebruary 17, 1994. The petitioner bank forthwith filed a petition for certiorari with the CA, docketed as CA-G.R. SP No.33585, for the nullification of the said order of the court, contending that:

1. The respondent Judge exceeded his authority thereby acted without jurisdiction in taking cognizance of, andgranting a "Motion" filed by a complete stranger to the case.

2. The respondent Judge committed a grave abuse of discretion in lifting the writ of preliminary attachmentwithout any basis in fact and in law, and contrary to established jurisprudence on the matter.39

On November 27, 1995, the CA rendered judgment granting the petition and setting aside the assailed orders of the trialcourt, thus:

WHEREFORE, premises considered, the petition is GRANTED, hereby setting aside the questioned orders (datedDecember 15, 1993 and February 17, 1994) for being null and void.

SO ORDERED.40

The CA sustained the contention of the private respondent and set aside the assailed orders. According to the CA, theRTC deprived the private respondent of its right to file a bond under Section 14, Rule 57 of the Rules of Court. Thepetitioner Encarnacion T. Ching was not a party in the trial court; hence, she had no right of action to have the levyannulled with a motion for that purpose. Her remedy in such case was to file a separate action against the privaterespondent to nullify the levy on the 100,000 Citycorp shares of stocks. The court stated that even assuming thatEncarnacion T. Ching had the right to file the said motion, the same was barred by laches.

Citing Wong v. Intermediate Appellate Court,41the CA ruled that the presumption in Article 160 of the New Civil Codeshall not apply where, as in this case, the petitioner-spouses failed to prove the source of the money used to acquire theshares of stock. It held that the levied shares of stocks belonged to Alfredo Ching, as evidenced by the fact that the saidshares were registered in the corporate books of Citycorp solely under his name. Thus, according to the appellate court,the RTC committed a grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the assailedorders. The petitioners motion for reconsideration was denied by the CA in a Resolution dated April 2, 1996.

The petitioner-spouses filed the instant petition for review on certiorari, asserting that the RTC did not commit any graveabuse of discretion amounting to excess or lack of jurisdiction in issuing the assailed orders in their favor; hence, the CAerred in reversing the same. They aver that the source of funds in the acquisition of the levied shares of stocks is not thecontrolling factor when invoking the presumption of the conjugal nature of stocks under Art. 160,42and that suchpresumption subsists even if the property is registered only in the name of one of the spouses, in this case, petitioner

Alfredo Ching.43According to the petitioners, the suretyship obligation was not contracted in the pursuit of the petitioner-husbands profession or business.

44And, contrary to the ruling of the CA, where conjugal assets are attached in acollection suit on an obligation contracted by the husband, the wife should exhaust her motion to quash in the main caseand not file a separate suit.45Furthermore, the petitioners contend that under Art. 125 of the Family Code, the petitioner-husbands gratuitous suretyship is null and void ab initio,

46and that the share of one of the spouses in the conjugalpartnership remains inchoate until the dissolution and liquidation of the partnership.47

In its comment on the petition, the private respondent asserts that the CA correctly granted its petition for certiorarinullifying the assailed order. It contends that the CA correctly relied on the ruling of this Court in Wong v. Intermediate

Appellate Court. Citing Cobb-Perez v. Lantin and G-Tractors, Inc. v. Court of Appeals, the private respondent alleges thatthe continuing guaranty and suretyship executed by petitioner Alfredo Ching in pursuit of his profession or business.Furthermore, according to the private respondent, the right of the petitioner-wife to a share in the conjugal partnershipproperty is merely inchoate before the dissolution of the partnership; as such, she had no right to file the said motion toquash the levy on attachment of the shares of stocks.

The issues for resolution are as follows: (a) whether the petitioner-wife has the right to file the motion to quash the levy onattachment on the 100,000 shares of stocks in the Citycorp Investment Philippines; (b) whether or not the RTC committeda grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders.

On the first issue, we agree with the petitioners that the petitioner-wife had the right to file the said motion, although shewas not a party in Civil Case No. 142729.48


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In Ong v. Tating,49we held that the sheriff may attach only those properties of the defendant against whom a writ ofattachment has been issued by the court. When the sheriff erroneously levies on attachment and seizes the property of athird person in which the said defendant holds no right or interest, the superior authority of the court which has authorizedthe execution may be invoked by the aggrieved third person in the same case. Upon application of the third person, thecourt shall order a summary hearing for the purpose of determining whether the sheriff has acted rightly or wrongly in theperformance of his duties in the execution of the writ of attachment, more specifically if he has indeed levied onattachment and taken hold of property not belonging to the plaintiff. If so, the court may then order the sheriff to releasethe property from the erroneous levy and to return the same to the third person. In resolving the motion of the third party,the court does not and cannot pass upon the question of the title to the property with any character of finality. It can treatthe matter only insofar as may be necessary to decide if the sheriff has acted correctly or not. If the claimants proof does not persuade the court of the validity of the title, or right of possession thereto, the claim will be denied by the court. Theaggrieved third party may also avail himself of the remedy of "terceria" by executing an affidavit of his title or right ofpossession over the property levied on attachment and serving the same to the office making the levy and the adverseparty. Such party may also file an action to nullify the levy with damages resulting from the unlawful levy and seizure,which should be a totally separate and distinct action from the former case. The above-mentioned remedies arecumulative and any one of them may be resorted to by one third-party claimant without availing of the other remedies.50

In this case, the petitioner-wife filed her motion to set aside the levy on attachment of the 100,000 shares of stocks in thename of petitioner-husband claiming that the said shares of stocks were conjugal in nature; hence, not liable for theaccount of her husband under his continuing guaranty and suretyship agreement with the PBMCI. The petitioner-wife hadthe right to file the motion for said relief.

On the second issue, we find and so hold that the CA erred in setting aside and reversing the orders of the RTC. Theprivate respondent, the petitioner in the CA, was burdened to prove that the RTC committed a grave abuse of itsdiscretion amounting to excess or lack of jurisdiction. The tribunal acts without jurisdiction if it does not have the legalpurpose to determine the case; there is excess of jurisdiction where the tribunal, being clothed with the power todetermine the case, oversteps its authority as determined by law. There is grave abuse of discretion where the tribunalacts in a capricious, whimsical, arbitrary or despotic manner in the exercise of its judgment and is equivalent to lack of

jurisdiction.51

It was incumbent upon the private respondent to adduce a sufficiently strong demonstration that the RTC actedwhimsically in total disregard of evidence material to, and even decide of, the controversy before certiorari will lie. Aspecial civil action for certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of judgment.When a court exercises its jurisdiction, an error committed while so engaged does not deprive it of its jurisdiction beingexercised when the error is committed.52

After a comprehensive review of the records of the RTC and of the CA, we find and so hold that the RTC did not commitany grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders.

Article 160 of the New Civil Code provides that all the properties acquired during the marriage are presumed to belong tothe conjugal partnership, unless it be proved that it pertains exclusively to the husband, or to the wife. InTan v. Court of

Appeals,53we 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. Infact, even when the manner in which the properties were acquired does not appear, the presumption will still apply, andthe properties will still be considered conjugal. The presumption of the conjugal nature of the properties acquired duringthe marriage subsists in the absence of clear, satisfactory and convincing evidence to overcome the same.54

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 whenthe said corporation was incorporated on May 14, 1979. This was done during the subsistence of the marriage of thepetitioner-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 exclusivemoney.55The barefaced fact that the shares of stocks were registered in the corporate books of Citycorp InvestmentPhilippines solely in the name of the petitioner-husband does not constitute proof that the petitioner-husband, not theconjugal partnership, owned the same.56The private respondents reliance on the rulings of th is Court in Maramba v.Lozano57and Associated Insurance & Surety Co., Inc. v. Banzon58is misplaced. In the Maramba case, we held thatwhere there is no showing as to when the property was acquired, the fact that the title is in the wifes name alone isd

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