Ayala Investments vs CA

Ayala Investments 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 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 TRP enjoining lower court from enforcing its order paving 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.