Ching v. CA, 423 SCRA 356, February 23, 2004

FACTS: Philippine Blooming Mills Company, Inc. (PBMCI) obtained two loans from the Allied Banking Corporation (ABC). (PBMCI) Executive Vice-President Alfredo Ching executed a continuing guaranty with the ABC for the payment of the said loan. The PBMCI defaulted in the payment of all its loans so ABC filed a complaint for sum of money against the PBMCI. Trial court issued a writ of preliminary attachment against Alfredo Ching requiring the sheriff of to attach all the properties of said Alfredo Ching to answer for the payment of the loans. Encarnacion T. Ching, wife of Alfredo Ching, filed a Motion to Set Aside the levy on attachment allegeing inter alia that the 100,000 shares of stocks levied on by the sheriff were acquired by her and her husband during their marriage out of conjugal funds. Petitioner spouses aver that the source of funds in the acquisition of the levied shares of stocks is not the controlling factor when invoking the presumption of the conjugal nature of stocks under Art. !21 and that such presumption subsists even if the property is registered only in the name of one of the spouses, in this case, petitioner Alfredo Ching. According to the petitioners, the suretyship obligation was not contracted in the pursuit of the petitioner-husband’s profession or business.44

ISSUE: WON 100,000 shares of stocks may be levied on by the sheriff to answer for the loans guaranteed by petitioner Alfredo Ching

HELD: No.

RATIO: The CA erred in holding that by executing a continuing guaranty and suretyship agreement with the private respondent for the payment of the PBMCI loans, the petitioner-husband was in the exercise of his profession, pursuing a legitimate business.

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 exclusive money.

The appellate court erred in concluding that the conjugal partnership is liable for the said account of PBMCI.

Article 121 provides: The conjugal partnership shall be liable for: (1) All debts and obligations contracted by the husband for the benefit of the conjugal partnership, and those contracted by the wife, also for the same purpose, in the cases where she may legally bind the partnership.

For the conjugal partnership to be liable for a liability that should appertain to the husband alone, there must be a showing that some advantages accrued to the spouses.

In this case, the private respondent failed to prove that the conjugal partnership of the petitioners was benefited by the petitioner-husband’s act of executing a continuing guaranty and suretyship agreement with the private respondent for and in behalf of PBMCI. The contract of loan was between the private respondent and the PBMCI, solely for the benefit of the latter. No presumption can be inferred from the fact that when the petitioner-husband entered into an accommodation agreement or a contract of surety, the conjugal partnership would thereby be benefited. The private respondent was burdened to establish that such benefit redounded to the conjugal partnership.