G-Tractors, Inc. v. Court of Appeals, G.R. No.

L-57402, February 28, 1985

FACTS: Luis R. Narciso, legally married to Josefina Narciso, is a businessman engaged
in business as a producer and exporter of Philippine mahogany logs and operates a
logging concession at del Gallego, Camarines Sur. G-Tractors, Inc. is a domestic
corporation engaged primarily in the business of leasing heavy equipments such as
tractors, bulldozers, and the like.

Luis entered into a Contract of Hire of Heavy Equipment with G-Tractors under the
terms of which the latter leased to the former tractors for the purpose of constructing
switchroads and hauling felled trees at the jobsite of Narciso's logging concession at del
Gallego, Camarines Sur. The contract provided for payment of rental for the use of said
tractors. Luis Narciso failed to pay; G-Tractors instituted an action urging Luis to pay a
certain amount (P155,410.25), representing the unpaid rentals. G-Tractors accepted his
offer for a compromise agreement, stating the mode of payment (installment plan); Luis
failed to comply; G-Tractors filed a motion for execution; Luis asked for suspension of
the motion stating that he still has a pending loan with a banking institution; request for
suspension denied. Levy was accordingly made by the City Sheriff of QC on certain
personal properties of the spouses at their residence in Quezon City. Auction sale was
held, and G-Tractors was awarded with the sale of such. Luis then offered to redeem
such properties for the same amount; accepted; a Deed of Reconveyance was
executed by G-Tractors.

On February 12, 1975, the Sheriff of Quezon City made a levy on "all rights, interest,
title, participation which the defendant Luis R. Narciso" may have over a parcel of
residential land of the Registry of Deeds of QC which parcel of land is allegedly the
conjugal property of the spouses Luis and Josefina. Sheriff sold at public auction to the
highest bidder for cash. Certificate of Sale was then issued to G-Tractors as the highest
bidder for P180,000.

On March 31, 1976, Josefina and Luis filed a complaint in CFI of Quezon City for
"declaration of nullity of levy on execution and auction sale of plaintiff's conjugal
property with damages and injunction", claiming that the conjugal property of the
plaintiffs-spouses could not be made liable considering that the subject matter was
never used for the benefit of the conjugal partnership or of the family

ISSUE: Whether or not the conjugal property of the spouses can be held answerable for
the debt of the husband

HELD: YES, the conjugal property of the spouses can be held answerable for the debt
of the husband. CAs decision reversed and set aside
RATIO:
Article 161 of the New Civil Code provides that the conjugal partnership shall be liable
for:
(1) All the 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

His account with petitioner G-Tractors, Inc. represents rentals for the use of petitioner's
tractors which he leased for the purpose of constructing switchroads and hauling felled
trees at the jobsite of the logging concession at del Gallego, Camarines Sur which is not
his exclusive property but that of his family. There is no doubt then that his account with
the petitioner was brought about in order to enhance the productivity of said logging
business, a commercial enterprise for gain which he had the right to embark the
conjugal partnership.

It is very clear, therefore, that the obligations were contracted in connection with his
legitimate business as a producer and exporter in mahogany logs and certainly
benefited the conjugal partnership.

The husband is the administrator of the conjugal partnership and as long as he believes
he is doing right to his family, he should not be made to suffer and answer alone. So
that, if he incurs an indebtedness in the legitimate pursuit of his career or profession or
suffers losses in a legitimate business, the conjugal partnership must equally bear the
indebtedness and the losses, unless he deliberately acted to the prejudice of his family.

The sale at public auction belonging to the conjugal partnership of gains of the Narcisos
in order to satisfy the judgment debt of the private respondent Luis R. Narciso was
validly and legally made in accordance with law.