G.R. No.

193038, March 11, 2015

JOSEFINA V. NOBLEZA, Petitioner, v. SHIRLEY B.
NUEGA, Respondent.
DECISION
VILLARAMA, JR., J.:
At bar is a petition for review on certiorari of the
Decision1 dated May 14, 2010 and the
Resolution2dated July 21, 2010 of the Court of
Appeals (CA) in CA-G.R. CV No. 70235, which
affirmed with modification the assailed
Decision3 dated February 14, 2001 of the Regional
Trial Court (RTC) of Marikina City, Branch 273, in
Civil Case No. 96-274-MK.

petitioner Josefina V. Nobleza (petitioner) - of the

existence of the cases that she had filed against
Rogelio and cautioned them against buying the
subject property until the cases are closed and
terminated. Nonetheless, under a Deed of Absolute
Sale11 dated December 29, 1992, Rogelio sold the
subject property to petitioner without Shirley's
consent in the amount of Three Hundred Eighty
Thousand Pesos (P380,000.00), including
petitioner's undertaking to assume the existing
mortgage on the property with the National Home
Mortgage Finance Corporation and to pay the real
property taxes due thereon.

The following facts are found by the trial court and

affirmed by the appellate court:

Meanwhile, in a Decision12 dated May 16, 1994, the

RTC of Pasig City, Branch 70, granted the petition for
legal separation and ordered the dissolution and
liquidation of the regime of absolute community of
property between Shirley and
Rogelio, viz.:chanroblesvirtuallawlibrary
WHEREFORE, in view of the foregoing, the Court
hereby grants the instant petition for legal
separation between the subject spouses with all its
legal effects as provided for in Art. 63 of the Family
Code. Their community property is consequently
dissolved and must be liquidated in accordance with
Art. 102 of the New Family Code. The respondent is
thus hereby enjoined from selling, encumbering or
in any way disposing or alienating any of their
community property including the subject house
and lot before the required liquidation. Moreover,
he, being the guilty spouse, must forfeit the net
profits of the community property in favor of the
petitioner who is the innocent spouse pursuant to
Art. 43 of the aforesaid law. Finally, in the light of
the claim of ownership by the present occupants
who have not been impleaded in the instant case, a
separate action must be instituted by the petitioner
against the alleged buyer or buyers thereof to
determine their respective rights thereon.

Respondent Shirley B. Nuega (Shirley) was married

to Rogelio A. Nuega (Rogelio) on September 1,
1990.4 Sometime in 1988 when the parties were still
engaged, Shirley was working as a domestic helper
in Israel. Upon the request of Rogelio, Shirley sent
him money5 for the purchase of a residential lot in
Marikina where they had planned to eventually build
their home. Rogelio was then also working abroad
as a seaman. The following year, or on September
13, 1989, Rogelio purchased the subject house and
lot for One Hundred Two Thousand Pesos
(P102,000.00)6 from Rodeanna Realty Corporation.
The subject property has an aggregate area of one
hundred eleven square meters (111 sq. m.) covered
by Transfer Certificate of Title (TCT) No. N133844.7 Shirley claims that upon her arrival in the
Philippines sometime in 1989, she settled the
balance for the equity over the subject property
with the developer through SSS8 financing. She
likewise paid for the succeeding monthly
amortizations. On October 19, 1989, TCT No.
1719639 over the subject property was issued by the
Registry of Deeds of Marikina, Rizal solely under the
name of Rogelio.
On September 1, 1990, Shirley and Rogelio got
married and lived in the subject property. The
following year, Shirley returned to Israel for work.
While overseas, she received information that
Rogelio had brought home another woman, Monica
Escobar, into the family home. She also learned, and
was able to confirm upon her return to the
Philippines in May 1992, that Rogelio had been
introducing Escobar as his wife.
In June 1992, Shirley filed two cases against Rogelio:
one for Concubinage before the Provincial
Prosecution Office of Rizal, and another for Legal
Separation and Liquidation of Property before the
RTC of Pasig City. Shirley later withdrew the
complaint for legal separation and liquidation of
property, but re-filed10 the same on January 29,
1993. In between the filing of these cases, Shirley
learned that Rogelio had the intention of selling the
subject property. Shirley then advised the interested
buyers - one of whom was their neighbor and

Let a copy of this decision be furnished the Local

Civil Registrar of Manila, the Register of Deeds of
Marikina, Metro Manila and the National Statistics
Office (NSO), sta. Mesa, Manila.
SO ORDERED.13cralawlawlibrary
Rogelio appealed the above-quoted ruling before
the CA which denied due course and dismissed the
petition. It became final and executory and a writ of
execution was issued in August 1995.14
On August 27, 1996, Shirley instituted a
Complaint15 for Rescission of Sale and Recoveiy of
Property against petitioner and Rogelio before the
RTC of Marikina City, Branch 273. After trial on the
merits, the trial court rendered its decision on
February 14, 2001, viz.:chanroblesvirtuallawlibrary
WHEREFORE, foregoing premises considered,
judgment is hereby rendered in favor of plaintiff
Shirley Nuega and against defendant Josefina
Nobleza, as follows:
1) the Deed of Absolute Sale dated December 29,

1992 insofar as the 55.05 square meters

representing the one half (1/2) portion of plaintiff
Shirley Nuega is concerned, is hereby ordered
rescinded, the same being null and void;
2) defendant Josefina Nobleza is ordered to
reconvey said 55.05 square meters to plaintiff
Shirley Nuega, or in the alternative to pay plaintiff
Shirley Nuega the present market value of said
55.05 square meters; and
3) to pay plaintiff Shirley Nuega attorney's fees in
the sum of Twenty Thousand Pesos (P20,000.00).
For lack of merit, defendant's counterclaim is
hereby DENIED.
SO ORDERED.16
Petitioner sought recourse with the CA, while
Rogelio did not appeal the ruling of the trial court. In
its assailed Decision promulgated on May 14, 2010,
the appellate court affirmed with modification the
trial court's ruling, viz.:chanroblesvirtuallawlibrary
WHEREFORE, subject to the foregoing disquisition,
the appeal is DENIED. The Decision dated 14
February 2001 of the Regional Trial Court of Marikina
City, Branch 273 in Civil Case No. 96-274MK is AFFIRMED with MODIFICATION in that the
Deed of Absolute Sale dated 29 December 1992 is
hereby declared null and void in its entirety, and
defendant-appellant Josefina V. Nobleza is ordered
to reconvey the entire subject property to plaintiffappellee Shirley B. Nuega and defendant Rogelio
Nuega, without prejudice to said defendantappellant's right to recover from defendant Rogelio
whatever amount she paid for the subject property.
Costs against defendant-appellant Nobleza.
SO ORDERED.17cralawlawlibrary
Petitioner moved for reconsideration. In a Resolution
dated July 21, 2010, the appellate court denied the
motion for lack of merit. Hence, this petition raising
the following assignment of
errors:chanroblesvirtuallawlibrary
[I. THE HONORABLE COURT OF APPEALS ERRED
] WHEN IT AFFIRMED THE DECISION OF THE
REGIONAL TRIAL COURT BY SUSTAINING THE
FINDING THAT PETITIONER WAS NOT A
PURCHASER IN GOOD FAITH.
[II. THE HONORABLE COURT OF APPEALS ERRED
] WHEN IT MODIFIED THE DECISION OF THE
REGIONAL TRIAL COURT BY DECLARING AS NULL
AND VOID THE DEED OF ABSOLUTE SALE DATED
29 DECEMBER 1992 IN ITS ENTIRETY.18
We deny the petition.
Petitioner is not a buyer in good faith.
An innocent purchaser for value is one who buys the
property of another, without notice that some other
person has a right or interest in the property, for
which a full and fair price is paid by the buyer at the
time of the purchase or before receipt of any notice
of claims or interest of some other person in the

property.19 It is the party who claims to be an

innocent purchaser for value who has the burden of
proving such assertion, and it is not enough to
invoke the ordinary presumption of good faith.20 To
successfully invoke and be considered as a buyer in
good faith, the presumption is that first and
foremost, the "buyer in good faith" must have
shown prudence and due diligence in the exercise of
his/her rights. It presupposes that the buyer did
everything that an ordinary person would do for the
protection and defense of his/her rights and
interests against prejudicial or injurious concerns
when placed in such a situation. The prudence
required of a buyer in good faith is "not that of a
person with training in law, but rather that of an
average man who 'weighs facts and circumstances
without resorting to the calibration of our technical
rules of evidence of which his knowledge is nil.'"21A
buyer in good faith does his homework and verifies
that the particulars are in order such as the title, the
parties, the mode of transfer and the provisions in
the deed/contract of sale, to name a few. To be more
specific, such prudence can be shown by making an
ocular inspection of the property, checking the
title/ownership with the proper Register of Deeds
alongside the payment of taxes therefor, or
inquiring into the minutiae such as the parameters
or lot area, the type of ownership, and the capacity
of the seller to dispose of the property, which
capacity necessarily includes an inquiry into the civil
status of the seller to ensure that if married, marital
consent is secured when necessary. In fine, for a
purchaser of a property in the possession of another
to be in good faith, he must exercise due diligence,
conduct an investigation, and weigh the surrounding
facts and circumstances like what any prudent man
in a similar situation would do.22
In the case at bar, petitioner claims that she is a
buyer in good faith of the subject property which is
titled under the name of the seller Rogelio A. Nuega
alone as evidenced by TCT No. 171963 and Tax
Declaration Nos. D-012-04723 and D-01204724.23 Petitioner argues, among others, that since
she has examined the TCT over the subject property
and found the property to have been registered
under the name of seller Rogelio alone, she is an
innocent purchaser for value and "she is not
required to go beyond the face of the title in
verifying the status of the subject property at the
time of the consummation of the sale and at the
date of the sale."24
We disagree with petitioner.
A buyer cannot claim to be an innocent purchaser
for value by merely relying on the TCT of the seller
while ignoring all the other surrounding
circumstances relevant to the sale.
In the case of Spouses Raymundo v. Spouses
Bandong,25 petitioners therein - as does petitioner
herein - were also harping that due to the
indefeasibility of a Torrens title, there was nothing in
the TCT of the property in litigation that should have

aroused the buyer's suspicion as to put her on guard

that there was a defect in the title of therein seller.
The Court held in the Spouses Raymundo case that
the buyer therein could not hide behind the cloak of
being an innocent purchaser for value by merely
relying on the TCT which showed that the registered
owner of the land purchased is the seller. The Court
ruled in this case that the buyer was not an
innocent purchaser for value due to the following
attendant
circumstances, viz.:chanroblesvirtuallawlibrary
In the present case, we are not convinced by the
petitioners' incessant assertion that Jocelyn is an
innocent purchaser for value. To begin with, she is a
grandniece of Eulalia and resides in the same
locality where the latter lives and conducts her
principal business. It is therefore impossible for her
not to acquire knowledge of her grand aunt's
business practice of requiring her biyaheros to
surrender the titles to their properties and to sign
the corresponding deeds of sale over said properties
in her favor, as security. This alone should have put
Jocelyn on guard for any possible abuses that Eulalia
may commit with the titles and the deeds of sale in
her possession.26cralawlawlibrary
Similarly, in the case of Arrofo v. Quio,27 the Court
held that while "the law does not require a person
dealing with registered land to inquire further than
what the Torrens Title on its face indicates," the rule
is not absolute.28 Thus, finding that the buyer
therein failed to take the necessary precaution
required of a prudent man, the Court held that
Arrofo was not an innocent purchaser for
value,viz.:chanroblesvirtuallawlibrary
In the present case, the records show that Arrofo
failed to act as a prudent buyer. True, she asked her
daughter to verify from the Register of Deeds if the
title to the Property is free from encumbrances.
However, Arrofo admitted that the Property is within
the neighborhood and that she conducted an ocular
inspection of the Property. She saw the house
constructed on the Property. Yet, Arrofo did not even
bother to inquire about the occupants of the house.
Arrofo also admitted that at the time of the sale,
Myrna was occupying a room in her house as her
lessee. The fact that Myrna was renting a room from
Arrofo yet selling a land with a house should have
put Arrofo on her guard. She knew that Myrna was
not occupying the house. Hence, someone else
must have been occupying the house.
Thus, Arrofo should have inquired who occupied the
house, and if a lessee, who received the rentals
from such lessee. Such inquiry would have led
Arrofo to discover that the lessee was paying rentals
to Quino, not to Renato and Myrna, who claimed to
own the Property.29cralawlawlibrary
An analogous situation obtains in the case at bar.
The TCT of the subject property states that its sole
owner is the seller Rogelio himself who was therein
also described as "single". However, as in the cases
of Spouses Raymundo and Arrofo, there are
circumstances critical to the case at bar which
convince us to affirm the ruling of both the appellate

and lower courts that herein petitioner is not a

buyer in good faith.
First, petitioner's sister Hilda Bautista, at the time of
the sale, was residing near Rogelio and Shirley's
house - the subject property - in Ladislao Diwa
Village, Marikina City. Had petitioner been more
prudent as a buyer, she could have easily checked if
Rogelio had the capacity to dispose of the subject
property. Had petitioner been more vigilant, she
could have inquired with such facility - considering
that her sister lived in the same Ladislao Diwa
Village where the property is located - if there was
any person other than Rogelio who had any right or
interest in the subject property.
To be sure, respondent even testified that she had
warned their neighbors at Ladislao Diwa Village including petitioner's sister - not to engage in any
deal with Rogelio relative to the purchase of the
subject property because of the cases she had filed
against Rogelio. Petitioner denies that respondent
had given such warning to her neighbors, which
includes her sister, therefore arguing that such
warning could not be construed as "notice" on her
part that there is a person other than the seller
himself who has any right or interest in the subject
property. Nonetheless, despite petitioner's adamant
denial, both courts a quo gave probative value to
the testimony of respondent, and the instant
petition failed to present any convincing evidence
for this Court to reverse such factual finding. To be
sure, it is not within our province to second-guess
the courts a quo, and the re-determination of this
factual issue is beyond the reach of a petition for
review on certiorari where only questions of law
may be reviewed.30
Second, issues surrounding the execution of the
Deed of Absolute Sale also pose question on the
claim of petitioner that she is a buyer in good faith.
As correctly observed by both courts a quo, the
Deed of Absolute Sale was executed and dated on
December 29, 1992. However, the Community Tax
Certificates of the witnesses therein were dated
January 2 and 20, 1993.31 While this irregularity is
not a direct proof of the intent of the parties to the
sale to make it appear that the Deed of Absolute
Sale was executed on December 29, 1992 - or
before Shirley filed the petition for legal separation
on January 29, 1993 - it is circumstantial and
relevant to the claim of herein petitioner as an
innocent purchaser for value.
That is not all.
In the Deed of Absolute Sale dated December 29,
1992, the civil status of Rogelio as seller was not
stated, while petitioner as buyer was indicated as
"single," viz.:chanroblesvirtuallawlibrary
ROGELIO A. NUEGA, of legal age, Filipino citizen and
with postal address at 2-A-2 Ladislao Diwa St.,
Concepcion, Marikina, Metro Manila, hereinafter
referred to as the VENDOR
And

JOSEFINA V. NOBLEZA, of legal age, Filipino citizen,

single and with postal address at No. L-2-A-3
Ladislao Diwa St., Concepcion, Marikina, Metro
Manila, hereinafter referred to as the
VENDEE.32cralawlawlibrary
It puzzles the Court that while petitioner has
repeatedly claimed that Rogelio is "single" under
TCT No. 171963 and Tax Declaration Nos. D-01204723 and D-012-04724, his civil status as seller
was not stated in the Deed of Absolute Sale - further
creating a cloud on the claim of petitioner that she
is an innocent purchaser for value.
As to the second issue, we rule that the appellate
court did not err when it modified the decision of the
trial court and declared that the Deed of Absolute
Sale dated December 29, 1992 is void in its entirety.
The trial court held that while the TCT shows that
the owner of the subject property is Rogelio alone,
respondent was able to prove at the trial court that
she contributed in the payment of the purchase
price of the subject property. This fact was also
settled with finality by the RTC of Pasig City, Branch
70, and affirmed by the CA, in the case for legal
separation and liquidation of property docketed as
JDRC Case No. 2510. The pertinent portion of the
decision reads:chanroblesvirtuallawlibrary
xxx Clearly, the house and lot jointly acquired by
the parties prior to their marriage forms part of their
community property regime, xxx
From the foregoing, Shirley sufficiently proved her
financial contribution for the purchase of the house
and lot covered by TCT 171963. Thus, the present
lot which forms part of their community property
should be divided equally between them upon the
grant of the instant petition for legal separation.
Having established by preponderance of evidence
the fact of her husband's guilt in contracting a
subsequent marriage xxx, Shirley alone should be
entitled to the net profits earned by the absolute
community property.33cralawlawlibrary
However, the nullity of the sale made by Rogelio is
not premised on proof of respondent's financial
contribution in the purchase of the subject property.
Actual contribution is not relevant in determining
whether a piece of property is community property
for the law itself defines what constitutes
community property.
Article 91 of the Family Code thus
provides:chanroblesvirtuallawlibrary
Art. 91. Unless otherwise provided in this Chapter or
in the marriage settlements, the community
property shall consist of all the property owned by
the spouses at the time of the celebration of the
marriage or acquired thereafter.
The only exceptions from the above rule are: (1)
those excluded from the absolute community by
theFamily Code; and (2) those excluded by the
marriage settlement.
Under the first exception are properties enumerated

in Article 92 of the Family Code, which

states:chanroblesvirtuallawlibrary
Art. 92. The following shall be excluded from the
community property:
(1) Property acquired during the marriage by
gratuitous title by either spouse, and the fruits as
well as the income thereof, if any, unless it is
expressly provided by the donor, testator or grantor
that they shall form part of the community property;
(2) Property for personal and exclusive use of either
spouse; however, jewelry shall form part of the
community property;
(3) Property acquired before the marriage by either
spouse who has legitimate descendants by a former
marriage, and the fruits as well as the income, if
any, of such property.
As held in Quiao v.
Quiao:34ChanRoblesVirtualawlibrary
When a couple enters into a regime of absolute
community, the husband and the wife becomes joint
owners of all the properties of the marriage.
Whatever property each spouse brings into the
marriage, and those acquired during the marriage
(except those excluded under Article 92 of the
Family Code) form the common mass of the couple's
properties. And when the couple's marriage or
community is dissolved, that common mass is
divided between the spouses, or their respective
heirs, equally or in the proportion the parties have
established, irrespective of the value each one may
have originally owned.
Since the subject property does not fall under any of
the exclusions provided in Article 92, it therefore
forms part of the absolute community property of
Shirley and Rogelio. Regardless of their respective
contribution to its acquisition before their marriage,
and despite the fact that only Rogelio's name
appears in the TCT as owner, the property is owned
jointly by the spouses Shirley and Rogelio.
Respondent and Rogelio were married on
September 1, 1990. Rogelio, on his own and without
the consent of herein respondent as his spouse, sold
the subject property via a Deed of Absolute Sale
dated December 29, 1992 - or during the
subsistence of a valid contract of marriage. Under
Article 96 of Executive Order No. 209, otherwise
known as The Family Code of the Philippines, the
said disposition of a communal property is
void, viz.:chanroblesvirtuallawlibrary
Art. 96. The administration and enjoyment of the
community property shall belong to both spouses
jointly. In case of disagreement, the husband's
decision shall prevail, subject to recourse to the
court by the wife for a proper remedy, which must
be availed of within five years from the date of the
contract implementing such decision.
In the event that one spouse is incapacitated or
otherwise unable to participate in the administration
of the common properties, the other spouse may
assume sole powers of administration. These

powers do not include the powers of

disposition or encumbrance without the
authority of the court or the written consent
of the other spouse. In the absence of such
authority or consent, the disposition or
encumbrance shall be void. However, the
transaction shall be construed as a continuing offer
on the part of the consenting spouse and the third
person, and may be perfected as a binding contract
upon the acceptance by the other spouse or
authorization by the court before the offer is
withdrawn by either or both
offerors.35cralawlawlibrary
It is clear under the foregoing provision of the Family
Code that Rogelio could not sell the subject property
without the written consent of respondent or the
authority of the court. Without such consent or
authority, the entire sale is void. As correctly
explained by the appellate
court:chanroblesvirtuallawlibrary
In the instant case, defendant Rogelio sold the
entire subject property to defendant-appellant
Josefina on 29 December 1992 or during the
existence of Rogelio's marriage to plaintiff-appellee
Shirley, without the consent of the latter. The
subject property forms part of Rogelio and Shirley's
absolute community of property. Thus, the trial court
erred in declaring the deed of sale null and void only
insofar as the 55.05 square meters representing the
one-half (1/2) portion of plaintiff-appellee Shirley. In
absolute community of property, if the husband,
without knowledge and consent of the wife, sells
(their) property, such sale is void. The consent of
both the husband Rogelio and the wife Shirley is
required and the absence of the consent of one
renders the entire sale null and void including the
portion of the subject property pertaining to
defendant Rogelio who contracted the sale with
defendant-appellant Josefina. Since the Deed of
Absolute Sale x x x entered into by and between
defendant-appellant Josefina and defendant Rogelio
dated 29 December 1992, during the subsisting
marriage between plaintiff-appellee Shirley and
Rogelio, was without the written consent of Shirley,
the said Deed of Absolute Sale is void in its entirety.
Hence, the trial court erred in declaring the said
Deed of Absolute Sale as void only insofar as the 1/2
portion pertaining to the share of Shirley is
concerned.36cralawlawlibrary
Finally, consistent with our ruling that Rogelio solely
entered into the contract of sale with petitioner and
acknowledged receiving the entire consideration of
the contract under the Deed of Absolute Sale,
Shirley could not be held accountable to petitioner
for the reimbursement of her payment for the
purchase of the subject property. Under Article 94 of
the Family Code, the absolute community of
property shall only be "liable for x x x [d]ebts and
obligations contracted by either spouse without the
consent of the other to the extent that the family
may have been benefited x x x." As correctly stated
by the appellate court, there being no evidence on
record that the amount received by Rogelio
redounded to the benefit of the family, respondent
cannot be made to reimburse any amount to

petitioner.37
WHEREFORE, in view of the foregoing, the petition
is DENIED. The assailed Decision and Resolution of
the Court of Appeals dated May 14, 2010 and July
21, 2010, respectively, in CA-G.R. CV No. 70235
are AFFIRMED.
Costs against petitioner.
SO ORDERED.chanroblesvirtuallawlibrary

MUNOZ VS CARPIO
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 decision set aside the
decision[5] of the Regional Trial Court (RTC), Branch
166, Pasig City, in Civil Case No. 63665. The CA
resolution denied the petitioners subsequent motion
for reconsideration.
FACTUAL BACKGROUND
The facts of the case, gathered from the
records, are briefly summarized below.
Subject of the present case is a seventyseven (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 the Registry 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 Erlinda Ramirez, married to Eliseo Carlos
(respondents).[7]
On April 6, 1989, Eliseo, a Bureau of Internal
Revenue employee, mortgaged TCT No. 1427, with
Erlindas consent, to the Government Service
Insurance System (GSIS) to secure a P136,500.00
housing loan, payable within twenty (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 Absolute Sale, dated April 30, 1992,
executed by Erlinda, for herself and as attorney-infact of Eliseo, for a stated consideration
of P602,000.00.[9]

On September 24, 1993, the respondents

filed a complaint with the RTC for the nullification of
the deed of absolute sale, claiming that there was
no sale but only a mortgage transaction, and the
documents transferring the title to the petitioners
name were falsified.
The respondents alleged that in April 1992,
the petitioner granted them a P600,000.00 loan, to
be secured by a first mortgage on TCT No. 1427; the
petitioner gave Erlinda a P200,000.00[10] advance to
cancel the GSIS mortgage, and made her sign a
document purporting to be the mortgage contract;
the petitioner promised to give the P402,000.00
balance when Erlinda surrenders TCT No. 1427 with
the GSIS mortgage cancelled, and submits an
affidavit signed by Eliseo stating that he waives all
his
rights
to
the
subject
property;
with
the P200,000.00
advance,
Erlinda
paid
GSIS P176,445.27[11] to cancel the GSIS mortgage on
TCT No. 1427;[12] in May 1992, Erlinda surrendered
to the petitioner the clean TCT No. 1427, but
returned Eliseos affidavit, unsigned; since Eliseos
affidavit was unsigned, the petitioner refused to
give the P402,000.00 balance and to cancel the
mortgage, and demanded that Erlinda return
the P200,000.00 advance; since Erlinda could not
return the P200,000.00 advance because it had
been used to pay the GSIS loan, the petitioner kept
the title; and in 1993, they discovered that TCT No.
7650 had been issued in the petitioners name,
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 subject property to him after
he refused their offer to mortgage the subject
property because they lacked paying capacity and
were unwilling to pay the incidental charges; the
sale was with the implied promise to repurchase
within one year,[13]during which period (from May 1,
1992 to April 30, 1993), the respondents would
lease the subject property for a monthly rental
of P500.00;[14] when the respondents failed to
repurchase the subject property within the one-year
period despite notice, he caused the transfer of title
in his name on July 14, 1993; [15] when the
respondents failed to pay the monthly 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 of the deed of
absolute sale.
During the pendency of the RTC case, or on
March 29, 1995, the MeTC decided the ejectment
case. It ordered Erlinda and her family to vacate the
subject property, to surrender its possession to the
petitioner, and to pay the overdue rentals.[17]
In the RTC, the respondents presented the
results of the scientific examination [18] conducted by
the National Bureau 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 it was registered in Erlindas name;
the residential lot was part of a large parcel of land
owned by Pedro Ramirez and Fructuosa Urcla,
Erlindas parents; it was the subject of Civil Case No.
50141, a complaint for annulment of sale, before
the RTC, Branch 158, Pasig City, filed by the
surviving heirs of Pedro against another heir, Amado
Ramirez, Erlindas brother; 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
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, even without
Eliseos consent as the deed of absolute sale bore
the genuine signatures of Erlinda and the petitioner
as vendor and vendee, respectively. It concluded
that the NBI finding that Eliseos signatures in the
special power of attorney and in the 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 Code and Calimlim-Canullas v. Hon. Fortun,
[24]
the CA held that the subject property, originally
Erlindas exclusive paraphernal property, became
conjugal property when it was used as collateral for
a housing loan that was paid through conjugal funds
Eliseos monthly salary deductions; the subject
property, therefore, cannot be validly sold or
mortgaged without Eliseos consent, pursuant to
Article 124[25] of the Family Code. Thus, the CA
declared void the deed of absolute sale, and set
aside the RTC decision. When the CA denied[26] the
subsequent
motion
for
reconsideration,[27] the
petitioner filed the present petition for review
on certiorari under Rule 45 of the Revised Rules of
Court.
THE PETITION
The 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 to cancel
the GSIS mortgage on TCT No. 1427; Article
120[29] of the Family Code is the applicable rule, and
since the value of the house is less than the value of
the lot, then Erlinda retained ownership of the
subject property. He also argues that the contract
between the parties was a sale, not a mortgage,

because (a) Erlinda did not deny her signature in the

document;[30] (b) Erlinda agreed to sign a contract of
lease over the subject property; [31] and, (c) Erlinda
executed a letter, dated 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 to determine ownership of
the subject property; it was acquired during their
marriage and, therefore, considered conjugal
property. They also submit that the transaction
between the parties was not a sale, but an equitable
mortgage because (a) they 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 price of P602,000.00.
THE ISSUE
The issues in the present case boil down to
(1) whether the subject property is paraphernal or
conjugal; and, (2) whether 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 mistaken, as in the present case, we can
review the evidence to allow us to arrive at the
correct factual conclusions based on the record.[33]
First Issue:
Paraphernal or Conjugal?
As a general rule, all property acquired during the
marriage, whether the acquisition appears to have
been made, contracted 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 sufficiently rebutted this presumption of
conjugal ownership.[35] Pursuant to Articles 92[36] and
109[37] of the Family Code, properties acquired by
gratuitous title by either spouse, during the
marriage, shall be excluded from the community
property and be the exclusive property of each
spouse.[38] The residential lot, therefore, is Erlindas
exclusive paraphernal property.
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
the
second
paragraph of Article 158 of the Civil Code, a land
that originally belonged to one spouse becomes
conjugal upon the 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, the
land ipso facto becomes conjugal, but the husband
is entitled to reimbursement of the value of the land
at the liquidation of the conjugal partnership.
The CA misapplied Article 158 of the
Civil Code and Calimlim-Canullas
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 of gains (Articles 142 to 189)
should
have
governed
their
property
relations. However, with the enactment of the
Family Code on August 3, 1989, the Civil Code
provisions on conjugal partnership of gains,
including Article 158, have been superseded by
those found in the Family Code (Articles 105 to
133). Article 105 of the Family Code states:
xxxx
The provisions of this Chapter
[on the Conjugal Partnership of
Gains]
shall
also
apply
to
conjugal 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 Civil Code, 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 in
determining the ownership of the improvements
that are made on the separate property of the
spouses, at the expense of the partnership or
through the acts or efforts of either or both spouses.
Under this provision, when the cost of the
improvement and any resulting increase in value are
more than the value of the property at the time of
the improvement, the entire property of one of the
spouses shall belong to the conjugal partnership,
subject to reimbursement of the value of the
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 deductions. From April 6, 1989[42] to April 30,
1992,[43] Eliseo paid about P60,755.76,[44] not the

entire amount of the GSIS housing loan plus

interest,
since
the
petitioner
advanced
the P176,445.27[45] paid by Erlinda to cancel the
mortgage in 1992. Considering the P136,500.00
amount of the GSIS housing loan, it is fairly
reasonable to assume that the value of the
residential
lot
is
considerably
more
than
theP60,755.76 amount paid by Eliseo through
monthly salary deductions.
Thus, the subject property remained the
exclusive paraphernal property of Erlinda at the
time she contracted with the petitioner; the written
consent of Eliseo to the transaction was not
necessary. The NBI finding that Eliseos signatures in
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 the parties.
Second Issue:
Sale or Equitable Mortgage?
Jurisprudence has defined an equitable
mortgage "as one which although lacking in some
formality, or form or words, or other requisites
demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as
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 be presumed 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 right to repurchase another instrument
extending the period of redemption or granting a
new period is executed; (d) when the purchaser
retains for himself a part of the purchase
price; (e) when the vendor binds himself to
pay the taxes on the thing sold; and, (f) in any
other case where it may be fairly inferred that
the real intention of the parties is that the
transaction shall secure the payment of a debt
or the performance of any other obligation.
These instances apply 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) requisites must concur: (a) that the
parties entered into a contract denominated as a
contract of sale; and, (b) that their intention was to
secure an existing debt by way of a mortgage. Any
of the circumstances laid out in Article 1602 of the
Civil
Code,
not
the
concurrence
nor
an
overwhelming
number
of
the
enumerated
circumstances, is sufficient to support the
conclusion that a contract of sale is in fact an
equitable mortgage.[48]
Contract is an equitable 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 a one-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 settle the GSIS housing loan, but refused
to give the P402,000.00 balance when Erlinda failed
to submit Eliseos signed affidavit of 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 is coupled with continuous
possession of the property, it constitutes evidence
of great weight that the person under whose name
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. The records show that the
petitioner, in fact, sent Erlinda a Statement of
Account showing that as of February 20, 1993, she
owed P384,660.00, and the daily interest, starting
February 21, 1993, was P641.10.[52] Thus, the parties
clearly intended an 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, prompted the latter to transfer the
subject property to the petitioner.Thus, before the
respondents can recover the subject property, they
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 the petitioner,[53] sans any evidence
of how this amount was arrived at. Additionally, a
daily interest of P641.10 or P19,233.00 per month
for a P200,000.00 loan is patently unconscionable.
While parties are free to stipulate on the interest to
be imposed on monetary obligations, we can step in
to temper the interest rates if they are
unconscionable.[54]
In Lustan v. CA,[55] where we established the
reciprocal obligations of the parties under an
equitable mortgage, we ordered 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 and resolution of the Court of

Appeals
in
CA-G.R.
are AFFIRMED with
following MODIFICATIONS:

CV

No.

57126
the

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 of Title No. 7650 of the Register of Deeds
of Mandaluyong City, UPON THE PAYMENT
OF P200,000.00, with 12% legal interest from April
30, 1992, by respondents within NINETY DAYS FROM
THE FINALITY OF THIS DECISION.
Costs against the petitioner.
SO ORDERED.
AYALA INVESTMENT & DEVELOPMENT CORP. and
ABELARDO MAGSAJO, petitioners, vs. COURT
OF APPEALS and SPOUSES ALFREDO &
ENCARNACION CHING, respondents.
DECISION
MARTINEZ, J.:
Under Article 161 of the Civil Code, what debts and
obligations contracted by the husband alone are considered
for the benefit of the conjugal partnership which are
chargeable against the conjugal partnership? Is a surety
agreement or an accommodation contract entered into by
the husband in favor of his employer within the
contemplation of the said provision?
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 and
Encarnacion Ching vs. Ayala Investment and Development
Corporation, et. al., docketed as CA-G.R. CV No. 29632,
[1]
upholding the decision of the Regional Trial Court of
Pasig, Branch 168, which ruled that the conjugal
partnership of gains of respondents-spouses Alfredo and
Encarnacion Ching is not liable for the payment of the debts
secured 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 Ayala
Investment and Development Corporation (hereinafter
referred to as AIDC). As added security for the credit line
extended to PBM, respondent Alfredo Ching, Executive
Vice President of PBM, executed security agreements on
December 10, 1980 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 and
respondent-husband Alfredo Ching with the then Court of
First Instance of Rizal (Pasig), Branch VIII, entitled Ayala
Investment and Development Corporation vs. Philippine
Blooming Mills and Alfredo Ching, docketed as Civil Case
No. 42228.
After trial, the court rendered judgment ordering PBM
and respondent-husband Alfredo Ching to jointly and

severally pay 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
of execution pending appeal. Upon AIDCs putting up of
an P8,000,000.00 bond, a writ of execution dated May 12,
1982 was issued. Thereafter, petitioner Abelardo Magsajo,
Sr., Deputy Sheriff of Rizal and appointed sheriff in Civil
Case No. 42228, caused the issuance and service upon
respondents-spouses of a notice of sheriff sale dated May
20, 1982 on three (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 First
Instance of Rizal (Pasig), Branch XIII, to enjoin the auction
sale alleging that petitioners cannot enforce the judgment
against the conjugal partnership levied on the ground that,
among others, the subject loan did not redound to the
benefit of the said conjugal partnership. [2] Upon application
of private respondents, the lower court issued a temporary
restraining order to prevent petitioner Magsajo from
proceeding with the enforcement of the writ of execution
and with the sale of the said properties at public auction.
AIDC filed a petition for certiorari before the Court of
Appeals,[3] questioning the order of the lower court enjoining
the sale. Respondent Court of Appeals issued a Temporary
Restraining Order on June 25, 1982, enjoining the lower
court[4] from enforcing its Order of June 14, 1982, thus
paving the way for the scheduled auction sale of
respondents-spouses conjugal properties.
On June 25, 1982, the auction sale took place. AIDC
being the only bidder, was issued a Certificate of Sale by
petitioner Magsajo, which was registered on July 2, 1982.
Upon expiration of the redemption period, petitioner sheriff
issued 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 certiorari in this
case is granted and the challenged order of the
respondent Judge dated June 14, 1982 in Civil
Case No. 46309 is hereby set aside and
nullified. The same petition insofar 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
of Rizal (Pasig) on the ground that the same had become
moot and academic with the consummation of the
sale. Respondents filed their opposition to the motion
arguing, among others, that where a third party who claims
ownership of the property attached or levied upon, a
different legal situation is presented; and that in this case,
two (2) of the 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
presented several 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 and

void. 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
trial court. It held that:
The loan procured from respondent-appellant AIDC
was for the advancement and benefit of Philippine
Blooming Mills and not for the benefit of the conjugal
partnership of petitioners-appellees.
xxxxxxxxx
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 court that 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
debts and obligations contracted during the marriage
by the designated Administrator-Spouse for the
benefit of the conjugal partnership of gains x x
x. The burden of proof that the debt was contracted
for the benefit of the conjugal 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 of the 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. The decision 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 dated
November 28, 1994.[7]
Hence, this petition for review. Petitioner contends that
the respondent court erred in ruling that the conjugal
partnership 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
RESPONDENT
HUSBAND
DID
NOT
REDOUND TO THE BENEFIT OF THE
CONJUGAL
PARTNERSHIP
OF
THE
PRIVATE RESPONDENT.
II RESPONDENT COURT ERRED IN RULING
THAT THE ACT OF RESPONDENT
HUSBAND IN SECURING THE SUBJECT
LOAN IS NOT PART OF HIS INDUSTRY,
BUSINESS OR CAREER FROM WHICH 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
the partnership; all that is necessary, they say, is that the
transaction was entered into for the benefit of the conjugal
partnership. Thus, petitioners aver that:
The wordings of Article 161 of the Civil Code is
very clear: for the partnership to be held liable,
the husband must have contracted the debt for
the benefit 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
conjugal
partnership 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 latter requires
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 or
benefited from on the one hand; and for the benefit of on
the other. They mean one and the same thing. Article 161
(1) of the Civil Code and Article 121 (2) of the Family Code
are similarly worded, i.e., both use the term for the benefit
of. On the other hand, Article 122 of the Family Code
provides that The payment of personal debts by the
husband or the wife before or during the marriage shall not
be charged to the conjugal partnership except insofar
as they redounded to 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 in the case of Cobb-Perez vs. Lantin,[9] that the
husband as head of the family and as administrator of the
conjugal partnership 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
Court 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 debts contracted by the husband during
the marriage relation, for and in the exercise of
the industry or profession 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 the payment 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 the partnership in an ordinary
commercial enterprise for gain, and the fact
that the wife may not approve of a venture
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 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.
(G-Tractors)
However, in the cases of Ansaldo vs. Sheriff of Manila,
Fidelity Insurance & Luzon Insurance Co., [14] Liberty
Insurance 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 to the 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 some benefit 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. (Liberty Insurance)
In the most categorical language, a conjugal
partnership under Article 161 of the new Civil
Code is liable only for such debts and
obligations contracted by the husband for the
benefit of the conjugal partnership. There must
be the requisite showing then of some
advantage which clearly accrued to the welfare
of the spouses. Certainly, to make a conjugal
partnership respond for a liability that should
appertain to the husband alone is to defeat and
frustrate the avowed objective of the new Civil
Code to show the utmost concern for the
solidarity and well-being of the family as a
unit. The husband, therefore, is denied the
power to assume unnecessary 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
benefit of the conjugal partnership. Here, no actual benefit
may be proved. It is enough that the benefit to the family is
apparent at the time of the signing of the contract. From the
very nature of the contract of loan or services, the family
stands to benefit from the loan facility or services to be
rendered to the business or profession of the husband. It is
immaterial, if in the end, his business or profession fails or
does not succeed. Simply stated, where the husband
contracts obligations on behalf of the family business, the
law presumes, and rightly so, that such obligation will
redound to the benefit of the conjugal partnership.
(B) On the other hand, 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. No presumption can be
inferred that, when a husband enters into a contract of
surety or accommodation agreement, it is for the benefit of
the conjugal partnership.Proof must be presented to
establish benefit redounding to the conjugal partnership.
Thus, the distinction between the Cobb-Perez case,
and we add, that of the three other companion cases, on
the one hand, and that of Ansaldo, Liberty Insurance and
Luzon Surety, is that in the former, the husband contracted
the obligation for his own business; while in the latter, the
husband merely acted as a surety for the loan contracted
by another for the latters business.
The evidence of petitioner indubitably show that corespondent Alfredo Ching signed as surety for the P50M
loan contracted 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
Philippine Blooming Mills and not for the
benefit of the conjugal partnership of
petitioners-appellees. Philippine Blooming
Mills has a personality distinct and separate
from the family of petitioners-appellees - this
despite the fact that the members of the said
family happened to be stockholders of said
corporate entity.
xxxxxxxxx
x x x. The burden of proof that the debt was
contracted for the benefit of the conjugal
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 of the conjugal partnership of
gains. What is apparent from the facts of the
case is that the judgment debt was contracted
by or in the name of the Corporation 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 to the extent of his corporate
stockholdings. It does not extend to the
conjugal partnership of gains of the family of
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, they
cite 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 obligations contracted by the husband for
the benefit of the conjugal partnership used in
Article 161 of the Civil Code of the Philippines
in describing the charges and obligations for
which the conjugal partnership is liable do not
require that actual profit or benefit must accrue
to the conjugal partnership from the husbands
transaction; but it suffices that the transaction
should be one that normally would produce
such benefit for the partnership. This is the

ratio behind our ruling in Javier vs. Osmea, 34

Phil. 336, that obligations incurred by the
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
be made liable for the surety agreement which was clearly
for the benefit of a third party. Such opinion merely
registered an exception to what may be construed as a
sweeping statement that in all cases actual profit or benefit
must accrue to the conjugal partnership. The opinion
merely made it clear that no actual benefits to the family
need be proved in some cases such as in the Javier
case. There, the husband was the principal obligor
himself. Thus, said transaction was found to be one that
would normally produce x x x benefit for the partnership. In
the later case of G-Tractors, Inc., the husband was also the
principal obligor - not merely the surety. This latter case,
therefore, did not create any precedent. It did not also
supersede the Luzon Surety Company case, nor any of the
previous accommodation contract cases, where this Court
ruled 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
for the 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 the
following:
(a) The employment of co-respondent Alfredo
Ching would be prolonged and he would be
entitled to his monthly salary of P20,000.00 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
rehabilitated through the loan obtained;
(c) His prestige in the corporation would be
enhanced and his career would be boosted
should PBM survive because of the loan.
However, these are not the benefits contemplated by
Article 161 of the Civil Code. The benefits must be one
directly resulting from the loan. It cannot merely be a byproduct or a spin-off of the loan itself.
In all our decisions involving accommodation contracts
of the husband,[18] we underscored the requirement
that: there must be the requisite showing x x x of some
advantage which clearly accrued to the welfare of the
spouses or benefits to his family or that such obligations are
productive of some benefit to the family. Unfortunately, the
petition did not present any proof to show: (a) Whether or
not the corporate existence of PBM was prolonged and for
how many months or years; and/or (b) Whether or not the
PBM was saved by the loan and its shares of stock
appreciated, if so, how much 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 been
already apparent or could be anticipated at the time the
accommodation agreement was entered into. But would
those benefits 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 the motion 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 debt granted to PBM, with petitionerappellee-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 Code provisions is specifically restricted
by Article 122 (par. 1) of the Family Code, so
that debts for which the husband is liable may
not be charged against conjugal partnership
properties. Article 122 of the Family Code is
explicit The payment of personal debts
contracted by the husband or the wife before or
during the marriage shall not be charged to the
conjugal partnership except insofar as they
redounded to the benefit of the family.
Respondents-appellants insist that the
corporate debt in question falls under the
exception laid down in said Article 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 of petitioners-appellees.
x x x appellee-husband derives salaries,
dividends benefits from Philippine
Blooming Mills (the debtor corporation), only
because said husband is an employee of said
PBM.These salaries and benefits, are not the
benefits contemplated by Articles 121 and 122
of the Family Code. The benefits contemplated
by the exception in Article 122 (Family Code) is
that benefit derived directly from the use of the
loan. In the case at bar, the loan is a corporate
loan extended to PBM and used by PBM itself,
not by petitioner-appellee-husband or his
family. The alleged benefit, if any, continuously
harped by respondents-appellants, are not only
incidental but also speculative.[19]
We agree with the respondent court. Indeed,
considering the odds involved in guaranteeing a large
amount (P50,000,000.00) of loan, the probable prolongation
of employment in PBM and increase in value of its stocks,
would be too small to qualify the transaction as one for the
benefit of the suretys family. Verily, no one could say, with a
degree of 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
the conservation of the conjugal partnership; for the
husbands duty to protect and safeguard, if not augment, not
to dissipate it.
This is the underlying reason why the Family Code
clarifies that the obligations entered into by one of the
spouses must be those that redounded to the benefit of the
family and that the measure of the partnerships liability is to
the extent that 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 the
spouses to donate or convey gratuitously any part of the

conjugal property.[21] Thus, when co-respondent Alfredo

Ching entered into a surety agreement he, from then on,
definitely put in peril the conjugal property (in this case,
including the family 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 or profession 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 instant case. 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
own employer, this should not be taken to mean that he had
thereby embarked in the business of suretyship or guaranty.
This is not to say, however, that we are unaware that
executives are often asked to stand as surety for their
companys 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
husband signed alone does not mean that being a surety
became part of his profession. Neither could he be
presumed to have acted for the conjugal partnership.
Article 121, paragraph 3, of the Family Code is
emphatic that the payment of personal debts contracted by
the husband or the wife before or during the marriage shall
not be charged to the conjugal partnership except to the
extent 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 the
benefit of the family.
On the basis of the facts, the rules, the law and equity,
the assailed decision should be upheld as we now uphold
it. This is, of course, without prejudice to petitioners right to
enforce the obligation in its favor against the PBM receiver
in accordance 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.

ALFREDO CHING, petitioner, vs. HON. COURT OF

APPEALS, HON. ZOSIMO Z. ANGELES, RTC - BR. 58,
MAKATI, METRO MANILA, PEOPLE OF THE
PHILIPPINES AND ALLIED BANKING
CORPORATION, respondents.
DECISION
BUENA, J.:
Confronting the Court in this instant petition for review
on certiorari under Rule 45 is the task of resolving the issue
of whether the pendency of a civil action for damages and
declaration of nullity of documents, specifically trust
receipts, warrants the suspension of criminal proceedings
instituted for violation of Article 315 1(b) of the Revised
Penal Code, in relation to P.D. 115, otherwise known as the
"Trust Receipts Law".xl-aw
Petitioner Alfredo Ching challenges before us the
decision[1] of the Court of Appeals promulgated on 27
January 1993 in CA G.R. SP No. 28912, dismissing his
"Petition for Certiorari and Prohibition with Prayer for
Issuance of Temporary Restraining Order/ Preliminary
Injunction", on the ground of lack of merit.
Assailed similarly is the resolution[2] of the Court of Appeals
dated 28 June 1993 denying petitioners motion for
reconsideration.
As borne by the records, the controversy arose from the
following facts:
On 04 February 1992,[3] petitioner was charged before the
Regional Trial Court of Makati (RTC- Makati), Branch 58,
with four counts of estafa punishable under Article 315 par.
1(b) of the Revised Penal Code, in relation to Presidential
Decree 115, otherwise known as the "Trust Receipts Law".
The four separate informations[4] which were couched in
similar language except for the date, subject goods and
amount thereof, charged herein petitioner in this wise:
"That on or about the (18th day of May
1981; 3rd day of June 1981; 24th day of
June 1981 and 24th day of June 1981), in
the Municipality of Makati, Metro Manila,
Philippines and within the jurisdiction of
this Honorable Court, the above-named
accused having executed a trust receipt
agreement in favor of Allied Banking
Corporation in consideration of the receipt
by the said accused of goods described as

12 Containers (200 M/T) Magtar Brand

Dolomites; 18 Containers (Zoom M/T)
Magtar Brand Dolomites; High Fired
Refractory Sliding Nozzle Bricks; and High
Fired Refractory Sliding Nozzle Bricks for
which there is now due the sum of (P 278,
917.80; P 419,719.20; P 387, 551. 95;
andP389, 085.14 respectively) under the
terms of which the accused agreed to sell
the same for cash with the express
obligation to remit to the complainant bank
the proceeds of the sale and/or to turn
over the goods, if not sold, on demand,
but the accused, once in possession of
said goods, far from complying with his
obligation and with grave abuse of
confidence, did then and there, willfully,
unlawfully and feloniously misappropriate,
misapply and convert to his own personal
use and benefit the said goods and/or the
proceeds of the sale thereof, and despite
repeated demands, failed and refused and
still fails and refuses, to account for and/or
remit the proceeds of sale thereof to the
Allied Banking Corporation to the damage
and prejudice of the said complainant
bank in the aforementioned amount of
( P 278,917.80; P 419,719.20; P 387,551.
95; and P389,085.14)." x-sc
On 10 February 1992, an "Omnibus Motion[5] to Strike Out
Information, or in the Alternative to Require Public
Prosecutor to Conduct Preliminary Investigation, and to
Suspend in the Meantime Further Proceedings in these
Cases," was filed by the petitioner.
In an order dated 13 February 1992, the Regional Trial
Court of Makati, Branch 58, acting on the omnibus motion,
required the prosecutors office to conduct a preliminary
investigation and suspended further proceedings in the
criminal cases.
On 05 March 1992, petitioner Ching, together with
Philippine Blooming Mills Co. Inc., filed a case[6] before the
Regional Trial Court of Manila (RTC-Manila), Branch 53, for
declaration of nullity of documents and for damages
docketed as Civil Case No. 92-60600, entitled "Philippine
Blooming Mills, Inc. et. al. vs. Allied Banking Corporation."
On 07 August 1992, Ching filed a petition[7] before the RTCMakati, Branch 58, for the suspension of the criminal
proceedings on the ground of prejudicial question in a civil
action.
The prosecution then filed an opposition to the petition for
suspension, against which opposition, herein petitioner filed
a reply.[8]
On 26 August 1992, the RTC-Makati issued an
order[9] which denied the petition for suspension and
scheduled the arraignment and pre-trial of the criminal
cases. As a result, petitioner moved to reconsider [10] the
order to which the prosecution filed an opposition.
In an order[11] dated 04 September 1992, the RTC-Makati,
before which the criminal cases are pending, denied
petitioner's motion for reconsideration and set the criminal
cases for arraignment and pre-trial.

Aggrieved by these orders[12] of the lower court in the

criminal cases, petitioner brought before the Court of
Appeals a petition for certiorari and prohibition which sought
to declare the nullity of the aforementioned orders and to
prohibit the RTC-Makati from conducting further
proceedings in the criminal cases.
In denying the petition,[13] the Court of Appeals, in CA G.R.
SP No. 28912, ruled:
"X X X Civil Case No. 90-60600 pending
before the Manila Regional Trial Court
seeking(sic) the declaration of nullity of the
trust receipts in question is not a
prejudicial question to Criminal Case Nos.
92-0934 to 37 pending before the
respondent court charging the petitioner
with four counts of violation of Article 315,
par. 1(b), RPC, in relation to PD 115 as to
warrant the suspension of the proceedings
in the latter X X X." Sc
Consequently, petitioner filed a motion for reconsideration
of the decision which the appellate court denied for lack of
merit, via a resolution[14] dated 28 June 1993.
Notwithstanding the decision rendered by the Court of
Appeals, the RTC-Manila, Branch 53 in an order dated 19
November 1993 in Civil Case No. 92-60600, admitted
petitioners amended complaint[15] which, inter alia, prayed
the court for a judgment:
"X X X
"1. Declaring the Trust Receipts, annexes
D, F, H and J hereof, null and void, or
otherwise annulling the same, for failure to
express the true intent and agreement of
the parties;
"2. Declaring the transaction subject
hereof as one of pure and simple loan
without any trust receipt agreement
and/or not one involving a trust receipt,
and accordingly declaring all the
documents annexed hereto as mere loan
documents XXX"(emphasis ours)
In its amended answer,[16] herein private respondent Allied
Banking Corporation submitted in riposte that the
transaction applied for was a "letter of credit/trust receipt
accommodation" and not a "pure and simple loan with the
trust receipts as mere additional or side documents", as
asserted by herein petitioner in its amended complaint. [17]
Through the expediency of Rule 45, petitioner seeks the
intervention of this Court and prays:
"After due consideration, to render
judgment reversing the decision and
resolution, Annexes A and B hereof,
respectively, and ordering the suspension
of Criminal Cases (sic) Nos. 92-0934 to
92-0937, inclusive, entitled "People of the
Philippines vs. Alfredo Ching" pending
before Branch 58 of the Regional Trial
Court of Makati, Metro Manila, until final
determination of Civil Case No. 92-600
entitled Philippine Blooming Mills Co. Inc.
and Alfredo Ching vs. Allied Banking

Corporation" pending before Branch 53 of

the Regional Trial Court of Manila."
The instant petition is bereft of merit.
We agree with the findings of the trial court, as affirmed by
the Court of Appeals, that no prejudicial question exists in
the present case. Scmis
As defined, a prejudicial question is one that arises in a
case the resolution of which is a logical antecedent of the
issue involved therein, and the cognizance of which
pertains to another tribunal. The prejudicial question must
be determinative of the case before the court but the
jurisdiction to try and resolve the question must be lodged
in another court or tribunal.[18]
It is a question based on a fact distinct and separate from
the crime but so intimately connected with it that it
determines the guilt or innocence of the accused, and for it
to suspend the criminal action, it must appear not only that
said case involves facts intimately related to those upon
which the criminal prosecution would be based but also that
in the resolution of the issue or issues raised in the civil
case, the guilt or innocence of the accused would
necessarily be determined.[19] It comes into play generally in
a situation where a civil action and a criminal action are
both pending and there exists in the former an issue which
must be preemptively resolved before the criminal action
may proceed, because howsoever the issue raised in the
civil action is resolved would be determinative juris et de
jure of the guilt or innocence of the accused in the criminal
case.[20]
More simply, for the court to appreciate the pendency of a
prejudicial question, the law,[21] in no uncertain terms,
requires the concurrence of two essential requisites, to wit:
a) The civil action involves an issue similar
or intimately related to the issue raised in
the criminal action; and
b) The resolution of such issue determines
whether or not the criminal action may
proceed.
Verily, under the prevailing circumstances, the alleged
prejudicial question in the civil case for declaration of nullity
of documents and for damages, does not juris et de
jure determine the guilt or innocence of the accused in the
criminal action for estafa. Assuming arguendo that the court
hearing the civil aspect of the case adjudicates that the
transaction entered into between the parties was not a trust
receipt agreement, nonetheless the guilt of the accused
could still be established and his culpability under penal
laws determined by other evidence. To put it differently,
even on the assumption that the documents are declared
null, it does not ipso facto follow that such declaration of
nullity shall exonerate the accused from criminal
prosecution and liability.
Accordingly, the prosecution may adduce evidence to prove
the criminal liability of the accused for estafa, specifically
under Article 315 1(b) of the Revised Penal Code which
explicitly provides that said crime is committed: Missc
"X X X (b) By misappropriating or
converting, to the prejudice of another,
money, goods, or any other personal
property received by the offender in trust
or on commission, or for administration, or

any other obligation involving the duty to

make delivery of or to return the same,
even though such obligation be totally or
partially guaranteed by a bond; or by
denying having received such money,
goods, or other property."
Applying the foregoing principles, the criminal liability of the
accused for violation of Article 315 1(b) of the Revised
Penal Code, may still be shown through the presentation of
evidence to the effect that: (a) the accused received the
subject goods in trust or under the obligation to sell the
same and to remit the proceeds thereof to Allied Banking
Corporation, or to return the goods, if not sold; (b) that
accused Ching misappropriated or converted the goods
and/or the proceeds of the sale; (c) that accused Ching
performed such acts with abuse of confidence to the
damage and prejudice of Allied Banking Corporation; and
(d) that demand was made by the bank to herein petitioner.
Presidential Decree 115, otherwise known as the "Trust
Receipts Law", specifically Section 13 thereof, provides:
"The failure of an entrustee to turn over
the proceeds of the sale of the goods,
documents or instruments covered by a
trust receipt to the extent of the amount
owing to the entruster or as appears in the
trust receipt or to return said goods,
documents or instruments if they were not
sold or disposed of in accordance with the
terms of the trust receipt shall constitute
the crime of estafa, punishable under the
provisions of Article Three hundred fifteen,
paragraph one (b) of Act Numbered Three
thousand eight hundred and fifteen, as
amended, otherwise known as the
Revised Penal Code."
We must stress though, that an act violative of a trust
receipt agreement is only one mode of committing estafa
under the abovementioned provision of the Revised Penal
Code. Stated differently, a violation of a trust receipt
arrangement is not the sole basis for incurring liability under
Article 315 1(b) of the Code.
In Jimenez vs. Averia,[22] where the accused was likewise
charged with estafa, this Court had occasion to rule that a
civil case contesting the validity of a certain receipt is not a
prejudicial question that would warrant the suspension of
criminal proceedings for estafa.
In the abovementioned case, a criminal charge for estafa
was filed in the Court of First Instance of Cavite against the
two accused. The information alleged that the accused,
having received the amount of P20,000.00 from Manuel
Jimenez for the purchase of a fishing boat, with the
obligation on the part of the former to return the money in
case the boat was not purchased, misappropriated the said
amount to the damage and prejudice of Jimenez.
[23]
Misspped
Before arraignment, the accused filed a civil case
contesting the validity of a certain receipt signed by them. In
the receipt, the accused acknowledged having received the
aforesaid sum, in addition to the amount of P240.00 as
agents commission. The complaint, however, alleged that
the accused never received any amount from Jimenez and

that the signatures on the questioned receipt were secured

by means of fraud, deceit and intimidation.
In ruling out the existence of prejudicial question, we
declared:
"X X X It will be readily seen that the
alleged prejudicial question is not
determinative of the guilt or innocence of
the parties charged with estafa, because
even on the assumption that the execution
of the receipt whose annulment they
sought in the civil case was vitiated by
fraud, duress or intimidation, their guilt
could still be established by other
evidence showing, to the degree required
by law, that they had actually received
from the complainant the sum of
P20,000.00 with which to buy for him a
fishing boat, and that, instead of doing so,
they misappropriated the money and
refused or otherwise failed to return it to
him upon demand. X X X "Spped
Furthermore, petitioner submits that the truth or falsity of
the parties respective claims as regards the true nature of
the transactions and of the documents, shall have to be first
determined by the Regional Trial Court of Manila, which is
the court hearing the civil case.
While this may be true, it is no less true that the Supreme
Court may, on certain exceptional instances, resolve the
merits of a case on the basis of the records and other
evidence before it, most especially when the resolution of
these issues would best serve the ends of justice and
promote the speedy disposition of cases.
Thus, considering the peculiar circumstances attendant in
the instant case, this Court sees the cogency to exercise its
plenary power:
"It is a rule of procedure for the Supreme
Court to strive to settle the entire
controversy in a single proceeding leaving
no root or branch to bear the seeds of
future litigation. No useful purpose will be
served if a case or the determination of an
issue in a case is remanded to the trial
court only to have its decision raised again
to the Court of Appeals and from there to
the Supreme Court (citing Board of
Commissioners vs. Judge Joselito de la
Rosa and Judge Capulong, G.R. Nos.
95122-23).
"We have laid down the rule that the
remand of the case or of an issue to the
lower court for further reception of
evidence is not necessary where the Court
is in position to resolve the dispute based
on the records before it and particularly
where the ends of justice would not be
subserved by the remand thereof
(Escudero vs. Dulay, 158 SCRA 69).
Moreover, the Supreme Court is clothed
with ample authority to review matters,
even those not raised on appeal if it finds

that their consideration is necessary in

arriving at a just disposition of the case." [24]
On many occasions, the Court, in the public interest and for
the expeditious administration of justice, has resolved
actions on the merits instead of remanding them to the trial
court for further proceedings, such as where the ends of
justice would not be subserved by the remand of the case.
[25]

Inexorably, the records would show that petitioner signed

and executed an application and agreement for a
commercial letter of credit to finance the purchase of
imported goods. Likewise, it is undisputed that petitioner
signed and executed trust receipt documents in favor of
private respondent Allied Banking Corporation. Josp-ped
In its amended complaint, however, which notably was filed
only after the Court of Appeals rendered its assailed
decision, petitioner urges that the transaction entered into
between the parties was one of "pure loan without any trust
receipt agreement". According to petitioner, the trust receipt
documents were intended merely as "additional or side
documents covering the said loan" contrary to petitioners
allegation in his original complaint that the trust receipts
were executed as collateral or security.
We do not agree. As Mr. Justice Story succinctly puts it:
"Naked statements must be entitled to little weight when the
parties hold better evidence behind the scenes." [26]
Hence, with affirmance, we quote the findings of the Court
of Appeals:
"The concept in which petitioner signed
the trust receipts, that is whether he
signed the trust receipts as such trust
receipts or as a mere evidence of a pure
and simple loan transaction is not decisive
because precisely, a trust receipt is a
security agreement of an indebtedness."
Contrary to petitioners assertions and in view of
jurisprudence established in this jurisdiction, a trust receipt
is not merely an additional or side document to a principal
contract, which in the instant case is alleged by petitioner to
be a pure and simple loan.
As elucidated in Samo vs. People,[27] a trust receipt is
considered a security transaction intended to aid in
financing importers and retail dealers who do not have
sufficient funds or resources to finance the importation or
purchase of merchandise, and who may not be able to
acquire credit except through utilization, as collateral, of the
merchandise imported or purchased.
Further, a trust receipt is a document in which is expressed
a security transaction whereunder the lender, having no
prior title in the goods on which the lien is to be given and
not having possession which remains in the borrower, lends
his money to the borrower on security of the goods which
the borrower is privileged to sell clear of the lien with an
agreement to pay all or part of the proceeds of the sale to
the lender.[28] It is a security agreement pursuant to which a
bank acquires a "security interest" in the goods. It secures
an indebtedness and there can be no such thing as security
interest that secures no obligation.[29]
Clearly, a trust receipt partakes the nature of a security
transaction. It could never be a mere additional or side
document as alleged by petitioner. Otherwise, a party to a

trust receipt agreement could easily renege on its

obligations thereunder, thus undermining the importance
and defeating with impunity the purpose of such an
indispensable tool in commercial transactions. Spp-edjo
Of equal importance is the fact that in his complaint in Civil
Case No. 92-60600, dated 05 March 1992, petitioner
alleged that the trust receipts were executed and intended
as collateral or security. Pursuant to the rules, such
particular allegation in the complaint is tantamount to a
judicial admission on the part of petitioner Ching to which
he must be bound.
Thus, the Court of Appeals in its resolution dated 28 June
1993, correctly observed:
"It was petitioner himself who
acknowledged the trust receipts as mere
collateral and security for the payment of
the loan but kept on insisting that the real
and true transaction was one of pure loan.
X X X"
"In his present motion, the petitioner
alleges that the trust receipts are evidence
of a pure loan or that the same were
additional or side documents that actually
stood as promissory notes and not a
collateral or security agreement. He
cannot assume a position inconsistent
with his previous allegations in his civil
complaint that the trust receipts were
intended as mere collateral or security X X
X."
Perhaps, realizing such flaw, petitioner, in
a complete turn around, filed a motion to
admit amended complaint before the RTCManila. Among others, the amended
complaint alleged that the trust receipts
stood as additional or side documents, the
real transaction between the parties being
that of a pure loan without any trust receipt
agreement.
In an order dated 19 November 1993, the RTC-Manila,
Branch 53, admitted the amended complaint. Accordingly,
with the lower courts admission of the amended complaint,
the judicial admission made in the original complaint was, in
effect, superseded. Mi-so
Under the Rules, pleadings superseded or amended
disappear from the record, lose their status as pleadings
and cease to be judicial admissions. While they may
nonetheless be utilized against the pleader as extrajudicial
admissions, they must, in order to have such effect, be
formally offered in evidence. If not offered in evidence, the
admission contained therein will not be considered. [30]
Consequently, the original complaint, having been
amended, lost its character as a judicial admission, which
would have required no proof, and became merely an
extrajudicial admission, the admissibility of which, as
evidence, required its formal offer.[31]
In virtue thereof, the amended complaint takes the place of
the original. The latter is regarded as abandoned and
ceases to perform any further function as a pleading. The
original complaint no longer forms part of the record. [32]

Thus, in the instant case, the original complaint is deemed

superseded by the amended complaint. Corollarily, the
judicial admissions in the original complaint are considered
abandoned. Nonetheless, we must stress that the
actuations of petitioner, as sanctioned by the RTC-Manila,
Branch 53 through its order admitting the amended
complaint, demands stern rebuke from this Court.
Certainly, this Court is not unwary of the tactics employed
by the petitioner specifically in filing the amended complaint
only after the promulgation of the assailed decision of the
Court of Appeals. It bears noting that a lapse of almost
eighteen months (from March 1992 to September 1993),
from the filing of the original complaint to the filing of the
amended complaint, is too lengthy a time sufficient to
enkindle suspicion and enflame doubts as to the true
intentions of petitioner regarding the early disposition of the
pending cases. Ne-xold
Although the granting of leave to file amended pleadings is
a matter peculiarly within the sound discretion of the trial
court and such discretion would not normally be disturbed
on appeal, it is also well to mention that this rule is relaxed
when evident abuse thereof is apparent.[33]
Hence, in certain instances we ruled that amendments are
not proper and should be denied when delay would arise,
[34]
or when the amendments would result in a change of
cause of action or defense or change the theory of the
case,[35] or would be inconsistent with the allegations in the
original complaint.[36]
Applying the foregoing rules, petitioner, by filing the
amended complaint, in effect, altered the theory of his case.
Likewise, the allegations embodied in the amended
complaint are inconsistent with that of the original complaint
inasmuch as in the latter, petitioner alleged that the trust
receipts were intended as mere collateral or security, the
principal transaction being one of pure loan.
Yet, in the amended complaint, petitioner argued that the
said trust receipts were executed as additional or side
documents, the transaction being strictly one of pure
loan without any trust receipt arrangement. Obviously
these allegations are in discord in relation to each other and
therefore cannot stand in harmony.
These circumstances, taken as a whole, lead this Court to
doubt the genuine purpose of petitioner in filing the
amended complaint. Again, we view petitioners actuations
with abhorrence and displeasure. Man-ikx
Moreover, petitioner contends that the transaction between
Philippine Blooming Mills (PBM) and private respondent
Allied Banking Corporation does not fall under the category
of a trust receipt arrangement claiming that the goods were
not to be sold but were to be used, consumed and
destroyed by the importer PBM.
To our mind, petitioners contention is a stealthy attempt to
circumvent the principle enunciated in the case of Allied
Banking Corporation vs. Ordonez,[37] thus:
"X X X In an attempt to escape criminal
liability, private respondent claims P.D. 115
covers goods which are ultimately
destined for sale and not goods for use in
manufacture. But the wording of Section
13 covers failure to turn over the proceeds
of the sale of the entrusted goods, or to

return said goods if unsold or disposed of

in accordance with the terms of the trust
receipts. Private respondent claims that at
the time of PBMs application for the
issuance of the LCs, it was not
represented to the petitioner that the items
were intended for sale, hence, there was
no deceit resulting in a violation of the
trust receipts which would constitute a
criminal liability. Again we cannot uphold
this contention. The non-payment of the
amount covered by a trust receipt is an act
violative of the entrustees obligation to
pay. There is no reason why the law
should not apply to all transactions
covered by trust receipts, except those
expressly excluded (68 Am. Jur. 125).
"The Court takes judicial notice of
customary banking and business practices
where trust receipts are used for
importation of heavy equipment,
machineries and supplies used in
manufacturing operations. We are
perplexed by the statements in the
assailed DOJ resolution that the goods
subject of the instant case are outside the
ambit of the provisions of PD 115 albeit
covered by trust receipt agreements ( 17
February 1988 resolution) and that not all
transactions covered by trust receipts may
be considered as trust receipt transactions
defined and penalized under P.D. 115 (11
January 1988 resolution). A construction
should be avoided when it affords an
opportunity to defeat compliance with the
terms of a statute. Manik-s
xxx......xxx......xxx
"The penal provision of P.D. 115
encompasses any act violative of an
obligation covered by the trust receipt; it is
not limited to transactions in goods which
are to be sold (retailed), reshipped, stored
or processed as a component of a product
ultimately sold."
An examination of P.D. 115 shows the growing importance
of trust receipts in Philippine business, the need to provide
for the rights and obligations of parties to a trust receipt
transaction, the study of the problems involved and the
action by monetary authorities, and the necessity of
regulating the enforcement of rights arising from default or
violations of trust receipt agreements. The legislative intent
to meet a pressing need is clearly expressed.[38]
In fine, we reiterate that the civil action for declaration of
nullity of documents and for damages does not constitute a
prejudicial question to the criminal cases for estafa filed
against petitioner Ching.
WHEREFORE, premises considered, the assailed decision
and resolution of the Court of Appeals are hereby
AFFIRMED and the instant petition is DISMISSED for lack
of merit. Accordingly, the Regional Trial Court of Makati,
Branch 58, is hereby directed to proceed with the hearing

and trial on the merits of Criminal Case Nos. 92-0934 to 920937, inclusive, and to expedite proceedings therein,
without prejudice to the right of the accused to due process.
SO ORDERED. Man-ikan

[G.R. No. 124642. February 23, 2004]

ALFREDO
CHING
and
ENCARNACION
CHING, petitioners, vs. THE HON. COURT OF
APPEALS
and
ALLIED
BANKING
CORPORATION, respondents.
DECISION
CALLEJO, SR., J.:
This petition for review, under Rule 45 of the Revised
Rules of Court, assails the Decision [1] of the Court of
Appeals (CA) dated November 27, 1995 in CA-G.R. SP No.
33585, as well as the Resolution[2] on April 2, 1996 denying
the petitioners motion for reconsideration. The impugned
decision granted the private respondents petition
for certiorari and set aside the Orders of the trial court dated
December 15, 1993[3] and February 17, 1994[4] nullifying the
attachment of 100,000 shares of stocks 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 the Allied 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% per annum.[5] As added security for the
said loan, on September 28, 1978, Alfredo Ching, together
with Emilio Taedo and Chung Kiat Hua, executed a
continuing guaranty with the ABC binding themselves to
jointly and severally guarantee the payment of all the
PBMCI obligations owing the ABC to the extent
of P38,000,000.00.[6] The loan was subsequently renewed
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 in eighteen months at 16%
interest per annum. As in the previous loan, the PBMCI,
through Alfredo Ching, executed a promissory note to
evidence the loan maturing on June 29, 1981. [8] This 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 of money with prayer for a writ of
preliminary attachment against the PBMCI to collect
the P12,612,972.88 exclusive of interests, penalties and
other bank charges. Impleaded as co-defendants in the
complaint were Alfredo Ching, Emilio Taedo 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. [10] In its
application for a writ of preliminary attachment, the ABC
averred that the defendants are guilty of fraud in incurring
the obligations upon which the present action is
brought[11] in that they falsely represented themselves to be
in a financial position to pay their obligation upon maturity
thereof.[12] Its supporting affidavit stated, inter alia, that the
[d]efendants have removed or disposed of their properties,
or [are] ABOUT to do so, with intent to defraud their
creditors.[13]
On August 26, 1981, after an ex-parte hearing, the trial
court issued an Order denying the ABCs application for a
writ of preliminary attachment. The trial court decreed that
the grounds alleged in the application and that of its
supporting affidavit are all conclusions of fact and of law
which do not warrant the issuance of the writ prayed for.
[14]
On motion for reconsideration, however, the trial court, in
an Order dated September 14, 1981, reconsidered its
previous order and granted 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 the alleged
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 who has allegedly
bound himself jointly and severally to pay plaintiff the defendant
corporations obligation to the plaintiff as a surety thereof.
WHEREFORE, let a writ of preliminary attachment issue as
against the defendant Alfredo Ching requiring the sheriff of this
Court to attach all the properties of said Alfredo Ching not
exceedingP12,612,972.82 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 in the
sum of Twelve Million Seven Hundred Thousand Pesos
(P12,700,000.00) executed in favor of the defendant Alfredo
Ching to secure the payment by plaintiff to him of all the costs
which may be adjudged in his favor and all damages he may
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, [16] save 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
the Securities and Exchange Commission (SEC), docketed
as SEC Case No. 2250, at the same time seeking the
PBMCIs rehabilitation.[17]
On July 9, 1982, the SEC issued an Order placing the
PBMCIs business, including its assets and liabilities, under
rehabilitation receivership, and ordered that all actions for
claims listed in Schedule A of the petition pending before
any court or tribunal are hereby suspended in whatever
stage the same may be until further orders from the

Commission.[18] The 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
to suspend 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. [19] On February 4, 1983,
the ABC filed its Opposition thereto.[20]
In the meantime, on July 26, 1983, the deputy sheriff
of the trial court levied on attachment the 100,000 common
shares of 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 by
suspending the proceedings only with respect to the
PBMCI. It denied Chings motion to dismiss the complaint/or
suspend the proceedings and pointed out that P.D. No.
1758 only concerns the activities of corporations,
partnerships and associations and was never intended to
regulate and/or control activities of individuals. Thus, it
directed the individual defendants 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 the pendency 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.[24] Ching eventually filed his
Answer on July 12, 1984.[25]
On October 25, 1984, long after submitting their
answers, Ching filed an Omnibus Motion, [26] again praying
for the dismissal of the complaint or suspension of the
proceedings on the ground of the July 9, 1982 Injunctive
Order issued in SEC Case No. 2250. He averred that as a
surety of the PBMCI, he must also necessarily benefit from
the defenses of his principal. The ABC opposed Chings
omnibus motion.
Emilio Y. Taedo, thereafter, filed his own Omnibus
Motion[27] praying for the dismissal of the complaint, arguing
that the ABC had abandoned and waived its right to
proceed against the continuing guaranty by its act of
resorting to preliminary attachment.
On December 17, 1986, the ABC filed a Motion to
Reduce the amount of his preliminary attachment bond
from P12,700,000 to P6,350,000.[28] Alfredo Ching opposed
the motion,[29] but on April 2, 1987, the court issued an
Order setting the incident for further hearing on May 28,
1987 at 8:30 a.m. for the parties to adduce evidence on the
actual value of 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 bond of P6,350,000.[31]
On November 16, 1993, Encarnacion T. Ching,
assisted by her husband Alfredo Ching, filed a Motion to Set
Aside the levy on attachment. She alleged 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 after the Citycorp Investment Philippines
was established in 1974.Furthermore, the indebtedness
covered by the continuing guaranty/comprehensive
suretyship contract executed by petitioner 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 the properties. [32] She
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,
contending that:
2.1 The supposed movant, Encarnacion T. Ching, is not a party to
this present case; thus, she has no personality to file any motion
before this Honorable Court;
2.2 Said supposed movant did not file any Motion for
Intervention pursuant to Section 2, Rule 12 of the Rules of Court;
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 cannot be acted
upon by this Honorable Court as the above-entitled case is still in
the archives and the proceedings thereon still remains
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
in custodia legis.
During the hearing of the motion, Encarnacion T.
Ching adduced in evidence her marriage contract to Alfredo
Ching to prove that they were married on January 8, 1960;
[35]
the articles of incorporation of Citycorp Investment
Philippines dated May 14, 1979;[36] and, the General
Information Sheet of the corporation showing that petitioner
Alfredo Ching was a member 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 Order [37] lifting the writ of
preliminary attachment on the shares of stocks and
ordering the sheriff to return the said stocks to the
petitioners. The dispositive portion reads:
WHEREFORE, the instant Motion to Quash Preliminary
Attachment, dated November 9, 1993, is hereby granted. Let the
writ of preliminary attachment subject matter of said motion, be
quashed and lifted with respect to the attached 100,000 common
shares of stock of Citycorp Investment Philippines in the name of
the defendant Alfredo Ching, the said shares of stock to be
returned to him and his movant-spouse by Deputy Sheriff
Apolonio A. Golfo who effected the levy thereon on July 26,
1983, or by whoever may be presently in possession thereof.
SO ORDERED.[38]
The plaintiff Allied Banking Corporation filed a motion
for the reconsideration of the order but denied the same on
February 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, and granting 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
attachment without 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 trial court, thus:
WHEREFORE, premises considered, the petition is GRANTED,
hereby setting aside the questioned orders (dated December 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, the RTC deprived the private respondent of its right
to file a bond under Section 14, Rule 57 of the Rules of
Court. The petitioner Encarnacion T. Ching was not a party
in the trial court; hence, she had no right of action to have
the levy annulled with a motion for that purpose. Her
remedy in such case was to file a separate action against
the private respondent to nullify the levy on the 100,000
Citycorp shares of stocks. The court stated that even
assuming that Encarnacion T. Ching had the right to file the
said motion, the same was barred by laches.
Citing Wong v. Intermediate Appellate Court,[41] the CA
ruled that the presumption in Article 160 of the New Civil
Code shall not apply where, as in this case, the petitionerspouses failed to prove the source of the money used to
acquire the shares of stock. It held that the levied shares of
stocks belonged to Alfredo Ching, as evidenced by the fact
that the said shares 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 assailed orders. 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 grave abuse of discretion amounting to excess or lack
of jurisdiction in issuing the assailed orders in their favor;
hence, the CA erred in reversing the same. They 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. 160,
[42]
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.[43] According to the
petitioners, the suretyship obligation was not contracted in
the pursuit of the petitioner-husbands profession or

business.[44] And, contrary to the ruling of the CA, where

conjugal assets are attached in a collection suit on an
obligation contracted by the husband, the wife should
exhaust her motion to quash in the main case and not file a
separate suit.[45] Furthermore, the petitioners contend that
under Art. 125 of the Family Code, the petitioner-husbands
gratuitous suretyship is null and void ab initio,[46] and that
the share of one of the spouses in the conjugal partnership
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
certiorari nullifying 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 that the 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 partnership property is merely inchoate
before the dissolution of the partnership; as such, she had
no right to file the said motion to quash 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 on attachment on the 100,000 shares of stocks in
the Citycorp Investment Philippines; (b) whether or not the
RTC committed a 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 she was not a party in Civil Case No. 142729.[48]
In Ong v. Tating,[49] we held that the sheriff may attach
only those properties of the defendant against whom a writ
of attachment has been issued by the court. When the
sheriff erroneously levies on attachment and seizes the
property of a third person in which the said defendant holds
no right or interest, the superior authority of the court which
has authorized the execution may be invoked by the
aggrieved third person in the same case. Upon application
of the third person, the court shall order a summary hearing
for the purpose of determining whether the sheriff has acted
rightly or wrongly in the performance of his duties in the
execution of the writ of attachment, more specifically if he
has indeed levied on attachment and taken hold of property
not belonging to the plaintiff. If so, the court may then order
the sheriff to release the 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 treat the 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. The aggrieved
third party may also avail himself of the remedy of terceria
by executing an affidavit of his title or right of possession
over the property levied on attachment and serving the
same to the office making the levy and the adverse

party. 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 are
cumulative 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 the name of petitioner-husband claiming that the
said shares of stocks were conjugal in nature; hence, not
liable for the account of her husband under his continuing
guaranty and suretyship agreement with the PBMCI. The
petitioner-wife had the 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. The private respondent, the petitioner in the CA, was
burdened to prove that the RTC committed a grave abuse
of its discretion amounting to excess or lack of
jurisdiction. The tribunal acts without jurisdiction if it does
not have the legal purpose to determine the case; there is
excess of jurisdiction where the tribunal, being clothed with
the power to determine the case, oversteps its authority as
determined by law. There is grave abuse of discretion
where the tribunal acts 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
acted whimsically in total disregard of evidence material to,
and even decide of, the controversy before certiorari will
lie. A special 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 being exercised 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 commit any 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 to the conjugal partnership, unless it be proved that
it pertains exclusively to the husband, or to the wife. In Tan
v. Court of Appeals,[53] we 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. In fact, even when the manner in which
the properties were acquired does not appear, the
presumption will still apply, and the properties will still be
considered conjugal. The presumption of the conjugal
nature of the properties acquired during the 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 when the said corporation was
incorporated on May 14, 1979. This was done during the

subsistence of the marriage of the petitioner-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 petitionerhusband acquired the stocks with his exclusive money.
[55]
The barefaced fact that the shares of stocks were
registered in the corporate books of Citycorp Investment
Philippines solely in the name of the petitioner-husband
does not constitute proof that the petitioner-husband, not
the conjugal partnership, owned the same. [56] The private
respondents reliance on the rulings of this Court
in Maramba v. Lozano[57] and Associated Insurance &
Surety
Co.,
Inc.
v.
Banzon [58] is
misplaced. In
the Maramba case, we held that where there is no showing
as to when the property was acquired, the fact that the title
is in the wifes name alone is determinative of the ownership
of the property. The principle was reiterated in
the Associated Insurance case where the uncontroverted
evidence showed that the shares of stocks were acquired
during the marriage of the petitioners.
Instead of fortifying the contention of the respondents,
the ruling of this Court in Wong v. Intermediate Appellate
Court[59] buttresses the case for the petitioners. In that case,
we ruled that he who claims that property acquired by the
spouses during their marriage is not conjugal partnership
property but belongs to one of them as his personal
property is burdened to prove the source of the money
utilized to purchase the same. In this case, the private
respondent claimed that the petitioner-husband acquired
the shares of stocks from the Citycorp Investment
Philippines in his own name as the owner thereof. It was,
thus, the burden of the private respondent to prove that the
source of the money utilized in the acquisition of the shares
of stocks was that of the petitioner-husband alone. As held
by the trial court, the private respondent failed to adduce
evidence to prove this assertion.
The CA, likewise, 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 appellate court erred in
concluding that the conjugal partnership is liable for the said
account of PBMCI under Article 161(1) of the New Civil
Code.
Article 161(1) of the New Civil Code (now Article 121[2
and 3][60] of the Family Code of the Philippines) provides:
Art. 161. 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.
The petitioner-husband signed the continuing guaranty
and suretyship agreement as security for the payment of
the loan obtained by the PBMCI from the private
respondent in the amount of P38,000,000. In Ayala
Investment and Development Corp. v. Court of Appeals,
[61]
this Court ruled that the signing as surety is certainly not
an exercise of an industry or profession. It is not embarking
in a business. No matter how often an executive acted on

or was persuaded to act as surety for his own employer,

this should not be taken to mean that he thereby embarked
in the business of suretyship or guaranty.
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. Certainly, to make a conjugal partnership
responsible for a liability that should appertain alone to one
of the spouses is to frustrate the objective of the New Civil
Code to show the utmost concern for the solidarity and well
being of the family as a unit. The husband, therefore, is
denied the power to assume unnecessary and unwarranted
risks to the financial stability of the conjugal partnership.[62]
In this case, the private respondent failed to prove that
the conjugal partnership of the petitioners was benefited by
the petitioner-husbands 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. [63]
It could be argued that the petitioner-husband was a
member of the Board of Directors of PBMCI and was one of
its top twenty stockholders, and that the shares of stocks of
the petitioner-husband and his family would appreciate if
the PBMCI could be rehabilitated through the loans
obtained; that the petitioner-husbands career would be
enhanced should PBMCI survive because of the infusion of
fresh capital. However, these are not the benefits
contemplated by Article 161 of the New Civil Code. The
benefits must be those directly resulting from the loan. They
cannot merely be a by-product or a spin-off of the loan
itself.[64]
This is different from the situation where the husband
borrows money or receives services to be used for his own
business or profession. In the Ayala case, we ruled that it is
such a contract that is one within the term obligation for the
benefit of the conjugal partnership. Thus:

obligation for his own business. In this case, the petitionerhusband acted merely as a surety for the loan contracted
by the PBMCI from the private respondent.
IN LIGHT OF ALL THE FOREGOING, the petition is
GRANTED. The Decision and Resolution of the Court of
Appeals are SET ASIDE AND REVERSED. The assailed
orders of the RTC are AFFIRMED.

(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 obligations for the benefit of the
conjugal partnership. Here, no actual benefit may be proved. It is
enough that the benefit to the family is apparent at the time of the
signing of the contract. From the very nature of the contract of
loan or services, the family stands to benefit from the loan facility
or services to be rendered to the business or profession of the
husband. It is immaterial, if in the end, his business or profession
fails or does not succeed. Simply stated, where the husband
contracts obligations on behalf of the family business, the law
presumes, and rightly so, that such obligation will redound to the
benefit of the conjugal partnership.[65]

SPOUSES ROBERTO BUADO G.R. No. 145222

and VENUS BUADO,
Petitioners, Present:

The Court held in the same case that the rulings of the
Court in Cobb-Perez and G-Tractors, Inc. are not controlling
because the husband, in those cases, contracted the

SO ORDERED.

SECOND DIVISION

CARPIO MORALES, J.,*

Acting Chairperson,
- versus - TINGA,
VELASCO, JR.,
LEONARDO DE CASTRO,**and

BRION, J
THE HONORABLE COURT OF
APPEALS, Former Division, and Promulgated:
ROMULO NICOL,
Respondents. April 24, 2009
x---------------------------------------------------------------------------------x

DECISION
TINGA, J.:
Before this Court is a petition for certiorari assailing the
Decision[1] of the Court of Appeals in CA-G.R. CV No. 47029
and its Resolution denying the motion for reconsideration thereof.

Finding Erlinda Nicols personal properties insufficient

to satisfy the judgment, the Deputy Sheriff issued a notice of levy
on real property on execution addressed to the Register of Deeds
of Cavite. The notice of levy was annotated on the Transfer
Certificate of Title No. T-125322.
On 20 November 1992, a notice of sheriffs sale was

The case stemmed from the following factual backdrop:

On 30 April 1984, Spouses Roberto and Venus Buado
(petitioners) filed a complaint for damages against Erlinda Nicol
(Erlinda) with Branch 19 of the Regional Trial Court (RTC) of
Bacoor, Cavite, docketed as Civil Case No. 84-33. Said action
originated from Erlinda Nicols civil liability arising from the
criminal offense of slander filed against her by petitioners.
On 6 April 1987, the trial court rendered a decision
ordering Erlinda to pay damages. The dispositive portion reads:
Wherefore, judgment is hereby rendered in
favor of the plaintiff[s] and against defendant
ordering the latter to pay the former the
amount of thirty thousand (P30,000.00) pesos
as moral damages, five thousand (P5,000.00)
pesos as attorneys fees and litigation expenses,
another five thousand (P5,000.00) pesos as
exemplary damages and the cost of suit.[2]
Said decision was affirmed, successively, by the Court
of Appeals and this Court. It became final and executory on 5
March 1992.
On 14 October 1992, the trial court issued a writ of
execution, a portion of which provides:

Now, therefore, you are commanded

that of the goods and chattels of the defendant
Erlinda Nicol, or from her estates or legal
heirs, you cause the sum in the amount of forty
thousand pesos (P40,000.00), Philippine
Currency, representing the moral damages,
attorneys fees and litigation expenses and
exemplary damages and the cost of suit of the
plaintiff aside from your lawful fees on this
execution and do likewise return this writ into
court within sixty (60) days from date, with
your proceedings endorsed hereon.
But if sufficient personal property cannot be
found whereof to satisfy this execution and
lawful fees thereon, then you are commanded
that of the lands and buildings of said
defendant you make the said sum of money in
the manner required by the Rules of Court, and
make return of your proceedings with this writ
within sixty (60) days from date.[3]

issued.
Two (2) days before the public auction sale on 28
January 1993, an affidavit of third-party claim from one Arnulfo
F. Fulo was received by the deputy sheriff prompting petitioners
to put up a sheriffs indemnity bond. The auction sale proceeded
with petitioners as the highest bidder.

On 4 February 1993, a certificate of sale was issued in

favor of petitioners.
Almost a year later on 2 February 1994, Romulo Nicol
(respondent), the husband of Erlinda Nicol, filed a complaint for
annulment of certificate of sale and damages with preliminary
injunction against petitioners and the deputy sheriff. Respondent,
as plaintiff therein, alleged that the defendants, now petitioners,
connived and directly levied upon and execute his real property
without exhausting the personal properties of Erlinda
Nicol. Respondent averred that there was no proper publication
and posting of the notice of sale. Furthermore, respondent
claimed that his property which was valued at P500,000.00 was
only sold at a very low price of P51,685.00, whereas the
judgment obligation of Erlinda Nicol was only P40,000.00. The
case was assigned to Branch 21 of the RTC of Imus, Cavite.
In response, petitioners filed a motion to dismiss on the
grounds of lack of jurisdiction and that they had acted on the
basis of a valid writ of execution. Citing De Leon v. Salvador,
[4]
petitioners claimed that respondent should have filed the case
with Branch 19 where the judgment originated and which issued
the order of execution, writ of execution, notice of levy and notice
of sheriffs sale.

In an Order[5] dated 18 April 1994, the RTC dismissed

respondents complaint and ruled that Branch 19 has jurisdiction
over the case, thus:
As correctly pointed out by the
defendants, any flaw in the implementation of
the writ of execution by the implementing
sheriff must be brought before the court
issuing the writ of execution. Besides, there
are two (2) remedies open to the plaintiff, if he
feels that the property being levied on belongs
to him and not to the judgment debtor. The
first remedy is to file a third-party claim. If he
fails to do this, a right is reserved to him to
vindicate his claim over the property by any
proper action. But certainly, this is not the
proper action reserved to the plaintiff to
vindicate his claim over the property in

question to be ventilated before this court. As

earlier stated, this case should have been
addressed to Branch 19, RTC Bacoor as it was
that court which issued the writ of execution.[6]
Respondent moved for reconsideration but it was denied
on 26 July 1994.
On appeal, the Court of Appeals reversed the trial court
and held that Branch 21 has jurisdiction to act on the complaint
filed by appellant. The dispositive portion reads:
WHEREFORE, the Orders appealed
from are hereby REVERSED and SET
ASIDE. This case is REMANDED to the
Regional Trial Court of Imus, Cavite, Branch
21 for further proceedings.
SO ORDERED.[7]

Petitioners motion for reconsideration was denied on 23

August 2000. Hence, the instant petition attributing grave abuse
of discretion on the part of the Court of Appeals.
A petition for certiorari is an extraordinary remedy that
is adopted to correct errors of jurisdiction committed by the lower
court or quasi-judicial agency, or when there is grave abuse of
discretion on the part of such court or agency amounting to lack
or excess of jurisdiction. Where the error is not one of
jurisdiction, but of law or fact which is a mistake of judgment, the
proper remedy should be appeal. In addition, an independent
action for certiorari may be availed of only when there is no
appeal or any plain, speedy and adequate remedy in the ordinary
course of law.[8]
Nowhere in the petition was it shown that the
jurisdiction of the Court of Appeals was questioned. The issue
devolves on whether the husband of the judgment debtor may file
an independent action to protect the conjugal property subject to
execution. The alleged error therefore is an error of judgment
which is a proper subject of an appeal.
Nevertheless, even if we were to treat this petition as
one for review, the case should still be dismissed on substantive
grounds.

Petitioners maintain that Branch 19 retained jurisdiction

over its judgment to the exclusion of all other co-ordinate courts
for its execution and all incidents thereof, in line with De Leon v.
Salvador. Petitioners insist that respondent, who is the husband of
the judgment debtor, is not the third party contemplated in
Section 17 (now Section 16), Rule 39 of the Rules of Court,
hence a separate action need not be filed. Furthermore, petitioners
assert that the obligation of the wife redounded to the benefit of
the conjugal partnership and cited authorities to the effect that the
husband is liable for the tort committed by his wife.

Respondent on the other hand merely avers that the

decision of the Court of Appeals is supported by substantial
evidence and in accord with law and jurisprudence. [9]
Verily, the question of jurisdiction could be resolved
through a proper interpretation of Section 16, Rule 39 of the
Rules of Court, which reads:
Sec. 16. Proceedings where property claimed
by
third
person.
If the property levied on is claimed
by any person other than the judgment obligor
or his agent, and such person makes an
affidavit of his title thereto or right to the
possession thereof, stating the grounds of such
right or title, and serves the same upon the
officer making the levy and a copy thereof
upon the judgment obligee, the officer shall
not be bound to keep the property, unless such
judgment obligee, on demand of the officer,
files a bond approved by the court to
indemnify the third-party claimant in a sum
not less than the value of the property levied
on. In case of disagreement as to such value,
the same shall be determined by the court
issuing the writ of execution. No claim for
damages for the taking or keeping of the
property may be enforced against the bond
unless the action therefor is filed within one
hundred twenty (120) days from the date of the
filing of the bond.
The officer shall not be liable for
damages for the taking or keeping of the
property, to any third-party claimant if such
bond is filed. Nothing herein contained shall
prevent such claimant or any third person
from vindicating his claim to the property in
a separate action, or prevent the judgment
obligee from claiming damages in the same
or a separate action against a third-party
claimant who filed a frivolous or plainly
spurious claim.
When the writ of execution is issued
in favor of the Republic of the Philippines, or
any officer duly representing it, the filing of
such bond shall not be required, and in case the
sheriff or levying officer is sued for damages
as a result of the levy, he shall be represented
by the Solicitor General and if held liable
therefor, the actual damages adjudged by the
court shall be paid by the National Treasurer
out of such funds as may be appropriated for
the purpose. (Emphasis Supplied)
Apart from the remedy of terceria available to a third-party
claimant or to a stranger to the foreclosure suit against the sheriff
or officer effecting the writ by serving on him an affidavit of his
title and a copy thereof upon the judgment creditor, a third-party
claimant may also resort to an independent separate action, the
object of which is the recovery of ownership or possession of the
property seized by the sheriff, as well as damages arising from

wrongful seizure and detention of the property. If a separate

action is the recourse, the third-party claimant must institute in a
forum of competent jurisdiction an action, distinct and separate
from the action in which the judgment is being enforced, even
before or without need of filing a claim in the court that issued the
writ.[10]
A third-party claim must be filed a person other than the
judgment debtor or his agent. In other words, only a stranger to
the case may file a third-party claim.

Parenthetically, by no stretch of imagination can it be

concluded that the civil obligation arising from the crime of
slander committed by Erlinda redounded to the benefit of the
conjugal partnership.

This leads us to the question: Is the husband, who was

not a party to the suit but whose conjugal property is being
executed on account of the other spouse being the judgment
obligor, considered a "stranger?"

In Guadalupe v. Tronco,[18] this Court held that the car

which was claimed by the third party complainant to be conjugal
property was being levied upon to enforce "a judgment for
support" filed by a third person, the third-party claim of the wife
is proper since the obligation which is personal to the husband is
chargeable not on the conjugal property but on his separate
property.

In determining whether the husband is a stranger to the

suit, the character of the property must be taken into
account. In Mariano v. Court of Appeals,[11] which was later
adopted in Spouses Ching v. Court of Appeals,[12] this Court held
that the husband of the judgment debtor cannot be deemed a
stranger to the case prosecuted and adjudged against his wife for
an obligation that has redounded to the benefit of the conjugal
partnership.[13] On the other hand, in Naguit v. Court of
Appeals[14] and Sy v. Discaya,[15] the Court stated that a spouse is
deemed a stranger to the action wherein the writ of execution was
issued and is therefore justified in bringing an independent action
to vindicate her right of ownership over his exclusive or
paraphernal property.

To reiterate, conjugal property cannot be held liable for

the personal obligation contracted by one spouse, unless some
advantage or benefit is shown to have accrued to the conjugal
partnership.[17]

Hence, the filing of a separate action by respondent is

proper and jurisdiction is thus vested on Branch 21. Petitioners
failed to show that the Court of Appeals committed grave abuse
of discretion in remanding the case to Branch 21 for further
proceedings.
WHEREFORE, the petition is DISMISSED. The
Decision of the Court of Appeals is AFFIRMED. Costs against
petitioners.
SO ORDERED.

Pursuant to Mariano however, it must further be settled

whether the obligation of the judgment debtor redounded to the
benefit of the conjugal partnership or not.
Petitioners argue that the obligation of the wife arising
from her criminal liability is chargeable to the conjugal
partnership. We do not agree.
There is no dispute that contested property is conjugal in
nature. Article 122 of the Family Code[16] explicitly provides that
payment of personal debts contracted by the husband or the wife
before or during the marriage shall not be charged to the conjugal
partnership except insofar as they redounded to the benefit of the
family.
Unlike in the system of absolute community where
liabilities incurred by either spouse by reason of a crime or quasidelict is chargeable to the absolute community of property, in the
absence or insufficiency of the exclusive property of the debtorspouse, the same advantage is not accorded in the system of
conjugal partnership of gains. The conjugal partnership of gains
has no duty to make advance payments for the liability of the
debtor-spouse.