Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-25659

October 31, 1969

LUZON SURETY CO., INC., petitioner,

vs.
JOSEFA AGUIRRE DE GARCIA, VICENTE GARCIA and the FOURTH DIVISION OF THE
COURT OF APPEALS, respondents.
Tolentino and Garcia and D. R. Cruz for petitioner.
Rodolfo J. Herman for respondents.
FERNANDO, J.:
The crucial question in this petition for the review of a decision of the Court of
Appeals, to be passed upon for the first time, is whether or not a conjugal
partnership, in the absence of any showing of benefits received, could be held
liable on an indemnity agreement executed by the husband to accommodate a
third party in favor of a surety company. The Court of Appeals held that it could
not. Petitioner Luzon Surety Co., Inc., dissatisfied with such a judgment, which
was an affirmance of a lower court decision, would have us reverse. We do not
see it that way. The Court of Appeals adjudicated the matter in accordance with
law. We affirm what it did.
As noted in the brief of petitioner Luzon Surety Co., Inc., on October 18, 1960, a
suit for injunction was filed in the Court of First Instance of Negros Occidental
against its Provincial Sheriff by respondents-spouses, Josefa Aguirre de Garcia
and Vicente Garcia "to enjoin [such Sheriff] from selling the sugar allegedly
owned by their conjugal partnership, pursuant to a writ of garnishment issued by
virtue of a writ of execution issued in Civil Case No. 3893 of the same Court of
First Instance ... against the respondent Vicente Garcia ... ." 1
There was a stipulation of facts submitted. There is no question as to one
Ladislao Chavez, as principal, and petitioner Luzon Surety Co., Inc., executing a
surety bond in favor of the Philippine National Bank, Victorias Branch, to
guaranty a crop loan granted by the latter to Ladislao Chavez in the sum of
P9,000.00. On or about the same date, Vicente Garcia, together with the said
Ladislao Chavez and one Ramon B. Lacson, as guarantors, signed an indemnity
agreement wherein they bound themselves, jointly and severally, to indemnify
now petitioner Luzon Surety Co., Inc. against any and all damages, losses, costs,
stamps, taxes, penalties, charges and expenses of whatsoever kind and nature
which the petitioner may at any time sustain or incur in consequence of having
become guarantor upon said bond, to pay interest at the rate of 12% per annum,
computed and compounded quarterly until fully paid; and to pay 15% of the
amount involved in any litigation or other matters growing out of or connected
therewith for attorney's fees.
It was likewise stipulated that on or about April 27, 1956, the Philippine National
Bank filed a complaint before the Court of First Instance of Negros Occidental,
docketed as its Civil Case No. 3893, against Ladislao Chavez and Luzon Surety
Co., Inc. to recover the amount of P4,577.95, in interest, attorney's fees, and
costs of the suit. On or about August 8, 1957, in turn, a third-party complaint

against Ladislao Chavez, Ramon B. Lacson and Vicente Garcia, based on the
indemnity agreement, was instituted by Luzon Surety Co., Inc.
Then, as set forth by the parties, on September 17, 1958, the lower court
rendered a decision condemning Ladislao Chavez and Luzon Surety Co., Inc., to
pay the plaintiff jointly and severally the amount of P4,577.95 representing the
principal and accrued interest of the obligation at the rate of 6% per annum as of
January 6, 1956, with a daily interest of P0.7119 on P4,330.91 from January 6,
1956, until fully paid, plus the sum of P100.00 as attorney's fees, and to pay the
costs. The same decision likewise ordered the third party defendants, Ladislao
Chavez, Vicente Garcia, and Ramon B. Lacson, to pay Luzon Surety Co., Inc., the
total amount to be paid by it to the plaintiff Philippine National Bank.
On July 30, 1960, pursuant to the aforesaid decision, the Court of First Instance of
Negros Occidental issued a writ of execution against Vicente Garcia for the
satisfaction of the claim of petitioner in the sum of P8,839.97. Thereafter, a writ
of garnishment was issued by the Provincial Sheriff of Negros Occidental dated
August 9, 1960, levying and garnishing the sugar quedans of the now
respondent-spouses, the Garcias, from their sugar plantation, registered in the
names of both of them.2 The suit for injunction filed by the Garcia spouses was
the result.
As noted, the lower court found in their favor. In its decision of April 30, 1962, it
declared that the garnishment in question was contrary to Article 161 of the Civil
Code and granted their petition, making the writ of preliminary injunction
permanent. Luzon Surety, Inc. elevated the matter to the Court of Appeals,
which, as mentioned at the outset, likewise reached the same result. Hence this
petition for review.
We reiterate what was set forth at the opening of this opinion. There is no reason
for a reversal of the judgment. The decision sought to be reviewed is in
accordance with law.
As explained in the decision now under review: "It is true that the husband is the
administrator of the conjugal property pursuant to the provisions of Art. 163 of
the New Civil Code. However, as such administrator the only obligations incurred
by the husband that are chargeable against the conjugal property are those
incurred in the legitimate pursuit of his career, profession or business with the
honest belief that he is doing right for the benefit of the family. This is not true in
the case at bar for we believe that the husband in acting as guarantor or surety
for another in an indemnity agreement as that involved in this case did not act
for the benefit of the conjugal partnership. Such inference is more emphatic in
this case, when no proof is presented that Vicente Garcia in acting as surety or
guarantor received consideration therefor, which may redound to the benefit of
the conjugal partnership."3
In the decision before us, the principal error assigned is the above holding of the
Court of Appeals that under Article 161 of the Civil Code no liability was incurred
by the conjugal partnership. While fully conscious of the express language of
Article 161 of the Civil Code, petitioner, in its well-written brief submitted by its
counsel, would impress on us that in this case it could not be said that no benefit
was received by the conjugal partnership. It sought to lend some semblance of
plausibility to this view thus: "The present case involves a contract of suretyship
entered into by the husband, the respondent Vicente Garcia, in behalf of a third
person. A transaction based on credit through which, by our given definitions,

respondent Vicente Garcia, by acting as guarantor and making good his

guaranty, acquires the capacity of being trusted, adds to his reputation or
esteem, enhances his standing as a citizen in the community in which he lives,
and earns the confidence of the business community. He can thus secure money
with which to carry on the purposes of their conjugal partnership." 4
While not entirely, without basis, such an argument does not carry conviction. Its
acceptance would negate the plain meaning of what is expressly provided for in
Article 161. In the most categorical language, a conjugal partnership under that
provision 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.
There is none in this case. Nor could there be, considering that the benefit was
clearly intended for a third party, one Ladislao Chavez. While the husband by
thus signing the indemnity agreement may be said to have added to his
reputation or esteem and to have earned the confidence of the business
community, such benefit, even if hypothetically accepted, is too remote and
fanciful to come within the express terms of the provision.
Its language is clear; it does not admit of doubt. No process of interpretation or
construction need be resorted to. It peremptorily calls for application. Where a
requirement is made in explicit and unambiguous terms, no discretion is left to
the judiciary. It must see to it that its mandate is obeyed. So it is in this case.
That is how the Court of Appeals acted, and what it did cannot be impugned for
being contrary to law.5
Moreover, it would negate the plain object of the additional requirement in the
present Civil Code that a debt contracted by the husband to bind a conjugal
partnership must redound to its benefit. That is still another provision indicative
of the solicitude and tender regard that the law manifests for the family as a
unit. Its interest is paramount; its welfare uppermost in the minds of the codifiers
and legislators.
This particular codal provision in question rightfully emphasizes the responsibility
of the husband as administrator.6He is supposed to conserve and, if possible,
augment the funds of the conjugal partnership, not dissipate them. If out of
friendship or misplaced generosity on his part the conjugal partnership would be
saddled with financial burden, then the family stands to suffer. No objection need
arise if the obligation thus contracted by him could be shown to be for the
benefit of the wife and the progeny if any there be. That is but fair and just.
Certainly, however, 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.7 The husband, therefore, as is wisely thus
made certain, is denied the power to assume unnecessary and unwarranted risks
to the financial stability of the conjugal partnership.
No useful purpose would be served by petitioner assigning as one of the errors
the observation made by the Court of Appeals as to the husband's interest in the
conjugal property being merely inchoate or a mere expectancy in view of the
conclusion thus reached as to the absence of any liability on the part of the
conjugal partnership. Nor was it error for the Court of Appeals to refuse to
consider a question raised for the first time on appeal. Now as to the question of
jurisdiction of the lower court to entertain this petition for injunction against the
Provincial Sheriff, to which our attention is invited, neither the Court of Appeals

nor the lower court having been asked to pass upon it. Of course, if raised
earlier, it ought to have been seriously inquired into. We feel, however, that
under all the circumstances of the case, substantial justice would be served if
petitioner be held as precluded from now attempting to interpose such a barrier.
The conclusion that thereby laches had intervened is not unreasonable. Such a
response on our part can be predicated on the authoritative holding in Tijam v.
Sibonghanoy.8
WHEREFORE, the decision of the Court of Appeals of December 17, 1965, now
under review, is affirmed with costs against petitioner Luzon Surety Co., Inc.
Concepcion, C.J., Dizon, Makalintal, Zaldivar Sanchez, Castro, Teehankee and
Barredo, JJ., concur.

Separate Opinions
REYES, J., concurring:
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 husband's transactions; but that 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.

Footnotes
1

Brief for Petitioner, p. 3.

Ibid., Appendix, pp. 39-42.

Ibid., pp. 46-47.

Ibid., pp. 24-25.

Cf. People v. Mapa, 20 SCRA 1164 (1967); Pacific Oxygen & Acetylene Co. v.
Central Bank, 22 SCRA 917 (1968); Dequito v. Lopez, 22 SCRA 1352 (1968);
Padilla v. City of Pasay, 23 SCRA 1349 (1968); Garcia v. Vasquez, 27 SCRA 505
(1969); La Perla Cigar & Cigarette Factory v. Capapas, L- 27948 & 28001-11, July
31, 1969; Mobil Oil Philippines v. Diocares, L-26371, Sept 30, 1969.
6

Article 165, New Civil Code.

Cf. Report of the Code Commission, p. 17 (1948).

23 SCRA 29 (1968). Cf. Carillo vs. Allied Workers' Association, 24 SCRA 566
(1968).

Luzon Surety Co vs de Garcia

Facts:
1) Ladislao Chavez, principal, and petitioner Luzon Surety Co Inc, executed a
surety bond in favor of PNB Victorias Branch to guaranty a crop loan granted by
the latter to Chavez in the sum of PhP9,000.
2) Vicente Garcia, together with Ladislao Chavez and Ramon Lacson, as
guarantors, signed an indemnity agreement binding themselves solidarily liable
to indemnify Luzon Surety Co Inc against any and all damages, costs and and
other expenses which the petitioner may sustain or incur in consequence of
having become guarantor upon said bond, to pay interest at the rate of 12% per
annum, computed and compounded quarterly until fully paid; and to pay 15% of
the amount involved in any litigation or other matters growing out of or
connected therewith for attorney's fees.
3) On April 27, 1956, PNB filed a complaint against Ladislao Chavez and Luzon
Surety Co. to recover the amount of PhP4,577.95, in interest, attorneys fees and
other costs.
4) On August 8, 1957, Luzon Surety Co. instituted a third party complaint against
Chavez, Lacson and Garcia.
5) On September 17, 1958, a judgment was rendered ordering Chavez and Luzon
Surety Co. to pay PNB in solidarity. The same decision likewise ordered the third
party defendants Chavez, Garcia and Lacson to pay Luzon Surety Co. the amount
to be paid to PNB.
6) On July 30, 1960, a writ of execution was issued against Garcia to satisfy the
claim of the petitioner. A writ of garnishment was soon issued levying and
garnishing the sugar quedans of the Garcia spouses from their sugar plantation.
7) Spouses Garcia filed a suit for injunction and the trial court ruled in favor of
them.
Issue:
WON the CPG could be liable on an indemnity agreement executed by the
husband to accommodate a third party in favor of a surety agreement
Held:
No. Decision appealed from was affirmed. Costs against petitioner.
Ratio Decidendi:
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;
(2) Arrears or income due, during the marriage, from obligations which
constitute a charge upon property of either spouse or of the partnership;
(3) Minor repairs or for mere preservation made during the marriage upon
the separate property of either the husband or the wife; major repairs
shall not be charged to the partnership;
(4) Major or minor repairs upon the conjugal partnership property;

(5) The maintenance of the family and the education of the children of
both husband and wife, and of legitimate children of one of the spouses;
(6) Expenses to permit the spouses to complete a professional, vocational
or other course. (1408a)

Petitioner contends that Garcias transaction as a guarantor through which he

acquires the capacity of being trusted, adds to his reputation and enhances his
standing in the community. He can thus secure money with which to carry on the
purposes of their conjugal partnership. While not entirely without basis, such
argument cannot prosper for it would negate what is expressly provided for in
Article 161.
In the most categorical language, a conjugal partnership under that provision 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. There is
none in this case. While Garcia by thus signing the agreement may be said to
enhance his reputation, such benefit, even if hypothetically accepted, is too
remote and fanciful to come within the express terms of the provision.
Its language is clear; it does not admit of doubt. No process of interpretation or
construction need be resorted to. It peremptorily calls for application. Where a
requirement is made in explicit and unambiguous terms, no discretion is left to
the judiciary. It must see to it that its mandate is obeyed. So it is in this case.
That is how the Court of Appeals acted, and what it did cannot be impugned for
being contrary to law.