MEMORANDUM OF LAW & FACTS

“POLICARPIO CASE”

AUTHOR/s: Romela M. Eleria RECIPIENTS : Atty. Bobby Quitain

Mari Grazielle P. Egenias JD4 S.Y. 2017-2018
Patricia Anne T. Ocampo
Ivan Paul J. Manaligod
Gerald Archie M. Agustin

DATE: 04-April-2018
CLIENT : Pepito A. Santos a.k.a. “Don Pepot”
SUBJECT MATTER:
I. RELATED LAWS AND JURISPRUDENCE GOVERNING MARITAL/PERSONAL LIABILITY INCURRED DURING
MARRIAGE
II. RELATED LAWS AND JURISPRUDENCE GOVERNING COLLECTIONS OF SUM OF MONEY

STATEMENT OF FACTS

This case involves spouses Policarpio and Pacita. The husband, Policarpio was not addicted to gambling
rather, it was Pacita who was addicted to gambling. She was the one who accumulated debts in order to pay off her
debts. Policarpio had to borrow money from several people including Don Pepot, his biggest creditor who was a rich
man with his own private army. When Policarpio abandoned Pacita and her two sons, his debt with Don Pepot and
other creditors was left unpaid.

Pacita suspects that it is Don Pepot who is threatening to harm them. Don Pepot denies the same and alleges
that it just so happens that he is Policarpio’s biggest creditor but that Policarpio may have other creditors. Pacita does
not have any evidence to prove that Don Pepot was the one threatening them except perhaps for the piece of paper
used to cover the rock that was thrown at their front door. The paper had a letterhead with the name “PeCorp” or
short for “Pepot Paper Corporation”, a company owned by Don Pepot.

Don Pepot also wants to know how he can collect from Pacita and perhaps file other cases against her.

RELEVANT LAWS & JURISPRUDENCE

I. RELATED LAWS AND JURISPRUDENCE

GOVERNING MARITAL/ PERSONAL
LIABILITY INCURRED DURING
MARRIAGE

Property Relations Between Husband

And Wife

Art. 74. The property relationship between husband and wife shall be governed in the following order:
(1) By marriage settlements executed before the marriage;
 (2) By the provisions of this Code; and
(3) By the local custom. (118)

Art. 75. The future spouses may, in the marriage settlements, agree upon the regime of absolute community,
conjugal partnership of gains, complete separation of property, or any other regime. In the absence of a
marriage settlement, or when the regime agreed upon is void, the system of absolute community of property
as established in this Code shall govern. (119a)

Art. 76. In order that any modification in the marriage settlements may be valid, it must be made before the
celebration of the marriage, subject to the provisions of Articles 66, 67, 128, 135 and 136.

Art. 66. The reconciliation referred to in the preceding Articles shall have the following
consequences:
(1) The legal separation proceedings, if still pending, shall thereby be terminated at whatever
stage; and
(2) The final decree of legal separation shall be set aside, but the separation of property and any
forfeiture of the share of the guilty spouse already effected shall subsist, unless the spouses
agree to revive their former property regime.

The court's order containing the foregoing shall be recorded in the proper civil registries. (108a)

Art. 67. The agreement to revive the former property regime referred to in the preceding Article shall
be executed under oath and shall specify:
(1) The properties to be contributed anew to the restored regime;
(2) Those to be retained as separated properties of each spouse; and
(3) The names of all their known creditors, their addresses and the amounts owing to each.

Art. 128. If a spouse without just cause abandons the other or fails to comply with his or her
obligation to the family, the aggrieved spouse may petition the court for receivership, for judicial
separation of property, or for authority to be the sole administrator of the conjugal partnership
property, subject to such precautionary conditions as the court may impose.

The obligations to the family mentioned in the preceding paragraph refer to marital, parental or
property relations.

A spouse is deemed to have abandoned the other when he or she has left the conjugal dwelling
without intention of returning. The spouse who has left the conjugal dwelling for a period of three
months or has failed within the same period to give any information as to his or her whereabouts
shall be prima facie presumed to have no intention of returning to the conjugal dwelling.

Art. 135. Any of the following shall be considered sufficient cause for judicial separation of property:
(1) That the spouse of the petitioner has been sentenced to a penalty which carries with it civil
interdiction;
(2) That the spouse of the petitioner has been judicially declared an absentee;
(3) That loss of parental authority of the spouse of petitioner has been decreed by the court;
 (4) That the spouse of the petitioner has abandoned the latter or failed to comply with his or her
obligations to the family as provided for in Article 101;
(5) That the spouse granted the power of administration in the marriage settlements has abused
that power; and
(6) That at the time of the petition, the spouses have been separated in fact for at least one year
and reconciliation is highly improbable.

In the cases provided for in Numbers (1), (2) and (3), the presentation of the final judgment against
the guilty or absent spouse shall be enough basis for the grant of the decree of judicial separation of
property. (191a)

Art. 136. The spouses may jointly file a verified petition with the court for the voluntary dissolution of
the absolute community or the conjugal partnership of gains, and for the separation of their common
properties.

All creditors of the absolute community or of the conjugal partnership of gains, as well as the
personal creditors of the spouse, shall be listed in the petition and notified of the filing thereof. The
court shall take measures to protect the creditors and other persons with pecuniary interest. (191a)

Rights And Obligations Between

Husband And Wife

RA 105721, Section 1. Article 73 of the Family Code, as amended, is hereby further amended to read as
follows:

"Art. 73. Either spouse may exercise any legitimate profession, occupation, business or activity
without the consent of the other. The latter may object only on valid, serious, and moral grounds.

"In case of disagreement, the court shall decide whether or not:

"(1) The objection is proper, and

"(2) Benefit has accrued to the family prior to the objection or thereafter. If the benefit
accrued prior to the objection, the resulting obligation shall be enforced against the
community property. If the benefit accrued thereafter, such obligation shall be enforced
against the separate property of the spouse who has not obtained consent.

"The foregoing provisions shall not prejudice the rights of creditors who acted in good faith."

1
AN ACT ESTABLISHING THE LIABILITY OF THE ABSOLUTE COMMUNITY OR CONJUGAL PARTNERSHIP FOR AN OBLIGATION OF A SPOUSE WHO PRACTICES A PROFESSION AND THE
CAPABILITY OF EITHER SPOUSE TO DISPOSE OF AN EXCLUSIVE PROPERTY WITHOUT THE CONSENT OF THE OTHER SPOUSE, AMENDING FOR THE PURPOSE ARTICLES 73 AND 111
OF EXECUTIVE ORDER NO. 209, ALSO KNOWN AS THE FAMILY CODE OF THE PHILIPPINES (JULY 23, 2012)
Charges Upon And Obligations Of The
Conjugal Partnership

Art. 121. The Conjugal partnership shall be liable for:

(1) The support of the spouse, their common children, and the legitimate children of either
spouse; however, the support of illegitimate children shall be governed by the provisions
of this Code on Support;
(2) All debts and obligations contracted during the marriage by the designated administrator-
spouse for the benefit of the conjugal partnership of gains, or by both spouses or by one
of them with the consent of the other;
(3) Debts and obligations contracted by either spouse without the consent of the other to the
extent that the family may have benefited;
(4) All taxes, liens, charges, and expenses, including major or minor repairs upon the conjugal
partnership property;
(5) All taxes and expenses for mere preservation made during the marriage upon the separate
property of either spouse;
(6) Expenses to enable either spouse to commence or complete a professional, vocational, or
other activity for self-improvement;
(7) Ante-nuptial debts of either spouse insofar as they have redounded to the benefit of the
family;
(8) The value of what is donated or promised by both spouses in favor of their common
legitimate children for the exclusive purpose of commencing or completing a professional
or vocational course or other activity for self-improvement; and
(9) Expenses of litigation between the spouses unless the suit is found to groundless.

If the conjugal partnership is insufficient to cover the foregoing liabilities, the spouses shall be
solidarily liable for the unpaid balance with their separate properties. (161a)

Art. 122. The payment of personal debts contracted by the husband or the wife before or during
the marriage shall not be charged to the conjugal properties partnership except insofar as they
redounded to the benefit of the family.

Neither shall the fines and pecuniary indemnities imposed upon them be charged to the
partnership.

However, the payment of personal debts contracted by either spouse before the marriage, that
of fines and indemnities imposed upon them, as well as the support of illegitimate children of
either spouse, may be enforced against the partnership assets after the responsibilities
enumerated in the preceding Article have been covered, if the spouse who is bound should have
no exclusive property or if it should be insufficient; but at the time of the liquidation of the
partnership, such spouse shall be charged for what has been paid for the purpose above-
mentioned. (163a)

Art. 123. Whatever may be lost during the marriage in any game of chance or in betting,
sweepstakes, or any other kind of gambling whether permitted or prohibited by law, shall be
 borne by the loser and shall not be charged to the conjugal partnership but any winnings
therefrom shall form part of the conjugal partnership property.

Related Jurisprudence

Property Regime: “While it is true that the personal stakes of each spouse in their conjugal assets are
inchoate or unclear prior to the liquidation of the conjugal partnership of gains and, therefore, none of them
can be said to have acquired vested rights in specific assets, it is evident that Article 256 of the Family Code
does not intend to reach back and automatically convert into absolute community of property relation all
conjugal partnerships of gains that existed before 1988 excepting only those with prenuptial agreements. The
Family Code itself provides in Article 76 that marriage settlements cannot be modified except prior to
marriage.” Art. 76. In order that any modification in the marriage settlements may be valid, it must be made
before the celebration of the marriage, subject to the provisions of Articles 66, 67, 128, 135 and 136.2”

“Clearly, therefore, the conjugal partnership of gains that governed the marriage between Efren and
Melecia who were married prior to 1988 cannot be modified except before the celebration of that marriage.
Post-marriage modification of such settlements can take place only where: (a) the absolute community or
conjugal partnership was dissolved and liquidated upon a decree of legal separation ; (b) the spouses who
were legally separated reconciled and agreed to revive their former property regime ; (c) judicial separation
of property had been had on the ground that a spouse abandons the other without just cause or fails to
comply with his obligations to the family ; (d) there was judicial separation of property under Article 135; (e)
the spouses jointly filed a petition for the voluntary dissolution of their absolute community or conjugal
partnership of gains .None of these circumstances exists in the case of Efren and Melecia.3”

Presumption: if either spouse contracts an obligation on behalf of the family business, there is a legal
presumption that such obligation redounds to the benefit of the conjugal partnership.4 Thus:
(a) If the husband himself is the principal obligor in the contract, i.e., the direct recipient of the money
and services to be used in or for his own business or profession, the transaction falls within the term
“obligations for the benefit of the conjugal partnership. 5
(b) But if the money or services are given to another person or entity and the husband acted only as
surety or guarantor, the transaction cannot by itself be deemed an obligation for the benefit of the
conjugal partnership. It is for the benefit of the principal debtor and not for the surety or his family. 6

Burden of Proof: The High Court here stated that the burden of proof that the debt was contracted
for the benefit of the conjugal partnership of gains lies with the creditor. The petitioner’s conclusion that the
loan obtained by the husband was used to finance the construction of housing units without a doubt
redounded to the benefit of his family, without adducing adequate proof , does not persuade this court.
Consequently, the conjugal partnership cannot be held liable for the payment of the principal obligation.7

2
Pana vs. Heirs of Jose Juanite, Sr. and Jose Juanite, Jr., GR No. 164201, 687 SCRA 414, December 10, 2012
3
Pana vs. Heirs of Jose Juanite, Sr. and Jose Juanite, Jr., GR No. 164201, 687 SCRA 414, December 10, 2012
4
SEBTC vs. Mar Tierra Corp., 508 SCRA 419 (2006); citing Ayala Investment and Development vs. CA, 286 SCRA 272 (1998)
5
SEBTC vs. Mar Tierra Corp., 508 SCRA 419 (2006); citing Ayala Investment and Development vs. CA, 286 SCRA 272 (1998)
6
SEBTC vs. Mar Tierra Corp., 508 SCRA 419 (2006); citing Ayala Investment and Development vs. CA, 286 SCRA 272 (1998)
7
Homeowner’s Savings and Loan Bank v. Miguela Dailo, GR 153802 ( March 11, 2005)
 Meanwhile, the case of Petrona Javier v. Lazaro Osmena8 discusses whether the sum owed by the
husband to the Osmena estate can and should be paid out of the fruits and revenues of the two
aforementioned parcels of real estate that exclusively belong to the wife. In answering this question, the
court took into consideration the nature of the debt. Considering the debts contracted by the husband during
the marriage is for the exercise of the industry or profession by which he contributes toward the support of
his family, cannot be deemed his personal or private debt. Whatever the husband contributed toward the
support of his family, he gave out what he earned from his commissions and professions. It has been held
that the fruits of the paraphernal property form a part of the assets of the conjugal partnership. Since the
debts in this case are properly classified as beneficial to the family, the fruits of the paraphernal property
forming part of the conjugal partnership can compensate the sum owed to the estate of Osmena.

In the case of Development Bank v. Hon. Midpantao9, the lower court held that in signing the promissory
note alone, the husband cannot thereby bind his wife. The Supreme Court disagreed and argued that under
Art. 165 of the Civil Code, the husband is the administrator of the conjugal partnership. As such, all debts and
obligations contracted by the husband for the benefit of the conjugal partnership are chargeable to the
conjugal partnership. No doubt, in this case, the husband signed the second promissory note for the benefit
of the conjugal partnership. Hence, the conjugal partnership is liable for this obligation.

II. RELATED LAWS AND JURISPRUDENCE

GOVERNING COLLECTIONS OF SUM OF
MONEY

Simple Loan Or Mutuum

Art. 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof,
and is bound to pay to the creditor an equal amount of the same kind and quality.

Art. 1955. The obligation of a person who borrows money shall be governed by the provisions of Article 1249
and 1250 of this Code. x x x x

Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile
documents shall produce the effect of payment only when they have been cashed, or when through
the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in the abeyance.

Art. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene,
the value of the currency at the time of the establishment of the obligation shall be the basis of
payment, unless there is an agreement to the contrary.

8
GR 9984 (March 23, 1916)
9
GR L- 48889 (May 11, 1989)
Extinguishment Of Obligations

Art. 1233. A debt shall not be understood to have been paid unless the thing or service in which the
obligation consists has been completely delivered or rendered, as the case may be.

Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no
interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial
to the debtor.

Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter,
cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty,
or penalty.

Art. 1240. Payment shall be made to the person in whose favor the obligation has been constituted, or his
successor in interest, or any person authorized to receive it.

Art. 1247. Unless it is otherwise stipulated, the extrajudicial expenses required by the payment shall be for
the account of the debtor. With regard to judicial costs, the Rules of Court shall govern

Art. 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelled partially to
receive the prestations in which the obligation consists. Neither may the debtor be required to make partial
payments.

However, when the debt is in part liquidated and in part unliquidated, the creditor may demand and the
debtor may effect the payment of the former without waiting for the liquidation of the latter.

Art. 1251. Payment shall be made in the place designated in the obligation.

There being no express stipulation and if the undertaking is to deliver a determinate thing, the payment shall
be made wherever the thing might be at the moment the obligation was constituted

In any other case the place of payment shall be the domicile of the debtor.
If the debtor changes his domicile in bad faith or after he has incurred in delay, the additional expenses shall
be borne by him.

These provisions are without prejudice to venue under the Rules of Court.

Obligation With A Period

Art. 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that
day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day
certain.

A day certain is understood to be that which must necessarily come, although it may not be known when.

If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be
regulated by the rules of the preceding Section. (1125a)

Art. 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period
or believing that the obligation has become due and demandable, may be recovered, with the fruits and
interests. (1126a)

Art. 1196. Whenever in an obligation a period is designated, it is presumed to have been established for the
benefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances it
should appear that the period has been established in favor of one or of the other. (1127)

Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred
that a period was intended, the courts may fix the duration thereof.

The courts shall also fix the duration of the period when it depends upon the will of the debtor.

In every case, the courts shall determine such period as may under the circumstances have been probably
contemplated by the parties. Once fixed by the courts, the period cannot be changed by them. (1128a)

Art. 1198. The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or
security for the debt;
(2) When he does not furnish to the creditor the guaranties or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when
through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period;
(5) When the debtor attempts to abscond. (1129a)

Period Of Prescription For The

Collection Of Sum Of Money

Art. 1403. The following contracts are unenforceable, unless they are ratified:
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by action, unless the same, or some note or
memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;
Art. 1144. The following actions must be brought within ten years from the time the right of
action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment. (n)

Art. 1145. The following actions must be commenced within six years:
(1) Upon an oral contract;
(2) Upon a quasi-contract. (n)

Obligation With Interest

Art. 1956. No interest shall be due unless it has been expressly stipulated in writing.

“xxx the rate of interest for the loan or forbearance of any money,
goods or credits and the rate allowed in judgments, in the absence
of an express contract as to such rate of interest, shall be 6 percent
per annum.”- (Cicular No. 779)

Art. 1959. Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn
interest. However, the contracting parties may by stipulation capitalize the interest due and unpaid,
which as added principal, shall earn new interest.

Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded,
although the obligation may be silent upon this point.

Art. 1960. If the borrower pays interest when there has been no stipulation therefor, the
provisions of this Code concerning solutio indebiti, or natural obligations, shall be applied, as the
case may be.

Legal Delay, Default Or Mora

Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it appears that the designation of the time
when the thing is to be delivered or the service is to be rendered was a controlling motive for the
establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply
in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his
obligation, delay by the other begins. (1100a)

Civil Procedure; Provisional Remedies:

Rule 57 Preliminary Attachment

Section 1. Grounds upon which attachment may issue. At the commencement of the action or at
any time before entry of judgment, a plaintiff or any proper party may have the property of the
adverse party attached as security for the satisfaction of any judgment that may be recovered in
the following cases:

(a) In an action for the recovery of a specified amount of money or damages, other than moral
and exemplary, on a cause of action arising from law, contract, quasi-contract, delict or quasi-
delict against a party who is about to depart from the Philippines which intent to defraud his
creditors; xxx

(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring
the obligation upon which the action is brought, or in the performance thereof;

(e) In an action against a party who has removed or disposed of his property, or is about to do
so, with intent to defraud his creditors; xxx”

Civil Procedure; Rule 4: Venue Of

Actions

Sec. 2. Venue of personal actions.

All other actions may be commenced and tried where the plaintiff or any of the principal
plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the
case of a non-resident defendant where he may be found, at the election of the plaintiff.

Civil Procedure; Bp 129: Jurisdiction Of

The First Level Courts; Exception To
The Proscription Against An
Amendment To Confer Jurisdiction To
The Court

Section 19(8) of Batas Pambansa Blg. 129, also known as “The Judiciary Reorganization Act of
1980.” as amended by Republic Act No. 7691, or otherwise known as An Act Expanding the
Jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts, states:
 “SEC. 19. Jurisdiction in civil cases. – Regional Trial Courts shall exercise exclusive original
jurisdiction:

xxxx

(8) In all other cases in which the demand, exclusive of interest, damages of whatever
kind, attorney’s fees, litigation expenses, and costs or the value of the property in controversy
exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila,
where the demand, exclusive of the abovementioned items exceeds Two hundred thousand
pesos (P200,000.00).”

Section 5 of Rep. Act No. 7691 further provides:

“SEC. 5. After five (5) years from the effectivity of this Act, the jurisdictional amounts
mentioned in Sec. 19(3), (4), and (8); and Sec. 33(1) of Batas Pambansa Blg. 129 as amended by
this Act, shall be adjusted to Two hundred thousand pesos (P200,000.00). Five (5) years
thereafter, such jurisdictional amounts shall be adjusted further to Three hundred thousand
pesos (P300,000.00): Provided, however, That in the case of Metro Manila, the abovementioned
jurisdictional amounts shall be adjusted after five (5) years from the effectivity of this Act to Four
hundred thousand pesos (P400,000.00).”

Relative thereto, the Supreme Court Circular No. 21-99 which was issued declaring the
first adjustment on the jurisdictional amount of first level courts or the MTCs outside of Metro
Manila from P100,000.00 to P200,000.00 took effect on March 20, 1999.

On the other hand, the second adjustment from P200,000.00 to P300,000.00 became
effective on February 22, 2004 in accordance with OCA Circular No. 65-2004 issued by the Office
of the Court Administrator on May 13, 2004.

Related Jurisprudence:

In mutuum, the person who receives the loan of money or any other fungible thing acquires
the ownership thereof and is bound to pay to the creditor an equal amount of the same kind
and quality.10

In Irene Sante vs. Hon. Claravall, the Supreme Court stated that since at the time of the filing
of the complaint on April 5, 2004, the MTCC’s jurisdictional amount has already been adjusted to
P300,000.00, there is no doubt that the Regional Trial Court (RTC) has jurisdiction over the case since
the total amount of damages being claimed by the petitioner in the case was P420,000.00.

Moreover, in the said case the Supreme Court found no error, much less grave abuse of
discretion, on the part of the Court of Appeals in affirming the RTC’s order allowing the amendment

10
Tolentino vs Gonzales, 50 Phil 558
 of the original complaint from P300,000.00 to P1,000,000.00 despite the pendency of a petition for
certiorari filed before the Court of Appeals.

The High Court declared that while it is a basic jurisprudential principle that an amendment
cannot be allowed when the court has no jurisdiction over the original complaint and the purpose of
the amendment is to confer jurisdiction on the court (Siasoco v. Court of Appeals, G.R. No. 132753,
February 15, 1999, 303 SCRA 186, 196), the RTC in the case clearly had jurisdiction over the original
complaint and the amendment of the complaint was then still a matter of right under Section 2, Rule
10 of the Rules of Court. Ergo, the amendment of the complaint was in order. (IRENE SANTE AND
REYNALDO SANTE vs. HON. EDILBERTO T. CLARAVALL, G.R. No. 173915, February 22, 2010,
VILLARAMA, JR., J.).

The case of Socorro Vda. De Sta. Romana v. Philippine Commercial and Industrial Bank11 discusses
the non-inclusion of the wife in the collection suit against the conjugal partnership. The Court ruled
that there is no rule or law requiring that a suit against the husband to enforce an obligation, either
pertaining to him alone or one chargeable against the conjugal partnership, the defendant husband
must be joined by his wife. Thus, there is no need to include the wife in the collection suit in order to
bind the conjugal partnership properties for the satisfaction of judgment.

ISSUE/s:

1. Whether or not absolute community of property governs the property relation of the spouses pursuant to
the provision of Art. 25612 of the Family Code in relation to last sentence of Art. 7513 of the Family Code.
2. Whether or not the conjugal partnership can be held liable for the loan contracted during the marriage by
Policarpio.
3. WON the abandonment done by Policarpio will deprive Don Pepot to file a claim against Pacita? Or against
the conjugal property
4. HOW can Don Pepot collect from Pacita and perhaps file other cases against her?

OPTIONS/ REMEDY

(1) Under the Civil Code, the presumption,

absent any evidence to the contrary, is that
they were married under the regime of
conjugal partnership of gains.

11
GR L- 56479 (Novermber 15, 1982)
12
Art. 256. This Code shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in
accordance with the Civil Code or other laws.
13
Art. 75. The future spouses may, in the marriage settlements, agree upon the regime of absolute community, conjugal
partnership of gains, complete separation of property, or any other regime. In the absence of a marriage settlement, or when the
regime agreed upon is void, the system of absolute community of property as established in this Code shall govern.
 First, it is important to know what property regime governs the property relations of the spouses Pacita and
Policarpio. It is undisputed that spouses were married when the Civil Code was still the operative law on marriages
and no pre-nuptial agreement was entered into.

Case on point is Pana vs. Heirs of Jose Juanite, Sr. and Jose Juanite, Jr.14 which tells us that the
propriety of levy and execution on conjugal properties where one of the spouses (Melecia Pana) has been
found guilty of a crime and ordered to pay civil liabilities to the victim’s heirs. There was disagreement of
what property regime will govern the property relations of the spouses. Here, petitioner Efren Pana claims
that his marriage with Melecia falls under the regime of conjugal partnership of gains, given that they were
married prior to the enactment of the Family Code and that they did not execute any prenuptial agreement.
On the other hand, although the heirs of the deceased victims do not dispute that it was the Civil Code, not
the Family Code, which governed the marriage, they insist that it was the system of absolute community of
property that applied to Efren and Melecia. The reasoning goes: Admittedly, the spouses were married
before the effectivity of the Family Code. But that fact does not prevent the application of [A]rt. 94, last
paragraph, of the Family Code because their property regime is precisely governed by the law on absolute
community. This finds support in Art. 256 of the Family Code which states: "This code shall have retroactive
effect in so far as it does not prejudice or impair vested or acquired rights in accordance with the Civil Code or
other laws." None of the spouses is dead. Therefore, no vested rights have been acquired by each over the
properties of the community. Hence, the liabilities imposed on the accused-spouse may properly be charged
against the community as heretofore discussed. The RTC applied the same reasoning as above. Efren and
Melecia’s property relation was admittedly conjugal under the Civil Code but, since the transitory provision of
the Family Code gave its provisions retroactive effect if no vested or acquired rights are impaired, that
property relation between the couple was changed when the Family Code took effect in 1988. The latter code
now prescribes in Article 75 absolute community of property for all marriages unless the parties entered into
a prenuptial agreement. As it happens, Efren and Melecia had no prenuptial agreement. The CA agreed with
this position.

In this case, the Supreme Court held that both the RTC and the CA were in error in this point and
further enunciated that “While it is true that the personal stakes of each spouse in their conjugal assets are
inchoate or unclear prior to the liquidation of the conjugal partnership of gains and, therefore, none of them
can be said to have acquired vested rights in specific assets, it is evident that Article 256 of the Family Code
does not intend to reach back and automatically convert into absolute community of property relation all
conjugal partnerships of gains that existed before 1988 excepting only those with prenuptial agreements. The
Family Code itself provides in Article 76 that marriage settlements cannot be modified except prior to
marriage.” Art. 76. In order that any modification in the marriage settlements may be valid, it must be made
before the celebration of the marriage, subject to the provisions of Articles 66, 67, 128, 135 and 136.

Clearly, therefore, the conjugal partnership of gains that governed the marriage between Efren and
Melecia who were married prior to 1988 cannot be modified except before the celebration of that marriage.
Post-marriage modification of such settlements can take place only where: (a) the absolute community or
conjugal partnership was dissolved and liquidated upon a decree of legal separation15; (b) the spouses who
were legally separated reconciled and agreed to revive their former property regime16; (c) judicial separation

14
GR No. 164201, 687 SCRA 414, December 10, 2012
15
Art. 66, FAMILY CODE
16
Art. 67, FAMILY CODE
 of property had been had on the ground that a spouse abandons the other without just cause or fails to
comply with his obligations to the family17; (d) there was judicial separation of property under Article 135; (e)
the spouses jointly filed a petition for the voluntary dissolution of their absolute community or conjugal
partnership of gains18.None of these circumstances exists in the case of Efren and Melecia.

What is more, under the conjugal partnership of gains established by Article 142 of the Civil Code, the
husband and the wife place only the fruits of their separate property and incomes from their work or industry
in the common fund. Thus:
Art. 142. By means of the conjugal partnership of gains the husband and wife place in a common fund
the fruits of their separate property and the income from their work or industry, and divide equally,
upon the dissolution of the marriage or of the partnership, the net gains or benefits obtained
indiscriminately by either spouse during the marriage.

This means that they continue under such property regime to enjoy rights of ownership over their separate
properties. Consequently, to automatically change the marriage settlements of couples who got married
under the Civil Code into absolute community of property in 1988 when the Family Code took effect would
be to impair their acquired or vested rights to such separate properties.

The RTC cannot take advantage of the spouses’ loose admission that absolute community of property
governed their property relation since the record shows that they had been insistent that their property
regime is one of conjugal partnership of gains. No evidence of a prenuptial agreement between them has
been presented.

What is clear is that Efren and Melecia were married when the Civil Code was still the operative law on
marriages. The presumption, absent any evidence to the contrary, is that they were married under the
regime of the conjugal partnership of gains. Article 119 of the Civil Code thus provides:
Art. 119. The future spouses may in the marriage settlements agree upon absolute or relative
community of property, or upon complete separation of property, or upon any other regime. In the
absence of marriage settlements, or when the same are void, the system of relative community or
conjugal partnership of gains as established in this Code, shall govern the property relations between
husband and wife.

Of course, the Family Code contains terms governing conjugal partnership of gains that supersede the terms
of the conjugal partnership of gains under the Civil Code. Article 105 of the Family Code states:
"x x x x
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."23

Hence, the presumption, absent any evidence to the contrary, is that they spouses Pacita and Policarpio were
married under the regime of the conjugal partnership of gains in relation to Art. 105 of the Family Code which states
that “The provisions of this Chapter [on the Conjugal Partnership of Gains] shall also apply to conjugal partnerships of

17
Art. 128, FAMILY CODE
18
Art. 136, FAMILY CODE
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”.
(2) IT DEPENDS:
2.1 Those contracted by one spouse
With consent of the other—YES;
2.2 Those contracted by one spouse
without consent of the other but
redounded to the benefit of the
family—YES;
2.3 Those contracted by one spouse
without consent of the other and
did not redounded to the benefit
of the family—No;

2.1 Those contracted by one spouse WITH consent of the other—YES;

Note that if the debt is contracted during the marriage by both spouses or by either spouse with the
consent of the other, the law conclusively presumes that such debt has redounded to the benefit of the
family, in which case, the creditor no longer has the burden of proving that the debt was contracted for the
benefit of the community or of the family.

Hence, in the present case, if it is shown by Don Pepot [the creditor] that Pacita consented in
borrowing money by Policarpio from several people including Don Peopt, his biggest creditors, the debt can
be chargeable to the Conjugal partnership. [Art. 121(2)]. However, should the conjugal partnership is
insufficient to cover the said liability, the spouses shall be solidarily liable for the unpaid balance with their
separate properties.

Solidary means that a creditor can proceed against one of the debtor-spouses for the payment of the
entire obligation subject to the reimbursement from the other of his/her share. So, assume that the
community property cannot pay a debt of Php500,000.00. the creditor enforce payment for the whole
amount of 500k from only one of the spouses, let us say from the husband. But the husband can proceed
against wife for her share of Php250,000.00. that is what it means to be liable solidarily. So if the wife
doesn’t have the money, the husband, in this example will bear the burden of the entire debt.

2.2 Those contracted by one spouse WITHOUT consent of the other BUT redounded to the benefit of the
family—YES;

If the debt is contracted by the designated administrator-spouse or by one spouse without the
consent of the other or if the debt is contracted prior to the marriage, the conjugal partnership shall be liable
only if it can be proven that the debt redounded to the benefit of the conjugal partnership or of the family.
For example, in one case, while the husband refused to sign the acknowledgment of indebtedness executed
by his wife but it was undoubtedly proven that the loan redounded to the benefit of the family because it
was used to purchase the house and lot which became the conjugal home, it was held that the husband was
also liable to pay the loan pursuant to Article 121 of the Family Code.
 Hence, liabilities shall only be chargeable to the conjugal partnership if it benefits the same. The
burden of proof that a debt was contracted for the benefit of the conjugal partnership lies with the creditor-
party litigant claiming as such. Ei incumbit probatio qui dicit, non qui negat (he who asserts, not he who
denies, must prove).

The benefit must be a direct result of the obligation. It cannot simply be a by-product or a spin-off of
the obligation or loan itself. Redounding to the benefit of the family must always be proven and cannot be
presumed, the burden of proof to show the benefit must always be on the person claiming that the
transaction redounded to the benefit of the family.

What debts and obligations contracted by one spouse alone are considered “for the benefit of the
conjugal partnership” which are chargeable against the conjugal partnership? The rule is that for the
conjugal partnership to be liable for a liability that should appertain to one of the spouses 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
law to show the utmost concern for the solidarity and well being of the family as a unit. The law, however,
does not require that actual profit or benefit must accrue to the conjugal partnership from the spouse’s
transaction for the partnership to be liable. It suffices that the transaction should be one that normally
would produce such benefit for the partnership.

In the case of Ayala Investment Development Corp. v. Court of Appeals19, PBM obtained a loan
from Ayala. To secure the debt, Alfredo Ching, VP of PBM, made himself jointly and severally answerable
with PBM’s indebtedness. PBM failed to pay the loan. Thus, a case for sum of money was filed against the
Ching spouses. According to petitioner, there is no need to prove that actual benefit redounded to the
benefit of the partnership, all that is necessary is that the transaction was entered into for the benefit of the
partnership. The Supreme Court here tackled the question of what debts and obligations contracted by the
husband alone are considered for the benefit of the conjugal partnership.

(A) If the husband himself is the principal obligor in the contract, i.e., he directly received the money or
services to be used in or for his own business or his own profession, that contract falls within the
term “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 contest of “obligation for the benefit of the conjugal partnership.” The contract of loan or
services is clearly for the benefi t 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

19
GR 118305 (February 12, 1998)
 accommodation agreement, it is “for the benefi t of the conjugal partnership.” Proof must be
presented to establish benefit redounding to the conjugal partnership

On the other hand, the Supreme Court in the case of Homeowner’s Savings and Loan Bank v.
Miguela Dailo20 discussed the burden of proof. In here, the husband obtained a loan secured by a real estate
mortgage from the petitioner without the knowledge and consent of the wife. The petitioner imposes the
liability for the payment of the principal obligation obtained by the husband on the conjugal partnership to
the extent that it redounded to the benefit of the family. The High Court here stated that the burden of
proof that the debt was contracted for the benefit of the conjugal partnership of gains lies with the creditor.
The petitioner’s conclusion that the loan obtained by the husband was used to finance the construction of
housing units without a doubt redounded to the benefit of his family, without adducing adequate proof ,
does not persuade this court. Consequently, the conjugal partnership cannot be held liable for the payment
of the principal obligation.

Meanwhile, the case of Petrona Javier v. Lazaro Osmena21 discusses whether the sum owed by the
husband to the Osmena estate can and should be paid out of the fruits and revenues of the two
aforementioned parcels of real estate that exclusively belong to the wife. In answering this question, the
court took into consideration the nature of the debt. Considering the debts contracted by the husband during
the marriage is for the exercise of the industry or profession by which he contributes toward the support of
his family, cannot be deemed his personal or private debt. Whatever the husband contributed toward the
support of his family, he gave out what he earned from his commissions and professions. It has been held
that the fruits of the paraphernal property form a part of the assets of the conjugal partnership. Since the
debts in this case are properly classified as beneficial to the family, the fruits of the paraphernal property
forming part of the conjugal partnership can compensate the sum owed to the estate of Osmena.

The case of Socorro Vda. De Sta. Romana v. Philippine Commercial and Industrial Bank22 discusses
the non-inclusion of the wife in the collection suit against the conjugal partnership. The Court ruled that there
is no rule or law requiring that a suit against the husband to enforce an obligation, either pertaining to him
alone or one chargeable against the conjugal partnership, the defendant husband must be joined by his wife.
Thus, there is no need to include the wife in the collection suit in order to bind the conjugal partnership
properties for the satisfaction of judgment.

In the case of Development Bank v. Hon. Midpantao23, the lower court held that in signing the
promissory note alone, the husband cannot thereby bind his wife. The Supreme Court disagreed and argued
that under Art. 165 of the Civil Code, the husband is the administrator of the conjugal partnership. As such, all
debts and obligations contracted by the husband for the benefit of the conjugal partnership are chargeable to
the conjugal partnership. No doubt, in this case, the husband signed the second promissory note for the
benefit of the conjugal partnership. Hence, the conjugal partnership is liable for this obligation.

20
GR 153802 ( March 11, 2005)
21
GR 9984 (March 23, 1916)
22
GR L- 56479 (Novermber 15, 1982)
23
GR L- 48889 (May 11, 1989)
 Assuming arguendo that Pacita did not give her consent to Policarpio’s loan, the conjugal partnership
is still liable because the loan proceeds redounded to the benefit of the family. The stipulated facts shows
that the loan was used for the payment of the debt of Policarpio’s wife (Pacita). Therefore, the debt obtained
is chargeable against the conjugal partnership.

Furthermore, if you go further with the facts of the case, the loan was obtained for the payment of
the debts of the wife Pacita because of her gambling problem which under Art. 123 of the Family Code makes
the gambler spouse bear all his/her losses during the marriage from all kinds of gambling, whether permitted
or prohibited by law, including sweepstakes and shall not be charged to the conjugal partnership. In which
case, we submt that the husband could make reimbursement of what he has paid for the debts of the wife for
one reason—the conjugal partnership should not make responsible for the losses of the gambler-spouse.

Setting aside the preceeding paragraph, it further Note however, art. 73 of the family code as
amended allows either spouse to exercise any legitimate profession, occupation, business or activity without
the consent of the other. The latter may object only on valid, serious, and moral grounds. And In case of
disagreement, the court shall decide whether or not: (1) The objection is proper, and (2) Benefit has accrued
to the family prior to the objection or thereafter. If the benefit accrued prior to the objection, the resulting
obligation shall be enforced against the community property. If the benefit accrued thereafter, such
obligation shall be enforced against the separate property of the spouse who has not obtained consent. The
foregoing provisions shall not prejudice the rights of creditors who acted in good faith. Thus:
(a) If the benefit has accrued to the family prior to the objection, the absolute community or conjugal
partnership is liable for the obligations incurred since all the profits or income from the acts or
transactions of the spouse who acted without the consent of the other become part of the absolute
community or conjugal properties.
(b) If the profits accrued after the objection, the resulting obligations of the spouse who acted without
the consent of the other shall be enforced only against his or her separate properties.
(c) Creditors who acted in good faith (i.e. without knowledge of the objection) are, however, protected
and will not be prejudiced in their rights. thus, they may go after the absolute community or
conjugal properties or the separate properties of the spouse with whom they contracted.

In the instant case, it falls under the letter (a) because as shown in the facts that there was already
benefit existed without any disagreement regarding the obligations incurred by Policarpio. Should there be it
was already too late. Hence, the debt can be charge against the conjugal partnerhip.

The same under 2.1 that in case of insufficiency of the conjugal partnership to cover the said liability,
the spouses shall be solidarily liable for the unpaid balance with their separate properties.

2.3 Those contracted by one spouse without consent of the other and did not redounded to the benefit of the
family—No;

Conjugal properties do not answer obligations of husband if they did not redound to the benefit of the
family.

In Philippine Bank of Commerce vs. C.A., et al., G.R. No. 106858, September 5, 1997, 86 SCAD 599, G.L. Chua
executed a Deed of Exchange with Jaleco Dev’t. Corp. with the conformity of his wife. There were creditors of Chua who
filed suits against him. They contended that the Deed of Exchange was fictitious and in fraud of creditor since Jaleco is
controlled by Chua and the immediate members of his family, hence, the house and lot were levied upon. Can the wife
contend that the same cannot be made to answer for Chua’s obligations because the transactions did not redound to the
benefit of the family? Why? Can she file a motion to quash the writ contending that the conjugal partnership was the
owner of the same? Why?

The High Court said:

No, because she was under estoppel to claim that the property belonged to the conjugal partnership because she
gave her conformity to the Deed of Exchange and never intervened in the suit toannul the Deed of Exchange.

The Supreme Court further said that the conjugal properties cannot be made to answer for obligations of the
husband if they did not redound to the benefit of the family. It said that this particular codal provision in question
rightfully emphasizes responsibility of the husband as administrator. He 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 needed to
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 (now the Family
Code) to show the utmost concern for the solidarity and well-being of the family as a unit. 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. (citing Luzon Surety, Inc. vs. De Garcia, 30 SCRA 111; Ting vs. Villarin, 174 SCRA 532).

Conjugal properties cannot answer for the surety under-taking of a spouse.

In Ayala Investments and Development Corp., et al. vs. CA, et al., G.R. No. 118305, February 12, 1998, 91
SCAD 663, the Supreme Court in saying that the surety undertakings of a spouse cannot bind the conjugal properties of
the husband and wife even if it has become a part of his duties as an officer of a corporation to sign as surety in certain
undertakings of the corporation of which he is the Executive Vice-President. In this case, Philippine Blooming Mills
(PBM) obtained a P50,300,000.00 loan from Ayala Investments and Development Corporation, with Alfredo Ching, its
Executive Vice-President as surety, making himself jointly and severally liable with PBM’s indebtedness to AIDC. The
former failed to pay, hence, the latter filed a suit for sum of money against PBM and Ching. After trial, the two (2)
defendants were held jointly and severally liable for the indebtedness. A writ of execution was issued where conjugal
properties of Ching and his wife were levied upon.

The basic issues raised were the following:

(1) Under Article 161 of the Civil Code (Now Arts. 94 and 121 of the Family 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?
(2) 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?

The Supreme Court ruled as follows:

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 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. In this case, it was shown that Ching signed as surety. It is incumbent upon PBM to
prove that Ching’s acting as surety redounded to the benefit of the conjugal partnership. Absent such proof, the conjugal
partnership is not liable. (Luzon Surety, Inc. vs.
De Garcia, 30 SCRA 111).

One question can be asked. When the guaranty is in favor of the husband’s employer, would it not result in the
employee’s benefit? This question is asked because it would prolong the employment of the surety. Or, would not the
shares of stocks of his family appreciate if PBM could be rehabilitated through the loan? Or, would not his career be
boosted if PBM would survive because of the loan? No, because these are not the benefits contemplated by the law. The
benefits must be one directly resulting from the loan. It cannot merely be a by-product or a spin-off of the loan itself
considering the odds involved in guaranteeing a large amount 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 surety’s
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. Such rule is even more emphasized in the Family Code as it highlights the underlying concern of
the law for the conservation of the conjugal partnership; for the husband’s duty to protect and safeguard, if not augment,
not to dissipate it. Thus, the Supreme Court said:

“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 partnership’s
liability is to ‘the extent that the family is benefited.’ (Art. 121, Nos. 2 and 3, Family Code).

“These are all in keeping with the spirit and intent of the other provisions of the Civil Code (now the Family
Code) which prohibits any of the spouses to donate or convey gratuitously any part of the conjugal property.
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 case of donation.”

In a very novel and new theory that was raised in this case, it was contended that Ching’s acting as surety is part
of his business or profession.

The signing as a surety is certainly not an exercise of an industry or profession. Signing as a surety is not
embarking in a business. No matter how often an executive acts or is 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. Thus, the
Supreme Court said:

“This is not to say, however, that we are unaware that executives are often asked to stand as surety for their
company’s 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.

Art. 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.”

Origin of the principle.

The predecessors of the law and the jurisprudence cited above can be traced from the cases of Ansaldo vs. Sheriff of
Manila, et al., 64 Phil. 115; Liberty Insurance Corp. vs. Banuelos, 59 O.G. No. 29, 4526; and Luzon Surety, Inc. vs. De
Garcia, 30 SCRA 111, where theSupreme Court said:

“The fruits of the paraphernal property (now exclusive 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 case)”

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 (now the
Family 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.).

In the instant case, 2.3 has no application because it was shown that there redounded to the benefit of the
family, regardless of whether or not there was consent.

(3) Don Pepot can collect from Pacita by

filing a complaint for collection of sum of
money and preliminary attachment.

Article 1953 of the Civil Code of the Philippines (CCP), provides that a person who receives a loan of money
or any other fungible thing acquires the ownership thereof and is bound to pay to the creditor an equal amount of
the same kind and quality. The obligation of one person who borrows money is governed by the provisions of Article
1249 and 1250 of the Civil Code of the Philippines. According to Article 1249, the payment of debts in money shall be
made in the currency stipulated and if it is not possible to deliver such currency, then in the currency which is legal
tender in the Philippines. Furthermore, promissory notes payable to order or bill of exchange or other mercantile
documents shall only produce effect of payment if and only if they have been cashed. In some instance, effect of
payment is considered when the documents have been impaired through the fault of the creditor. Article 1250
contemplates a case of extraordinary inflation or deflation of the currency stipulated. It provides that the value of the
currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an
agreement to the contrary.

A debtor has the obligation to return to the amount that he borrowed on the date and time that he and
the creditor have agreed upon. The following provisions govern the rules on payment found in Section 1, Chapter 4,
Book V of the Civil Code of the Philippines:

Art. 1233. A debt shall not be understood to have been paid unless the thing or
service in which the obligation consists has been completely delivered or rendered, as
the case may be.

Art. 1236. The creditor is not bound to accept payment or performance by a

third person who has no interest in the fulfillment of the obligation, unless there is a
stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid,
except that if he paid without the knowledge or against the will of the debtor, he can
recover only insofar as the payment has been beneficial to the debtor.

Art. 1237. Whoever pays on behalf of the debtor without the knowledge or
against the will of the latter, cannot compel the creditor to subrogate him in his rights,
such as those arising from a mortgage, guaranty, or penalty.

Art. 1240. Payment shall be made to the person in whose favor the obligation
has been constituted, or his successor in interest, or any person authorized to receive it.

Art. 1247. Unless it is otherwise stipulated, the extrajudicial expenses required

by the payment shall be for the account of the debtor. With regard to judicial costs, the
Rules of Court shall govern
 Art. 1248. Unless there is an express stipulation to that effect, the creditor
cannot be compelled partially to receive the prestations in which the obligation consists.
Neither may the debtor be required to make partial payments.

However, when the debt is in part liquidated and in part unliquidated, the
creditor may demand and the debtor may effect the payment of the former without
waiting for the liquidation of the latter.

Art. 1251. Payment shall be made in the place designated in the obligation.

There being no express stipulation and if the undertaking is to deliver a

determinate thing, the payment shall be made wherever the thing might be at the
moment the obligation was constituted.
In any other case the place of payment shall be the domicile of the debtor.

If the debtor changes his domicile in bad faith or after he has incurred in delay,
the additional expenses shall be borne by him.

These provisions are without prejudice to venue under the Rules of Court.

If a debtor fails to comply with his obligation, the creditor shall have the right to institute an action against
him for the collection of his indebtedness. The right to institute an action against a debtor is also subject to
conditions set by law. One of which is the period of time given within which a creditor must enforce his right. The
failure to file a case within such period shall result in the prescription of right of action for the collection of
indebtedness. Furthermore, an Immature filing of complaint for collections of sum of money to an obligation not yet
due and demandable will also constitute as a ground for dismissal by the court. Below are the provisions found in
Section 2, Chapter III, Book IV of the Civil Code governing obligation with a period:

Art. 1193. Obligations for whose fulfilment a day certain has been fixed shall
be demandable only when that day comes. Obligations with a resolutory period take
effect at once, but terminate upon arrival of the day certain.
A day certain is understood to be that which must necessarily come,
although it may not be known when.
If the uncertainty consists in whether the day will come or not, the obligation
is conditional, and it shall be regulated by the rules of the preceding Section.

Art. 1195. Anything paid or delivered before the arrival of the period, the
obligor being unaware of the period or believing that the obligation has become due and
demandable, may be recovered, with the fruits and interests.

Art. 1196. Whenever in an obligation a period is designated, it is presumed

to have been established for the benefit of both the creditor and the debtor, unless from
the tenor of the same or other circumstances it should appear that the period has been
established in favor of one or of the other.

Art. 1197. If the obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended, the courts may fix the
duration thereof.

The courts shall also fix the duration of the period when it depends upon the
will of the debtor.
 In every case, the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once fixed by the courts,
the period cannot be changed by them.

Art. 1198. The debtor shall lose every right to make use of the period:

(1) When after the obligation has been contracted, he becomes insolvent, unless he
gives a guaranty or security for the debt;

(2) When he does not furnish to the creditor the guaranties or securities which he has
promised;

(3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through a fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory;

(4) When the debtor violates any undertaking, in consideration of which the creditor
agreed to the period;

(5) When the debtor attempts to abscond.

The period of prescription for the collection of sum of money varies depending on the existence of a written
agreement between creditor and debtor. If parties executed a written contract of loan, the creditor may institute an
action for collection of sum of money within ten (10) years from the time the right of action accrues. For efficiency
and enforceability, it is important that the loan agreement entered by both parties must comply to the Statute of
Frauds provided in Article 1403.

Art. 1403. The following contracts are unenforceable, unless they are ratified:

xxx (2) Those that do not comply with the Statute of Frauds as set forth in this number.
In the following cases an agreement hereafter made shall be unenforceable by action,
unless the same, or some note or memorandum, thereof, be in writing, and subscribed
by the party charged, or by his agent; evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed within a year from the
making thereof;

(b) A special promise to answer for the debt, default, or miscarriage of another; xxx

If, however, parties only orally agreed upon the loan, the action may still be enforced but it shall be
considered to have prescribed after the lapse of six (6) years.

Article 1144. The following actions must be brought within ten years from the
time the right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;
(3) Upon a judgment.

Article 1145. The following actions must be commenced within six years:
 (1) Upon an oral contract;
(2) Upon a quasi-contract.

In collections of sum of money, debts are not extinguished by simply paying the principal obligation when
there is a stipulation of interest. With the suspension of Usury Law, the debtor and creditor are free to stipulate the
interest on their agreement provided it is done freely with no presence of fraud or intimidation. The agreement shall
be the law to both parties and shall be controlling between them so long as it is not unconscionable or shocking to
the conscience of man.

Art. 1956. Provides that No interest shall be due unless it has been expressly stipulated in writing. The
interest referred in Art. 1956 is interest for the use of money. The interest must be clearly and categorically written
within the agreement. The stipulation of an interest and absence of the specific rate, however, shall not affect the
validity of such stipulation. The interest shall be considered to be the present legal interest in the country which is 6
% per annum

“xxx the rate of interest for the loan or forbearance of any money, goods or credits and
the rate allowed in judgments, in the absence of an express contract as to such rate of
interest, shall be 6 percent per annum.”
- (Cicular No. 779)

Moreover, according to Art. 1959, without prejudice to the provisions of Article 2212, interest due and
unpaid shall not earn interest. However, the contracting parties may by stipulation capitalize the interest due and
unpaid, which as added principal shall earn new interest. The general rule is that accrued interest (interest due and
unpaid) will not bear interest, the exceptions would be (a) if there is agreement to this effect (Art. 1959), or (b) if
there is judicial demand (Art. 2212). Such accrued interest will bear interest at the legal rate unless, a different rate is
stipulated.

In a contract of loan where both parties agreed that payment should be made by installments, the parties
may include an acceleration clause. It is a clause in a contract stating that the happening of a certain event, like
failure to pay of a debtor to any of the installment due, shall make the entire balance become due and payable.
Parties may also agree that obligation becomes due and demandable upon the happening of a future and certain
event even in the absence of oral or written demand. This is an exception rather than the rule provided in Article
1169.

Legal Delay, Default or Mora is the failure to perform an obligation on time, which failure constitutes a
breach of obligation. Mora solvendi or the delay on the part of debtor of his obligation by reason imputable to him
exists when ; there is failure failure of the debtor to perform his (positive) obligation on the date agreed upon;
demand (not mere reminder or notice) made by the creditor upon the debtor to fulfill, perform, or comply with his
obligation which demand, may be either judicial (when a complaint is filed in court) or extra-judicial (when made
outside of court, orally or in writing); and failure of the debtor to comply with such demand.

Article 1169 of the Civil Code on delay requires the following:

Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfilment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may
exist:

(1) When the obligation or the law expressly so declares; x x x

 A creditor may only file an action for the collection of sum of money before the court when the debt is
already due and demandable and there is failure of payment on the part of the debtor. But before resorting to filing
a case, a demand letter is important. Demand letters will ensure that the debtor is reminded of his obligation and
that he shall be given the chance to pay his debt without resorting to a full blown trial. Demand Letters also serve as
compelling evidence that the creditor formally demanded payment of the debt due.

In some cases, where one or more of the grounds for preliminary attachment apply to the creditor, he may
attach the debtor’s property by including an application for preliminary attachment when the creditor files action for
collection of sum of money in court. This is provided in Rule 57 of the Revised Rules of Court. Attachment is the
process of including the adverse party’s property in the proceedings, so it can be used as security for the satisfaction
of the judgment.

Section 1. Grounds upon which attachment may issue.

At the commencement of the action or at any time before entry of judgment, a

plaintiff or any proper party may have the property of the adverse party attached as security
for the satisfaction of any judgment that may be recovered in the following cases:

(a) In an action for the recovery of a specified amount of money or damages, other
than moral and exemplary, on a cause of action arising from law, contract, quasi-contract,
delict or quasi-delict against a party who is about to depart from the Philippines which intent
to defraud his creditors; xxx

xxx(d) In an action against a party who has been guilty of a fraud in contracting the
debt or incurring the obligation upon which the action is brought, or in the performance
thereof;

(e) In an action against a party who has removed or disposed of his property, or is
about to do so, with intent to defraud his creditors; xxx”

The institution of action also depends on the amount of money to be collected. The amount of money
determines where the action must be filed.
The Municipal Trial Court, Municipal Circuit Trial Court, Metropolitan Trial Court has Exclusive Original Jurisdiction to
actions demanding the sum of money not exceeding 300,000 Php or 400,000 Php in cases in Metro Manila.
Amount exceeding 300,000 Php or 400,000 php shall be cognizable by the Regional Trial Court.

In case of joinder of causes of action where the claims are principally for recovery of money, Section 5, Rule
2 of the 1997 Rules of Civil Procedure provides that the aggregate amount claimed shall be the test of jurisdiction.

When the amount to be collected does not exceed One Hundred Thousand Pesos (100,000 Php), Section 2,
A.M. No. 08-8-7-SC provides that the case should be filed under the jurisdiction of the small claims court which is the
Metropolitan or Municipal Trial Court in the place where the creditor or debtor resides.