G.R. No. 118305 - Ayala Investment and Development Corp. vs. Court of Appeals

Philippine Blooming Mills, Inc. (PBM) obtained a loan of P50,300,000.00 from Ayala Investment and Development Corporation (AIDC).
Alfredo Ching, Executive Vice President of PBM and respondent-husband, personally executed security agreements making himself jointly and severally liable with PBM for the loan.
PBM failed to repay the loan; consequently, AIDC filed a sum of money case against PBM and Alfredo Ching before the Court of First Instance (now Regional Trial Court, RTC) of Rizal (Pasig), Branch VIII.

The trial court rendered a judgment requiring PBM and Alfredo Ching to pay the loan with interest jointly and severally.
Pending appeal, AIDC obtained a writ of execution based on posting of an P8,000,000.00 bond and initiated the levy and notice of sheriff sale on three conjugal properties owned by the spouses Alfredo and Encarnacion Ching.
The spouses filed an injunction to enjoin the auction, arguing the loan did not benefit the conjugal partnership and thus the conjugal properties cannot be seized. The court initially issued a temporary restraining order.
AIDC filed a certiorari petition before the Court of Appeals (CA) which issued a temporary restraining order enjoining the enforcement of the injunction and allowed the sale to proceed.

The auction proceeded on June 25, 1982. AIDC was the sole bidder and obtained a certificate of sale executed by the sheriff.
Upon expiration of the redemption period, the final deed of sale was issued and registered.
The injunction case proceeded, and on September 18, 1991, the RTC declared the sale null and void for lack of benefit to the conjugal partnership.
AIDC appealed to the CA, which on April 14, 1994, affirmed the RTC ruling, holding that the loan was not for the benefit of the conjugal partnership and thus the conjugal properties were not liable to pay the debt.
The petitioners’ motion for reconsideration was denied, leading to this petition for review before the Supreme Court.

The petitioners (AIDC and sheriff) argued that the obligation incurred by Alfredo Ching was for the benefit of the conjugal partnership and that the husband’s act in securing the loan was part of his business or profession from which he supports his family.
They maintained that under Article 161 of the Civil Code, no actual benefit needs to be shown; it suffices that the debt was contracted for the benefit of the partnership.
They also suggested that even a surety agreement entered by the husband as an accommodation contract in favor of his employer should be considered as benefiting the conjugal partnership.

Are debts and obligations contracted by the husband alone considered for the benefit of the conjugal partnership and thus chargeable against the conjugal partnership under Article 161 of the Civil Code (and its equivalent provisions in the Family Code)?
Is a surety agreement or accommodation contract entered into by the husband in favor of his employer within the contemplation of Article 161 (i.e., considered as contracted for the benefit of the conjugal partnership)?