Luzon Surety Co., Inc. vs.

De Garcia

No. L-25659

October 31, 1969

FERNANDO, J

Facts:

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. 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 other expenses which the petitioner may sustain or incur in
consequence of having become guarantor upon said bond, to pay interest and attorney's fees related to
the loan. On April 27, 1956, PNB filed a complaint against Ladislao Chavez and Luzon Surety Co. to
recover the amount of P4, 577.95, in interest, attorney’s fees and other costs. On August 8, 1957,
Luzon Surety Co. instituted a third party complaint against Chavez, Lacson and Garcia. 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. 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. Spouses Garcia
filed a suit for injunction and the trial court ruled in favor of them. Which the CA affirmed on appeal.
Hence, this petition for review.

Issue: Whether or not a conjugal partnership could be held liable on an indemnity agreement
executed by the husband to accommodate a third party in favor of a surety company.

Held:

No, a conjugal partnership under Article 161 of the new Civil Code is liable only for such
"debts and obligations contracted by the husband for the benefit of the conjugal partnership” There
must be the requisite showing then of some advantage which clearly accrued to the welfare of the
spouses. The husband in acting as guarantor or surety for another in an indemnity agreement does not
act for the benefit of the conjugal partnership considering that the benefit is clearly intended for
the third party. No process of interpretation or construction need be resorted to where a provision of
law 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.
REYES, J.B.L., J., concurring:

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.