Published 14 November 2022, The Daily Tribune

All marriages make promises such until the end, they will end up being together forever.
Many have stayed that way, but some are less fortunate with their partners leading to
separations or even nullity of marriages. But even if they’ve moved on their separate
ways, liabilities won’t stop making legal actions a possibility when they’ve remained
unsettled.

Par. 2 of the Art. 121 of the Family Code states that the conjugal partnership shall be
liable for: (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.

This means that debts contracted by the husband for and in the exercise of the industry
or profession by which he contributes to the support of the family, cannot be deemed to
be his exclusive and private debts. If he incurs an indebtedness in the legitimate pursuit
of his career or profession or suffers losses in a legitimate business, the conjugal
partnership must equally bear the indebtedness and the losses, unless he deliberately
acted to the prejudice of his family.

But like most provisions of law, there are exceptions. If the husband incurred
indebtedness but did not accrue an actual benefit to the family, his personal payment on
the said debts shall not be charged to the conjugal properties.

Art. 122 states 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 properties
partnership except insofar as they have redounded to the benefit of the family.

A good example of this is the case of Ayala Investment and Development Corporation
and Abelardo Magsajo v. Court of Appeals (G.R. 118305 12 February 1998). Philippine
Blooming Mills obtained a P50,300,000 loan from AIDC with the corresponding surety
agreement from respondent Alfredo Ching, executive vice president of PBM, as
collateral. Under the agreement, Ching was made jointly and severally answerable with
PBM’s indebtedness to AIDC. PBM failed to pay the loan, hence a complaint was filed
against PBM and Ching.

The RTC rendered judgment ordering PBM and Ching to jointly and severally pay AIDC
the principal amount with interest. To implement the judgment, a notice of sheriff sale on
three of the conjugal properties of the Chings was issued. The court ruled that the loan
procured from respondent-appellant AIDC was for the advancement and benefit of PBM
and not for the benefit of the conjugal partnership. PBM has a personality distinct and
separate from the family of petitioners-appellees — this despite the fact that the
members of the said family happened to be stockholders of said corporate entity.

Article 121, paragraph 3, of the Family Code is emphatic that the payment of personal
debts contracted by the husband or the wife before or during the marriage shall be
charged to the conjugal partnership except to the extent that they redounded to the
benefit of the family.

In sum, 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, it is enough that the benefit to the family is apparent at the time of the
signing of the contract if, 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.

But if the money or services are given to another person or entity, and the husband
acted only as a surety or guarantor, that contract cannot, by itself, alone be categorized
as falling within the context of “obligations for the benefit of the conjugal partnership.”

I n the case Johnson & Johnson (Phils.), Inc. vs. CA (G.R. No. 102692, September 23,
1996) the wife, owner of an enterprise, and her husband, were sued by the
plaintiff corporation for a sum of money. The wife purchased cosmetic
products from the plaintiff and incurred liabilities in the amount of
P235,880.89. She issued checks in payment of the same, but the check
bounced when presented for payment, hence, the suit.
After trial, the court declared the wife solely liable, stating that plaintiff and
the husband had no privity of contract and that the husband was not a co-
owner of the business enterprise. In addition, said obligations were
contracted without the husband’s knowledge or consent, and that the
conjugal partnership never derived benefit therefrom.
The trial court decided that the husband should not be held liable for the
obligations incurred by his wife without his knowledge or consent. However,
when notices of levy on execution were issued, these covered not only the
wife’s exclusive or paraphernal properties, but also the real and personal
properties of the conjugal partnership of the spouses. This has caused the
husband to file a third-party claim, which was denied by the trial court. The
case then reached the Supreme Court.

Supreme Court ruled that:

In order to bind the conjugal partnership and its properties, the law provides
that the debts and obligations contracted by the husband must be for the
benefit of the conjugal partnership and that the husband must consent to his
wife’s engaging in business.

And in the above case, the lower Court already found that the defendant
husband did not give his consent; neither did the obligation incurred by the
defendant wife redound to the benefit of the family. Hence, the conjugal
partnership, as well as the defendant husband, cannot be held liable. As
originally decreed by the lower Court, only the defendant wife and her
paraphernal property can be held liable. Since the power of the court in
execution of judgments extends only to properties unquestionably belonging
to the judgment debtor alone, the conjugal properties and the capital of the
defendant husband cannot be levied upon.

Family Code also provides that:

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 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 partner 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 purposes above-mentioned.

Thus, the following shall not be charged against the conjugal partnership:
a. debts incurred (before or during the marriage) except insofar as they benefited
the family; and
b. fines and pecuniary indemnities.
However, if the separate property is insufficient, the conjugal partnership
property shall be liable, subject to two conditions:

a. the obligations of and charges upon the conjugal partnership shall have been
covered; and
b. there must be reimbursement during liquidation.