Luzon Surety Co, Inc. v. De Garcia (1969)

LUZON SURETY CO, INC. vs. DE GARCIA

GR No L-256659

October 31, 1969

Ponente: Justice Fernando

FACTS:

Ladislao Chavez (principal) and Luzon Surety Co (petitioner) executed a surety bond in favor of the Philippine National Bank to guaranty a crop loan granted by the bank to Chavez for the sum of P9,000. Vicente Garcia (respondent) together with Chavez, signed an indemnity agreement that  (1) binds themselves jointly and severally, to indemnify the petitioner against any and all costs or expenses of whatsoever kind and nature which it may sustain or incur as a consequence of being a guarantor; (2) pay an interest rate of 12% per annum computed and compounded quarterly until fully paid and (3) pay 15% of the amount involved in any litigation. On April 27, 1956, PNB filed a complaint before the Court of First Instance against the Chavez and herein petitioner to recover the amount of P4,577 and the court rendered a decision condemning therein respondents to pay the said amount jointly and severally to PNB. The lower court issued a writ of execution against Vicente Garcia for the satisfaction of the claim of PNB and a writ of garnishment was issued by the Provincial Sheriff levying the sugar quedans of spouses Garcias from their sugar plantation, registered under both of their names. The spouses Garcias filed for an injunction invoking Article 161 of the family code and the lower court ruled in their favor. Herein petitioner elevated the case to the Court of Appeals, which affirmed the decision of the lower court. The petitioners contend that the Court of Appeals erred in holding that no liability was incurred by the conjugal partnership.

ISSUE:

- W/N 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.

HOLDING/RATIONALE:

- NO. In this case, no benefit was received by the conjugal partnership.

- The Court of Appeals adjudicated the matter in accordance with law.

- Article 161 is clear and gives no room for doubt. It states that there must be a requisite showing then of some advantage which clearly accrued to the welfare of the spouses, which in this case, there was none. 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.

JUDGMENT:

- The decision of the court of appeals is AFFIRMED.