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    Luzon Surety Co., Inc. vs. de Garcia

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    The Supreme Court ruled that a conjugal partnership cannot be held liable for an indemnity agreement signed by the husband to accommodate a third party in favor of a surety company. Article 161 of the Civil Code states that a conjugal partnership is only liable for debts and obligations contracted by the husband for the benefit of the partnership. Acting as a guarantor or surety for another does not benefit the partnership, as the benefit is intended for the third party. While one justice concurred, noting that actual profit is not required by Article 161, but rather that the transaction would normally produce such benefit.

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    Luzon Surety Co., Inc. vs. de Garcia

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    755 views2 pages
    The Supreme Court ruled that a conjugal partnership cannot be held liable for an indemnity agreement signed by the husband to accommodate a third party in favor of a surety company. Article 161 of the Civil Code states that a conjugal partnership is only liable for debts and obligations contracted by the husband for the benefit of the partnership. Acting as a guarantor or surety for another does not benefit the partnership, as the benefit is intended for the third party. While one justice concurred, noting that actual profit is not required by Article 161, but rather that the transaction would normally produce such benefit.

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    Case Digest Luzon Surety Co., Inc. vs. De Garcia No. L-25659

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    The Supreme Court ruled that a conjugal partnership cannot be held liable for an indemnity agreement signed by the husband to accommodate a third party in favor of a surety company. Article 161 of the Civil Code states that a conjugal partnership is only liable for debts and obligations contracted by the husband for the benefit of the partnership. Acting as a guarantor or surety for another does not benefit the partnership, as the benefit is intended for the third party. While one justice concurred, noting that actual profit is not required by Article 161, but rather that the transaction would normally produce such benefit.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    755 views2 pages

    Luzon Surety Co., Inc. vs. de Garcia

    Uploaded by

    C
    The Supreme Court ruled that a conjugal partnership cannot be held liable for an indemnity agreement signed by the husband to accommodate a third party in favor of a surety company. Article 161 of the Civil Code states that a conjugal partnership is only liable for debts and obligations contracted by the husband for the benefit of the partnership. Acting as a guarantor or surety for another does not benefit the partnership, as the benefit is intended for the third party. While one justice concurred, noting that actual profit is not required by Article 161, but rather that the transaction would normally produce such benefit.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    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.

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