Cordova vs. Ty

Conjugal property may not be levied to satisfy a spouse's personal debt unless the creditor proves that the debt redounded to the benefit of the family; the presumption of benefit applies only when the spouse is the principal obligor who directly received money for use in his own business or profession, not when the funds were obtained for rediscounting or other personal purposes unrelated to the family business.

Chi Tim Cordova and Robert Young, officers and authorized signatories of Wood Technology Corporation, drew checks from the corporate account to obtain cash from Edward Ty. The checks were subsequently dishonored, leading to eleven counts of violation of B.P. 22 filed against Chi Tim and Young before the MeTC of Manila, Branch 27. While the criminal aspect was dismissed on demurrer to evidence, the MeTC proceeded on the civil aspect and held Chi Tim and Young jointly and solidarily liable. Chi Tim is the husband of petitioner Teresita Cordova and the father of petitioner Jean Ong Cordova. The spouses were married prior to the effectivity of the Family Code and did not execute any pre-nuptial agreement, such that their property relations is governed by the regime of conjugal partnership of gains.

Chi Tim Cordova and Robert Young, as officers and authorized signatories of Wood Technology Corporation, drew checks from the corporate account to obtain cash from Edward Ty. The checks were dishonored upon presentment, prompting Ty to file eleven counts of violation of B.P. 22 against Chi Tim and Young before the MeTC of Manila, Branch 27. The MeTC dismissed the criminal aspect on demurrer to evidence for failure of the prosecution to prove guilt beyond reasonable doubt but proceeded to resolve the civil aspect, finding Chi Tim and Young jointly and solidarily liable for ₱6,200,000.00 representing the value of the bounced checks and ₱100,000.00 as attorney's fees and litigation expenses. The MeTC rejected their assertion that the checks were issued for the payment of suppliers, noting the absence of any supporting evidence.

After the MeTC Decision became final and executory, Ty moved for the issuance of a writ of execution, which was granted. The sheriff levied two properties: (1) a parcel of land covered by TCT No. 77973, registered in the name of Teresita O. Cordova, married to Chi Tim Cordova, containing 125 square meters; and (2) a condominium unit covered by CCT No. 4441, registered in the name of Cordova Chi Tim, married to Teresita Cordova, located at the Blue Diamond Tower Condominium Project in Tondo, Manila. Petitioners filed a Very Urgent Motion to Exclude their Properties from the Auction Sale before the MeTC, which merely noted the motion.

Petitioners then filed a Petition for Prohibition and Mandamus before the RTC of Manila, Branch 32, asserting that the liability was corporate in nature and that Chi Tim should not be held personally liable. As to exemption, petitioners alleged that the TCT No. 77973 property was exclusively owned by Teresita, purchased using funds donated to her by her father, and that the CCT No. 4441 property was the Cordova family home, presently utilized by Jean as her own family home. The RTC issued a temporary restraining order on July 21, 2017, a preliminary prohibitory injunction on September 7, 2017, and a Decision on November 16, 2017 permanently restraining the sale of the subject properties. Ty appealed to the CA, which reversed the RTC and reinstated the MeTC's writ of execution, holding that the TCT No. 77973 property was conjugal because it was acquired during the marriage and that the CCT No. 4441 property was not proven to be a family home. Petitioners sought reconsideration, which was denied, leading to the instant petition.

• Conjugality Does Not Automatically Create Liability: Petitioners alleged that the appellate court erred in holding the subject properties liable to the personal obligation of Chi Tim on the basis of conjugality alone, citing Article 121 of the Family Code, which requires that before the conjugal partnership is made liable for the personal debt of one spouse, it must be shown to have redounded to the benefit of the family.
• No Benefit to the Family: Petitioners averred that the personal obligation of Chi Tim did not redound to the benefit of his family, which he had already abandoned even before he contracted or was adjudged liable for such personal debt.
• Family Home Exemption: Petitioners argued that under Article 160 of the Family Code, certain facts must be established before a family home is subjected to execution, and having failed to establish these facts, the subject properties may not be levied upon and executed to satisfy Chi Tim's civil liability.

• Principal Obligor Scenario: Ty asserted that the first scenario in Philippine National Bank vs. Reyes, Jr. — where the husband is the principal obligor who directly received the money — was squarely applicable, such that a legal presumption of benefit to the family arises without need for proof of actual benefit.
• Due Process Not Violated: Ty argued that he was not deprived of the opportunity to present evidence before the RTC, contending that he was given the chance to be heard.

• Nature of the Subject Properties: Whether the TCT No. 77973 property and the CCT No. 4441 property are conjugal properties of Chi Tim and Teresita.
• Family Home Exemption: Whether the CCT No. 4441 property qualifies as a family home exempt from execution.
• Liability of Conjugal Assets for Personal Debt: Whether the subject conjugal properties may be executed upon to satisfy Chi Tim's civil liability arising from the civil aspect of the B.P. 22 case.

• Nature of the Subject Properties: Yes. Both properties are part of the conjugal partnership, the presumption of conjugality under Article 160 of the Civil Code (reproduced in Article 116 of the Family Code) not having been rebutted by clear and convincing evidence of exclusive ownership.
• Family Home Exemption: No. The CCT No. 4441 property was not proven to be a family home, petitioners having failed to establish the requisites set forth in FEB Mitsui Marine Insurance Co., Inc. vs. Manalastas, including actual residence, constitution as a family home, and compliance with the value ceiling.
• Liability of Conjugal Assets for Personal Debt: No. Conjugal property cannot be held liable for the personal obligation of one spouse unless some advantage or benefit is shown to have accrued to the conjugal partnership, and Ty failed to prove that the loans redounded to the benefit of the family.

• Nature of the Subject Properties: The spouses were married prior to the effectivity of the Family Code and did not execute any pre-nuptial agreement, so their property relations is governed by conjugal partnership of gains. Under Article 160 of the Civil Code, all property of the marriage is presumed to belong to the conjugal partnership unless proved to pertain exclusively to the husband or the wife. In Ching vs. Court of Appeals, the Court held that it is not even necessary to prove that the properties were acquired with funds of the partnership; the presumption applies even when the manner of acquisition does not appear. To rebut the presumption, strong, clear, and convincing evidence of exclusive ownership is required, with the burden resting on the party asserting it. The TCT No. 77973 property was acquired during the marriage; the fact that Teresita was the sole vendee and registered owner did not destroy its conjugal nature, as registration is not conclusive evidence of exclusive ownership. Petitioners' assertion that Teresita purchased the property using funds donated by her father was unsubstantiated — only Jean testified, and she had no personal knowledge of the circumstances of the sale. Petitioners conceded that the CCT No. 4441 property was part of the conjugal properties.

• Family Home Exemption: The claim that a property is a family home is not a magic wand that forestalls execution of a final and executory ruling. In Salazar vs. Felias, the Court held that the claim for exemption must be set up and proved. The appellate court's finding that the CCT No. 4441 property was not proven to be a family home was borne out by the records. Petitioners failed to establish the requisites enumerated in FEB Mitsui Marine Insurance Co., Inc. vs. Manalastas: (a) it must be the house where the family actually resides and the lot on which it is situated; (b) it must be part of the conjugal or community properties or exclusive properties with consent; and (c) the actual value must not exceed ₱300,000.00 in urban areas at the time of its constitution. Jean merely recounted living with her parents under "one roof" but never identified the subject condominium unit as that residence. Petitioners attempted to shift the burden to Ty by asserting he failed to comply with requisites for execution under Article 157 of the Family Code, but this burden never shifted because the property was not proven to be a family home to begin with.

• Liability of Conjugal Assets for Personal Debt: Although the Civil Code governed the spouses' marriage, the subsequent enactment of the Family Code superseded the terms of conjugal partnership under the Civil Code, pursuant to Article 105 of the Family Code. Under Article 121(3) of the Family Code, the conjugal partnership is liable for debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have benefited. Article 122 of the Family Code provides that payment of personal debts shall not be charged to the conjugal partnership except insofar as they redounded to the benefit of the family. In Philippine National Bank vs. Reyes, Jr., the Court identified two scenarios: (A) where the husband is the principal obligor who directly received money for his own business or profession, a legal presumption of benefit arises; and (B) where the husband acted as surety or guarantor for another, no presumption applies and actual benefit must be proved. The first scenario was not squarely applicable because while Chi Tim directly received the money, there was no showing it was used in his business or profession. The MeTC found no proof that the money was used to pay suppliers of Wood Technology; instead, the checks were drawn for rediscounting for personal benefit. Since no presumption of benefit arose, Ty bore the burden of proving actual benefit. Ty presented no such evidence, having opted not to present evidence or pleadings before the RTC. The Court distinguished this case from Pana vs. Heirs of Juanite, Sr. and Dewara vs. Spouses Lamela, where the erring spouses were found guilty beyond reasonable doubt and civil liabilities were treated as "fines and indemnities" under Article 122, enforceable against partnership assets under certain conditions. Here, the criminal case was dismissed and only the civil aspect was resolved, making the liability properly characterized as a "debt or obligation" rather than a fine or indemnity.

• Presumption of Conjugal Property — Under Article 160 of the Civil Code (reproduced in Article 116 of the Family Code), all property acquired during the marriage is presumed to belong to the conjugal partnership unless proved to pertain exclusively to the husband or the wife. It is not necessary to prove that the properties were acquired with funds of the partnership; the presumption applies even when the manner of acquisition does not appear. Registration of property solely in the name of one spouse is not conclusive evidence of exclusive ownership. To rebut the presumption, strong, clear, and convincing evidence of exclusive ownership is required, with the burden on the party asserting exclusive ownership. The Court applied this doctrine to hold both subject properties conjugal, petitioners having failed to present sufficient evidence of exclusive ownership.

• Benefit to the Conjugal Partnership (Two Scenarios) — As articulated in Philippine National Bank vs. Reyes, Jr., two scenarios determine whether a personal debt redounds to the benefit of the conjugal partnership: (A) if the spouse is the principal obligor who directly received money or services for his own business or profession, the law presumes benefit to the family and no actual benefit need be proved; (B) if the spouse acted as surety or guarantor for another, no presumption arises and actual benefit must be proved. The Court applied this framework and found that the first scenario did not apply because although Chi Tim directly received the money, it was not shown to have been used in his business or profession, having been obtained for rediscounting for personal benefit. The burden thus fell on Ty to prove actual benefit, which he failed to do.

• Requisites of a Family Home — As held in FEB Mitsui Marine Insurance Co., Inc. vs. Manalastas, for property to be considered a family home, the following must be established: (a) it must be the house where the family actually resides and the lot on which it is situated; (b) it must be part of the absolute community, conjugal partnership, or exclusive properties with consent; and (c) the actual value must not exceed ₱300,000.00 in urban areas or ₱200,000.00 in rural areas at the time of its constitution. The occupancy must be actual, not merely presumptive or constructive. The Court found that none of these requisites were met by petitioners.

• Distinction Between Fines/Indemnities and Debts/Obligations Under Article 122 — Under Article 122 of the Family Code, fines and indemnities imposed upon a spouse may be enforced against conjugal partnership assets after the responsibilities under Article 121 have been covered, if the spouse has no exclusive property or it is insufficient. This applies where the spouse has been found guilty beyond reasonable doubt of a crime. In contrast, a personal debt or obligation — such as liability arising from the civil aspect of a B.P. 22 case where the criminal aspect was dismissed — requires proof of benefit to the family before the conjugal partnership may be held liable. The Court distinguished Pana vs. Heirs of Juanite, Sr. and Dewara vs. Spouses Lamela on this basis.

• "Settled is the rule that conjugal property cannot be held liable for the personal obligation contracted by one spouse, unless some advantage or benefit is shown to have accrued to the conjugal partnership." — This passage states the controlling rule on the liability of conjugal assets for personal debts, forming the core of the ratio decidendi.

• "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, that contract falls within the term 'x x x obligations for the benefit of the conjugal partnership.' Here, no actual benefit may be proved. It is enough that the benefit to the family is apparent at the time of the signing of the contract." — This quotation from Philippine National Bank vs. Reyes, Jr., as adopted by the Court, defines the first scenario under which a presumption of benefit to the conjugal partnership arises, and explains why it did not apply to the present case.

• "The claim that a property is a family home is not a magic wand that will freeze the court's hand and forestall the execution of a final and executory ruling." — This passage articulates the principle that the family home exemption is not automatic and must be properly pleaded and proved, emphasizing the claimant's burden of establishing the requisites.

• "The burden of proof that the debt was contracted for the benefit of the conjugal partnership of gains lies with the creditor-party litigant claiming as such. Ei incumbit probatio qui dicit, non qui negat (he who asserts, not he who denies, must prove)." — This quotation from Homeowners Savings & Loan Bank vs. Dailo, as adopted by the Court, establishes the allocation of the burden of proof on the creditor seeking to hold conjugal assets liable for a spouse's personal debt.

• Ching vs. Court of Appeals, 467 Phil. 830 (2004) — Followed. The Court relied on this case for the principle that the presumption of conjugality applies even when the manner of acquisition does not appear, and that strong, clear, and convincing evidence is required to rebut it.
• Philippine National Bank vs. Reyes, Jr., 796 Phil. 736 (2016) — Followed and distinguished. The Court adopted the two-scenario framework for determining whether a personal debt redounds to the benefit of the conjugal partnership, but found the first scenario inapplicable because Chi Tim did not use the loan proceeds in his business or profession.
• Salazar vs. Felias, G.R. No. 213972, February 5, 2018 — Followed. The Court cited this case for the rule that a claim for exemption of a family home must be set up and proved.
• FEB Mitsui Marine Insurance Co., Inc. vs. Manalastas, G.R. No. 236001, March 18, 2019 — Followed. The Court adopted the three requisites for a valid family home as articulated in this case.
• Homeowners Savings & Loan Bank vs. Dailo, 493 Phil. 436 (2005) — Followed. The Court adopted the principle that the burden of proving benefit to the conjugal partnership lies with the creditor.
• Pana vs. Heirs of Juanite, Sr., 700 Phil. 525 (2012) — Distinguished. The Court distinguished this case because the erring spouse therein was found guilty beyond reasonable doubt, making the civil liability a "fine or indemnity" under Article 122, unlike the present case where only the civil aspect was resolved.
• Dewara vs. Spouses Lamela, 663 Phil. 35 (2011) — Distinguished. Same rationale as Pana, distinguished on the ground that criminal conviction was obtained, characterizing civil liability as fines and indemnities enforceable against conjugal assets under Article 122.
• Spouses Buado vs. Court of Appeals, 604 Phil. 294 (2009) — Followed. Cited for the settled rule that conjugal property cannot be held liable for a personal obligation unless benefit to the conjugal partnership is shown.

• Article 160, Civil Code — Provides that all property of the marriage is presumed to belong to the conjugal partnership unless proved to pertain exclusively to the husband or the wife. Applied to determine that the subject properties are conjugal in nature, petitioners having failed to rebut the presumption.
• Article 116, Family Code — Reproduces Article 160 of the Civil Code, providing that all property acquired during the marriage is presumed conjugal unless the contrary is proved. Applied in conjunction with Article 160 of the Civil Code.
• Article 121(3), Family Code — Provides that the conjugal partnership is liable for debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have benefited. Applied as the basis for requiring proof of benefit before conjugal assets may be held liable.
• Article 122, Family Code — Provides that payment of personal debts contracted by either spouse shall not be charged to the conjugal partnership except insofar as they redounded to the benefit of the family; also provides that fines and indemnities may be enforced against partnership assets under certain conditions. Applied to distinguish personal debts from fines and indemnities, and to hold that the civil liability in this case is a debt requiring proof of benefit.
• Article 105, Family Code — Provides that the Family Code provisions on property relations apply to conjugal partnerships established before its effectivity, without prejudice to vested rights. Applied to justify the application of Family Code provisions to the spouses' conjugal partnership, which was established under the Civil Code.
• Article 157, Family Code — Sets conditions for execution of a family home when its actual value has increased due to voluntary improvements. Discussed in the context of petitioners' attempt to shift the burden to Ty, which the Court rejected because the property was not proven to be a family home.
• Article 119, Civil Code — Provides that in the absence of marriage settlements, the system of conjugal partnership of gains governs property relations between husband and wife. Applied to establish the property regime governing the spouses.

Justices Leonen (Chairperson), Hernando, Inting, and J. Lopez concurred. No separate concurring opinions were written.