TERESITA CORDOVA AND JEAN ONG CORDOVA, PETITIONERS, VS. EDWARD TY, RESPONDENT.

Cordova versus Ty

The Case

This is a petition for review on certiorari brought by Teresita Cordova and her daughter Jean Ong Cordova against Edward Ty. The petitioners seek to exclude two pieces of real property from a writ of execution issued to satisfy the civil liability of Chi Tim Cordova, Teresita's husband and Jean's father, arising from eleven counts of violation of the Bouncing Checks Law. The case matters because it draws the line between two distinct rules that students often blur: the presumption that property acquired during marriage is conjugal, and the separate requirement that the conjugal partnership may be held liable for a spouse's personal debt only to the extent that the family benefited. It also teaches that calling a property a family home is not a magic wand that freezes the court's hand.

Procedural History

The Metropolitan Trial Court of Manila, Branch 27, rendered a decision on the civil aspect of the Bouncing Checks Law cases, holding Chi Tim Cordova and Robert Young jointly and solidarily liable. That decision became final and executory, and the trial court issued a writ of execution covering the two subject properties. When the petitioners filed a very urgent motion to exclude the properties from the auction sale, the trial court merely noted it. The petitioners then filed a petition for prohibition and mandamus with a prayer for injunctive relief before the Regional Trial Court of Manila, Branch 32. The Regional Trial Court granted a temporary restraining order and later a preliminary prohibitory injunction, and on November 16, 2017 rendered a decision permanently restraining the sale of the subject properties. Edward Ty's motion for reconsideration was denied.

On appeal, the Court of Appeals, in its decision of November 15, 2018, granted Ty's appeal, found no grave abuse of discretion on the part of the Metropolitan Trial Court, and reinstated the writ of execution. The petitioners' motion for reconsideration was denied in a resolution dated April 2, 2019. The petitioners then elevated the matter to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

Chi Tim Cordova and Teresita Cordova were married before the effectivity of the Family Code and executed no prenuptial agreement, so their property relations were governed by the conjugal partnership of gains. During the marriage, two properties were acquired: a parcel of land covered by a transfer certificate of title registered in the name of Teresita, married to Chi Tim; and a condominium unit covered by a condominium certificate of title registered in the name of Chi Tim, married to Teresita.

Chi Tim and Robert Young drew checks on the account of their company, Wood Technology Corporation, to obtain cash from Edward Ty. When the checks bounced, Ty filed eleven counts of violation of the Bouncing Checks Law. The criminal aspect was dismissed, but the Metropolitan Trial Court resolved the civil aspect and held Chi Tim and Young jointly and solidarily liable for six million two hundred thousand pesos representing the value of the checks, plus one hundred thousand pesos as attorney's fees and litigation expenses. The court found that the checks were drawn for rediscounting for the personal benefit of Chi Tim and Young, and that there was no proof the money was used to pay the corporation's suppliers.

After the decision became final, Ty moved for execution, and the sheriff levied the two properties for public auction. The petitioners resisted, claiming that the land was Teresita's paraphernal property purchased with funds donated by her father, and that the condominium unit was the family home and therefore exempt from execution. Only Jean testified on the alleged exclusive funds of her mother.

Issues

• Whether or not the two subject properties form part of the conjugal partnership of Chi Tim and Teresita.
• Whether or not the conjugal properties may be executed upon to satisfy the civil liability of Chi Tim arising from the Bouncing Checks Law case.

Applicable Provisions

Article 160 of the Civil Code provides:

All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife.

This presumption anchors the Court's finding that both properties are conjugal, since they were acquired during the marriage and no clear and convincing evidence of exclusive ownership was presented.

Article 121 of the Family Code provides, in its relevant portion, 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.

Article 122 of the Family Code provides:

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.

This is the decisive provision: the civil liability arising from the bounced checks is a personal debt of Chi Tim, chargeable to the conjugal partnership only to the extent the family benefited.

Ruling

On the first issue, the Court held that both properties belong to the conjugal partnership. The land was acquired during the marriage, and the fact that Teresita was the sole vendee and registered owner did not destroy its conjugal character, because registration is not conclusive evidence of exclusive ownership. The claim that she used funds donated by her father rested on a bare allegation, and Jean's testimony did not show personal knowledge of the sale. As for the condominium unit, the petitioners themselves conceded it is conjugal. The Court held that the claim of exemption as a family home must be set up and proved, and the requisites were not established: that it was constituted as a family home, that it was constituted jointly by the parents, and that its actual value did not exceed three hundred thousand pesos in an urban area. The Court stressed that occupancy must be actual, not merely possible or presumptive.

On the second issue, the Court ruled that the conjugal properties may not be executed upon. Although the properties are conjugal, conjugality alone does not make them answerable for a spouse's personal debt. The Court quoted Article 122 and held that the creditor must show that the debt redounded to the benefit of the family. The Court distinguished the two scenarios in Philippine National Bank versus Reyes, Jr.: where the husband is the principal obligor and the money is used in his business or profession, benefit is presumed; where the money goes to another person or entity, proof of benefit is required. Here, the first scenario did not apply, because the Metropolitan Trial Court found no proof that the money was used in Chi Tim's business or profession; the checks were drawn for rediscounting for personal benefit. Since no presumption arose, the burden fell on Ty to prove actual benefit, and he presented no evidence. The Court also distinguished Pana versus Heirs of Juanite, Sr. and Dewara versus Spouses Lamela: there the spouses were convicted, so the civil liability fell within fines and indemnities under Article 122; here the criminal case was dismissed and only the civil aspect was resolved, so the liability is properly a debt or obligation.

Doctrine

• All property of the marriage is presumed conjugal under Article 160 of the Civil Code; to rebut it, a movant must present strong, clear and convincing evidence of exclusive ownership, and registration in one spouse's name is not conclusive.
• Conjugal property is not automatically liable for the personal debt of one spouse. Under Article 122 of the Family Code, it is liable only insofar as the debt redounded to the benefit of the family.
• Where the husband is the principal obligor and the money is used in his business or profession, benefit to the family is presumed; where the money goes to another person or entity, the creditor must prove actual benefit. The burden lies with the creditor who asserts it.
• The family home exemption must be alleged and proved, including actual occupancy and the value limits; it is not presumed from a mere claim.

Disposition

The petition was granted; the Court of Appeals decision and resolution were reversed and set aside, and the Regional Trial Court decision permanently restraining the sale of the subject properties was affirmed.

Remember This

Memorize this line: conjugal property answers for a spouse's personal debt only to the extent the family benefited, and the creditor bears the burden of proving that benefit. Examiners use this case to test the interplay of the conjugality presumption under Article 160 of the Civil Code and the benefit requirement under Article 122 of the Family Code, and to distinguish personal debts from fines and indemnities in criminal cases.