Exclusive

Properties acquired during the marriage are presumed to be conjugal unless there is strong preponderant evidence that they belong exclusively to a spouse. This is the rule applied in this case of the married couple Larry and Malou.

During their marriage, Malou who was more business minded put up a single proprietorship construction business (M&Y Industries) registered in her own name and solely managed by her. Eventually, the couple’s marriage hit the rocks until Larry abandoned Malou and their children.

Two months after abandoning his family, Larry secured a loan of P600,000 from a financing company (BF) as evidenced by a promissory note he signed in his own behalf and as representative of the M&Y Industries. Larry presented an alleged Special Power of Attorney (SPA) purportedly authorizing him to procure the loan and sign the promissory note. But when the loan became due and demandable, Larry failed to pay the same.

So BF filed a complaint before the trial court (Court of First Instance now Regional Trial Court [RTC]) against the estranged spouses Larry and Malou with a prayer for a writ of attachment. The trial   court issued the writ thus enabling BF to attach the properties of M&Y Industries.

It turned out however that Malou’s signature in the SPA submitted by Larry was a forgery as alleged by Malou in her answer and proven during the trial. Thus after hearing, the trial court dismissed BF’s complaint against Malou and ordered it to pay her actual and exemplary damages and attorney’s fees all totaling P1.4 million.

BF appealed the decision contending among others that even if Malou’s signature was forged or even if M&Y Industries were registered exclusively in Malou’s name, the same can be made answerable to the obligation because the said business and its properties form part of the conjugal partnership of the spouses as said business was put up during their marriage. Was BF correct?

Both the Court of Appeals (CA) and the Supreme Court (SC) said no. The CA said that there is strong preponderant evidence to show that M&Y Industries belongs exclusively to Malou as shown by the Certificate of Registration and the Mayor’s Permit where it is stated that M&Y is a single proprietorship in the name of Malou. In fact the CA said that assuming without admitting its due execution, the SPA itself is tangible proof that Larry has no interest whatsoever in M&Y Industries, otherwise, it would have been no necessity of said SPA if he is part owner of said business.

The SC further ruled that even if M&Y Industries is presumed to be conjugal despite being registered only in the name of Malou, the said property could be held liable for the obligation contracted by Larry only if it redounded to the benefit of the conjugal partnership. In this case the obligation which BF is seeking to enforce against the conjugal property managed by Malou was undoubtedly contracted by Larry for his own benefit only because at the time he incurred the obligation, he had already abandoned his family and had left the conjugal home. Worse, he made it appear that he was duly authorized by his wife in behalf of M&Y Indistries, to procure such loan. Clearly, to make M&Y Industries liable for said loan would be unjust and contrary to the express provision of the Civil Code. The damages awarded to Malou was however reduced to P660,000 (BA Finance Corp. vs. Court of Appeals, G.R. L-61464, May 28, 1988, 161 SCRA, 608).

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