We previously noted that we are breaking down the discussion on the property relations of the spouses during marriage under the Family Code, as follows: (1) Prenuptial agreements and introduction to property relations between husband and wife; (2) The system of absolute community; (3) Conjugal partnership of gains; (4) Complete separation of property; (5) Donations by reason of marriage; and (6) Comparison of the various types of property relations between spouses. This post is Part 3.

NATURE OF CONJUGAL PARTNERSHIP OF GAINS

Sometimes referred to as the CPG, it is one of the property relations between the spouses, under which the husband and wife place in a common fund the proceeds, products, fruits and income from their separate properties and those acquired by either or both spouses through their efforts or by chance, and, upon dissolution of the marriage or of the partnership, the net gains or benefits obtained by either or both spouses shall be divided equally between them, unless otherwise agreed in the marriage settlements. In other words, the following are placed in a common fund:

• 1. the proceeds, products, fruits and income from their separate properties; and

• 2. those acquired by either or both spouses through their efforts or by chance.

WHEN APPLICABLE

The property relations of conjugal partnership of gains applies only when the future spouses agree to it in the marriage settlement, if any. It also applies to conjugal partnerships of gains already established between spouses before the effectivity of the Family Code, without prejudice to vested rights. This is the default property relationship under the Civil Code, which was changed to that of absolute community of property under the Family Code.

COMMENCEMENT

The regime of conjugal partnership of gains begins at the precise moment when the marriage is celebrated, exactly like in absolute community of property.

RULES ON ORDINARY PARTNERSHIP

The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is provided in the Family Code or by the spouses in their marriage settlements.

EXCLUSIVE PROPERTY OF EACH SPOUSE

The following items form part of the exclusive property of each pose:

• (1) That which is brought to the marriage as his or her own;

• (2) That which each acquires during the marriage by gratuitous title (through pure liberality, as in donation and testate/intestate succession);

• (3) That which is acquired by right of redemption, by barter or by exchange with property belonging to only one of the spouses; and

• (4) That which is purchased with exclusive money of the wife or of the husband.

SIGNIFICANCE OF EXCLUSIVE PROPERTY

The spouses retain the ownership, possession, administration and enjoyment of their exclusive properties. A spouse may also mortgage, encumber, alienate or otherwise dispose of his or her exclusive property, without the consent of the other spouse, and appear alone in court to litigate with regard to the same.

Either spouse may, during the marriage, transfer the administration of his or her exclusive property to the other by means of a public instrument, which shall be recorded in the registry of property of the place the property is located. However, the alienation of any exclusive property of a spouse administered by the other automatically terminates the administration over such property and the proceeds of the alienation shall be turned over to the owner-spouse.

PROPERTIES THAT BELONG TO CPG

(1) Those acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses;

(2) Those obtained from the labor, industry, work or profession of either or both of the spouses;

(3) The fruits, natural, industrial, or civil, due or received during the marriage from the common property, as well as the net fruits from the exclusive property of each spouse;

(4) The share of either spouse in the hidden treasure which the law awards to the finder or owner of the property where the treasure is found;

(5) Those acquired through occupation such as fishing or hunting;

(6) Livestock existing upon the dissolution of the partnership in excess of the number of each kind brought to the marriage by either spouse; and

(7) Those which are acquired by chance, such as winnings from gambling or betting. However, losses therefrom shall be borne exclusively by the loser-spouse.

ACQUISITIONS DURING MARRIAGE; PRESUMPTION

All property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved.

PURCHASE BY INSTALLMENT

Property bought on installments paid partly from exclusive funds of either or both spouses and partly from conjugal funds belongs to the buyer or buyers if full ownership was vested before the marriage and to the conjugal partnership if such ownership was vested during the marriage. In either case, any amount advanced by the partnership or by either or both spouses shall be reimbursed by the owner or owners upon liquidation of the partnership.

CREDITS PAYABLE OVER TIME

Whenever an amount or credit payable within a period of time belongs to one of the spouses, the sums which may be collected during the marriage in partial payments or by installments on the principal shall be the exclusive property of the spouse. However, interests falling due during the marriage on the principal shall belong to the conjugal partnership.

IMPROVEMENTS ON EXCLUSIVE PROPERTY

The ownership of improvements, whether for utility or adornment, made on the separate property of the spouses at the expense of the partnership or through the acts or efforts of either or both spouses shall pertain to the conjugal partnership, or to the original owner-spouse, subject to the following rules:

1. When the cost of the improvement made by the conjugal partnership and any resulting increase in value are MORE than the value of the property at the time of the improvement, the entire property of one of the spouses shall belong to the conjugal partnership.

2. When the cost of the improvement made by the conjugal partnership and any resulting increase in value are LESS than the value of the property at the time of the improvement, the entire property shall remain with the owner-spouse.

3. In either case, the owner-spouse or the conjugal partnership, as the case may be, is entitled to reimbursement for the value of the principal property or the improvement, as the case may be.

4. It doesn’t matter if the improvements are for utility or adornment.

CHARGES ON CPG

The conjugal partnership shall be liable for:

(1) The support of the spouse, their common children, and the legitimate children of either spouse; however, the support of illegitimate children shall be governed by the provisions of the Family Code on Support;

(2) All debts and obligations contracted during the marriage by the designated administrator-spouse for the benefit of the conjugal partnership of gains, or by both spouses or by one of them with the consent of the other;

(3) Debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have benefited;

(4) All taxes, liens, charges, and expenses, including major or minor repairs upon the conjugal partnership property;

(5) All taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse;

(6) Expenses to enable either spouse to commence or complete a professional, vocational, or other activity for self-improvement;

(7) Ante-nuptial debts of either spouse insofar as they have redounded to the benefit of the family;

(8) The value of what is donated or promised by both spouses in favor of their common legitimate children for the exclusive purpose of commencing or completing a professional or vocational course or other activity for self-improvement; and

(9) Expenses of litigation between the spouses unless the suit is found to groundless.

If the conjugal partnership is insufficient to cover the foregoing liabilities, the spouses shall be solidarily liable for the unpaid balance with their separate properties.

PERSONAL DEBTS BEFORE OR DURING MARRIAGE

1. As a rule, 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 properties.

2. However, these debts shall be charged to the conjugal partnership properties insofar as they redounded to the benefit of the family.

3. If the spouse has no exclusive property, it may be charged to the conjugal partnership, subject to the provisions below.

FINES AND PECUNIARY INDEMNITIES

These cannot be charged to the partnership. However, the payment of personal debts contracted by either spouse before the marriage, that of fines and indemnities imposed upon them, as well as the support of illegitimate children of either spouse, may be enforced against the partnership assets after the charges/obligations enumerated in above have been covered, if the spouse who is bound should have no exclusive property or if it should be insufficient; but at the time of the liquidation of the partnership, such spouse shall be charged for what has been paid for the purpose above-mentioned.

WINNINGS OR LOSSES IN GAMBLING

Any loss incurred by a spouse during the marriage in any game of chance or in betting, sweepstakes, or any other kind of gambling whether permitted or prohibited by law, shall be borne by that spouse, and shall not be charged to the conjugal partnership. Any winnings, on the other hand, shall form part of the conjugal partnership property.

AUTHORITY TO ADMINISTER

The administration and enjoyment of the conjugal partnership shall belong to both spouses jointly. In case of disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.

DONATIONS FROM CPG

As a rule, neither spouse may donate any conjugal partnership property without the consent of the other. However, either spouse may, without the consent of the other, make moderate donations from the conjugal partnership property for charity or on occasions of family rejoicing or family distress.

WHEN CPG TERMINATES

(1) Upon the death of either spouse;

(2) When there is a decree of legal separation;

(3) When the marriage is annulled or declared void; or

(4) In case of judicial separation of property during the marriage.

SEPARATION IN FACT OR DE FACTO; EFFECT

No. However, the following are the effects:

(1) The spouse who leaves the conjugal home or refuses to live therein, without just cause, shall not have the right to be supported;

(2) When the consent of one spouse to any transaction of the other is required by law, judicial authorization shall be obtained in a summary proceeding;

(3) In the absence of sufficient conjugal partnership property, the separate property of both spouses shall be solidarily liable for the support of the family. The spouse present shall, upon petition in a summary proceeding, be given judicial authority to administer or encumber any specific separate property of the other spouse and use the fruits or proceeds thereof to satisfy the latter’s share.

ABANDONMENT BY ONE SPOUSE

If a spouse without just cause abandons the other or fails to comply with his or her obligation to the family (referring to marital, parental or property relations), the aggrieved spouse may petition the court for receivership, for judicial separation of property, or for authority to be the sole administrator of the conjugal partnership property, subject to such precautionary conditions as the court may impose.

A spouse is deemed to have abandoned the other when he or she has left the conjugal dwelling without intention of returning. The spouse who has left the conjugal dwelling for a period of three months or has failed within the same period to give any information as to his or her whereabouts shall be prima facie presumed to have no intention of returning to the conjugal dwelling.

PROCEDURE IN LIQUIDATION OF CPG

The following procedure shall apply:

(1) An inventory shall be prepared, listing separately all the properties of the conjugal partnership and the exclusive properties of each spouse.

(2) Amounts advanced by the conjugal partnership in payment of personal debts and obligations of either spouse shall be credited to the conjugal partnership as an asset thereof.

(3) Each spouse shall be reimbursed for the use of his or her exclusive funds in the acquisition of property or for the value of his or her exclusive property, the ownership of which has been vested by law in the conjugal partnership.

(4) The debts and obligations of the conjugal partnership shall be paid out of the conjugal assets. In case of insufficiency of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties.

(5) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of them.

(6) Unless the owner had been indemnified from whatever source, the loss or deterioration of movables used for the benefit of the family, belonging to either spouse, even due to fortuitous event, shall be paid to said spouse from the conjugal funds, if any.

(7) The net remainder of the conjugal partnership properties shall constitute the profits, which shall be divided equally between husband and wife, unless a different proportion or division was agreed upon in the marriage settlements or unless there has been a voluntary waiver or forfeiture of such share as provided in the Family Code.

(8) The presumptive legitimes of the common children shall be delivered upon partition.

(9) In the partition of the properties, the conjugal dwelling and the lot on which it is situated shall, unless otherwise agreed upon by the parties, be adjudicated to the spouse with whom the majority of the common children choose to remain. Children below the age of seven years are deemed to have chosen the mother, unless the court has decided otherwise. In case there is no such majority, the court shall decide, taking into consideration the best interests of said children.

DEATH OF ONE SPOUSE; LIQUIDATION

Upon the termination of the marriage by death, the conjugal partnership property shall be liquidated in the same proceeding for the settlement of the estate of the deceased. If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the conjugal partnership property either judicially or extra-judicially within six months from the death of the deceased spouse.

If the procedure on liquidation, as outlined above, is not followed: (a) any disposition or encumbrance involving conjugal partnership property by the surviving spouse shall be void; and (b) any subsequent marriage shall be governed by the mandatory regime of complete separation of property.

SUPPORT DURING LIQUIDATION

From the common mass of property support shall be given to the surviving spouse and to the children during the liquidation of the inventoried property and until what belongs to them is delivered; but from this shall be deducted that amount received for support which exceeds the fruits or rents pertaining to them.