Property Relations between the Spouses

Governing Order and Commencement

Property relations between spouses are the rules that determine ownership, administration, enjoyment, liability, dissolution, and liquidation of property during and after marriage. They attach because of marriage, but the parties may shape them before marriage through a valid marriage settlement.

The governing order is sequential: first, the marriage settlements; second, the provisions of the Family Code; and third, local custom. Local custom operates only in gaps and cannot defeat mandatory law, public policy, creditors' rights, or the essential equality of the spouses.

The property regime begins at the precise moment of celebration of the marriage. Any stipulation that it will begin before or after the marriage is void, because the regime is an incident of the marital status itself.

The regime may not be changed during marriage by private agreement alone. During marriage, separation of property requires the judicial process allowed by the Family Code; after dissolution, waivers and partitions must respect formal requirements and cannot prejudice creditors.

Marriage Settlements

A marriage settlement is the pre-marital agreement by which future spouses fix their property regime. It may adopt absolute community, conjugal partnership, complete separation of property, or another lawful arrangement, provided the arrangement does not impair legitimes, support, parental authority, creditor rights, or prohibitions imposed by law.

The settlement must be in writing, signed by the parties, and executed before the marriage. To affect third persons, it must also be recorded in the local civil registry where the marriage contract is recorded and in the proper registries of property when real rights are involved.

If a party who must obtain parental consent for marriage executes a settlement, the persons whose consent is required must participate in the settlement. If a party is under civil interdiction or another legal disability, the guardian must be made a party. These participation requirements protect the vulnerable spouse and third persons who may rely on the regime.

Everything stipulated in consideration of the future marriage is generally rendered ineffective if the marriage does not take place. Stipulations that are independent of the marriage, however, may remain effective according to their own nature.

Modification of the settlement before the celebration of marriage must observe the same formalities as the original settlement. Once the marriage is celebrated, the chosen regime is binding until it is dissolved or judicially modified in the manner allowed by law.

Donations by Reason of Marriage

Donations by reason of marriage are donations made before the celebration of marriage, in consideration of the marriage, and in favor of one or both future spouses. They are governed by the rules on ordinary donations, subject to special Family Code limitations.

If the future spouses choose a regime other than absolute community, they cannot donate to each other in the marriage settlements more than the lawful fraction of their present property allowed by the Family Code. Donations of future property are treated according to the rules on succession because a person cannot freely dispose of future property by ordinary donation.

Donations between spouses during marriage are void, except moderate gifts on occasions of family rejoicing. The same prohibition applies to persons living together as husband and wife without a valid marriage, because the law prevents indirect circumvention of marital property restrictions.

A donation by reason of marriage may be revoked when the marriage is not celebrated, when the marriage is judicially declared void in a case where revocation is allowed, when the marriage is annulled and the donee acted in bad faith, when legal separation is decreed and the donee is the guilty spouse, when a resolutory condition is fulfilled, or when the donee commits an act of ingratitude. Revocation protects the donor because the cause of the donation is the contemplated marriage and the faithful performance of marital obligations.

Default Regime Under the Family Code

For marriages governed by the Family Code, absolute community of property is the default regime when there is no valid marriage settlement, when the settlement is void, or when the chosen regime is incomplete. The Civil Code's conjugal partnership default remains relevant mainly for marriages celebrated before the Family Code took effect, subject to transitional rules and vested rights.

Absolute community is broader than conjugal partnership because it generally pools present property owned at the time of marriage and future property acquired during marriage. Conjugal partnership is narrower because it generally preserves exclusive ownership of property brought into the marriage and pools only the gains, fruits, income, and acquisitions chargeable to the partnership.

Absolute Community of Property

In absolute community, the community generally consists of all property owned by the spouses at the time of marriage and all property acquired thereafter. The idea is full pooling, subject only to exclusions expressly recognized by law or by a valid settlement.

The following are excluded from the absolute community unless the law or the transferor provides otherwise: property acquired during the marriage by gratuitous title and its fruits and income when the donor, testator, or grantor keeps them exclusive; property for the personal and exclusive use of either spouse, except jewelry; and property acquired before the marriage by a spouse who has legitimate descendants by a former marriage, including its fruits and income.

Property acquired during the marriage is presumed to belong to the community unless the contrary is proved. Registration in the name of one spouse alone does not by itself overcome the presumption when the acquisition occurred during the marriage and the source of funds is not shown to be exclusive.

Neither spouse owns a physical half of each community asset during the marriage. Each has an inchoate interest in the community that becomes definite only upon liquidation, although either spouse may dispose by will of his or her interest in the community to the extent allowed by succession law.

Charges Against the Absolute Community

The absolute community is liable for obligations connected with the family, the community property, and acquisitions or expenses that benefit the household. It is not a general insurer of every personal debt of either spouse.

• Support of the spouses, their common children, and legitimate children of either spouse is a community charge.
• Debts contracted by both spouses, by one spouse with the consent of the other, or by the authorized administrator for the benefit of the community bind the community.
• Debts contracted by one spouse without the other's consent bind the community only to the extent the family benefited.
• Taxes, liens, repairs, and preservation expenses on community property are community charges.
• Expenses for the professional, vocational, or self-improvement activity of either spouse may be charged to the community because they are treated as family-benefiting expenses.
• Ante-nuptial debts benefit the community only when they redound to the benefit of the family; otherwise, they are primarily chargeable to the debtor-spouse's exclusive property.
• Support of illegitimate children, liabilities arising from crime or quasi-delict, and purely personal debts of one spouse may be paid from the community only in the absence or insufficiency of the debtor-spouse's exclusive property, and the payment is treated as an advance deductible from that spouse's share upon liquidation.
• Litigation expenses between the spouses may be charged to the community unless the suit is groundless.

If the community assets are insufficient to satisfy legitimate community obligations, the spouses are solidarily liable with their separate properties, subject to the special treatment of purely personal obligations.

Administration and Disposition

Administration and enjoyment of the absolute community belong to both spouses jointly. Joint administration reflects the equal dignity of spouses and prevents one spouse from unilaterally depleting the common mass.

In case of disagreement, the Family Code gives a provisional rule for action and permits judicial recourse by the aggrieved spouse within the period fixed by law. The court may determine what is required by the interest of the family and the protection of the community property.

If one spouse is incapacitated or otherwise unable to participate in administration, the other may assume sole powers of administration. This authority does not include disposition or encumbrance of community property without the other spouse's consent or court authority.

A sale, mortgage, donation, or other disposition or encumbrance of community property by one spouse without the required consent or court authority is void under the Family Code. The transaction may operate only as a continuing offer by the consenting spouse and the third person, which may be perfected if the other spouse accepts before the offer is withdrawn.

Neither spouse may donate community property without the consent of the other, except for moderate donations for charity or on occasions of family rejoicing or distress. The moderation of the gift is measured by the family's economic condition and the value of the community assets.

Dissolution and Liquidation

The absolute community is dissolved by death, legal separation, annulment, declaration of nullity, or judicial separation of property during marriage. Dissolution ends the regime; liquidation determines the assets, liabilities, reimbursements, and shares.

Liquidation requires an inventory of community and exclusive properties, payment of community debts, delivery of exclusive properties, division of the net assets, delivery of presumptive legitimes when required, and recording of adjudications involving registrable property.

The net assets of the absolute community are divided equally unless the marriage settlements provide a different lawful proportion or a valid waiver applies. A waiver made during marriage is void except in judicial separation of property; a waiver after dissolution must comply with formal requirements and cannot prejudice creditors.

When the regime is dissolved because of legal separation, the guilty spouse's share in the net profits is forfeited according to the order provided by the Family Code. In absolute community, net profits for this purpose are determined by comparing the market value of the community property at the celebration of marriage and at dissolution, after proper charges.

When a marriage is terminated by death, liquidation of the community should be made in the settlement of the deceased spouse's estate. If the surviving spouse fails to liquidate within the period required by law and contracts a subsequent marriage, the property regime of the subsequent marriage is generally complete separation of property, and dispositions involving the unliquidated community may be void.

Conjugal Partnership of Gains

In conjugal partnership of gains, the spouses retain separate ownership of certain properties, while the partnership owns the gains, income, fruits, and acquisitions obtained during the marriage through the common effort, industry, or funds of the spouses. The partnership is a regime of sharing gains, not a merger of all present property.

The rules on ordinary partnership apply suppletorily only when consistent with the Family Code and the nature of marriage. The marital partnership is not a purely commercial association, because family support, mutual obligations, and statutory protections control its operation.

Exclusive Property

Each spouse retains as exclusive property what he or she brought into the marriage as owner, what he or she acquires during the marriage by gratuitous title, what he or she acquires by right of redemption, barter, or exchange with exclusive property, and what he or she purchases with exclusive money.

Property remains exclusive even if administered by the other spouse, but fruits and income due or received during the marriage generally belong to the conjugal partnership after deduction of expenses for production and preservation.

Property bought on installments may be exclusive or conjugal depending on when ownership vested and what funds were used. If ownership vested before marriage, the property is generally exclusive, subject to reimbursement for conjugal payments; if ownership vested during marriage, it is generally conjugal, subject to reimbursement of exclusive payments.

Improvements on exclusive property require comparison between the value of the property and the cost plus resulting increase in value of the improvement. If the improvement and increase exceed the value of the original property, the property may belong to the conjugal partnership subject to reimbursement; otherwise, it remains exclusive subject to payment for the improvement.

Conjugal Property

Conjugal property includes property acquired by onerous title during the marriage at the expense of the common fund, property obtained from the labor, industry, work, or profession of either or both spouses, fruits and income from common property, net fruits from exclusive property, shares in hidden treasure, property acquired through occupation, livestock excess upon dissolution, and winnings by chance. Losses in gambling or betting are borne exclusively by the losing spouse.

All property acquired during marriage is presumed conjugal unless it is proved to be exclusive. The presumption is evidentiary and may be defeated by proof of the time, mode, and source of acquisition.

Charges, Administration, and Liability

The conjugal partnership is liable for family support, obligations contracted for the benefit of the family, taxes and expenses on conjugal property, preservation expenses on separate property used by the family, expenses for professional or vocational improvement, and other charges recognized by the Family Code.

Personal debts, support of illegitimate children, and liabilities from crime or quasi-delict are primarily chargeable to the separate property of the debtor-spouse. If separate property is insufficient and the conjugal partnership pays, the amount is treated as an advance deductible from that spouse's share during liquidation.

Administration and disposition follow rules parallel to absolute community. The spouses jointly administer the partnership, and disposition or encumbrance of conjugal property by one spouse without the required consent or court authority is void, subject only to the continuing-offer treatment recognized by the Family Code.

Liquidation of Conjugal Partnership

Liquidation of conjugal partnership is more accounting-intensive than liquidation of absolute community because exclusive properties, reimbursements, advances, and net gains must be separated.

1. An inventory is made of all conjugal and exclusive properties.
2. Amounts advanced by the partnership for personal debts of either spouse are charged against the debtor-spouse's share.
3. Each spouse is reimbursed for exclusive funds used to acquire conjugal property, or for exclusive property whose ownership became vested in the partnership.
4. Conjugal debts and obligations are paid from conjugal assets.
5. Exclusive properties are delivered to the owner-spouse.
6. Loss or deterioration of movable exclusive property used for the benefit of the family is paid from conjugal funds if the owner has not been otherwise indemnified.
7. The net remainder, constituting net gains, is divided equally unless a lawful settlement or valid waiver provides otherwise.
8. Presumptive legitimes are delivered when required, and adjudications involving registrable property are recorded.

Forfeiture of net profits in legal separation, annulment, or nullity cases applies according to the Family Code. In conjugal partnership, the forfeitable amount is the guilty or bad-faith spouse's share in the net gains after liquidation.

Complete Separation of Property

Complete separation of property may be established by marriage settlement or by judicial decree. It may cover present property, future property, or both; it may also be total or partial depending on the lawful stipulations of the spouses or the terms of the court order.

Under this regime, each spouse owns, administers, enjoys, and disposes of his or her separate estate without the consent of the other. The independence of administration does not erase mutual support, family expense obligations, or creditor protections imposed by law.

Unless the settlement or decree provides otherwise, separation of property is understood to cover all property of the spouses. If separation is partial, property not covered by the separation remains governed by the applicable community or partnership rules.

The spouses contribute to family expenses in proportion to their income. If income is insufficient or absent, they contribute in proportion to the current market value of their separate properties. Their liability to creditors for family expenses is solidary because the family should not be deprived of necessary support by internal allocation rules.

Judicial Separation of Property During Marriage

Judicial separation of property dissolves or modifies the existing property regime while the marriage bond remains. It protects a spouse, the family, and creditors when continuation of the common regime becomes legally unjust or impracticable.

Separation may be voluntary when both spouses jointly seek it under the safeguards of the Family Code. The petition must disclose creditors so that the court can protect third persons whose claims may be affected by the change of regime.

Separation may also be decreed for sufficient cause, including civil interdiction of a spouse, judicial declaration of absence, loss of parental authority, abandonment or failure to comply with family obligations, abuse of administration granted in the marriage settlements, or de facto separation for the period and under the circumstances required by law.

After the decree, the former community or partnership is liquidated. Thereafter, the spouses are generally governed by separation of property, subject to the terms of the decree and their continuing obligations for support and family expenses.

The former regime may be revived when the cause for separation ceases or when the spouses reconcile and comply with the formal and judicial requirements for revival. Revival does not impair rights already acquired by creditors or third persons during the period of separation.

Effect of Crisis in the Marriage on Property

Legal separation does not dissolve the marriage bond, but it dissolves the property regime and triggers liquidation. The guilty spouse forfeits the share in net profits in the manner provided by the Family Code, and donations by reason of marriage in favor of the guilty spouse may be revoked.

Annulment and declaration of nullity require liquidation, partition, distribution, and delivery of presumptive legitimes in cases covered by the Family Code. A spouse who acted in bad faith may lose the share in net profits, and the forfeiture is applied first in favor of the common children, then in the order fixed by law.

A final judgment affecting marital status should settle property consequences when required, because remarriage and third-party transactions depend on liquidation and registration. Property consequences are not mere incidents of procedure; they determine ownership, creditor recourse, and succession expectations.

Unions Without a Valid Marriage

The Family Code separately governs property relations of persons who live together without a valid marriage. These rules prevent unjust enrichment while refusing to give an invalid union all the effects of a valid marriage.

Parties Capacitated to Marry and Living Exclusively Together

When a man and a woman are capacitated to marry each other and live exclusively as husband and wife without a valid marriage, their wages and salaries are owned in equal shares, and property acquired through their work or industry is governed by co-ownership.

Property acquired while they lived together is presumed to have been obtained by their joint efforts and is presumed owned in equal shares. A party who did not earn money or directly participate in acquisition is still deemed to have contributed when his or her efforts consisted in the care and maintenance of the family and household.

Neither party may dispose of or encumber by act inter vivos his or her share in the co-owned property without the other's consent until the cohabitation terminates. This restriction preserves the property mass for settlement when the relationship ends.

If only one party is in good faith, the share of the party in bad faith in the co-owned property is forfeited in favor of their common children, or in default of children or descendants, in favor of the innocent party. If both are in bad faith, the statutory forfeiture rules still prevent either from profiting from the invalid arrangement beyond what the law allows.

Relationships With Legal Impediments or Non-Exclusive Cohabitation

When the parties are not capacitated to marry each other, when one or both are validly married to another, when the relationship is adulterous or bigamous, or when the cohabitation is not exclusive, only property acquired through actual joint contribution of money, property, or industry is co-owned.

In this stricter regime, wages and salaries remain separately owned. There is no automatic equal sharing merely because the parties lived together; ownership depends on proof of actual contribution, and shares are proportionate to contribution unless equality is presumed from lack of proof of different proportions.

If one party is validly married to another, his or her share in the co-owned property accrues to the proper property regime of the valid marriage. If the party in bad faith is not validly married to another, forfeiture applies in favor of the common children or in the order provided by law.

Third Persons, Creditors, and Registration

Property regimes bind the spouses between themselves from the marriage, but third persons are protected by registration, consent requirements, and creditor safeguards. A secret settlement or unrecorded modification cannot be used to defeat a creditor who relied on the apparent regime.

Creditors of the family may proceed against the property mass liable for family obligations. Creditors of only one spouse generally reach that spouse's exclusive property first, and reach the common property only when the law permits, often with reimbursement or deduction upon liquidation.

Transactions over registered land must respect both the land registration system and the Family Code. A certificate of title in one spouse's name does not automatically make the property exclusive if acquisition during marriage and source of funds show community or conjugal character.

Consent of the non-acting spouse is especially important in conveyances, mortgages, long-term leases, and substantial encumbrances of community or conjugal property. Court authority substitutes for consent only when the law allows it and the interests of the family justify the transaction.

Operational Distinctions

The controlling inquiry in any marital property issue is the governing regime, the time and mode of acquisition, the source of funds or title, the existence of consent or court authority, the nature of the obligation, and the status of the marriage at dissolution. These facts determine whether property is community, conjugal, exclusive, separately owned, or merely co-owned under the special rules for invalid unions.