Monday, March 10, 2014

Property relations between Husband and Wife

The Family Code (Executive Order No. 209, as amended) provides couples with ample leeway to formulate the property regime of their preference. Spouses may choose among the three principal types of property regime provided by the Code: (1) absolute community, (2) conjugal partnership of gains, (3) complete separation of property, and (4) any other system that is “not contrary to law, morals, good customs, public order or public policy” (such as the dowry system). If the parties do not have prenuptial agreement or when the regime they agreed upon is void, the system of absolute community of property will govern the property relations of the parties. (Art. 75, Family Code)

Absolute community of property refers to the fusion of all the properties of the spouses owned by them at the precise moment of the marriage and those assets acquired during their marriage. The spouses are the joint or co-owners of all the properties of the marriage that form a common mass that will be divided equally when the marriage is dissolved. Under the Code, selected assets are not included in the community property and remain as the exclusive properties of each spouse, as follows:

·        1.  Properties (and their income and fruits) acquired by either spouse during the marriage by gratuitous title (donation or inheritance)
·         2. Properties for the personal and exclusive use of either spouse (except jewelry)
·        3.  Properties (as well as their products and proceeds) acquired before marriage by either spouse who has legitimate children by a prior marriage. (Art. 92, Family Code)

It is presumed that property acquired during the marriage belongs to the community, unless there is proof that it is the exclusive property of either spouse. (Art. 93, Family Code) The reason behind the creation of the absolute community of property is to bring about a closer union in the life and interest of the spouses.

Conjugal partnership of gains is a system that allows the spouses to keep the ownership of assets that they bring to the marriage and those they may acquire during the marriage by gratuitous title or by right of redemption, barter or by exchange with separate property and those that were bought with their individual funds. The husband and wife create a common fund out of the fruits and income derived from their separate properties and those funds and assets acquired by their efforts or by chance. When their marriage is dissolved, the husband and wife will divide equally the net gains and benefits they obtained.

Separation of property is a matrimonial regime under which the interest of the spouses are completely independent of each other, there being a separation not only of assets, but also of liabilities. As to their separate estate, the spouses have the right to own, possess, enjoy, administer and dispose of it without the consent of the other. The earnings of the spouses and the fruits received during the marriage from their separate properties belong to the husband or wife alone. (Art. 145, Family Code) However, the liability of the spouses to creditors for family expenses is still solidary in nature. (Art. 146, Family Code) This means that creditors may elect to sue both parties or just one of them for the full payment of family expenses.

The property relations between husband and wife shall be governed in the following order:

1. By marriage settlement executed before the marriage.
2. By the provisions of the Family Code.
3. By the local custom. (Art. 74, Family Code)

Marriage settlement is a contract entered into by persons who are about to be united in marriage for the purpose of fixing the condition of the conjugal partnership with regard to present and future property.

Those who were married after August 3, 1988 (the date when the Family Code became effective) and have not made any prenuptial agreement will automatically adopt the absolute community of property regime. Those married before August 3, 1988 without any marriage settlement will be governed by the rules on conjugal partnership of gains.

The absolute community and the conjugal partnership may be terminated and dissolved under any of the four grounds: (1) upon 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. (Arts. 99 and 126, Family Code) The debts and obligations of the community property and conjugal partnership should be paid out of the community and conjugal assets. In case of insufficiency, the spouses shall be solidarily liable for the unpaid balance with their separate properties. The remainder of the exclusive properties of the spouses will be delivered to each of them. (Arts. 102 and 129, Family Code)

In cases, where a man and a woman who are capacitated to marry each other live exclusively together as husband and wife, but they are not married, or their marriage is void from the beginning, what rules shall govern their property relations?

According to Article 147 of the Family Code, their wages and salaries shall be owned by them in equal shares. On the other hand, the property acquired by both of them through their work or industry shall be governed by the rules on co-ownership, that is, they shall own the property in proportion to the corresponding effort each exerts in obtaining the property. In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares.

An example of this kind of “union without marriage” is where a man and a woman both above 18 years of age and single and who are capacitated to marry each other since they have no legal impediment to get married, cohabit or live together exclusively with each other as husband and wife without, however, getting married; or where the man and woman do not have valid marriages with other persons but their marriage is void for such reasons as, the marriage is incestuous  or is against public policy or was solemnized by one who is not authorized by law to perform the marriage.

How about if a man and a woman live together as husband and wife when one or both of them have existing valid marriages with other persons, simply known as “kabit,” what rules shall govern their property relations?

The rules are: (1) only the properties acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned by them in common in proportion to their respective contributions. In the absence of proof to the contrary, their contributions and corresponding shares are presumed to be equal. It is noted that wages and salaries pertaining to each party belong to the earning party exclusively; and (2) if one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute community or conjugal partnership existing in such valid marriage. (Jurado, Civil Law Reviewer, 17th Ed.)

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