Monday, September 03, 2007

Primer on the Family Code of the Philippines: Absolute community of property

Articles 88 up to 104 of the Family Code are the governing laws on the system of property relations between spouses known as ACP or absolute community of property. Under this system, the husband and wife become the co-owners of all the properties they bring into the marriage and those they acquire during the marriage, subject to exceptions under Art. 92. The committee which crafted the Family Code believed that this system was in keeping with the accepted practice of Filipino families of the husband and wife treating each other as co-owners of the properties acquired before and during marriage.

When does the ACP start?

The absolute community of property between spouses commences at the precise moment that the marriage is celebrated. Any stipulation, express or implied, for the commencement of the community regime at any other time shall be void. (Art. 88)

Can there be a waiver of the rights, shares and effects of the ACP?

No waiver of rights, shares and effects of the absolute community of property during the marriage can be made except in case of judicial separation of property.

When the waiver takes place upon a judicial separation of property, or after the marriage has been dissolved or annulled, the waiver must appear in a public instrument and must be recorded as provided in Article 77. The creditors of the spouse who made such waiver may petition the court to rescind the waiver to the extent of the amount sufficient to cover the amount of their credits. (Art. 89)

What constitutes community property?

Unless otherwise provided in this Chapter or in the marriage settlements, the community property consist of all the property owned by the spouses at the time of the celebration of the marriage or acquired thereafter. (Art. 91)

What are excluded from the community property?

(1) Property acquired during the marriage by gratuitous title by either spouse, and the fruits as well as the income thereof, if any, unless it is expressly provided by the donor, testator or grantor that they form part of the community property;

(2) Property for personal and exclusive use of either spouse. However, jewelry form part of the community property;

(3) Property acquired before the marriage by either spouse who has legitimate descendants by a former marriage, and the fruits as well as the income, if any, of such property. (Art.92)

What is the presumption regarding property acquired during the marriage?

Property acquired during the marriage is presumed to belong to the community, unless it is proved that it is one of those excluded therefrom. (Art. 93)

What will the ACP be liable for?

Art. 94 provides that the absolute community of property is liable for:

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

(2) All debts and obligations contracted during the marriage by the designated administrator-spouse for the benefit of the community, or by both spouses, or by one spouse 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 been benefited;

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

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

(6) Expenses to enable either spouse to commence or complete a professional or vocational course, 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;

(9) Ante-nuptial debts of either spouse other than those falling under paragraph (7) of this Article, the support of illegitimate children of either spouse, and liabilities incurred by either spouse by reason of a crime or a quasi-delict, in case of absence or insufficiency of the exclusive property of the debtor-spouse, the payment of which shall be considered as advances to be deducted from the share of the debtor-spouse upon liquidation of the community; and

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

If the community property is insufficient to cover the foregoing liabilities, except those falling under paragraph (9), the spouses are solidarily liable for the unpaid balance with their separate properties.

What about losses or winnings in games of chance like sweepstakes or the lotto?

Whatever may be lost during the marriage in any game of chance, betting, sweepstakes, or any other kind of gambling, whether permitted or prohibited by law, must be borne by the loser and must not be charged to the community but any winnings therefrom form part of the community property. (Art. 95)

Who has the right to the administration and enjoyment of the community property?

Art. 96 provides that the administration and enjoyment of the community property belong to both spouses jointly. In case of disagreement, the husband's decision prevails, 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 common 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 is void. However, the transaction will 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.

Can the husband or wife dispose of his or her share in the community property?

Either spouse may dispose by will of his or her interest in the community property. (Art. 97)

Can either spouse make donations out of the community property?

Neither spouse may donate any community property without the consent of the other. However, either spouse may, without the consent of the other, make moderate donations from the community property for charity or on occasions of family rejoicing or family distress. (Art. 98)

How is the absolute community dissolved?

Art. 99 provides that the absolute community 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 under Articles 134 to 138.

What happens to the absolute community if the spouses are separated?

Art. 100 provides that the separation in fact between husband and wife shall not affect the regime of absolute community except that:

(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 community property, the separate property of both spouses shall be solidarily liable for the support of the family. The spouse present shall, upon proper 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.

What are the remedies of an abandoned spouse with regards the community property?

Art. 101 provides that if a spouse without just cause abandons the other or fails to comply with his or her obligations to the family, the aggrieved spouse may petition the court for receivership, for judicial separation of property or for authority to be the sole administrator of the absolute community, subject to such precautionary conditions as the court may impose.

The obligations to the family mentioned in the preceding paragraph refer to marital, parental or property relations.

When is a spouse deemed to have abandoned the other?

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.

What is the procedure in the liquidation of the absolute community assets and liabilities?

Art. 102 provides that upon dissolution of the absolute community regime, the following procedure shall apply:

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

(2) The debts and obligations of the absolute community shall be paid out of its assets. In case of insufficiency of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties in accordance with the provisions of the second paragraph of Article 94.

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

(4) The net remainder of the properties of the absolute community shall constitute its net assets, 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 of such share provided in this Code. For purpose of computing the net profits subject to forfeiture in accordance with Articles 43, No. (2) and 63, No. (2), the said profits shall be the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution.

(5) The presumptive legitimes of the common children shall be delivered upon partition, in accordance with Article 51. (6) Unless otherwise agreed upon by the parties, in the partition of the properties, the conjugal dwelling and the lot on which it is situated shall 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.

What is the procedure in the liquidation of the community property upon the death of a spouse?

Art. 103 provides that upon the termination of the marriage by death, the community 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 community property either judicially or extra-judicially within six months from the death of the deceased spouse. If upon the lapse of the six months period, no liquidation is made, any disposition or encumbrance involving the community property of the terminated marriage shall be void. Should the surviving spouse contract a subsequent marriage without compliance with the foregoing requirements, a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage.