THE CONJUGAL PARTNERSHIP OF GAINS

What is the concept of the conjugal partnership of gains?

The conjugal partnership of gains concept is that 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 settlement.
This is provided for under Art. 105 of the FC.

The conjugal partnership of gains or CPG is a special type of partnership, and it shall be
governed by the rules on conjugal partnership in all that are not in conflict with the FC. So just
like in a normal partnership, any stipulation which excludes the partners from any share of the
profits and losses of the partnership is void. This is Art. 1977 of the NCC.

1811 of the CC provides that “a partner is co-owner with his partners of specific partnership
property”. This is likewise applicable to the CPG.

Article 1807 of the NCC. Every partner must account to the partnership for any benefit, and
hold as trustee for it any profits derived by him without the consent of the other partners from
any transaction connected with the formation, conduct, or liquidation of the partnership or from
any use by him/her of its property.

The partnership between the spouses regarding their properties does not produce the merger
of the properties of the spouse. They can exercise all the rights of dominion or of ownership
over these exclusive properties. The said properties cannot be encumbered, alienated, nor
disposed of by the other spouse without the consent of the owner spouse. The nature of the
property as separate property shall remain unless the contrary is proved by positive and
convincing evidence.

When are the couple governed by the conjugal partnership of gains?

1. If the marriage is celebrated under the Civil Code or prior to August 3, 1988, the regime of
CPG shall govern if:
a) It was provided for in the marriage settlement of the future spouses;
b) If there was no marriage settlement at the time of the celebration of the marriage, or;
c) If the marriage settlement was void.

2. The couple will be governed by the CPG if the marriage is celebrated during the effectivity
of the FC on August 3, 1988, or thereafter, it is the CPG that shall govern if it was provided
for in the marriage settlement between the future spouses.

When does the conjugal partnership commence?

It can only commence at the precise moment that the marriage is celebrated. Any stipulation,
express or implied, for the commencement of this regime at any other time shall void. Hence,
the spouses who reconcile after the finality of the decree of legal separation may not adopt
conjugal partnership of gains as their new regime, notwithstanding the provisions of Sec. 23(c)
and 24(a) on the New Rule on Legal Separation.

Just like in the ACP, the law for the CPG prohibits the waiver of rights, interests, shares, and
effects of the CPG during the marriage. The exception is when the waiver takes place upon a
judicial separation of property, the reason for this is discussed by the SC in the case Abalos
vs. Macatangay Jr. decided in 2004.

ABALOS vs. MACATANGAY JR. 2004

HELD:
Prior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal
assets is inchoate, a mere expectancy, which does not ripen into title until it appears that there
are assets in the community as a result of the liquidation and settlement. Thus, the right of the
husband or wife to one-half of the conjugal assets does not vest until the dissolution and
liquidation of the conjugal partnership, or after dissolution of the marriage, when it is finally
determined that, after settlement of conjugal obligations, there are net assets left which can be
divided between the spouses or their respective heirs.

What properties are excluded from the CPG or are separate properties of the spouses.
1. Properties acquired before the marriage. Except the fruits and income of said properties
which shall be included in the CPG but only the net fruits shall be included. Those included
therein in the marriage settlement subject to the 1/5 limitation under Art. 84 of the FC.

2. Properties acquired during the marriage by gratuitous title. Such that property donated
or left by will to the spouses jointly and with designation of determinate shares shall pertain
to the done-spouse as his/her exclusive property. In the absence of designation, they shall
share alike without prejudice to the right of accretion. If retirement benefits, pensions,
annuities, gratuities, usufructs or similar benefits are obtained purely out of liberality of the
donor, then such benefit becomes separate property of the grantee-spouse. If such benefit
is simply an accumulation or deduction from money earned during the marriage or from
salaries of either spouse, then such benefit becomes conjugal partnership property.

3. Property acquired by redemption, barter or exchange of one property belonging to

one spouse is separate property.

1. Property purchased with exclusive money of one spouse remains his/her exclusive
or separate property.
 ARTICLE 116 FC

What properties are part of the CPG?

Article. 116 provides a presumption:

Art. 116. 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.

Registration of one spouse does not destroy its conjugal nature and it is not conclusive
evidence of exclusive ownership of the husband and wife hence the presumption is not
rebutted by the mere fact that the certificate of title of the property or the tax declaration is in
the name of one of the spouses only.

ARTICLE 117 FC

Other properties that form part of the CPG is provided under Art. 117.

Art. 117. The following are conjugal partnership properties:

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.

ARTICLE 119 FC

With respect to an amount of credit payable within a period of time.

Art. 119. Whenever an amount or credit payable within a period of time belong 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.

ARTICLE 120 FC

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 depending on the improvement made on the conjugal partnership and
the resulting increase in value. If it is more than the value of the property at the time of the
improvement, the entire property of one spouse shall belong to the conjugal partnership of
gains. (Art. 120, FC)

ARTICLE 109 FC
Take not that the excluded properties from the CPG are…

Art. 109. The following shall be the exclusive property of each spouse:
1) That which is brought to the marriage as his or her own; (there is no merger that takes
place upon the solemnization of the marriage)
2) That which each acquires during the marriage by gratuitous title (remains exclusive);
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 (remains
exclusive property).

The property acquired by gratuitous title.

Anything received by each spouse from any source by way of an act of liberality of the giver
such as donation or a gift shall belong exclusively to the spouse recipient and will not belong to
the conjugal partnership of gains. This includes moderate gifts given by ones spouse to
another during family occasions. Also, an honorarium may be included as property acquired by
gratuitous title as it had been defined as something given not as a matter of obligation but in
appreciation for services rendered. A voluntary donation in consideration of services which
admit no compensation in money.

Also, in one case, it was held that if the property was acquired by lucrative or gratuitous title
such as by way of succession, the said property is said property is separate property
regardless if it was acquired before or after the marriage.
In the conjugal partnership of gains, the income and the fruits of the property acquired by
gratuitous title shall be considered however conjugal partnership property. The law does not
include fruits and income of properties received by gratuitous title as separate property. This is
different from ACP where property acquired during the marriage by gratuitous title by either
spouse and the fruits as well as the income thereof if any shall be considered as exclusive
property, unless it was expressly provided by the donor, testator, or grantor, that they shall
form part of the community property.

Redemption, Barter or Exchange

In cases of redemption, the property shall belong to the spouse who has the right to redeem
regardless of whether or not he/she uses personal funds. However, when conjugal funds are
used to effect a redemption, the spouse making the redemption thru conjugal funds shall be
liable to the CPG for the reimbursement of the amount used to redeem his/her exclusive
property. The conjugal partnership shall have a lien for the amount paid by it. Similarly,
property acquired by exchange made by one spouse using his/her exclusive property shall
remain the separate property of such spouse. Barter here is limited to goods. However, if the
separate property of the spouse is used as a part of the purchase price of the new property,
the new property should be considered as conjugal property.

Property Purchased With Exclusive Money

Property purchased with exclusive money of either spouse shall belong to such spouse.

What happens when one of the spouses buys a property on installment prior to the
marriage?
The rule provided for with respect to property bought thru installment is that if the property is
bought on installment prior to the marriage but the payment is completed only during the
marriage and paid partly from exclusive funds and partly from conjugal funds, if full ownership
was vested prior to the marriage, the property is an exclusive property of the buying spouse.
But if full ownership was vested during the marriage, then the property is conjugal property. In
either case, there shall be reimbursement upon liquidation of the partnership.

With respect to improvements on the separate property of the spouses during the
marriage.
An improvement is made on a separate property of either spouse and the improvement is
made during the marriage. The improvement is an expense of the conjugal partnership or to
the acts or efforts of either or both spouses.

How do we determine the ownership of this properties?

If the cause of the improvement and any resulting increase in value are more than the value of
the property at the time of the improvement, the entire property, shall belong to the conjugal
partnership. If it is less than, the entire property shall belong to the owner spouse.
In either case, there shall be reimbursement upon the liquidation of the conjugal partnership
and the ownership of the entire property shall be vested only upon reimbursement. The
obligation to reimburse for the cause of the reimbursements under Art. 120 of the FC rests on
the spouse upon whom ownership of the entire property is vested.

What are the obligations that are chargeable to the conjugal partnership?
Support of spouses, common children, and legitimate children of either spouse. But support of
illegitimate children of either spouse is chargeable to the exclusive property of the illegitimate
parent.

Debts and obligations.

Antenuptial debts contracted before the marriage of either spouse are chargeable to the
conjugal partnership if they have redounded to the benefit of the family. For those debts and
obligations contracted during the marriage, if it is contracted by both spouses, if it is contracted
by one spouses with the consent of the other, or if it is contracted by one spouse without the
consent of the other but only to the extent that they have redounded to the benefit of the
family, then it is the CPG that is liable. If it is contracted by the administrator spouse for the
benefit of the conjugal partnership, those debts and obligation are chargeable to the conjugal
partnership of gains.

Personal debts contracted by ether spouse without the consent of the other spouse.
The rules is that if it was contracted by the conjugal partnership, or for the benefit of the family,
then the debt is chargeable to the conjugal partnership, if it is not, it is chargeable against the
exclusive property only of the debtor spouse.

The CPG is also liable for taxes and expenses falling upon the conjugal partnership
property and those falling upon the separate property.
Expenses incurred on the conjugal partnership property whether the repair is major or minor
shall be chargeable to the conjugal partnership. Expenses incurred on a separate property is
chargeable to the CPG if it is incurred during the marriage and the expense is for mere
preservation.

Expenses to enable spouse to commence or complete a professional or vocational course or

other activity for self-improvement shall be chargeable to the conjugal partnership. Value of
what is donated or promised by both spouses in favor of common legitimate children for the
exclusive purpose of commencing or completing a professional or vocational course, or other
anticity for self-improvement, is chargeable to the conjugal partnership. Even expenses of
litigation between the spouse is chargeable to the conjugal partnership unless the suit is found
to be groundless. If the conjugal partnership is insufficient, the spouse is solidarity liable for the
unpaid balance with their separate properties.

The obligations chargeable to the separate properties of the spouses.

The separate properties of the spouses are liable for the support of their illegitimate children
and it would be charged exclusively to the property of the illegitimate parent.

Liabilities incurred by reason of a crime or quasi-delict.

Expenses of litigation between the spouses, if the suit is found to be groundless.

Losses during the marriage in any game of chance, betting, sweepstakes, or any other
kind of gambling, whether permitted or prohibited by law, shall be borne by the
exclusive property of the spouse.

Debts contracted during the marriage is payable by the exclusive property of one spouse if the
debt was by the administrator spouse and it did not benefit the community or by one spouse
without the consent of the other and it did not benefit the family.

Another that is chargeable to the exclusive and separate property of the spouse are
antenuptial debts by either spouse which did not benefit the family and expenses incurred
during the marriage on a separate property if the same is not for its preservation.

The administration and disposition of conjugal property. It is the same with the ACP.
The administration of conjugal partnership property belongs to both spouses jointly and in case
of disagreement, the husband’s decision shall prevail subject to the recourse to the court by
the wife for property remedy which shall be availed of within 5 years from the date of the
contract implementing such decision.

When can there be sole administration?

There can be sole administration of the conjugal partnership if one spouse is incapacitated or
otherwise unable to participate in the administration of conjugal property. The other may
assume sole power of administration without need of court approval or authorization. Also, if
the spouse without just cause abandons the other or fails to comply with his/her obligation to
the family, the aggrieved spouse may petition the court for sole administration and during the
pendency of legal separation case, the court may designate either of the spouses as sole
administration. Remember that the power to administer does not include the power of
disposition or encumbrance without the authority of the court or the written consent of the other
spouse.

How is the conjugal partnership regime dissolved?

The same reason that the ACP is terminated.
Art. 126. The conjugal partnership 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.

Art. 127. The separation in fact between husband and wife shall not affect the regime of
conjugal partnership, 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 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.

Art. 128. If a spouse without just cause abandons the other or fails to comply with his or her
obligation 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 conjugal
partnership property, subject to such precautionary conditions as the court may impose.

How is the CPG liquidated?

Article 129 enumerates the procedure for the liquidation of the conjugal partnership assets and
liability.

Art. 129. Upon the dissolution of the conjugal partnership regime, 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, in accordance with the provisions of
paragraph (2) of Article 121.
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 this Code.
8) The presumptive legitimes of the common children shall be delivered upon the partition in
accordance with Article 51.
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.

Art. 130. 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 upon the lapse of the six-month period no liquidation is
made, any disposition or encumbrance involving the conjugal partnership 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.