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Lessons from Quiao vs.

Quiao:
The following principles can thus be culled from Quiao:
(i). The definition of net profits in Article 102(4) of the Family Code
applies to both the absolute community regime and conjugal partnership regime
as provided for under Article 63, No. (2) of the Family Code, relative to the
provisions on legal separation.
(ii). The liquidation procedure for the absolute community property is
different from the liquidation procedure for the conjugal partnership of gains. Thus:
ABSOLUTE
COMMUNITY PROPERTY
Art. 102

CONJUGAL PARTNERSHIP
OF GAINS

(a) Prepare an inventory,


listing separately all the properties
of the absolute community and the
exclusive properties of each.

(a) Prepare an inventory shall


be prepared, listing separately all the
properties of the conjugal partnership
and the exclusive properties of each
spouse.

Note:
The
exclusive
properties are included in the
inventory because said properties
shall be solidarily liable if the
community's
properties
are
insufficient to pay the community
debts.

Note: The exclusive properties


are included in the inventory because
said properties shall be solidarily
liable if the conjugal assets are
insufficient to pay the conjugal debts.

(b) 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.
Note: The following are
considered assets of the conjugal
partnership: support advanced by the
conjugal
partnership
for
the
illegitimate children, personal debts,
and fines and pecuniary indemnities
(Art. 122)

(c) 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.
Note: The following are
reimbursements that may be made in
favor of one of the spouses: (a)
Payment made pursuant to Art. 118,
FC re Property Bought on
Installment; and (b) Payments made
pursuant to Art. 120 FC, re Payment
for the land which is the separate
property of the spouse
(b)
The debts and
obligations
of
the
absolute
community are paid out of the
absolute community's assets and if
the community's properties are
insufficient, the separate properties
of each of the couple will be
solidarily liable for the unpaid
balance.

(d) 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.

(c) Whatever is left of the


separate properties will be delivered
to each of them.

(e) Whatever remains of the


exclusive properties of the spouses
shall thereafter be delivered to each of
them.

(f) 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.

(d)
The
net
remainder
of
the
absolute
community is its net assets, which
shall be divided between the
husband and the wife;

(e) 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.

(f) The presumptive legitimes


of the common children shall be
delivered upon the partition in
accordance with Article 51.
(g) 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.
(e)
For purposes of
computing the net profits subject to
forfeiture, 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.

(iii). The separate properties of the husband and the wife are not subject to
forfeiture since they are not considered assets of the absolute community property of the
conjugal partnership of gains.
(iv). In determining the net profit subject of forfeiture, the following are
illustrative:
FOR ABSOLUTE COMMUNITY PROPERTY
In determining the net profits:
1.
Determine the market value of the properties at the time of the community's
dissolution.
2.
From the totality of the market value of all the properties, subtract the debts
and obligations of the absolute community
3.
The result to the net assets or net remainder of the properties of the absolute
community, from which we deduct the market value of the properties at the time of
marriage, which then results to the net profits.
In applying the above, let us assume the following:
a.

Husband is the guilty spouse.

b. The parties brought properties the fair market value of which is P6Million
at the time of the celebration of the marriage.
c. The fair market value of the community properties at the time of
dissolution is worth P10M
d. The community debts and liabilities amount to P2M
Thus:
P10M (FMV of the properties at the time of dissolution)
minus
P2M (community debts and charges)
===================================
P8M (net remainder)
minus
P6M (FMV of the properties at the time of the celebration of the marriage)

======================================
P2M
divided by
2 ( to determine the share of the H and the W in the net profit)
===============
P1M share of the net profit of the wife
P1M share of the net profit of the husband
Since H is the guilty spouse, his P1M share in the net profit shall be forfeited in
favor of their common children.
Note 1: Since the parties brought properties at the time of the celebration of the
marriage, the fair market of those properties will be divided into two. Theoretically
therefore, the husband will still get P3M; the wife will get P4M.
Note 2: If the parties did not bring any property at the time of the celebration of
the marriage, then the net profits shall be determined as follows:
P10M (FMV of the properties at the time of dissolution)
minus
P2M (community debts and charges)
===================================
P8M (net remainder)
divided by
2 ( to determine the share of the H and the W in the net profit)
===============
P4M share of the net profit of the wife
P4M share of the net profit of the husband
In this case, following Quiao nothing is left to the H since both parties entered
into their marriage without bringing with them any property.
FOR CONJUGAL PARTNERSHIP OF GAINS
Let us assume the following:
a. The actual inventory conjugal properties is worth P10M;
b. The parties do not have any separate properties.

c. There is no restitution involved.


d. No personal debts.
e. Conjugal debt is worth P4M
The net assets to be subject to forfeiture shall be determined as follows:
P10M (conjugal assets)
minus
P4M (conjugal debts)
==========================
P6 M (net assets = net profits)
Divided by 2
================
P3M is share of the wife
P 3M is the share of husband subject of forfeiture
Note 1:
Like in the absolute community regime, nothing will be returned to
the guilty party in the conjugal partnership regime, because there is no separate property
which may be accounted for in the guilty party's favor.
(v). At this point, it is best to restate the statement made in the case of Siochi vs.
Gozon , to wit:
Thus, among the effects of the decree of legal separation is that the conjugal
partnership is dissolved and liquidated and the offending spouse would have no right to
any share of the net profits earned by the conjugal partnership. It is only Alfredos share
in the net profits which is forfeited in favor of Winifred. Article 102(4) of the Family
Code provides that "[f]or purposes of computing the net profits subject to forfeiture in
accordance with Article 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." Clearly,
what is forfeited in favor of Winifred is not Alfredos share in the conjugal partnership
property but merely in the net profits of the conjugal partnership property.
[1]

[1] Siochi vs. Gozon, G.R. No. 169900, March 18, 2010