JORE, Ma. Jovi P.

I. Quiao vs. Quiao (2012)

II. Rules on Forfeiture of the share of the guilty spouse/ Effects of dissolution/ Liquidation
procedure/ Conjugal Partnership of Gains/ Dissolution of CPG
III. DOCTRINE
Share of the guilty party from the net profits of the conjugal partnership is forfeited in favor
of the common children, pursuant to Article 63(2) of the Family Code.

IV. STATEMENT OF FACTS

Brigido Quiao and Rita Quiao contracted marriage in 1977. They had no separate properties
prior to their marriage. During the course of said marriage, they produced four children. In
2000, Rita filed a complaint against Brigido for legal separation for cohabiting with another
woman. Subsequently, the RTC rendered a decision in 2005 declaring the legal separation of
the parties pursuant to Article 55. Save for one child (already of legal age), the three minor
children remains in the custody of Rita, who is the innocent spouse. The properties accrued
by the spouses were ordered by the court to be divided equally between them subject to
the respective legitimes of their children and payment of unpaid conjugal liabilities;
however, Brigido’s share of the net profits earned by the conjugal partnership shall be
forfeited in favor of their children in accordance to par. 9 of Article 129 of the FC. The court
also ordered the reimbursement of attorney’s fees and litigation expenses in favor of Rita.

A few months thereafter, Rita filed a motion for execution, which was granted by the trial
court. By 2006, Brigido paid Rita with regards to the earlier decision; the writ was partially
executed. After more than nine (9) months later, Brigido filed a motion for clarification
asking the RTC to define “Nets Profits Earned.” In an order, the court held that the phrase
denotes “the remainder of the properties of the parties after deducting the separate
properties of each of the spouses and debts.” It also held that after determining the
remainder of the properties, it shall be forfeited in favour of the common children because
the offending spouse does not have any right to any share of the net profits earned
(pursuant to Art 63 (2) and 43(2),FC). Only separate properties of Brigido shall be delivered
to him which he has none. Upon a motion for reconsideration, RTC initially set aside its
previous decision and stated that NET PROFIT EARNED shall be computed in accordance
with par. 4 of Article 102 of the FC. However, it later reverted to its original Order, setting
aside the last ruling.

V. ISSUE
i. What law governs the property relations between the Husband and the Wife who
got married in 1977? What law governs the dissolution and the consequent
liquidation of the common properties of the Husband and the Wife by virtue of
decree of legal separation?
ii. What is the meaning of the net profits earned by the conjugal partnership for
purposes of effecting the forfeiture authorized under Art 63 of the FC
iii. What properties shall be included in the forfeiture of the guilty spouse in the net
conjugal partnership as a result of the issuance of the decree of legal separation?

VI. RULING
i. Article 129 of the Family Code applies since the property relation is governed by the
system of CPG. Brigido claimed that the court is wrong when it applied Art 129 and argued
that Art 102 should be applied because no other provision of the FC which defined net profit
earned subject to forfeiture as a result of legal separation. When Brigido and Rita got
married in 1977, the operative law was the civil code. Since they did not agree on marriage
settlement, the property relation between them is the conjugal partnership of gains. Under
such property relation, the husband and wife place in a common fund the fruits of their
separate property and the income from their work and industry. The husband and the wife
also own in common all the property of the CPG.

Since at the time of the dissolution of their marriage the operative law is already the FC, the
same applies and the applicable law as to the liquidation of the conjugal partnership assets
and liabilities is Art 129 of the FC in relation to Art 63(2) of the FC. It is applicable because
Art 256 of the FC provides that “ this code shall have retroactive effect insofar as it does not
prejudice or impair vested or acquired rights in accordance with the Civil Code or other
laws”

ii. The net profits of the conjugal partnership of gains are all the fruits of the separate
properties of the spouses and the products of their labor and industry. Article 102(4) of the
FC expressly provides that for purposes of computing net profits subject to forfeiture under
Art 43 (2), 63(2), Articles 102(4) applies. In such provision, net profits shall be the increase in
value between the market value of the community property at the time of the celebration
of marriage and the market value at the time of dissolution. It applies to both absolute
community regime and conjugal partnership of gains. The court however clarified that
Article 102(2) of the FC applies in the instant case for purpose only of defining net profit.

iii. The share of the guilty spouse from the net profits of the conjugal partnership is forfeited
in favor of the common children, pursuant to Article 63 (2).When a couple enters into
a regime of conjugal partnership of gains under Article 142 of the Civil Code, "the husband
and the wife place in common fund the fruits of their separate property and income from
their work or industry, and divide equally, upon the dissolution of the marriage or of the
partnership, the net gains or benefits obtained indiscriminately by either spouse during the
marriage." From the foregoing provision, each of the couple has his and her own property
and debts. The law does not intend to effect a mixture or merger of those debts or
properties between the spouses. Rather, it establishes a complete separation of capitals.
Considering that the couple's marriage has been dissolved under the Family Code, Article
129 of the same Code applies in the liquidation of the couple's properties in the event that
the conjugal partnership of gains is dissolved. It was established by the trial court that the
spouses have no separate properties when they got married, there is nothing to return to
any of them. Conjugal properties should be divided equally between the spouses and/or
their respective heirs. However, since the trial court found the petitioner the guilty party, his
share from the net profits of the conjugal partnership is forfeited in favor of the common
children, pursuant to Article 63(2) of the Family Code. Again, lest we be confused, 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.