ACP Liquidation, A102 Family Code
1. ACP Liquidation Procedure
a. Step 1: Inventory
Art. 102. 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. x x x
1) When the absolute community of property between spouses ends — such as through legal separation, annulment, or death — a formal process must take place to identify and account for the assets involved. The first step in this process is the creation of a detailed inventory or list. This list must clearly distinguish two sets of assets:
(a) [Absolute community] or the properties that belong to the absolute community (shared by both spouses), and
(b) [Exclusive properties] or the properties that belong exclusively to each spouse (such as personal inheritance, pre-marriage assets, or items excluded by law or agreement). (OpenAI ChatGPT-4 [2025], reviewed by Legal / J. Del Puerto, Accessed 5 May 2025)
Example 1: Eduardo and Minerva, after twenty years of marriage, decided to part ways through annulment. Before any division could occur, their lawyer had to draft an inventory. Minerva’s antique violin, inherited from her grandmother before marriage, was recorded as her exclusive property, while their jointly purchased farm was placed under the community assets list. (Ibid.)
Example 2: When Cecilia’s husband, Tomas, passed away, she didn’t jump straight into inheritance proceedings. First, she worked with a notary to prepare an inventory. Cecilia’s condo in Quezon City, bought before marriage, was documented under her exclusive assets, whereas their joint savings account was listed as part of the community property. (Ibid.)
Example 3: Jorge and Alona, who agreed to a judicial separation of property, submitted to the court an organized list of all possessions. Jorge’s workshop tools, acquired through his personal earnings before their wedding, were logged under his name, while their shared car, bought during the marriage, was included in the community’s ledger. (Ibid.)
b. Step 2: Debts and obligations
Art. 102. Upon dissolution of the absolute community regime, the following procedure shall apply:
x x x
(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. x x x
1) When a couple is under the absolute community of property regime, the assets they jointly own are the first to be used to pay off any debts or obligations they incurred during the marriage. This includes loans or financial responsibilities taken on for the good of the family or the shared household. If the value of the community assets is not enough to settle all the debts, both spouses will be held [solidarily] for the unpaid amount. In such a case, their individual, privately owned properties — those not included in the community — can be used to pay the remaining balance, as long as the debts meet the criteria laid out in Article 94’s second paragraph. (OpenAI ChatGPT-4 [2025], reviewed by Legal / J. Del Puerto, Accessed 5 May 2025)
2) [Article 102, paragraph 2] clarifies that debts must have been taken on either by both spouses, by the spouse assigned as the administrator of the community assets (if it was for the community’s benefit), or by one spouse with the other’s agreement. (Ibid.)
Example 1: Mauro, a small business owner, took out a loan to expand a home-based bakery run by him and his wife Leny. The loan was signed with her consent and used to buy new baking equipment. Years later, after the marriage dissolved, the business failed and couldn’t repay the loan. Since the bakery and its income were part of the community property, the lender first claimed those assets. When those weren’t enough, [either Mauro or Leny] [could be made fully liable] to pay the rest from their personal savings. (Ibid.)
Example 2: Raquel, the designated administrator of their family’s finances, borrowed money to renovate the house she and Jonas lived in with their kids. The renovation improved the home’s value, and it was clearly for the benefit of the household. Years later, when they separated and the property was sold, the remaining renovation debt wasn’t fully covered. Their community assets were insufficient, so [the contractor for the renovation can compel either Raquel or Jonas to pay the full unpaid amount] from their own personal funds. (Ibid.)
Example 3: Dennis took out a personal loan during his marriage to Eva to purchase a luxury watch collection. Eva never consented to this purchase, and it had no benefit to the household or family. Since the loan wasn’t for the community’s benefit and wasn’t covered by Article 94’s second paragraph, the lender couldn’t demand payment from the community property. Instead, Dennis alone was made liable, and his exclusive properties were used to cover the debt. (Ibid.)
c. Step 3: Remaining exclusive properties
Art. 102. Upon dissolution of the absolute community regime, the following procedure shall apply:
x x x
(3) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of them. x x x
1) After the community of property is dissolved and all debts have been settled and shared properties divided, each spouse is entitled to take back what remains of their own separate or exclusive properties. These are the belongings or assets that were never included in the [community property] — such as personal gifts, inherited items, or properties owned before the marriage. What’s left of these exclusive assets will be returned to their rightful owner. (OpenAI ChatGPT-4 [2025], reviewed by Legal / J. Del Puerto, Accessed 5 May 2025)
2) This step ensures that, after the end of the marriage, each spouse recovers what originally belonged to them, minus any part that may have been used to pay community debts or obligations. (Ibid.)
Example 1: Nina owned a beachfront lot inherited from her parents [during her marriage with] Carlos. When their marriage ended and all community assets were divided and obligations paid, the [beachfront lot] was officially turned back over to Nina. (Ibid.)
Example 2: Jorge [received a personal gift consisting of a] valuable stamp collection during his marriage [with Tina]. After the dissolution of their union, with all shared debts and properties accounted for, the stamp collection was returned to Jorge in full. (Ibid.)
Example 3: Luisa received a small farm as a personal gift from her uncle during the marriage, which she managed separately. Although part of the harvest was once used to help pay a family loan, the farm itself was never considered community property. After liquidation of community assets and payment of liabilities, [the farm was delivered] to Luisa. (Ibid.)
d. Step 4: Net remainder
Art. 102. Upon dissolution of the absolute community regime, the following procedure shall apply:
x x x
(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. x x x
Related provisions:
Article 43. The termination of the subsequent marriage referred to in the preceding Article shall produce the following effects:
x x x
(2) The absolute community of property or the conjugal partnership, as the case may be, shall be dissolved and liquidated, but if either spouse contracted said marriage in bad faith, his or her share of the net profits of the community property or conjugal partnership property shall be forfeited in favor of the common children or, if there are none, the children of the guilty spouse by a previous marriage or in default of children, the innocent spouse;
Article 63. The decree of legal separation shall have the following effects:
x x x
(2) The absolute community or the conjugal partnership shall be dissolved and liquidated but the offending spouse shall have no right to any share of the net profits earned by the absolute community or the conjugal partnership, which shall be forfeited in accordance with the provisions of Article 43(2);
A. In General
1) Once the absolute community of property ends — such as through legal separation, annulment, or the death of a spouse — what’s left after paying off all debts and settling obligations is called the net assets. This is the clean total of what remains, not counting any liabilities. These net assets are generally split equally between the spouses, unless they made a different arrangement before the marriage in their marriage settlement (like 60-40), or unless one spouse has willingly given up their right to their share based on the law. (OpenAI ChatGPT-4 [2025], reviewed by Legal / J. Del Puerto, Accessed 5 May 2025)
B. Offending spouse: Contracting marriage in bad faith
1) [If] a spouse was at fault [e.g. contracting marriage in bad faith], that guilty spouse loses their right to the [net profits] earned during the marriage. These profits [are forfeited in favor of the following in this specific order]:
(a) Common children,
(b) If there are none, children from a previous marriage;
(c) If there are none, innocent spouse. (Ibid.)
Example 1: Isaac and Therese had no marriage settlement, so their community property was meant to be divided equally. Over the years, their shared bookstore tripled in value. But when Therese filed [an annulment case after learning Isaac’s previous marriage which is still existing], the court applied Article 63(2). Isaac lost his share of the bookstore’s increased value, which was then transferred to their two children. (Ibid.)
Example 2: Lina entered a second marriage with Marco, believing in good faith that her first husband was dead. Later, when the first marriage was discovered and declared still valid, her marriage with Marco was voided. Since Lina [was in good faith], she is entitled to net profits earned by their community property during the marriage.
e. Step 5: Presumptive legitimes
Art. 102. Upon dissolution of the absolute community regime, the following procedure shall apply:
x x x
(5) The presumptive legitimes of the common children shall be delivered upon partition, in accordance with Article 51. x x x
Related provision:
Article 51. In said partition, the value of the presumptive legitimes of all common children, computed as of the date of the final judgment of the trial court, shall be delivered in cash, property or sound securities, unless the parties, by mutual agreement judicially approved, had already provided for such matters.
The children or their guardian or the trustee of their property may ask for the enforcement of the judgment.
The delivery of the presumptive legitimes herein prescribed shall in no way prejudice the ultimate successional rights of the children accruing upon the death of either of both of the parents; but the value of the properties already received under the decree of annulment or absolute nullity shall be considered as advances on their legitime. (n)
1) [Presumptive legitimes] are a portion of inheritance the law reserves for children, calculated as of the date the trial court issued its final ruling. It must be given either in cash, property, or [sound securities]. However, if the parents already made arrangements on this matter — like through a written agreement approved by the court — then that prevails. (OpenAI ChatGPT-4 [2025], reviewed by Legal / J. Del Puerto, Accessed 5 May 2025)
2) Importantly, this early delivery of the presumptive legitime does not cancel or reduce the children’s full inheritance rights when either parent dies in the future. Instead, what they received earlier will simply count as an advance [against] their future inheritance. (Ibid.)
Example 1: After the annulment of Benjie and Clarisse’s marriage, their two daughters were each entitled to a portion of their parents’ condominium units. The court ruled that the market value of the units, as of the final judgment date, would be used to calculate the daughters’ presumptive legitimes. One daughter received a studio unit, while the other was given a cash equivalent. Years later, when Clarisse passed away, what they previously received was deducted from their rightful inheritance. (Ibid.)
Example 2: Eloisa and Mario had already placed funds into a trust for their son before filing for annulment. The court approved this as a valid arrangement covering the presumptive legitime. Because it was agreed upon and judicially sanctioned, no further property had to be turned over during the partition. Still, when Mario died years later, the trust value was treated as an advance on the son’s final share of the estate. (Ibid.)
Example 3: During the division of assets following the void marriage of Caloy and Rowena, their son’s share in the family business was calculated as his presumptive legitime. Since the company couldn’t be split, the boy was instead given sound securities equivalent to his share. The business stayed with Caloy, but the son’s future inheritance from either parent would take into account the value of the shares already received. (Ibid.)
f. Step 6: Conjugal Home
Art. 102. Upon dissolution of the absolute community regime, the following procedure shall apply:
x x x
(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 in no such majority, the court shall decide, taking into consideration the best interests of said children. (n)
1) When a couple separates and divides their shared assets, the family home and the land it stands on are usually granted to one of the spouses. By default, if most of the common children choose to live with one parent, that parent gets the house and lot — unless the spouses made a different arrangement beforehand. For children who are under seven years old, the law [deems that they have chosen their] mother, unless a court decides [otherwise]. (OpenAI ChatGPT-4 [2025], reviewed by Legal / J. Del Puerto, Accessed 5 May 2025)
2) If there is no clear majority [on the number of children choosing one parten] — for example, the children are equally divided in choosing between the two parents — then it’s up to the court to decide who should receive the family home, always guided by what would best serve the children’s welfare and stability. (Ibid.)
Example 1: After Jasper and Lea legally separated, their four children were asked where they wanted to live. Three of them chose to stay with Lea, so the family’s residential house and the adjoining garden lot were awarded to her. Even though Jasper initially contested, the law gave weight to the children’s preference. (Ibid.)
Example 2: Marco and Dina had two children aged six and five when their marriage ended. Though too young to speak for themselves, the law [deems] they would live with Dina. Because of this, and in the absence of any agreement to the contrary, Dina was granted the family townhouse as part of the property division. (Ibid.)
Example 3: Ronald and Bea had three children — one chose Ronald, one chose Bea, and the youngest was six years old. With no majority preference among the children, the court evaluated each parent’s living situation and ability to care for the kids. Eventually, the court ruled that giving the family home to Bea would better support the children’s education and emotional needs, so she was awarded the house. (Ibid.)
