Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 92772 November 28, 1996

SAN MIGUEL JEEPNEY SERVICE and MAMERTO GALACE, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, EDELBERTO PADUA and 23 OTHERS, 1 respondents.

PANGANIBAN, J.:

May workers who are paid on commission basis be considered regular employees, and therefore entitled to separation pay? What constitutes "serious business losses" under Art. 283 of the Labor Code which may justify closure or cessation of operations of business establishments and the laying-off of employees without need of paying separation pay?

The foregoing questions are resolved in this special civil action for certiorari alleging grave abuse of discretion by public respondent National Labor Relations Commission 2 in its Resolution 3 promulgated on February 28, 1990 in NLRC case RB-III-03-12-0201-87, which modified the decision of Labor Arbiter Oswald B. Lorenzo dated August 29, 1988.

The Facts

The 23 complainants were formerly working (as drivers, dispatchers and mechanic) with petitioner San Miguel Jeepney Service (SMJS), with services ranging from two to eight years. Petitioner SMJS had a contract with the U.S. Naval Base Facility located in San Miguel, San Antonio, Zambales, to provide transportation services to personnel and dependents inside said facility. When the said contract expired on 02 May 1988, petitioner Galace, owner and general manager of SMJS, "opted not to renew the existing contract nor bid on the new contract", 4 due to financial difficulties, he having suffered a net loss the prior year. As a consequence, the services of the complainants were terminated. By that time, however, the 23 had already filed a complaint for non-compliance with the minimum wage law from 1980 onwards, plus non-payment of the 13th month pay, legal holiday pay, overtime pay, service incentive leave pay and separation pay. In their position paper, complainants claimed that they were drivers (except for Edna Farin and Brainly Aglibot who worked as dispatchers, and Abner Martinez who was a mechanic-dispatcher) and all of them were receiving their pay based on commission basis, which was below the statutory minimum wage. They further alleged, among others, that their work entitled them to overtime pay, legal holiday pay and severance pay, which were not paid to them.

Petitioners on the other hand rejected any liability for the money claims. In refutation of the complainants' claims, they submitted a position paper stating:

1. Legal Holiday Pay — Complainants are not entitled. (a) the casual dispatchers have no fix (sic) day of work, they merely act as substituted (sic); and (b) the drivers-complainants, who are purely on commission basis are not entitled to legal holiday pay (Rule IV, Holiday Pay, Sec. 1 (e), Implementing Rules of the Labor Code).

2. 13th month pay: — Not applicable to complainants who are purely on commission basis (Sec. 3 (e), Rules and Regulations Implementing P.D. 851) Complainants casual-dispatchers are not allowed 13th month pay because they are not (paid on) monthly basis.

3. Underpayment of Minimum Wage: Complainants-drivers are not wage earners. They are not paid on the basis of their work-hours rendered but on the percentages of their collections representing fares from their passengers. They control their own collections. There is no basis of minimum wage in relation to their commissions taken by them.

The complainants-casual dispatchers are well over their minimum wage.

4. Overtime pay. — Complainants cannot claim overtime pay. They control their own time. The amount of their percentages depend on how industrious they are in looking for paying passengers. Hence, complainants control their pay, not the respondents. So, why give overtime pay to one who is really working on such a (sic) time?

5. Separation Day. — All the complainants stopped working when(ever) they pleased. At least respondent Mamerto Galace has given all the complainants notice on July 17, 1988 (should be 1987) that his contract will terminate on February 3, 1988 and after this date, complainants went on strike. How could they be entitled to separation pay when they willfully stopped working without the fault of the respondents(?)

6. Service Incentive Day: — This is not applicable to the complainants who are purely on commission basis (Rule V, Sec. 1 (d), Implementing Rules and Regulations of the Labor Code).

The arbiter ruled that insofar as the claims for holiday pay, 13th month pay and service incentive pay were concerned, under the Rules Implementing PD 851, the complainants were not entitled to such benefits, being workers on a purely commission basis. With respect to the alleged underpayment of minimum wage, the arbiter held that "since the complainants-drivers control(led) their own collections and time, . . . there could be no basis to determine minimum wage in relation to their commissions . . . Moreover, a perusal of the Complaint . . . shows a clear admission of payment of the latter on commission basis at the rate of 14.4% of their collections. . . (T)he failure of the complainants-drivers to state in their Complaint and pleadings the amount of their alleged underpayment only reflects that complainants themselves were unsure if they were underpaid or not. Hence this Arbiter finds no basis to grant the same." (The foregoing findings by the arbiter were subsequently cited with approval by the respondent NLRC.)

It seems that the arbiter also went on to hold implicitly that the drivers were not regular employees of SMJS. He stated:

(Insofar) as the cases of Edna Farin and Brainly Aglibot and Abner Martinez are concerned, we rule that they are entitled to the difference of the underpayment of their wages as their jobs are different from that of complainants-drivers, but regular employees of respondents, in accordance with Article(s) 280 and 281 of the Labor Code as amended. These three (3) employees having been found to have been dismissed without due process of law are entitled to separation pay equivalent to one-half (1/2) month for every year of service. (emphasis supplied).

He likewise held that the non-renewal of the contract with the US Naval Base is a closure or cessation of operations NOT due to serious business losses under Art. 283 of the Labor Code, and that being the case, the drivers became entitled to one-half (1/2) month pay for every year of service. All other claims, such as for overtime pay and the like, were dismissed for lack of both legal basis and evidence to support the same. However, the arbiter ordered payment of P1,000.00 to each of the complainants-drivers by way of financial assistance, considering their length of service. The dispositive portion of the arbiter's decision reads: 5

WHEREFORE, premises considered, judgment is hereby rendered ordering respondents to pay complainants Edna Farin, Brainly Aglibot and Abner Martinez the differentials for underpayment of wages, as well as, their severance pay, equivalent to one-half (1/2) month for every year of service.

Respondents are further ordered to extend by way of financial assistance in the amount of P1,000.00 each or a total of P19,000.00.

On appeal, the respondent Commission modified the arbiter's ruling, holding that "all the complainants are regular employees in the contemplation of Article 281 (now Art. 280) of the Labor Code, which provides that employment "shall be deemed regular when the employee performs activities which are usually necessary and desirable in the usual business or trade . . . "; respondent Commission thus ruled that the complainants are entitled to separation pay of one-half month for every year of service, by virtue of the non-renewal of the transportation contract with the naval base. However, finding that the complainants did not ask for financial assistance, the NLRC deleted the award of P1,000.00 for the each of the complainants. The fallo of the Commission's Resolution states: 6

WHEREFORE, in the light of the preceding disquisition, the judgment appealed from is hereby modified, in that the award of P1,000.00 each to the complainants for financial assistance is deleted. The respondent is ordered to pay all the complainants their separation pay equivalent to one-half (1/2) month for every year of service.

Dissatisfied, petitioners brought this petition for certiorari under Rule 65 of the Rules of Court on April 19, 1990.

The Issues

The issues raised by petitioners are as follows: 7

I

The respondent NLRC acted in grave abuse of its discretion in awarding separation pay in favor of respondents, such award not being warranted by the facts and the law.

II

Assuming arguendo that such award of separation pay is warranted by law, the respondent NLRC nevertheless gravely abused its discretion in making said award in the absence of the requisite factual basis therefor.

Petitioners concede that the NLRC may have been correct after all in holding that complainants/private respondents were regular employees, for they acknowledged albeit grudgingly that "the above ruling seems to be tinged with reason and authority". Nevertheless, they contend that they cannot be held liable for separation pay for "petitioner SMJS had been experiencing financial reverses since 1986". 8 Petitioners cited the figures provided by petitioner Galace showing "sliding incomes": 9

Our gross receipt in 1985 amounted to P846,459.25Our gross receipt in 1986 amounted to 676,748.75—————So, our income decreased in 1986 by P169,710.50

Our gross income in 1986 was P676,748.75Our gross income in 1987 was 534,204.71—————Our income decreased in 1987 by P142,544.04

Petitioners also fault the NLRC for acknowledging in its findings of fact (p. 2 of the Resolution) that SMJS had experienced financial reverses while at the same time holding that the closure of SMJS was simply due to non-renewal of its transportation contract, and thereby implying unfairly that SMJS did not cease operations due to financial reverses. Finally, petitioners argue that in order to award separation pay, there must be some numerical and factual basis (e.g. latest salary rate) for the computation thereof, which they claim is absent in this case, as complainants were earning commissions, which of course varied from period to period.

The Court's Ruling

We shall discuss the two issues raised by the petition in reverse order: first, the factual bases for "serious business losses" and then, the applicability and computation of separation pay.

No Serious Business Losses

As petitioners themselves admitted, what they suffered were "sliding incomes", in other words, decreasing gross revenues. What the law speaks of is serious business losses or financial reverses. Clearly, sliding incomes are not necessarily losses, much less serious business losses within the meaning of the law. In this connection, we are reminded of our previous ruling that "the requisites of a valid retrenchment are: (a) the losses expected should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent; (c) the retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if

already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence." 10 We have also held that adverse business conditions justify the exercise of management prerogative to retrench in order to avoid the not-so-remote possibility of closure of the entire business. 11 At the other end of the spectrum, it seems equally clear that not every asserted possibility of loss is sufficient legal warrant for reduction of personnel. In the nature of things, the possibility of incurring losses is constantly present, in greater or lesser degree, in the carrying on of business operations, since some, indeed many, of the factors which impact upon the profitability or viability of such operations may be substantially outside the control of the employer. 12

All the foregoing considerations simply require that the employer bears the burden of proving his allegation of economic or business reverses with clear and satisfactory evidence, it being in the nature of an affirmative defense.13 Apparently, the petitioners' evidence failed to persuade the public respondent, and it is not difficult to understand why. The petition made reference to a position paper dated March 10, 1988, 14 in which petitioner Galace admitted that "I did not ask to renew our contract with the Navy Exchange because our income had been consistently going down (petitioner then shows the decreases in gross incomes for 1985, 1986 and 1987). It became clear to me as early as of (sic) July last year that I shall not be able to continue operating because of the sliding incomes. So, in August, I announced that I would not renew my contract." Apparently, petitioner did not renew his contract because of "sliding incomes", and not because of serious business losses.

In the same position paper, he also stated that "(i)n 1987, I incurred a loss of P40,471.69 from operation. . . . From 1980 to 1986, or in the six years of previous operations, I had managed to make a profit in spite of all the expenses." Such loss per se, absent any other evidence, and viewed in the light of the amounts of gross receipts the business generated historically, may not be deemed the serious business loss contemplated by law, and thus cannot justify the non-payment of separation pay. Neither did petitioners present any evidence whatsoever regarding the impact of the said net loss on the business (extent of impairment of equity, loss of liquidity, and so forth) nor on expected losses that would have been incurred had operations been continued (under, say, a new contract with the base).

Moreover, we note that in the same position paper, petitioner Galace admitted that he had been persistently refusing to recognize the union organized among his employees, which undoubtedly had to do with the work stoppage that he later complained of. In brief, we are of the belief that the cessation of operations and closure of SMJS were, in the ultimate analysis, triggered by factors other than a P40,000.00 loss. We therefore find no grave abuse of discretion on the part of respondent Commission in ordering the payment of separation pay equivalent to one-half month's wage for every year of service.

Propriety of Granting Separation Pay

Public respondent had found the private respondents — drivers, dispatchers and mechanic — to be regular employees, 15 and, as mentioned earlier, petitioners yielded to said ruling, terming it "tinged with reason and authority". But even if they had not conceded thus, it is obvious that public respondent is correct. The rationale for this ruling is simply that the complainants/private respondents were unarguably performing work necessary and desirable in the business of SMJS. Without the services rendered by private respondents, petitioners could not have conducted their business of providing transportation services within the naval base. This plus the fact that private respondents had each

rendered from two to eight years of service cause them to come squarely within the ambit of Art. 280 of the Labor Code; beyond dispute, they were not only employees, but regular employees, as correctly held by public respondent.

The mere fact that they were paid on commission basis does not affect or change their status as regular employees. The test for determining whether an employee is regular or casual has nothing to do with the manner of computing or paying a employee's wages or compensation. Rather,

The primary standard, . . ., of determining a regular (as against casual) employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists." 16 (emphasis supplied)

On the other hand, we should hasten to add that while in this particular case, these "commission-basis" employees involved were regular employees (by operation of law, plus of course, the fact that their status as employees had never been challenged at any stage of the present case), it does not follow that every employee paid (whether wholly or partly) on commission basis can be considered a regular employee, or an employee at all, for that matter. While this caveat may seem rather elementary, it is still needful to stress that there are many lines of business legally and legitimately engaging the services of workers, who are paid on commission basis to perform activities desirable and necessary for such businesses, without creating any kind of employer-employee relationship at any time. A case in point is Singer Sewing Machine Company vs. Drilon, 17 where certain individuals were hired to work as collectors or "collecting agents" of the company but per written agreement were to be considered at all times as independent contractors and not employees of the company. The key issue in Singer was whether these so-called independent contractors were in reality employees. After applying the control test, this Court held: 18

The nature of the relationship between a company and its collecting agents depends on the circumstances of each particular relationship. Not all collecting agents are employees and neither are all collecting agents independent contractors. The collectors could fall under either category depending on the facts of each case.

The (Collection Agency) Agreement confirms the status of the collecting agent in this case as an independent contractor not only because he is explicitly described as such but also because the provisions permit him to perform collection services for the company without being subject to the control of the latter except only as to the result of his work.

xxx xxx xxx

The Court finds the contention of the respondents that the union members are employees under Article 280 of the Labor Code to have no basis. The definition that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. Any agreement may provide that one party shall render services for and in behalf of another for a consideration (no matter how necessary for the latter's business) even without being hired as an employee. This is precisely true in the case of an independent contractorship as well as in an agency agreement. The Court agrees with the petitioner's argument that Article 280 is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute. (emphasis ours)

Having said that, we return to the instant case and, at the risk of being repetitive, reiterate that in this case there was no question about the existence of employer-employee relationship between petitioners and private respondents. Art. 280 therefore can be properly applied to the present case, to confirm the regular-employee status of the private respondents.

Prescinding from the foregoing, as such regular employees, private respondents are entitled to security of tenure and their services may be terminated only for causes provided by law. Likewise, they are also to be accorded the benefits provided under the Labor Code, including inter alia separation pay for loss of employment resulting from retrenchment to prevent losses or closure/cessation of operation not due to serious business losses. The Solicitor General in his Comment suggested that, being regular employees, they are likewise entitled to the protection of minimum wage statutes. 19 Hence, the separation pay due them may be computed on the basis of the minimum wage prevailing at the time their services were terminated by petitioners. We agree. Executive Order No. 178 fixed the minimum wage for non-agricultural workers working outside Metro Manila at P53.00 a day effective October 1, 1987. Thus, we utilize this figure as the basis for computing private respondents' separation pay.

WHEREFORE, in view of the foregoing, the assailed Resolution of public respondent NLRC is hereby AFFIRMED. The separation pay of the private respondents equivalent to one-half month pay for every year of service shall be computed at the then prevailing minimum daily wage of P53.00.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

Footnotes

1 Should be 22 only, Edelberto Padua being one of the 23 complainants, now private respondents. The 22 others are: Edna Farin, Brainly Aglibot, Abner Martinez, Federico Ablog, Pelagio Aglibot, Marino Alumpo, Angel Amiller, Joseph Aquino, Pablo Beza, Carlito Evangelista, Virgilio Diaz, Victorio Laconsay, Virgilio Lucero, Cesario Martinez, Mariano Minola, Herminio Navilla, Eduardo Pulido, Paulo Radoc, Jr., Jesus de la Resma, Ferdinand Farin, Deolito Reolizo and Santos Taben. See Labor Arbiter's Decision, p. 2; rollo, p. 35.

2 Third Division, composed of Comm. Rogelio I. Rayala, ponente, and Pres. Comm. Lourdes C. Javier and Comm. Ireneo B. Bernardo, concurring.

3 Rollo, p. 17.

4 Per the Memorandum dated 02 May 1988 of Lt. J. R. Jutte, Officer in Charge, Navy Resale Activity Detachment, U.S. Naval Communication Station, Philippines.

5 NLRC Resolution, p. 1.

6 NLRC Resolution, p. 5.

7 Rollo, p. 10.

8 Rollo, pp. 11-12.

9 Ibid., p. 103.

10 Catatista vs. National Labor Relations Commission, 247 SCRA 46, August 3, 1995, citing the case of Lopez Sugar Corporation vs. Federation of Free Workers, 189 SCRA 179, August 30, 1990.

11 Revidad vs. National Labor Relations Commission, 245 SCRA 356, June 27, 1995.

12 Lopa Sugar Corporation vs. Federation of Free Workers, supra, at page 186.

13 Precision Electronics Corporation vs. NLRC, 178 SCRA 667, 670, October 23, 1989.

14 Rollo, pp. 43-44.

15 NLRC Resolution, pp. 3-4.

16 De Leon vs. National Labor Relations Commission, 176 SCRA 615. 621, August 21, 1989, cited in Baguio Country Club Corporation vs. NLRC, 206 SCRA 643, February 28, 1992. See also Ferrochrome Phils., Inc. vs. NLRC, 236 SCRA 315, September 5, 1994.

17 193 SCRA 170, January 24, 1991.

18 Ibid., at p. 279.

19 Under Art. 98 of Title II, Book III of the Labor Code, persons excluded from the application of minimum wage statutes are those in "farm tenancy or leasehold, domestic service and persons working in their respective homes in needle work or in any cottage industry duly registered in accordance with law." Since the drivers, dispatchers and mechanic in this case are not excluded by law, and moreover are considered as non-agricultural workers within the scope of Art. 99 of the same Code, they are entitled to payment of minimum wage.

FIRST DIVISION

[G.R. No. 122749. July 31, 1996]

ANTONIO A. S. VALDES, petitioner, vs. REGIONAL TRIAL COURT, BRANCH 102, QUEZON CITY, and CONSUELO M. GOMEZ-VALDES,respondents.

D E C I S I O N

VITUG, J.:

The petition for review bewails, purely on a question of law, an alleged error committed by the Regional Trial Court in Civil Case No. Q-92-12539. Petitioner avers that the court a quo has failed to apply the correct law that should govern the disposition of a family dwelling in a situation where a marriage is declared void ab initio because of psychological incapacity on the part of either or both of the parties to the contract.

The pertinent facts giving rise to this incident are, by and large, not in dispute.

Antonio Valdes and Consuelo Gomez were married on 05 January 1971. Begotten during the marriage were five children. In a petition, dated 22 June 1992, Valdes sought the declaration of nullity of the marriage pursuant to Article 36 of the Family Code (docketed Civil Case No. Q-92-12539, Regional Trial Court of Quezon City, Branch 102). After hearing the parties following the joinder of issues, the trial court,[1] in its decision of 29 July 1994, granted the petition; viz:

"WHEREFORE, judgment is hereby rendered as follows:

"(1) The marriage of petitioner Antonio Valdes and respondent Consuelo Gomez-Valdes is hereby declared null and void under Article 36 of the Family Code on the ground of their mutual psychological incapacity to comply with their essential marital obligations;

"(2) The three older children, Carlos Enrique III, Antonio Quintin and Angela Rosario shall choose which parent they would want to stay with.

"Stella Eloisa and Joaquin Pedro shall be placed in the custody of their mother, herein respondent Consuelo Gomez-Valdes.

"The petitioner and respondent shall have visitation rights over the children who are in the custody of the other.

"(3) The petitioner and respondent are directed to start proceedings on the liquidation of their common properties as defined by Article 147 of the Family Code, and to comply with the provisions of Articles 50, 51 and 52 of the same code, within thirty (30) days from notice of this decision.

"Let a copy of this decision be furnished the Local Civil Registrar of Mandaluyong, Metro Manila, for proper recording in the registry of marriages."[2] (Italics ours)

Consuelo Gomez sought a clarification of that portion of the decision directing compliance with Articles 50, 51 and 52 of the Family Code. She asserted that the Family Code contained no provisions on the procedure for the liquidation of common property in "unions without marriage." Parenthetically, during the hearing on the motion, the children filed a joint affidavit expressing their desire to remain with their father, Antonio Valdes, herein petitioner.

In an Order, dated 05 May 1995, the trial court made the following clarification:

"Consequently, considering that Article 147 of the Family Code explicitly provides that the property acquired by both parties during their union, in the absence of proof to the contrary, are presumed to have been obtained through the joint efforts of the parties and will be owned by them in equal shares, plaintiff and defendant will own their 'family home' and all their other properties for that matter in equal shares.

"In the liquidation and partition of the properties owned in common by the plaintiff and defendant, the provisions on co-ownership found in the Civil Code shall apply."[3] (Italics supplied)

In addressing specifically the issue regarding the disposition of the family dwelling, the trial court said:

"Considering that this Court has already declared the marriage between petitioner and respondent as null and void ab initio, pursuant to Art. 147, the property regime of petitioner and respondent shall be governed by therules on co-ownership.

"The provisions of Articles 102 and 129 of the Family Code finds no application since Article 102 refers to the procedure for the liquidation of the conjugal partnership property and Article 129 refers to the procedure for the liquidation of the absolute community of property."[4]

Petitioner moved for a reconsideration of the order. The motion was denied on 30 October 1995.

In his recourse to this Court, petitioner submits that Articles 50, 51 and 52 of the Family Code should be held controlling; he argues that:

"I

"Article 147 of the Family Code does not apply to cases where the parties are psychological incapacitated.

"II

"Articles 50, 51 and 52 in relation to Articles 102 and 129 of the Family Code govern the disposition of the family dwelling in cases where a marriage is declared void ab initio, including a marriage declared void by reason of the psychological incapacity of the spouses.

"III

"Assuming arguendo that Article 147 applies to marriages declared void ab initio on the ground of the psychological incapacity of a spouse, the same may be read consistently with Article 129.

"IV

"It is necessary to determine the parent with whom majority of the children wish to stay."[5]

The trial court correctly applied the law. In a void marriage, regardless of the cause thereof, the property relations of the parties during the period of cohabitation is governed by the provisions of Article 147 or Article 148, such as the case may be, of the Family Code. Article 147 is a remake of Article 144 of the Civil Code as interpreted and so applied in previous cases;[6] it provides:

"ART. 147. When a man and a woman who are capacitated to marry each other, live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be owned by them in equal shares and the property acquired by both of them through their work or industry shall be governed by the rules on co-ownership.

"In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. For purposes of this Article, a party who did not participate in the acquisition by the other party of any property shall be deemed to have contributed jointly in the acquisition thereof if the former's efforts consisted in the care and maintenance of the family and of the household.

"Neither party can encumber or dispose by acts inter vivos of his or her share in the property acquired during cohabitation and owned in common, without the consent of the other, until after the termination of their cohabitation.

"When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in the co-ownership shall be forfeited in favor of their common children. In case of default of or waiver by any or all of the common children or their descendants, each vacant share shall belong to the respective surviving descendants. In the absence of descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall take place upon termination of the cohabitation."

This peculiar kind of co-ownership applies when a man and a woman, suffering no legal impediment to marry each other, so exclusively live together as husband and wife under a void marriage or without the benefit of marriage. The term "capacitated" in the provision (in the first paragraph of the law) refers to the legal capacity of a party to contract marriage, i.e., any "male or female of the age of eighteen years or upwards not under any of the impediments mentioned in Articles 37 and 38" [7] of the Code.

Under this property regime, property acquired by both spouses through their work and industry shall be governed by the rules on equal co-ownership. Any property acquired during the union isprima facie presumed to have been obtained through their joint efforts. A party who did not participate in the acquisition of the property shall still be considered as having contributed thereto jointly if said party's "efforts consisted in the care and maintenance of the family household."[8] Unlike the conjugal partnership of gains, the fruits of the couple's separate property are not included in the co-ownership.

Article 147 of the Family Code, in substance and to the above extent, has clarified Article 144 of the Civil Code; in addition, the law now expressly provides that —

(a) Neither party can dispose or encumber by act inter vivos his or her share in co-ownership property, without the consent of the other, during the period of cohabitation; and

(b) In the case of a void marriage, any party in bad faith shall forfeit his or her share in the co-ownership in favor of their common children; in default thereof or waiver by any or all of the common children, each vacant share shall belong to the respective surviving descendants, or still in default thereof, to the innocent party. The forfeiture shall take place upon the termination of the cohabitation[9] or declaration of nullity of the marriage.[10]

When the common-law spouses suffer from a legal impediment to marry or when they do not live exclusively with each other (as husband and wife ),only the property acquired by both of them through their actual   joint contribution of money, property or industry shall be owned in common and in proportion to their respective contributions. Such contributions and corresponding shares, however, are prima facie presumed to be equal. The share of any party who is married to another shall accrue to the absolute community or conjugal partnership, as the case may be, if so existing under a valid marriage. If the party who has acted in bad faith is not validly married to another, his or her share shall be forfeited in the manner already heretofore expressed.[11]

In deciding to take further cognizance of the issue on the settlement of the parties' common property, the trial court acted neither imprudently nor precipitately; a court which has jurisdiction to declare the marriage a nullity must be deemed likewise clothed with authority to resolve incidental and consequential matters. Nor did it commit a reversible error in ruling that petitioner and private respondent own the "family home" and all their common property in equal   shares, as well as in concluding that, in the liquidation and partition of the property owned in common by them, the provisions on co-ownership under the Civil Code, not Articles 50, 51 and 52, in relation to Articles 102 and 129,[12] of the Family Code, should aptly prevail. The rules set up to govern the liquidation of either the absolute community or the conjugal partnership of gains, the property regimes recognized for valid and voidable marriages (in the latter case until the contract is annulled ),are irrelevant to the liquidation of the co-ownership that exists between common-law spouses. The first paragraph of Article 50 of the Family Code, applying paragraphs (2 ),(3 ),(4) and (5) of Article 43, [13] relates only, by its explicit terms, to voidable marriages and, exceptionally, to void marriages under Article 40[14] of the Code, i.e., the declaration of nullity of a subsequent marriage contracted by a spouse of a prior void marriage before the latter is judicially declared void. The latter is a special rule that somehow recognizes the philosophy and an old doctrine that void marriages are inexistent from the very beginning and no judicial decree is necessary to establish their nullity. In now requiring for purposes  of   remarriage, the declaration of nullity by final judgment of the previously contracted void marriage, the present law aims to do away with any continuing uncertainty on the status of the second marriage. It is not then illogical for the provisions of Article 43, in relation to Articles 41 [15] and 42,[16] of the Family Code, on the effects of the termination of a subsequent marriage contracted during the subsistence of a previous marriage to be made applicable pro hac vice. In all other cases, it is not to be assumed that the law has also meant to have coincident property relations, on the one hand, between spouses in valid and voidable marriages (before annulment) and, on the other, between common-law spouses or spouses of void marriages, leaving to ordain, in the latter case, the ordinary rules on co-ownership subject to the provision of Article 147 and Article 148 of the Family Code. It must be stressed, nevertheless, even as it may merely state the obvious, that the provisions of the Family Code on the "family home," i.e., the provisions found in Title V, Chapter 2, of the Family Code, remain in force and effect regardless of the property regime of the spouses.

WHEREFORE, the questioned orders, dated 05 May 1995 and 30 October 1995, of the trial court are AFFIRMED. No costs.

SO ORDERED.

Padilla, Kapunan, and Hermosisima, Jr., JJ., concur.Bellosillo, J., on leave.

[1] Hon. Perlita Tria Tirona, presiding.[2] Rollo, p. 22.[3] Rollo, p. 42.[4] Rollo, pp. 38-39.[5] Rollo, pp. 24-25.[6] See Margaret Maxey vs. Court of Appeals, 129 SCRA 187; Aznar, et al. vs. Garcia, et al., 102 Phil. 1055.[7] Art. 5.Any male or female of the age of eighteen years or upwards not under any of the impediments mentioned in Articles 37 and 38, may contract marriage.

Art. 37.Marriages between the following are incestuous and void from the beginning, whether the relationship between the parties be legitimate or illegitimate:

(1) Between ascendants and descendants of any degree; and

(2) Between brothers and sisters, whether of the full or half-blood.

Art. 38. The following marriages shall be void from the beginning for reasons of public policy:

(1) Between collateral blood relatives; whether legitimate or illegitimate, up to the fourth civil degree;

(2) Between step-parents and stepchildren;

(3) Between parents-in-law and children-in-law;

(4) Between the adopting parent and the adopted child;

(5) Between the surviving spouse of the adopting parent and the adopted child;

(6) Between the surviving spouse of the adopted child and the adopter;

(7) Between an adopted child and a legitimate child of the adopter;

(8) Between adopted children of the same adopter; and

(9) Between parties where one, with the intention to marry the other, killed that other person's spouse or his or her own spouse.[8] Article 147, Family Code.[9] Article 147, Family Code.

[10] Articles 43, 50 and 51, Family Code.[11] Article 148, Family Code.[12] Art. 50. The effects provided for in paragraphs (2 ),(3 ),(4) and (5) of Article 43 and in Article 44 shall also apply in proper cases to marriages which are declared void ab initio or annulled by final judgment under Articles 40 and 45.

The final judgment in such case shall provide for the liquidation, partition and distribution of the properties of the spouses, the custody and support of the common children, and the delivery of their presumptive legitimes, unless such matters had been adjudicated in previous judicial proceedings.

All creditors of the spouses as well as of the absolute community or the conjugal partnership shall be notified of the proceedings for liquidation.

In the partition, the conjugal dwelling and the lot on which it is situated, shall be adjudicated in accordance with the provisions of Articles 102 and 129.

Art. 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 or 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.

Art. 52. The judgment of annulment or of absolute nullity of the marriage, the partition and distribution of the properties of the spouses, and the delivery of the children's presumptive legitimes shall be recorded in the appropriate civil registry and registries of property; otherwise, the same shall not affect third persons.

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.

(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 as provided in this Code. For purposes 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.

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 has 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 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.[13] Art. 43. The termination of the subsequent marriage referred to in the preceding Article shall produce the following effects:

(1) The children of the subsequent marriage conceived prior to its termination shall be considered legitimate, and their custody and support in case of dispute shall be decided by the court in a proper proceeding;

(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;

(3) Donations by reason or marriage shall remain valid, except that if the donee contracted the marriage in bad faith, such donations made to said donee are revoked by operation of law;

(4) The innocent spouse may revoke the designation of the other spouse who acted in bad faith as a beneficiary in any insurance policy, even if such designation be stipulated as irrevocable; and

(5) The spouse who contracted the subsequent marriage in bad faith shall be disqualified to inherit from the innocent spouse by testate and intestate succession.[14] Art. 40. The absolute nullity of a previous marriage may be invoked for purposes of remarriage on the basis solely of a final judgment declaring such previous marriage void.[15] Art. 41. A marriage contracted by any person during the subsistence of a previous marriage shall be null and void, unless before the celebration of the subsequent marriage, the prior spouse had been absent for four consecutive years and the spouse present had a well-founded belief that the absent spouse was already dead. In case of disappearance where there is danger of death under the circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two years shall be sufficient.

For the purpose of contracting the subsequent marriage under the preceding paragraph, the spouse present must institute a summary proceeding as provided in this Code for the declaration of presumptive death of the absentee, without prejudice to the effect of reappearance of the absent spouse.[16] Art. 42. The subsequent marriage referred to in the preceding Article shall be automatically terminated by the recording of the affidavit of reappearance of the absent spouse, unless there is a judgment annulling the previous marriage or declaring it void ab initio.

A sworn statement of the fact and circumstances of reappearance shall be recorded in the civil registry of the residence of the parties to the subsequent marriage at the instance of any interested person, with due notice to the spouses of the subsequent marriage and without prejudice to the fact of reappearance being judicially determined in case such fact is disputed.