Can a Spouse Recover Funds Used to Improve Conjugal Property?

Introduction

A spouse may use inherited money to construct a house or make substantial improvements on property connected with the marriage. The central legal question is whether the improvement belongs exclusively to the spouse who paid for it, forms part of the conjugal partnership, or gives rise only to a reimbursement claim upon liquidation.

The answer depends on the spouses’ property regime, the ownership of the land when the improvement was made, the source of the funds, and the evidence proving payment. This article assumes that the marriage is governed by the conjugal partnership of gains and that the money used for construction came from the inheritance of one spouse.

Why the Source of the Funds Matters

Under Article 109 of the Family Code, property acquired by a spouse during the marriage through a gratuitous title, such as inheritance, is generally the spouse’s exclusive property. Property purchased with the exclusive money of either spouse is likewise exclusive property ([Family Code of the Philippines](#L2.117)).

Thus, inherited money ordinarily remains the separate property of the spouse who received it. The spouse claiming reimbursement must still prove that the inherited funds were actually used for the construction or improvement and must identify the legal basis for reimbursement.

The Supreme Court has held that property acquired by inheritance during marriage remains exclusive property and does not become conjugal merely because it was acquired while the marriage existed (“Tan, et al. v. Court of Appeals, et al.,” G.R. No. 120594, 1997) ([Tan, et al. v. Court of Appeals, et al. (1997)](#J3.8)).

When Improvements Become Conjugal Property

Article 120 of the Family Code governs improvements made on the separate property of either spouse through the expense of the conjugal partnership or through the acts or efforts of either or both spouses. It establishes two possible consequences.

First, if the cost of the improvement and the resulting increase in value are greater than the value of the property before the improvement, the entire property may belong to the conjugal partnership, subject to reimbursement of the value of the original property of the owner-spouse.

Second, if the value of the original property is greater than the cost of the improvement and the resulting increase in value, the owner-spouse retains ownership of the property, subject to reimbursement of the cost of the improvement ([Family Code of the Philippines](#L2.129)).

Ownership of the entire property is settled upon reimbursement, which ordinarily takes place during liquidation of the conjugal partnership. The applicable rule is therefore not simply that the spouse who paid for the construction automatically owns the house or receives the entire amount spent.

Does Exclusive Inheritance Money Create a Reimbursement Claim?

Generally, yes, if the inherited money can be traced to an improvement that benefited property belonging to the conjugal partnership or to the other spouse. The amount and character of the claim, however, depend on the property regime and the ownership of the land.

If the land is the exclusive property of one spouse and the other spouse uses inherited funds to construct a building on it, the contributing spouse must establish the actual amount spent, the source of the funds, and the legal basis for charging the owner-spouse or the partnership.

If the improvement was made at the expense of the conjugal partnership, Article 120 may determine whether the entire property belongs to the partnership or remains with the owner-spouse subject to reimbursement. The provision focuses on the cost of the improvement, the resulting increase in value, and the value of the property before the improvement—not merely on the identity of the person who physically paid the contractor.

The Supreme Court has recognized that an exclusive property may be affected by improvements made at the expense of the partnership, while the owner-spouse remains entitled to reimbursement under the statutory rules (“Nayve-Pua v. Union Bank of the Philippines,” G.R. No. 253450, 2024) ([Nayve-Pua v. Union Bank of the Philippines (2024)](#J2.8)).

When the House Remains Exclusive Property

A house constructed during the marriage does not automatically become conjugal when the construction was financed entirely with the separate funds of the spouse who owned the land. The Supreme Court has held that buildings constructed on a spouse’s separate land using that spouse’s private money may remain separate property (“Diaz v. Erlanger & Galinger, Inc., et al.,” G.R. No. 38052, 1933) ([Diaz v. Erlanger & Galinger, Inc., et al. (1933)](#J6.1)).

Similarly, the Supreme Court has ruled that a building constructed during marriage on paraphernal land using funds exclusively obtained and managed by the wife remained paraphernal where there was no showing that conjugal funds were used (“Villabona v. Court of Appeals, et al.,” G.R. No. 10799, 1958) ([Villabona v. Court of Appeals, et al. (1958)](#J1.7)).

These cases illustrate the importance of proving the source of the construction funds. A spouse who merely alleges that personal money was used may not prevail without bank records, inheritance documents, receipts, contractor records, or other competent evidence.

What Happens Upon Dissolution of the Partnership?

Upon dissolution, the spouses’ property and obligations must be identified and accounted for before the net partnership assets are divided. A reimbursement claim should be presented during liquidation, supported by evidence showing:

• the spouse’s receipt of the inheritance;
• the deposit, withdrawal, or transfer of the inherited funds;
• payment to the contractor, suppliers, workers, or professionals;
• the ownership status of the land before construction; and
• the cost and resulting value of the improvement.

The claim is not necessarily equal to the current market value of the house. Depending on the governing rule and the evidence, the relevant amount may involve the documented cost of the improvement, the increase in value, or the value of the original land.

A spouse should also distinguish between a personal reimbursement claim and a claim belonging to the conjugal partnership. If partnership funds paid for the improvement, the partnership may have the claim. If the spouse’s separate inheritance paid for the improvement, the spouse may assert a separate-credit claim, subject to the applicable property rules and proof.

Evidence Required to Prove the Claim

Courts determine whether property is conjugal or exclusive from the law and the evidence, not from a spouse’s characterization alone. The Supreme Court has emphasized that the nature of property requires examination of titles, documents, and surrounding facts (“Candano-Lim v. Lim, et al.,” G.R. Nos. 262727-28, 2025) ([Candano-Lim v. Lim, et al. (2025)](#J9.29)).

The following documents are particularly useful:

• the decedent’s will, settlement documents, deed of donation, or other inheritance records;
• bank statements showing receipt and use of the inheritance;
• construction contracts, official receipts, invoices, and payroll records;
• building permits, plans, tax declarations, and certificates of occupancy;
• proof of the land’s ownership before and during construction; and
• an appraisal establishing the property’s value before and after the improvement.

Cash payments are more difficult to prove because they may not establish that the money came from the inheritance or that it was used for the particular property. Documentary evidence should therefore be preserved as early as possible.

Reimbursement Is Not Automatically Enforceable Against a Purchaser

If the owner-spouse later sells the property, the reimbursement claim is ordinarily directed against the spouse or the spouse’s estate, not automatically against the buyer. The Supreme Court has ruled that the obligation to reimburse for improvements rests on the spouse upon whom ownership is vested and does not generally bind a purchaser who acquired the property through a valid sale (“Ferrer v. Ferrer, et al.,” G.R. No. 166496, 2006) ([Ferrer v. Ferrer, et al. (2006)](#J4.9)).

This makes timing important. A spouse who believes that separate funds were used to improve marital property should document and assert the claim before liquidation, settlement, sale, or distribution of the estate.

Illustrative Example

Suppose a wife inherits ₱2 million from her parents and uses ₱1.5 million to construct a house on land owned exclusively by her husband. The wife must prove both the inheritance and the application of the money to the construction.

If the land remains the husband’s exclusive property under Article 120, the legal result depends on the comparative values of the land and the improvement and on whether the construction is treated as having been made at the expense of the conjugal partnership or with the wife’s separate funds. The wife cannot assume that she owns the house merely because she paid for it, but she may have a reimbursement or accounting claim supported by the evidence.

If, on the other hand, the land and the improvement form part of the conjugal partnership, the wife’s separate contribution should be raised during liquidation so that the partnership accounting reflects the amount properly chargeable or reimbursable.

Effect of the Property Regime

The analysis changes if the spouses are governed by the absolute community of property rather than the conjugal partnership of gains. Under the absolute community regime, property acquired during marriage is generally presumed community property unless shown to fall within an exclusion ([Family Code of the Philippines](#L2.94)).

Because the legal consequences differ, the first step is to determine whether the spouses executed a marriage settlement, when the marriage took place, and whether the Family Code or an earlier Civil Code regime applies. A conclusion based only on the fact that the money came from an inheritance may be incomplete without identifying the governing regime.

Recommended Steps Before Filing a Claim

1. Identify the property regime. Examine the marriage settlement, marriage date, and applicable law.
2. Establish the land’s ownership. Obtain the title, deed, tax declaration, and acquisition records.
3. Trace the inheritance. Collect probate, settlement, donation, bank, and transfer documents.
4. Reconstruct construction payments. Organize contracts, invoices, receipts, permits, and payment records.
5. Obtain a valuation. Determine the property’s value before the improvement, construction cost, and resulting increase in value.
6. Assert the claim during liquidation. Include the reimbursement demand in the inventory, accounting, settlement, or judicial proceeding.

Conclusion

A spouse who uses inherited money to improve marital real estate may have a reimbursement claim, but recovery is not automatic. The result depends on the property regime, ownership of the land, the source and traceability of the funds, the cost and value of the improvement, and the rules governing liquidation.

The safest course is to preserve complete financial and construction records and to raise the claim during the formal accounting of the spouses’ property. A spouse should not rely solely on title registration, personal assertions, or the fact that the improvement was paid for during marriage.

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