Is the family home exempt from execution?

The family home is exempt from execution as expressly provided for in Article 153 of the Family Code.[1]It has been said that the family home is a real right that is gratuitous, inalienable and free from attachment.[2] The great controlling purpose and policy of the Constitution is the protection or the preservation of the homestead - the dwelling place. A houseless, homeless population is a burden upon the energy, industry, and morals of the community to which it belongs. No greater calamity, not tainted with crime, can befall a family than to be expelled from the roof under which it has been gathered and sheltered.[3] The family home cannot be seized by creditors except in special cases.[4]

The nature and character of the property that debtors may claim to be exempt, however, are determined by the exemption statute. The exemption is limited to the particular kind of property or the specific articles prescribed by the statute; the exemption cannot exceed the statutory limit.[5]

Articles 155 and 160 of the Family Code specify the exceptions mentioned in Article 153, to wit:

ARTICLE 155. The family home shall be exempt from execution, forced sale or attachment except:

(1) For nonpayment of taxes;

(2) For debts incurred prior to the constitution of the family home;

(3) For debts secured by mortgages on the premises before or after such constitution; and

(4) For debts due to laborers, mechanics, architects, builders, materialmen and others who have rendered service or furnished material for the construction of the building.

ARTICLE 160. When a creditor whose claims is not among those mentioned in Article 155 obtains a judgment in his favor, and he has reasonable grounds to believe that the family home is actually worth more than the maximum amount fixed in Article 157, he may apply to the court which rendered the judgment for an order directing the sale of the property under execution. The court shall so order if it finds that the actual value of the family home exceeds the maximum amount allowed by law as of the time of its constitution. If the increased actual value exceeds the maximum allowed in Article 157 and results from subsequent voluntary improvements introduced by the person or persons constituting the family home, by the owner or owners of the property, or by any of the beneficiaries, the same rule and procedure shall apply.

At the execution sale, no bid below the value allowed for a family home shall be considered. The proceeds shall be applied first to the amount mentioned in Article 157, and then to the liabilities under the judgment and the costs. The excess, if any, shall be delivered to the judgment debtor.

Related to the foregoing is Article 157 of the Family Code, which provides:

ARTICLE 157. The actual value of the family home shall not exceed, at the time of its constitution, the amount of three hundred thousand pesos in urban areas, and two hundred thousand pesos in rural areas, or such amounts as may hereafter be fixed by law.

In any event, if the value of the currency changes after the adoption of this Code, the value most favorable for the constitution of a family home shall be the basis of evaluation.

For purposes of this Article, urban areas are deemed to include chartered cities and municipalities whose annual income at least equals that legally required for chartered cities. All others are deemed to be rural areas. 

The minutes of the deliberation by the drafters of Family Code on Article 160 are enlightening, to wit:

Justice Puno inquired if the above Article [160] is still necessary. In reply, Judge Diy opined that the above Article is intended to cover a situation where the family home is already worth P500,000 or P1M. Justice Reyes stated that it is possible that a family home, originally valued at P300,000. later appreciated to almost P1M because of improvements made, like roads and plazas. Justice Caguioa, however, made a distinction between voluntary and involuntary improvements in the sense that if the value of the family home exceeded the maximum amount because of voluntary improvements by the one establishing the family home, the Article will apply; but if it is through an involuntary improvement, like the conversion into a residential area or the establishment of roads and other facilities, the one establishing the family home should not be punished by making his home liable to creditors. He suggested that the matter be clarified in the provision.

x x x x

Prof. Bautista objected to the phrase "is worth" since if they will specify that the family home is worth more than the maximum amount at the time it was constituted, they will avoid the suit because the creditor will be given proper warning. Justice Puno opined that this is a question of fact. Justice Caguioa added that, under the second sentence, there will be a preliminary determination as to whether the family home exceeds the maximum amount allowed by law.

x x x x

Justice Caguia accordingly modified the last sentence as follows:

If the excess in actual value over that allowed in Article 157 is due to subsequent voluntary improvements by the person or persons constituting the family home or by the owner or owners of the property, the same rules and procedure shall apply.

Prof. Bautista objected to the above provision, because it will in effect penalize the owner for improving the family home. On the other hand, Justice Puno opined that the provision covers only the excess in actual value over that allowed by law. Judge Diy added that the owner may improve the family home up to P300,000. Justice Caguioa stated that without the above provision, one can borrow money, put it all on improvement of the family home even beyond the maximum value of a family home and, thereby, exempt it from levy on the part of the creditor. He added that anyway, if one voluntarily improves his family home out of his money, nobody can complain because there are no creditors.

Justice Puno posed the question: What is "due to the subsequent improvement?" Is it the "excess" or is it the "increase", or is it the "increase", which constitutes the "excess"? In reply. Justice Reyes opined that it is the "increase" which constituted the "excess". Justice Puno, Justice Reyes and Justice Caguioa modified the last sentence as follows:

If the increase in actual value exceeds that maximum allowed in Article 157 and results from subsequent voluntary improvements introduced by the person or persons constituting the family home or by the owner or owners of the property, the same rule and procedure shall apply.

Prof. Bautista commented that the phrase "increase in actual value" does not include the original value. Justice Puno suggested that they just say "increased actual value", which the Committee approved.[6] [Underscoring supplied]

To summarize, the exemption of the family home from execution, forced sale or attachment is limited to P300,000 in urban areas and P200,000 in rural areas, unless those maximum values are adjusted by law. If it is shown, though, that those amounts do not match the present value of the peso because of currency fluctuations, the amount of exemption shall be based on the value that is most favorable to the constitution of a family home. Any amount in excess of those limits can be applied to the payment of any of the obligations specified in Articles 155 and 160.

Any subsequent improvement or enlargement of the family home by the persons constituting it, its owners, or any of its beneficiaries will still be exempt from execution, forced sale or attachment provided the following conditions obtain: (a) the actual value of the property at the time of its constitution has been determined to fall below the statutory limit; and (b) the improvement or enlargement does not result in an increase in its value exceeding the statutory limit.[7] Otherwise, the family home can be the subject of a forced sale, and any amount above the statutory limit is applicable to the obligations under Articles 155 and 160.

Certainly, the humane considerations for which the law surrounds the family home with immunities from levy do not include the intent to enable debtors to thwart the just claims of their creditors.[8]

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[1] Executive Order No. 209 (As Amended), Article 153, provides:

ARTICLE 153. The family home is deemed constituted on a house and lot from the time it is occupied as a family residence. From the time of its constitution and so long as any of its beneficiaries actually resides therein, the family home continues to be such and is exempt from execution, forced sale or attachment except as hereinafter provided and to the extent of the value allowed by law.

[2] Taneo v. Conn of Appeals, 363 Phil 652 (1999).

[3] Gomez v. Gealone, G.R. No. 58281, 13 November 1991, 203 SCRA 474, citing Young v. Olivarez, 41 Phil. 391, 395 (1921).

[4] Yap v. Chua, G.R. No. 186730, 13 June 2012.

[5] 35 C.J.S. Exemption §26, at 44 (1943).

[6] Minutes of the 179th Meeting of the Civil Code and Family Law Committees held on Saturday, 4 April 1987, 9:00 a.m. at the First Floor Conference Room of Bocobo Hall, U.P. Law Complex, pp. 29-32.

[7] 40 Am. Jur. 2d, Homestead §40, at 285-286 (1999).

If the homestead property is less in amount or value that that which has been specified by the statute, it may be enlarged until it has reached the statutory quantity or value. Where a house and lot are duly selected and declared a homestead, the subsequent erection of an additional dwelling house on the lot does not vitiate the homestead or render any part of its subject to seizure and sale under execution, unless the value of the homestead has increased beyond the statutory limit.

[8] People v. Chavez, 120 Phil. 1019 (1964).