Can property subject to encumbrances be donated?

Donations by reason of marriage of property subject to encumbrances shall be valid. In case of foreclosure of the encumbrance and the property is sold for less than the total amount of the obligation secured, the donee shall not be liable for the deficiency. If the property is sold for more than the total amount of said obligation, the donee shall be entitled to the excess. (Art. 85, FC)

What are the grounds for revoking a donation by reason of marriage?

A donation by reason of marriage may be revoked by the donor on the following grounds:

(1) If the marriage is not celebrated or judicially declared void ab initio except donations made in the marriage settlements, which shall be governed by Article 81;

(2) When the marriage takes place without the consent of the parents or guardian, as required by law;

(3) When the marriage is annulled, and the donee acted in bad faith;

(4) Upon legal separation, the donee being the guilty spouse;

(5) If it is with a resolutory condition and the condition is complied with;

(6) When the donee has committed an act of ingratitude as specified by the provisions of the Civil Code on donations in general.  (Art. 86, FC)

Are donations made by either spouse in favor of the other during the marriage valid?

Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void. (Art. 87, FC) 

Why are donations between the spouses during the marriage prohibited?

Donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. (Ching vs. Goyanko, Jr., G.R. No. 165879, November 10, 2006)

Are donations made by either spouse in favor of their step-children or persons of whom the other spouse is a presumptive heir during the marriage valid?

No. Donations made by either spouse in favor of the  children whom the other spouse had by another marriage (donations to step-children) or persons of whom the other spouse is a presumptive heir during the marriage is not valid because they constitute as an indirect donation to the other spouse which is prohibited by Art. 87 of the Family Code. 

What is the exception to the rule on donations during the marriage?

Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. (Art. 87, Family Code)

What is the extent of the prohibition on donations during the marriage and why?

Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage. (Art. 87)

The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, “the condition of those who incurred guilt would turn out to be better than those in legal union.” (Ching vs. Goyanko, Jr., G.R. No. 165879, November 10, 2006)