Chapter 3 - EFFECTS OF POSSESSION

Q. What are the two (2) Kinds of Possession?

1. Possession in the Concept of an Owner
2. Possession in the Concept of a Holder
A. Possession in the Concept of an Owner (en concepto de dueno)

Possession in the concept of an owner DOES NOT refer to the possessors inner
belief or inner disposition regarding the property in his possession.

Possession in the concept of an owner refers to his OVERT ACTS which tend to
induce the belief on the part of others that he is the owner. This is regardless of
his good faith or bad faith.

Possession in the concept of an owner is jus possidendi.

(Right TO Possession - a right or incident of ownership)

Possession in the concept of an owner by its nature is provisional. It usually

ends up as ownership.

Q. WHAT ARE THE EFFECTS OR CONSEQUENCES OF POSSESSION IN THE

CONCEPT OF AN OWNER as to TITLE?

1. Possession is converted into ownership after lapse of

time (Article 540)
Art. 540. Only the possession acquired and enjoyed in the concept of owner can
serve as a title for acquiring dominion.
o

Requisite: Possessor claiming adverse possession must in fact be in

possession (actual or constructive) of the property.

Why? A person who is not in possession of the property cannot acquire by

prescription the property by mere assertion of a right therein. (Gamboa v.
Gamboa, 52 Phil. 503)

2. Legal Presumption that Possessor in the Concept of

Owner has a Just Title (Article 541)
Art. 541. A possessor in the concept of owner has in his favor the legal presumption
that he possesses with a just title and he cannot be obliged to show or prove it.

Requisite: For legal presumption of just title to apply to a Possessor in the

concept of an owner, he must be in possession of the property, whether
actual or constructive.

o If there is a true owner disputing the possession or ownership, he must go to

court if he wants to recover his property possessed by a PCO. (Chan v. CA,
L-27488, June 30, 1970)
Q. WHAT IS THE RELEVANCE & EFFECT OF THE (Inner Disposition of the
Possessor) GOOD FAITH or BAD FAITH OF THE POSSESSOR IN THE CONCEPT
OF AN OWNER?
[ Arts. 544, 545, 546, 547, 548, 552 ]
1. GOOD FAITH
a. What are the Requisites of Good Faith ?
i. Ostensible Title
o

If it is not an ostensible title, but a real title, then its ownership.

OSTENSIBLE outwardly appearing as such; nominal, titular, apparent,

illusory,

ii. Vice or Defect in the Title

o

If there was no vice or defect in the title, then its ownership.

Examples of vice or defect in title :

1.
2.
3.
4.

Grantor was not the owner

Requirements for transmission were not complied with
Mistake in the identity of the person
Property was not really res nullius

iii. Possessor is ignorant of the vice or defect; he must have an honest belief that the
thing belongs to him
o Otherwise, its bad faith.

WHAT ARE THE LEGAL EFFECTS OF GOOD FAITH or BAD FAITH if

POSSESSOR is IN THE CONCEPT OF OWNER:
AS TO THE FRUITS (Art. 544, par.1, Art. 545)
1. FRUITS ALREADY RECEIVED (ARTICLE 544, PAR. 1)

Art. 544. A possessor in good faith is entitled to the fruits received before the
possession is legally interrupted.
Natural and industrial fruits are considered received from the time they are gathered
or severed.
Civil fruits are deemed to accrue daily and belong to the possessor in good faith in
that proportion.
Q. Is Possessor in the Concept of Owner (PCO) - in Good Faith, entitled to all the
fruits received before possession is legally interrupted?

PCO is entitled to all the fruits received until possession is legally interrupted
(i.e. before summons is received from court).

After receipt of judicial summons or legal interruption, the right to get the
fruits not yet gathered, ceases.

Q. Is PCO in Bad Faith also entitled to the fruits received before possession is
legally interrupted?
A. NO. Art. 544 applies only to a PCO in Good Faith. If he is in Bad Faith, he has
NO right whatsoever to the fruits, whether gathered or pending.
However, in case the fruits were already gathered before his possession is legally
interrupted, he may be reimbursed for the necessary expenses for production,
gathering and preservation of the fruits, if applicable, under Art. 443, to avoid
unjust enrichment of the true owner/possessor who will get the fruits.
Q. What are the FRUITS referred to in Art. 544?
A. Fruits refer to Natural, Industrial and Civil fruits.

( see Art. 442)

Natural fruits are the spontaneous products of the soil and the
young
and other products of animals.

o Industrial fruits are those produced by lands or any kind through

cultivation or labor.
o Civil fruits are the rents of buildings, the price of leases of lands and
other property
and the amount of perpetual or life annuities or other similar
income.
Q. When are Civil Fruits Deemed to have Accrue?
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Art. 544.

A possessor in good faith is entitled to the

fruits received before the possession is
legally interrupted.

3rd par. - Civil fruits are deemed to accrue daily, and

belong to the possessor in good faith in that
proportion.
Q. What is the rule as to civil fruits when possession of a possessor in good faith
is legally interrupted?
A. Civil fruits (like rents) are accrued daily, Art. 544 applies, NOT Art. 545;
Actual receipt of the rents is immaterial.

Example : X in good faith, possesses a big house which he rents out as

a B&B Inn. Y filed a case for accion reivindicatoria against X and on 20
May 2000, X received summons from the RTC.
Q. If B wins the case against X, who will receive the income or rent received up
to 19 May 2000, and on the date after?
A. If B wins the case against X, all income or rent received up to 19 May 2000
will belong to X. Thereafter, starting 20 May 2000, the rent or income will
pertain to winner/plaintiff -B. For as of 20 May, X can no longer claim good
faith when X received summons from RTC re complaint for recovery of
property.
Q. Possession of X was legally interrupted on 20 May 2000. But if a guest
checked in on May 15, and checked out and paid only on May 30, who will be
entitled to receive the rent or civil fruits within this period?
A.

X will be entitled to the rent that has accrued from May 15-19, before the
possession of X was legally interrupted. Rent paid on May 20-30 will pertain
to B.
That the rent was received or paid only on the 30th of May is immaterial.

Q. When Are Natural Fruits & Industrial Fruits Considered Received?

Art. 544. A possessor in good faith is entitled to the fruits received
before the possession is legally interrupted.
2nd par.:
Natural and industrial fruits are considered
received from the time they are gathered or severed.
Q. When are Natural and Industrial fruits considered received?
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A. From the time they are gathered or severed.

Q. If the possession of PCO is legally interrupted when the crops have already
been gathered, but not yet sold or alienated or consumed, is PCO entitled to
receive these crops or its value?
A. (a) Yes. The law (Art. 544, par. 2) requires only a gathering of severance for
the natural and industrial fruits to be deemed received.
(b) If at the time of legal interruption, the crops have already been gathered,
but are sold only after such interruption, the sale is immaterial.

ILLUSTRATE:
Facts:
X a possessor in good faith, harvested rice from his
farm on 01 Sept. 2000. He sold for P100,000 net, the rice
harvested on 30 Sept. 2000. But on 15 Sept. 2000, he
received summons from the Court due to the recovery action
filed by Y vs. X.
Q. If plaintiff- Y wins the case against X, who will be entitled to receive the
P100K from the rice harvest (industrial fruit) ?

A.

X will be entitled to receive the P100K from the rice harvest (industrial
fruit) under Art. 544, par. 2: A possessor in good faith is entitled to
the fruits received before the possession is legally interrupted.
Natural and industrial fruits are considered received from the
time they are gathered or severed.

B. If at the time of legal interruption, the natural or industrial fruits are still

growing or pending, the rule of pending crops, not that on gathered

crops, should apply. (See Art. 545)
2.

FRUITS

STILL

PENDING (Article 545)

Art. 545. If at the time the good faith ceases, there should be any natural or industrial
fruits, the possessor shall have a right to a part of the expenses of cultivation, and to
a part of the net harvest, both in proportion to the time of the possession. The
charges shall be divided on the same basis by the two possessors.
The owner of the thing may, should he so desire, give the possessor in good faith the
right to finish the cultivation and gathering of the growing fruits, as an indemnity for
his part of the expenses of cultivation and the net proceeds; the possessor in good

faith who for any reason whatever should refuse to accept this concession, shall lose
the right to be indemnified in any other manner.
Q.

If at the time the good faith of a Possessor in the Concept of Owner (PCO)
ceases, or legally interrupted, there should be any natural or industrial fruits,
pending or growing, but not yet gathered or harvested, what will be his rights to
these if any?

A. PCO in good faith is entitled to pro-rate the fruits already growing but not yet
harvested, when his possession was legally interrupted, as follows:
a.) Right to a part of the expenses of cultivation, and;
b.) Right to a part of the net harvest,
c.) Both in proportion to the time of the possession.
Q. How should the fruits be divided or pro-rated?
For example: PCO X planted corn in good faith on land he thinks he owns. It
took the corn 3 months to grow and mature. On the first week of the 3 RD
month, summons is served to X arising from the action to recover filed by Y. At
the end of the 3rd month, the crops are harvested.
A. Under Article 545, the possessor X is entitled to 2/3 of the crop since the
possessor was in good faith possession for 2 months while the corn crop is
growing. However, PCO X also pays 2/3 of the expenses.
Note: What about if crop is rice which need 6 mos. to grow and harvest, and X possessed
only for 2 mos. But X paid more for the 2 mos. of land preparation and planting & labor. But
his share in rice yield net is only 2/6 or 33% if the basis is time-length of possession. While
Y, will have 67% share even if he paid lesser expense for cultivation in the last 4-mos.
before harvest. How should expenses be borne by the parties in this case?
J. Paras opinion: Expenses to be borne in proportion to what each receive from the
harvest/yield. Fair. No unjust enrichment resulting. X will have a share in harvest 33% and
also in expense. Y will share in harvest and expense by 67%.
Applying: in proportion to the time of the possession to the length of
possession
Q. What are the options given to the true owner Y if he wins the case against
PCO X, with regard to the pending fruits under Art. 545?
A. The adjudged owner Y may:
1.) Get his share in the natural or industrial fruits, but he must also pay for his
proportional share in the expenses for cultivation, or;
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2.) If Y is not interested in the pending fruits, or for whatever reason, Y can simply
allow the PCO X to complete the cultivation and harvest, and this will serve as
Ys indemnity for his part of the expenses of cultivation and the net proceeds.
o

If Y elects option 2 but X refuses to accept, X will lose the right to be

indemnified in any other manner (e.g. costs of cultivation).

Q. WHAT ARE THE LEGAL EFFECTS OF GOOD FAITH or BAD FAITH if

POSSESSOR is IN THE CONCEPT OF OWNER:
i.

AS TO NECESSARY EXPENSES (Article 546, par.1)

Art. 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.
Q. What is NECESSARY EXPENSES?
A. Those without which the thing would physically deteriorate or be lost; or
those made for the preservation of the thing.
Example of Necessary Expenses:
1.) Those incurred for cultivation, production and upkeep of the land.
2.) Those made for necessary repairs of the thing possessed
3.) Those made for urgent repairs of the thing possessed
Q. What are the rights of a PCO in GOOD FAITH with respect to NECESSARY
Expenses?
A. PCO in GOOD FAITH, is Entitled to these RIGHTS:
1.) Refund for his necessary expenses.

o Must be filed as a compulsory counter-claim in the same action

filed against PCO. Otherwise, it will be barred; to prevent
multiplicity of suits. (Beltran v. Valbuena, 53 Phil. 697)
o Article 2175. Any person who is constrained to pay the taxes of
another shall be entitled to reimbursement from the latter. (Civil
Code of Phils.)
2.) Retain the thing until he is reimbursed or refunded
Q. What are the rights of a PCO in BAD FAITH as to NECESSARY Expenses?
A. PCO in BAD FAITH as to NECESSARY Expenses:
1.) Entitled to a refund of necessary expenses.
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2.) No right to retain the thing until he is reimbursed for necessary expenses.
o This serves as penalty to the bad faith possessor (Dir. Of Lands v. Abagat, 53 Phil.
147)
ILLUSTRATE:
1. PCO X possess in good faith, an old house and lot which is now subject of a recovery case
filed by the true owner Y. A year before the case was filed, X spent P90K for the
replacement of the roof which has asbestos and leaking; P60k for the electrical re-wiring
and waterline re-piping before X received judicial summons.
Q. Are these constructions deemed necessary expenses?
Q. If Y wins, will he be required to reimburse these expenses to X?
2. PCO X possess in good faith, a farm land which is now subject of a recovery case filed by
the true owner Y. PCO X built on the land a warehouse to store the harvest, and ditches to
irrigate the land.
Q. Are the warehouse and irrigation ditches deemed necessary expenses?
Q. Should Y win vs. X, will Y be required to reimburse X for these expenses?

Q. WHAT ARE THE LEGAL EFFECTS OF GOOD FAITH or BAD FAITH if

POSSESSOR is IN THE CONCEPT OF OWNER:
ii.

AS TO USEFUL EXPENSES (Article 546, par. 2; Art. 547)

Art. 546, par. 2. Useful expenses shall be refunded only to the possessor in good
faith with the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses or of paying
the increase in value which the thing may have acquired by reason thereof.
Art. 547. If the useful improvements can be removed without damage to the principal
thing, the possessor in good faith may remove them, unless the person who recovers
the possession exercises the option under paragraph 2 of the preceding article.
Q. What is USEFUL Expense?
A. Those that add value to the property; or increase the objects productivity; or
for satisfaction of ones spiritual and religious yearnings; or one that gives rise
to all kinds of fruits.

Useful expense may sometimes be deemed luxurious expense depending

on the persons economic capacity or needs;
In general, if only a certain possessor would benefit or enjoy from the
expense or improvement, it may be deemed a luxury. If improvement
benefits all or every possessor, it is deemed a useful expense.
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Determination of whether the expense is useful or luxurious or necessary

is a judicial question of fact.

Example of Useful Expenses:

1.) for irrigation system
2.) for building a chapel
3.) for making of artificial fishponds
4.) for construction of additional rooms in a house, e.g. bathroom, kitchen etc.
5.) for clearing of land formerly thickly covered with trees and shrubberies
Q. What are the rights of a Possessor in the Concept of Owner (PCO) whos in
GOOD FAITH, as to USEFUL Expenses if his possession is later defeated by
another person claiming to be the true owner/possessor?
A. As to USEFUL Expenses, PCO in GOOD FAITH, is Entitled to these RIGHTS:
1.) He is entitled to a REFUND of useful expenses.

The other party who won or recovered the property, has the option to a. Refund the amount of useful expenses; or
b. Pay the increase in value which the thing may have acquired

2.) He is entitled to RETAIN the property until he is reimbursed.

If possessor in good faith exercises his right of retention, he is NOT required to pay
rent
during his stay in the premises until reimbursed.

3.) He is entitled to REMOVE the useful improvements if no damage is caused to

the principal thing, or, unless the other party who won or recovered the
property wants to keep the useful improvements. In the latter case, the party
who won may exercise either :
(a) Refund the amount of useful expenses; or
(b) Pay the increase in value which the thing may have acquired.
Q. If a possessor in good faith wants to remove the useful improvements as no
damage will be caused to the principal property, but the true owner or person who
recovers possession, wants to retain them, who shall prevail?
A. The person who recovers possession will prevail. The right of removal is
subordinate to the right or option to retain granted the owner or person who
recovers possession, provided the latter pays the proper indemnity required in Art.
547.
Example: PCO -A in good faith built good quality wire fences in the land to
prevent other animals from eating the flower and vegetables in the farm.
Landowner B who won the recovery case wanted to retain the fences. But A
wanted to get them as removing them will not cause any damage to the land.
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Q. Who will prevail in case of disagreement between the parties?

A. Landowner B will prevail as the option is given to him by law. However, B

must refund A for the fence expenses (material and labor) as these are
deemed as useful expenses.

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