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.
o

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.

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.

o
o
o

( see Art. 442)

Natural fruits are the spontaneous products of the soil and the young
and other products of animals.
Industrial fruits are those produced by lands or any kind through
cultivation or labor.
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?

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?
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

gathered or severed.

received

from the time they are

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;
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.

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)

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.
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.

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.
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.