Prop Effects of Possession

ARTICLE 546. Purpose: To administer complete justice between the owner of the land and the possessor in good faith, in such a way as neither the former nor the latter may enrich himself of that which does not belong to him, nor any one of them remain prejudiced by the vagueness of the rules Possessor in good faith entitled to many rights: Because necessary expenses are incurred for the preservation of the realty in order that it may produce the natural, industrial, and civil fruits it ordinarily produces; while expenses purely for ostentation and mere pleasure only of the civil fruits. Basis of amount to be refunded: The current market value of the improvements which should be the basis of the reimbursement to be made by the owner to the builder. Possessor in bad faith generally without rights, except: 1. Art. 546: right to be refunded for necessary expenses 2. Art. 549: limited right of removal of improvements for pure luxury Necessary expenses – expenses made for the preservation of the thing or those which seek to prevent the waste, deterioration, or loss of the thing; or those without which the thing would deteriorate or be lost. Among such expenses are: 1. Incurred for cultivation, production and upkeep and for repairs of a house which was uninhabitable and almost in ruins 2. Incurred for ordinary repairs required by the wear and tear due to the natural use of the thing and are indispensable for its preservation (Art. 592) in as much as they did not increase the value of the thing, but merely prevent it from becoming useless 3. Taxes for which a co-owner may compel the others to contribute.1 (Art. 448) Under Art. 2175, any person who is constrained to pay the taxes of another shall be entitled to reimbursement from the latter NOT necessary expenses: 1. Filling in and leveling of a land because it is not a repair but an improvement 2. Construction of a house because it is not necessary for the preservation of the land 3. Making improvement on a land by a purchaser at a sheriff’s sale just to prevent redemption 4. Paying costs of litigation over the property for they shall be borne by every possessor 5. Introducing improvements consisting of the addition of a dining, kitchen, closet and kitchen for without them the house would have continued to stand just as before Rights of possessor with respect to necessary expenses: If possessor is in good faith: 1. Right of reimbursement 2. Right of retention – during this period, he cannot be obliged to pay rent nor damages for refusing to vacate the premises for he is merely exercising his right of retention which has the character of a real right registerable as an encumbrance on the certificate of title. 2 If possessor is in bad faith:  Right of reimbursement without right of retention – a possessor in bad faith sued by the owner to recover the property should file a counterclaim for the refund of necessary expenses to which he is entitled; otherwise a subsequent action to recover the same will be barred. A possessor whether in good or bad faith, is not granted the right of removal with respect to necessary expenses as they affect the existence or substance of the property itself.

Useful expenses – expenses which add value to a thing, or augment its income, or introduce improvements thereon or increase its usefulness to the possessor, or better serve the purpose for which it is intended. Among such expenses are: 1. Levelling the ground, cutting down the trees and removing the shrubbery 2. Introducing improvements consisting of a dining room, kitchen, closet and ballroom, and a stable suitable as a coach house and dwelling 3. Construction of a fishpond as it gives its owner benefits called industrial benefits, or an irrigation system but not including farming implements and work animals which the possessor retains and which do not remain on the land 4. Erection of a chapel as it satisfies spiritual and religious yearnings and contributes to the attainment of man’s higher destinies Rights possessor with respect to useful expenses: If possessor is in good faith: 1. Right of reimbursement and retention, as with regard to necessary expenses 2. Right of removal - provided the removal can be done without damage to the principal thing3 (Art. 547) 3. Right to offset – where the owner and the possessor in good faith have claims against each other, the court may order offsetting after the parties have proved their respective claims. The amount to be offset is factual in nature and needs to be proved by factual evidence. If possessor is in bad faith: No right whatsoever  Useful expenses incurred during the period of retention by a possessor in good faith are to be considered in bad faith  One who possesses a land registered in the name of another under the Torrens system cannot be a possessor in good faith, the registration being binding on the whole world. A Torrens title issued pursuant to a court decree is superior to a homestead patent granted subsequent to such decree  Possession of a lot by lessees is not possession in good faith for purposes of Art. 546, and after the lessees become coowners thereof, no co-owner can claim prior possession of any individual portion as to entitle him to a refund of useful expenses made on his share once the lot is finally partitioned ARTICLE 547. Removal of useful expenses: If possessor is in good faith – right of removal is given subject to two conditions: 1. The removal can be done without damage or injury to the principal thing 2. The prevailing party does not choose to keep the improvements by refunding the expenses incurred or paying the increase in value which the thing may have acquired by reasons thereof Note: If the two conditions are present, the prevailing party cannot refuse the possessor’s right to remove but he can compel him to remove. The right is purely potestative. If the first condition is not present and the prevailing party does not choose to reimburse the possessor in good faith, the latter has no right to remove. If possessor is in bad faith – he cannot remove the useful improvement even if the removal is possible without injury to the principal thing Damage: the useful improvements must have been attached to the principal thing in a more or less permanent way that their removal would necessarily cause some damage or injury to the thing. The damage must be substantial or important, one that will cause diminution in the value of the property ARTICLE 548.

1 Cabigao v. Valencia, on whether or not the payment of land tax was necessary expense: “This question is generally solved on the assumption that the land tax is an encumbrance upon, or charge against, the net income of the property and not against the property itself, for which reasons by the strict law of equity, the same must be paid by the one receiving its fruits.” The thing itself is netiher impaired nor destroyed by the non-payment of this expenditure. The code agrees with this doctrine: the payment of the land tax is neither necessary nor useful, not purely for ostentation or pleasure; it is a charge against the property and as such must be considered included in the second paragraph of Art. 452 (now Art. 454.) It would be absurd to require the payment of that charge of a person who does not derive any benefit from the property.

2 This principle applies as well to useful expenses. But the retention right does not entitle the possessor to the fruits of the thing.

Expenses for pure luxury or mere pleasure – also referred to as luxurious expenses, ornamental expenses, or expenses for pure ostentation. These are expenses not necessary for the preservation of a thing nor do they increase its productivity although they add value to the thing, but are incurred merely to embellish the thing and for the convenience or enjoyment of particular possessors. Right of possessor with respect to luxurious expenses: If the possessor is in good faith:  Right of removal without right of reimbursement – he is not entitled to refund but may remove the ornaments on two conditions:

3 Art. 1678

a. b.

The principal thing suffers no damage or injury thereby The successor in possession does not prefer to refund the amount expended

If the possessor is in bad faith:  Right of reimbursement – the possessor in bad faith has the same rights above but the owner or lawful possessor is liable only for the value of the ornaments, in case he prefers to retain them, at the time he enters into possession Note: Neither the possessor in good faith nor the possessor in bad faith is entitled to reimbursement for luxurious expenses unless the prevailing party decides to keep the improvements ARTICLE 549. Rights and liabilities of possessor in bad faith: 1.

Fruits – not entitled to the fruits a. He must reimburse the value of the fruits received subject to Art. 443 b. He has no right whatsoever with respect to pending fruits (Art. 449) c. He must reimburse the value of fruits which the legitimate possessor could have received subject to Art. 443

2.

Necessary expenses – only entitled to reimbursement without a right of retention (Art. 546(1), Art. 443)

3.

Useful expenses a. Not entitled to refund (art. 546(2)) b. Forfeits the improvements (Art. 449) c. No right of removal



If the possessor is in bad faith: absolutely liable in every case until delivery is made to the lawful possessor ARTICLE 553. 

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5.

Charges – he shall share them with the owner or lawful possessor in proportion to the time of their possession

6.

Deterioration or loss – always liable, whether due to his fault or negligence, or due to a fortuitous event

7.

Others – liable to the owner or lawful possessor for an amount equal to a reasonable rent for the use and occupation of the property



1.

 

Covers all the natural accessions mentioned in Art. 457-465 No distinction made regarding the kind of possession

ARTICLE 552. Liability for loss or deterioration: If the possessor is in good faith:  Before receipt of judicial summons: possession in good faith is presumed to continue in the same character, not liable even if due to his fault or negligence

Abandonment – is the voluntary renunciation of all rights which a person has over a thing thereby allowing third person to acquire ownership or possession thereof by means of occupancy. Abandonment is always gratuitous. Abandoner: must have a right to the thing possessed and the legal capacity to renounce it (Art. 38-39). May be the owner or a mere possessor, but the latter obviously cannot abandon ownership which belongs to another Intention: owner cannot be held to have abandoned unless a. Until at least he has some knowledge of the loss of its possession or of the thing b. A thing cannot be considered abandoned under the law until the following are given up i. Hope of recovery – spes recuperandi ii. Intention to return – animus revertendi Effect: thing becomes without an owner or possessor and is converted into res nullius and may thus be acquired by a third person by occupation Applicability: not applicable to land which said mode of acquisition is not available (Art. 714)

2.

Assignment – the complete transmission of the thing or right to another by any lawful manner. It may either be onerous or gratuitous title.

3.

Destruction, total loss4 or withdrawal from commerce – covers not only that which is caused voluntarily or intentionally but also that which is caused by accident.

4.

Possession of another for more than one year – refers to possession de facto (possession as a fact or material possession) and not de jure (legal right or real right of possession)  Possession by violence (Art. 537), or force, intimidation, strategy or stealth (Art. 536) for more than 1 year will cause the loss of possession de facto according to law on forcible entry.  Possession by mere tolerance (Art. 537) even for over a year does not affect possession de facto.  The remedy of accion publiciana prescribes after the lapse of 10 years. The owner may bring an accion reivindicatoria to recover possession de jure unless he is barred by prescription.

5.

Recovery by lawful owner or possessor – in a reivindicatory action or by the lawful possession in an action to recover the better right of possession

Reason: They redound to his benefit, the court action being necessary to maintain his possession

ARTICLE 551.

Applies to both real and personal property except No. (4) which refers only to real property.

Modes of losing possession:

ARTICLE 550.

“Every possessor” – to any possessor, in good faith or in bad faith, in the concept of owner or holder, or in his own name or in that of another. It does not include the prevailing party who succeeds in the possession

The presumption is useful for purposes of prescription.

ARTICLE 555.

Two subsequent cases have categorically ruled that “the right given a possessor in bad faith to remove improvements applies only to improvements for pure luxury or mere pleasure subject to Art. 549. Luxurious expenses a. Not entitled to refund b. Loses the improvements but granted the limited right of removal c. In case the lawful possessor decides to retain the improvements, he shall pay only the value they may have at the time he enters into possession

But he is liable for necessary expenses even if the thing for which they were incurred no longer exists. Necessary expenses are not considered improvements.

ARTICLE 554.

Note: As a matter of equity, if the lawful possessor can retain the improvements introduced by the possessor in bad faith for pure luxury or mere pleasure only by paying the value thereof at the time he enters into possession, then a possessor in bad faith should be allowed to remove useful improvements unless the lawful owner or possessor chooses to pay for their value at the time said improvements were introduced.

4.

After receipt of judicial summons: good faith is converted into bad faith; only liable in case of fraud or negligence but not for damage due to fortuitous event

ARTICLE 556. Control of movables ceases: deemed lost when they cease to be under the control of the possessor either because 1. They have come into the possession of a third person 2. Although they have not been taken by another a. The possessor has completely no idea of their whereabouts or location b. Even if known, they cannot be recovered, whether as a matter of fact or of law

4 Art. 1189

3. Control of movables remain: not lost by the mere fact that the possessor does not know for the time being the precise whereabouts of a specific movable when he has not given up all hope of finding it; he has not lost legal right to the object and retains his juridical control of the thing which remains in his (not another’s) patrimony.

When owner cannot recover Doctrine of law that no one can give what he has not. Sale is a derivative mode of acquiring ownership and the vendee gets only such rights as the vendor had. Exceptions:

ARTICLE 557.

a.

Against a recorded title, ordinary prescription of ownership or real rights shall not take place to the prejudice of a third person, except in virtue of another title also recorded and the time shall begin to run from the recording of the latter. (Art. 1126)

b. c.

ARTICLE 558. d. “Possessor” – same possessor mentioned in Art. 525  

e. Authority or subsequent ratification (Art. 1317) Possession may be acquired for another by a stranger provided there be subsequent ratification (Art. 532)

f.

ARTICLE 559.

g.

“Movable property” – pertains to a specific or determinate thing If the acquisition was in good faith (Art. 1127), below are the rules: 1.

Possession equivalent to a title Doctrine of irrevindicability: possession in good faith of a movable is presumed ownership. It is equivalent to a title. No further proof is necessary. Purpose: facilitating transactions on movables which are usually done without special formalities. The possessor’s title, however, is not absolute. It is equivalent to a title but not the title itself. It is merely presumptive because it can be defeated by the true owner.

ARTICLE 560. Animals may be: 1. Wild – animals, whether terrestrial or aquatic, living in a state of nature independently of and without the aid and care of man - may be the object of hunting. (Art. 713) They are possessed only if they are under one’s control. Possession is lost when they regain their freedom or come under another’s control. 2.

Domesticated or tamed – animals which are wild or savage by nature but have been subdued and made use of by man and become accustomed to live in a tamed condition - possessed if they habitually return to the premises of the possessor (Art. 715-716)

3.

Domestic or tame – or any of the various animals which live and are born and reared, under the control and care of man, lacking the instinct to roam freely.

Exception: a. b.

Where owner or possessor has lost possession of a movable Has been unlawfully deprived of a movable

These two can still enforce right of ownership without reimbursement against the actual possessor or even a bona fide purchaser for value, except when the possessor acquired it in a public sale. Unlawful deprivation – includes all cases of taking that constitutes a criminal offense (conviction is not necessary), such as theft, robbery, estafa, etc, including those involving abuse of confidence The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision of law like Art. 559.

Where the owner of the movable is, by his conduct, precluded from denying the seller’s authority to sell Where the law5 enables the apparent owner to dispose of the movable as if he were the true owner thereof Where the sale is sanctioned by statutory or judicial authority Where the sale is made at merchant’s stores, fairs or markets (Art. 1505) Where the seller has a voidable title which has not been avoided at the time of the sale to the buyer in good faith for value and without notice of the seller’s defect of title (Art. 1506) Where recovery is no longer possible because of prescription (Art. 1132) Where the possessor becomes the owner of the thing in accordance with the principle of finder’s keeper (Art. 719)

ARTICLE 561.  



Applies to both possession in good faith as well as to possession in bad faith, but only if beneficial to the possessor A possessor in good faith will be deemed to be in continuous possession for purposes of prescription (Art. 554) A possessor in bad faith is not liable for the fruits he recovered during the time he was unlawfully deprived of possession, for to consider him in possession continuously would be prejudicial and not redound to his benefit.

Effect of non-payment of price by transferor: A seller (voluntary) of movable property who was not paid by the first buyer who, in turn, sold it to another who acquired it in good faith, cannot claim to have been “unlawfully deprived of his property.” It only creates a right to demand payment or to rescind the contract, or to criminal prosecution of bouncing checks. Proof by the owner of a chattel is necessary in order to contest the apparent title of the possessor. Remedy:  

2.

Replevin under Rule 60, Rules of Court The mere filing of a criminal case by the owner against the transferor does not justify a court in distributing the possession of the possessor in good faith because such filing does not necessarily mean that loss or unlawful deprivation has occurred and furthermore, the possessor not being a party to the criminal case, the court has no jurisdiction over him.

Where the property was acquired at a public sale – owner cannot recover without reimbursing the price paid thereof Public sale – is one where there has been a public notice of the sale in which anyone is allowed to bid for the object he desires to buy

5 Such as the Property Registration Decree, The Negotiable Instruments Law, and the Warehouse Receipts Law; see Art. 1507-1520 of CC