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This article was originally published on June 1, 2022 and has been updated to reflect recent legal developments.

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

AT A GLANCE:

Good faith is an  intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry.

Under the Civil Code of the Philippines, possession may be exercised either in good faith or in bad faith. This distinction is significant because it determines the possessor’s rights over fruits, reimbursement for expenses, improvements introduced on the property, and liability for loss or destruction.

Presumption of Good Faith

The Civil Code begins with a fundamental presumption. 

Article 527 provides that  good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof.

Definition of Good Faith

Article 526 defines a possessor in good faith as one who is not aware of any flaw in his title or mode of acquisition that would invalidate it.

Article 526, paragraph 3 further provides that a mistake upon a doubtful or difficult question of law may be the basis of good faith.

In Florentino, Troadio and Pedro, all surnamed Ochoa v. Mauro Apeta and Apolonia Almazan, G.R. No. 146259, September 13, 2007, the Supreme Court defined good faith as:

An intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. 

Essence of good faith

The essence of good faith lies in an honest belief in the validity of one’s right, ignorance of a superior claim and absence of intention to overreach another. Applied to possession, one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. This principle was affirmed in the case of Florentino v. Apeta.

When Good Faith Ceases

Article 528 states that possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully.

But, what are the Rights of a Possessor in Good faith? 

1.) Rights to Fruits (Article 544, Civil Code)

A possessor in good faith is entitled to the benefits received before his 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.

2.) Rights Upon Cessation of Good Faith (Article 545, Civil Code)

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.

3.) Reimbursement for Expenses (Article 546 to 548, Civil Code)

1. In case of necessary expenses, every possessor shall be refunded but only the possessor in good faith may retain the thing until he has been reimbursed therefor.  (Article 546(1), Civil Code)
2. In case of useful expenses, only the possessor in good faith shall be refunded 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. (Article 546(2), Civil Code)
3. If 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 Article 546(2). (Article 547, Civil Code)
4. For expenses for pure luxury or mere pleasure,  it shall not be refunded to the possessor in good faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his successor in the possession does not prefer to refund the amount expended. (Article 548, Civil Code)

4.) Liability for Loss or Deterioration (Article 552(1), Civil Code)

A possessor in good faith shall not be liable for the deterioration or loss of the thing possessed, except in cases in which it is proved that he has acted with fraudulent intent or negligence, after the judicial summons.

Related Articles:

• WHAT IS POSSESSION?
• HOW DO YOU ACQUIRE POSSESSION?

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.

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