CIVIL LAW > IX. PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS > B. Ownership > 8. Possession > c. Effects of Possession > iv. Right to Necessary Expenses, Useful Expenses, and Luxurious Expenses
Under Philippine civil law, particularly the provisions of the Civil Code of the Philippines, the effects of possession include rights related to expenses incurred by the possessor over the property. These are classified into necessary expenses, useful expenses, and luxurious expenses, each of which is treated differently depending on the type of possession (e.g., in good faith or in bad faith). Below is a detailed discussion:
1. Necessary Expenses
Necessary expenses are those incurred for the preservation of the property or its improvement that is indispensable to its preservation.
Key Rules:
- Reimbursement by the owner:
- Article 546 of the Civil Code provides that a possessor, whether in good faith or bad faith, is entitled to reimbursement for necessary expenses.
- The owner cannot refuse to pay necessary expenses as these are essential to preserve or maintain the property.
- Retention Right:
- The possessor in good faith has a retention right until the necessary expenses are reimbursed. (Article 546 in relation to Article 546(2)).
- A possessor in bad faith does not have this retention right but is still entitled to reimbursement.
Examples of Necessary Expenses:
- Repairing a leaking roof of a house.
- Replacing a broken water pipe.
- Paying real property taxes, when necessary to avoid delinquency.
2. Useful Expenses
Useful expenses are those that enhance the value of the property or improve its productivity, even if they are not necessary for its preservation.
Key Rules:
- Reimbursement by the owner:
- Article 546 states that only a possessor in good faith is entitled to reimbursement for useful expenses.
- A possessor in bad faith is not entitled to reimbursement for useful expenses.
- Retention Right:
- A possessor in good faith may also retain the property until reimbursed for useful expenses.
- The possessor in bad faith does not have this right.
- Option to Appropriate:
- Article 547 provides that the owner has the option to appropriate the improvements introduced through useful expenses by reimbursing their value, or to allow the possessor in good faith to remove them, provided it does not cause damage to the property.
Examples of Useful Expenses:
- Adding an irrigation system to a piece of agricultural land.
- Constructing a garage in a residential property.
- Installing solar panels to increase energy efficiency.
3. Luxurious Expenses
Luxurious expenses are those incurred for the sole purpose of luxury or embellishment and do not add significant value or utility to the property.
Key Rules:
- No Reimbursement by the Owner:
- Article 548 provides that luxurious expenses are not subject to reimbursement, regardless of the possessor's good faith or bad faith.
- Retention or Removal:
- A possessor in good faith or bad faith may remove the luxurious improvements, provided this does not cause injury or damage to the property.
- If removal of luxurious expenses will damage the property, then the possessor loses the right to remove them unless expressly permitted by the owner.
Examples of Luxurious Expenses:
- Installing a fountain in a garden purely for aesthetic purposes.
- Adding chandeliers made of precious stones.
- Building a koi pond in a property for personal enjoyment.
4. Distinction Between Possessor in Good Faith and Possessor in Bad Faith
The type of possession affects the rights of the possessor concerning expenses:
Possessor in Good Faith:
- Entitled to reimbursement for necessary and useful expenses.
- Has a right of retention until reimbursed for these expenses.
- Can remove luxurious improvements if no damage is caused.
Possessor in Bad Faith:
- Entitled only to reimbursement for necessary expenses.
- No right of retention for any type of expense.
- May remove luxurious improvements if no damage is caused, but has no right to reimbursement for luxurious or useful expenses.
5. Jurisprudence and Application
Supreme Court Rulings:
The Philippine Supreme Court has consistently upheld these provisions, emphasizing:
- The distinction between necessary, useful, and luxurious expenses.
- The protection granted to possessors in good faith, especially their retention rights, until reimbursed for necessary and useful expenses.
- The strict treatment of possessors in bad faith, allowing them only the most basic rights of reimbursement for necessary expenses.
Example Case:
- Heirs of Atienza v. Espidol (G.R. No. 170496, April 30, 2009): The Supreme Court ruled that a possessor in bad faith could not claim reimbursement for useful expenses but was allowed reimbursement for necessary expenses incurred for the preservation of the property.
6. Summary Table of Rights and Obligations
| Type of Expense | Possessor in Good Faith | Possessor in Bad Faith |
|---|---|---|
| Necessary Expenses | Entitled to reimbursement; retention | Entitled to reimbursement; no retention |
| Useful Expenses | Entitled to reimbursement; retention | Not entitled to reimbursement |
| Luxurious Expenses | Not entitled to reimbursement; removal allowed if no damage | Not entitled to reimbursement; removal allowed if no damage |
Conclusion
The provisions on necessary, useful, and luxurious expenses in relation to possession reflect the principle of equity embedded in Philippine law. They ensure that possessors, especially those in good faith, are compensated for their investments in a property while safeguarding the owner’s rights. Proper classification of expenses and the status of possession are critical in resolving disputes over these issues.