MODULE 10- SALES

LAST PART
EXTINGUISHMENT OF
SALE
(ARTS. 1600 – 1623, NCC)
 CAUSES (ARTS. 1600, 1231, NCC)

Art. 1600. Sales are extinguished by the same causes as

all other obligations, by those stated in the preceding
articles of this Title, and by conventional or legal
redemption.
1. Same causes as in all other obligations;
2. Conventional redemption;
3. Legal redemption.
MODES OF EXTINGUISING AN OBLIGATION
Article 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
(6) By novation.

Other causes of extinguishment of obligations, such as annulment of

voidable contracts, rescission, fulfillment of a resolutory condition, and
prescription, are governed elsewhere in this Code. (1156a)
 CONVENTIONAL REDEMPTION
(ART. 1601, NCC)

Conventional redemption – that which takes place when

vendor reserves the right to purchase the thing sold with the
obligation to reimburse to the vendee the price of the sale,
expenses of the contract, other legitimate payments made by
reason of the sale, as well as necessary and useful expenses on
the thing sold (Arts. 1601, 1616, CC).
DEFINITION OF EQUITABLE MORTGAGE

One which although lacking in some formality, form

or words, or other requisites demanded by a statute
nevertheless reveals the intention of the parties to
charge a real property as security for a debt, and
contains nothing impossible or contrary to law. (41
Corpus Juris 303).
DEFINITION OF EQUITABLE MORTGAGE

One which although lacking in some formality, form

or words, or other requisites demanded by a statute
nevertheless reveals the intention of the parties to
charge a real property as security for a debt, and
contains nothing impossible or contrary to law. (41
Corpus Juris 303).
 EQUITABLE MORTGAGE, (ART. 1602 -1604, NCC)

One which lacks the proper formalities, form of words, or other requisites
prescribed by law for a mortgage, but shows the intention of the parties to make
the property subject of the contract as security for a debt and contains nothing
impossible or contrary to law (Cachola vs. CA 208 SCRA 496).

Instances when there can be a presumption as to equitable mortgage:

a. Parties must have entered into a contract denominated as a contract of sale;
b. The intention of the parties was to secure an existing debt by way of
mortgage.
In the cases referred to in Arts. 1602 and 1604, the apparent vendor may ask for
the reformation of the instrument.
Remedy of Reformation:
To correct the instrument so as to make it express the true intent of the parties.
 EQUITABLE MORTGAGE
DEFINITION AND ELEMENTS

(a) The contract entered into is denominated as a Sale (absolute

or a retro); and

(b) Real intention was to secure an existing debt by way mortgage

Molina v. CA, 398 SCRA 97 (2003)

9
 EQUITABLE MORTGAGE
Art. 1602. The contract shall be presumed to be an
equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is
unusually inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to
repurchase another instrument extending the period of
redemption or granting a new period is executed;
 EQUITABLE MORTGAGE
Art. 1602. The contract shall be presumed to be an equitable
mortgage, in any of the following cases: cont’d.
(4) When the purchaser retains for himself a part of the purchase
price;
(5) When the vendor binds himself to pay the taxes on the thing
sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit
to be received by the vendee as rent or otherwise shall be
considered as interest which shall be subject to the usury laws.
(n)
 EQUITABLE MORTGAGE
When there is doubt as to whether the
contract is a contract of sale with right to
repurchase or an equitable mortgage, the
presumption under the law is that is equitable
mortgage.
(Art. 1603, CC).
EQUITABLE MORTGAGE

Art. 1604. The provisions of Article 1602 shall

also apply to a contract purporting to be an
absolute sale.
 Remedy of Reformation

Art. 1605. In the cases referred to in Articles 1602 and

1604, the apparent vendor may ask for the reformation of
the instrument.
 TIME WITHIN WHICH TO REDEEM
Art. 1606. The right referred to in Article 1601, in the absence
of an express agreement, shall last four years from the date of
the contract.
Should there be an agreement, the period cannot exceed ten
years.
However, the vendor may still exercise the right to repurchase
within thirty days from the time fi nal judgment was rendered in
a civil action on the basis that the contract was a true sale with
right to repurchase.
 TIME WITHIN WHICH TO REDEEM
Rules:
1) No time agreed upon — 4 years from date of contract.
2) Time agreed upon — period cannot exceed 10 years.
 EQUITABLE MORTGAGE cont’d

RATIONALE OF EQUITABLE MORTGAGE PRINCIPLE

Prevent circumvention of law on usury and rule against pactum

commissorium, i.e. against a creditor appropriating the mortgage property.
To end unjust or oppressive transactions or violations in connection with
a sale or property.
Spouses Miseña v. Rongavilla, 303 SCRA 749 (1999).
Matanguihan v. CA, 275 SCRA 380 (1997)
Lao v. CA, 275 SCRA 237 (1997)

17
RIGHT OF SELLERS A RETRO TO REDEEM
PROPERTY FROM PERSONS OTHER THAN THE
BUYER A RETRO

Art. 1608. The vendor may bring his action against every
possessor whose right is derived from the vendee, even if
in the second contract no mention should have been made
of the right to repurchase, without prejudice to the
provisions of the Mortgage Law and the Land Registration
Law with respect to third persons.
RIGHT OF SELLERS A RETRO TO REDEEM
PROPERTY FROM PERSONS OTHER THAN
THE BUYER A RETRO
Example:
S sold B with right to repurchase. B sold the thing to T. In
the second contract, no mention was made of the right of
repurchase. Can S proceed against T?
ANS.: Yes, without prejudice to the provisions of the
Mortgage Law and the Land Registration Law with respects
to third persons.
Subrogation of Buyer in the Seller’s Rights
and Action
Art. 1609. The vendee is subrogated to the vendor’s rights
and actions.
Subrogation of Buyer in the Seller’s Rights
and Action
Examples of Rights of Vendor Transferred to the Vendee
(a) Right to mortgage the property (provided seller is really the owner);
(b) Right to continue prescription;
(c) Right to receive fruits. Thus, the seller in making the repurchase, has no right to
require the buyer to make an accounting of the products received from the land.
(Lustado v. Penol, et al., L-10825, Sept. 27, 1957).
WHEN SELLER’S CREDITOR CAN USE SELLER’S
RIGHT OF REDEMPTION

Art. 1610. The creditors of the vendor cannot make use of

the right of redemption against the vendee, until after
they have exhausted the property of the vendor.
 WHEN SELLER’S CREDITOR CAN USE SELLER’S
RIGHT OF REDEMPTION

When Seller’s Creditor Can Use Seller’s Right of Redemption

(a) Example:
S sold to B with pacto de retro. S has unpaid creditors. Can the
creditors exercise S’s right of redemption?
ANS.: Yes, but only if S’s properties have first been exhausted.

(b) The buyer a retro as a rule therefore possesses a better

right to the property than the creditors of the seller.
WHEN SELLER MAY BE REQUIRED TO REDEEM THE
WHOLE PROPERTY ALTHOUGH HE HAD SOLD ONLY
PART THEREOF
Art. 1611. In a sale with a right to repurchase, the vendee
of a part of an undivided immovable who acquires the
whole thereof in the case of Article 498, may compel the
vendor to redeem the whole property, if the latter wishes
to make use of the right of redemption.
RULE WHEN PROPERTY OWNED IN COMMON IS SOLD
BY THE CO-OWNERS JOINTLY AND IN THE SAME
CONTRACT

Art. 1612. If several persons, jointly and in the same

contract, should sell an undivided immovable with a right
of repurchase, none of them may exercise this right for
more than his respective share.
The same rule shall apply if the person who sold an
immovable alone has left several heirs, in which case each
of the latter may only redeem the part which he may have
acquired.
When Buyer Cannot Be Compelled to
Consent to a Partial Redemption
Art. 1613. In the case of the preceding article, the vendee may
demand of all the vendors or co-heirs that they come to an agreement
upon the repurchase of the whole thing sold; and should they fail to
do so, the vendee cannot be compelled to consent to a partial
redemption.

Example:
In the case given in Art. 1612, X has even the right to refuse to let A
redeem A’s share under the conditions set in Art. 1613. In other words, X
may ask that A, B, and C agree to redeem the whole thing. If they fail to
do so, X cannot be compelled to consent to a partial redemption.
When Co-Owners Sell Their Shares
Separately
Art. 1614. Each one of the co-owners of an undivided immovable who
may have sold his share separately, may independently exercise the
right of repurchase as regards his own share, and the vendee cannot
compel him to redeem the whole property.
Rule if Buyer Dies, Leaving Several Heirs

Art. 1615. If the vendee should leave several heirs, the

action for redemption cannot be brought against each of
them except for his own share, whether the thing be
undivided, or it has been partitioned among them.
But if the inheritance has been divided, and the thing sold
has been awarded to one of the heirs, the action for
redemption may be instituted against him for the whole.
WHAT SELLER MUST GIVE BUYER IF
REDEMPTION IS MADE
Art. 1616. The vendor cannot avail himself of the right
of repurchase without returning to the vendee the
price of the sale, and in addition:
(1) The expenses of the contract, and any other
legitimate payments made by reason of the sale;
(2) The necessary and useful expenses made on the
thing sold.
 CONVENTIONAL REDEMPTION
The right which the vendor reserves to himself, to
reacquire the property sold provided he returns to the
vendee:

1. the price of the sale;

2. expenses of the contract;
3. any other legitimate payments made therefore;
4. the necessary and useful expenses made on the thing
sold; and
5. fulfill other stipulations which may have been agreed
upon.
Rule With Respect to Fruits

Art. 1617. If at the time of the execution of the sale there should be on
the land, visible or growing fruits, there shall be no reimbursement for or
prorating of those existing at the time of redemption, if no indemnity was
paid by the purchaser when the sale was executed.
Should there have been no fruits at the time of the sale, and some exist at
the time of redemption, they shall be prorated between the redemptioner
and the vendee, giving the latter the part corresponding to the time he
possessed the land in the last year, counted from the anniversary of the
date of the sale.
Property to Be Freed Generally from
Charges and Mortgages
Art. 1618. The vendor who recovers the thing sold shall receive it
free from all charges or mortgages constituted by the vendee, but
he shall respect the leases which the latter may have executed in
good faith, and in accordance with the custom of the place where
the land is situated.
 LEGAL REDEMPTION
DEFINITION AND RATIONALE:
Privilege created by law for reasons of public policy.
For benefit and convenience of the redemptioner, to afford him a way
out of what might be a disagreeable or inconvenient association into which he
has been thrust.
Intended to minimize co-ownership.
Fernandez v. Tarun, 391 SCRA 653 (2002)
Basa v. Aguilar, 117 SCRA 128 (1982)

33
 LEGAL REDEMPTION

Legal redemption – the right to be subrogated upon the

same terms and conditions stipulated in the contract in
the place of one who acquires a thing by
a. purchase or
b. dation in payment, or
c. by any other transaction whereby ownership is
transmitted by onerous title (Art. 1619, CC)
 LEGAL REDEMPTION, (ART. 1619, NCC)

The right to be subrogated upon the same terms and

conditions stipulated in the contract in the place of one
who acquires a thing by purchase or dation in payment, or
by any other transaction whereby ownership is
transmitted by onerous title (Art. 1619, NCC).

It may be effected against movables or immovables.

It must be exercised within thirty (30) days from the

notice in writing by the vendor.
EXAMPLES OF LEGAL REDEMPTION

(a) Art. 1088: Should any of the heirs sell his hereditary
rights to a stranger before the partition, any or all of the
co-heirs may be subrogated to the rights of the purchaser
by reimbursing him for the price of the sale, provided
they do so within the period of one month from the time
they were notified in writing of the sale of the vendor.
EXAMPLES OF LEGAL REDEMPTION

(b) Art. 1620: A co-owner of a thing may exercise the right

of redemption in case the shares of all the other co-
owners or of any of them, are sold to a third person. If the
price of the alienation is grossly excessive, the
redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right
of redemption, they may only do so in proportion to the
share they may respectively have in the thing owned in
common.
EXAMPLES OF LEGAL REDEMPTION
.
(c) Art. 1621: The owners of adjoining lands shall also have the right
of redemption when a piece of rural land, the area of which does not
exceed one hectare, is alienated, unless the grantee does not own
any rural land.
This right is not applicable to adjacent lands which are separated by
brooks, drains, ravines, roads and other apparent servitudes for the
benefit of other estates.
If two or more adjoining owners desire to exercise the right of
redemption at the same time, the owner of the adjoining land
of smaller area shall be preferred and should both lands have
the same area, the one who first requested the redemption.
EXAMPLES OF LEGAL REDEMPTION

(d) Art. 1622: Whenever a piece of urban land which is so small and so
situated that a major portion thereof cannot be used for any practical
purpose within a reasonable time, having been bought merely for
speculation, is about to be resold, the owner of any adjoining land has
a right of pre-emption at a reasonable price.
If the re-sale has been perfected, the owner of the adjoining land
shall have a right of redemption, also at a reasonable price.
When two or more owners of adjoining lands wish to exercise the
right of pre-emption or redemption, the owner whose intended use of
the land in question appears best justified shall be preferred.
 INSTANCES OF LEGAL REDEMPTION
1. Among Co-Heirs (Art. 1088, NCC)
 A co-heir cannot exercise the right of redemption alone.
 There is also no legal redemption for sale of the property of the
estate.
 Written notice to other co-owners is deemed unnecessary by the fact
that the buyers already took possession of the property in full view
of other co-owners.
 INSTANCES OF LEGAL REDEMPTION

2. Among Co-Owners (Art. 1620, NCC)

 Right of legal redemption arises only when shares of other owners are
sold to a “third person,” and not to another co-owner.
 Registration of the sale does not estop a co-owner.
 Notice required to be given to co-owners must be in writing; and
redemption by co-owner redounds to the benefit of all other co-owners.
 No written notice is required to co-owner who acted as active
intermediary in the consummation of the sale.
 Redemption by co-owner, even when he uses his own fund, inures to the
benefit of all the other co-owners.
 INSTANCES OF LEGAL REDEMPTION

3. Among Adjoining Owners (Arts. 1621-

1622, NCC)
 Redemption covers only “resale” and does not cover
exchanges or barter of properties.
 Requisite of “speculation dropped.
 Does not apply if one adjacent lot is not also rural
land.
 INSTANCES OF LEGAL REDEMPTION

Art. 1620. A co-owner of a thing may exercise the right of

redemption in case the shares of all the other co-owners
or of any of them, are sold to a third person. If the price
of the alienation is grossly excessive, the redemptioner
shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right
of redemption, they may only do so in proportion to the
share they may respectively have in the thing owned in
common.
 LEGAL REDEMPTION BY ADJACENT
OWNER OF RURAL PROPERTY
Art. 1621. The owners of adjoining lands shall also have
the right of redemption when a piece of rural land, the
area of which does not exceed one hectare, is alienated,
unless the grantee does not own any rural land.
This right is not applicable to adjacent lands which are
separated by brooks, drains, ravines, roads and other
apparent servitudes for the benefit of other estates.
 LEGAL REDEMPTION BY ADJACENT
OWNER OF RURAL PROPERTY
Art. 1621. cont’d.

If two or more adjoining owners desire to exercise the right of

redemption at the same time, the owner of the adjoining land of
smaller area shall be preferred; and should both lands have the
same area, the one who first requested the redemption.
 LEGAL PRE-EMPTION AND REDEMPTION BY
ADJACENT OWNERS OF URBAN PROPERTY
Art. 1622. Whenever a piece of urban land which is so small
and so situated that a major portion thereof cannot be used for
any practical purpose within a reasonable time, having been
bought merely for speculation, is about to be re-sold, the
owner of any adjoining land has a right of pre-emption at a
reasonable price.
If the re-sale has been perfected, the owner of the adjoining
land shall have a right of redemption, also at a reasonable
price.
When two or more owners of adjoining lands wish to exercise
the right of pre-emption or redemption, the owner whose
intended use of the land in question appears best justified shall
be preferred.
 WITHIN WHAT PERIOD RIGHT MAY BE
EXERCISED

Art. 1623. The right of legal pre-emption or redemption shall not

be exercised except within thirty days from the notice in writing
by the prospective vendor, or by the vendor, as the case may be.
The deed of sale shall not be recorded in the Registry of
Property, unless accompanied by an affidavit of the vendor that
he has given written notice thereof to all possible
redemptioners.
The right of redemption of co-owners excludes that of adjoining
owners.
 WITHIN WHAT PERIOD RIGHT MAY BE
EXERCISED

Doromal v. Court of Appeals L-36083, Sep. 5, 1975

The 30-day notice in writing referred to in Art. 1623 should be
counted from notice, not of the perfected sale, but of the actual
execution and delivery of the document of sale. (Note that Art. 1623
speaks only of a “notice in writing” without specifying what the
notice is all about).
LEGAL REDEMPTION cont’d
PERIOD OF LEGAL REDEMPTION BEGINS:
30 DAYS FROM WRITTEN NOTICE
Written notice must cover perfected sale
Art. 1623
Spouses Doromal v. CA, 66 SCRA 575 (1975)
Notice must be given by seller; and that notice given by buyer or even by the
Register of Deeds are not sufficient.
Francisco v. Boiser, 332 SCRA 305 (2000)
Butte v. Manuel Uy and Sons, Inc., 4 SCRA 526 (1962)
Salatandol v. Retes, 162 SCRA 568 (1988)

49
 LEGAL REDEMPTION cont’d

Seller furnishing of the copies of deeds of sale to co-owner would be sufficient.

Distrito v. CA, 197 SCRA 606 (1991)
Conejero v. CA, 16 SCRA 775 (1966)
Badillo v. Ferrer, 152 SCRA 407 (1987)

Notice to minors may validly be served upon parents even when not judicially
appointed since beneficial to the children.
Badillo v. Ferrer, 152 SCRA 407 (1987).

50
 LEGAL REDEMPTION cont’d

Deemed complied when co-owners signed Deed of Extrajudicial Partition

embodying disposition of part of the property owned in common.
Fernandez v. Tarun, 391 SCRA 653 (2002)
Filing of ejectment suit or collection of rentals against a co-owner
dispenses with need for written notice.
Alonzo v. IAC, 150 SCRA 259 (1987)

51
 PREFERENCE OF CO-OWNERS

Art. 1623. The right of legal pre-emption or redemption

shall not be exercised except within thirty days from the
notice in writing by the prospective vendor, or by the
vendor, as the case may be. The deed of sale shall not be
recorded in the Registry of Property, unless accompanied
by an affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of
adjoining owners.
PRE-EMPTION VS REDEMPTION

PRE-EMPTION REDEMPTION
The sale to a third person The sale to a third person
has not yet been perfected has already been perfected

No rescission because no There can be no rescission

sale as yet exists of the sale

The action here is directed Action is directed against

against the prospective the buyer
seller
END