XIII.

EXTINGUISHMENT OF THE SALE

A. In General
Generally, extinguished by the same
causes as all other obligations [Arts.1600,
1231]
(P-PLAN-C3-R3)
Payment/performance
Prescription
Loss of thing due
Annulment
Novation
Condonation/remission
Confusion/merger
Compensation
Rescission
Resolutory condition fulfilled
Redemption (Conventional or Legal)
BOOK: 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.
B. Conventional Redemption
DEFINITION
Vendor reserves the right to repurchase
the thing sold, with the obligation to
comply with the provisions of Article 1616
and other stipulations which may have
been agreed upon. [Art 1601,CC]
Available when the seller reserves
right to repurchase the thing sold in
same instrument of sale as one of
stipulations of the contract [Villarica v
1968]

the
the
the
CA,

1. Distinguished
from
Equitable
Mortgage under the Old Civil Law
BOOK:
Pacto de retro and mortgage
distinguished
The following are the distinctions:
1. In Pacto de Retro, ownership is
immediately transferred provided
there is delivery, but the ownership
is subject to the condition that the
seller might recover the ownership
within a certain period of time,
while in mortgage, ownership is not
transferred but the property is
merely subject to a charge or lien
as security for the compliance of a
principal obligation, usually a loan.

2. If the seller does not repurchase

the property upon the very day
named in the contract, he loses all
interest thereon title to which vests
upon the buyer by operation of law,
while the mortgagor does not lose
his interest in the property if he
fails to pay the debt at its maturity
but merely subjects the property
for foreclosure and public sale; and
3. In the case of Pacto de retro, there
is no obligation resting upon the
purchaser to foreclose: neither
does the vendor have any right to
redeem the property after the
maturity of the debt. On the other
hand, it is the duty of the
mortgagee
to
foreclose
the
mortgage if he wishes to secure a
perfect title thereto, and after the
maturity of the debt secured by the
mortgage and before foreclosure,
the mortgagor has a right to
redeem
2. Under the New Civil Law
3. Remedies under the New Civil Code
BOOK: Article 1602 is a new
provision and is one of the suitable
remedies (see Art.1603-1607)
sponsored by the code commission
to provide safeguards and
restrictions against the evils of
sales with a right of repurchase,
commonly called Pacto de
retrosales often used to conceal a
contract of loan secured by a
mortgage.
REMEDIES OF APPARENT VENDOR

If the instrument does not

reflect the true agreement: remedy
is reformation

If decreed to be an
equitable mortgage: any money,
fruits or other benefit to be
received by the buyer as rent or
otherwise considered as interest.

If decreed as a true sale

with right to purchase: seller may
redeem within 30 days from finality
of judgment, even if the period for
redemption has expired.
4. Distinguished from Option to Buy

BOOK: An option to buy is different

and distinct from the right of
repurchase which must be reserved
by the vendor by stipulation to that
effect in the contract of Sale. This
is clear from Art. 1601.

-the price of the sale

-the expenses of the contract and any
other legitimate payments made by
reason of the sale
-the necessary and useful expenses made
on the thing sold [Art.1616].

1. The right of repurchase is not a

right granted the vendor by the
vendee
in
a
subsequent
instrument, but a right reserved
by the vendor in the same
instrument of sale as one of the
stipulations of the contract.
2. Once
the
instrument
of
absolute sale is executed, the
vendor no longer reserves the
right to repurchase, and any
right thereafter granted the
vendor by the vendee in a
separate instrument cannot be
a right of repurchase, but some
other right like the option to
buy.

How redemption is exercised

5. Period to Redeem
No stipulation: 4 years from the date of
contract
When there is agreement: Period not to
exceed 10 years
General Rule: Period starts to run from
the date of the execution of the
contract
Exception: When the efficacy of the sale is
subject to a suspensive condition, period
should be counted not from the date
appearing on the instrument, but from the
date when the condition is fulfilled,
marking the consummation of the sale
[Tolentino citing Manresa].
Additional 30 days for Repurchase
The last paragraph of Art. 1606 giving the
vendor the right to repurchase within 30
days from the time of the rendition of final
judgment applies only where the nature
and the character of the transaction,
whether as a pacto de retro or an
equitable mortgage, was put in issue
before the court [Gonzales v. De Leon, 4
SCRA 332].
6. Exercise of the Right to Redeem
ART. 1616
The seller can avail himself of the right of
repurchase by returning to the buyer:

The vendor de retro must complete the

repurchase before the expiration of the
redemption period [Panganiban v. Cuevas,
7 Phil 477].
A sincere or genuine tender of payment
is enough. The deposit of the amount of
the repurchase money with the Clerk of
Court was simply and additional security
[Legazpi v. Court of Appeals, 1986]
When tender of payment cannot be
validly made because the buyer cannot be
located, it becomes imperative for the
seller a retro to file a suit for consignation
with the courts of the redemption price
[Catangcatang v. Legayada, 1978].
If the offer or tender of payment for
repurchase is refused, it is not necessary
for the vendor a retro to consign in court
or make judicial deposit of the repurchase
price [Rosales v. Reyes, 25 Phil 495].
7. By Whom Exercised
-Vendor
-His heirs, assigns or agents
-Creditor, if he has exhausted the property
of the vendor
- Co-owners of an immovable, if they sold
their interests to the same person, may
only redeem their respective shares
-Vendee cannot be compelled to agree to
a partial redemption
If the co-owners sold their interest to
the same person who previously bought
the share of a co-owner subject to a right
of redemption, then the latter may be
compelled to redeem the whole property
8. From Whom to Redeem
-Vendee a retro
-His heirs, assigns or agents
-Subsequent purchaser of property, even if
the right to redeem was not mentioned in
the subsequent contract; except if
registered land, where the right to redeem
must be annotated on the title
-If several heirs, then the right of
redemption can be exercised against each
heir for his share of the property

9. Effect of Redemption
The seller shall receive the thing free
from all charges or mortgages constituted
by the buyer BUT he shall respect leases
executed by the buyer in good faith and in
accordance with local custom.
If there are growing fruits at the time of
sale and at the time of redemption: no
reimbursement or prorating if the buyer
did not pay indemnity at the time of sale
If there were no growing fruits at the
time of sale, but some exist at the time of
redemption: fruits prorated (buyer entitled
to part corresponding to time he
possessed the land in the last year,
counted from the anniversary of the date
of sale)
10. Effect of Non-redemption
Ownership is consolidated in the buyer
BUT the consolidation shall not be
recorded in the Registry of property
without a judicial order, after the vendor
has been duly heard.

C. Legal Redemption
1. Under the New Civil Code
a. Definition

b. Co-Owners
Redemption by Co-owners [Art. 1621]
A co-owner of a thing may exercise the
right of redemption in case the shares of
all the co-owners or any of them are sold
to a third person
Third person refers to all persons who
are not heirs of the vendor, by will or
intestate succession
The right is available not only to
original co-owners, but to those who had
later acquired the share of the co-owner
But the right of redemption may be
exercised by a co-owner only when part of
the community property is sold to a
stranger. When the portion is sold to
another co-owner, the right does not arise
because a new participant is not added to
the co-ownership [Fernandez v. Tarun,
2002]
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, they may also do so in
proportion to the share they may
respectively have in the thing owned in
common.

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, CC]
-Applies to transfers of ownership by
onerous title where subrogation is
possible. Hence, it cannot apply to barter
or to transfer by gratuitous title or
hereditary succession.
Applies to sales with pacto de retro
[Baviera citing
MANRESA]
MANNER
- a formal offer to redeem or
-filing of an action in court together with
the consignation of the redemption price
within the reglementary period

Rationale:
Public
Policy,
since
coownership is a hindrance to the
development and administration of the
property. [Baviera]
c. Adjoining Landowners of Rural
Land
Rationale:
Public
Policy,
since
coownership is a hindrance to the
development and administration of the
property. [Baviera]
Redemption by Adjoining Land-owners
of rural land [Art. 1621]
The ff. Requisites must concur:
A piece of rural land is alienated
Area does not exceed one hectare
When not applicable:
The grantee does not own any rural
land

Adjacent lands are separated by

brooks, drains, roads and other apparent
servitudes for the benefit of other estates

urban land [Art.

1622]

of sale
Actual knowledge of
the

Order of preference if two or more wishes

to exercise the right:
Owner with smaller land area

sal
e

is

immaterial,

absent any showing

that

If same land area, then the one who

first requested the redemption

theco-ownerhasbeen

What constitutes rural or urban is to

be determined from the character of the
community or vicinity in which it is found,
and NOT from the nature of the land itself
nor the purpose to which it is devoted.
[Ortega v. Orcine, 1971]

Shownacopyofthe
Deedofsalethrougha
written

communicatio
n.

[Doromal v. CA, 1975]

d. Adjoining Landowners of Urban

Land

Thelawdidnotprovide

Redemption by adjoining landowners of urban land (applies only to

small portions of urban land) [Art. 1621]

Foraparticularmodeof
writtennotice,thusany
compliance with
written

e. Assignment of a chose in action

Redemption of Credit

notice shouldsuffice,

Available when it is sold while in litigation

(From the time the complaint is answered)

including the giving of

a

NOT available when the assignment is in

favor of:
Co-heir/co-owner of right assigned
Creditor in payment of his credit

copy of the deed of

sale.

Possessor of a tenement or piece of

land which is subject to the right assigned

[Conejero v. CA,
1966]
Debtor in case a credit 30daysfromthedate
or
incorporeal right

f.

litigation

Period to Redeem

To whom granted
(a) Co-owner [Art
1620]

owner of

Rural Land [Art

1621]

Period

30 days from notice

(c)
Adjoining

owner of

sold payment from debtor

Taxpayerincaseoftax

1yearfromdateof

sale [Sec. 215,

NIRC]

forfeiture

Judgment
g.

(b) By the
seller
(c) Of

demand
s

[Art.1634]

(a) In writing
(b)
Adjoining

is

in The assignee

the

Actual

execution

And

deliveryof Thedeed

debtor, 1yearfromthedateof
How exercised: reimburse the
assignee for the:
-Price paid
-Judicial expenses incurred
-Interest on the price from
date of payment

2. Under the Public Land Act

Coverage:

Every conveyance of land acquired

under a free patent or homestead
The ownership of the land must have
been transferred to another. If the
transaction is a mere promise to sell, there
is no right yet to redeem
This refers to conveyances made after
the prohibited 5 years from the issuance
of the patent or grant
Period:
Within 5
conveyance

years

from

the

date

sale
(a)
within 12

foreclosure
(a) within
year
From
Dateof
sale

Months

the After
the Sale

of

If pacto de retro sale, the period to

redeem cannot be less than 5 years
Who may redeem:
General Rule: Applicant, widow, or heirs
Exception: land is sold to another
member of the family of the applicant, or
his direct descendant or heir
From whom: Subsequent purchasers

mortgage
d
In

favor
of
a
bank
(a) within 1
The year
After
The
Sale
(not
available in
Case
of A
Corporate
mortgagor)

Amount of redemption
Amount of the purchase
Interest at 1% per month from the
time of the sale up to the time of
redemption
Any assessment or taxes which the
purchaser may have paid
b. Under the Agrarian Reform Law
1. Lessees right of pre-emption
The agricultural lessee shall have the
preferential right to buy under the same
reasonable terms and conditions, in case
the lessor decides to hold the landholding
Conditions:

3. Under Special Laws

a. Foreclosure and Execution Sale
Who may Redeem
judicia In
execution
In
extra
l
sales
(a)
Judgment
foreclosure
debtor
(b)
Successor
in
(a) Debtor
interest
(b)
Successor
in (c) Creditor having a
interest
lien
Thepropertysol
(c) Judicialor judgment On d
attachmen
creditor
of said
By
t,
debtor
judgment
Or
(d) Junior mortgage on
The
Subseque
encumbrancer
property nt
to the judgment
Period to redeem
Extra judicial Execution
If land Is

The landholding must be pre-empted by

the DAR
When two or more lessees, each shall
have preferential right only to the extent
of the area cultivated by him
Period: 180 days from notice in writing
2. Lessees right of redemption
Sec. 12 RA 3844: In case landholding is
sold to 3rd person without the knowledge
of the lessee, the latter shall have the
right to redeem the same at a reasonable
price and consideration
Period: within 180 days from notice in
writing