EXTINGUISHMENT

OF SALE
Banzuela, Ronald Rayden
Perez, Maria Hannah
 General Extinguishment
• Article 1231 Civil Code
-Payment or Performance
-Loss of thing due
-Condonation
-Confusion
-Compensation
-Novation
 General Extinguishment
• Art. 1600 Civil Code
Sales are extinguished by the same causes
as all other obligations, by those stated in
preceding articles of this title or by
CONVENTIONAL or LEGAL REDEMPTION
 What is Redemption
-an act of redeeming or atoning for a fault or
mistake, or the state of being redeemed.
-REDEMPTION, contracts. The act of taking
back by the seller from the buyer a thing
which had been sold subject to the right of
repurchase.
 Conventional Redemption
• Art. 1601 Conventional redemption shall
take place when the vendor reserves the
right to repurchase the thing sold, with
compliance to

1- Art 1616 of the Civil Code

2-Other stipulations agreed upon
 Characteristics of Right to
Redemption
• Not a separate contract, Part of the main
contract.
• Right to redeem imbedded prior or after
perfection of sale
• May not exceed 10 years
• Promise to sell
 Who exercises redemption
• Seller
• His Heirs
• His Assigns
• His Agent
• Co-owners of an immovable (only to
their respective share)
 From whom to redeem
• Buyer or vendee a retro
• Heirs
• Assigns
• Agent
• Subsequent buyers
 Period
• Generally, within 10 years maximum
from execution of contract.
• If there is no stipulation, it would be 4
years from the execution of the contract.
• Within thirty days from the time final
judgment was rendered in a civil action
on the basis that the contract was a true
sale with right to repurchase
• A is the owner of an ice cream parlour
who sold it to B with a right to repurchase
the lot upon condition that the ice cream
parlour ceased operation or transfers
location. 11 years had passed after the
sale and the ice cream parlour ceased
operation. A exerted his right to
repurchase the lot. B said his right
prescribed. Is B correct?
• B is wrong.
• Under our Jurisprudence (Misterio vs.
Cebu State College…), the period of
redemption would be 4 years after the
happening of the suspensive condition
stipulated.
A sold his property to B with a right to
repurchase within 10 years from the
execution of the sale. A zombie outbreak
occurred. B made the property rat proof,
bullet proof ,and zombie proof. A
exercised his right to repurchase but B
refused since A is not willing to reimburse
all the expenses he incurred. Is B correct?
• Yes B is correct!
• Under Art. 1616 of the Civil Code
provides vendor must return price of
sale, expenses of the contract and other
legitimate payments made by reason of
sale, Necessary and useful expenses on
thing sold.
• Tender of payment is sufficient.
 Effect of redemption
• The seller shall receive the thing free
from all charges or mortgages
constituted by the buyer.
• If there are growing fruits at the time of
sale, then no reimbursement.
• If no growing fruits at the time but some
exist at redemption, then reimbursement
from last year counted from anniversary
of sale
 EFFECT OF NON REDEMPTION
• If the seller does not exercise his or her
right to redemption, then buyer a retro
automatically acquires full ownership.
• 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.
 EQUITABLE MORTGAGE
• One which, although lacking in some formality, or
form or words, or other requisites demanded by a
statute, nevertheless reveals the intention of the
parties to charge real property as security for a
debt, and contains nothing impossible or contrary
to law.

• PACTUM COMMISSORIUM
– A stipulation enabling the mortgagee to acquire
ownership of the mortgaged properties without need of
foreclosure proceedings which is a nullity being
contrary to the provisions of Article 2088 of the Civil
Code.
– A stipulation for automatic vesting of title over the
security in the creditor in case of the debtor’s default.
 PRESUMPTION THAT A CONTRACT IS AN
EQUITABLE MORTGAGE[ARTICLE 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;
4) When the purchaser retains for himself 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.
 REQUISITES FOR
PRESUMPTION OF AN
EQUITABLE MORTGAGE

1)That the parties entered into a contract

denominated as a contract of sale, and

2)That their intention was to secure an

existing debt by way of a mortgage.
 RATIONALE BEHIND
PROVISION ON EQUITABLE
MORTGAGE

1) Circumvention of usury law

2) Circumvention of prohibition against

pactum commissorium
 REMEDY OF APPARENT
VENDOR
• If the instrument does not reflect the true
agreement: remedy is reformation.
[Article 1605]
– Reformation is that remedy in equity by means
of which a written instrument is made or
construed so as to express or conform to the real
intention of the parties when such intention is not
expressed in the instrument.
PERIOD OF REDEMPTION [ART. 1606]
• 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.
• If decreed as a true sale with right to repurchase:
seller may redeem within 30 days from finality of
judgment, even if the period for redemption has expired.
 EXERCISE OF THE RIGHT TO
REDEEM [ART. 1616]
• The seller can avail himself of the right of repurchase
by returning to the buyer:
a) the price of the sale
b) the expenses of the contract and any other legitimate
payments made by reason of the sale
c) the necessary and useful expenses made on the thing
sold
– Necessary expenses are those incurred for the preservation of the
thing or those which seek to prevent the waste, deterioration, or loss
of the thing.
– Useful expenses are those which increase the value of the thing or
create improvements thereon.
RIGHTS OF PARTIES AS TO FRUITS
OF LAND [ARTICLE 1617]
• There were fruits at the time of the sale and the
vendee paid for them: He must be reimbursed at the
time of redemption
• No indemnity was paid by the vendee for the fruits:
No reimbursement for those existing at the time of
redemption
• No fruits at the time of the sale and some exist at
the time of redemption: They shall be prorated
between 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.
• The vendor has the right to receive
the property in the same condition
in which it was at the time of the sale.
[Article 1618]
LEGAL REDEMPTION
 What is Legal Redemption?
• Art. 1619 Legal Redemption is the RIGHT
to be subrogated, upon 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 transferred by onerous title.
Pre-emption Redemption

ARISES BEFORE ARISES AFTER SALE

SALE

NO RECISSION BECAUSE THERE CAN BE RECISSION

NO SALE AS YET EXISTS OF ORIGINAL SALE

THE ACTION HERE IS THE ACTION HERE IS

DIRECTED AGAINST DIRECTED AGAINST BUYER
PROSPECTIVE SELLER
 Characteristics
- It does not have to be expressly reserved
- Legal right of redemption is given to a
third person
- Extinguishes the original sale and
essentially creates a new sale in
substitution of the old sale
To whom is this right granted?
*Co-heirs
*Co-owners
* Adjoining owners of rural lands
*Adjoining owners of Urban land
 In what manner to redeem
(1)a formal offer to redeem(Tender of
Payment) or
(2) filing of an action in court together with
the consignation of the redemption price
within the reglementary period
 Co owner
• May exercise only when part of the
community property is sold to a stranger
• Shall pay only reasonable price
• If sold to a fellow co owner right does not
arise since now new participant
 Other Requisites
• There must be co-ownership
• Alienation of all or any of the shares of
the other co-owners
• Sale must be to a third person (Non-co-
owner)
• Before partition
• Within 30 days notice from seller in
writing
• Vendee is reimbursed for the price of
sale
 Co Heirs
• Any or all of the other co heirs may be
subrogated the rights by reimbursing the
third person price of sale
• Co heirs who did not participate in
execution of sale has the right to redeem
• Redeem respective share or portion
inherited
• Vendee may refuse and require all co-
heirs to redeem by any one of them
 Owners of Adjoining Rural lands
• It must not exceed 1 hectare
• It must not be adjacent (not separated by
roads, drains, ravines, etc.)
• Must be rural lands if a part is urban then
it cannot be invoked
 Owners of Rural land
• If lot is so small and situated for no
practical purpose bought for
speculation, then owner of any adjoining
land has right to redeem.
• Not to the nature of the land but the
purpose
• Reasonable price
 Other requisites
• Land must be rural, adjacent, alienation
• Land must not exceed 1 hectare
• Vendee must own some rural land
• Rural land must not be seperated by
brooks, drains, ravines, roads etc.
 Owner’s of Urban Land
• Land is urban
• Exerciser is adjacent owner
• Land was bought for mere speculation
• Reasonable price
• Law prefers him whose intent of use of
the lot is best justified
 Period of Redemption
• 30 days from notice
• (a) In writing
• (b) By the seller
• (c) Of the actual execution and delivery
of the deed of sale
• No form needed
• Actual knowledge immaterial; written
notice is a must
 OTHER INSTANCES OF LEGAL
REDEMPTION RIGHTS
a) Redemption of Homesteads
– 5 years from date of sale [Section 119 of Public Land Act]
b) Redemption in Tax Sales
– Within 1 year from the date of sale [Section 214 of National
Internal Revenue Code of 1997]
c) Redemption by Judgment Debtor
– 1 year (365 days) from the date of registration of the
certificate of sale [Section 27 & 28 of the Rules of Court]
d) Redemption in Extrajudicial Foreclosure
– Within 1 year from and after the date of the sale and
registration thereof [Section 6 of Act No. 3135]
– Until registration of certificate of foreclosure sale/no more
than 3 months after foreclosure [Section 47 of the General
Banking Law of 2000]
 OTHER INSTANCES OF LEGAL
REDEMPTION RIGHTS
e) Redemption in Judicial Foreclosure
– No right to redeem; Option to buy on the part of the creditor
f) Foreclosure by Banking Institutions
– Within 1 year from the date of sale
– Not be more than 3 months after foreclosure for Juridical
Persons
g) When Rural Bank Forecloses
– 2 years from date of foreclosure/registration of the sheriff’s
certificate of sale at such foreclosure, if not covered by Torrens
title [RA 720]
– Failed to exercise: May still repurchase 5 years from the
expiration of 2 year redemption [Section 119 of the Public Land
Act]
h) Under Agrarian Reform Code
– Within 180 days from notice in writing [Section 12 of RA 3844]