LAW ON SALES – Chapter 7

Extinguishment of sale 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

Article 1600. Sales are extinguished by the same causes
unusually inadequate;
as all other obligations, by those stated in the preceding
articles of this Title, and by conventional or legal (2) When the vendor remains in possession as lessee or
redemption. otherwise;

(3) When upon or after the expiration of the right to

repurchase another instrument extending the period of
Causes for extinguishment of sale.
redemption or granting a new period is executed;
The modes or causes of extinguishing the contract of sale
(4) When the purchaser retains for himself a part of the
may be classified into:
purchase price;
(1) Common or those causes which are also the means of
(5) When the vendor binds himself to pay the taxes on
extinguishing all other contracts like payment, loss of the
the thing sold;
thing, condonation, etc. (see Art. 1231.);
(6) In any other case where it may be fairly inferred that
(2) Special or those causes which are recognized by the
the real intention of the parties is that the transaction
law on sales (such as those covered by Articles 1484,
shall secure the payment of a debt or the performance of
1532, 1539, 1540, 1542, 1556, 1560, 1567, and 1591.);
any other obligation.
and
In any of the foregoing cases, any money, fruits, or other
(3) Extra-special or those causes which are given special
benefit to be received by the vendee as rent or otherwise
discussion by the Civil Code and these are conventional
shall be considered as interest which shall be subject to
redemption and legal redemption. (see 10 Manresa 300,
the usury laws.
303.)

Equitable mortgage defined.

SECTION 1 – CONVENTIONAL REDEMPTION
An equitable mortgage is one which lacks the proper
formalities, form or words, or other requisites prescribed
Article 1601. Conventional redemption shall take place by law for a mortgage, but shows the intention of the
when the vendor reserves the right to repurchase the parties to make the property subject of the contract as
thing sold, with the obligation to comply with the security for a debt and contains nothing impossible or
provisions of article 1616 and other stipulations which contrary to law.
may have been agreed upon.
When contract with right to repurchase presumed an
equitable mortgage.

Conventional redemption defined. For a presumption of an equitable mortgage to arise,

there are two (2) requisites, namely: that the parties
Conventional redemption is the right which the vendor entered into a contract denominated as a contract of sale
reserves to himself, to reacquire the property sold with a right of repurchase or purporting to be an absolute
provided he returns to the vendee the price of the sale, sale (Art. 1604.) and that their intention was to secure an
the expenses of the contract, any other legitimate existing debt by way of mortgage.
payments made therefor and the necessary and useful
expenses made on the thing sold (Art. 1616.), and fulfills
other stipulations which may have been agreed upon.
LAW ON SALES – Chapter 7
“Pacto de retro” and mortgage, distinguished. Article 1605. In the cases referred to in articles 1602 and
1604, the apparent vendor may ask for the reformation
The following are the distinctions:
of the instrument.
(1) In pacto de retro, ownership is transferred but the
Article 1606. The right referred to in article 1601, in the
ownership is subject to the condition that the seller
absence of an express agreement, shall last four years
might recover the ownership within a certain period of
from the date of the contract.
time3, while in mortgage, ownership is not transferred
but the property is merely subject to a charge or lien as Should there be an agreement, the period cannot exceed
security for the compliance of a principal obligation, ten years.
usually a loan;
However, the vendor may still exercise the right to
(2) If the seller does not repurchase the property upon repurchase within thirty days from the time final
the very day named in the contract, he loses all interest judgment was rendered in a civil action on the basis that
thereon, while the mortgagor does not lose his interest the contract was a true sale with right to repurchase.
in the property if he fails to pay the debt at its maturity;
and
Period for exercise of right of redemption.
(3) In the case of a pacto de retro, there is no obligation
resting upon the purchaser to foreclose. Neither does the Article 1606 refers to conventional redemption. It does
vendor have any right to redeem the property after the not apply where the contract is not one of sale with right
maturity of the debt. On the other hand, it is the duty of of repurchase.
the mortgagee to foreclose the mortgage if he wishes to
secure a perfect title thereto, and after the maturity of For conventional redemption to take place, the vendor
the debt secured by the mortgage and before should reserve, in no uncertain terms, the right to
foreclosure, the mortgagor has a right to redeem. repurchase the thing sold. (see Art. 1601.) Thus, the right
to redeem must be expressly stipulated in the contract of
sale in order that it may have legal existence.
Article 1603. In case of doubt, a contract purporting to (1) No agreement granting right. — If there is no
be a sale with right to repurchase shall be construed as agreement in a contract of sale granting the vendor the
an equitable mortgage. right to redeem, there is no right of redemption since the
sale should be considered an absolute sale.
Article 1604. The provisions of article 1602 shall also
apply to a contract purporting to be an absolute sale. (2) Agreement merely grants right. — If the parties
agreed only on the right to redeem on the part of the
vendor but there is a total absence of express stipulation
Effect where contract held as an equitable mortgage. as to the time within which the repurchase should be
made, then the period of redemption shall be four (4)
(1) Formal requirements of mortgage deemed
years from the date of the contract. (par. 1.)
complied with.
(3) Definite period of redemption agreed upon. — If the
(2) Contract subordinate to a subsequent registered
parties agreed on a definite period of redemption, then
mortgage. – Unregistered but binding to both
the right to redeem must be exercised within the period
parties but not to third persons.
fixed provided it does not exceed 10 years. (par. 2.)
(3) Title of property remains in supposed vendor.
(4) Period agreed upon exceeds ten years. — Where the
(4) Remedy of creditor is to foreclose. – Pactum agreed period exceeds 10 years, the vendor a retro has
commissorium is void. Action for foreclosure to 10 years from the execution of the contract to exercise
sell in a public auction is valid. his right of redemption.

(5) Period of redemption not specified. — If the parties

agreed that the vendor shall have a right to redeem and
LAW ON SALES – Chapter 7
they intend a period which, however, is not specified, (b) If the co-owners cannot agree that the
then the redemption period is 10 years. thing be allotted to one of them, it shall
be sold and its proceeds distributed.
(6) Final judgment that contract is pacto de retro. —
(Art. 498.)
“From the time final judgment was rendered in a civil
action on the basis that the contract was a true sale with (2) In either case, the vendee who acquires the whole of
right to repurchase,” the vendor a retro has 30 days an undivided immovable a part of which is subject to a
within which to exercise the right to repurchase. (par. 3) right to repurchase, has a right to demand that the
vendor a retro, who likes to exercise his right of
redemption, redeem the whole property.
Article 1607. In case of real property, the consolidation
of ownership in the vendee by virtue of the failure of the
vendor to comply with the provisions of article 1616 shall Article 1612. If several persons, jointly and in the same
not be recorded in the Registry of Property without a contract, should sell an undivided immovable with a right
judicial order, after the vendor has been duly heard. of repurchase, none of them may exercise this right for
more than his respective share.
Article 1608. The vendor may bring his action against
every possessor whose right is derived from the vendee, The same rule shall apply if the person who sold an
even if in the second contract no mention should have immovable alone has left several heirs, in which case
been made of the right to repurchase, without prejudice each of the latter may only redeem the part which he
to the provisions of the Mortgage Law and the Land may have acquired.
Registration Law with respect to third persons.
Article 1613. In the case of the preceding article, the
Article 1609. The vendee is subrogated to the vendor's vendee may demand of all the vendors or co-heirs that
rights and actions. they come to an agreement upon the repurchase of the
whole thing sold; and should they fail to do so, the
Article 1610. The creditors of the vendor cannot make
vendee cannot be compelled to consent to a partial
use of the right of redemption against the vendee, until
redemption.
after they have exhausted the property of the vendor.
Article 1614. Each one of the co-owners of an undivided
Article 1611. In a sale with a right to repurchase, the
immovable who may have sold his share separately, may
vendee of a part of an undivided immovable who
independently exercise the right of repurchase as
acquires the whole thereof in the case of article 498, may
regards his own share, and the vendee cannot compel
compel the vendor to redeem the whole property, if the
him to redeem the whole property.
latter wishes to make use of the right of redemption.
Article 1615. If the vendee should leave several heirs, the
action for redemption cannot be brought against each of
Redemption in sale of part of undivided immovable. them except for his own share, whether the thing be
undivided, or it has been partitioned among them.
The purpose of the above article (and Arts. 1612-1615.)
is to discourage co-ownership which is recognized as But if the inheritance has been divided, and the thing sold
undesirable, since it does not encourage the has been awarded to one of the heirs, the action for
improvement of the property co- owned. redemption may be instituted against him for the whole.

(1) A co-owner may demand the partition of the thing

owned in common insofar as his share is concerned. (Art.
494.)

(a) If the thing is essentially indivisible, it

may be allotted to the co-owner who
shall indemnify the others.
LAW ON SALES – Chapter 7
Article 1616. The vendor cannot avail himself of the right possessed the land in the last year, counted from the
of repurchase without returning to the vendee the price anniversary of the date of the sale.
of the sale, and in addition:

(1) The expenses of the contract, and any other

Right of parties as to fruits of land.
legitimate payments made by reason of the sale;
This article applies only when the parties have not
(2) The necessary and useful expenses made on the thing
provided for any sharing arrangement with respect to
sold.
the fruits existing at the time of redemption. It refers
Obligation of vendor a retro in case of redemption. only to natural and industrial fruits. Civil fruits are
deemed to accrue daily and belong to the vendee in that
Article 1616 defines the obligations of the vendor who
proportion.
desires to exercise his right of repurchase. He must
return to the vendee a retro: (1) If there were fruits at the time of the sale and the
vendee paid for them, he must be reimbursed at the time
(1) The price. — The law speaks of “price of the sale” and
of redemption as the payment forms part of the
not the value of the thing. It is lawful, however, for the
purchase price.
parties to agree that the price to be returned will be
more or less than the original sum paid by the vendee; (2) If no indemnity was paid by the vendee for the fruits,
there shall be no reimbursement for those existing at the
(2) Expenses of contract and other legitimate expenses.
time of redemption. (par. 1.)
— If the expenses for the execution and registration of
the sale were paid by the vendee, the same shall be (3) If the property had no fruits at the time of the sale
reimbursed by the vendor. and some exist at the time of redemption, they shall be
apportioned proportionately between the redemptioner
(a) The necessary expenses which must be
and the vendee, giving the latter a share in proportion to
repaid to the vendee are not those
the time he possessed the property during the last year
which are ordinary and simple expenses
counted from the anniversary of the date of the sale (par.
of preservation because these expenses
2.) to compensate the vendee for his expense.
are incident to the enjoyment of the
thing and should be borne by the The same rule, it is believed, is also applicable if there
vendee. were fruits at the time of the sale and the vendee paid
for them.
(b) Useful expenses are refunded to the
vendee a retro because he is considered
a possessor in good faith. They are
Article 1618. The vendor who recovers the thing sold
refunded to the vendee a retro because
shall receive it free from all charges or mortgages
he is considered a possessor in good
constituted by the vendee, but he shall respect the leases
faith
which the latter may have executed in good faith, and in
accordance with the custom of the place where the land
is situated.
Article 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
LAW ON SALES – Chapter 7
SECTION 2 – Legal REDEMPTION notice in writing which shall be served by the vendee on
all lessees affected and the Department of Agrarian
Article 1619. Legal redemption is the right to be
Reform upon the registration of the sale. This right has
subrogated, upon the same terms and conditions
priority over any other right of redemption, like the right
stipulated in the contract, in the place of one who
of redemption of a co-owner under Article 1620.
acquires a thing by purchase or dation in payment, or by
any other transaction whereby ownership is transmitted
by onerous title.
Article 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
Transfer of ownership by onerous title.
the price of the alienation is grossly excessive, the
Subrogation transfers to the person subrogated the redemptioner shall pay only a reasonable one.
rights pertaining to another. (Art. 1303.) Note that legal
Should two or more co-owners desire to exercise the
redemption may take place not only in purchase or
right of redemption, they may only do so in proportion
dation in payment but in any other transfer of ownership
to the share they may respectively have in the thing
by onerous title. It has been held, however, that it cannot
owned in common.
take place in barter and in the transmission of property
by hereditary title.

Evidently, the right is not available where there is only a Right of legal redemption of co-owner.
mortgage or lease.
The right of legal redemption among co-owners
presupposed of course, the existence of a co-ownership.
The following are the requisites for the right to exist:
Instances of legal redemption.
(1) There must be co-ownership of a thing;
(1) Under the Civil Code, the instances of legal
redemption are found in Articles 1620, 1621, 1622, 1634 (2) There must be alienation of all or of any of the shares
(infra.), and 1088. of the other co-owners;

(2) Under special laws, the following are instances of (3) The sale must be to a third person or stranger (Art.
legal redemption: 1620.), i.e., a non-co-owner;

(a) Redemption by owner of real property sold for (4) The sale must be before partition;
delinquent taxes. The period is within one year from the
(5) The right must be exercises within the period
date of sale
provided in Art. 1623; and
(b) Repurchase by homesteader of homestead sold
(6) The vendee must be reimbursed for the price of the
under the Public Land Act. The period is five years.
sale.
(c) Redemption by judgment debtor or redemptioner of
Article 1621. The owners of adjoining lands shall also
real property sold on execution. The period is twelve
have the right of redemption when a piece of rural land,
months
the area of which does not exceed one hectare, is
(d) Redemption by mortgagor after mortgaged property alienated, unless the grantee does not own any rural
has been judicially foreclosed and sold. The period is land.
ninety days but before confirmation of sale by the court.
This right is not applicable to adjacent lands which are
In all cases of extra-judicial foreclosure sale, the
separated by brooks, drains, ravines, roads and other
mortgagor may redeem the property within one year
apparent servitudes for the benefit of other estates.
from the date of registration of the sale; and
If two or more adjoining owners desire to exercise the
(e)Redemption by an agricultural lessee of landholding
right of redemption at the same time, the owner of the
sold by the landowner. The period is 180 days from
LAW ON SALES – Chapter 7
adjoining land of smaller area shall be preferred; and (b) Redemption, which is exercised after the sale has
should both lands have the same area, the one who first been perfected against the vendee. The recognition of
requested the redemption. the right of redemption will result in the rescission of the
sale.
Right of legal redemption of adjacent owners of rural
lands. (2) Requisites. — The conditions or requisites for the
exercise of the right of pre-emption or redemption, as
The following are the requisites for the exercise of the
the case may be, are the following:
right under this article:
(a) The piece of land is urban land;
(1) Both the land of the one exercising the right of
redemption and the land sought to be redeemed must (b) The one exercising the right must be an adjacent
be rural; owner;

(2) The lands must be adjacent; (c) The piece of land sold must be so small and so situated
that a major portion thereof cannot be used for any
(3) There must be an alienation;
practical purpose within a reasonable time;
(4) The piece of rural land alienated must not exceed one
(d) Such urban land was bought by its owner merely for
(1) hectare;
speculation.
(5) The grantee or vendee must already own any other
(e) It is about to be resold, or that its resale has been
rural land; and
perfected.
(6) The rural land sold must not be separated by brooks,
The above requisites must be alleged by the adjoining
drains, ravines, roads and other apparent servitudes
owner in his complaint and proved by him.
from the adjoining lands.
(3) Price. — The price to be paid is a reasonable price. In
Article 1622. Whenever a piece of urban land which is so
a case, an adjoining owner was held not entitled to
small and so situated that a major portion thereof cannot
redeem a lot (612 sq. meters) which was much bigger
be used for any practical purpose within a reasonable
area-wise, than the lot (140 sq. meters) owned by him.
time, having been bought merely for speculation, is
about to be re-sold, the owner of any adjoining land has (4) Preference as between two or more adjacent owners.
a right of pre-emption at a reasonable price. — In case two or more adjoining owners desire to
exercise the right of legal redemption, the law prefers
If the re-sale has been perfected, the owner of the
him whose intended use of the land appears best
adjoining land shall have a right of redemption, also at a
justified. (last par.) The determinative factor is the
reasonable price.
intended use that appears best justified, and not
When two or more owners of adjoining lands wish to whether the land was acquired for speculative purposes.
exercise the right of pre-emption or redemption, the
Article 1623. The right of legal pre-emption or
owner whose intended use of the land in question
redemption shall not be exercised except within thirty
appears best justified shall be preferred.
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,
Rights of pre-emption and legal redemption of adjacent unless accompanied by an affidavit of the vendor that he
owners of urban lands. has given written notice thereof to all possible
(1) Meaning. — Article 1622 recognizes two rights; redemptioners.
namely: The right of redemption of co-owners excludes that of
(a) Pre-emption, which has been defined as the act or adjoining owners.
right of purchasing before others. It is exercised before
the sale or resale against the would-be vendor; and