Chapter 13 Extinguishment of Sale PDF

SALES
REVIEWER (2013-‐2014) ATTY. RAY PAOLO SANTIAGO

CHAPTER 13: EXTINGUISHMENT OF or legal redemption. (1506)

SALE • Same grounds by which obligations in general are extinguished
also apply to extinguishment of obligations arising from sale

o PA-‐LO-‐RE-‐CO-‐CO-‐NO
I. In General (Articles 1231 and 1600)
! Payment

• Only extinguishes obligations to which
Article 1231.
they pertain in a contract of sale
Obligations are extinguished:
• Not necessarily the contract itself

! Loss
(1) By payment or performance;
! Remission

! Compensation
(2) By the loss of the thing due;
! Confusion

! Novation
(3) By the condonation or remission of the debt;
o Annulment

o Rescission
(4) By the confusion or merger of the rights of creditor and debtor;
o Resolutory Condition

o Prescription
(5) By compensation;
o Conventional or Legal Redemption (Article 1600)

(6) By novation.
II. Conventional Redemption

Other causes of extinguishment of obligations, such as annulment,
A. Definition (Article 1601)
rescission, fulfillment of a resolutory condition, and prescription, are

governed elsewhere in this Code. (1156a)
Article 1601.

Conventional redemption shall take place when the vendor reserves
Article 1600.
the right to repurchase the thing sold, with the obligation to comply
Sales are extinguished by the same causes as all other obligations, by
with the provisions of article 1616 and other stipulations which may
those stated in the preceding articles of this Title, and by conventional
have been agreed upon. (1507)

NOTES BY RACHELLE ANNE GUTIERREZ (UPDATED: MAY 21, 2014)
SALES REVIEWER (2013-‐2014) ATTY. RAY PAOLO SANTIAGO

! Once instrument executed, vendor may no
1. Conventional Redemption Takes Place: longer reserve
• When the seller reserved for himself the right to repurchase the o Any right thereafter granted to the vendor, by the
thing sold, with obligation to: vendee cannot be considered a right to repurchase, but
a. Return price of the sale some other right, like an option to buy.
b. Return expenses of the contract • Essence of pacto de retro " title and ownership is immediately
c. Any other legitimate payments made by reason of the vested in the vendee a retro, subject to a restrictive condition of
sale repurchase by the vendor within the redemption period.
d. Necessary and useful expenses of the thing sold. • Sales with rights of repurchase, as defined by the Civil Code, are
• Even when sale is one with right to repurchase, buyer is not favored. We will not construe instruments to be sales with a
subrogated to the seller’s rights and actions even during the right to repurchase, with the stringent and onerous effects
period where redemption can be made by the seller. which follow, unless the terms of the document and the
o In other words, right to redemption does not prevent surrounding circumstances require it. Whenever, under the
full consummation. terms of the writing, any other construction can fairly and
• Who may exercise? reasonably be made, such construction will be adopted and the
a. Seller in whom right is recognized by contract contract will be construed as a mere loan unless the court can
b. Any person to whom such right may have been see that, if enforced according to its terms, it is not an
transferred unconscionable one. Bautista v. Unangst, 557 SCRA 256 (2008).
c. In the case of legal redemption, the person so entitled [citing Ramos v. Court of Appeals 180 SCRA 635 (1989), which
by law. in turn cites Padilla v. Linsangan, 19 Phil. 65 (1911) and Aquino
v. Deala, 63 Phil. 582 (1936).
B. Proper Reservation Of Right To Repurchase
• Distinguishing right to redeem from option to purchase. 1. Valid Sale Required For There To Be A Valid Right To
o Article 1601: Right of repurchase must be reserved by Repurchase
the vendor through stipulation to that effect in the • Valid existence of a right to repurchase hinges upon fact that
contract of sale the underlying contract of sale is valid, and that there has been
! Not a right granted to the vendor by the vendee performance.
! It is one of the stipulations in the contract


o Right to repurchase must be constituted as part of a family remained in possession of the property for almost 13 years.
valid sale at perfection. xVillarica v. CA, 26 SCRA 189 Despite repeated demand, Papio refused to pay and refused to leave
(1968).1 the premises. Hence, Roberts filed a complaint for unlawful detainer.
• An agreement to repurchase becomes a promise to sell when
made after the sale because when the sale is made without Paprio raised the defense that in the original contract of sale, Roberts
such agreement the purchases acquires the things sold gave him the right to redeem the property at any time for a reasonable
absolutely; and, if he afterwards grants the vendor the right to amount. In fact, on 1985 he remitted to Roberts’ authorized
repurchase, it is a new contract entered into by the purchases representative, Perlita Ventura, the amount of P250,000 as repurchase
as absolute owner. Roberts v. Papio, 515 SCRA 346 (2007).2 price. Allegedly, Roberts only refused to execute a deed of absolute sale
because Ventura misappropriated the amount of P39,000 from the
Roberts v. Papio supposed repurchase price

Facts: Spouses Martin and Lucina Papio were owners of a residential lot Issue: Whether or not the contract of sale entered into by Papio and
located in Makati. They executed a real estate mortgage on said Roberts is actually an equitable mortgage.
property to obtain a long from Amparo Investments. Upon Papio’s
failure to pay the loan, the corporation filed a petition for extrajudicial Held: NO. It is the contract of sale. One repurchases only what one has
foreclosure of mortgage. Since the couple needed money to prevent the previously sold. The right to repurchase presupposes a valid contract of
foreclosure, they executed a Deed of Absolute Sale over the property in sale between same parties. By insisting that he had repurchased the
favor of Amelia Roberts. Of the P85,000 purchase price, P59,000 was property, Papio thereby admitted that the deed of absolute sale
paid to Amparo Investments while the P26,000 difference was retained executed by him and Roberts was in fact and in law a deed of absolute
by the spouses. The title to the property was delivered to Amelia sale and not an equitable mortgage; he had acquired ownership over
Roberts. the property based on said deed. Respondent, is thus estopped from
asserting that the contract under the deed of absolute sale is an
Thereafter, the parties executed a 2-‐year contract of lease over the equitable mortgage unless there is an allegation and evidence of
property, with Roberts as lessor and Papio as lessee. At first, Papio paid palpable mistake on the part of respondent, or a fraud on the part of
his monthly rentals, but stopped paying after 1985. However, he and his Roberts.

1
Claravall v. CA, 190 SCRA 439 (1990); Torres v. CA, 216 SCRA 287 (1992); Doctrine:
Roberts v. Papio, 515 SCRA 346 (2007).
2
Ramos v. Icasiano, 51 Phil (1927).


• In sales denominated as pacto de retro, the price agreed upon
should not generally be considered as the just value of the thing D. Distinguished From Option To Purchase
sold, absent other corroborative evidence—there is no
requirement in sales that the price be equal to the exact value Right to Redeem Option to Purchase
of the thing subject matter of the sale. xDorado Vda. De Delfin Not a separate contract – merely Generally a principal contract,
v. Dellota, 542 SCRA 397 (2008). part of a main contract of sale – created independent of another
cannot exist unless reserved at contract
C. Right Of Repurchase Provable By Parol Evidence time of perfection
• Right to repurchase: merely a feature in the contract of sale Must be imbedded into the May exist before or after the
o Thus, it is governed by the Statute of Frauds contract of sale upon its perfection perfection of the sale, or be
o However, SC has held: when the contract of sale is in imbedded in another contract
writing, parol evidence may be adduced to prove the upon its perfection
right to repurchase Does not need a separate Must have consideration separate
! This is because the Deed of Sale and the verbal consideration to be valid and and distinct from the purchase
agreement allowing the right to repurchase are effective price
an integral whole. Redemption period cannot exceed Period for an option may exceed
! The deed of sale itself is the “note or 10 years 10 years
memorandum” required to remove the contract Exercise requires that notice be Requires only a notice of exercise
from the Statute of Frauds. accompanied by tender of to be given to the optioner
o Also, if there is no objection to such parol evidence, it payment – consignment when
will be admissible in trial. tender cannot be made
• SC: “Best Evidence” Rule not an obstacle to the adducement of Exercise extinguishes contract of Results in perfection of a contract
such parol evidence. sale of sale
o When parol agreement was the moving cause of the
written contract. E. Redemption Period
o When written contract was executed on the • The period to repurchase is not suspended merely because
faith/representation of the parol contract. there is a divergence of opinion between the parties as to the
o Right to repurchase proved orally is consistent with precise meaning of the phrase providing for the condition upon
terms of written contract. which the right to repurchase is triggered. The existence of


seller a retro’s right to repurchase the proper is not dependent 1. When No Period Agreed Upon
upon the prior final interpretation by the court of the said • General Rule: If it is stipulated that there is a right to redeem,
phrase. Misterio v. Cebu State College of Science and and in the absence of agreement as to period of exercise, it shall
Technology, 461 SCRA 122 (2005). last 4 years from date of the contract.
• Misterio v. Cebu State College, 461 SCRA 122 (2005)
Misterio v. Cebu State College of Science and Technology o It was held that the four-‐year period began from
happening of condition contained in deed of sale (rather
Facts: Asuncion sold to Sudlon Agricultural High School (SAHS) a parcel than date of contract).
of land, reserving the right to repurchase the same in case (1) the school o CLV: This is inexplicable! (To be discussed later)
ceases to exist, or (2) the school transfers location. She had her right
annotated. She died. By virtue of BP 412, SAHS was merged with the 2. When Period Agreed Upon
Cebu State College, effective June 1983. In 1990, the heirs of Asuncion • General Rule: If there is an agreement as to period, it cannot
sought to exercise their right to redeem, claiming that school has ceased exceed 10 years if it exceeds 10 years, the agreement is only
to exist. valid for the first 10 years.
• Anchuel v. Intermediate Appellate Court, 147 SCRA 434 (1987)
Issue: Whether or not the heirs of Asuncion may still exercise their right o Stipulation: Vendor cannot redeem within 19 years from
to redeem the property execution.
o SC: Such is void for being violative of Article 1601, and
Held: NO. Their right has already prescribed. Considering that no period fixed the period of redemption at ten years.
for redemption was agreed upon, the law imposes a 4-‐year limitation. • Tayao v. Dulay, 13 SCRA 758 (1965)
This means that from the time the school was merged to Cebu State o Stipulation: right of redemption cannot be exercised
College, they had 4 years, or until June 1987 to redeem the property. within 10 years
However, they failed to do so within the period. Failure to redeem o SC: Stipulation was void. However, such nullity does not
automatically consolidates ownership in favor of the vendee. The fact convert contract into a mere indebtedness nor an
that the right to redeem was annotated does not make it equitable mortgage.
imprescriptible, it only serves to notify third persons. ! Article 1606 would apply " seller may exercise
right to redemption within a period of 10 years
Doctrine: form date of contract


o Although stipulation as to the period may be unclear or o Note: The successors-‐in-‐interest of the seller a retro
void, there is still a stipulation. sought to exercise the redemption right after the
! Thus, we follow the 10-‐year period for expiration of the four-‐year redemption period.
redemption. • CLV: No contradiction between these two cases
! We do not consider the right of redemption as o Important consideration: “vesting” of the exercise of
being one without a stipulated period. the right by its proper exercise (requiring notice and
• Bandong v. Austria, 31 Phil. 479 (1915) tender)
o Stipulation: sellers could exercise in March of any year. o Thus, in essence, completion of redemption process
o Such could be exercised for a period of 10 years from (payment of amounts required in Article 1616) is tolled
date thereafter, but not after 10 years by the filing of a civil action relating to the issue of such
• Ochagabia v. Court of Appeals, 304 SCRA 867 (1999) redemption
o Right to redeem had prescribes when exercised after 10 ! Provided that both exercise and filing would be
years. done within redemption period

3. Pendency of Action Tolls Redemption Period 4. Non-‐payment of Price Does Not Affect Running of Redemption
• Ong Chua v. Carr, 53 Phil. 957 (1929) " pendency of an action Period
brought in good faith and relating to the validity of a sale a retro • Catangcatang v. Legayada, 82 SCRA 51 (1978) " nonpayment
tolls the running of the period of redemption. of purchase price does not serve to suspend the period of
o Note: The seller a retro had given notice of the exercise redemption.
of the redemption right within the redemption period. o Sale was consummated upon execution of document,
BUT and delivery of land to the vendee.
• Misterio v. Cebu State College, 461 SCRA 122 (2005) " o Nonpayment of the balance of the price does not
Pendency of a litigation does not toll the period. suspend the efficacy of the provisions of the valid
o Such period is not suspended merely because there is a contract.
divergence of opinion between the parties as to when
the condition upon which the right to repurchase is F. Situation Prior to Redemption
triggered. • In a sale a retro, buyer has a right to the immediate possession
o Existence of right to repurchase is not dependent upon of the property sold, unless otherwise agreed upon, since title
the interpretation by the court of said condition and ownership of the property sold are immediately vested in


the buyer a retro, subject only to the resolutory condition of the part which he may have acquired. (1514)
repurchase by the seller a retro within the stipulated period.
xVda. de Rigonan v. Derecho, 463 SCRA 627 (2005).1 Article 1613.
• Pending repurchase, the buyer may alienate, mortgage, or In the case of the preceding article, the vendee may demand of all the
encumber the property. vendors or co-‐heirs that they come to an agreement upon the
o But such alienation, mortgage or encumbrance is as repurchase of the whole thing sold; and should they fail to do so, the
revocable as his right. vendee cannot be compelled to consent to a partial redemption.
o When right exercised, the buyer has to return the (1515)
property free from all encumbrances imposed by him.
Article 1614.
G. Who Can Redeem (Articles 1611 to 1614) Each one of the co-‐owners of an undivided immovable who may have
sold his share separately, may independently exercise the right of
Article 1611. repurchase as regards his own share, and the vendee cannot compel
In a sale with a right to repurchase, the vendee of a part of an him to redeem the whole property. (1516)
undivided immovable who acquires the whole thereof in the case of
article 498, may compel the vendor to redeem the whole property, if • Article 1611 " Seller wants to repurchase only his part: Buyer
the latter wishes to make use of the right of redemption. (1513) may compel him to repurchase the whole thing.
• Article 1614 " Creditors of the seller cannot make use of the
Article 1612. right of redemption against the buyer, until after they have
If several persons, jointly and in the same contract, should sell an exhausted the property of the seller.
undivided immovable with a right of repurchase, none of them may • De Guzman v. Court of Appeals, 148 SCRA 74 (1987)
exercise this right for more than his respective share. o If one of the co-‐owners/co-‐heirs alone redeem the
whole property, he will be a mere trustee with respect
The same rule shall apply if the person who sold an immovable alone to the shares of the co-‐owners/co-‐ heirs.
has left several heirs, in which case each of the latter may only redeem o Thus, no prescription lies against the rights of these co-‐
owners/co-‐heirs to demand from the redemptioner
1
Reyes v. Hamada, 14 SCRA 215 (1965); Solid Homes, Inc. v. CA, 275 SCRA 267 their share in the property
(1997); Misterio v. Cebu State College of Science and Technology, 461 SCRA 122
(2005); Cadungog v. Yap, 469 SCRA 561 (2005); Ramos v. Dizon, 498 SCRA 17
(2006); Lumayag v. Heirs of Jacinto Nemeño, 526 SCRA 51 (2007). H. How Redemption Effected (Article 1616)


• Well-‐settled is the rule that a formal offer to redeem must be
Article 1616. accompanied by a valid tender of the redemption price and the
The vendor cannot avail himself of the right of repurchase without filing of a judicial action, plus the consignation of the
returning to the vendee the price of the sale, and in addition: redemption price within the period of redemption, is equivalent
to a formal offer to redeem. xVillegas v. Court of Appeals, 499
(1) The expenses of the contract, and any other legitimate payments SCRA 276 (2006).
made by reason of the sale; o In order to exercise the right to redeem, only tender of
payment is sufficient xLegaspi v. CA, 142 SCRA 82
(2) The necessary and useful expenses made on the thing sold. (1518) (1986); consignation is not required after tender is
refused xMariano v. CA, 222 SCRA 736 (1993).
• Three things need to be returned (Article 1616) o The fact that the seller a retro deposited the amount of
1. Price of the sale. the repurchase money with the Clerk of Court was
2. Expenses of contract, and any other legitimate simply an additional security.
payments made by reason of the sale. o Mere sending of letters expressing desire to repurchase,
3. Necessary and useful expenses made on the thing sold. without tender, does not comply with the requirement
• Seller may bring his action against every possessor who derives of law.
right from the buyer. • But when tender not possible, consignation should be made
o Even if there is no mention of the right to repurchase in xCatangcatang v. Legayada, 84 SCRA 51 (1978).
the contract between buyer and subsequent buyer. • A formal offer to redeem, accompanied by a bona fide tender of
o Without prejudice to provisions of Property Registration redemption price, is not essential where the right to redeem is
Decree and the Mortgage Law, with respect to exercised through a judicial action within the redemption period
mortgagees/purchasers in good faith and for value. and simultaneously depositing the redemption price. xLee Chuy
• Failure to pay useful improvements entitles buyer a retro to Realty Corp. v. CA, 250 SCRA 596 (1995).
retain possession of the land until actual reimbursement is o No prescribed form for an offer to redeem
done. o Thus, we have two ways of redeeming
• Article 1616 is not exclusive ! Formal offer to pay accompanied by bona fide
o It should be construed with Article 1601 which states tender of payment.
that in order to redeem, Article 1616 must be complied
with as well as “other stipulations agreed upon.”


Only necessary to preserve right of
• prorating of those existing at the time of redemption, if no indemnity
redemption for further enforcement. was paid by the purchaser when the sale was executed.
(as opposed to exercised).
! Exercise through judicial action accompanied Should there have been no fruits at the time of the sale and some exist
with simultaneous deposit of the redemption at the time of redemption, they shall be prorated between the
price. redemptioner and the vendee, giving the latter the part corresponding
• Filing of action is equivalent to formal to the time he possessed the land in the last year, counted from the
offer. anniversary of the date of the sale. (1519a)
o When is right of redemption deemed “vested”
! Formal offer to redeem, accompanied by bona • Article 1617 on the disposition of fruits of property redeemed
fide tender of payment, within redemption applies only when the parties failed to provide a sharing
period. arrangement thereof; otherwise, the parties contractual
! Thus, the right is “vested” – it may be enforced stipulations prevail. xAlmeda v. Daluro, 79 SCRA 327 (1977).
even beyond redemption period • Article 448 of the Civil Code on the rights of a builder in good
faith is inapplicable in cases involving contracts of sale with right
I. Redemption Price (Article 1616) of repurchase—it is inapplicable when the owner of the land is
• A stipulation in a sale a retro requiring as part of the the builder, sower, or planter. Where the true owner himself is
redemption price interest for the cost of money, is not in the builder of the works on his own land, the issue of good faith
contravention with Article 1616, since the provision is not or bad faith is entirely irrelevant. The right to repurchase may
restrictive nor exclusive, and does not bar additional amounts be exercised only by the vendor in whom the right is recognized
that the parties may agree upon, since the article itself provides by contract or by any person to whom the right may have been
“and other stipulations which may have been agreed upon.” transferred. In a sale with right of repurchase, the applicable
xSolid Homes v. Court of Appeals, 275 SCRA 267 (1997). provisions are Articles 1606 and 1616 of the Civil Code, and not
Article 448. Narvaez v. Alciso, 594 SCRA 60 (2009).
J. Fruits (Article 1617)
K. Effect When No Redemption Made: Consolidation (Article 1607)
Article 1617.
If at the time of the execution of the sale there should be on the land, Article 1607.
visible or growing fruits, there shall be no reimbursement for or 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 exercise the redemption right within the period agreed upon or
article 1616 shall not be recorded in the Registry of Property without a provided for by law, vests upon the buyer a retro absolute title
judicial order, after the vendor has been duly heard. (n) and ownership over the property sold by operation of law.
Consequently, after the effect of consolidation, the mortgage or
• Before the New Civil Code: when no redemption made, buyer re-‐sale by the seller a retro of the same property would not
automatically acquired full ownership. Today, Article 1607. transfer title and ownership to the mortgagee or buyer, as the
o This proceeding for consolidation is an ordinary civil case may be, under the Latin maxim NEMO DAT QUOD NON
action, not a motion incident to another action. HABET. xCadungog v. Yap, 469 SCRA 561 (2005).
o If such is denied because contract was actually an o Notwithstanding Article 1607, recording in the Registry
equitable mortgage, then another action may be filed to of Deeds of the consolidation of ownership to the buyer
collect/foreclose is not a condition sine qua non to transfer of ownership
• Article 1607 abolished automatic consolidation of ownership in ! Buyer would still be the owner.
the vendee a retro upon expiration of the redemption period by ! Essence of pacto de retro " title and ownership
requiring the vendee to institute an action for consolidation are immediately vested in buyer, subject to
where the vendor a retro may be duly heard. If the vendee resolutory condition of repurchase.
succeeds in proving that the transaction was indeed a pacto de ! Failure of seller to perform the said condition
retro, the vendor is still given a period of thirty days from the vests absolute title and ownership over the
finality of the judgment within which to repurchase the property sold.
property. xSolid Homes v. Court of Appeals, 275 SCRA 267 ! Failure to consolidate title under Article 1607
(1997). does not impair buyer’s ownership. The method
• Once the vendor fails to redeem the property within the prescribed is merely for purposes of
stipulated period, irrevocable title shall be vested in the vendee registration.
by operation of law. xVda. de Rigonan v. Derecho, 463 SCRA
627 (2005). L. Equitable Mortgage (Articles 1602-‐1604)
• Under a sale a retro, the failure of the buyer to consolidate his
title under Article 1607 does not impair such title and Article 1602.
ownership because the method prescribed thereunder is merely The contract shall be presumed to be an equitable mortgage, in any of
for the purpose of registering and consolidating titles to the the following cases:
property. In fact, the failure on the part of a seller a retro to


(1) When the price of a sale with right to repurchase is unusually
inadequate; 1. Definition
• An equitable mortgage is “one which although lacking in some
(2) When the vendor remains in possession as lessee or otherwise; formality, or form or words, or other requisites demanded by a
statute, nevertheless reveals the intention of the parties to
(3) When upon or after the expiration of the right to repurchase charge real property as security for a debt, and contains nothing
another instrument extending the period of redemption or granting a impossible or contrary to law.” Raymundo v. Bandong, 526
new period is executed; SCRA 514 (2007) 1
• Essential requisites of equitable mortgage: xMolina v. Court of
(4) When the purchaser retains for himself a part of the purchase Appeals, 398 SCRA 97 (2003).2
price; a. Parties entered into a contract denominated as a
contract of sale; and
(5) When the vendor binds himself to pay the taxes on the thing sold; b. The intention was to secure an existing debt by way of a
mortgage.
(6) In any other case where it may be fairly inferred that the real • San Pedro v. Lee, 430 SCRA 338 (2005) " when the two above
intention of the parties is that the transaction shall secure the conditions are not proven, the existence of any circumstance
payment of a debt or the performance of any other obligation.

1
In any of the foregoing cases, any money, fruits, or other benefit to be Ceballos v. Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323
(2004); Alvaro v. Ternida, 479 SCRA 288 (2006); Cirelos v. Hernandez, 490 SCRA
received by the vendee as rent or otherwise shall be considered as
624 (2006); Lumayag v. Heirs of Jacinto Nemeño, 526 SCRA 51 (2007); Olivares
interest which shall be subject to the usury laws. (n) v. Sarmiento, 554 SCRA 384 (2008); Tio v. Abayata, 556 SCRA 175 (2008);
Deheza-‐Inamarga v. Alano, 574 SCRA 651 (2008); Rockville Excel International
Exim Corp. v. Culla, 602 SCRA 124 (2009); Kings Properties Corp. v. Galido, 606
Article 1603.
SCRA 137 (2009).
In case of doubt, a contract purporting to be a sale with right to 2
Matanguihan v. CA, 275 SCRA 380 (1997); Martinez v. CA, 358 SCRA 38
repurchase shall be construed as an equitable mortgage. (n) (2001); Hilado v. Heirs of Rafael Medlla, 37 SCRA 257 (2002); Ceballos v.
Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004); San Pedro

v. Lee, 430 SCRA 338 (2005); Go v. Bacaron, 472 SCRA 229 (2005), citing
Article 1604. VILLANUEVA, CESAR L. PHILIPPINE LAW ON SALES, (1998 ed.), p. 271; Romulo v. Layug,
The provisions of article 1602 shall also apply to a contract purporting Jr., 501 SCRA262 (2006); Roberts v. Papio, 515 SCRA 346 (2007); Raymundo v.
Bandong, 526 SCRA 514 (2007); Dorado Vda. De Delfin v. Dellota, 542 SCRA 397
to be an absolute sale. (n)
(2008); Muñoz, Jr. V. Ramirez, 629 SCRA 38 (2010).


enumerated in Article 1602 cannot be the basis to treat the competent. Dorado Vda. De Delfin v. Dellota, 542 SCRA 397
transaction as an equitable mortgage. (2008).
• General Rule: In other words, we look at the two requisites first
before going to Article 1602. 2. Rationale Behind Provisions On Equitable Mortgage
• The decisive factor in evaluating whether an agreement is an • The provisions of the Civil Code governing equitable mortgage
equitable mortgage is the intention of the parties, as shown not disguised as sale contracts are primarily designed to curtail the
necessarily by the terminology used in the contract but by all evils brought about by contracts of sale with right to
the surrounding circumstances, such as the relative situation of repurchase, particularly the circumvention of the usury law and
the parties at that time, the attitude, acts, conduct, declarations pactum commissorium. Heirs of Jose Reyes, Jr. v. Reyes, 626
of the parties, the negotiations between them leading to the SCRA 758 (2010).
deed, and generally, all pertinent facts having a tendency to fix o They envision contracts of sale w/ right to repurchase
and determine the real nature of their design and where the real intention of the parties is that the
understanding. Necessitous men are not always free, in that to repurchase price is money loaned, and the “pacto de
answer a pressing emergency, they will submit to any term that retro sale” is a means of securing the loan.
the crafty may impose on them. Banga v. Bello, 471 SCRA 653 o Since Article 1602 is remedial in nature, it was applied
1
(2005) retroactively in cases prior to the effectivity of the New
• This kind of arrangement, where the ownership of the land is Civil Code.
supposedly transferred to the buyer who provides for the funds
to redeem the property from the bank but nonetheless allows 3. When In Doubt, Construe As Equitable Mortgage And Not
the seller to later on buy back the properties, is in the nature of Right To Repurchase
an equitable mortgage governed by Articles 1602 and 1604 of • When in doubt, courts construe transactions as equitable
the Civil Code. Bacungan v. Court of Appeals, 574 SCRA 642 mortgages since it provides for lesser transmission of rights.
(2008). o The law on equitable mortgage favors the least
• If the terms of the pacto de retro sale were unfavorable to the transmission of rights and interest over a property in
vendor, courts have no business extricating her from that bad controversy, since the law seeks to prevent
bargain—courts are not guardians of persons who are legally circumvention of the law on usury and the prohibition
against pactum commissorium provisions. Additionally,
1
it is aimed to end unjust or oppressive transactions or
Austria v. Gonzales, Jr., 420 SCRA 414 (2004); Raymundo v. Bandong, 526
violations in connection with a sale or property. The
SCRA 514 (2007).


wisdom of these provisions cannot be doubted, • General Rule: Existence of any one of these conditions suffices
considering many cases of unlettered persons or even to give rise to the non-‐conclusive presumption that the contract
those with average intelligence invariably finding is an equitable mortgage.
themselves in no position whatsoever to bargain fairly • Exception: Article 1602 is not conclusive and may be rebutted
with their creditors. xSpouses Miseña v. Rongavilla, by competent and satisfactory proof to the contrary.
303 SCRA 749 (1999).1 • Lim v. Calaguas (45 O.G. No. 8, p.3394) " in order for
• Lapat v. Rosario, 312 SCRA 539 (1999) " contract should be presumption to apply, the parties must have intended the
considered as a mortgage or as a loan instead of pacto de retro contract to be a mortgage and not a pacto de retro.
when its terms are ambiguous or the circumstances are • Lim enumerates the following circumstances to treat the
inconsistent with a sale. contract as an equitable mortgage.
• Molina v. Court of Appeals, 398 SCRA 97 (2003) " intention of o Terms used in power-‐of-‐attorney indicate that
parties is showed by all surrounding circumstances, not by the conveyance was intended to be a loan secured by a
terminology used in the contract. mortgage
• Equitable mortgage seeks to prevent situation where o Price paid in relation to value of property is grossly
necessitous men, who are not always free in that to answer a inadequate
pressing emergency, will submit to any term that the crafty may ! However, mere allegation of insufficiency of
impose on them. Banga v. Bello, 471 SCRA 653 (2005) selling price does not create the presumption if
o Besides, it is a fact that in time of grave financial distress there is no proof regarding the market values of
which render persons hard-‐pressed to meet even their the area and property in question
basic needs or answer an emergency, such persons • Inadequacy of price: Consideration so
would have no choice but to sign a deed of absolute far short of the real value as to startle
sale of property or a sale thereof with pacto de retro if the mind.
only to obtain a much-‐needed loan from unscrupulous • Even with the assertion that the price in
money lenders. xMatanguihan v. Court of Appeals, 275 a pacto de retro is not the assessed
SCRA 380 (1997).2 price, does not justify the conclusion
that the contract is one of equitable
4. When Presumed Equitable Mortgage (Article 1602) mortgage.
1 o Practice in pacto de retro sale is
Lao v. Court of Appeals, 275 SCRA 237 (1997).
2
Salonga v. Concepcion, 470 SCRA 291 (2005). to fix a relatively reduced price


to afford the seller a retro every outstanding mortgage obligations. – Equitable
facility to redeem the property. Mortgage
o Seller at time of alleged sale was in urgent need of ! Alleged loan disbursed on installments – no
money. proof as to inadequacy of price – continued
o Supposed seller invested money he obtained in making receipt of rentals by seller was found to be a
improvements on the property sold. gesture of generosity : considered sale on
o Seller remained in possession. installments
! Although the seller only remained in possession o There was a previous debt between the parties that was
for a year, such stipulation did not detract from not extinguished by the sale but remained subsisting.
the fact that possession (an indicium of • Delay in transferring title does not give rise to presumption.
ownership) was retained by the vendor, and
that the vendor retained part of the purchase 5. Badges of Equitable Mortgage (Article 16021)
price. • A contract of sale actually intended to secure the payment of an
! This pointed to an equitable mortgage. obligation is presumed an equitable mortgage. xRomulo v.
! Continued possession where sellers promised to Layug, Jr., 501 SCRA 262 (2006).2
vacate, but did not. Tolerated possession is not • The presence of only one circumstance defined in Article 1602 is
enough to prove equitable mortgage. sufficient for a contract of sale a retro to be presumed an
o Seller paid land tax equitable mortgage. xHilado v. Medalla 377 SCRA 257 (2002).3
o Buyer accepted partial payments, such acceptance • The presumption in Article 1602 jibes with the rule that the law
being incompatible with idea of irrevocability of the title favors the least transmission of property rights. xEnriquez, Sr. v.
of ownership of the purchaser at the expiration of the
1
term stipulated in the original contract for the exercise Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Balatero v. IAC, 154 SCRA 530
(1987); Mariano v. CA, 220 SCRA 716 (1993); Lobres v. CA, 351 SCRA 716 (2001).
of the right to redemption 2
Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256
o Seller remained bound for the repayment of the money (2008).
3
o Transaction had origin in a borrowing of money. Claravall v. CA, 190 SCRA 439, 448 (1990); Uy v. CA, 230 SCRA 664 (1994);
Lobres v. CA, 351 SCRA 716 (2001); Alvaro v. Ternida, 479 SCRA 288 (2006);
! When true intention was not to convey
Diño v. Jardines, 481 SCRA 226 (2006); Raymundo v. Bandong, 526 SCRA 514
ownership, but to secure housing loan of (2007); Aleligay v. Laserna, 537 SCRA 699 (2007); Dorado Vda. De Delfin v.
“buyer” in which “seller” had a direct interest Dellota, 542 SCRA 397 (2008); Bautista v. Unangst, 557 SCRA 256 (2008);
since proceeds were to be applied to their Rockville Excell International Exim Corp. V. Culla, 602 SCRA 124 (2009); Heirs of
Jose Reyes, Jr. v. Reyes, 626 SCRA 758 (2010).


Heirs of Spouses Nieves and Alfredo Baldonado, 498 SCRA 365 (1994); it must be grossly inadequate or shocking to the
(2006); but it is not conclusive, for it may be rebutted by conscience. Tio v. Abayata, 556 SCRA 175 (2008).
competent and satisfactory proof to the contrary. xSantiago v. • To presume a contract is an equitable mortgaged based on
Dizon, 543 SCRA 402 (2008). gross inadequacy of price, it must be clearly shown from the
• The provisions of Article 1602 on the presumption of equitable evidence presented that the consideration was in fact grossly
mortgage applies also to a contract purporting to be an absolute inadequate at the time the sale was executed. Mere inadequacy
sale. xTuazon v. CA, 341 SCRA 707 (2000).1 of price is not sufficient to create the presumption. xOlivares v.
• A contract purporting to be an absolute sale is presumed to be Sarmiento, 554 SCRA 384 (2008).5
an equitable mortgage: (a) when the price of the sale is • Mere tolerated possession is not enough to prove that the
unusually inadequate; 2 (b) when the vendor remains in transaction was an equitable mortgage. xRedondo v. Jimenez,
possession as lessee or otherwise;3 (c) when after the expiration 536 SCRA 639 (2007).
of the right of repurchase, it is extended by the buyer. xHilado • Payment of real estate taxes is a usual burden attached to
v. Heirs of Rafael Medalla, 37 SCRA 257 (2002);4 (d) when the ownership, and when such payment is coupled with continuous
purported seller continues to collect rentals from the lessees of possession of the property, it constitutes evidence of great
the property sold. Ramos v. Dizon, 498 SCRA 17 (2006); (e) weight that a person under whose name the realty taxes were
when the purported seller was in desperate financial situation declared has a valid and right claim over the land. xGo v.
when he executed the purported sale. Bautista v. Unangst, 557 Bacaron, 472 SCRA 229 (2005).6
SCRA 256 (2008); or under threat of being sued criminally. • However mere allegations without proof to support inadequacy
Ayson, Jr. V. Paragas, 557 SCRA 50 (2008). of price, or when continued possession by the seller is
• “Inadequacy of purchase price” is considered so far short of the supported by a valid arrangement consistent with the sale,
real value of the property as to startle a correct mind. xSantiago would not support the allegation of equitable mortgage.
v. Dizon, 543 SCRA 402 (2008); or that the mind revolts at it as xCirelos v. Hernandez, 490 SCRA 624 (2006).7
such that a reasonable man would neither directly or indirectly • Although under the agreement the seller shall remain in
be likely to consent to it. xVda de Alvarez v. CA, 231 SCRA 309 possession of the property for only one year, such stipulation
1 does not detract from the fact that possession of the property,
Zamora v.CA, 260 SCRA 10 (1996).
2
Romulo v. Layug, Jr., 501 SCRA262 (2006). an indicium of ownership, was retained by the alleged vendor to
3
Romulo v. Layug, Jr., 501 SCRA262 (2006); Ayson, Jr. V. Paragas, 557 SCRA 50
5
(2008); Bautista v. Unangst, 557 SCRA 256 (2008); Rockville Excell International Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
6
Exim Corp. v. Culla, 602 SCRA 124 (2009). Lumayag v. Heirs of Jacinto Nemeño, 526 SCRA 51 (2007).
4 7
Cruz v. Court of Appeals, 412 SCRA 614 (2003). Austria v. Gonzales, Jr., 420 SCRA 414 (2004).


qualify the arrangement as an equitable mortgage, especially a. Parties entered into contract denominated as a contract
when it was shown that the vendor retained part of the of sale.
purchase price. xLegaspi v. Ong, 459 SCRA 122 (2005).1 b. Intention was to secure an existing debt by way of
• Under Article 1602, delay in transferring title is not one of the mortgage.
instances enumerated by law—instances in which an equitable
mortgage can be presumed. Nor does the fact that the original 7. Proof By Parole Evidence; Best Evidence Rule
transaction on the land was to support a loan, which when it • That is why parol evidence is competent and admissible in
was not paid on due date was negotiated into a sale, without support of the allegations that an instrument in writing,
evidence that the subsequent deed of sale does not express the purporting on its face to transfer the absolute title to property,
true intentions of the parties, give rise to a presumption of or to transfer the title with a right to repurchase under specified
equitable mortgage. xCeballos v. Intestate Estate of the Late conditions reserved to the seller, was in truth and in fact given
Emigdio Mercado, 430 SCRA 323 (2004). merely as security for the repayment of a loan. xMariano v.
• The fact that the price in a pacto de retro sale is not the true Court of Appeals, 220 SCRA 716 (1993).3
value of the property does not justify the conclusion that the • Matanguihan v. Court of Appeals, 275 SCRA 380 (1997)
contract is one of equitable mortgage; in fact a pacto de retro o Parol evidence is competent to prove that the
sale, the practice is to fix a relatively reduced price to afford the instrument in question was given merely as a security.
seller a retro every facility to redeem the property . xIgnacio v. o Upon proof of the truth of such allegations, court will
CA, 246 SCRA 242 (1995).2 enforce the agreement as they truly intended.
• Article 1602 being remedial in nature, may be applied • Austria v. Gonzales 420 SCRA 414 (2004) " non-‐application of
retroactively in cases prior to the effectivity of the Civil Code. “best evidence rule” to equitable mortgage situations.
xOlea v. CA, 247 SCRA 274 (1995). o Decisive factor in evaluating intent in such agreements
is not always the document itself.
6. Applicability To Deeds Of Absolute Sale (Article 1604) o But all the surrounding circumstances. Thus, parole
• Two requisites for Article 1604 (in relation to Article 1602) to evidence is acceptable.
apply 3
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Cuyugan v. Santos, 34 Phil. 100
(1916); Matanguihan v. CA, 275 SCRA 380 (1997); Hilado v. Heirs of Rafael
Medlla, 37 SCRA 257 (2002); Madrigal v. Court of Appeals, 456 SCRA 659
1
Oronce v. CA, 298 SCRA 133 (1998). (2005); Legaspi v. Ong, 459 SCRA 122 (2005); Banga v. Bello, 471 SCRA 653
2
De Ocampo v. Lim, 38 Phil. 579 (1918); Feliciano v. Limjuco, 41 Phil.147 (1920); (2005); Diño v. Jardines, 481 SCRA 226 (2006); Ayson, Jr. V. Paragas, 557 SCRA
Belonio v. Movella, 105 Phil. 756 (1959). 50 (2008).


! To determine whether the mortgage had been
8. Remedies Allowed For Equitable Mortgage (Articles 1454, settled.
1602, 1605) ! And if not, how much mortgagor should pay to
settle the same.
Article 1454. • In the case of an equitable mortgage, although Article 1605
If an absolute conveyance of property is made in order to secure the which allows for the remedy of reformation, nothing therein
performance of an obligation of the grantor toward the grantee, a precludes an aggrieved party from pursuing other remedies to
trust by virtue of law is established. If the fulfillment of the obligation effectively protect his interest and recover his property, such as
is offered by the grantor when it becomes due, he may demand the an action for declaration of nullity of the deed of sale and
reconveyance of the property to him. specific performance. xTolentino v. Court of Appeals, 386 SCRA
36 (2002).
Article 1605. o CLV: However, nullification proposed by Tolentino
In the cases referred to in articles 1602 and 1604, the apparent vendor would be unfair – it would leave buyer without the
may ask for the reformation of the instrument. necessary security contract, which remains valid.
(n) Reformation should be the proper remedy to enforce
true intention. But, in the event property had been sold
• When a contract is construed to be an equitable mortgage, the to a third party, nullification of that sale and
following may result: reconveyance should be allowed provided security
o Any money, fruit or benefit to be received by the buyer arrangement over the property is preserved.
as rent shall be considered as interest subject to usury • If a sale a retro is construed to be an equitable mortgage,
laws; execution of an affidavit of consolidation is of no consequence,
o The apparent “Seller” may ask for reformation of the and “constructive possession” would not ripen to ownership
instrument; since such was not in concept of an owner. Balatero v.
o Court may decree that “buyer”-‐debtor must pay his Intermediate Appellate Court, 154 SCRA 530 (1987)
outstanding loan to “seller”-‐creditor • In an equitable mortgage situation, the consolidation of
o Where trial court did not pass upon the mortgagor’s ownership in the person of the mortgagee in equity upon failure
claim that he paid the mortgage obligation, a remand of of the mortgagor in equity to pay the obligation, would amount
the case to trial court is in order to a pactum commissorium. The only proper remedy is to cause
the foreclosure of the mortgage in equity. xBriones-‐Vasquez v.


Court of Appeals, 450 SCRA 644 (2005); or to determine if the should be a property mortgaged by way of security for the
principal obligation secured by the equitable mortgage has been payment of the principal obligation, and (2) there should be a
paid or settled. xBanga v. Bello, 471 SCRA 653 (2005). stipulation for automatic appropriation by the creditor of the
• Expiration of “period of redemption” in an equitable mortgage thing mortgaged in case of non-‐payment of the principal
does not prevent the purported seller from extinguishing the obligation within the stipulated period. Ong v. Roban Lending
main contract of loan, and thus also the equitable mortgage Corp., 557 SCRA 516 (2008).
contract. • It does not apply when the security for a debt is also money in
o As long as foreclosure has not been done. the form of time deposit. xConsing v. CA, 177 SCRA 14 (1989).
• Vda. de Zulueta v. Octaviano, 121 SCRA 314 (1983)
9. Pactum Commissorium (Article 2088) o Stipulation: upon redemption by buyer from third party,
that instrument would be considered a deed of absolute
Article 2088. sale from seller to buyer. Another instrument was
The creditor cannot appropriate the things given by way of pledge or executed entitled “option to repurchase.”
mortgage, or dispose of them. Any stipulation to the contrary is null o This was not a sale a retro as the option to repurchase
and void. (1859a) was in a separate document.
o Neither was it an equitable mortgage as it was not
• A stipulation which is a pactum commisorium enables the meant to secure a loan – no application of Article 1602.
mortgagee to acquire ownership of the mortgaged properties o SC: It was not a pactum commissorium either
without need of any foreclosure proceedings—it is a nullity ! Seller was not a debtor
being contrary to the provisions of Article 2088 of the Civil ! Nothing was offered as security.
Code. xLumayag v. Heirs of Jacinto Nemeño, 526 SCRA 315 o Public Policy on pactum commissorium applies only
(2007).1 when the transaction is a mortgage or other security
• The elements of pactum commissorium, which enable the contract – no application to a true sale or transfer
mortgagee to acquire ownership of the mortgaged property transaction.
without the need of any foreclosure proceedings, are: (1) there • Guerrero v. Yñigo, 96 Phil. 37 (1954) " “mortgage with
conditional sale”
1
Guerrero v. Yñigo, 96 Phil. 37 (1954); Montevirgin v. CA, 112 SCRA 641 (1982); o Stipulation: Mortgagor reserved for himself the right to
Vda. de Zulueta v. Octaviano, 121 SCRA 314 (1983); Ong v. Roban Lending redeem property by paying back the amount loaned. On
Corp., 557 SCRA 516 (2008); Heirs of Jose Reyes, Jr. V. Reyes, 626 SCRA 758
(2010).


failure of mortgagor to exercise such right, title would prohibited by law. Ong v. Roban Lending Corp., 557 SCRA 516
pass and be vested in the mortgagee. (2008).
o SC: Such stipulation cannot be construed as giving
mortgagee right to own the property upon failure of the Solid Homes v. Court of Appeals
mortgagor to pay. This is void for being pactum
commissorium. Facts: Solid Homes executed in favor of State Financing Center a Real
• Montevirgin v. Court of Appeals, 112 SCRA 641 (1982) Estate Mortgage on its properties embraced in the TCT, in order to
o Equitable mortgage guised as a sale a retro cannot be secure the payment of a loan of 10M which the former obtained from
enforced as a sale the latter.
o When a purported sale a retro is found to be an
equitable mortgage, the proper remedy in case the A year later, Solid Homes applied for and was granted an additional loan
borrower does not pay the “price” is to foreclose on the of 1, 511,270.03 by State Financing, and to secure its payment, Solid
mortgage. executed an amendment to real estate mortgage whereby the credits
! There can be no loss of the “seller’s” right to secured by the first mortgage on the abovementioned properties were
redeem for that would be pactum increased from 10M to 11,511,270.03.
commissorium. Solid homes obtained additional credits and financing facilities from
! Return of redemption price would be equaL to State Financing in the sum of 1,499,811.97 and to secure its payment,
paying the principal loan, thus extinguishing the the former executed the amendment to real estate mortgage whereby
equitable mortgage. the mortgage executed on its properties was again amended so that the
• The provision in a MOA/Dacion en Pago with a Right to loans or credits secured thereby were further increased from 11,511,
Repurchase that in the event the borrower fails to comply with 270.03 to 13,011,082.00.
the new terms of restructuring the loan, the agreement shall
automatically operate to be an instrument of dacion en pago When the obligations became due and payable, State Financing made
without need of executing any new document does not repeated demands upon Solid homes for the payment thereof, but the
constitute pactum commissorium. Solid Homes, Inc. v. Court of latter failed to do so.
Appeals, 275 SCRA 267 (1997); the questioned contracts were
freely and voluntarily executed by petitioners and respondent is State Financing filed a petition for extrajudicial foreclosure of the
of no moment, pactum commissorium being void for being mortgages who in pursuance of the petition, issued a notice of sheriff’s
sale whereby the mortgaged properties of Solid homes and the


improvements existing thereon, including the V.V. Soliven Towers II informed Solid homes of the registration with the register of deeds of
Building were set for public auction sale in order to satisfy the full their memorandum of agreement/dacion en pago and the issuance of
amount of Solid homes’ mortgage indebtedness, the interest thereon, the new certificates of title in the name of State Financing.
and the fees and expenses incidental to the foreclosure proceedings.
Clearly, petitioner was not prejudiced by the non-‐ annotation of such
Before the scheduled public auction sale, the mortgagor Solid homes right in the certificates of title issued in the name of State Financing.
made representations and induced State Financing to forego with the Also, it was not the function of the corporation to cause said
foreclosure of the real estate mortgage. By reason thereof, State annotation. It was equally the responsibility of petitioner to protect its
Financing agreed to suspend the foreclosure of mortgaged properties, own rights by making sure that its right of repurchase was indeed
subject to the terms and conditions they agreed upon, and in pursuance annotated in the consolidated titles of State Financing.
of the said agreement, they executed a document entitled
MEMORANDUM OF AGREEMENT/DACION EN P AGO. The only legal transgression of State was its failure to observe the
proper procedure in effecting the consolidation of the titles in its name.
But this does not automatically entitle the petitioner to damages absent
Issue: convincing proof of malice and bad faith on the part of private
1. Whether or not the memorandum of agreement/dacion en respondent-‐corporation.
pago executed by the parties is valid and binding " YES
2. Whether or not solid homes can claim damages arising from the Doctrine:
non-‐annotation of its right of repurchase in the consolidated
titles " NO • BUT SEE: The stipulation in the promissory note providing that
upon failure of the makers to pay interests, ownership of the
Held: The Memorandum of Agreement/Dacion En Pago was valid and property would automatically be transferred to the payee, and
binding, and that the registration of said instrument in the Register of the covering deed of sale would be registered is in substance a
Deeds was in accordance with law and the agreement of the parties. pactum commissorium in violation of Article 2088, and
consequently, the resultant sale is void and the registration and
Solid homes utterly failed to prove that respondent corporation had obtaining of new title in the name of the buyer would have be
maliciously and in bad faith caused the non-‐annotation of petitioner’s
right of repurchase so as to prevent the latter from exercising such right.
On the contrary, it is admitted by both parties that State Financing


declared void also. A. Francisco Realty v. Court of Appeals, 298
SCRA 349 (1998).1 Doctrine:

A. Francisco Realty v. Court of Appeals 10. Final Chance to Redeem in “Mistaken Equitable Mortgage”
(Article 1606)
Facts: A. Francisco Realty and Development Corp. granted a loan worth
P7.5M in favor of spouses Javillonar, to which the latter executed three Article 1606.
documents: a) a promissory note containing the interest charge of 4% The right referred to in article 1601, in the absence of an express
monthly, b) a deed of mortgage over the subject property, c) an agreement, shall last four years from the date of the contract.
undated deed of sale of the mortgaged property. Since the spouses
allegedly failed to comply with the payments, petitioner registered the Should there be an agreement, the period cannot exceed ten years.
sale in its favor, getting a TCT issued in its name without knowledge by
the spouses. Subsequently, the spouses obtained another loan worth However, the vendor may still exercise the right to repurchase within
P2.5M, signing another promissory note in favor of petitioner. Petitioner thirty days from the time final judgment was rendered in a civil action
demanded the possession of the property, as well as the interest on the basis that the contract was a true sale with right to repurchase.
payments, to which the spouses refused to comply. Petitioner filed an (1508a)
action for possession in the RTC. RTC ruled in favor of petitioner, but CA
reversed. • Grant Of 30-‐Day Redemption Right In Case Of Litigation And
Article 1606: Expiration of period ipso jure extinguishes right to
Issue: Whether or not the sale was considered as an equitable mortgage redeem. However, when there was a previous suit concerning
the nature of the contract, the seller may still exercise right to
Held: YES. The transfer was in the nature of pactum commissorium, repurchase within 30-‐days from the time final judgment was
since the sale was really considered as an equitable mortgage. It was rendered
really intended by the spouses to make such undated deed of sale a o The 30-‐day period contemplates a case involving a
security. Also, when petitioners transferred the title in its name, the controversy as to the nature of the contract. Court
spouses was never informed of such action. Such transfer was therefore decides whether it is a pacto de retro or an equitable
void, making the TCT held by petitioners null and void as well. mortgage. Tapas v. Court of Appeals, 69 SCRA 393
(1976).
1
Legaspi v. Ong, 459 SCRA 122 (2005).


o The 30-‐day period under Article 1606 does not apply if mortgage; and (b) that if they truly believed the sale to be an
the courts should find the sale to be absolute. equitable mortgage, as a sign of good faith, they should have
Pangilinan v. Ramos, 181 SCRA 359 (1990). consigned with the trial court the amount representing their
• Rationale For 30-‐Day Period alleged loan, on or before the expiration of the right to
o Seller may have considered the sale to be an equitable repurchase. Abilla v. Gobonseng, 374 SCRA 51 (2002).1
mortgage. Being such, the seller has every right to
extinguish the equitable mortgage by paying-‐up the Abilla v. Gobonseng
loan at any time before the buyer has foreclosed on the
mortgage. Facts: Spouses Abilla instituted against Spouses Gobonseng an action for
o Allowing the expiration of the redemption period is specific performance, recovery of sum of money and damages, seeking
consistent with his claim that the sale was an equitable the reimbursement of the expenses they incurred in the preparation
mortgage. and registration of 2 public instruments-‐-‐ Deed of Sale and Option to
o Thus, upon finding of the court that it was indeed a Buy. As a defense, Spouses Gobonseng contended that the transaction
pacto de retro, then the seller must be granted a final covered by these instruments was a mortgage. RTC ruled in favor of
30-‐day period within which to decide and if ever, Spouses Abilla, stating that it was a sale giving Spouses Gobonseng until
exercise his right to redeem. August 31, 1983 within which to buy back the 17 lots subject of the sale.
• However: if issue was whether the contract was an absolute CA affirmed and held that the transaction was a pacto de retro sale, and
sale or sale a retro not an equitable mortgage.
o Judgment of sale a retro does not give the seller the 30-‐ In 1999, Spouses Gobonseng filed with the RTC an urgent motion to
day period. repuchase the lots with tender of payment, which was denied.
o In such a case, seller is negligent for not exercising the However, after the judge inhibited himself from the case, it was
right to redeem. reraffled to a different branch, which granted the motion to repurchase.
• Sellers in a sale judicially declared as pacto de retro may not
exercise the right to repurchase within the 30-‐day period Issue: Whether or not Spouses Gobonseng may exercise the right to
provided under Article 1606, although they have taken the repurchase, as stipulated in Article 1606(3).
position that the same was an equitable mortgage, if it is shown
that there was no honest belief thereof since: (a) none of the Held: NO. Sellers in a sale judicially-‐declared as pacto de retro may NOT
circumstances under Article 1602 were shown to exist to
warrant a conclusion that the transaction was an equitable 1
Vda. de Macoy v. CA, 206 SCRA 244 (1992).


exercise the right to repurchase within the 30-‐day period provided • When sale is judicially declared pacto de retro, and after
under Article 1606, although they have taken the position that the same vendors take the position that it was an equitable mortgage,
was an equitable mortgage, if it shown that there was no honest belief having no honest belief to that effect – vendors may not avail of
thereof since: (a) none of the circumstances under Article 1602 were the additional 30-‐day period. Abilla v. Gobonseng, 374 SCRA
shown to exist to warrant a conclusion that the transaction was an 429 (2002)
equitable mortgage; and (b) that if they truly believed the sale to be an o If they truly believed that the sale was an equitable
equitable mortgage, as a sign of good faith, they should have consigned mortgage, they should have consigned with the trial
with the trial court the amount representing their alleged loan, on or court the amount representing the alleged loan.
before the expiration of the right to repurchase. • However, this was reversed. Article 1606 only applies when the
nature of the transaction was put in issue before the court.
Doctrine: o It applies in a situation where one party claims that it
was a pacto de retro, and the other claimed that it was
• An equitable mortgage is a voidable contract. It may be an equitable mortgage, and the courts decided that it
annulled within four (4) years from the time the cause of action was a pactto de retro sale.
accrues. Ayson, Jr. v. Paragas, 557 SCRA 50 (2008). [CLV: o However, applicability still rests on the bona fire intent
Thereafter, it may be enforced against the provision on of the seller a retro, if he truly believed that the
pactum commissorium?] transaction was an equitable mortgage.
o It doesn’t matter what the buyer intended the
11. Feigning Equitable Mortgage Situation to Avail of Article 1606 transaction to be.
• What if seller feigns defense of equitable mortgage in order to
get the 30-‐day period? III. Legal Redemption
• Where evidence established no honest doubt as to parties’
intentions to make it a sale pacto de retro, seller would not be A. Definition (Article 1619)
entitled to Article 1606’s benefits. Adorable v. Inacala, 103
SCRA 481 (1958) Article 1619.
• There must be honest belief on part of vendor that the Legal redemption is the right to be subrogated, upon the same terms
agreement was in reality a mortgage, merely to give security for and conditions stipulated in the contract, in the place of one who
an obligation. Vda. De Macoy v. Court of Appeals, 206 SCRA acquires a thing by purchase or dation in payment, or by any other
244 (1992) and Felicen v. Orias, 156 SCRA 586 (1987) transaction whereby ownership is transmitted by onerous title.


(1521a) time of perfection transfers of title
In favor of the seller Given to a third-‐party to the sale.
• Legal redemption is in the nature of a privilege created by law Exercise extinguishes the Constitutes a new sale in
partly for reasons of public policy and partly for the benefit and underlying contract of sale, as substitution of the original sale
convenience of the redemptioner, to afford him a way out of though there was never any
what might be a disagreeable or [an] inconvenient association contract at all
into which he has been thrust. It is intended to minimize co-‐
ownership. xFernandez v. Tarun, 391 SCRA 653 (2002).1 B. Legal Redemption Rights Under The Civil Code
1. Among Co-‐Heirs (Article 1088)
1. Rationale For Legal Redemption
• Reasons of public policy Article 1088.
• Benefit and convenience of redemptioner, to afford him a way Should any of the heirs sell his hereditary rights to a stranger before
out of what might be an inconvenient association the partition, any or all of the co-‐heirs may be subrogated to the rights
• Intended to minimize co-‐ownership of the purchaser by reimbursing him for the price of the sale, provided
o Law grants a co-‐owner the exercise of said right of they do so within the period of one month from the time they were
redemption when shares of other owners are sold to a notified in writing of the sale by the vendor. (1067a)
third person
• Once property is subdivided and distributed among the co-‐ • No right of legal redemption available to co-‐heirs when sale
owners, no more reason to sustain any right of legal covers a particular property of the estate.
redemption. Avila v. Barabat, 485 SCRA 8 (2006) • Redemption right pertain to disposition of right to inherit, and
not when there is a sale of a particular property of the estate.
2. Salient Distinctions Between Conventional And Legal Right Of xPlan v. Intermediate Appellate Court, 135 SCRA 270 (1985).
Redemption • When the heirs have partitioned the estate among themselves
and each have occupied and treated definite portions thereof as
Conventional (“right a retro”) Legal (“subrogation”) their own, co-‐ownership has ceased even though the property is
Can only be constituted by express Does not have to be expressly still under one title, and the sale by one of the heirs of his
reservation in a contract of sale at reserved, covers other onerous definite portion cannot trigger the right of redemption in favor
of the other heirs. xVda. De Ape v. Court of Appeals, 456 SCRA
1
Basa v. Aguilar, 117 SCRA 128 (1982). 193 (2005).


• The heirs who actually participated in the execution of the • When the seller a retro dies, the right to redeem cannot be
extrajudicial settlement, which included the sale to a third exercised by a co-‐heir alone, since the right to redeem belonged
person of their pro indiviso shares in the property, are bound by in common to all the heirs. xDe Guzman v. Court of Appeals,
the same; while the co-‐heirs who did not participate are given 148 SCRA 75 (1987).
the right to redeem their shares pursuant to Article 1088. xCua • Redemption by co-‐owner redounds to the benefit of all other
v. Vargas, 506 SCRA 374 (2006). co-‐owners. xMariano v. Court of Appeals, 222 SCRA 736 (1993);
and the 30-‐day period for the commencement of the right to
2. Among Co-‐Owners (Article 1620) exercise the legal redemption right, even when such right has
been recognized to exist in a final and executory court decision,
Article 1620. does not begin from the entry of judgment, but from the
A co-‐owner of a thing may exercise the right of redemption in case the written notice served by the seller to the party entitled to
shares of all the other co-‐owners or of any of them, are sold to a third exercise such redemption right. Guillen v. Court of Appeals, 589
person. If the price of the alienation is grossly excessive, the SCRA 399 (2009).
redemptioner shall pay only a reasonable one. • The requisites for the exercise of legal redemption are as
follows: (1) there must be co-‐ownership; (2) one of the co-‐
Should two or more co-‐owners desire to exercise the right of owners sold his right to a stranger; (3) the sale was made before
redemption, they may only do so in proportion to the share they may the partition of the co-‐owned property; (4) the right of
respectively have in the thing owned in common. (1522a) redemption must be exercised by one or more co-‐owners within
a period of thirty days to be counted from the time he or they
• The right of redemption may be exercised by a co-‐owner only were notified in writing by the co-‐owner vendor; and (5) the
when part of the community property is sold to a stranger, now vendee must be reimbursed the price of the sale. Calma v.
when sold to another co-‐owner because a new participant is not Santos, 590 SCRA 359 (2009).
added to the co-‐ownership. xFernandez v. Tarun, 391 SCRA 653
(2002). 3. Effect Of De Facto Partition Among Co-‐Heirs And Co-‐Owners
o Should two or more co-‐owners desire to exercise the • When the heirs have partitioned the estate among themselves
right of redemption, they may do so only in proportion and each have occupied and treated definite portions thereof as
to the share they have in the co-‐owned thing. their own, co-‐ownership has ceased even though the property is
o Right of redemption of co-‐owners excludes adjoining still under one title, and the sale by one of the heirs of his
owners. Article 1623(2) definite portion cannot trigger the right of redemption in favor


of the other heirs. Vda. De Ape v. Court of Appeals, 456 SCRA The owners of adjoining lands shall also have the right of redemption
193 (2005) when a piece of rural land, the area of which does not exceed one
• For the right of redemption to be exercised, co-‐ownership must hectare, is alienated, unless the grantee does not own any rural land.
exist at the time of the conveyance is made by a co-‐owner and
the redemption is demanded by the other co-‐owner or co-‐ This right is not applicable to adjacent lands which are separated by
owners. xAvila v. Barabat, 485 SCRA 8 (2006). brooks, drains, ravines, roads and other apparent servitudes for the
benefit of other estates.
4. Distinguishing Between Right Of Redemption Of Co-‐Heirs And
Co-‐Owners – If two or more adjoining owners desire to exercise the right of
• Article 1620 includes the doctrine that a redemption by a co-‐ redemption at the same time, the owner of the adjoining land of
owner of the property owned in common, even when he uses smaller area shall be preferred; and should both lands have the same
his own fund, within the period prescribed by law inures to the area, the one who first requested the redemption. (1523a)
benefit of all the other co-‐owners. xAnnie Tan v. Court of
Appeals, 172 SCRA 660 (1989).1 • Right of redemption covers only “resale” and does not cover
• Article 1088, the heir may redeem for himself the heredity exchanges or barter of properties. De Santos v. City of Manila,
rights sold by a co-‐heir. 45 SCRA 409 (1972).
• Mariano v. Court of Appeals, 220 SCRA 716 (1993) " co-‐heir • Requisite to show property previously bought on “speculation”
exercised legal redemption over parcel of land belonging to dropped. xLegaspi v. CA, 69 SCRA 360 (1976).
estate of decedent. Thus, which redemption clause to apply? • Right of redemption covers only “resale” and does not cover
o Distinction between 1088 and 1620 exchanges or barter of properties xDe Santos v. City of Manila,
o When sake of particular property or interest in 45 SCRA 409 (1972); and cannot arise unless both adjacent
property, Article 1620. lands are rural lands. xPrimary Structures Corp. v. Valencia, 409
o When sale of hereditary right itself, Article 1088. SCRA 371 (2003).
• When there is no issue that when the adjoining lands involved
5. Among Adjoining Owners Of Rural Lands (Articles 1621) are both rural lands, then the right of redemption can be
exercised and the only exemption provided is when the buyer
Article 1621. can show that he did not own any other rural land. But the
burden of proof to provide for the exception lies with the buyer.
1
De Guzman v. CA, 148 SCRA 75 (1987); Adille v. CA, 157 SCRA 455 (1988).


xPrimary Structures Corp. v. Valencia, 409 SCRA 371, 374 • Legaspi v. Court of Appeals, 69 SCRA 360 (1976) " practically
(2003). did away with requirement of having purchased land previously
for speculation.
6. Among Adjoining Owners of Urban Land (Article 1622) • Sen Po Ek Marketing v. Martinez, 325 SCRA 210 (2000) held
that Article 1622 only deals with small urban lands bought for
Article 1622. speculation.
Whenever a piece of urban land which is so small and so situated that o Right does not apply to a lessee trying to buy the land
a major portion thereof cannot be used for any practical purpose he is leasing.
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 7. Sale of Credit in Litigation (Article 1634) – 30 days from notice
pre-‐emption at a reasonable price. of demand to pay.

If the re-‐sale has been perfected, the owner of the adjoining land shall Article 1634.
have a right of redemption, also at a reasonable price. When a credit or other incorporeal right in litigation is sold, the debtor
shall have a right to extinguish it by reimbursing the assignee for the
When two or more owners of adjoining lands wish to exercise the right price the latter paid therefor, the judicial costs incurred by him, and
of pre-‐emption or redemption, the owner whose intended use of the the interest on the price from the day on which the same was paid.
land in question appears best justified shall be preferred. (n)
A credit or other incorporeal right shall be considered in litigation from
• Ortega v. Orcine, 38 SCRA 276 (1971) " the purpose of this the time the complaint concerning the same is answered. The debtor
provision is to discourage speculation in real estate and the may exercise his right within thirty days from the date the assignee
aggravation of the housing problems. demands payment from him. (1535)
o “Urban” " refers to the character of the community or
vicinity in which the land is found. C. When Period of Legal Redemption Begins (Article 1623)
• Redemption of Urban land only applies when there is resale
o No right of redemption when urban land is transferred Article 1623.
under “exchange” of properties. 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 the same is beneficial to the children. xBadillo v. Ferrer, 152
affidavit of the vendor that he has given written notice thereof to all SCRA 407 (1987).
possible redemptioners. • The notice required under Article 1623 is deemed to have been
complied with when the other co-‐owner has signed the Deed of
The right of redemption of co-‐owners excludes that of adjoining Extrajudicial Partition and Exchange of Shares which embodies
owners. (1524a) the disposition of part of the property owned in common.
xFernandez v. Tarun, 391 SCRA 653 (2002).
1. Kind Of Notice Contemplated By Law • The existence of a clause in the deed of sale to the effect that
• Both the letter and the spirit of the law argue against any the vendor has complied with the provisions of Article 1623,
attempt to widen the scope of the notice specified in the Civil cannot be taken to “being the written affirmation under oath,
Code to include any other kind of notice, such as verbal or by as well as the evidence, that the required written notice to
registration. Marinao v. Court of Appeals, 222 SCRA 736 petitioner under Article 1623 has been meet, for the person
(1993).1 entitled to the right is not a party to the deed of sale. xPrimary
o Neither the registration of the sale xCabrera v. Structures Corp. v. Valencia, 409 SCRA 371 (2003).
Villanueva, 160 SCRA 627 (1988), nor the annotation of
an adverse claim xVda. De Ape v. Court of Appeals, 456 2. Counting Of The Period
SCRA 193 (2005), nor notice being given by the city • The 30-‐day period for the commencement of the right to
treasurer xVerdad v. Court of Appeals, 256 SCRA 593 exercise the legal redemption right, even when such right has
(1996), comply with the written notice required under been recognized to exist in a final and executory court decision,
Article 1623 to begin the tolling of the 30-‐day period of does not begin from the entry of judgment, but from the
redemption. written notice served by the seller to the party entitled to
• The written notice of sale is mandatory, notwithstanding actual exercise such redemption right. Guillen v. Court of Appeals, 589
knowledge of a co-‐owner, in order to remove all uncertainties SCRA 399 (2009).
about the sale, its terms and conditions, as well as its efficacy • The interpretation of Article 1623 where there is a need for
and status. xVerdad v. Court of Appeals, 256 SCRA 593 (1996). notice in writing, should always tilt in favor of the redemptioner
• Notice to minors may validly be served upon parents even when and against the buyer, since the purpose is to reduce the
the latter have not been judicially appointed as guardians since number of participants until the community is terminated, being
1
a hindrance to the development and better administration of
Citing Hernaez v. Hernaez, 32 Phil. 214 (1915); Castillo v. Samonte, 106 Phil.
1024 (1960).
the property. “It is a one-‐way street,” in favor of the


redemptioner since he can compel the buyer to sell to him but v. CA, 148 SCRA 507 (1987), which allowed the giving of
he cannot be compelled by the vendee to buy. xHermoso v. notice by the buyer to be effective under Article 1623;
Court of Appeals, 300 SCRA 516 (1998). o When notice is given by the proper party (i.e., the
seller), no particular form of written notice is prescribed
3. Notice Must Cover Perfected Sale under Article 1623, so that the furnishing of the copies
• The 30-‐day period does not begin to run in the absence of of the deeds of sale to the co-‐owner would be
written notification coming from the seller. xCua v. Vargas, 506 sufficient, as held previously in xDistrito v. CA, 197
SCRA 374 (2006);1 and it must be a written notice of a perfected SCRA 606 (1991); Conejero v. CA, 16 SCRA 775 (1966);
sale. xSpouses Doromal v. Court of Appeals, 66 SCRA 575 xBadillo v. Ferrer, 152 SCRA 407 (1987), but only on the
(1975). form of giving notice but not on the ruling of who is the
• Notice must be with execution and delivery of the deed of sale. proper party to give notice;
o Period should not be deemed to have commenced o Affirmed ruling in xAlonzo v. Intermediate Appellate
unless notice is made after execution of formal deed of Court, 150 SCRA 259 (1987), that the filing of the suit
disposal. for ejectment or collection of rentals against a co-‐owner
• This doctrine cannot be applied to legal pre-‐emption. actually dispenses with the need for a written notice,
and must be construed as commencing the running of
4. Summation On Strict Rules On Article 1623 Concerning Notice the period to exercise the right of redemption, since the
• Francisco v. Boiser, 332 SCRA 305 (2000), summarized the case-‐ filing of the suit amounted to actual knowledge of the
law on Article 1623, and with definitiveness declared: sale from which the 30-‐day period of redemption
o For the 30-‐day redemption period to begin to run, commences to run.
notice must be given by the seller; and that notice given
by the buyer or even by the Register of Deeds is not Francisco v. Boiser
sufficient. This expressly affirms the original ruling in
Butte v. Manuel Uy and Sons, Inc., 4 SCRA 526 (1962), Facts: Petitioner Adalia Francisco and three of her sisters, Ester,
as affirmed in xSalatandol v. Retes, 162 SCRA 568 Elizabeth, and Adeluisa, were co-‐owners of four parcels of registered
(1988). This expressly overruled the ruling in xEtcuban land in Caloocan City. On August 1979, they sold 1/5 of their undivided
share to their mother, Adela Blas, for PhP10,000, making her a co-‐owner
of the real property to that extent.
1
Garcia v. Calaliman, 17 SCRA 201 (1989); Mariano v. Court of Appeals, 222

SCRA 736 (1993).


7 years later, in 1986, however, Adela sold her 1/5 share for PhP10,000 compliance with the notice requirement of Article 1623 for the purpose
to respondent Zenaida Boiser, another sister of petitioner. of legal redemption.
In 1992 or 6 years after the sale, Adalia received summons with a copy
of a complaint by Zenaida demanding her share in the rentals being Held: The petitioner points out that the case does not concern the
collected from the tenants of the Ten Commandments Building, which particular form in which such notice must be given, but rather the
stands on the co-‐owned property. Adalia then informs Zenaida that she sufficiency of notice given by a vendee in lieu of the required notice to
was exercising her right of redemption as co-‐owner of the subject be given by the vendor or prospective vendor.
property, depositing for that purpose PhP10,000 with the Clerk of Court
The case was however dismissed after Zenaida was declared non-‐suited, The text of Article 1623 clearly and expressly prescribes that the 30 days
and Adalia’s counterclaim was thus dismissed as well. for making the redemption shall be counted from notice in writing by
the vendor it makes sense to require that notice be given by the vendor
3 years after, Adalia institutes a complaint demanding the redemption and nobody else, since the vendor of an undivided interest is in the best
of the property, contending that the 30-‐ day period for redemption position to know who are his co-‐owners, who under the law must be
under Art. 1623 had not begun to run against her or any of the other co-‐ notified of the sale.
owners, since the vendor Adela did not inform them about the sale,
which fact they only came to know of when Adalia received the Notice by the co-‐owner likewise removes all doubt as to the fact of the
summons in 1992. Zenaida on the other hand contends that Adalia sale, its perfection, and its validity by not immediately notifying, or not
already knew of the sale even before she received the summons since notifying at all, a co-‐ owner, the vendor can delay or even effectively
Zenaida had informed Adalia by letter of the sale with a demand for her prevent the meaningful exercise of the right of redemption.
share of the rentals three months before filing suit, attaching to it a
copy of the deed of sale. Adalia’s receipt of the said letter is proven by However, it would be unjust in the case at bar to require the vendor
the fact that within a week, she advised the tenants of the building to Adela to serve notice of the sale, when the fact has already been
disregard Zenaida’s letter-‐demand. The trial court dismissed the established in both lower courts Adalia has effectively exercised her
complaint for legal redemption, holding that Art. 1623 does not right when she deposited the P10,000 redemption price 7 days after
prescribe any particular form of notifying co-‐owners on appeal, the CA receiving the summons.
affirmed.
5. Rare Exceptions:
Issue: Whether or not the letter-‐demand by Zenaida to Adalia, to which • Alonzo v. Intermediate Appellate Court, 150 SCRA 259 (1987)
the deed of sale was attached, can be considered as sufficient As An Exception To Article 1088


o Situation where co-‐heirs lived with purchaser in the • Interpretation in these cases tilts in favor of the redemptioner.
same lot, but the action was brought only after 13 years • The written notice of sale is mandatory, notwithstanding actual
of knowing about the same. The co-‐heirs are deemed to knowledge of a co-‐owner, in order to remove all uncertainties
have received actual notice of the same (even if no about the sale, its terms and conditions, as well as its efficacy
written notice). Laches seems to be the main principal. and status. Verdad v. Court of Appeals, 256 SCRA 593 (1996)
o When the buyers took possession of the property o Written notice required was enacted to remove all
immediately after the execution of the deed of sale in doubts about the alienation.
their favor and lived in the midst of the other co-‐owners
who never questioned the same. xPilapil v. CA, 250 B. Francisco v. Boiser, 332 SCRA 305 (2000) – Requirements under
SCRA 560 (1995). Article 1623
• Exception To The Exception (i.e. Exception To The Alonzo 1. Notice must be given by seller in order for 30-‐day redemption
Doctrine) When the sale to the buyer was effected through the period to run.
co-‐owner who acted as the broker, and never indicated that he 2. No particular form is prescribed.
would exercise his right to redeem. xDistrito v. CA, 197 SCRA 3. Filing of suit for ejectment or collection of rentals dispenses
606 (1991). with need for written notice – filing of the suit amounts to
• Verdad v. Court of Appeals, 256 SCRA 593 (1996) – Alonzo and actual knowledge of the sale.
Distrito are special exceptions • Other co-‐owner signs deed of partition embodying disposition
o Co-‐owner learned of the sale through city treasurer of property – proper notice. Fernandez v. Tarun, 391 SCRA 653
o Her exercise of right of redemption was timely: no (2002)
written notice of sale was ever given to her, thus the 30-‐
day period had not yet run. D. Other Legal Redemption Rights
1. Redemption in Patents (Sec. 119, C.A. 141)
Summation On Strict Rules On Notice
COMMONWEALTH ACT NO. 141
A. Hermoso v. Court of Appeals, 300 SCRA 516 (1998). Notice in writing Section 119.
is needed in 3 other species of legal redemption Every conveyance of land acquired under the free patent or
1. Case where share of co-‐owners are sold to a third person homestead provisions, when proper, shall be subject to repurchase by
2. Redemption of adjoining rural land the applicant, his widow, or legal heirs, within a period of five years
3. Redemption of adjoining urban land. from the date of the conveyance.


pay the taxes, penalties and costs, the Internal Revenue Officer
• Sale within 5 years void even when in favor of homesteader’s conducting the sale shall declare the property forfeited to the
own child. Government in satisfaction of the claim in question and within two (2)
• Right to repurchase is granted by law and need not be provided days thereafter, shall make a return of his proceedings and the
for in the deed of sale. xBerin v. Court of Appeals, 194 SCRA forfeiture which shall be spread upon the records of his office. It shall
508 (1991). be the duty of the Register of Deeds concerned, upon registration with
• General Rule: Under the free patent or homestead provisions of his office of any such declaration of forfeiture, to transfer the title of
the Public Land Act a period of five (5) years from the date of the property forfeited to the Government without the necessity of an
conveyance is provided, to be reckoned from the date of the order from a competent court.
sale and not from the date of registration in the office of the
Register of Deeds. xLee Chuy Realty Corp. v. CA, 250 SCRA 596 Within one (1) year from the date of such forfeiture, the taxpayer, or
(1995).1 any one for him may redeem said property by paying to the
o Exception: Where homestead was sold at extrajudicial Commissioner or the latter's Revenue Collection Officer the full
foreclosure, 5 year period begins to run after expiration amount of the taxes and penalties, together with interest thereon and
of one year period of repurchase allowed in the costs of sale, but if the property be not thus redeemed, the
extrajudicial foreclosure. forfeiture shall become absolute.
• Section 119 of Public Land act should be read with Article 1616
of New Civil Code – there should be a return of the price/tender 3. Redemption by Judgment Debtor (Secs. 27-‐28, Rule 39, Rules
of payment. of Civil Procedure)
o Mere notice of intent to redeem is insufficient.
1997 RULES OF CIVIL PROCEDURE
2. Redemption in Tax Sales (Sec. 215, NIRC of 1997) Section 27. Who may redeem real property so sold.
Real property sold as provided in the last preceding section, or any
NATIONAL INTERNAL REVENUE CODE OF 1997 part thereof sold separately, may be redeemed in the manner
Section 215. Forfeiture to Government for Want of Bidder. hereinafter provided, by the following persons:
In case there is no bidder for real property exposed for sale as herein
above provided or if the highest bid is for an amount insufficient to (a) The judgment obligor; or his successor in interest in the whole or
any part of the property;
1
Mata v. Court of Appeals, 318 SCRA 416 (1999).


(b) A creditor having a lien by virtue of an attachment, judgment or assessments or taxes which the last previous redemptioner paid after
mortgage on the property sold, or on some part thereof, subsequent the redemption thereon, with interest thereon, and the amount of any
to the lien under which the property was sold. Such redeeming liens held by the last redemptioner prior to his own, with interest.
creditor is termed a redemptioner. (29a)
Written notice of any redemption must be given to the officer who
Section 28. Time and manner of, and amounts payable on, successive made the sale and a duplicate filed with the registry of deeds of the
redemptions; notice to be given and filed. place, and if any assessments or taxes are paid by the redemptioner or
The judgment obligor, or redemptioner, may redeem the property if he has or acquires any lien other than that upon which the
from the purchaser, at any time within one (1) year from the date of redemption was made, notice thereof must in like manner be given to
the registration of the certificate of sale, by paying the purchaser the the officer and filed with the registry of deeds; if such notice be not
amount of his purchase, with the per centum per month interest filed, the property may be redeemed without paying such
thereon in addition, up to the time of redemption, together with the assessments, taxes, or liens. (30a)
amount of any assessments or taxes which the purchaser may have
paid thereon after purchase, and interest on such last named amount • Under Section 28, Rule 39 of the 1997 Rules of Civil Procedure,
at the same rate; and if the purchaser be also a creditor having a prior the period of redemption shall be “at any time within one (1)
lien to that of the redemptioner, other than the judgment under which year from the date of registration of the certificate of sale,” so
such purchase was made, the amount of such other lien, with interest. that the period is now to be understood as composed of 365
days, unlike the 360 days under the old provisions of the Rules
Property so redeemed may again be redeemed within sixty (60) days of Court. xYsmael v. CA, 318 SCRA 215 (1999).
after the last redemption upon payment of the sum paid on the last • In execution sales, the sheriff does not warrant the title to the
redemption, with two per centum thereon in addition and the amount property sold by him and it is not incumbent on him to place the
of any assessments or taxes which the last redemptioner may have purchaser in possession of the property.
paid thereon after redemption by him, with interest on such last o The rule of caveat emptor applies to execution sales.
named amount, and in addition, the amount of any liens held by said • Written notice must be given to the judgment debtor before the
last redemptioner prior to his own, with interest. The property may be sale of the property on execution, to give him the opportunity
again, and as often as a redemptioner is so disposed, redeemed from to prevent the sale by paying the judgment debt sought to be
any previous redemptioner within sixty (60) days after the last enforced and the costs which have been incurred. xTorres v.
redemption, on paying the sum paid on the last previous redemption, Cabling, 275 SCRA 329 (1997).
with two per centum thereon in addition, and the amounts of any


• Where there is a third-‐party claim, sheriff should demand from the redemption price when the said judgment debtor or
the judgment creditor who becomes the highest bidder, mortgagor effects the redemption.
payment in cash of his bid instead of merely crediting the • The redemption of extra-‐judicially foreclosed properties is
amount to the partial satisfaction of the judgment debt. exercised within one (1) year from the date of the auction sale
xTorres v. Cabling, 275 SCRA 329 (1997). as provided for in Act 3135. xLee Chuy Realty Corp. v. CA, 250
SCRA 596 (1995).
4. Redemption in Extrajudicial Foreclosure (Sec. 6, Act 3135) • The execution of a dacion en pago by sellers effectively waives
the redemption period normally given a mortgagor. xFirst
ACT NO. 3135 Global Realty and Dev. Corp. v. San Agustin, 377 SCRA 341
Section 6. (2002).
In all cases in which an extrajudicial sale is made under the special
power hereinbefore referred to, the debtor, his successors in interest 5. Redemption In Judicial Foreclosure Of Mortgage (Sec. 47, R.A.
or any judicial creditor or judgment creditor of said debtor, or any 8791)
person having a lien on the property subsequent to the mortgage or
deed of trust under which the property is sold, may redeem the same REPUBLIC ACT NO. 8791
at any time within the term of one year from and after the date of the Section 47. Foreclosure of Real Estate Mortgage.
sale; and such redemption shall be governed by the provisions of In the event of foreclosure, whether judicially or extra-‐judicially, of
sections four hundred and sixty-‐four to four hundred and sixty-‐six, any mortgage on real estate which is security for any loan or other
inclusive, of the Code of Civil Procedure, in so far as these are not credit accommodation granted, the mortgagor or debtor whose real
inconsistent with the provisions of this Act. property has been sold for the full or partial payment of his obligation
shall have the right within one year after the sale of the real estate, to
• This is the General Rule redeem the property by paying the amount due under the mortgage
• Before the expiration of the 1-‐year redemption period within deed, with interest thereon at rate specified in the mortgage, and all
which the judgment-‐debtor or mortgagor may redeem the the costs and expenses incurred by the bank or institution from the
property, the purchaser thereof is not entitled, as a matter of sale and custody of said property less the income derived therefrom.
right, to the possession of the subject matter. However, the purchaser at the auction sale concerned whether in a
• The Court may allow the purchaser to receive the rentals of the judicial or extra-‐judicial foreclosure shall have the right to enter upon
purchased property, but the purchaser is accountable to the and take possession of such property immediately after the date of
judgment-‐debtor for that amount, and may be credited against the confirmation of the auction sale and administer the same in


accordance with law. Any petition in court to enjoin or restrain the
conduct of foreclosure proceedings instituted pursuant to this Issue: Whether or not Soriano may buy the mortgaged property of
provision shall be given due course only upon the filing by the Bautista
petitioner of a bond in an amount fixed by the court conditioned that
he will pay all the damages which the bank may suffer by the enjoining Held: YES. True that the transaction is a mortgage, which carried with it
or the restraint of the foreclosure proceeding. a customary right of redemption. However, the mortgagor’s right to
redeem was rendered defeasible at the election of the mortgagees by
Notwithstanding Act 3135, juridical persons whose property is being virtue of Par. 5, allowing them the option to purchase the said lot. There
sold pursuant to an extrajudicial foreclosure, shall have the right to is nothing immoral or illegal about such stipulation. It was supported by
redeem the property in accordance with this provision until, but not the same consideration as the mortgage contract and constituted an
after, the registration of the certificate of foreclosure sale with the irrevocable continuing offer within the time stipulated. That being the
applicable Register of Deeds which in no case shall be more than three case, Bautista spouses must be compelled to honor the sale.
(3) months after foreclosure, whichever is earlier. Owners of property
that has been sold in a foreclosure sale prior to the effectivity of this Doctrine:
Act shall retain their redemption rights until their expiration.
• No right to redeem from a judicial foreclosure sale, except those
• Section 47(1) refers to foreclosures by banking institutions. granted by banks or banking institutions. xGSIS v. CFI, 175 SCRA
• Section 47(2) is the Exception to Act 3135. 19 (1989).
• A stipulation to render the right to redeem defeasible by an • The one-‐year redemption period in the case of foreclosure is
option to buy on the part of the creditor. Soriano v. Bautista, 6 not interrupted by the filing of an action assailing the validity of
SCRA 946 (1962). the mortgage, so that at the expiration thereof, the mortgagee
who acquires the property at the foreclosure sale can proceed
Soriano v. Bautista to have title consolidated in his name and a writ of possession
issued in his favor. xUnion Bank v. CAs, 359 SCRA 480 (2001).1
Facts: Bautista spouses mortgaged their lot to Soriano, who took • After bank has foreclosed the property as highest bidder in the
possession thereof and cultivated the same. Pursuant to Par. 5 of their auction sale, the accepted offer of spouses-‐borrowers to
agreement, Soriano decided to buy the lot. Bautista refused to sell “repurchase” the property was actually a new option contract,
claiming that being mortgagors, they cannot be deprived of their right
to redeem the property. 1
Vaca v. CA, 234 SCRA 146 (1994).


and the condition that the spouses-‐borrowers will pay monthly Section 12. Lessee's Right of Redemption
interest during the one-‐year option period is considered to be In case the landholding is sold to a third person without the
the separate consideration to hold the option contract valid. knowledge of the agricultural lessee, the latter shall have the right to
xDijamco v. Court of Appeals, 440 SCRA 190 (2004). redeem the same at a reasonable price and consideration: Provided,
• No right to redeem is granted to the debtor-‐mortgagor when That the entire landholding sold must be redeemed: Provided, further,
there has been a judicial foreclosure of a real estate mortgage, That where these are two or more agricultural lessees, each shall be
except when the mortgagee is a bank or a banking institution. entitled to said right of redemption only to the extent of the area
• “Equity of Redemption” " the right of the defendant-‐ actually cultivated by him. The right of redemption under this Section
mortgagor to extinguish the mortgage and retain ownership of may be exercised within two years from the registration of the sale,
the property by paying the secured debt within 90 days after and shall have priority over any other right of legal redemption.
the judgment becomes final, or even after the foreclosure sale
but before the confirmation of it by the Court. • Under Section 12 of R.A. 3844, as amended, in the event that
the landholding is sold to a third person without the knowledge
6. Redemption in Foreclosure by Rural Banks (R.A. No. 720) of the agricultural lessee, the latter is granted by law the right to
• If the land is mortgaged to a rural bank, mortgagor may redeem redeem it within 180 days from notice in writing and at a
within two (2) years from the date of foreclosure or from the reasonable price and consideration. xQuiño v. CA, 291 SCRA
registration of the sheriff's certificate of sale at such foreclosure 249 (1998).2
if the property is not covered or is covered, respectively, by
Torrens title. If the mortgagor fails to exercise such right, he or
his heirs may still repurchase within five (5) years from
expiration of the two (2) year redemption period pursuant to
Sec. 119 of the Public Land Act (C.A. 141). xRural Bank of Davao
City v. CA, 217 SCRA 554 (1993).1

7. Legal Right to Redeem under Agrarian Reform Code

REPUBLIC ACT NO. 3844
1 2
Heirs of Felicidad Canque v. CA, 275 SCRA 741 (1997). Springsun Management Systems Corp. v. Camerino, 449 SCRA 65 (2005).


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