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EXTINGUISHMENT OF SALES CONTRACT
GROUNDS:
1. same grounds whereby obligations in general are extinguished:
a. payment or performance
b. loss of the subject matter
c. condonation or remission
d. confusion or merger of rights of creditor and debtor
e. compensation
f. novation
g. annulment
h. rescission
i. fulfillment of a resolutory condition
j. prescription
2. conventional redemption – only extinguishes obligations pertaining to contract of sale, not extinguish contract itself; only applies to contract of sale
3. legal redemption – only applies to contract of sale
CONVENTIONAL REDEMPTION
• seller reserved the right to repurchase thing sold
• coupled with obligation to return price of the sale, expenses of contract & other legitimate payments and the necessary & useful expenses made on the thing sold
• right is exercised only be seller in whom right is recognized in the contract or by any person to whom right was transferred; must be in the same contract
OPTION TO PURCHASE
• right to repurchase the thing sold granted to the vendor in a separate instrument from the deed of sale
EQUITABLE MORTGAGE
• a contract with right to repurchase is equitable mortgage if the following requisites concur:
1. price of sale with right to repurchase is unusually inadequate
2. seller remains in possession as lessee or otherwise
3. upon or after expiration of right to repurchase, another instrument extending the period of redemption or granting new period is executed
4. buyer retains for himself a part of the purchase price
5. seller binds himself to pay taxes on thing sold
6. real intention of parties is to secure the payment of a debt or performance of other obligation
IN CASE OF DOUBT – IN DETERMINING WHETHER IT IS EQUITABLE MORTGAGE OR SALE A RETRO (WITH RIGHT OF REPURCHASE) – IT SHALL BE CONSTRUED AS EQUITABLE MORTGAGE
WHAT TO LOOK FOR IN DETERMINING NATURE OF CONTRACT
1. language of the contract
2. conduct of parties – to reveal real intent
REMEDY AVAILABLE TO VENDOR: ask for reformation of contract
RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE:
1. Circumvention of usury law
2. Circumvention of prohibition against pactum commissorium – creditor cannot appropriate the things given by way of pledge or mortgage; remedy here is foreclosure
• real intention of parties is that the pretended purchase price is money loaned & to secure payment of the loan, sale with pacto de retro is drawn up
PERIOD OF REDEMPTION
1. No period agreed upon – 4 years from date of contract
2. When there is agreement – should not exceed 10 years; if it exceeded, valid only for the first 10 years.
3. When period to redeem has expired & there has been a previous suit on the nature of the contract – seller still has 30 days from final judgment on the basis that contract was a sale with pacto de retro: rationale: no redemption due to erroneous belief that it is equitable mortgage which can be extinguished by paying the loan.
4. When period has expired & seller allowed the period of redemption to expire – seller is at fault for not having exercised his rights so should not be granted a new period
EFFECT WHEN THERE IS NO REDEMPTION MADE:
1. jurisprudence before the NCC: buyer a retro automatically acquires full ownership
2. under present art 1607: there must be judicial order before ownership of real property is consolidated in the buyer a retro
HOW IS REDEMPTION EFFECTED:
1. Seller a retro must first pay the following:
a. the price of the thing sold
b. expenses of the contract and other legitimate payments made by reason of the sale
c. necessary and useful expenses made on the thing sold
2. Valid tender of payment is sufficient
3. Mere sending of notice without valid tender is insufficient
4. Failure to pay useful & unnecessary expenses entitles vendee to retain land unless actual reimbursement is made
IN CASE OF MULTI-PARTIES
1. When an undivided thing is sold because co-owners cannot agree that it be allotted to one of them – vendee a retro may compel the vendor to redeem the whole thing
2. When an undivided thing is sold by co-owners / co-heirs, vendors a retro may only exercise his right over his respective share; vendee a retro may demand that they must come to an agreement first and may not be compelled to consent to a partial redemption
3. When rights of co-owners over an undivided thing is sold as regards to their own share – vendee retro cannot compel one to redeem the whole property
4. Should one of the co-heirs/co-owners succeed in redeeming the property – such vendor a retro shall be considered as trustee with respect to the share of the other co-owners/co-heirs.
FRUITS
1. what controls is the stipulation between parties as regards the fruits;
2. if none:
a) at time of execution of the sale a retro there are visible or growing fruits – there shall be no pro-rating at time of redemption if no indemnity was paid by the vendee a retro
b) at time of execution sale a retro there be no fruits but there are fruits at time of redemption – pro-rated between vendor a retro & vendee a retro giving the vendee a retro a part corresponding to the time he possessed the land.
LEGAL REDEMPTION
• right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires the thing by purchase or by dation in payment or by other transaction whereby ownership is transmitted by onerous title.
1. among co-heirs
• any of the heirs sell his hereditary rights to stranger before partition
• any of the co-heirs may be subrogated to the rights of the purchaser by redeeming said hereditary right: reimburse buyer of the price of the sale
• co-heirs has 1 month from receipt of notice in writing
2. among co-owners
• any or all of co-owners sells their shares to 3rd person
• any co-owner may exercise right of redemption by paying reasonable price of property to the buyer
• if 2 or more co-owners desire to exercise right of redemption, they may only do so in proportion to the share they respectively have in thing owned in common
DISTINCTION BETWEEN RIGHT OF REDEMPTION OF CO-HEIRS FROM CO-OWNERS
CO-HEIRS
Heir may redeem for himself alone the hereditary right sold by a co-heir
Sale of hereditary right (1088) over no particular object
CO-OWNERS
Co-owner may redeem property but even if uses his own funds, redemption inures to the benefit of other co-owners
Sale of interest in particular property
Sale of hereditary right (1088) over no particular object
Sale of interest in particular property
3. among adjoining owners
a. rural land
• where piece of rural land has an area not exceeding 1 hectare, adjoining owner has right to redeem unless grantee does not own a rural land
• if 2 or more adjacent lot owners desire to exercise right to redeem, owner of adjoining lot with smaller area shall be preferred
• if 2 or more adjacent lot owners desire to exercise right to redeem & both have same lot area, one who first requested shall be granted
b. urban land
• when piece of land is small & cannot be used for any practical purpose & bought merely for speculation, owner of adjoining land can redeem
• 2 or more owners of adjoining lot desire to exercise right to redeem, owner whose intended use is best justified shall be preferred.
c. sale of credit in litigation
• when a credit or other incorporeal right in litigation is sold, debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor plus judicial costs, interest
• debtor may exercise right within 30 days from the date assignee demands payment from him
WHEN PERIOD OF REDEMPTION BEGINS TO RUN
1. right of legal pre-emption of redemption shall be exercised within 30 days from notice by the seller
2. deed of sale not to be recorded in Register of Deeds unless accompanied by affidavit of seller that he has given notice to all possible redemptioners
3. GR: actual knowledge notwithstanding, written notice is still required.
Exception: actual knowledge by co-heirs living in same land with purchaser, or co-owner was middleman in sale to 3rd party, no need to give written notice; period of redemption begins to run from actual knowledge
OTHER INSTANCES WHEN RIGHT OF LEGAL REDEMPTION IS GRANTED
1. Redemption of homesteads
• Public Land Act
• Land acquired under free patent homestead
• Subject to repurchase by wife, legal heirs within 5 years from date of conveyance
• Granted by law, need not be stipulated
2. Redemption in tax sales
• in case of tax delinquency/failure to pay tax assessments, property is foreclosed
• delinquent payer has 1 year from date of sale to redeem by paying to the revenue District Officer the amount of tax delinquencies, & interest or purchase price.
3. Redemption by judgment debtor
• 1 year from date of registration of certificate of sale to redeem by paying purchaser at public auction with interest
4. Redemption in extrajudicial foreclosure
• 1 year from date of sale and registration
5. Redemption in judicial foreclosure of mortgage
• no right to redeem is granted to debtor mortgagor
• except when mortgagee is bank of a banking institution
• 90 days after finality of judgment
GROUNDS:
1. same grounds whereby obligations in general are extinguished:
a. payment or performance
b. loss of the subject matter
c. condonation or remission
d. confusion or merger of rights of creditor and debtor
e. compensation
f. novation
g. annulment
h. rescission
i. fulfillment of a resolutory condition
j. prescription
2. conventional redemption – only extinguishes obligations pertaining to contract of sale, not extinguish contract itself; only applies to contract of sale
3. legal redemption – only applies to contract of sale
CONVENTIONAL REDEMPTION
• seller reserved the right to repurchase thing sold
• coupled with obligation to return price of the sale, expenses of contract & other legitimate payments and the necessary & useful expenses made on the thing sold
• right is exercised only be seller in whom right is recognized in the contract or by any person to whom right was transferred; must be in the same contract
OPTION TO PURCHASE
• right to repurchase the thing sold granted to the vendor in a separate instrument from the deed of sale
EQUITABLE MORTGAGE
• a contract with right to repurchase is equitable mortgage if the following requisites concur:
1. price of sale with right to repurchase is unusually inadequate
2. seller remains in possession as lessee or otherwise
3. upon or after expiration of right to repurchase, another instrument extending the period of redemption or granting new period is executed
4. buyer retains for himself a part of the purchase price
5. seller binds himself to pay taxes on thing sold
6. real intention of parties is to secure the payment of a debt or performance of other obligation
IN CASE OF DOUBT – IN DETERMINING WHETHER IT IS EQUITABLE MORTGAGE OR SALE A RETRO (WITH RIGHT OF REPURCHASE) – IT SHALL BE CONSTRUED AS EQUITABLE MORTGAGE
WHAT TO LOOK FOR IN DETERMINING NATURE OF CONTRACT
1. language of the contract
2. conduct of parties – to reveal real intent
REMEDY AVAILABLE TO VENDOR: ask for reformation of contract
RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE:
1. Circumvention of usury law
2. Circumvention of prohibition against pactum commissorium – creditor cannot appropriate the things given by way of pledge or mortgage; remedy here is foreclosure
• real intention of parties is that the pretended purchase price is money loaned & to secure payment of the loan, sale with pacto de retro is drawn up
PERIOD OF REDEMPTION
1. No period agreed upon – 4 years from date of contract
2. When there is agreement – should not exceed 10 years; if it exceeded, valid only for the first 10 years.
3. When period to redeem has expired & there has been a previous suit on the nature of the contract – seller still has 30 days from final judgment on the basis that contract was a sale with pacto de retro: rationale: no redemption due to erroneous belief that it is equitable mortgage which can be extinguished by paying the loan.
4. When period has expired & seller allowed the period of redemption to expire – seller is at fault for not having exercised his rights so should not be granted a new period
EFFECT WHEN THERE IS NO REDEMPTION MADE:
1. jurisprudence before the NCC: buyer a retro automatically acquires full ownership
2. under present art 1607: there must be judicial order before ownership of real property is consolidated in the buyer a retro
HOW IS REDEMPTION EFFECTED:
1. Seller a retro must first pay the following:
a. the price of the thing sold
b. expenses of the contract and other legitimate payments made by reason of the sale
c. necessary and useful expenses made on the thing sold
2. Valid tender of payment is sufficient
3. Mere sending of notice without valid tender is insufficient
4. Failure to pay useful & unnecessary expenses entitles vendee to retain land unless actual reimbursement is made
IN CASE OF MULTI-PARTIES
1. When an undivided thing is sold because co-owners cannot agree that it be allotted to one of them – vendee a retro may compel the vendor to redeem the whole thing
2. When an undivided thing is sold by co-owners / co-heirs, vendors a retro may only exercise his right over his respective share; vendee a retro may demand that they must come to an agreement first and may not be compelled to consent to a partial redemption
3. When rights of co-owners over an undivided thing is sold as regards to their own share – vendee retro cannot compel one to redeem the whole property
4. Should one of the co-heirs/co-owners succeed in redeeming the property – such vendor a retro shall be considered as trustee with respect to the share of the other co-owners/co-heirs.
FRUITS
1. what controls is the stipulation between parties as regards the fruits;
2. if none:
a) at time of execution of the sale a retro there are visible or growing fruits – there shall be no pro-rating at time of redemption if no indemnity was paid by the vendee a retro
b) at time of execution sale a retro there be no fruits but there are fruits at time of redemption – pro-rated between vendor a retro & vendee a retro giving the vendee a retro a part corresponding to the time he possessed the land.
LEGAL REDEMPTION
• right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires the thing by purchase or by dation in payment or by other transaction whereby ownership is transmitted by onerous title.
1. among co-heirs
• any of the heirs sell his hereditary rights to stranger before partition
• any of the co-heirs may be subrogated to the rights of the purchaser by redeeming said hereditary right: reimburse buyer of the price of the sale
• co-heirs has 1 month from receipt of notice in writing
2. among co-owners
• any or all of co-owners sells their shares to 3rd person
• any co-owner may exercise right of redemption by paying reasonable price of property to the buyer
• if 2 or more co-owners desire to exercise right of redemption, they may only do so in proportion to the share they respectively have in thing owned in common
DISTINCTION BETWEEN RIGHT OF REDEMPTION OF CO-HEIRS FROM CO-OWNERS
CO-HEIRS
Heir may redeem for himself alone the hereditary right sold by a co-heir
Sale of hereditary right (1088) over no particular object
CO-OWNERS
Co-owner may redeem property but even if uses his own funds, redemption inures to the benefit of other co-owners
Sale of interest in particular property
Sale of hereditary right (1088) over no particular object
Sale of interest in particular property
3. among adjoining owners
a. rural land
• where piece of rural land has an area not exceeding 1 hectare, adjoining owner has right to redeem unless grantee does not own a rural land
• if 2 or more adjacent lot owners desire to exercise right to redeem, owner of adjoining lot with smaller area shall be preferred
• if 2 or more adjacent lot owners desire to exercise right to redeem & both have same lot area, one who first requested shall be granted
b. urban land
• when piece of land is small & cannot be used for any practical purpose & bought merely for speculation, owner of adjoining land can redeem
• 2 or more owners of adjoining lot desire to exercise right to redeem, owner whose intended use is best justified shall be preferred.
c. sale of credit in litigation
• when a credit or other incorporeal right in litigation is sold, debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor plus judicial costs, interest
• debtor may exercise right within 30 days from the date assignee demands payment from him
WHEN PERIOD OF REDEMPTION BEGINS TO RUN
1. right of legal pre-emption of redemption shall be exercised within 30 days from notice by the seller
2. deed of sale not to be recorded in Register of Deeds unless accompanied by affidavit of seller that he has given notice to all possible redemptioners
3. GR: actual knowledge notwithstanding, written notice is still required.
Exception: actual knowledge by co-heirs living in same land with purchaser, or co-owner was middleman in sale to 3rd party, no need to give written notice; period of redemption begins to run from actual knowledge
OTHER INSTANCES WHEN RIGHT OF LEGAL REDEMPTION IS GRANTED
1. Redemption of homesteads
• Public Land Act
• Land acquired under free patent homestead
• Subject to repurchase by wife, legal heirs within 5 years from date of conveyance
• Granted by law, need not be stipulated
2. Redemption in tax sales
• in case of tax delinquency/failure to pay tax assessments, property is foreclosed
• delinquent payer has 1 year from date of sale to redeem by paying to the revenue District Officer the amount of tax delinquencies, & interest or purchase price.
3. Redemption by judgment debtor
• 1 year from date of registration of certificate of sale to redeem by paying purchaser at public auction with interest
4. Redemption in extrajudicial foreclosure
• 1 year from date of sale and registration
5. Redemption in judicial foreclosure of mortgage
• no right to redeem is granted to debtor mortgagor
• except when mortgagee is bank of a banking institution
• 90 days after finality of judgment
