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Extinguishment of Sale

How is a sale extinguished?

This provision of the New Civil Code has laid down three instances on how a sale can be extinguished:

Art. 1600. Sales are extinguished by the same causes as all other obligations, by those stated in the preceding articles of this Title, and by conventional or legal redemption. (1506)

What is conventional redemption?

The happening of conventional redemption is best defined under this provision:

Art. 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon. (1507)

*Conventional redemption isthe right which the vendor reserves to himself, to reacquire the property sold provided he returns to the vendee the price of the sale, expenses of the contract, any other legitimate payments made therefore, the necessary and useful expenses made on the thing sold and fulfills other stipulations which may have been agreed upon.

 

What is Pacto de Retro sale?

Pacto de Retro sale refers to the sale wherein the seller has the right to repurchase the subject matter or the property being sold.The essence of a pacto de retro sale is that the title and ownership of the property sold transfers immediately to the vendee a retro. However it is still subject to the resolutory condition of repurchase of the subject property by a vendor a retro within the period agreed upon by them, or, in the absence thereof, as provided by law or else it would vests upon the vendee a retro absolute title and ownership over the property sold by operation of law.

What is the redemption period for pacto de retro sale?

This period applies to conventional redemption and not to those contracts which involves a sale with a right of repurchase. The period of redemption laid down by law is expressed in this provision:

Art. 1606. The right referred to in Article 1601, in the absence of an express agreement, shall last four years from the date of the contract.

Should there be an agreement, the period cannot exceed ten years.

However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase. (1508a)

*If there is an agreement: period agreed upon cannot exceed 10 years and in the absence of the period, 4 years from the date of the contract. The vendor who fails to repurchase the property within the period agreed upon may, however, exercise the right to repurchase within 30 days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right of repurchase.

 

What is legal redemption?

Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transferred by onerous title. It must be exercised within thirty (30) days from the notice in writing by the vendor. This does not apply to barter, donation, transmission of things by hereditary title, mortgage, lease.

What are the instances of legal redemption?

  1. Under the Civil Code
  1. Sale of co-owner of his share to a stranger
  2. When a credit or other incorporeal right in litigation is sold
  3. Sale of an heir of his hereditary rights to a stranger
  4. Sale of adjacent rural lands not exceeding one hectare
  5. Sale of adjacent small urban lands bought merely for speculation
  6. Under special laws
  7. An equity of redemption in cases of judicial foreclosures
  8. A right of redemption in cases of extra-judicial foreclosures
  9. Redemption of homesteads
  10. Redemption of tax sales
  11. Redemption by an agricultural tenant of land sold by the landowner

What is the time provided for the vendor a retro to redeem or repurchase a thing?

  1. If there is no agreement as to the period for redemption- 4 years from date of contract
  2. If there is agreed period, it must be done within the fixed period
  3. If the parties agreed as to the period within which to repurchase but have not fixed a definite period,- 10 years from the date of the contract to redeem but shall not extend beyond 10 years
  4. Vendor a retro may still exercise his right to redeem within 30 days from the time of the final judgment on the basis that the contract was a true sale with right to repurchase.

What is the rules for legal redemption by co-owner?

Art. 1620: A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one.

Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common.

Requisites:

  1. There is c-ownership
  2. There is alienation of all or any of the shares
  3. The sale was made to a stranger
  4. The legal redemption was exercised before partition

What is the rules for legal redemption by an adjacent owner?

Art. 1621: The owners of adjoining lands shall also have the right of redemption when a piece of rural land, the area of which does not exceed one hectare, is alienated, unless the grantee does not own any rural land.

This right is not applicable to adjacent lands which are separated by brooks, drains, ravines, roads and other apparent servitudes for the benefit of other estates.

If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner of the adjoining land of smaller area shall be preferred; and should both lands have the same area, the one who first requested the redemption.

Requisites:

  1. Both lands are rural
  2. The lands are adjacent to each other
  3. There is an alienation
  4. The land are is less than 1 hectare

Rights of adjacent owners:

  1. Right of pre-emption which the preferential right to buy the urban land before the same is sold to a third person
  2. In the event the urban land has been sold, the adjacent owners have the right of redemption.

 

What is the doctrine of caveat emptor (buyer beware)?

Requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendor’s title takes all the risks and losses consequent to such failure. The actual possession by people other than the vendor should, at least, put the purchaser upon inquiry. Site identification and survey are a must also.

An action for reconveyance is a legal and equitable remedy granted to the rightful owner of land which has been wrongfully or erroneously registered in the name of another for the purpose of compelling the latter to transfer or convey the land to him.

References

De Leon, H. (2010). Comments and Cases on Sales. Quezon City: Rex Printing Company, Inc.

New Civil Code of the Philippines

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