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Extinguishment of Sales f. It is a resolutory condition because when it is fulfilled, the ownership of the vendee
over the thing is extinguished
Art. 1600- Causes for Extinguishing Sales
1. Ordinary Causes—causes which extinguish ordinary contracts such as: PACTO DE RETRO SALE vs. MORTGAGE
a. Payment PACTO DE RETRO SALE MORTGAGE
b. Loss of the things Ownership is consolidated in the vendee if Failure of mortgagor to pay his obligations on
c. Novation vendor does not repurchase w/in time agreed time does not deprive him of his interest in the
d. Merger of rights of creditor and debtor upon property
e. Rescission No obligation on the part of the vendee to Mortgagee must foreclose if he wants to secure
f. Fulfillment of resolutory condition foreclose a perfect title
g. Prescription Vendor has no more right to redeem after Mortgagor may redeem before foreclosure and
2. Special Causes—refer to conventional redemption and legal redemption expiration of period to redeem even after, w/in one year from registration of
the sale in extra-judicial foreclosure. In judicial
Causes for extinguishment of sale. foreclosure redemption may be made before
The modes or causes of extinguishing the contract of sale may be classified into: confirmation of the sale by the court.
(1)Commonor those causes which are also the means of extinguishing all othercontracts Vendee may alienate property Mortgagee cannot alienate property
like payment, loss of the thing, condonation, etc. Vendee becomes automatically the owner in Mortgagee does not automatically become
(2) Specialor those causes which are recognized by the law on sales; and case of vendor’s failure to redeem owner, there must be foreclosure sale first
(3)Extra-specialor those causes which are given special discussion by the Civil Codeand Vendee is entitled to reimbursement for Mortgagee is not entitled to reimbursement for
these are conventional redemption and legal redemption. necessary and useful expenses improvements he made

CONVENTIONAL REDEMPTION. Art. 1602—Presumption of Equitable Mortgage. (IPERTOD)

1. When the price of a sale with right to repurchase is unusually inadequate
Art. 1601. Requisites REV-CR 2. When the vendor remains in possession as lessee or otherwise
A. The vendor reserves the right to repurchase the thing sold 3. When upon or after the expiration of the right to repurchase another instrument extending the
B. He shall shoulder the expenses of the contract and other legitimate payments made by period of redemption or granting a new period is executed.
the buyer. 4. When the purchaser retains for himself a part of the purchase price
C. He shall pay the value of the necessary and useful expenses made on the thing incurred 5. When the vendor binds himself to pay the taxes on the thing sold.
by the buyer 6. In any other case where it may be fairly inferred that the real intention of the parties is that the
D. He shall comply with other stipulations agreed upon. transaction shall secure the payment of a debt or the performance of any other obligation.
E. He shall return the price of the sale 7. When there is doubt as to whether contract is Pacto de retro or an equitable mortgage

Conventional Redemption Conventional redemptionis the right which the vendor reserves to Equitable Mortgage—one which lacks the proper formalities, form of words or other requisites
himself, toreacquire the property sold provided he returns to the vendee the price of the sale, prescribed by law for a mortgage, but however shows the intention of the contracting parties to
theexpensesofthecontract,anyotherlegitimatepaymentsmadetherefor and thenecessary and useful make the property subject of the contract as security for a debt and contains nothing impossible or
expenses made on the thing sold, and fulfills other stipulationswhich may have been agreed upon contrary to law.

Characteristics of Conventional Redemption [EAR RPR]
a. It begins to exist at the time of the perfection of the contract. (It becomes a mere
promise to sell if stipulated upon after the sale had been consummated)
b. It is an accidental stipulation because it is a right created by the parties
c. It is reciprocal when the right to redeem is exercised. (both vendor and vendee has
obligations with each other)
d. It gives rise to a real right when properly registered because it affects third persons.
e. It is potestative as its exercise depends upon the sole will of the vendor.
Consequences of Declaration of Pacto de Retro Sale as an Equitable Mortgage (PTFR)
1. The repurchase price paid by the vendor is considered the principal of the loan.
2. Title remains in the vendor or if the title has already been transferred to the vendee, the same
must be revested into the vendor by a deed of reconveyance.
3. Any money fruits or other benefits received thereafter by the vendee are considered interests on
the loan.
4. If the vendor does not redeem on time the remedy of the vendee is to foreclose the mortgage.

Art. 1603—In case of doubt, a contract purporting to be a sale with right to repurchase shall be
construed as an equitable mortgage.
Rationale: Least transmission of rights.
*Although in conflict with Art. 1378, where it provides that if the contract is onerous, the
doubt shall be settled in favor of the greatest reciprocity of interests, Art. 1603 is the exception.
This is justified by the condemnation of pactum commissorium (which is a stipulation that creditor
automatically becomes owner of a property upon non-payment by the debtor)
Art. 1604—Art. 1602 also applicable to contract purporting to be an absolute sale
Art. 1605—Vendor may ask for reformation of instrument in cases referred to in 1602 & 1604
Art. 1606—Time to redeem in conventional redemption
1. If there is a period agreed upon then this shall be observed, but this should not exceed 10 years
2. If there is no period agreed upon, the redemption shall be exercised within 4 years from the
date of contract.
3. If an action was brought by the seller claiming that the contract was an equitable mortgage but
later on proven that it was Pacto de retro Sale, he is given 30 days from the time final judgment was
rendered to repurchase.
Art. 1607—Judicial Order is required for the registration of the consolidation of ownership of a
real property in the vendee by failure of the vendor to redeem.
Rationale: To accord the vendor the maximum safeguards for the protection of his legal
rights under the true agreement of the parties.
Art. 1608—The vendor may exercise his right of redemption against every possessor whose
right is derived from the vendee, even if the second contract does not mention of the right of
redemption.
Art. 1609—Vendee is subrogated to the vendor’s rights and actions
As owner, vendee may:
a. transfer his rights to a 3rd person
b. mortgage the property
c. enjoy the fruits thereof
d. recover the property against every possessor
e. perform other acts of ownership
Art. 1610—Creditors of the vendor must exhaust first all the other properties of vendor before
they could exercise the right of redemption against the vendee.
Art. 1611—Applicability.
1. The vendee entered a Pacto de Retro Sale of a part of an undivided immovable.
2. The vendee later acquired the whole of the property.
3. The vendor in the “Pacto de Retro Sale of a part” wishes to exercise his right of redemption over
the part.
If the above mentioned are present the vendee may compel the vendor in the Pacto de Retro Sale of
a part to redeem the whole property.
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Rationale: Co-ownership is not favored, because the co-owners are reluctant to make
improvements on the property due to the state of instability in its ownership.
Art. 1612—Joint Pacto de Retro Sale by Co-Owners or Co-Heirs of an Undivided
Immovable.
 Each Co-Owner/Co-Heir can exercise right of redemption with respect to their share
Art. 1613—In the case referred to in Art. 1612, vendee may demand that all the vendors or co-
heirs come to an agreement upon the repurchase of the whole thing, if they failed to do so vendee
cannot be compelled to accept partial redemption.
Art. 1614—Separate Sales of Shares of Co-owners of an undivided immovable.
 Each vendor may exercise their right of redemption independently and the vendee
cannot compel any of them to redeem the whole property
Art. 1615—If the vendee dies and property is left to several heirs, the action for redemption can
only be brought to each of them independently with respect to their share, whether or not the
property is still undivided or already partitioned.
Art. 1616—Obligations of the Vendor a Retro if he desires to redeem
a. Return to the vendee the price of the sale
b. He shall shoulder the expenses of the contract and other legitimate payments made by the buyer.
c. He shall pay the value of the necessary and useful expenses made on the thing incurred by the
buyer
Art. 1617—Rule in case there is no agreement on the sharing of the fruits of the property.
1. If there are fruits at the time of the sale and the vendee paid them, he shall be reimbursed by the
vendor.
2. Where there are no fruits at the time of the sale but there are existing at the time of redemption,
the vendee shall be entitled to the fruits gathered for one year reckoned from the last anniversary of
the date of the effectivity of the contract of sale.
Art. 1618—The vendor who recovers the thing shall receive it free from all charges or
mortgages constituted by the vendee, but shall respect the lease contract constituted on the
property in good faith and in accordance with the customs of the place.
LEGAL REDEMPTION (1619)
--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 transmitted by onerous title.
Art. 1620—A co-owner of a thing may exercise the right of redemption when the shares of all the
other co-owners or any of them are sold to a 3rd person. If the price of alienation is grossly
excessive, redemptioner shall pay only a reasonable price.
--If two or more co-owners desire to exercise right of redemption they may only
do so in proportion to their share.

Art. 1621—Redemption by adjacent owner of rural lands. Requisites: (RATSO)
1. The adjacent lands involved must be rural land.
2. The rural land alienated and to be redeemed must not exceed one hectare in area
3. The alienation must be made in favor of a third person, not in favor of another adjacent owner
4. The two lands involved must not be separated by brooks, drains, ravines, roads and other
servitudes for the benefit of other estates.
5. The vendee or grantee must already be an owner of a rural land. If he does not own any,
redemption is not allowed.
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3. A right of redemption in cases of extra-judicial foreclosures
4. An equity of redemption in cases of judicial foreclosures
5. Redemption by an agricultural tenant of land sold by the landowner
ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
Assignment of Credit—an agreement whereby credits, rights or actions pertaining to a person
(called assignor) are transferred by him to another (called assignee) either onerously or
gratuitously who acquires the power to enforce the same against the debtors.

If two or more adjoining owners desire to exercise the right of redemption at the same time, the one Nature of Assignment of Credits and other incorporeal rights: Has all the elements of a contract of
with a smaller area shall be preferred. If both have same area, the one who first requested. sale: (1) consent (2) Object which is the credit, right , action assigned and (3) consideration which
is the price paid for the assignment, or liberality of the assignor if the assignment is gratuitous.
Art. 1622—Applicability: Piece of Urban Land which is so small and so situated that a major Distinction :
portion cannot be used for any practical purpose w/in a reasonable time, having bought merely for Basis Contract of Sale Assignment of Credits
speculation and is about to resold. Object Property Credit, incorporeal rights or rights
*Speculation—means buying or selling with expectation of profiting by a rise and fall in of action
price. Manner of Delivery of Object It need not be through public It must be through a public
Rights recognized by Article 1622. instrument instrument (1625)
1. Right of Pre-emption—the right of an adjacent owner to purchase the property before it is sold Subject obligated The whole world A definite third person
to a third person or before the projected sale to a 3 rd person is consummated. Ownership when transferred Transfer of ownership need not be Ownership is transferred upon
2. Right of Redemption—the right of an adjacent owner to redeem the property after the sale had upon delivery of the thing. The delivery of the documents
parties may agree that ownership evidencing the credit or
been perfected and consummated.
be transferred only after full incorporeal rights
payment (1478)
Pre-emption Redemption Consideration It is always a requisite It is not always a requisite. Action
Arises before sale Arises after sale may be maintained by the assignee
No Rescission because no sale as yet exists There can be rescission of the original sale based on his title even if there is
The action is directed against the prospective Action is directed against the buyer no consideration.
seller
* Preference when two or more owners of adjoining lands wish to exercise the right of redemption Basis Dation in Payment Assignment of Credits
or pre-emption: To the owner whose intended use is best justified. Nature It is an alienation of property of a The alienation of credits or rights,
debtor in satisfaction of a debt in need not be in satisfaction of
money debtor’s debt
Art. 1623—Period of Legal Pre-emption or Redemption.
Object Determinate property Credits, incorporeal rights or rights
 Must be exercised within 30 days from the notice in writing by the prospective vendor.
of action
 The deed of sale executed by the vendor is not registered if not accompanied by an affidavit that Obligation is extinguished Obligation is not extinguished
Effect
he has given the required written notice.
 Consent of debtor is not necessary for the assignment. He is therefore released from the
 The right of redemption of co-owners is superior to the right of adjoining owners.
obligation if he pays the creditor before having knowledge of the assignment (1626)
 Scope of Assignment: All accessory rights, such as guaranty, mortgage, pledge or
Instances of Legal Redemption under the Civil Code (CHURC)
preference (1627)
1. Sale of a co-owner of his share to a stranger (1620)
2. Sale of an heir of his hereditary rights to a stranger (1088)
Art. 1628 What the Assignor of the Credit Warrants? (ELS)
3. Sale of adjacent small urban lands bought merely for speculation (1622)
1. The existence of the credit at the time of the assignment
4. Sale of adjacent rural land not exceeding one hectare (1621)
2. The legality of the credit unless he sold the thing as “doubtful”, meaning, he is not sure of the
5. When a credit or other incorporeal right in litigation is sold (1634)
validity of his acquisition of the thing sold which fact he has disclosed to the assignee
Instances of Legal Redemption under special laws (THEJA)
3. The solvency of the debtor, if expressly stipulated or if the insolvency of the debtor was prior to
1. Redemption in tax sales
the sale and of common knowledge
2. Redemption of homesteads
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Scope of Liability in case of breach of warranty b. A creditor in payment of his credit
1. In good faith: Assignor shall pay (a) consideration of price which he received from the assignee; c. The possessor of a tenement or piece of land which is subject to the right in litigation
(b) expenses of the contract (c) other legitimate expenses occasioned by the assignment assigned.
2. In bad faith: Same liabilities as in above but with damages

Art. 1629 Duration of the Liability of the Assignor in Good Faith (in case there is no
agreement)
1. One year from the date of the assignment of the credit if the period of payment of the credit has
already expired
2. One year after maturity of the credit if the period of payment has not yet expired

Art. 1630 Sale of Inheritance (Hereditary Rights) without specification of things.

--Seller shall only be answerable for his character as an heir. He warrants the fact of his heirship in
the estate of the decedent. If it turns out that he is not an heir, then he is liable for the breach of
warranty.

Sale of Hereditary Rights—presumes the existence of a contract or deed of sale between the
parties
Waiver of Hereditary Rights—a mode of extinction of ownership, where there is intentional
relinquishment of a known right with knowledge of its existence and intention to relinquish it in
favor of other persons who are co-heirs in the succession

Lump-Sum Purchase of the whole of certain rights, rents or products (1631)

 Vendor warrants the legitimacy of the whole of the rights, rents or products but not the
various parts of which the whole is composed of.
 Exception: If the vendee is evicted from the whole or the part of the greater value (more
than half) of the credits in which case warranty stays.

Art. 1632—If vendor profited from the fruits or received anything from the inheritance sold he
must restore it by paying the vendee, unless there is a contrary stipulation.

Art. 1633—Charges and debts on the estate paid by the vendor must be reimbursed by the
vendee, unless there is a contrary stipulation.

Assignment of Credit or right in Litigation. (1634)

 debtor is given the right to extinguish the obligation by reimbursing the assignee: (PIJ)
a. The price paid for the credit or right
b. Interest on the said price from the time the day it was paid
c. Judicial costs incurred by the assignee
 When is credit or right in litigation? From the time the complaint concerning the same is
answered.
 Prescriptive Period: 30 days from the date the assignee demands payment from debtor

Exceptions to the Right of Extinguishment by the debtor (1635)

 Assignments or sales made to: (CCP)
a. A co-heir or co-owner of the right assigned