Extinguishment of Sale and Equitable Mortgage

Extinguishment of Sale

• Common extinguishment means canceling all other contracts.
• Special extinguishment is recognized by the law of sales.
• Extra-special extinguishment is given special discussion by the Civil Code.

Conventional Redemption

• It is the vendor's right to reacquire sold property.
• Vendor must reimburse the price, contract expenses, legitimate payments, and necessary expenses.
• The vendor also needs to fulfill agreed-upon stipulations.

Equitable Mortgage

• It shows the parties' intention to secure an obligation with the property.

Presumption of Inequitable Mortgage

• A contract is presumed an equitable mortgage if the sale price with the right to repurchase is unusually inadequate.
• It is also an equitable mortgage if the vendor remains in possession as a lessee.
• Another case is when a new instrument extends the redemption period after its expiration.
• The contract is not an equitable mortgage when the purchaser does not retain a part of the purchase price.

Equitable Mortgage Determination Factors

• A contract is considered an equitable mortgage when the purchaser retains a part of the price.
• Equitable mortgage also exists if vendor commits to pay the taxes.
• The true intention of securing debt payment makes it an equitable mortgage.
• It is not an equitable mortgage if the vendee commits to pay the taxes.

Price Discrepancy in Pacto de Retro

• In a sale with pacto de retro, the price is usually less than in absolute sales.
• The vendor expects to reacquire/redeem the property, recovering losses from the price inadequacy.

Presumption in Case of Doubt

• An equitable mortgage is favored by law.
• A contract purporting to be a sale with the right to repurchase shall still be regarded as an equitable mortgage.

Reformation Remedy

• Reformation is the remedy to make a written instrument express the parties' real intention.

Reformation Context

• The intention was not expressed in the instrument.
• In reformation, there has been a meeting of the minds between the parties.
• Annulment is the remedy when there has been no meeting of the minds.

Right to Article 1601

• Without an agreement, the right lasts four years from the contract date.
• There is a limit of ten years from the date of the contract.

Vendor's Repurchase Right

• The vendor can still exercise the right to repurchase within thirty days from the final judgment.

Consolidation of Real Property Ownership

• The consolidation should be recorded in the Registry of Property without a judicial order, after the vendor has been duly heard.

Repurchase Right

• A vendor a retro cannot exercise the right of redemption against a subsequent transferee for value and in good faith if his right is not properly registered or annotated.

Pato de Retro Sale

• A pacto de retro sale transfers ownership to the vendee, subject to the condition of repurchase.
• A pacto de retro sale transfers ownership to the vendee, although subject to the condition of repurchase,
• The vendee is subrogated to the vendor's rights and actions.
• As the owner, the vendor may transfer or alienate the property to a third person.
• The creditors of the vendor can only exercise their right of redemption against the vendee after exhausting the vendor's property.

Sale with Repurchase Right

• If the vendee of a part of an undivided immovable acquires the whole, they may compel the vendor to redeem the whole property if the vendor wishes to exercise the right of redemption.

Joint Sale

• In a joint sale, none of the sellers may exercise the right to repurchase more than their respective share. (undivided immovable)
• Those selling an undivided immovable can only repurchase their respective shares.
• Co-heirs of the vendoe of an undivided immovable, can exercise the right of redemption only for the respective portions they have inherited.
• A retro vendor can refuse partial redemption, requiring all vendors/heirs to redeem the entire property.
• A co-owner's right to redeem accrues to the benefit of the others.

Co-owners

• Co-owners in an undivided immovable can exercise their right within their shares.
• The vendee cannot compel a co-owner to redeem the whole property.
• Redemption applies separately if co-owners sold shares separately.

Multiple Heirs and Redemption

• If the vendee leaves multiple heirs, redemption can't be brought except for their share.
• If inheritance is divided and one heir gets the sold item, only that heir can be sued for redemption for the whole.
• The vendor must return the price of the sale to avail of the repurchase right
• They also must cover the expenses of the contract, and any other illegitimate payments made by reason of the sale.

Preserving Redemption Right

• The vendor's intention to exercise repurchase isn't enough to preserve the right.
• The offer must be bona fide and with a tender of the agreed price.
• If there were fruits at the time of sale and the vendor paid for them, the vendee must be reimbursed at the time of redemption as the payment forms part of the purchase price.

Vendor's Rights After Recovery

• The vendor recovers the sold item free from charges/mortgages.
• The vendor must respect leases the vendee executed in good faith.
• Legal redemption is subrogation on the terms of a contract where one acquires property through purchase/payment.

Requisites for Legal Redemption

• There must be a co-ownership.
• There must be alienation of all or any of the shares of the other co-owners.
• The sale must be to a third person or stranger, a non co-owner.
• Sale must be before partition.
• The right must be exercised in the period provided in Article 1623.
• The vendee must be reimbursed for the price of the sale; the vendor doesn't need to be.
• Co-owners can sell, assign, or mortgage ideal shares in common property.
• Co-owners lack legal redemption rights against each other for granted privileges, only against third parties.
• If selling hereditary rights before partition, co-heirs can subrogate by reimbursing the price within one month of sale notification
• The right of legal redemption extends to those acquiring original co-owners' shares while the community exists.
• Both the land of the one exercising the right of redemption and the land sought to be redeemed must be rural.
• There must be an alienation
• Piece must not exceed one (1) hectare, and the vendee doesn't have to already own land.
• The rural land should not be separated by natural or manmade boundaries from the adjoining lands

Pre-emption and Redemption

• Pre-emption is the act of purchasing before others.
• Redemption is exercised after the sale against the vendee.
• When purchasing after another, the piece of land needs to be urban land.
• The piece sold has to be so small that a major portion of it cannot be used for any practical purpose within a reasonable amount of time.
• The rural land shouldn't be bought purely for speculation purposes.