Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty.

FAbsy was speaking at maximum

speed and I was not able to get everything. Use at your own risk! - sjgrafilo

SALES (FINALS)
09.08.2011
Obligations of a seller?
1. preserve the subject matter
- with the diligence of a good father
of a family, from perfection of the contract
of sale until delivery
- if the subject matter of the sale is
specific, the seller is required to preserve so
as not to be liable for deterioration or loss.
2. deliver the thing, consequence is to
transfer ownership
3. deliver the fruits, accessories and
accessions
When should you deliver?
Delivery should be made:
1. at the time stipulated by the
parties
2. usage of trade or custom
3. within reasonable hours - working
hours 8am - 5pm
Where should you deliver?
Delivery should be made:
1. at the place stipulated by the
parties
2. usage of trade or custom
3. place of business of seller
4. sellers residence
XPN: specific goods - where the goods may
be found
Can you demand delivery at 3am or at
9pm? If beyond reasonable hour, can you
be compelled to deliver or to accept?
If beyond reasonable hour denial of delivery
is JUSTIFIABLE. You have a ground to deny or
reject delivery. Remember: acceptance is
effective, denial is justifiable.
When do you deliver the fruits?
a) The obligation to deliver the fruits
arises from the time the obligation to
deliver arises.
b) In case of CONDITIONAL SALE,
ownership transfers immediately, it is
perfected upon the meeting of the
minds, but the obligation to deliver

arises upon the happening of the

suspensive condition.
c) In case of CONTRACT OF SALE, the
obligation to deliver arises at the
time of PERFECTION.
What are GENERAL WARRANTIES?
Warranty against eviction
Warranty against hidden defects.
Will all delivery result to transfer of
ownership?
GEN.
RULE
DELIVERY
TRANSFERS
OWNERSHIP
2 Requisites for delivery to produce LEGAL
EFFECT:
1. intention to transfer ownership even if you deliver but it is without the
intention, that delivery will not transfer
ownership
2. That delivery is a consequence of
a VALID contract of Sale
EXECUTION OF A PUBLIC INSTRUMENT
Public Instrument - these are
instruments that are notarized
Registered Instruments - binds 3rd
persons, not necessarily notarized
REMEMBER 2 KINDS OF DELIVERY:
constructive and actual
If an instrument of conveyance is made a
public instrument, what is the effect?
Real or actual delivery
Execution of deed of sale = constructive
delivery
d) if made public instrument = real or
actual delivery
What are the XPNs that the execution of a
public instrument will result to actual
delivery?
1. if the thing sold is under material
control by the seller at the time of perfection
of the contract of sale
XPN to this XPN: if there is a
stipulation as to assumption of risk
2. possession and control within a
reasonable period of time

Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

3. if there is a stipulation to the

contrary
3 Types of Constructive Delivery of
Incorporeal Property:
1. Execution of Public Instrument
2. Title of ownership placed in the
hands of the Buyer
3. Using such right with the consent
of the seller
When is delivery complete?
In case of MOVABLE goods,
if what has been delivered was less
than what has been contracted:
1. buyer has right to reject
2. accept what has been delivered,
but pay at the contract price and demand
specific performance
Can
the
buyer
reject
after
acceptance?
Depends on whether the buyer has
knowledge of the capacity of the seller to
deliver the remaining difference of the
quantity agreed upon.
If what has been delivered was more
than what has been contracted:
1. buyer may reject all the goods
delivered (if indivisible)
2. accept all the goods and pay at
contract price - this is deemed as an
amendment to the contract of sale
3. reject the excess, pay and accept
only what has been agreed upon.
In case of MIXED goods, same as the rules
above.
When the goods are in the hands of a 3 rd
person, delivery is completed when that 3rd
person acknowledges that the goods are
now
owned
by
the
buyer.
That
acknowledgment transfers ownership.
In case of IMMOVABLE PROPERTIES,
If less than what has been agreed
upon, the Buyer may:
1. accept the property, with
proportionate reduction of the price.
2. not accept = rescission, provided
that the area lacking is not less than 1/10 of
the entire area

09.14.2011
What are the instances when delivery does
not transfer ownership in contract of sale?
(Art. 1502)
1. Sale on return - ownership not fully
perfected, buyer may revest ownership
within a reasonable time
2. Sale on trial or acceptance a) buyer signifies approval or
acceptance = transfer of ownership
b) buyer retained goods
without notice of rejection, failed to return
within reasonable time = transfer of
ownership
c) does any other act
accepting the transaction = transfer of
ownership
When do you reserve ownership?
Gen. Rule - Delivery transfers ownership
XPNS
1. express reservation by stipulation
2. implied reservation of ownership:
a) bill of lading deliverable to seller,
or his agent or to their order - because the
goods will be deliverable to the seller or his
agent, or to their order, therefore the buyer
cannot get the goods yet, subject to certain
conditions.
b) bill of lading deliverable to the
buyer or his agent or to their order, but the
bill of lading is retained by the seller because without the bill of lading, the buyer
cannot take possession of the goods
because the goods cannot be released
without it.
c) bill of lading + bill of exchange
deliverable to the buyer, his agent or their
order - for the purpose of getting
acceptance and payment, if the bill of
exchange is dishonored, NO effective
delivery
*Bill of Lading (lay-ding) - a document
acknowledging the receipt of goods by a
carrier or by the shippers agent and the
contract for transporting those goods, a
document of title
*buyer retains bill of lading = no perfected
transfer ownership

Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

It is the Sellers obligation to deliver, but is

the acceptance of the buyer a requisite to
perfect delivery? What is the distinction
between non-acceptance and refusal to
accept? Will refusal always result to the
prevention of transfer of ownership?
Gen. Rule - Acceptance is NOT necessary
because it is the obligation of the seller.
Gen. Rule - Refusal to accept will NOT
prevent completion of delivery.
XPN: Justifiable reason for such refusal.
Obligations of the Buyer:
1. payment of the price
2. acceptance of the subject matter
When do you pay the price?
1. at the time stipulated
2. If there is no stipulation
reasonable time

When will the obligation to warrant be

extinguished?
1. there is a waiver
2. buyer fails to give notice of such breach
of warranty within reasonable time
Remedies of the Seller
I. General Remedies/ Ordinary Remedies
-movables:
If there is no delivery yet:
rescission a) buyer does not appear at the
place of delivery
b) buyer appears but does not pay
EXCEPT when there is a stipulation to the
contrary
if there is delivery:
specific performance - to recover
payment

within

Are you required to pay interest?

Gen. Rule: NO!
XPN:
1. there is stipulation
2. if there is a stipulation that should
the buyer be in default, interest is required counted from the time of either judicial or
extra-judicial demand
3. the subject matter produces fruits
When do you accept delivery?
1. at the time stipulated
2. at the time and place of actual delivery
When is there an implied acceptance of
delivery?
1. buyer intimates to seller that he accepts
the goods
2. if after reasonable time, the buyer retains
the goods and does not tell seller he rejects
3. buyer does acts inconsistent with
ownership of seller - when the buyer
exercises rights of ownership
Will acceptance by the buyer relieve the
seller of all his obligations? NO!

(no delivery)
1. to offer delivery
2. refusal to accept - rescission + damages
3. resell the goods at reasonable price
4. notify the buyer that you hold the goods
as bail
What will be the measure of damages by
reason of non-acceptance?
1. profits that the seller would have earned
2. actual loss resulting from nonacceptance
3. goods later on resold, difference between
contract price and price were the goods
were sold to buyer
4. seller already informed that buyer is
repudiating the sale, expenses incurred at
deliverable state
II. Special Remedies
1. possessory lien - right to possess
2. stoppage in transit
3.. special right of resale
4. special right to rescind
Why special right?
Not ordinary (duh!), specific only to unpaid
seller.

What obligations remain? Warrant the thing.

Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

Who is an unpaid seller? (Art. 1525)

1. when the whole of the price has not been
paid or tendered
2. when a bill of exchange or other
negotiable instrument has been received as
conditional payment and the condition was
not fulfilled
* seller may still be considered an unpaid
seller even if the title to the goods has
passed to the buyer, even if the seller was
paid partially
What is the minimum requirement for the
exercise of special remedies?
The goods must be at sellers possession
If still have possession of the goods, no
transfer of ownership yet = possessory lien +
withholding of delivery
Instances when to exercise possessory lien
If there is Partial delivery - possessory
lien on the undelivered goods
UNLESS the part delivery shows waiver of
right to possessory lien.
Instances where seller losses his possessory
lien:
1. when he delivers the goods to a carrier for
the purpose of transmission to the buyer
without reservation of ownership
2. buyer already acquired possession of the
goods
3. waiver of possession
What is the right of STOPPAGE IN TRANSITU?
Art. 1530 - Right of the seller who sold his
goods on credit, to repossess them while
they are in transit (while in the possession of
the carrier or middleman) by reason of
discovery of insolvency of the buyer
What is the ground?
Buyer is or becomes INSOLVENT. judicial
declaration of insolvency is not required.
If your petition for insolvency is sufficient in
form at the start of proceedings
Sufficient for the seller to show that the
buyer has more liabilities than his assests.

When are goods considered to be in transit?

Art. 1531 - 1. After delivery t0o a carrier or
other bailee and before the buyer or his
agent takes delivery of them
2. if the goods are rejected by the
buyer and the carrier or ther bailee
continues in possession of them.
When are the goods considered no longer in
transit? (Atty. Fabellas lectures states only 3, but the
reviewer stated 4 check the book na lang )

1. after delivery to buyer or his agent

2. buyer or his agent obtains
possession of the goods at the point before
the destination originally fixed
3.
the
carrier
or
bailee
acknowledges that he holds the goods in
behalf of buyer or his agent
4. carrier or bailee wrongfully refuses
to deliver the goods to the buyer or his
agent
How is the right of stoppage in transit
exercised?
1. notice of claim to the carrier
- you are claiming that you are an
unpaid seller and you are claiming the
amount of the liability of the buyer
- notice of claim is given to the
carrier or bailee or to the actual possessor of
the goods.
CONSEQUENCE: The contract of
carriage will cease because carrier no
longer carrying the goods to a destination. It
is converted to a simple obligation of bailee
where you are in possession of the goods in
behalf of the seller. Carrier must redeliver
the goods to seller or upon sellers directions.
What if the carrier still delivers the goods to
the buyer?
The carrier is liable for damages for violation
of his contract which was converted to a
bailor-bailee contract and failure to comply
with the directions of the seller.
2. by obtaining actual possession of the
goods
Who will bear the expenses for redelivery?
Seller he was the one who gave
instructions for redelivery

Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

09.21.2011
In all the 4 rights of the UNPAID SELLER, the
minimum requirement for him to be able to
exercise them is - SELLER MUST HAVE
POSSESSION OF THE GOODS
Right to Resell the Goods (when exercised):
1. goods are perishable
2. there is a stipulation
3. buyer in default for unreasonable length
of time
- any profit received by seller is for his own
benefit only
- BUT any damage may be reimbursed from
the buyer
Is notice needed?
NO need for validity of resale,
BUT it is ADVISABLE to notify buyer if 3rd
ground, because this is to determine
damages and if really in default for
unreasonable length of time
May the seller himself be the buyer in
resale?
NO! This is to prevent abuse. The seller will
acquire goods at a lower price and ask
buyer for deficiency = UNJUST ENRICHMENT
How to exercise the special right to rescind?
1. there is express stipulation in case of
default of the buyer
2. buyer is in default for unreasonable length
of time
Is notice needed? YES!
1) To inform buyer that the seller is
rescinding the contract
2) to determine if seller is right in
exercising his right to rescind
3) to determine if buyer is really in
default for unreasonable length of time
Remedies of Buyer if there is no delivery:
1. specific performance
2. rescission

What is anticipatory breach on the part of

the buyer?
Art. 1590 - disturbed in the possession or
ownership of the thing acquired, or should
he have reasonable grounds to fear such
disturbance, by a vindicatory action or a
foreclosure of mortgage
REMEDY: suspension of payment during
disturbance or until the seller has caused the
disturbance to cease
Gen. Rule - The buyer is justified in refusing
payment.
XPNs: 1. Seller gives security to buyer for the
return of the purchase price
2. there is a stipulation - assumption
of risk on the part of the buyer
3.
seller
has
succeeded
in
eliminating the danger or disturbance
What is anticipatory breach on the part of
the seller?
Art. 1591 - seller have reasonable grounds to
fear the loss of immovable property sold
and its price
* Should such ground not exist, the provisions
of Article 1191 shall be observed.
REMEDY: rescission of the sale (but this is
available only in specific cases)
Failure to pay the price ( remedy of seller):
1. specific performance
2. rescission
When will rescission take effect?
Notice is required for rescission to take
effect, so it will only take effect upon notice.
DEMAND = NOTICE
Art. 1592 - How Notice should be made,
either:
1. Judicial Notice - file action in court
2. Notarial Notice - in writing &
notarized
* If there was notice already, buyer
may still pay, and seller will be compelled to
accept = why? Because the contract is still
existing. Seller has no ground to refuse
payment

Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

Art. 1593 - Automatic Rescission of Sale of

Movable property:
1. if the buyer upon the expiration of the
period fixed for delivery of the thing
purchased, refused to receive the thing
without justifiable cause
2. if the buyer failed to pay the price unless
granted a longer period within which to pay

Who is a Purchaser in Good Faith?

1. One who buys the property without
notice that some other person has interest
on the subject matter
2. Gives full payment of the purchase price
*these 2 most concur before you
can be considered as a purchaser in good
faith

Judicial or Notarial Act not required for

movable property. WHY?
- market value of personal things may easily
go down because of deterioration, delay
may prejudice the seller
BUT for practical reasons, notification is
necessary

Why do you need good faith?

You need good faith to be given priority
under the rules in Art. 1544

* this provision is not applicable if the subject

matter is already delivered
10.04.2011
What is the rule on double sale?
1. MOVABLE property - person who may
have 1st taken possession in Good Faith
- longer possession in GF is preferred
2. IMMOVABLE property
Requisites:
a) 2 or more VALID contracts of sale
b) 2 or more contracts of sale have
the same subject matter
c) 2 or more buyers must present
conflicting interests
d) the interest is regarding ownership
e) 2 or more buyers, only 1 seller
Rules on Preference (Art. 1544):
a) the one who 1st registered in good
faith
b) if without registration - possessor in
good faith
c) one who presents the oldest title
Registration - entry of instrument of
conveyance
- entry in the books of registration,
includes annotation, cancellation, and
even the marginal notes

Do you have to have personal knowledge of

ADVERSE CLAIM to be in bad faith?
If there is adverse claim, that notice will
disqualify you from being a purchaser in GF.
Your only defense is that adverse claim has
NO basis.
What if there is lis pendens?
G.R. = Same effect as adverse claim.
There is notice that there is something wrong
with the property.
If no adverse claim or lis pendens, will the
buyer be considered in GF?
Yes! Because the law does not require the
buyer to look beyond the title.
BUT if buyer has ACTUAL KNOWLEDGE of the
lis pendens and the adverse claim = BF
There are 2 buyers who bought the same
property. 1st buyer from the original owner,
2nd buyer from the heir. Who will be given
priority? If 2nd buyer 1st registers, will he be
given priority? (asked in the recit but can also be
found in Jurado reviewer )

ART. 1544 NOT applicable, not SAME seller.

Inheritance is not considered in Art. 1544.
Apply : first in time, priority in right.
- oldest title given preference, this
may be the deed of sale or deed of
conveyance
Death of a person does not invalidate any
contract entered into prior to the death.
2 buyers, same seller, same property
1st buyer - no registration
2nd buyer - registered property first.
Who will be given preference?
It depends, we have to consider now the GF
in applying 1544.

Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

2 buyers, same seller, same property

1st buyer knew of the 2nd sale, so he registers
first. Will the 1st buyer be given preference
even if he is in BF?
Yes. BF in the 1st buyer does not matter, the
1st buyer will always be given priority.
Bad faith only matters for the 2nd and
subsequent buyers.
What is a condition?
Future and uncertain event which may or
may not happen, upon which depends the
rising or extinction of an obligation.
(suspensive or resolutory)
Non-performance of obligation or condition
is NOT necessarily a breach of warranty.
2
remedies
in
non-performance
of
condition:
1. refuse to proceed with the contract
2. proceed with the contract, waiving the
performance of the condition
Distinction between Warranty and Condition
Warranty
- not always
stipulated, some are
implied

Conditions
- stipulated by the
parties

- refers to the
performance

- refers to the
existence of an
obligation

-refers to fitness/
mercantability

- refers to delivery or
transfer of ownership

What are express warranties?

Express stipulations agreed upon by the
parites
What are the 3 requisites?
1. affirmation of fact or any promise by the
seller relating to the thing
2. if the natural tendency of such affirmation
or promise is to induce the buyer to
purchase the same
3. buyer purchase the thing relying thereon

Will all affirmations or promise be

considered as an express warranty?
NO! Sales talk/ dealers talk - mere opinions,
UNLESS the seller is an EXPERT and the buyer
relied on that opinion to buy the subject
matter.
What are implied warranties?
1. seller has the right to sell
2. warranty against eviction
3. warranty against non-apparent servitude
4. warranty against hidden defects
seller has the right to sell - only required at
the consummation stage of the sale
warranty against eviction - legal transfer of
ownership and peaceful possession of the
subject matter from time of transfer of
ownership
5 requisites:
a) buyer is evicted in whole or in
part from the subject matter of the
sale
b) there is a final judgment
c) basis of eviction is a right prior to
the sale or an act imputable to the
seller
d) seller has been summoned in the
suit for eviction at the instance of
the buyer; or made 3rd party
defendant
through
3rd
party
claimant brought by the buyer
e) no waiver on the part of the
buyer
Who shall take the lead in the
defense? SELLER, he is the one who
warranted the thing sold. The
buyers only obligation is to notify
the seller.
Final Judgment - Entry in the book
of judgment. Without appeal within
15 days, the judgment becomes
final and executory.

Breach of Express Warranty = Seller liable for

damages

Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

Failure of the buyer to appeal = he

can still avail of remedies. It is the
seller who has the obligation to
appeal. Buyer may still enforce his
right of warranty against eviction.
What are the rights of a buyer in Breach of
Warranty Against Eviction?
1. Value of the thing (at the time of
eviction)to be returned by the seller
2. costs of suit - a)eviction suit and b)
enforcement of warranty
3. in come and fruits
4. expenses of the contract
5. damages + interests
May a warranty against eviction be waived?
YES!. When the buyer with knowledge of risk
of eviction assumed its consequence and
made a waiver, the seller will not be liable.
Qualification:
Should be an EXPRESS waiver
If general waiver = will only limit the
liability of the seller
If specific waiver = will extinguish the
liability of the seller to the warranty
specifically waived.
warranty against non-apparent servitude
- immovable is encumbered with nonapparent servitude not mentioned in the
agreement
Remedies:
1. rescission
2. action for damages
- should be exercised within 1 year
from the perfection of the contract or
execution of deed
After 1 year, what remedy is available?
Damages from discovery of non-apparent
servitude.

Are there XPNs?

Yes! 1. If the defect is latent or visible
2. if buyer is an expert in trade or
profession
May the buyer waive this warranty? What is
the effect?
Yes. Seller not aware = no liability
Seller aware = Bad Faith = still liable
Remedies of buyer:
1. withdraw from the contract + damages
2. reduction of purchase price + damages
8 should be exercised within 6 months from
delivery of the thing sold.
What is Redhibitory Defect?
Despite professional inspection, the hidden
defect cannot be discovered (SALE of
ANIMALS)
Prescriptive period (ANIMALS) = 40 days
from delivery of the animal
Remedies: 1. Withdrawal from contract
2. reduction in the purchase
price
Implied warranties in case of sale of goods
1. warranty of fitness
2. warranty or mercantibility
What are the instances of waiver?
1. even if knew of the defect,
buyer
accepted goods without protest.
2. failure to notify the seller that he is
rescinding the sale
3. failure to return goods in substantially
good condition.

warranty against hidden defects

a) hidden defect renders object unfit
for its purpose
b) the hidden defect diminishes the
fitness of the object, to the extent that had
buyer known of it, he would have not
bought it.

Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

10.06.2011
What are the grounds for extinguishmentof
sale?
Same grounds by which obligations are
extinguished:
1. payment / performance
2. loss of the subject matter
3. novation
4. annulment
5. condonation/remission
6. confusion/ merger
7. compensation
8. fulfillment of resolutory condition
9. prescription
10. rescission
The contract of sale is also extinguished by:
- conventional redemption
- legal redemption
What is conventional redemption? When
does it take place?
The right of the seller to repurchase and to
fulfill the obligations enumerated under Art.
1611
It takes place when:
1. the vendor reserves the right to
repurchase the thing sold
2. vendor returns the price of the sale
3. he shoulders the expense of the
contract and any other legitimate expense
of the contract
4. pay the value of the necessary
and useful expenses made on the thing
incurred by the buyer
5. and comply with other stipulations
they may have agreed upon.
Application of conventional redemption:
ONLY if there is a stipulation granting the
seller the right to redeem the thing he sold,
otherwise conventional redemption has no
basis.
CONVENTIONAL REDEMPTION = ACCIDENTAL
ELEMENT
It is stipulated upon by the parties
Remember: Conventional redemption is
stipulated on the perfection stage of the
contract. It should be part of the original
deed of sale.

Example: Parties executed first a deed of

sale.
Then
they
executed
another
instrument. This 2nd instrument will be
considered as a separate contract and not
part of the original contract of sale even if
the 2 instruments were notarized and
executed at the same time.
Characteristics of conventional redemption:
1. exists at the time of perfection of the
contract
If the stipulation was made after the
sale was already consummated, it is
considered as a mere promise to sell
2. accidental stipulation
3. reciprocal
Buyer must return the property, seller
must return the price
4. gives rise to real right if properly registered
Affects 3rd persons
5. potestative
Its exercise depends upon the sole
will of the seller
6. resolutory condition
When fulfilled, the ownership of the
buyer is extinguisehd
OPTION TO PURCHASE vs. RIGHT TO REDEEM
1. may be created 1. part of the main
independent of the contract
main contract
2. must have a
separate
and
distinct
consideration

2. does not need a

separate
consideration to be
valid and effective

3. may exceed 10
years

3.
redemption
period is up to 10
years

Prescriptive period of right to redeem:

1. by agreement of the parties but should
not exceed 10 years from the date of
contract
2. no agreement - 4 years from date of
contract
*date of contract is also date of
notarization, the parties will sign the
contract upon notarization

Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

What if the parties agreed 4 years from 2010

is the period to redeem and the contract
was dated year 2000?
The stipulation is VOID. It exceeds 10 years.
If there is stipulation as to period, apply 10
years.
If no stipulation, apply 4 years.
How is redemption effected?
Seller returns to buyer:
a. price of the sale
b. expenses of the contract and any
other legitimate payments
c. necessary and useful expenses
If seller does not want to pay necessary and
useful expenses - non-payment will warrant
the retention of the object of the sale by the
buyer.
How is redemption exercised?
By tender of payment and notice
What is tender of payment? Is the offer to
pay sufficient?
Mere intention to pay is not sufficient. You
must really have the money when you offer
to pay.
If the tender of payment is refused, are you
required to consign?
NO. mere valid tender of payment is
sufficient.

Immovable separately sold:

Same rule applies but buyer can be
compelled to partial redemption
because the basis is the different
contracts entered into.
What is the effect if the seller fails to
redeem?
The transfer of title is NOT automatic.
Buyer acquires title = Automatic
Recording of title = NOT automatic
consolidation
- proof of title by the order of the
court
*Seller may question title in the proceeding,
only ground is whether the contract is
EQUITABLE MORTGAGE or SALE WITH PACTO
DE RETRO
Nature of the opposition (buyer) - no right of
redemption, no basis, only equitable
mortgage
REDEMPTION EVEN AFTER FINAL JUDGMENT
30 days. W/N contract is equitable
mortgage or sale with pacto de retro, other
than this ground = no more 30 days.
If court finds that it is a sale with pacto de
retro = 30 days
Why? Because in case of Equitable
mortgage, seller may pay anytime before
foreclosure.
10.10.2011

Consignment = added security.

If buyer cannot be found = consignation is a
valid tender of payment.
What are the rules in sale of undivided
immovable? Who can redeem and what
can be redeemed? Multi-parties.
In co-ownership:
Co-owner
may
redeem
his
respective share but cannot compel
buyer to partial redemption
Basis: single contract where property
was sold - buyer may compel all coowners to redeem the entire
property.

EQUITABLE MORTGAGE (EM)

- a mortgage which lacks the proper
formalities, form or words or other requisites
prescribed by law for a mortgage BUT shows
the intention of the parties to make the
property subject of the contract a s security
for debt and contains nothing impossible or
contrary to law
Requisites of Equitable Mortgage:
1. parties entered into a contract
denominated as a contract of sale
2. their intention was to secure an existing
debt by way of a mortgage

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Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

Instances when a contract is presumed to

be Equitable Mortgage:
1. price of the sale is unusually inadequate
2. vendor remains in possession as lessee or
otherwise
3. upon or after the expiration of the right to
repurchase, another contract extending the
period of redemption is executed
4. buyer retains for himself a part of the
purchase price
5. vendor binds himself to pay taxes on the
thing sold
6. where it may be fairly inferred that the
real intention of the parties is that the
transaction shall secure payment of a debt
* instances of any one of the conditions =
sufficient to give rise to the presumption that
the contract is an equitable mortgage
What are the requisites for this presumption?
1. clear language in the contract that the
parties intended to secure debt by
mortgage
2. conduct of the parties clearly show that it
is an equitable mortgage
(Villanueva book - there is an enumeration of
circumstances when to treat a contract as an
equitable mortgage - Lim v. Calaguas case - sj)

When in doubt if sale with pacto de retro or

equitable mortgage:
EM prevails! Why? Because it involves lesser
transmission of rights and interests over the
property
Purpose: to prevent circumvention of the
law on usury and the prohibition against a
creditor appropriating the mortgaged
property and additionally to end unjust or
oppressive transactions or violations in
connection with a sale of property
Note: Art 1602 applicable also to absolute
sale. Requisites before absolute sale can be
considered as equitable mortgage (Art.
1604)
Effect if the sale was declared as Equitable
Mortgage:
Title remains to the seller

- if the title already transferred to

buyer - must be revested to seller through
DEED OF CONVEYANCE after compliance
with obligations under art.1616
a. return the purchase price
b. pay expenses of the
contract
c. pay all necessary and
useful expenses
Affidavit of consolidation is of no
consequence, declaration by the court that
the contract is Equitable Mortgage would
still prevail.
What is the remedy?
1. reformation of the instrument by the seller
to show true intention - Primary remedy
2. Annulment/ specific performance
Connect with Acquisitive prescription:
Ordinary = 10 years with good faith +
legal title
Extraordinary = 30 years without GF
and without legal title
Parties entered into contract, after 10 years,
can buyer refuse to surrender title because
of ordinary acquisitive prescription? If
decision rendered after 5 years (=10) = 15
years in possession of the property.
Buyer CANNOT refuse, for possession to ripen
into ownership it must be in the concept of
an owner.
Tile was adjudged as equitable mortgage,
meaning he is only holding the property but
NOT in concept of owner
Pactum Commissorium - stipulation vesting
automatic title to creditor when debtor is in
default
- against public policy
LEGAL REDEMPTION
- the right to be subrogated upon
the same terms and conditions stipulated in
the contract in the palce of one who
acquires a thing by purchase or dation in
payment or by any other trabsaction
whereby ownership is transmitted by
onerous title

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Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

Rationale for Legal Redemption:

- a privilege accorded to redemptioners
- to minimize co-ownership ( law frowns
upon co-ownership)
Legal redemption:
1. among co-heirs (hereditary rights) Art.
1088
- must be sold to stranger, if also to
co-heir, will not apply
- notice: given by selling co-heir,
within 1 month from the time other co-heirs
were notified in writing of the sale
- redemption by other co-heir - will
redound to the benefit of the redemptioner
heir only
- if already property = legal
redemption of co-owner
2. among co-owners Art 1620
- co-owner may redeem what coowner sold to 3rd person
- redemption by co-owner will
redound to the benefit of ALL the other coowners
- may be exercised by a co-owner
only when part of the community property is
sold to a stranger
3. among adjoining owners of Rural Land
(art. 1621)
- Are all owners of the adjoining land
allowed to exercise legal redemption? NO!
Not applicable to adjacent lands which are
separated by rivers, brooks, ravines, drains,
roads and other apparent servitudes
REQUISITES for the exercise:
1. rural land with area not exceeding
1 hectare
2. such land is alienated
3. grantee does not own any rural
land
If two or more adjoining owners desire to
exercise the right or redemption at the same
time, who shall be given preference?
The owner of the land with the smaller area
will be preferred.
If both lands have the same area, the one
who first requested the redemption will be
given preference.

4. among adjoining owners of urban land

(art. 1622)
a piece of urban land which is so
small and so situated that a major portion
thereof cannot be used for any practical
purpose 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 pre-emption at
a reasonable price.
2 rights given:
Right of Redemption and Right of Preemption
What is pre-emption?
It is the right of first refusal.
Are all urban land redeemable?
No. If the transfer is by way of inheritance =
NO redemption
Rule on Preference:
The one whose intended use is best justified
will be given preference
When does legal redemption begin to run?
Upon 30 days from receipt of notice from
the prospective seller whether co-heir, coowner or owner of adjoining land.
Is the 30-day period a prescriptive period?
NO! It is a condition precedent before one
can exercise the right of legal redemption
Is actual knowledge of the sale allowed?
Gen. Rule- Written notice by the seller is
required to exercise legal redemption.
Why? Because the seller is in the best
position to know to whom that notice must
be given.
XPN: (basis: jurisprudence)
1. actual knowledge to the point of
estoppel and laches
2. lack of objection = estoppel and
laches

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Disclaimer: These notes are NOT complete. It might have been that I was reciting or Atty. FAbsy was speaking at maximum
speed and I was not able to get everything. Use at your own risk! - sjgrafilo

Redemption in tax sales - within 1 year from

the date of the sale
Redemption of judgment debtor - within 1
year from registration of the certificate of
sale foreclosure
If no redemption = tile will be consolidated
How do you exercise legal redemption?
1. pay the purchase price
2. pay all other expenses
G.R. Judicial foreclosure = no right of
redemption, only EQUITY OF REDEMPTION
- you can pay the debt within 90
days from the order of foreclosure, but
before the confirmation of the sale by the
court
Within 90 days from final judgment
Extrajudicial foreclosure
Natural Person given = within 1 year from
registration of sale
Juridical person = anytime until registration
of the certification of sale within 3 months
- must redeem immediately, ends
upon registration

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