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Conventional Redemption

1. Definition
The right of the vendor to repurchase the thing sold in a pacto de retro
sale
Nature
1. Contractual created by virtue of an express contract.
2. Accidental by stipulation - its nullity cannot affect the sale itself
3. Real Right when registered, it binds 3rd persons
4. Potestative depends upon the will of the vendor
5. Resolutory Condition when exercised by the vendor, the right of
ownership acquired by the vendee is extinguished
6. A Power/Privilege reserved by the vendor for himself
7. It is reserved at the moment of the perfection of the contract
8. The person entitled to exercise the right of redemption is the owner of
the property
9. It gives rise to the reciprocal obligation; the vendor returns the price of
the sale and other expenses. Vendee returns the thing object of the sale.
2. Who may exercise
a. The vendor, his heirs/ assigns (the right belongs to the owner of the
property)
b. The creditors of the vendor but only after they have exhausted the
property of the vendor
3. Subject matter
Real or Personal property
4. Against whom may the action for the Right of Redemption be exercised
a. Vendee
b. Heirs of the Vendee (Art. 1615)
i. General Rule: If the vendee has several heirs, the action for
redemption cannot be brought against each of them except for his
own share whether the thing be undivided, or it has been
partitioned among them.
ii. Exception: If the inheritance has been divided, and the thing sold
has been awarded to one of the heirs, the action for redemption
may be instituted against him for the whole.
5. When may the Right of Redemption be exercised
a. When the vendor has reserved his right to repurchase the property sold
through a stipulation made in the contract of sale(art 1601, NCC)
b. Sale of an undivided immovable by several persons, jointly and in the
same contract.
Each person may redeem only his respective share
c. Sale of an undivided immovable by one person of several heirs
Each heir may redeem only what he could have acquired
d. Sale of a co-owner of his undivided share in an immovable
The co-owner may independently exercise the right of repurchase
with regards to his own share ( Article 1614)
6. Period to exercise
a. If there is an agreement: It should not exceed 10 years
b. If the is no express agreement: 4 years from the date of contract
The vendor may still 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 a right to repurchase.
Effect of Stipulation extending the period.
After the expiration of the period of redemption, it is legally
impossible to extend the period because ownership has
consolidated in the buyer
Before the expiration of the period of redemption, the original term
may be extended provided, the orginal and new term does not
exceed ten (10) years.
7. Effects of Exercise of the Right
Sale is extinguished
It gives rise to reciprocal obligations between the vendor and
vendee

Obligations of the Vendor

a. Return to the vendee the price of the sale (Art. 1616)


b. The expenses of the contract (Art. 1616)
c. Any other legitimate payments made by reason of the sale (Art 1616)
d. The necessary and useful expenses made on the thing sold (Art. 1616)
e. With regards to the growing fruits
i. Growing fruits at the time of execution of sale & at the time of
redemption
No reimbursement of prorating if no indemnity was paid by the
purchaser at the time of the sale
ii. If there are no growing fruits at the time of sale, but there are
growing fruits at the time of redemption.
The vendor shall reimburse to the vendee his share pro-rata of
the growing fruits corresponding to the time he possessed the
land in the last year, counted from the anniversary of the date
of the sale (Art. 1617)
f. Respect the leases executed by the vendee in good faith, and in
accordance with the custom of the place where the land is located. (Art.
1618)

Right of the Vendor

To receive the thing sold free from all charges and mortgages constituted
by the vendee.

Obligation of the Vendee


To return the thing bought free from all charges or mortgages
Rights of the Vendee
a. To compel the vendor/vendors to redeem the whole property when:
i. The vendee of a part of an undivided immovable acquires the
whole thereof;
ii. Several persons, jointly and in the same contract should sell an
undivided immovable; and
iii. One person who sold an immovable alone has several heirs.
b. To refuse a partial redemption when:
i. The vendee of a part of an undivided immovable acquires the
whole thereof;
ii. Several persons, jointly and in the same contract should sell an
undivided immovable; and
iii. One person who sold an immovable alone has several heirs.
8. Effect of Non-Exercise of the Right of Redemption by the Vendor
The buyer becomes the irrevocable owner but the consolidation of
ownership in the buyer shall not be recorded in the registry of property
without a judicial order and after the vendor has been duly heard.
Failure to comply results in the buyer not being able to have his
absolute ownership registered in the Registry of Property, but it
does not impair the buyers title or ownership over the property
9. Legal presumption.
a. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
i. When the price of a sale with right to repurchase is unusually
inadequate;
ii. When the vendor remains in possession as lessee or otherwise;
iii. When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new
period is executed;
iv. When the purchaser retains for himself a part of the purchase price;
v. When the vendor binds himself to pay the taxes on the thing sold;
vi. In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation. (Art.
1602)
b. In case of doubt, a contract purporting to be a sale with right to repurchase
shall be construed as an equitable mortgage (Art. 1603)
c. The provisions of Art 1602 shall also apply to a contract purporting to be
an absolute sale (Art. 1604)