Extinguishment of Sale

Dominic Martin
Paula Benilde Dungo
Tonie Marie Moreno
Monico Joseph Matutina

Submitted To:
Atty. Irvin Joseph Fabella
Dominic Martin
General modes of extinguishment
Q: What are the general modes of
extinguishments in a contract of sale?
A: The same grounds by which obligations
in general are extinguished, also apply to
the extinguishment of the obligations
arising from contracts of sale.
They include:
a) payment of the price or
performance
b) loss of the subject matter,
c) condonation or remission,
d) confusion or merger of the
rights of creditor and debtor,
e) compensation,
f) novation,
g) annulment,
h) rescission,
i) fulfillment of a resolutory
condition,
j) prescription, and
Q: What is the mode of extinguishment
that is unique to contracts of sale?
A: Redemption. Conventional or legal
redemption.
Q: What is the effect of payment of the
price or performance in a contract of
sale?
A: It extinguishes the obligations to which
they pertain to in a contract of sale, but not
necessarily the contract itself, since the
relationship between buyer and seller
remains after performance or payment,
such as the continuing enforceability of the
warranties of the seller.
Conventional Redemption
Q: When does conventional redemption
shall take place?
A: 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.
Q: What are those enumerated in
Article 1616?
A: (a) return the price of the sale,
(b) the expenses of the contract,
(c) any other legitimate payments
made by reason of the sale, and
(d) the necessary and useful
expenses made on the thing sold.
Q: What happens to the rights of the
buyer in a sale with a right of
repurchase?
A: The buyer would still be subrogated to
the seller’s rights and actions, even during
the period when redemption can be made
by the seller. The redemption feature of
sale does not prevent its full
consummation.
Q: Who may exercise the right of
repurchase?
A: The seller in whom the right is
recognized by a contract, or by any person
to whom the right may have been
transferred, or in the case of legal
redemption, by the person so entitled by
law.
Presumed to be Equitable Mortgage
Q: What instances does a contract be
presumed to be an equitable
mortgage?
A:
(1) When the price of a sale with
right to repurchase is unusually
inadequate;
Dominic Martin

2) “Title and ownership of the

(2) When the vendor remains in property sold is immediately vested
possession as lessee or otherwise; in the vendee a retro, subject to
the restrictive condition of
(3) When upon or after the repurchase by the vendor a retro
expiration of the right to within the redemption period.”
repurchase another instrument (Misterio v. Cebu State College of
extending the period of redemption Science and Technology)
or granting a new period is
executed; 3) “The vendor must have a right to
transfer the ownership thereof at
(4) When the purchaser retains for the time it is delivered.” (Nool v.
himself a part of the purchase price; Court of Appeals)

(5) When the vendor binds himself Q: How is the right of repurchase
to pay the taxes on the thing sold; reserved?

(6) 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.
Q: How should a contract purporting to be
a sale with right to repurchase be
construed?
A: In case of doubt, a contract purporting
to be a sale with right to repurchase shall
be construed as an equitable mortgage.
Proper reservation of the right
repurchase
Q: What are the proper reservations of
the right to repurchase?
A:
1) “The right of repurchase must be
reserved by the vendor, by
stipulation to that effect, in the
contract of sale.” (Villarica v. Court
of Appeals)
A: The right of repurchase is reserved by
the vendor in the same instrument of sale
as one of the stipulations of the contract.
Q: Can the vendor still reserve the right
to repurchase once the instrument of
absolute sale is executed? How about
in a separate instrument?
A: No, the vendor can no longer reserve
the right to repurchase once the
instrument of absolute sale is executed.
Still no, any right thereafter granted the
vendor by the vendee in a separate
instrument cannot be a right of repurchase
to but some other right like the option to buy.
Q: When should a seller exercise the
right to repurchase?
A: It should be within the redemption
period.
Q: When is there a valid existence of a
stipulated right of repurchase?
A: Valid existence of a stipulated right of
repurchase is premised upon the fact that
the underlying contract of sale is valid and
Dominic Martin
there has been performance (i.e., delivery
of the subject matter and transfer of
ownership to the buyer), upon which the
right to repurchase can be exercised later
on.
Right of Repurchase May Be Proved by
Parol Evidence
Q: What governs the right to
repurchase?
A: It is governed by the Statute of Frauds.
Right to repurchase is merely a feature of
the contract of sale.
Q: May parol evidence be adduced to
prove an agreement granting the seller
a right to repurchase of the property
sold?
A: Yes, the Supreme Court has held that
when the contract of sale has been
reduced in writing, parol evidence may be
adduced to prove the agreement granting
the seller a right to repurchase the
property sold. Since the deed of sale and
the verbal agreement allowing the right of
repurchase should be considered as an
integral whole, then the deed of sale relied
upon by the seller “is in itself the note or
memorandum evidencing the contract,”
which would take the case outside the
provisions of the Statute of Frauds.
Q: Would “best evidence rule” be an
obstacle in the adducement of such
parol evidence?
A: No, the Court also held that the “best
evidence rule” would not be an obstacle to
the adducement of such parol evidence,
where it is shown that the parol agreement
was:
(a) the moving cause of the written
contract, or
(b) where the parol agreement
forms part of the consideration of the
written contract, and
(c) it appears that the written
contract was executed on the faith of the
parol contract or representation, and
(d) especially so when the right of
repurchase proved by parol evidence is
not inconsistent with the terms of the
written contract.
Period of Redemption
Q: In a sale with a right to repurchase,
how long is the period of redemption if
there is no express agreement as to the
period?
A: In the absence of an express
agreement, the right of redemption can be
exercised and shall last for 4 years from
the date of the contract.
Q: Should there be an agreement, can
the period exceed 10 years? What
happens if it exceeds 10 years?
A: Under Art. 1606 of the Civil Code, the
period of redemption cannot be agreed
upon to exceed 10 years. If it exceeds 10
years, the agreement is valid only for the
first 10 years.
XPN: 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.
Q: What happens if there is a period of
redemption agreed upon by the parties
in a sale a retro, but the agreement is
unclear or void?
Dominic Martin
A: Although the stipulation as to period
may be unclear or void, it is the 10 year
period provided in Article 1606 that applies
and not the 4 year period provided therein
where there is no agreement as to period.
(Tayao v. Dulay)
Q: Can pendency of action toll the
redemption period?
A: Yes. The pendency of an action
brought in good faith and relating to the
validity of a sale a retro tolls the running of
the period of redemption.
However, the pendency of a litigation
pertaining to the right of redemption does
not toll the period because such period “is
not suspended merely and solely because
there is a divergence of opinion between
the parties as to the precise meaning of
the phrase providing for the condition
upon which the right to repurchase is
triggered. The existence of seller a retro’s
right to repurchase the proper is not
dependent upon the prior final
interpretation by the court of the said
phrase.
In essence therefore, the completion of
the redemption process (i.e., the payment
of the amounts required by Article 1616) is
tolled by the filing of a civil action relating
to the issue of such redemption, provided
that the exercise of the redemption right
and the filing of the suit are done within
the redemption period.
Q: Does non-payment of price affect
the running of the redemption period?
A: The non-payment of the purchase price
by itself would not serve to suspend the
period of redemption.
Possession of Subject Matter During
Period of Redemption
Q: Does a buyer have a right to the
immediate possession of the property
sold in a sale a retro?
A: Yes, unless otherwise agreed upon. It
is basic that in a pacto de retro sale, the
title and ownership of the property sold are
immediately vested in the buyer a retro,
subject only to the resolutory condition of
repurchase by the seller a retro within the
stipulated period.
Q: May a buyer of a sale of a property
with the right to repurchase alienate,
mortgage or encumber the same?
A: Yes. Pending the repurchase of the
property, the vendee a retro may alienate,
mortgage or encumber the same, but such
alienation or encumbrance is as revocable
as is his right. If the vendor a retro
repurchases the property, the right of the
vendee a retro is resolved, because he
has to return the property free from all
damages and encumbrances imposed by
him. The vendor a retro may also register
his right to repurchase under the Land
Registration Act and may be enforced
against any person deriving title from the
vendee a retro.
How Redemption Effected
Q: How may the vendor avail himself of
the right of repurchase?
A: He must returning to the vendee the
price of the sale, and in addition, he
must pay the expenses of the contract,
and any other legitimate payments
made by reason of the sale, and the
necessary and useful expenses made
on the thing sold.
Q: Can the seller bring his action
against every possessor whose right is
derived from the buyer?
Dominic Martin
A: Yes. Even if in the second contract no
mention should have been made of the
right to repurchase, without prejudice to
the provisions of the Mortgage Law and
the Property Registration Decree, with
respect to third persons, who may have
bought in good faith and for value.
Q: Is the “rights of a builder in good
faith" applicable in cases involving
contracts of sale with the right of
repurchase wherein the owner of the
land is the “builder”, “sower”, or
“planter”?
A: No. the right to repurchase may be
exercised only by the vendor in whom the
right is recognized by the contract or by
any person to whom the right may have
been transferred; and that in the sale with
right of repurchase, the applicable
provisions are Art. 1606 and 1616, and not
Art. 448. (Narvaez v. Alciso)
Q: Is the buyer a retro entitled to retain
possession of a property until actual
reimbursement for useful
improvements is paid by the seller a
retro?
A: Yes. Failure of the seller a retro to pay
the useful improvements, entitles the
buyer a retro to retain possession of the
land until actual reimbursement is done by
the seller a retro. (Gargollo v. Duero)
Q: Is the enumeration in Art. 1616
exclusive?
A: No. The exercise of redemption is not
limited only to the total redemption price
enumerated in Art. 1616 which is not
restrictive nor exclusive in its language.
Court held that Art. 1616 should be
construed with Art. 1601. (Solid Homes,
Inc v. CA)
Q: What is the proper exercise of the
right of redemption?
A:
a) To exercise the right to redeem,
only tender of payment is sufficient.
(Legaspi v. CA)
b) To file a suit for consignation
with the courts of the redemption price
when tender of payment cannot be validly
made, because the buyer cannot be
located. (Catangcatang v. Legayada)
c) No prescribed form for an offer
to redeem to be properly effected. It can
either be through a formal tender with
consignation, or by filing a complaint in
court coupled with consignation of the
redemption price within the prescribed
period. (Lee Chuy Realty Corp. v. Court of
Appeals)
Q: How is the right to redemption
effected in multi-parties cases?
A: In a sale with a right to repurchase,
the vendee of a part of an undivided
immovable who acquires the whole
thereof in the case of article 498, may
compel the vendor to redeem the whole
property, if the latter wishes to make
use of the right of redemption.
Q: When there are several persons,
jointly and in the same contract, who
may sell an undivided immovable with
a right of repurchase?
A: None of them may exercise this right
for more than his respective share. The
same rule shall apply if the person who
sold an immovable alone has left
several heirs, in which case each of the
latter may only redeem the part which
he may have acquired.
Dominic Martin
Q: What happens when one of the co-
owners or co-heirs succeed alone in
redeeming the whole property? When
will prescription lie?
A: Such co-owner or co-heir shall be
considered as a mere trustee with respect
to the shares of his co-owners or co-heirs.
No prescription will lie against the right to
any co-owner or co-heir to demand from
the redemptioner his respective share in
the property redeemed, which share is
subject to a lien in favor of the
redemptioner for the amount paid by him
corresponding to the value of the share.
Q: What should a vendee do in the
case there are several persons, jointly
and in the same contract sell an
undivided immovable with a right of
repurchase?
A: The vendee may demand of all the
vendors or co-heirs that they come to
an agreement upon the purchase of the
whole thing sold. Should they fail to do
so, the vendee cannot be compelled to
consent to a partial redemption.
Q: Can a co-owner, of an undivided
immovable who sold his share
separately, independently exercise the
right of repurchase as regards his own
share?
A: Yes. Each one of the co-owners of
an undivided immovable who may have
sold his share separately, may
independently exercise the right of
repurchase as regards his own share,
and the vendee cannot compel him to
redeem the whole property.
Q: When can creditors of the vendor
make use of the right of redemption
against the vendee?
A: They made do so after they have
exhausted the property of the vendor. The
creditors of the vendor cannot make use
of the right of redemption against the
vendee, until after they have exhausted
the property of the vendor.
When Redemption Not Made
Q: What is the proceeding for
consolidation of title under Article
1607?
A: The proceeding for consolidation of title
under Article 1607 is an ordinary civil
action where a complaint or petition must
be filed, with the buyer a retro being made
a party to the complaint and summons
being served upon him.
Q: What happens if the action is found
to be an equitable mortgage, and thus
denied?
A: If such action for consolidation of
ownership is denied because the contract
is found to be an equitable mortgage,
another action can be filed to collect on
the indebtedness or to foreclose the
mortgage.
Q: How is automatic consolidation of
ownership in the buyer a retro
abolished upon expiration of the
redemption period?
A: Article 1607 abolished automatic
consolidation of ownership in the buyer a
retro upon expiration of the redemption
period by requiring the buyer to institute
an action for consolidation where the
vendor a retro may be duly heard.
Q: What is the effect if the buyer
succeeds in proving that the
transaction was indeed a pacto de
retro?
Dominic Martin

A: If the buyer succeeds in proving that

the transaction was indeed a pacto de
retro, the vendor is still given a period of
thirty days from the finality of the judgment
within which to repurchase the property.

Q: What is the effect of recording in the

Registry of Deeds of the consolidation
of ownership of the buyer?

A: Notwithstanding the provisions of

Article 1607, the recording in the Registry
of Deeds of the consolidation of ownership
of the buyer is not a condition sine qua
non to the transfer of ownership. The
buyer would still be the owner of the
property when the seller a retro fails to
redeem the property within the redemption
period.

Q: What is the effect if there is a failure

to perform the resolutory condition of
repurchase by the seller a retro within
the stipulated period?

A: Failure of the seller a retro to perform

said resolutory condition vests absolute
title and ownership over the property sold.

Q: What is the effect when the buyer a

retro failed to consolidate his title
under Article 1607?

A: As title is already vested in the buyer a

retro, his failure to consolidate his title
under Article 1607 does not impair such
title or ownership for the method
prescribed thereunder is merely for the
purpose of registering the consolidated
title.
Paula Benilde Dungo
Grant of 30-day Redemption Right
 When the period of redemption has
expired, the right to redeem is
extinguished
 If there has been a pervious suit on
the nature of the contract, the
seller has the right to repurchase
within 30 days from time final
judgement was rendered
 Does not apply to a contract found
to be in absolute sale
 A judgement finding the contract to
be a sale a retro should not
authorize the application of the 30-
day redemption period
 Article 1606 applies only where the
nature and character of the
transaction was put in issue before
the court
 Applicability of Article 1606 rests
on the bona fide intent of the seller
a retro
Fruits
At time of execution of the sale, the land
has visible or growing fruits
At time of execution of the sale, No fruits
and some exist at time of redemption
 pro -rated: the buyer is given the
part corresponding to the time
possessed the land in the last
year, counted from the anniversary
of the date of the sale
 Article 1617 only applies when the
parties have not provided for their
sharing arrangement with the fruit
existing at the time of redemption.
Equitable Mortgage
 Definition
o one which although lacking
in some formality, or form
or words, or other
requisites demanded by a
statute, nevertheless
reveals the intention of the
parties to charge real
property as security for a
debt, and contains nothing
impossible or contrary to
law
 Essential requisites
o that the parties entered into
a contract denominated as
a contract of sale
o that their intention was to
secure an existing debt by
way of a mortgage.
 When in doubt, courts are inclined
to construe a transaction
purporting it to be a sale as an
equitable mortgage
 Intention of the parties is not
shown by the terminology but by
the surrounding circumstances
 Pactum Commissorium
o Automatic appropriation by
the creditor of the thing
pledged or mortgaged upon
the failure of the debtor to
pay the principal obligation.
o Stipulation for automatic
vesting of title over the
security in the creditor in
case of the debtor’s default.
o Only applies when the
covering transaction is a
mortgage
o When a purported sale a
retro is found to be an
equitable mortgage, the
proper remedy in case the
borrower refuses to pay the
price is to foreclose the
mortgage
 Rationale
Paula Benilde Dungo

o To prevent circumvention of o Not applicable to equitable

the laws on usury and the mortgage situations
prohibition against the  Effects when Sale Adjudged to be
creditor appropriating the an Equitable Mortgage
mortgaged property o Any money or fruit received
 When a sale a retro shall be by the buyer as rent or
presumed as an equitable otherwise shall be
mortgage considered as interest
o  Price of the sale with right which shall be subject to
to repurchase is unusually the usury laws
Inadequate o Seller may ask for the
o Seller Remains in reformation of the
possession as lessee or instrument
otherwise o For the court to decree that
o Upon or after the expiration debtor to pay his
of the right to repurchase outstanding loan to the
Another instrument creditor
extending the period of o Where the trial court did not
redemption or granting a pass upon the mortgagor’s
new period is executed claim that he had paid his
o Purchaser Retains for obligation, a remand of the
himself a part of the case to the trial court is in
purchase price order
o Seller binds himself to pay
the Taxes on the thing sold
o In any other case where the
real intention of the parties
is that the transaction shall
Secure the payment of a
debt or the performance of
any other obligation.
 Applicability of Deeds of Absolute
Sale
o Two requisites
 Parties entered into
a contract
denominated as a
contract of sale
 real intention of the
parties is that the
transaction will
secure the payment
of a debt
 Best evidence rule
o Instrument in writing
o Transfers the absolute title
to property
Tonie Marie Moreno
What is legal redemption?
- 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, dation in
payment, or any other transaction
whereby ownership is transmitted
by onerous title.
Rationale for Legal Redemption
- It is intended to minimize co-
ownership.
Who can exercise legal redemption?
- General rule is that everybody can
exercise legal recemption.
- EXCEPT is the obligation is
personal to the vendee. Only
transmissible obligations can be
subrogated and subject to legal
redemption.
Salient Distinctions Between
Conventional and Legal Rights of
Redemption
A. When Constituted
- Conventional of redemption: by
express reservation in a contract of
sale at the time of perfection
- Legal Redemption: does not have
to be reserved since it is a right
granted by law.
B. In favor of whom
- Conventional redemption: of the
seller
- Legal Redemption: given to a 3rd
party of the sale
C. Effect
- Conventional redemption:
extinguishes the underlying
contract as if it has never existed
- Legal Redemption: extinguishes
original right as well, but it actually
just constitutes a new one in
substitution
LEGAL REDEMPTION UNDER THE
CIVIL CODE
A. Among Co-Heirs
- Art. 1088 of the Civil Code
provides that should any of the
heirs sell his hereditary rights to a
stranger before the partition of the
decedent’s estate, any or all of the
other co-heirs may be subrogated
to the rights of the purchaser by
reimbursing him for the price of the
sale, provided they do so within the
period of one (1) month from the
time they were notified in writing of
the sale by the selling co-heir.
- No legal right of redemption is
available to co-heirs if the sale
covers a particular property of the
estate since the legal right of
redemption applies only to the sale
by an heir of his hereditary right.
B. Among Co-Owners
- Article 1620 of the Civil Code
provides that 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 price
therefor.
-
- It may be exercised when by a co-
owner only when part of the
community property is sold to a
stranger. When the portion is sold
to another co-owner, the right does
not arise because a new
participant is not added to the co-
ownership.
C. Effect of De Facto Partition Among
Co-Heirs and Co-Owners
- The case of Vda de Ape v. CA
held that although an inherited
Tonie Marie Moreno
property is succeeded to by the
heirs as co-owners thereof, if in
fact they have partitioned it among
themselves and each have
occupied and treated definite
portions thereof as their own, co-
ownership has ceased even
though the property is covered
under one title, and the sale by one
of the heirs of his definite portion
cannot trigger the right of
redemption in favor of the other
heirs.
D. Distinguishing Between the Rights
of Redemption of Co-heirs and Co-
owners
- In the case of Mariano v CA, the
Court was confronted with the
issue of which redemption clause
to apply when a co- heir had
exercised the right of legal
redemption over the sale of a
parcel of land belonging to the
estate of the decedent. Mariano
held that “the fine distinction
between Article 1088 and Article
1620 is that when the sale consists
of an interest in some particular
property or properties of the
inheritance, the right of redemption
that arises in favor of the other co-
heirs is that recognized in Article
1620.
- If the sale is the hereditary right
itself, fully or in part, in the abstract
sense, without specifying any
particular object, the right
recognized in Article 1088 exists.”
- Thus, under Mariano, when the
subject matter sold was a
particular property of the estate
and not hereditary rights, the
redemption by a co-owner/co-heir
redounded to the benefit of all
other co-owners, while redemption
by a co-heir of hereditary rights
sold is only for his own account.
E. Among Adjoining Owners of Rural
Lands
- Art. 1621 of the Civil Code
provides that he owners of
adjoining lands have the right of
redemption when a piece of rural
land, the area of which does not
exceed one (1) hectare, is
alienated, unless the grantee does
not own any rural land.
What are the conditions before you can
exercise your right as an adjoining
owner of a land?
1. Must be rural land.
2. Grantee must also own adjoining
rural land
3. Two lands must not be separated
by any serviturde.
4. Rural lands alienated and to be
redeemed must not exceed 1
hectare.
- The burden of proof to apply the
exemption (i.e., the buyer does not
own any other rural land) lies with
the buyer.
- 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.
F. Among Adjoining Owners of Urban
Land
- Art. 1622 of the Civil Code
provides that whenever 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
Tonie Marie Moreno

bought merely for speculation, is

about to be resold, the owner of What is assignment of credit?
any adjoining land has a right of - An agreement whereby credits,
pre-emption at a reasonable price. incorporeal rights or actions
pertaining to the assignor are
What is your right in case of urban transferred by him to an assignee,
land? either onerously or gratuitously
- Right of pre-emption or who acquires the power to enforce
redemption. the same against the debtors.

What is pre-emption? - When a credit or other incorporeal

- Right of any person to be given
“preference” of the sale over ay
buyer.
What are the conditions before you can
exercise these rights?
1. The piece of urban land is so small
that it cannot be used for any
practical purpose within
reasonable time.
2. Such land was bought for
speculation.
right in litigation is sold, the debtor
shall have a right to extinguish it
by reimbursing the assignee for
the price the latter paid therefor,
the judicial costs incurred by him,
and the interest on the price from
the day on which the same was
paid.
- The debtor may exercise his right
within 30 days from the date the
assignee demands payment from
- him.

When two or more owners of adjoining

lands wish to exercise the right of pre-
emption or redemption, the owner
whose intended use of the land in
question appears best justified shall be
preferred.

- If the re-sale has been perfected,

the owner of the adjoining land
shall have a right of redemption,
also at a reasonable price.
- The case of Sen Po Ek Marketing
Corp. v. Martinez, held that Article
1622 of the Civil Code which
grants an adjacent owner the right
of pre-emption or the right of
redemption only deals with small
urban lands that are bought for
speculations; the right does not
apply to a lessee trying to buy the
land that he is leasing.

G. Sale of Credit in Litigation

Tonie Marie Moreno
Monico Joseph Matutina
Period of legal redemption
Art. 1623 The right of legal pre-emption
or redemption shall not be exercised
except within thirty days from the
notice in writing by the prospective
vendor, or by the vendor, as the case
may be. The deed of sale shall not be
recorded in the Registry of Property,
unless accompanied by an affidavit of
the vendor that he has given written
notice thereof to all possible
redemptioners.
The right of redemption of co-owners
excludes that of adjoining owners.
What is the nature of the period
nature?
(1) Absolute and non-extendible — The
period provided in the above article is
absolute. It is peremptory and non-
extendible. Even if the person entitled to
redeem is a minor, the running of the
period is not interrupted.
(2) A condition precedent. —It is not one
of prescription. In other words, if no offer
is made within the prescribed period, no
action will be allowed to enforce the right
of redemption.
*Reason for rule. — The fundamental
policy of the law is to discourage the
keeping for a long time of property in a
state of uncertainty, beyond the thirty-day
period, a situation which obviously is
unjust to the purchaser and prejudicial to
public interest.
When does legal redemption begins to
run?
The period of thirty (30) days is counted
from the notice in writing given by the
prospective vendor or by the vendor, as
the case may be.
Why should the notice in writing be
given by the vendor or prospective
vendor only?
*they are in the best position to know who
are the co-owners that must be notified of
the sale. Also, it removes all doubts as to
the fact of the sale, its perfection, and its
validity.
Why must it be in writing? And what is
the prescribed from of the written
notice?
* the notice must be in writing as to
remove all uncertainty as to the sale, its
terms and its validity and to quiet any
doubts that the alienation is not definitive.
*there is no prescribed form of written
notice given by the law – so long as they
are given a written notice so even a deed
of sale is equivalent to a written notice.
*the notice must cover a perfected sale
because the redemptioner is subrogated
as to the rights of the vendor hence if
there is no perfected sale then there is not
right to be subrogated.
Is the requirement absolute (the vendor
or prospective vendor should give the
written notice)?
No, it is not absolute. There are
exceptions such as:
 Principle of Laches - wherein they
could easily ascertain the truth but
neglected to do so and only years
later that they exercise their right.
(Alonzo v IAC)
 When the Redemptioner acted as
an active intermediary in the
consummation of the sale, was
held that he was and must be
considered to have had actual
notice of the sale.
 Civil case initiated by the buyer for
a share in the rentals of the
property and the co-owner is
summoned by the court has been
held to constitute actual knowledge
of the sale. On that basis, the co-
owner may exercise the right of
Monico Joseph Matutina

redemption within 30 days from 1 year from and Equity of

finality of the decision. after the sale and redemption
 The executor of the deceased registration thereof (Within 90 days
granted authority by the court to after final
sell the properties with the judgement)
conformity of all the heirs. It was
held that the heirs’ conformity was
“actually a waiver of their right of Foreclosures in banking institutions
pre-emption; and, in the least, it Juridical Natural Rural Bank
was notice of the intention of the persons in persons forecloses
heirs to sell their shares, sufficient Extrajudicial and
to supplement the written notice foreclosure Juridical
required by Article 1623 of the Civil persons in
Code.” Judicial
foreclosure
until, but not Within 1 Within 2
What is/are the effect if the vendor did not after, the year after years from
comply to the written notice requirement? registration the sale the date of
 The only effect is that the deed of of the foreclosure
sale shall not be recorded in the certificate of or the
Registry of Property unless foreclosure registration
accompanied by an affidavit that a sale which of the sale
written notice has been given to all in no case
possible redemptioners. It does not shall be
state that by reason of such lack of more than
notice the sale shall become void. three (3)
months after
foreclosure,
Different period for Legal redemption in whichever is
other instances earlier
Redem Redem RedemRedem  Note that in case of a homestead
ption of ption in ption by
ption of that is foreclose by the bank the 5
Homest tax Judgem
an year period would also apply
ead sales ent agricult hence after 2 years of the
Debtor
ural foreclosure the redemptioner
lessee would still have 3 years to redeem
5 years 1 year 1 year Within said property
from from from 180
date of date of date of days
conveya sale registrat from
nce ion of notice
the
certificat
e of
sale

Foreclosures
Extrajudicial Judicial

Martin, Dominic A.
Extinguishment haveof any
Sales / 2B
Art. 1601
Case Digest
Nool v. previously
Conchita Nool, et al. v. Court of
Appeals, et al.,
G.R. No. 116635, July 24, 1997
FACTS:
In this case there are 2 parcels of land are
in dispute and litigated. Plaintiff-appellants
alleged that they are the owners and they
bought it from Conchita’s other brothers,
Victorino Nool and Francisco Nool
because they were in dire need of money.
They obtained a loan from Development
Bank of the Philippines secured by a real
estate mortgage on said parcels of land,
which were still registered in the names of
Victorino and Francisco. At the time, and
for the failure of plaintiffs to pay the said
loan, including interest and surcharges,
totaling P56,000.00, the mortgage was
foreclosed. Within the period of
redemption, plaintiffs contacted defendant
Anacleto Nool for the latter to redeem the
foreclosed properties from DBP, which the
latter did. As a result, the titles of the 2
parcels of land in question were
transferred to Anacleto Nool. Anacleto
agreed to buy from Conchita Nool the 2
parcels of land for a total price of
P100,000.00, P30,000.00 of which price
was paid to Conchita, and upon payment
of the balance of P14,000.00, plaintiffs
were to regain possession of the 2
hectares of land, which amounts
defendants failed to pay, and the same
day the said arrangement was made.
ISSUE:
Whether Conchita can still reacquire the
property subject of the contract of
repurchase arising from the contract of
sale.
RULING:
No. A contract of repurchase arising out of
a contract of sale where the seller did not
Saletitle to the property “sold” is not
valid. Since nothing was sold, then there is
also nothing to repurchase. One
“repurchases” only what one has
CA sold. In other words, the right to
repurchase presupposes a valid contract
of sale between the same parties.
Undisputedly, private respondents
acquired title to the property from DBP,
and not from petitioners.
Article 1601 of the Civil Code provides,
“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.”
The right of repurchase is not a right
granted the vendor by the vendee in a
subsequent instrument but is a right
reserved by the vendor in the same
instrument of sale as one of the
stipulations of the contract. Once the
instrument of absolute sale is executed,
the vendor can no longer reserve the right
to repurchase, and any right thereafter
granted the vendor by the vendee in a
separate instrument cannot be a right of
repurchase but some other right like the
option to buy in the instant case.
DISPOSITION:
WHEREFORE, the petition is DENIED
and the assailed Decision of the Court of
Appeals affirming that of the trial court is
hereby AFFIRMED.
Martin, Dominic A.
Extinguishment of Sale
Sales / 2B
Art. 1601
Case Digest
Diamante v. CA
Percelino Diamante v. Court of
Appeals, et al.,
G.R. No. 51824, February 7, 1992
FACTS:

In this case, Diamante sold to Deypalubus
his leasehold rights over the property in
question for P8,000.00 with the right to
repurchase the same within 3 years from
said date. Later on, the private respondent
filed an application with the Bureau of
Fisheries for a fishpond permit and a
fishpond lease agreement over the entire
lot, submitting therewith the deeds of sale
executed by Dafeliz and the petitioner.
Because of urgent financial needs the
petitioner sold all his remaining rights over
the property in question to the private
respondent for P4,000.00. On 25 October
1960, private respondent, with his wife’s
consent, executed in favor of the petitioner
an Option to Repurchase the property in
question within 10 years from said date,
with a ten-year grace period. Deypalubus
submitted to the Bureau of Fisheries the
definite deed of sale; he did not, however,
submit the Option to Repurchase.
Thereafter, his request was granted. On
the other hand, Diamante requested the
Bureau of Fisheries to nullify FLA No.
1372 insofar as the said property is
concerned because he contended that he
has a valid twenty-year option to
repurchase the subject property.
ISSUE:
Whether conventional redemption applies
to this case.
RULING:
No. The Option to Repurchase executed
by private respondent in the present case,
was merely a promise to sell. An
agreement to repurchase becomes a
promise to sell when made after the sale,
because when the sale is made without
such an agreement, the purchaser
acquires the thing sold absolutely, and if
he afterwards grants the vendor the right
to repurchase, it is a new contract entered
into by the purchaser, as absolute owner
already of the object. In that case the
vendor has not reserved to himself the
right to repurchase.
The right of repurchase is not a right
granted the vendor by the vendee in a
subsequent instrument, but is a right
reserved by the vendor in the same
instrument of sale as one of the
stipulations of the contract. Once the
instrument of absolute sale is executed,
the vendor can no longer reserve the right
to repurchase, and any right thereafter
granted the vendor by the vendee in a
separate instrument cannot be a right of
repurchase but some other right like the
option to buy in the instant case.
In this case, the Secretary was of the
opinion that the Option to Repurchase was
an encumbrance on the property which
affected the absolute and exclusive
character of private respondent’s
ownership over the 4.4 hectares sold to
him by petitioner. This is a clear case of a
misapplication of the law on conventional
redemption and a misunderstanding of the
effects of a right to repurchase granted
subsequently in an instrument different
from the original document of sale.
DISPOSITION:
WHEREFORE the instant petition is
GRANTED. The Resolution of Court of
Appeals and the Decision of the trial court,
insofar as they declare, for the reasons
therein given, Fishpond Lease Agreement
No. 1372, valid and binding, are
REVERSED and SET ASIDE. The
challenged Orders of the respondent
Secretary of Agriculture and Natural
Resources are likewise REVERSED and
SET ASIDE and Fishpond Lease
Agreement No. 1372 is ordered
REINSTATED. No pronouncement as to
costs. IT IS SO ORDERED.

Martin, Dominic A.
Extinguishmenttheof petitioner
Sales / 2B
Art. 1601
Case Digest
Vasquez RULING:
v. CA
Cipriano Vasquez v. Court of Appeals,
G.R. No. 83759, July 12, 1991
FACTS:
Vallejera leased the lot in question to
Vaquez. Eventually, they sold it to the
Vasquez through Deed of Sale for the
amount of P9,000.00. Along with the
execution of the Deed of Sale, a separate
instrument of Right to Repurchase was
executed by the parties granting Vallejera
the right to repurchase the said lot for
P12,000.00. However, five years later,
Vallejera sold the same lot to another
buyer for the sum of P12,000.00. Vasquez
protested and effected the cancellation of
the second sale after he paid the second
buyer of P12,000.00. In 1975, Spouses
Vallejera filed an action against the
Spouses Vasquez to redeem a parcel of
land of the Himamaylan Cadastre.
Vasquez resisted this action for
redemption on the premise that the Right
to Repurchase is just an option to buy
since it is not embodied in the same
document of sale but in a separate
document, and since such option is not
supported by a consideration distinct from
the price, said deed for right to repurchase
is not binding upon them. The trial court
rendered judgement against the Vasquez,
ordering them to resell the questioned lot
to the Vallejera for the repurchase price of
P24,000.00. It was affirmed by the CA.
Vasquez insisted that they cannot be
compelled to resell the said lot because
the nature of the sale was that of an
absolute deed of sale and that the right to
repurchase can only be either an option to
buy or a mere promise on their part to
resell the property.
ISSUE:
Whether there is evidence showing that
Sale accepted the right to
repurchase the land in question in order
for them to resell the property.
No. the transaction between the
petitioners and private respondents was
not a sale with right to repurchase, the
private respondents cannot avail of Article
1601 of the Civil Code which provides for
conventional redemption. Conventional
redemption takes place ‘when the vendor
reserves the right to repurchase the thing
sold, with the obligation to comply with the instead of the promisee to whom the
provisions of Article 1616 and other option to buy is given.
stipulations which may have been agreed
upon. In the same light, the right of
repurchase is not a right granted the DISPOSITION:
vendor by the vendee in a subsequent
instrument, but is a right reserved by the WHEREFORE, the petition is GRANTED.
vendor in the same instrument of sale as The questioned decision and resolution of
one of the stipulations of the contract. the Court of Appeals are hereby
Once the instrument of absolute sale is REVERSED and SET ASIDE. The
executed, the vendor can no longer complaint is DISMISSED. No costs.
reserve the right to repurchase, and any
right thereafter granted the vendor by the
vendee in a separate instrument cannot
be a right of repurchase but some other
right like the option to buy in the instant
case.

In the instant case and contrary to the

appellate court’s finding, it is clear that the
right to repurchase was not supported by
a consideration distinct from the price. The
rule is that the promisee has the burden of
proving such consideration. Unfortunately,
the private respondents, promisees in the
right to repurchase failed to prove such
consideration.

The annotation and registration of the right

to repurchase at the back of the certificate
of title of the petitioners cannot be
considered as acceptance of the right to
repurchase. Annotation at the back of the
certificate of title of registered land is for
the purpose of binding purchasers of such
registered land. This only served as notice
of the existence of such unilateral promise
of the petitioners to resell the same to the
private respondents. This, however, can
not be equated with acceptance of such
right to repurchase by the private
respondent.

Furthermore, neither can the signature of

the petitioners in the document called
“right to repurchase” signify acceptance of
the right to repurchase. The respondents Martin, Dominic A.
did not sign the offer. Acceptance should Extinguishment of Sale
be made by the promisee, in this case, the Sales / 2B
private respondents and not the Art. 1602
promisors, the petitioners herein. It would Case Digest
be absurd to require the promisor of an Heirs of Jose Reyes, Jr. v. Reyes et al.,
option to buy to accept his own offer
 Heirs of Jose Reyes, Jr. v. Amanda S.
Reyes, et al.,
G.R. No. 158377, August 4, 2010
FACTS:
Leoncia and her three sons executed a
Kasulatan ng Biling Mabibiling Muli,
whereby they sold their land and its
existing improvements to the Spouses
Francia for P500.00, subject to the
vendors’ right to repurchase for the same
amount sa oras na sila'y makinabang.
Leoncia’s sons and respective families
remained in possession of the property
and paid realty taxes thereon, they did not
repay the amount of P500. Alejandro, the
son of Jose, Sr., paid to the heirs of
Spouses Francia the amount for the
obligation of Leoncia, his uncles and his
father and eventually, Alejandro was able
to secure a deed entitled Pagsasa-ayos
ng Pag-aari at Pagsasalin, executed by
the heirs of the Spouses Francia whereby
they transferred and conveyed to
Alejandro all their rights and interests in
the property for P500.00. In 1970,
Alejandro executed a Kasulatan ng
Pagmeme-ari, wherein he declared that he
had acquired all the rights and interests of
the heirs of the Spouses Francia, including
the ownership of the property, after the
vendors had failed to repurchase within
the given period. Nevertheless, Alejandro,
his grandmother, and his father executed
a Magkakalakip na Salaysay, by which
Alejandro acknowledged the right of
Leoncia, Jose, Jr., and Jose, Sr. to
repurchase the property at any time for the
same amount of P500.00. In 1993,
Alejandro died intestate and was survived
by his wife, Amanda Reyes, and their
children, In 1994, respondent Amanda
Reyes asked the heirs of Teofilo and Jose,
Jr., to vacate the property because she
and her children already needed it.
ISSUE:
Whether the Honorable Court of Appeals
erred in finding that respondents (were)
already barred from claiming that the
transaction entered into by their
predecessors-in-interest was an equitable
mortgage and not a pacto de retro sale.
RULING:
The CA correctly concluded that the true
agreement of the parties vis-à-vis the
Kasulatan ng Biling Mabibiling Muli was an
equitable mortgage, not a pacto de retro
sale. There was no dispute that the
purported vendors had continued in the
possession of the property even after the
execution of the agreement; and that the
property had remained declared for
taxation purposes under Leoncia’s name,
with the realty taxes due being paid by
Leoncia, despite the execution of the
agreement. Such established
circumstances are among the badges of
an equitable mortgage enumerated in
Article 1602, paragraphs 2 and 5 of the
Civil Code, to wit:
“Art. 1602. The contract shall be
presumed to be an equitable mortgage, in
any of the following cases:
(2) When the vendor remains in
possession as lessee or otherwise;
(5) When the vendor binds
himself to pay the taxes on the thing sold;
The existence of any one of the conditions
enumerated under Article 1602 of the Civil
Code, not a concurrence of all or of a
majority thereof, suffices to give rise to the
presumption that the contract is an
equitable mortgage. Consequently, the
contract between the vendors and
vendees was an equitable mortgage.
Considering that sa oras na sila’y
makinabang, the period of redemption
stated in the Kasulatan ng Biling
Mabibiling Muli, signified that no definite
period had been stated, the period to
redeem should be ten years from the
execution of the contract, pursuant to
Articles 1142 and 1144 of the Civil Code.
Thus, the full redemption price should
have been paid by July 9, 1955; and upon
the expiration of said 10-year period,
mortgagees Spouses Francia or their heirs
should have foreclosed the mortgage, but
they did not do so. Instead, they accepted
Alejandro’s payments, until the debt was
fully satisfied by August 11, 1970. The
acceptance of the payments even beyond
the 10-year period of redemption estopped
the mortgagees’ heirs from insisting that
the period to redeem the property had
already expired. Their actions impliedly
recognized the continued existence of the
equitable mortgage. The conduct of the
original parties as well as of their
successors-in-interest manifested that the
parties to the Kasulatan ng Biling
Mabibiling Muli really intended their
transaction to be an equitable mortgage,
not a pacto de retro sale.
Furthermore, The provisions of the Civil
Code governing equitable mortgages
disguised as sale contracts, like the one
herein, are primarily designed to curtail the
evils brought about by contracts of sale
with right to repurchase, particularly the
circumvention of the usury law and
pactum commissorium Art. 1602 states
that “The contract shall be presumed to be
an equitable mortgage, in any of the
following cases:
(3) 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;
Ostensibly, the law allows a new period of
redemption to be agreed upon or granted
even after the expiration of the equitable
mortgagor’s right to repurchase, and treats
such extension as one of the indicators
that the true agreement between the
parties is an equitable mortgage, not a
sale with right to repurchase. It was
indubitable, therefore, that the
Magkasanib na Salaysay effectively
afforded to Leoncia, Teofilo, Jose, Sr. and
Jose, Jr. a fresh period within which to pay
to Alejandro the redemption price of
P500.00.
DISPOSITION:
WHEREFORE, we grant the petition for
review on certiorari. The decision
rendered by the Court of Appeals is
reversed and set aside, and another
judgment is rendered. a) Upholding the
validity of the Kasulatan ng Biling
Mabibiling Muli (Deed of Sale with Right of
Repurchase) Declaring the Kasulatan ng
Biling Mabibili Muli to be an equitable
mortgage, not a contract of sale with right
to repurchase. c) Finding the
Magkakalakip na Salaysay executed on
October 17, 1970 by and among Leoncia
Mag-isa Reyes, Jose Reyes, Sr. and
Alejandro Reyes valid and effective; c) 
Nullifying the Kasulatan ng Pagmeme-ari
executed by Alejandro M. Reyes on
August 21, 1970; and d) Dismissing the
petitioners’ counterclaim. Costs of suit to
be paid by the respondents.
Martin, Dominic A.
Extinguishment of Sale
Sales / 2B
Art. 1602
Case Digest
Dorado vda. De Delfin v. Dellota
Dionisia Dorado vda. De Delfin v.
Salvador d. Dellota, et al.,
G.R. No. 143697, January 28, 2008
FACTS:
In her lifetime, the late Dionisia Dorado
Delfin, was the registered owner of Lot No.
1213. Dionisia executed an “Escritura De
Venta Con Pacto de Retro” over a 50,000-
square meter portion of Lot No. 1213 in
favor of spouses Ildefonso Dellota and
Patricia Delfin. However, Dionisia failed to
exercise her right of redemption. Dionisia
never redeemed this 50,000-square meter
portion from Gumersindo. Records show
that Salvador Dellota (also a respondent
represented by his heirs) leased this area
from Gumersindo. The late Dionisia
Dorado Delfin and her heirs sought to
recover a certain parcel of land from
Dellota. Petitioners contended that the
Deed of Sale with Right of entered into by
Dionisia and respondent Dellota is an
equitable mortgage under Article 1602 of
the Civil Code. They insist that the price
stipulated for a five-hectare portion of the
subject property is grossly inadequate.
This readily shows that the contract is an
equitable mortgage, not a sale with right of
redemption. The trial court rendered a
judgment adverse to Dionisia while the CA
affirmed in toto the trial court’ decision.
ISSUE:
Whether the Deed of Sale with Right of
Redemption executed by Dionisia and
Dellota is an equitable mortgage under
Article 1602 of the Civil Code.
RULING:
Jurisprudence recognizes that there is no
conclusive test to determine whether a
deed purporting to be a sale on its face is
really a simple loan accommodation
secured by a mortgage. However, our
case law consistently shows that the
presence of even one of the
circumstances enumerated in Article 1602
suffices to convert a purported contract of
sale into an equitable mortgage. In this
case, what should be determined is
whether the consideration of P5,300.00
paid by Gumersindo to Dionisa for a five-
hectare portion of Lot No. 1213 on June 9,
1949 is “unusually inadequate”.
Court held that in sales denominated as
pacto de retro, the price agreed upon
should not generally be considered as the
just value of the thing sold, absent other
corroborative evidence. This is because,
on the part of the vendor, the right to
repurchase the land makes it immaterial to
him whether or not the price of the sale is
the just value thereof. As for the vendee,
the price does not induce him to enter into
the contract as he does not acquire the
thing irrevocably, but subject to
repurchase at the stated period. Rather,
the vendee pins his hope on the
expectancy that he will acquire the thing
absolutely at a favorable price should the
vendor fail to redeem the thing sold. No
requirement in sales that the price be
equal to the exact value of the thing
subject matter of the sale.
DISPOSITION:
WHEREFORE we DENY the petition. The
Decision of the Court of Appeals is
AFFIRMED. Costs against the heirs of
Dionisia.
Martin, Dominic A.
Extinguishment of Sale
Sales / 2B
Art. 1602
Case Digest
Bautista v. Unangst
Benjamin Bautista v. Shirley G.
Unangst,
G.R. No. 173002, July 4, 2008
FACTS:
Salak rented a car from Bautista who
failed to return the car after 3 days
prompting the latter to file a complaint
against him demanding the sum of
P232,372.00. Salak and Unangst
expressed willingness to pay but since
they were then short on cash, they sold to
Bautista a house and lot with right to
repurchase, specifying, among others,
that: (1) Unangst, as vendor, shall pay
capital gains tax, current real estate taxes
and utility bills pertaining to the property;
(2) if Unangst fails to repurchase the
property within 30 days from the date of
the deed, she and her assigns shall
immediately vacate the premises and
deliver its possession to petitioner without
need of a judicial order; and (3) Unangst
refusal to do so will entitle petitioner to
take immediate possession of the
property. Unangst failed to repurchase the
property within the stipulated period. As a
result, Bautista filed a complaint for
specific performance or recovery of
possession, for sum of money, for
consolidation of ownership and damages
against Unangst. Unangst argued that her
consent to the deed of sale with right to
repurchase was procured under duress
and that even assuming that her consent
was freely given, the contract partakes of
the nature of an equitable mortgage.
Bautista alleged that the deed should not
be construed as an equitable mortgage as
it does not fall under any of the instances
mentioned in Article 1602 of the Civil Code
where the agreement can be construed as
an equitable mortgage. He added that the
"language and terms of the Deed of Sale
with Right to Repurchase executed by
UNANGST in favor of him are clear and
unequivocal. Said contract must be
construed with its literal sense.”
ISSUE:
Whether the Honorable Court of Appeals
erred on a question of law in reversing the
Decision of the Court a quo finding the
Deed of Sale with Right to Repurchase a
document of sale executed by the
respondent in favor of the petitioner and in
further holding such contract as one of
equitable mortgage.
RULING:
Respondent is correct in alleging that the
deed of sale with right to repurchase
qualifies as an equitable mortgage under
Article 1602. She merely secured the
payment of the unpaid car rentals and the
amount advanced by petitioner to Jojo
Lee. The transaction between the parties
is one of equitable mortgage and not a
sale with right to purchase as maintained
by petitioners. Article 1602 of the New
Civil Code provides that the contract is
presumed to be an equitable mortgage in
any of the following cases:
(2) When the vendor remains in
possession as lessee or otherwise;
(6) 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.
When the vendor is in urgent need of
money when he executes the sale, the
alleged sale with pacto de retro will be
construed as an equitable mortgage.
Where in a contract of sale with pacto de
retro, the vendor remains in possession,
as a lessee or otherwise, the contract shall
be presumed to be an equitable mortgage.
The reason for the presumption lies in the
fact that in a contract of sale with pacto de
retro, the legal title to the property is
immediately transferred to the vendee,
subject to the vendor’s right to redeem.
Retention, therefore, by the vendor of the
possession of the property is inconsistent
with the vendee’s acquisition of the right of
ownership under a true sale. It discloses,
in the alleged vendee, a lack of interest in
the property that belies the truthfulness of
the sale a retro.
The rule is firmly settled that whenever it is
clearly shown that a deed of sale with
pacto de retro, regular on its face, is given
as security for a loan, it must be regarded
as an equitable mortgage. Settled is the
rule that to create the presumption
enunciated by Article 1602, the existence
of one circumstance is enough. Lastly,
sales with rights to repurchase, as defined
by the Civil Code, are not favored. We will
not construe instruments to be sales with
a right to repurchase, with the stringent
and onerous effects which follow, unless
the terms of the document and the
surrounding circumstances require it.
DISPOSITION:
WHEREFORE the petition is DENIED for
lack of merit.

Martin, Dominic A.
Extinguishmentaffirming
Sales / 2B
Art. 1602
Case Digest
Sps. Santiago & Domingo et al., v.
Dizon
Spouses Ester Santiago and Domingo
Cristobal, et al. v. Aida G. Dizon,
G.R. No. 172771, January 31, 2008
FACTS:
Dizon mortgaged to Monte de Piedad a
parcel of land, which was registered in her
name including the two-storey apartment
built thereon, to secure a P265,000 loan.
Respondent failed to settle the loan,
drawing Monte de Piedad to foreclose the
mortgage, consolidate its ownership of the
property, and register it in its name. Monte
de Piedad nevertheless gave respondent
until May 28, 1987 to purchase back the
property for P550,000. Elizabeth, on
behalf of respondent, paid P550,000 for
the property. Monte de Piedad thereupon
executed a deed of sale in favor of
respondent who, the following day or on
May 29, 1987, in turn executed a deed of
sale in favor of Elizabeth and her herein
co-petitioners. The respondent and
petitioners executed an agreement giving
respondent “the option to buy back the
property within 3 months from the date of
this agreement at the price of
P900,000.00,” failing which respondent
should “vacate the premises occupied by
her, and turn over possession thereof to
[petitioners] including the lessees of the
building.” Respondent thus continued to
stay in the property. Three months having
elapsed without respondent repurchasing
the property, petitioners registered with
the Registry of Deeds of Manila the Deed
of Sale executed by Monte de Piedad in
favor of respondent, as well as the Deed
of Sale of the property executed by
respondent in favor of petitioners who
were issued a title thereover. Respondent
failed to vacate the property. Petitioner
Elizabeth thus filed an ejectment case.
ISSUE:
Whether the Court of Appeals erred in
of Salethe findings and conclusions of
the Regional Trial Court of Manila despite
the fact that there was no equitable
mortgage.
RULING:
The presumption of equitable mortgage
created in Article 1602 of the Civil Code is
not conclusive. It may be rebutted by
competent and satisfactory proof of the
contrary. In the case at bar, ample
evidence supports petitioners’ claim that
the transaction between them and
respondent was one of sale with option to
repurchase. While after the sale of the
property respondent remained therein, her
stay was not in the concept of an owner.
Through her, petitioners were the ones
who received rentals paid by lessees with
whom she had contracted before the sale
of the property to petitioners. After the 3-
month option to buy back the property
expired without respondent exercising it,
petitioner Elizabeth was the one who
directly dealt with and entered into
contracts with tenants of the property and
received the rentals As for the alleged
inadequacy of the purchase price—a
consideration so far short of the real value
of the property as to startle a correct mind
—this Court, in determining whether the
price of a property is inadequate, has
often referred to its assessed value. In the
case at bar, as of 1988, the market value
of the land was P85,550 while that of its
improvements was P27,880. And the
assessed value of the land and its
improvements for the same year was
P29,850. Clearly, the P550,000 purchase
price at which petitioners bought the
property in 1987 is not inadequate. In fine,
respondent failed to prove that the
transaction was one of equitable
mortgage. Reformation of the deed of sale
of the property to petitioners does not thus
lie.
DISPOSITION:
WHEREFORE petition is GRANTED. The
decision of the Court of Appeals is SET
ASIDE. Civil Case No. 96-81354 of the
Manila Regional Trial Court is DISMISSED
Martin, Dominic A.
Extinguishment allegation
Sales / 2B
Art. 1602
Case Digest
Deheza-Inamarga price
Mary Ann Deheza-Inamarga v. Celenia
C. Alano, et al.,
G.R. No. 171321, December 18, 2008
FACTS:
Tomas, husband of respondent Celenia
Alano, owned two parcels of land, which
he mortgaged in favor of Gepty. Gepty
demanded that Tomas pay the loan.
Tomas, however, did not have money at
that time to redeem his properties so he
sought help from his niece, petitioner Mary
Ann Deheza-Inamarga. Petitioner agreed
to pay the loan while the spouses, in turn,
mortgaged said properties to her.
Petitioner kept in her possession OCTs
and asked the spouses to sign blank
pieces of paper which petitioner said will
be converted into receipts evidencing their
indebtedness to her.
Celenia and her children went to petitioner
to redeem the property after Tomas had
passed away. Petitioner, however, told
them that she had mortgaged the property
to the Rural Bank of Libacao.
Respondents verified the matter with the
bank and discovered that TCTs were
issued in petitioner’s name. Respondents
learned that the TCTs in petitioner’s favor
were issued by virtue of a Deed of Sale
purportedly executed by the Spouses
Alano in her favor.
On January 24, 1991, respondents filed a
complaint for the declaration of nullity of
document, reconveyance and damages
against petitioner and the Rural Bank of
Libacao. Respondents contended that the
deed of sale is null and void because the
signatures of the Spouses Alano were
forged and even if they were the
signatures of the spouses, they were
affixed on blank sheets of paper which
were not intended to be a deed of sale.
Petitioner, on the other hand, denied the
of Sale of forgery and maintained that
the deed of sale was valid. She claimed
that the spouses offered to sell her the
property so they can use the purchase
v. Alano,
of P7,000
et al to redeem the property
from Gepty. Petitioner added that the
action is barred by prescription, laches
and estoppel.
ISSUE:
Whether the lower court erred in declaring
the transaction between spouses Tomas
and Celenia Alano and the petitioner Mary
Ann Deheza-Inamarga as one of the
equitable mortgage and not one of sale.
RULING:
No, the appellate court did not err in
sustaining the decision of the trial court
holding that the transaction between the
parties is an equitable mortgage. An
equitable mortgage is one which, although
lacking in some formality, or form, or
words, or other requisites demanded by a
statute, nevertheless reveals the intention
of the parties to charge real property as
security for a debt, and contains nothing
impossible or contrary to law. Articles WHEREFORE the Decision and the
1602 and 1604 of the Civil Code of the Resolution of the Court of Appeals are
Philippines state: AFFIRMED. Costs against petitioner.

ART. 1602. The contract shall be

presumed to be an equitable mortgage, in
any of the following cases:
(1) When the price of the sale with
right to repurchase is unusually
inadequate;
(2) When the vendor remains in
possession as lessee or otherwise;
(3) 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;
(4) When the purchaser retains for
himself a part of the purchase price;
(5) When the vendor binds himself
to pay the taxes on the thing sold;
(6) In any 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.

In any of the foregoing case, any

money, fruits, or other benefit to be
received by the vendee as rent or
otherwise shall be considered as interest
which shall be subject to the usury laws.
ART. 1604. The provisions of Article 1602
shall also apply to a contract purporting to
be an absolute sale.
In the instant case, the RTC, as
affirmed by the Court of Appeals, correctly
found that more than one of the
circumstances enumerated in Article 1602
are present, to wit: the inadequacy of the
selling price of the properties in relation to
its true value; the vendors (Spouses
Alano) remained in possession as lessee
or otherwise; respondents paid the real
property taxes; and the spouses secured
the payment of the principal debt owed to
petitioner with said properties. On this
score, we are in agreement that the
parties intended an equitable mortgage
and not a contract of sale.
DISPOSITION:
Martin, Dominic A.
Extinguishment of Sale
Sales / 2B
Art. 1616
Case Digest
Catangcatang v. Legayada
Catangcatang v. Legayada
G.R. No. L-26295, 14 July 1978
FACTS:
Respondent executed in favor of petitioner
a deed of sale with pacto de retro, with a
five-year period of redemption, over a
parcel of land with a stated area of 8.8272
hectares more or less, for P1,400.00. Of
the total consideration, the amount of
P1,200.00 was paid upon the execution of
the deed and the balance of P200.00,
covered by a promissory note, was agreed
to be payable at a later date. Later on, the
petitioner found that the area of the land
actually delivered to her was only 5.0779
hectares. Because of this, she instituted a
Civil Case seeking the recovery of the
area allegedly withheld. During the
pendency of the case, respondent forcibly
took back the possession of the land from
petitioner. The period for the repurchase
of the land expired, allegedly without
respondent having availed himself of his
right to repurchase the same. The CFI of
Iloilo, finding that respondent was not able
to effect the repurchase within the period
stipulated, rendered judgment declaring
title over the land consolidated in the
name of petitioner and ordering
respondent to deliver the possession of
the same to her. CA reversed the decision
of the trial court.
ISSUE:
Whether or not respondent was able to
effect redemption of the property in
question within the period stipulated in the
contract.
RULING:
Article 1616 of the Civil Code states that,
“the vendor cannot avail himself of the
right of repurchase without returning to the
vendee the price of the sale, and in
addition: (1) the expenses of the contract,
and any other legitimate payments made
by reason of the sale; (2) the necessary
and useful expenses made on the thing
sold.”
The respondent, without the knowledge of
petitioner, took possession of the subject
property. It is claimed that on the same
date, respondent’s counsel wrote a letter
to petitioner, informing her that the
redemption money was already in his
(counsel’s) possession. This letter never
reached petitioner, and was allegedly
returned to said counsel. The reason
given by respondent for the non-delivery
of the letter is that petitioner could not be
found. This was found by the trial court to
be unworthy of credence.
When tender of payment cannot be validly
made, because the buyer cannot be
located, it becomes imperative for the
seller a retro then to file a suit for
consignation with the courts of the
redemption price, and failing to do so
within the redemption period, his right of
redemption shall lapse.
No further effort to effect redemption was
made other than the letter. Respondent
could have deposited the amount for the
redemption with the court, but this he
didn’t. In the exercise of the right to
repurchase, it is not sufficient that the
vendor a retro manifests his desire to
repurchase. This statement of intention
must be accompanied with an actual and
simultaneous tender of payment which
constitutes the legal exercise of the right
to repurchase. While consignation of the
redemption price is not necessary in order
to allow the repurchase within the time
provided by law or by contract, a mere
tender being enough, said tender does not
relieve the vendor from the obligation of
paying the price. In case of absence of the
vendee a retro, the right of redemption
may still be exercised, as a vendor who
decides to redeem a property sold with
pacto de retro stands as the debtor and
the vendee as the creditor of the purchase
price. The vendor could and should have
exercised his right of redemption against
the vendee by filing a suit against him and
making a consignation with the court of
the amount due for the redemption.
DISPOSITION:
WHEREFORE the decision appealed from
is hereby REVERSED, and the decision of
the Court of First Instance of Iloilo is
AFFIRMED, with costs against
respondent.

Martin, Dominic A.
Extinguishmentequitable
Sales / 2B
Art. 1607
Case Digest
De Guzman v. CA
De Guzman v. Court of Appeals
G.R. No. L-46935, December 21, 1987
FACTS:
Queriza was the original owner of a parcel
of unregistered residential land. He
executed a Deed of Pacto de Retro sale
over said land in favor of his niece,
Quirimit, with the express stipulation that
the "vendor a retro may exercise the right
of repurchase within 5 years from the
execution of these presents and upon
failure to take advantage of the right
herein granted him, then this contract shall
acquire the character of absolute,
irrevocable and consummated sale”.
Private respondent did not register the
Deed of Pacto de Retro Sale, but took
possession of the land by building her
house on a portion thereof. Without having
exercised his right to repurchase under
the Pacto de Retro Sale, executed over
said parcel of land, a Deed of Donation in
favor of Miguel Queriza, who thereafter
declared the land in his name for taxation
purposes and registered the Deed of
Donation. Miguel, however, sold the land
to De Guzman. The Deed of Sale was
registered and the tax declaration placed
under his name. De Guzman sent Quirimit
a written notice to vacate the land in
question, but Quirimit refused to vacate
and so, instituted a Civil Case for Quieting
of Title and Recovery of Possession to the
Trial Court. The court rendered judgment
declaring De Guzman as owner of the
land in question. It ruled that the Pacto de
Retro Sale was only a mortgage and that
the Deed of Donation in favor of Miguel
was valid. On Appeal, the Court of
Appeals reversed the decision. The
appellate court held that private
respondent had a preferential right to the
land as against petitioners who were
purchasers in bad faith since it was found
the transaction between Queriza and
private respondent to be what it purported
to be a pacto de retro sale and not an
of Salemortgage. De Guzman moved
for a reconsideration of the appellate
court's decision and upon denial thereof,
took the present recourse.
ISSUE:
Whether the contact was only an equitable
mortgage and not a pacto de retro sale.
RULING:
It was a pacto de retro sale. The essence
of a pacto de retro sale is that title and
ownership of the property sold are
immediately vested in the vendee a retro,
subject to the resolutory condition of
repurchase by the vendor a retro within
the stipulated period. Failure thus of the
vendor a retro to perform said resolutory
condition vests upon the vendee by
operation of law absolute title and
ownership over the property sold and
failure of the vendee a retro to consolidate
his title under Article 1607 of the Civil
Code does not impair such title or
ownership for the method prescribed
thereunder is merely for the purpose of
registering the consolidated title.

The transaction between Queriza and

Quirimit was a true pacto de retro sale.
The consideration of P500.00 paid by
Quirimit in 1957 was not unusually
inadequate, considering that the land had
an assessed value of only P380.00 at the
time of Miguel’s sale thereof to De
Guzman in 1971. In the case at bar,
absolute ownership of the land in question
was vested on Quirimit in 1962 upon
failure of Queriza to repurchase said land.
Hence, in the alleged donation to Miguel,
Queriza was no longer the owner thereof.
Settled is the rule that a donor cannot
lawfully convey what is not his property.
Should one of the co-owners or co-heirs
succeed alone in redeeming the whole
property, such co-owner or co-heir shall
be considered as a mere trustee with
respect to the shares of his co-owners or
co-heirs; Accordingly, no prescription will
lie against the right to any co-owner or co-
heir to demand from the redemptioner his
respective share in the property
redeemed, which share is subject to a lien
in favor of the redemptioner for the
amount paid by him corresponding to the
value of the share.

DISPOSITION:

WHEREFORE, the instant petition is

hereby DENIED. The decision of the Court
of Appeals under review declaring private
respondent Raymunda Ringor Quirmit
owner of the land in dispute is affirmed,
with costs against petitioners.

Dungo, Paula Benilde D.
Sales / 2B
Case Digest
Alexander Bacungan, et al. vs.
Court of Appeals
G.R. No. 170282, 18 December
2008
FACTS:
Respondents namely Sps. Napoleon,
sought assistance from Sps. Bacungan
by securing a loan. They claimed that
around the month of February of 1993,
they had been experiencing business
reversals and financial difficulties. Sps
Bacungan proposed that the loan
would be obtained from the bank.
However, the respondents had to
secure the transfer of the titles to them
to be used as security for their loan.
The respondents agreed to the
stipulated terms. However, they
claimed that after the new titles were
obtained by the petitioners, the latter
did not apply for a loan with the bank.
The former alleged that the petitioners
secretly negotiated for the sale of the
properties to third parties.
On the other hand, the petitioners
asserted that the respondents offered
to sell them 23 parcels of land. 18 of
these parcels were then used as
collateral for the loan Sps. Napoleon
obtained from Traders Royal Bank.
The RTC dismissed the complaint for
lack of merit. It gave evidentiary
weight on the notarized deed of sale.
The CA on the other hand, reversed the
decision of the lower court. According
to the CA, the deeds of sale were
simulated because the parties did not
intend to be bound by the same. The
appellate court pointed out indicators
to reach this conclusion such as the
gross inadequacy of prices,
respondents’ failure to receive any part
of the purchase price stated in the
deeds of sale, the offer by petitioners to
return some of the certificates of title
and petitioner Alexander Bacungan’s
admission that the sale was simulated.
ISSUE:
Whether or not the agreement of the
parties is one of equitable mortgage?
RULING:
Yes. The agreement of the parties is
one of equitable mortgage. The kind of
agreement by the parties in this case,
where the ownership of the land is
supposedly transferred to the buyer
who provides for the funds to redeem
the property from the bank but
nonetheless allows the seller to later
on buy back the properties, is in the
nature of an equitable mortgage
governed by Articles 1602 and 1604 of
the Civil Code, which provide:
Article 1602. The contract shall be
presumed to be an equitable mortgage,
in any of the following cases: (1) When
the price of a sale with right to
repurchase is unusually inadequate;
(2) When the vendor remains in
possession as lessee or otherwise; (3)
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; (4) When the purchaser
retains for himself a part of the
purchase price; (5) When the vendor
binds himself to pay the taxes on the
thing sold; (6) In any 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. In any of the
foregoing cases, any money, fruits, or
other benefit to be received by the
vendee as rent or otherwise shall be
considered as interest which shall be
subject to the usury laws.
Art. 1604. The provisions of Article
1602 shall also apply to a contract
purporting to be an absolute sale.
According to the above mentioned
provisions, a presumption of an
equitable mortgage arises when the
following requisites are satisfied: (1)
that the parties entered into a contract
denominated as a contract of sale, and
(2) that their intention was to secure
an existing debt by way of mortgage.
In this case, there are three
circumstances which indicate that an
equitable mortgage exists. First, as
established by the CA, the price of each
of the properties was grossly
inadequate. Second, petitioners
retained part of the "purchase price"
when they failed to turn over to the
respondents the loan that they were
supposed to secure from the bank.
Third, petitioners insisted that part of
the consideration of the sale consisted
of amounts previously borrowed by
respondents from them, indicating
that petitioners were using the
properties as "security" for the
payment of respondents’ other loans
from them.
DISPOSITION:
The court declared the Deeds of
Absolute Sale as equitable mortgages
and ordered the reconveyance of the
properties to respondents upon
payment of P369,000.00.
Dungo, Paula Benilde D.
Sales / 2B
Case Digest
Sps. Jovenal and Cecelia Toring
vs. Sps. Gilbert and Rosalie Olan
G.R. No. 168782, 10 October
2008
FACTS:
Petitioner, Jovenal Toring was given a
loan from the respondents amounting
to P6,000,000 with an interest rate of
3% per month. Toring secured the loan
by a mortgage on a parcel of land. This
was evidenced by a Deed of Real Estate
Mortgage.
The two parties executed a Deed of
Absolute Sale which conveyed the
mortgaged parcel of land in favor of
Sps. Olan. The latter gave the former
an option to repurchase the subject
land for P10,000,000.
This stipulation was embodied in a
document denominated as an option
to buy dated September 1998. It also
stipulated that if the option is
exercised after December 5, 1998, the
purchase price shall increase at the
rate of P300,000 or 3% of the
purchase price every month until
September 5, 1999 and thereafter at
the rate of P381,000 or 3.81% of the
purchase price every month, with the
fifth of every month as the cut-off date
for said increases. On the same
document, the respondents
acknowledged the receipt of
P10,000,000 from the petitioners as
consideration for the property.
On July 28, 2000, Sps. Toring filed a
complaint for reformation of
instruments and abuse of rights and
damages against the respondents.
They claim that the interest rates
stipulated were unconscionable.
Although the Usury Law is already
suspended and the parties are given a
wide latitude to agree on any interest
rate, the court held that the stipulated
interest rates are illegal if they are
unconscionable
The SC also noted that the CA erred in
sustaining the trial court's decision
upholding the stipulated interest of 3%
and 3.81%. It held that CB Circular
No. 905, s. 1982 grants lenders carte
blanche authority to raise interest
rates to levels which will either enslave
their borrowers or lead to a
hemorrhaging of their assets.

The RTC ruled in favor of the DISPOSITION:

respondents and the Sps. Toring were
ordered to pay P20,000,000. The
petitioners brought the case before the
CA, where the later affirmed the
decision of the trial court.
ISSUE:
The decision of the RTC and CA are
MODIFIED to the effect that the
stipulated interest rate of 3% or 3.81%
per month on the subject equitable
mortgage is hereby ordered
REDUCED to 1% per month only.

Whether or not the stipulated interest

rates are considered unconscionable?

RULING:

Yes. The Supreme Court ruled that the

interest rates of 3% and 3.81%
monthly are unconscionable. Although
the petitioners contend that the option
to buy did not mention any rate of
interest chargeable to the loan but an
escalation of the purchase price, the
respondents maintain that they are
liable to pay interest based on the
Deed of Absolute Sale and option to
buy.

The Supreme Court held that the

parties are free to stipulate on the
interest to be imposed on monetary
obligations, however, the Court will
temper the interest rates if the same
deems them unconscionable.

Dungo, Paula Benilde D.
Sales / 2B
Case Digest
Juan Olivares vs. Esperanza Dela
Cruz Sarmiento
G.R. No. 158384, 12 June 2008
FACTS:
Respondent Esperanza Dela Cruz,
owned a 230 spm parcel of residential
lot. Her husband Manuel obtained a
P12,000 loan for the construction of
their house on the property. They
mortgaged the land to the bank as a
security for the payment of the loan.
However Manuel failed to pay the
monthly amortizations on the loan.
Subsequently the respondent allegedly
loaned an amount of P35,000 from
one Boteros so she could pay her
obligation with the bank to prevent the
foreclosure of the mortgaged property.
Boteros then sold the property to the
petitioners, Sps. Olivares for P27,000.
The former alleged that the
respondent was aware of the sale of
the subject property to the petitioners.
He said that the respondents were
even among those who looked for
interested buyers of the said property.
The petitioners bought the property
from Boteros. However, a year after,
the Register of Deeds cancelled the
transfer certificate title and issued a
new one in the petitioners’ name. After
the said title was transferred to the
petitioner’s name, he demanded that
Sarmiento vacate the property.
The latter filed with the MTC an illegal
detainer case against the former when
they refused to vacate the property
after several repeated demands. The
lower court ruled in favor of the
petitioners and ordered the
respondent to vacate the property and
deliver the possession of the same to
the petitioners.
The respondent then filed with the
RTC a complaint for recovery of
ownership, annulment of title and
damages against Boteros and the
petitioners. The court held that the
Deed of Absolute Sale executed by the
respondent in favor of Boteros was
valid. It noted that the mere denial of
the respondent in entering into a
contract of sale cannot be given
evidentiary weight against the
notarized deed of sale.
After an appeal, the CA held that the
transaction between the respondent
and Boteros was not a contract of sale.
It held that the transaction was an
equitable mortgage.
ISSUE:
Whether or not the transaction
between Boteros and the respondents
was an equitable mortgage?
RULING:
No. The Supreme Court held that the
contract was not an equitable
mortgage. The court defined an
equitable mortgage as one which
reveals the intention of the parties to
charge real property as a security for a
debt and contains nothing impossible
or contrary to law, although lacking in
some formality.
A contract of sale is deemed as an
equitable mortgage when the real
intention of the parties was to secure
an existing debt by way of mortgage.
In the case at bar, the subject property
of the Deed of Absolute Sale was
already mortgaged to another entity
who was not a party to the contract. In
this case, the land was already
mortgaged to the bank by Manuel, who
was unable to pay for the loan.
For it to be presumed that a contract is
an equitable mortgage based on the
gross inadequacy of price, it must be
shown clearly that the consideration
was grossly inadequate at the time of
the execution of the sale. In this case,
no evidence of the market value of the
real estate was presented.
Continuous possession of the property
even after the property was sold does
not mean that the transaction was not
an absolute sale, but an equitable
mortgage. Boteros merely tolerated the
respondent’s continuous possession of
the subject property until he sold the
same to the petitioners. Therefore,
Boteros can validly sell the property to
petitioners.
DISPOSITION:
The decision of CA is SET ASIDE and
the said case REMANDED for prompt
hearing and determination on the
merits. This Decision shall be
immediately executory upon
promulgation.
Dungo, Paula Benilde D.
Sales / 2B
Case Digest
Sps. Lumayag vs. Heirs of Jacinto
Nemeno
G.R. No. 162112, 3 July 2003
FACTS:
Two parcels of coconut land were
conveyed by Jacinto Nemeno to
petitioners, Sps. Lumayag. The
instrument of conveyance is
denominated as Deed of Sale with
Pacto De Retro. A consideration of
P20,000 was stipulated in this alleged
sale. It was also stipulated that the
vendors a retro have the right to
repurchase the same lots within five
years from the date the instrument
was executed "conveyance shall
become absolute and irrevocable
without the necessity of drawing up a
new absolute deed of sale, subject to
the requirements of law regarding
consolidation of ownership of real
property."
10 years after the death of Jacinto, his
heirs were issued a new owner’s
duplicate copy of one of the lots.
Subsequently, the heirs of Jacinto filed
against the Sps. Lumayag filed a
complaint for Declaration of Contract
as Equitable Mortgage, Accounting
and Redemption with Damages.
They alleged that the Deed of Sale with
Pacto De Retro was only executed for
the purpose of securing the payment of
the P20,000 loan obtained by the
defendants for the medication and
hospitalization of Jacinto.
Sps. Lumayag on the other hand
denied that the contract was an
equitable mortgage and claimed that
the P20,000 received by the
respondents was the consideration for
the sale of the two lots.
First of which is the gross inadequacy
of the contract price. The two parcels
of land whose total area is almost 5.5
hectares is not worth only P20,000.
Secondly, the respondent heirs
remained in possession of the subject
property even after the execution of
the alleged Deed of Sale with Pacto de
Retro.
Thirdly, the respondents continued the
payment of the realty taxes on the
subject property.
Lastly, there was a provision on
pactum commissorium.

The RTC ruled the contract as an DISPOSITION:

equitable mortgage. Upon appeal, the
CA upheld the decision of the Trial The instant petition is DENIED, and
Court. the assailed decision and resolution of
the CA are AFFIRMED
ISSUE:

Whether or not the Deed of Sale with

Pacto De Retro was an equitable
mortgage?

RULING:

Yes. The Deed of Sale with Pacto De

Retro is considered as an equitable
mortgage. The SC held that Article
1602 of the Civil Code enumerates the
instances when a contract may be
presumed as equitable mortgage.

Article 1604 provides that the

provisions of the aforementioned
article also apply to a contract
purporting to be an absolute sale. In
case of doubt with the right to
repurchase, the sale shall be construed
as an equitable mortgage.

The SC held that present in this case

are four circumstances which indicate
the true nature of the contract as an
equitable mortgage.

Dungo, Paula Benilde D.
Sales / 2B
Case Digest
Amelia S. Roberts vs. Martin B.
Papio
G.R. No. 166714, 9 February 2007
FACTS:
Martin Papio and his wife obtained a
loan from Amparo Investments
Corporation (AIC). It was secured by a
real estate mortgage on their property.
However, they were unable to pay for
the loan. In order to prevent the
foreclosure of their property, they sold
the same to Amelia Roberts.
Both a Deed of Sale and a lease
agreement was executed. In the
agreement, the sellers would lease the
property back from the buyer so that
the property would remain in their
possession.
However, the buyer-lessor moved to
the USA and the seller-lessees were
not able to sustain the payment of
rentals. Despite repeated demands, the
latter refused to pay. Because of this
the buyer-lessor demanded that they
vacate the subject property, but the
former refused to do so.
Roberts then filed a complaint for
unlawful detainer against the
respondents. The seller-lessee claimed
that the agreement made between
them gave them the right to
repurchase, and that they were already
able to redeem the property by
remitting the consideration to the
buyer’s agent in the Philippines. They
also claimed that said agents
misappropriated part of the price.
The MeTC ruled that the right to
purchase was not granted to the seller
by the buyer in a subsequent
instrument, but it was stipulated in the
same contract of sale. The RTC
affirmed the lower court’s decision.
The CA on the other hand reversed the
decision of the RTC and found that the
contract between the parties was an
equitable mortgage.
ISSUE:
Whether or not the transaction
entered into by the parties was an
equitable mortgage?
RULING:
No. The transaction was not that of an
equitable mortgage.
In this case, the seller-lessee admitted
to this in his answer as evidenced in
his letter. When he insisted that he
had repurchased the property, he
admitted that a deed of absolute sale
was executed between the two parties.
Because of this, the buyer had
acquired ownership of the property
with the deed as the basis. Because this
equates to a judicial admission, the
seller is estopped from claiming
otherwise. The transaction was a
contract of sale absolute is character,
and therefore the seller has the burden
of proving his right to repurchase. The
seller failed to establish such.
The court also noted that an
agreement to repurchase becomes a
promise to sell when it is made after
the sale. This is because when a sale is
made without an agreement, then the
purchaser obtains the thing sold
absolutely. If he grants the vendor
right to repurchase afterwards, it is
considered a new contract entered by
the purchaser and the absolute owner.
In the case at bar, there was no
evidence that the buyer’s agent was
authorized to enter into a separate
promise to sell. Even if he was given
the authority, the transaction would be
considered void. Lastly, there was no
perfected contract because of the
seller’s refusal to accept the buyer’s
offer to sell the property.
DISPOSITION:
The petition is granted and the
decision of the CA is reversed and set
aside.
Dungo, Paula Benilde D.
Sales / 2B
Case Digest
Sps. Raymundo vs. Sps. Bandong
G.R. No. 171250, 4 July 2007
FACTS:
The petitioners are spouses who were
engaged in the business of buying and
selling cattle from different provinces
of the country. They employed
“Biyaheros” whose job was procuring
the cattle with the capital provided by
them, and delivering the same. The
petitioners required their “Biyaheros”
to surrender their TCT’s of their
properties and to execute deeds of
absolute sale in her favor in order to
secure the financial capital given to
them.
The respondent is one of the
petitioner’s “biyaheros”. It was found
out by the petitioners that Dominador
Bandong incurred a shortage in the
procurement of cattle. Because of the
shortage in the operation a deed of
sale was executed over a parcel of land
and registered under the names of the
petitioner. The subject property was
subsequently sold to their grand niece,
thus the property was named after her
and her husband.
The grandniece of the petitioners
instituted an action for ejectment
against the respondents before the
MeTC. The Court ruled against the
respondents. Their decision was
affirmed by both the RTC and by the
CA.
After which, the respondents
instituted an action for annulment of
sale before the RTC. they alleged that
the sale was not intended, and the
transaction was merely that of an
equitable mortgage.
The petitioner’s grandniece averred
that she was a buyer in good faith.
The RTC held that the Deed of Sale
between the parties was valid. On
appeal, CA reversed the decision of the
Trial Court.
ISSUE:
Whether or not the transaction was
that of an equitable mortgage?
the parties is that the transaction shall
secure the payment of a debt or the
performance of any other obligation.
The court held that the decisive factor
in evaluating the parties’ intentions is
proven by all the surrounding
circumstances made at the time of the
perfection of the contract and not the
terminology of the stipulations.
In the case at bar, the parties never
intended the transfer of ownership of
the subject property. It was only meant
to secure the indebtedness incurred by
Dominador.

RULING:
Yes. The transaction between the
parties is an equitable mortgage
because the subject property was given
to secure the indebtedness incurred by
the respondents.
DISPOSITION:
The instant Petition is DENIED. The
Decision, rendered by the Court of
Appeals in, is hereby AFFIRMED.

The SC defines equitable mortgage as a

transaction although lacking in some
formality, forms and words, or other
requisites demanded by a statute –
nevertheless reveals the intention of
the parties to charge a real property as
security for a debt and contains
nothing impossible or contrary to law.

Article 1602 provides that The contract

shall be presumed to be an equitable
mortgage, in any of the following
cases:

(1) When the price of a sale with right

to repurchase is unusually inadequate;
Dungo, Paula Benilde D. Right t
(2) When the vendor remains in
possession as lessee or otherwise; Sales / 2B
Case Digest

(6) In any other case where it may be

fairly inferred that the real intention of
 Benjamin Bautista vs. Shirley
Unangst, et al.
G.R. No. 173002, 4 July 2008
FACTS:
Hamilton Salak and Benjamin Bautista
entered into a contract where Salak
would be allowed to rent a car from the
latter. Salak failed to return the car in
three days. Because of this, Bautista
filed a complaint demanding the sum
of P232,372 as payment for the car
rental fees, the fees accumulated in
locating the car, attorney’s fees and
incidental expenses.
Salak and his common-law wife who is
the respondent in this case, expressed
that they were willing to pay, however
they were short not cash. They then
sold a house and lot to Bautista with a
right to repurchase. They stipulated
that the respondents shall pay capital
gains tax, current real estate taxes and
utility bills pertaining to the property.
If the respondent fails to repurchase
the subject property within 30 days
after the deed of sale is executed, she
should vacate the premises and deliver
the possession of the property to
Bautista without need of a judicial
order.
The respondents failed to repurchase
the property within 30 days. This
prompted Bautista to file a complaint
for specific performance for the
recovery of possession including the
sum of money, and damages.
The petitioner argues that the deed of
sale should not be construed as an
equitable mortgage because it does not
fall under the circumstances listed
under Article 1602 of the New Civil
Code.
ISSUE:
Whether or not the Deed of Sale
executed by the parties was an
equitable mortgage?
RULING:
Yes. The transaction between the
parties is considered an equitable
mortgage because the true intention of
the parties was merely to secure the
payment of debts.
In this case, the respondent and Salak
were under police custody before
executing the deed. They were clearly
pressed for money because they would
be granted release from custody if they
were unable to pay the petitioner. The
respondents had no other choice than
to execute the deed with a right to
repurchase. It was evidenced that the
respondents only signed the deed
because of the urgent need for money.
The court also noted that the
respondent was allowed to retain the
possession of the subject property even
after executing the deed. The
respondent was only obligated to
deliver the possession of the property
to the petitioner if they were unable to
pay him the amount he demanded.
The court explained that a contract of
sale with pacto de retro would entail
that the legal title to the property is
immediately transferred to the vendee.
The retention of the respondent of the
subject property goes against the
vendee’s acquisition of the right of
ownership.
Lastly, the purchase price stipulated in
the deed was equal to the amount of
the debt of the respondent to the
petitioner.
The above-mentioned incidents prove
that the intentions of the parties was
only to secure the payment of the
debts. The surrounding circumstances
that show the intention of the parties
outweigh the terminologies found in
their stipulations.
DISPOSITION:
The petition is DENIED for lack of
merit.
Dungo, Paula Benilde D.
Sales / 2B
Case Digest
Lorbes vs. Court of Appeals.
G.R. No. 139884, 15 February
2001
FACTS:
The petitioners owned a parcel of land
which they mortgaged to Carlos for the
amount of P150,000. The mortgage
then eventually increased to
P500,000. Because of the fear
foreclosure, the petitioners asked their
son in law for his help in redeeming
the property. He agreed to help his
parents in law, however he had no
money, so he asked help from a family
friend, Josefina Cruz who was an
employee of Land Bank.
They agreed that the petitioners would
sign a deed of sale which conveyed the
mortgaged property in favor of their
family friend. She would later apply for
a housing loan from Land Bank and
use the subject property as collateral.
The proceeds of the loan would be
given to Carlos as payment for the
petitioners’ debt. The excess would be
used to reimburse Cruz for the housing
loan which was supposed to be
deducted from her monthly salary.
The old TCT of the subject property
was cancelled and a new one was
issued in the name of Cruz.
Sometime later, the petitioners
informed their son in law that they
could already redeem the property.
However, he refused. This prompted
the petitioners to file a complaint with
the RTC.
They claimed that the deed was an
equitable mortgage whose only
intention was in securing the loan.
They averred that Cruz retracted from
the original agreement. The
respondents failed to submit an
answer within the reglementary
period. The RTC ruled in favor of the
petitioners.

However upon appeal, the CA reversed

the decision of the trial court and
declared that the transaction between
the parties was that of an absolute sale.

ISSUE:

Whether or not the transaction

between the parties was that of an
equitable mortgage?

RULING:

Yes. The transaction between the

parties was that of an equitable
mortgage.

The Court ruled that it is enough that

one of the incidents mentioned in
Article 1602 is present for a deed to be
considered an equitable mortgage.

In the case at bar, the court held that it

was proven that the true intention Dungo, Paula Benilde D. Right t
between the parties for executing the
Deed of Absolute Sale was not to Sales / 2B
transfer ownership, but to secure the Case Digest
housing loan of Cruz in which the
petitioners had direct interest because
the proceeds of the loan were applied
to the petitioner’s outstanding
mortgage obligation. Mary Ann Deheza-Inamarga vs.
Celenia Alano

G.R. No. 171321, 18 December

2008

FACTS:

Tomas Alano was the owner of 2

parcels of land. The property was
mortgaged to one Renato Gepty. Alano
was unable to pay the loans when
Gepty demanded payment. He then
sought the help of the petitioner who
was his niece.
Inamarga and the petitioners agreed
that the former would pay the loan
upon the condition that the later
mortgage the property to her. The
petitioners were also asked to sign a
blank document which would be
converted into receipts of
indebtedness.
After some time, Tomas died. Celenia
and their children proceeded to
Inamarga to redeem the property. The
latter denied the alleged mortgage to
the bank.
After investigation, the respondents
found out that the OCT of the subject
property was cancelled and a TCT was
issued in Inamarga’s name.
The respondents contended that the
deed was only executed to redeem the
property from Gepty.
The petitioner on the other hand
argued that the respondents offered to
sell the subject property so that the
could use the consideration to redeem
the property for Gepty.
The RTC held that the transaction
between the parties was one of
equitable mortgage and that the
respondents were entitled to redeem
the property.
The appeal of the petitioners was
denied by the CA.
ISSUE:
Whether or not the transaction
between the parties was one of
equitable mortgage?
RULING:
Yes. The transaction between the
parties was one of equitable mortgage
since the intent of the contract was
clear that it was instituted to charge a
real property as security for a debt.
Article 1602 of the Civil Code of the
Philippines state:
ART. 1602. The contract
shall be presumed to be an
equitable mortgage, in any
of the following cases:
(1) When the price of the
sale with right to
repurchase is unusually
inadequate;
(2) When the vendor
remains in possession as
lessee or otherwise;
(3) 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;
(4) When the purchaser
retains for himself a part of
the purchase price;
(5) When the vendor binds
himself to pay the taxes on
the thing sold;
(6) In any 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.
In the instant case, the RTC, as
affirmed by the Court of Appeals,
correctly found that more than one of
the circumstances enumerated in
Article 1602 are present, to wit: the
inadequacy of the selling price of the
properties in relation to its true value;
the vendors (Spouses Alano) remained
in possession as lessee or otherwise;
respondents paid the real property
taxes; and the spouses secured the
payment of the principal debt owed to
petitioner with said properties. On this
score, the court noted that the parties
intended an equitable mortgage and
not a contract of sale.
DISPOSITION:
the Decision and the Resolution of the
Court of Appeals in are AFFIRMED.
Moreno, Tonie Marie C.
Extinguishment
Sales / 2B
Art. 1604
Case Digest
Bacungan v. CA
Alexander and Jean J. Bacungan v.
Court of Appeals, et al.,
G.R. No. 170282, December 18, 2008
FACTS:
Respondent Sps. Napoleon and Victoria
Velo claimed that sometime in February of
1993, they had experienced business
reversals and financial difficulties and had
sought assistance from petitioners in
securing a loan.
Petitioners Alexander and Jean Bacungan
allegedly proposed that they would obtain
the loan from the bank provided that
respondents secure the transfer of the
titles to petitioners that would be used as
security for the loan. Respondents agreed,
however, respondents claimed that after
petitioners had obtained the new titles,
they never applied for a loan with the bank
but had secretly negotiated for the sale of
the properties to third parties.
In their answer, petitioners asserted that
respondents offered to sell to them 23
parcels of land, 18 of which were used as
collateral for the loan respondents had
obtained from Traders Royal Bank.
RTC dismissed the complaint for lack of
merit and gave evidentiary weight on the
notarized deed of sale. CA reversed the
decision and held that by their
contemporaneous and subsequent acts,
the deeds of sale were simulated as the
parties did not intend to be bound by them
at all.
Among the indicators pointed out by the
appellate court in support of its conclusion
were the gross inadequacy of prices,
respondents’ failure to receive any part of
the purchase price stated in the deeds of
sale, the offer by petitioners to return
some of the certificates of title and
petitioner Alexander Bacungan’s
admission that the sale was simulated.
MR was denied.
of Sale
ISSUE:
Whether or not the real agreement of the
parties is one of equitable mortgage under
Art. 1602 and 1604 of the Civil Code.
RULING:
Yes. The Supreme Court held that this
kind of arrangement, where the ownership
of the land is supposedly transferred to the
buyer who provides for the funds to
redeem the property from the bank but
nonetheless allows the seller to later on
buy back the properties, is in the nature of
an equitable mortgage governed by
Articles 1602 and 1604 of the Civil Code,
which provide:
Article 1602. The contract shall be
presumed to be an equitable
mortgage, in any of the following
cases:
(1) When the price of a sale with
right to repurchase is unusually
inadequate;
(2) When the vendor remains in
possession as lessee or otherwise;
(3) 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;
(4) When the purchaser retains for
himself a part of the purchase
price;
(5) When the vendor binds himself
to pay the taxes on the thing sold;
(6) In any 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.
In any of the foregoing cases, any
money, fruits, or other benefit to be
received by the vendee
as rent or otherwise shall be
considered as interest which shall
be subject to the usury laws.
Art. 1604. The provisions of Article
1602 shall also apply to a contract
purporting to be an absolute sale.
From a reading of the above-quoted
provisions, for a presumption of an
equitable mortgage to arise, two requisites
must be satisfied, namely: that the parties
entered into a contract denominated as a
contract of sale and that their intention
was to secure an existing debt by way of
mortgage. Under Art. 1604 of the Civil
Code, a contract purporting to be an
absolute sale shall be presumed to be an
equitable mortgage should any of the
conditions in Art. 1602 be present. The
existence of any of the circumstances
therein, not a concurrence or an
overwhelming number of such
circumstances, suffices to give rise to the
presumption that the contract is an
equitable mortgage.
DISPOSITION:
WHEREFORE, the petition for review on
certiorari is PARTLY GRANTED and the
decision and resolution of the Court of
Appeals in CA-G.R. CV No. 64370
are AFFIRMED with the
following MODIFICATIONS:
1) DECLARING the Deeds of Absolute
Sale as equitable mortgages; and
2) ORDERING petitioners
to RECONVEY to respondents the
properties covered by Transfer Certificate
of Title Nos. 34998, 36022, 35158, 36017,
18128, 26761, 36020, 28381, 35585,
25739, 36023, 40059, 40055, 40060,
40057, 40056, 36967 AND 35268 of the
Register of Deeds of Pangasinan UPON
THE PAYMENT OF P369,000.00 by
respondents within NINETY DAYS FROM
THE FINALITY OF THIS DECISION.

In the instant case, three telling

circumstances indicating that an equitable
mortgage exists are present. First, as
established by the CA, the price of each of
the properties was grossly inadequate.
Second, petitioners retained part of the
"purchase price" when they failed to turn
over to the respondents the loan that they
were supposed to secure from the bank.
Third, petitioners insisted that part of the
consideration of the sale consisted of
amounts previously borrowed by
respondents from them, indicating that
petitioners were using the properties as
"security" for the payment of respondents’
other loans from them. The court declared
the Deeds of Absolute Sale as equitable
mortgages and ordered the reconveyance
of the properties to respondents upon
payment of P369,000.00.
Moreno, Tonie Marie C.
Extinguishmentagreement
Sales / 2B
Art. 1604
Case Digest
Olivares v. Sarmiento
Juan Olivares and Dolores Robles v.
Esperanza Sarmiento
GR 158384, June 12, 2008
FACTS:
Respondent Sarmiento owned a 230-
square meter parcel of residential land
located at Barangay San Antonio, Oton,
Iloilo. On 18 August 1976, respondent and
her husband Manuel Sarmiento (Manuel)
obtained a P12,000 loan from the
Development Bank of the Philippines
(DBP) for the construction of a residential
house on the land. Respondent
mortgaged the land to DBP as security for
the payment of the loan. Respondent and
Manuel failed to pay the monthly
amortizations on the loan. In 1979,
respondent allegedly obtained a loan of
P35,000 from Luis Boteros (Boteros) so
she could pay her obligation with the DBP
and to prevent the foreclosure of the
mortgaged land. Boteros was
respondent's neighbor and the godfather
of her eldest son. Respondent alleged that
instead of getting the amount she loaned
from Boteros, she authorized Boteros and
his niece Segunda Planta (Planta) to pay
her loan with the DBP.
Respondent accused Boteros and Planta
of forging her signatures in two deeds of
sale, making it appear that respondent
and her husband Manuel sold the land
and the house (property) constructed
thereon to Boteros.
Bateros alleges that the respondent
offered to sell the property to him provided
Boteros would pay respondent's loan with
the DBP plus the interest due thereon.
Boteros accepted the offer and paid
respondent's loan plus interest with the
DBP, totaling P21,009.62. Boteros made a
final payment of the loan on 26 June 1979
and the DBP thereafter issued a
certification of cancellation of mortgage
dated 28 June 1979. Meanwhile, the
of Sale between Boteros and
respondent was put in writing through a
notarized Deed of Definite Sale dated May
1979, signed by both respondent and
Boteros.
After the title was transferred to
petitioners' name, Olivares demanded that
respondent vacate the property.
Respondent allegedly requested that she
be given some time to find a place where
her family could transfer. Petitioners
eventually filed with the Municipal Trial
Court of Oton an illegal detainer case
against respondent and Manuel when they
continued to stay on the property despite
repeated demands from petitioners for
them to vacate the property. On 14
October 1988, the Municipal Trial Court
rendered a decision in the illegal detainer
case and ordered respondent and Manuel
to vacate the property and deliver the
possession thereof to petitioners.
Respondent then filed a civil case for
recovery of possession, ownership,
annulment of title, and damages against
Boteros and Planta. 2 years later,
respondent filed with the Regional Trial
Court of Iloilo a complaint for recovery of
ownership, annulment of title, and
damages against Boteros, Planta, and
petitioners. RTC dismissed the complaint.
CA reversed and declared the deeds null
and void.
ISSUE:
Was the contract considered to be an
equitable mortgage?
RULING:
The Court held that the contract was not
an equitable mortgage.
An equitable mortgage is defined as one
that, although lacking some formality or
form, nevertheless reveals the intention of
the parties to charge a real property as
security for a debt. A contract of sale is
considered an equitable mortgage when
the real intention of the parties was to
secure an existing debt by way of
mortgage.
In this case, the land which was the
subject of the Deed of Absolute Sale was
already mortgaged not to the buyer but to
another entity who was not a party to the
contract. The land was already mortgaged
to DBP by the sellers (respondent and her
husband Manuel), who were unable to pay
their loan. The records show that the
property was about to be foreclosed so
respondent and Manuel decided to sell the
property to Boteros.

Under the terms of the Deed of Definite

Sale dated May 1979, the consideration
for the sale was P2,000 plus the
assumption of Boteros of the sellers' loan
from the DBP, including all interests. Prior
to their sale transaction, there is no
evidence that respondent had an existing
debt with Boteros. There is likewise no
substantial evidence on the records that
the parties to the contract agreed upon a
different transaction other than the sale of
real property.

Respondent's continuous possession of

the property even after the property was
sold to Boteros does not automatically
mean that the transaction was an
equitable mortgage and not an absolute
sale. In this case, Boteros merely tolerated
respondent's continued possession of the
property until Boteros sold the property
and the new buyers, petitioners herein,
demanded respondent to vacate the
property.

Thus, it was a contract of absolute sale of

real property and not merely an equitable
mortgage.

DISPOSITION:

WHEREFORE, we GRANT the petition.

We SET ASIDE the Decision dated 30
October 2002 and the Resolution dated 8
May 2003 of the Court of Appeals in CA-
G.R. CV No. 48949. We REINSTATE the
Decision dated 1 March 1993 of the
Regional Trial Court of Iloilo, Branch 36.
Moreno, Tonie Marie C.
Extinguishment saleof Sale
Sales / 2B
Art. 1604
Case Digest
Sps. Austria v. Sps.
Sps. Austria and Leonisa Hilario vs.
Sps. Gonzalez
January 21, 2004, G.R. No. 147321
FACTS
Petitioners, Spouses Hilario, filed a civil
action for Declaration of Nullity of
Document and Reconveyance before the
RTC of Malolos, Bulacan, against herein
respondents Danilo Gonzales, Jr., and
Veronica Gonzales. It involves 3 parcels of
lands which were the subject of 2 Deeds
of Sale executed Leonisa Hilario in favor
of the latter spouses. One lot was priced
at P50, 000 and the other at P240,000.
Spouses Hilario claimed that the contract
between them and Spouses Gonzalez
were not of sale but loans for P260,000.
However, it turned out that Spouses
Gonzalez registered the disputed lots in
their names through the use of fraud,
misrepresentation and falsification, using
the fictitious contracts of sale.
Respondents alleged that petitioner
Leonisa Hilario sold to them the three lots
in question. Respondent Veronica
Gonzales agreed to buy the same out of
pity for petitioners, whose several
properties had earlier been foreclosed by
the bank. The transaction was embodied
in a Deed of Absolute Sale and notarized
before Notary Public Protacio Cortez, Jr.
The original amount in the Deed of
Absolute Sale was ₱240,000. However,
before the properties were registered,
petitioner Leonisa Hilario in a letter dated
July 20, 1983, requested for the execution
of another Deed of Absolute Sale
indicating a price of ₱50,000, purportedly
to lessen the taxes and fees that they will
be paying as the vendors.
The RTC ruled in favour of Spouses
Hilario. CA reversed RTC ruling.
ISSUE:
Whether the transaction is an absolute
or equitable mortgage of real
property.
RULING:
TheGonzales
Court held that the transaction is not
an absolute sale.
The presumption of equitable mortgage is
not always conclusive. Spouses Hilario
failed to present any evidence that the fair
market value of the real property at the
time of the selling price of the parcels. As
to the allegation that petitioners were in
possession of the properties even after the
sale, it is obviated by the fact that they
executed an undertaking promising to
vacate the premises.
Additionally, they were not able to rebut
the testimony of the Notary Public who
testified in court that the petitioners as
vendors of the properties personally
appeared and acknowledged the sale
documents before him.
The Court also held that the petitioners
contention must fail in light of the fact that
Leonisa Hilario even sent a note to Mrs.
Gonzales requesting them to execute
another deed of sale, providing for a
decreased selling price, so as to reduce
petitioners' taxes, e.g. capital gains tax.
The existence and genuineness of the
letter was never rebutted. Leonisa used
the term "Kasulatan ng Bilihan" (Deed of
Sale). She also made mention about
capital gains tax and registration fees,
which can only find relevance and
necessity in a contract of sale and not in a
contract of mortgage.
The Court ruled that petitioners cannot
feign ignorance and illiteracy as to its
contents. Said letter is written not in
English but in Filipino in which petitioners
are conversant. Thus, the true intent of the
parties involves a contract of sale.
DISPOSITION:
WHEREFORE, the petition is DENIED,
and the decision of the Court of Appeals
dated February 23, 1999, in CA-G.R. CV
No. 49581 as well as its resolution dated
February 28, 2001, is AFFIRMED. Costs
against petitioners.
Moreno, Tonie Marie C.
Extinguishment to buy
Sales / 2B
Art. 1606
Case Digest
Abila v. Gobonseng
Ronaldo P. Abilla and Geralda A. Dizon
v. Carlos Gobonseng and Theresita
Ong
August 6, 2002, G.R. No. 146651
FACTS:
Respondent Gobonseng contracted a loan
from petitioner Abila, amounting to Php
550, 000. It was secured by a real estate
mortgage over two parcels of land.
However, Gobonseng defaulted in the
payment, which has ballooned to PhP
700,000. Gobonseng sought to renew the
loan and even issued 2 postdated checks,
one for PhP 690,000 and the other for
PhP 10,000.
The PhP 690,000 check was dishonoured,
and Gobonseng promised to pay the
amount upon approval of his pending loan
application with the State Investment
House, Inc. However, State Investment
House required a collateral for which
reason respondent borrowed from
petitioner the two titles so he can
mortgage the same. Thus, petitioner
cancelled the mortgage in his favor and
delivered the two titles to respondent.
Respondent failed to pay the outstanding
obligation to petitioner in spite of his loan
being approved. He was threatened to be
sued, so he executed a deed of absolute
sale over his17 lots in Dumaguete in favor
of petitioner. On the same day, the parties
executed an Option to Buy whereby
respondent was allowed to repurchase the
lots within a period of 6 months. He failed
to repurchase within that period.
The RTC ruled in favor of the
buyers/petitioners. They found that the
Option to Buy was rendered null and void
by respondent's failure to exercise the
option within the period of six months. On
appeal, the Court of Appeals affirmed the
decision of the trial court, but further
declared that "the deed of sale and option
of Sale
actually constitute a pacto de retro
sale."
ISSUE:
Whether or not the contract between the
parties was an absolute sale with pacto de
retro.
RULING:
The Court held that it was not an absolute
sale with pacto de retro, but a mere
equitable mortgage.
Respondent's claim of the right to
repurchase the lots is anchored on the
third paragraph of Article 1606 of the Civil
Code, which states:
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.
The Court ruled that upon a careful review
and analysis of the antecedent facts, we
are convinced that the right granted under
the third paragraph of Article 1606 may be
invoked by respondent.
The applicability of Article 1606 rests on
the bona fide intent of the vendor a retro,
i.e., Gabonseng in this case. If he honestly
believed that the transaction was an
equitable mortgage, the said article
applies and he can still repurchase the
property within thirty days from finality of
the judgment declaring the transaction as
a sale with pacto de retro. Parenthetically,
it matters not what the vendee intended
the transaction to be.
The Court’s ruling stated that these
circumstances, peculiar to the case at bar,
make this case fall squarely within the
situation in the doctrine – that there was a
belief on the part of the vendor a retro,
founded on facts attendant upon the
execution of the sale with pacto de retro,
honestly and sincerely entertained, that
the agreement was in reality a mortgage,
one not intended to affect the title to the
property ostensibly sold, but merely to
give it as security for a loan or other
obligation. Consistently therewith,
respondent has maintained throughout the
proceedings that transaction between him
and petitioner was really an equitable
mortgage. As such, respondent may avail
of the third paragraph of Article 1606 of
the Civil Code and repurchase the lots
affected by the deed of absolute sale and
option to buy.

DISPOSITION:

WHEREFORE, in view of the foregoing,

the Decision dated January 17, 2002
is SET ASIDE. The instant petition
is DENIED. Petitioners are ORDERED to
accept the payment tendered by
respondents and to execute the necessary
deed of sale conveying the subject lots to
respondents.

Moreno, Tonie Marie C.
Extinguishment being
Sales / 2B
Art. 1606
Case Digest
Agan v. Heirsconsolidating
Philadelphia Agan v. Heirs of Sps.
Andres Nueva and Diosdado Nueva
December 11, 2003, G.R. No. 155018
FACTS:
Diosdada Nueva, with marital consent,
sold under a pacto de retro, a parcel of
land with an area of 2,033 square meters
situated in Kauswagan, Cagayan de Oro
City, to Philadelphia Agan for ₱21,000.00.
The property is covered by Transfer
Certificate of Title (TCT) No. 25370 and
registered in the name of Spouses Andres
and Diosdada Nueva.
The agreement is evidenced by a public
instrument entitled “Deed of Sale under a
Pacto de Retro” executed and duly signed
by the late Diosdada and Philadelphia.
The parties agreed that the Nuevas are
granted the right to repurchase the
property sold, within six (6) months for the
same consideration. However, they failed
to repurchase the property within the six-
month period.
Upon the death of Diosdada Nueva on
July 5, 1991, the property was
extrajudicially partitioned where Andres
sold his interest in the land in question to
his daughter Ann and son Lou. Since the
title to the property was allegedly lost
during the fire that razed the property on
March 19, 1990 where Diosdada died, title
was reconstituted and subsequently
transferred and registered in the name of
Ann and Lou Nueva under TCT No.
63403.
On June 19, 1992, Philadelphia Agan filed
a petition for consolidation of ownership
against Spouses Andres and Diosdada
Nueva with the Regional Trial Court
(RTC). In their answer filed on October 28,
1998, the Nuevas alleged that the pacto
de retro sale was actually an equitable
mortgage, the consideration for the sale
of Sale
only ₱21,000.00 as against its Fair
Market Value of ₱81,320.00.
On August 3, 2000, the judgment
of Nueva ownership over the disputed
property in favor of Philadelphia was
rendered by RTC. However, the second
paragraph of the dispositive portion gave
the vendors a period of 30 days from
receipt of the decision within which to
redeem the property. Because of the
refusal of Agan to accept the amount of
P52,080.00 as redemption price, the
Nuevas were constrained to consign the
amount with the court.
The CA held that they do not agree with
the contention of the private respondent
that Article 1606 of the Civil Code does
not apply in the instant case. In their
answer to the petition for consolidation
filed on October 22, 1998, petitioners
raised the defense that the transaction
between the parties was actually an
equitable mortgage, considering that they
remained in possession of the subject
property and continued to pay the real
taxes thereon. The lower court, in its
August 3, 2000 Further, We do not agree
with the contention of the private
respondent that Article 1606 of the Civil
Code does not apply in the instant case.
In their answer to the petition for
consolidation filed on October 22, 1998,
petitioners raised the defense that the
transaction between the parties was
actually an equitable mortgage,
considering that they remained in
possession of the subject property and
continued to pay the real taxes thereon.
The lower court, in its August 3, 2000
decision, ruled that the transaction is one
of sale under a pacto de retro, hence it
acted within its authority under Article
1606 of the Civil Code in giving the
petitioners thirty days as redemption
period.
ISSUE:
Whether the transaction in this case was
an equitable mortgage.
RULING:
The Court held that it was an equitable
mortgage.

Article 1606 is intended to cover suits

where the seller claims that the real
intention was a loan with equitable
mortgage but decides otherwise. The
seller, however, must entertain a good
faith belief that the contract is an equitable
mortgage. The RTC in this case made no
finding in its Decision that respondents’
defense that the pacto de retro sale was
an equitable mortgage was not made in
good faith. Indeed, it does not appear
that petitioner even attempted to prove
bad faith on the part of respondents during
the trial, which accounts for the RTC
Decision’s utter silence on the matter.

The Court stated that the law presumes

good faith and, in the absence of a
contrary finding by the RTC in its Decision,
respondents are entitled to the right to
redeem the property pursuant to the third
paragraph of Article 1606 of the New Civil
Code.

The Court also notes that the RTC erred in

allowing petitioners the right to repurchase
said property within thirty (30) days from
receipt of the RTC Decision. By express
provision, Article 1606 grants the vendor a
retro thirty (30) days “from the time final
judgment was rendered,” not from the
defendant’s receipt of the judgment. The
Court has construed “final judgment” to
mean one that has become final and
executory.

DISPOSITION:

ACCORDINGLY, the Court Resolves to

DENY the petition for lack of merit.
Moreno, Tonie Marie C.
Extinguishment property
Sales / 2B
Art. 1607
Case Digest
Sps. Cruz money
Spouses Alexander Cruz and Adelaida
Cruz v. Eleuterio Leis, Raymundo Leis,
Anastacio L. Lagdano, Loreta L.
Cayonda and the Honorable Court Of
Appeals
FACTS:
Adriano and Gertrudes were married.
Gertrudes had a TCT issued by the
Department of Agriculture and Natural
Resources (DANR) which referred her as
a "widow”. However, it did not appear that
Adriano executed a will before his death.
Gertrudes contracted a loan from the
petitioners, which she was unable to pay
upon the due date. Thus, unable to pay
her outstanding obligation, Gertrudes
executed two contracts in favor of
petitioner Alexander Cruz. The first is
denominated as "Kasunduan" which the
parties concede is a pacto de retro sale,
granting Gertrudes one year within which
to repurchase the property. The second is
a "Kasunduan ng Tuwirang Bilihan," a
Deed of Absolute Sale covering the same
property for the price of P39,083.00, the
same amount stipulated in the
"Kasunduan." For failure of Gertrudes to
repurchase the property, ownership
thereof was consolidated in the name of
Alexander Cruz.
Upon her death, her heirs, herein private
respondents, received demands to vacate
the premises from petitioners, the new
owners of the property. Private
respondents responded by filing a
complaint. RTC rendered a decision in
favor of private respondents. The RTC
held that the land was conjugal property
since the evidence presented by private
respondents disclosed that the same was
acquired during the marriage of the
spouses and that Adriano contributed
money for the purchase of the property.
The RTC held that the land was conjugal
of Salesince the evidence presented by
private respondents disclosed that the
same was acquired during the marriage of
the spouses and that Adriano contributed
v. Leis for the purchase of the property.
Thus, the court concluded, Gertrudes
could only sell to petitioner spouses her
one-half share in the property. CA affirmed
RTC ruling.
ISSUE:
Whether or not a co-owner may acquire
exclusive ownership over the property
held in common?
RULING:
The Court find no merit in the petition.
The right of repurchase may be exercised
by a co-owner with respect to his share
alone. While the records show that
petitioner redeemed the property in its
entirety, shouldering the expenses
therefor, that did not make him the owner
of all of it. In other words, it did not put to
end the existing state of co-ownership.
There is no doubt that redemption of
property entails a necessary expense.
The result is that the property remains to
be in a condition of co-ownership. While a
vendee a retro, under Article 1613 of the
Code, "may not be compelled to consent
to a partial redemption," the redemption by
one co-heir or co-owner of the property in
its totality does not vest in him ownership
over it. Failure on the part of all the co-
owners to redeem it entitles the vendee a
retro to retain the property and consolidate
title thereto in his name. But the provision
does not give to the redeeming co-owner
the right to the entire property. It does not
provide for a mode of terminating a co-
ownership.
It is conceded that, as a rule, a co-owner
such as Gertrudes could only dispose of
her share in the property owned in
common.
The Court ruled against petitioners by
affirming the Regional Trial Court's
decision on the premise that there was no
compliance with Article 1607 of the Civil
Code requiring a judicial hearing before
registration of the property in the name of
petitioners. This provision states:
Art. 1607. In case of real property,
the consolidation of ownership in
the vendee by virtue of the failure
of the vendor to comply with the
provisions of article 1616 shall not
be recorded in the Registry of
Property without a judicial order,
after the vendor has been duly
heard.

The aforequoted article is intended to

minimize the evils which the pacto de retro
sale has caused in the hands of usurers. A
judicial order is necessary in order to
determine the true nature of the
transaction and to prevent the interposition
of buyers in good faith while the
determination is being made.

DISPOSITION:
WHEREFORE, the decision of the Court
of Appeals is MODIFIED in that the
petitioners are deemed owners of the
property by reason of the failure of the
vendor, Gertrudes Isidro, to repurchase
the same within the period stipulated.
However, Transfer Certificate of Title No.
130584, in the name of Alexander M.
Cruz, which was issued without judicial
order, is hereby ordered CANCELLED,
and Transfer Certificate of Title No. 43100
in the name of Gertrudes Isidro is ordered
REINSTATED, without prejudice to
compliance by petitioners with the
provisions of Article 1607 of the Civil
Code.
Moreno, Tonie Marie C.
Extinguishmentbranch
Sales / 2B
Art. 1616
Case Digest
BPI Family Savingsprice
Veloso
BPI Family Savings Bank, Inc. v. Sps.
Januario Antonio Veloso and Natividad
Veloso
August 9, 2004, G.R. No. 141974
FACTS:
Respondent spouses obtained a loan of
P1,300,000 from petitioner’s predecessor-
in-interest Family Bank and Trust
Company. To secure payment of the loan,
respondent spouses executed in favor of
the bank a deed of mortgage over three
parcels of land, with improvements,
registered in their names from the Registry
of Deeds of Quezon City.
When the respondents defaulted in the
monthly installments due on their loan,
Family Bank instituted an extra-judicial
foreclosure proceeding on the
respondents’ mortgaged properties and
was sold at public auction with Family
Bank as the highest bidder for
P2,782,554.66. Family bank assigned all
its right and interests in the foreclosed
properties to petitioner BPI Family Bank,
Inc. (BPI).
Respondents then wrote to petitioners,
offering to redeem the foreclosed
properties for PhP 1.872,935 but were
rejected. They then filed with the RTC of
Quezon City, a complaint for annulment of
foreclosure and thereafter were ordered
by the latter to deposit with the clerk of
court the sum of P1,500,000 representing
the redemption price.
The trial court ordered the release to the
respondents of P1,400,000 of the
consigned amount. The balance of
P100,000 is to take the place of the
injunction bond to answer for whatever
damages petitioner might suffer because
of the issuance of the preliminary
injunction previously issued by a different
of Sale
of RTC and then later lifted. The
RTC rendered a decision finding the extra-
judicial closure valid but allowed the
redemption of the same at a redemption
Bank ofv.P2,140,000.
Sps. CA affirmed RTC
ruling.
ISSUE:
Whether the respondent spouses
complied with all the requirements for the
redemption of the subject properties.
RULING:
The Court reversed and set aside the CA
ruling.
The general rule on redemption is that the
statement of intention to exercise the right
to repurchase must be accompanied by an
actual and simultaneous tender of
payment, otherwise, the offer to redeem is
ineffectual. A bona fide redemption
necessarily implies a reasonable and valid
tender of the entire repurchase price,
otherwise the rule on the redemption
period fixed by law can easily be
circumvented.
The case of Bodiongan vs. Court of
Appeals heldthat in order to effect a
redemption, the judgment debtor must pay
the purchaser the redemption price
composed of the following: (1) the price
which the purchaser paid for the property;
(2) interest of 1% per month on the
purchase price; (3) the amount of any
assessments or taxes which the purchaser
may have paid on the property after the
purchase; and (4) interest of 1% per
month on such assessments and taxes.
Moreover, Article 1616 of the Civil Code
provides that the vendor cannot avail
himself of the right to repurchase without
returning to the vendee the price of the
sale.
In this case, the offer by respondents to
redeem the foreclosed properties for
P1,872,935 and the subsequent
consignation in court of P1,500,000 while
made within the redemption period was
ineffective because the amount offered
and actually consigned not only excluded
the interest but was lower than the
P2,782,554.66 paid by the highest
bidder/purchaser of the properties during
the auction sale.

DISPOSITION:
WHEREFORE, the appealed decision of
the Court of Appeals is hereby
REVERSED and SET ASIDE. The
complaint filed by respondents, the
spouses Veloso, is hereby dismissed.
Moreno, Tonie Marie C.
Extinguishmentoffer
Sales / 2B
Art. 1620
Case Digest
Lee Chuy Realty Corporation
Lee Chuy Realty Corporation v. Court
Of Appeals and Marc Realty and
Development Corporation
December 4, 1995, G.R. No. 104114
FACTS:
A piece of land located at Meycauyan,
Bulacan, which was originally co-owned
by Ruben Jacinto(one-sixth), Dominador,
Arsenio, Liwayway all surnamed Bascara
and Ernesto jacinto(collectively owned the
remaining five-sixths). It is being disputed
by Lee Chuy Realty Corporation and Marc
Realty and Development Corp.
Ruben Jacinto sol sold his one-sixth pro-
indiviso share to LEE CHUY REALTY
which was registered 30 April 1981. On 5
May 1989 the Bascaras and Ernesto
Jacinto also sold their share to MARC
REALTY which was registered on 16
October 1989.
Lee Chuy Realty claims that it was never
informed of the existence of the sale
between Marc Realty and the
Bascaras/Jacinto. Marc Realty insists that
Lee Chuy verbally notified of the sale and
was given a copy of the deed of sale.
Jence, they filed a complaint for legal
redemption against Marc Realty.
The trial court ruled in favour of Lee Chuy
Realty which stated that there was a valid
tender of payment and consignation. It
also stated that neither a separate offer to
redeem nor a formal notice of
consignation is necessary for the reason
that the filing of the action itself, within the
period of redemption, is equivalent to a
formal offer to redeem.
Marc Realty contends that prior tender of
payment is a condition precedent to the
filing of an action in court in order to validly
exercise the right of legal redemption. Lee
Chuy Realty however argues that the filing
of the action itself is equivalent to a formal
of Sale
to redeem, which is a condition
precedent to the valid exercise of the right
of legal redemption.
ISSUE: v. CA
Whether the filing of action itself is
equivalent to a formal offer to redeem.
RULING:
The Supreme Court ruled in favour of Lee
Chuy Realty.
Arts. 1620 and 1623 of the Civil Code on
legal redemption provide:
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.
Art. 1623. The right of legal pre-
emption or redemption shall not be
exercised except within thirty days
from the notice in writing by the
prospective vendor, or by the
vendor, as the case may be. The
deed of sale shall not be recorded
in the Registry of Property unless
accompanied by an affidavit of the
vendor that he has given written
notice thereof to all possible
redemptioners.
There is actually no prescribed form for an
offer to redeem to be properly effected.
Hence, it can either be through a formal
tender with consignation, or by filing a
complaint in court coupled with
consignation of the redemption price
within the prescribed period.
A co-owner desirous of exercising his right
of legal redemption is given a period of
thirty (30) days from notice of the sale
within which to avail of the right to redeem.
Under the free patent or homestead
provisions of the Public Land Act a period
of five (5) years from the date of
conveyance is provided, the five-year
period to be reckoned from the date of the
sale and not from the date of registration
in the office of the Register of Deeds. The
redemption of extrajudicially foreclosed
properties, on the other hand, is
exercisable within one (1) year from the
date of the auction sale as provided for in
Act No. 3135.

DISPOSITION:
WHEREFORE, the petition for certiorari is
GRANTED. The decision of respondent
Court of Appeals in CA-G.R. SP No.
24220 dated 22 November 1991 is
REVERSED and SET ASIDE. The
decision of the Regional Trial Court of
Malolos, Bulacan, Br. 7, in Civil Case No.
661-M-89 dated 26 December 1990
holding that the filing of the action for legal
redemption coupled with the consignation
of the redemption price is equivalent to a
formal offer to redeem as a condition
precedent to the valid exercise of the right
of legal redemption, is REINSTATED.

Let the records of this case be

REMANDED to the court of origin for
further proceedings in the light of this
pronouncement.
Moreno, Tonie Marie C. provision (Article 1623 of the New
Extinguishment of Sale
Civil Code) this Court had stressed
Sales / 2B that written notice is indispensable,
Art. 1620 actual knowledge of the sale
Case Digest acquired in some other manners
Mariano v. CA by the redemptioner,
notwithstanding. He or she is still
Mariano v. Court of Appeals entitled to written notice, as
May 28, 1993, G.R. No. 101522 exacted by the code to remove all
uncertainty as to the sale, its terms
FACTS: and its validity, and to quiet and
The lot in Cagayan, which was originally doubt that the alienation is not
owned by Francisco Gosiengfiao, was definitive. The law not having
mortgaged by the decedent to the Rural provided for any alternative, the
Bank of Tuguegarao. However, the loan method of notifications remains
was left unpaid and the lot was foreclosed exclusive, though the Code does
as a result. Third-party defendant Amparo not prescribe any particular form of
Gosiengfiao-Ibarra was able to redeem written notice nor any distinctive
the property. method written notification of
redemption.
The plaintiffs filed a complaint for
"recovery of possession and legal
redemption with damages" against
defendants Leonardo and Avelina
Mariano. Plaintiffs alleged in their
complaint that as co-heirs and co-owners
of the lot in question, they have the right to
recover their respective shares in the
same, and property as they did not sell the
same, and the right of redemption with
regard to the shares of other co-owners
sold to the defendants.

ISSUE:
Whether a co-owner who redeems the
whole property with her own personal Matutina, Monico Joseph L. Co
funds becomes the sole owner of said
property and terminates the existing state Sales / 2B
of co-ownership. Case Digest
RULING:
BERNARDO MENDOZA I,
The Court held that a co-owner who
redeems the whole property with her own BERNARDO MENDOZA II,
personal funds does not become the sole GUADALUPE M. MANGALE,
owner of said property; the redemption JULIANA M. SAMONTE, PACITA M.
inures to the benefit of all the other co- SAMONTE, RICARDO MENDOZA,
owners. FRANCISCO MENDOZA, PATRICIA
MENDOZA, OLYMPIA M. DIZON,
It is a requirement for there to be a written ROMEO MENDOZA, REYNALDO
notice. The Court reiterated the MENDOZA, REMEDIOS M.
requirement for written notice, as laid BERNABE and TRINIDAD MANUEL
down in the ruling of Castillo v. Samonte: MENDOZA, Petitioners, v. HON.
Consistent with aforesaid ruling, in
COURT OF APPEALS, RENATO
the interpretation of a related
 SAMONTE and LUCIA DELA CRUZ
SAMONTE, Respondents.
G.R. No. 44664, July 31, 1991
FACTS:
Plaintiffs are the legal heirs of the late
Arcadio Mendoza in which Trinidad
Manuel is the wife of the late Arcadio.
The late Arcadio Mendoza died
intestate and left properties among
which is the subject Lot 3. The said Lot
3 were acquired by Arcadio through
donation.
Later on, Lot 3 were subdivided into
Lot 3-A and Lot 3-B.
Trinidad Manuel sold Lot 3-A
evidenced by “Dokumento ng Bilihan’.
The said document clearly states that
the Lot in questioned was partitioned
and that the heirs agreed that Lot 3-A
would belong to Trinidad; and with the
consent of the heirs she sold Lot 3-A
Accordingly, the Document was
drafted by their attorney and notarized
with Pacita and Juliana Samonte as
witnesses.
Plaintiffs Trinidad Manuel, Pacita
Samonte and Juliana Samonte alleged
that they did not the contents of the
document. Trinidad was asked by her
sister to signed the document while
Pacita and Juliana did not read the
contents as their mother Trinidad
complied with the affixing her signature
thus they followed suit.
However, the court still took noticed
that after the execution of the
document the defendants constructed
a building on the said lot without the
plaintiffs questioning it.
Therefore the RTC dismissed their
complaint (an action for reconveyance)
which the CA affirmed.
ISSUE(S):
Whether or not (1) the "Dokumento ng
Bilihan" is valid; and (2) petitioners can
still exercise the right of legal
redemption.
RULING:
The Dokumento ng Bilihan is valid
The land in question was sold by
Trinidad to private respondents with
the knowledge and consent of her
children. The amount paid therefor
was known to her and her children.
Having participated in, consented to
and/or benefited from the sale,
petitioners are estopped from
impugning the validity and
enforceability thereof.
Petitioners cannot exercise the right
of legal redemption.
Ordinarily, Under Article 996 of the
Civil Code, petitioner Trinidad Manuel
Mendoza is not entitled to one-half
(1/2) of Lot 3 but only to the share of
one (1) legitimate child or 1/13 rights
and interests. However, from the
findings of the court the whole Lot 3-A
was adjudicated to Trinidad Mendoza.
Article 1620 of the Civil Code applies
only if the co-ownership still exists. If
the property has been partitioned or an
identified share has been sold, there is
no longer any right of legal
redemption.
Petitioners’ co-ownership over Lot 3
was extinguished when it was
subdivided into Lot 3-A and Lot 3-B.
Hence petitioners cannot exercise their
right of legal redemption.
DISPOSITION:
Petition is hereby DENIED

Matutina, Monico Joseph L.
Sales / 2B
Case Digest
MARINA Z. REYES, AUGUSTO M.
ZABALLERO and SOCORRO Z.
FRANCISCO, petitioners, vs. THE
HONORABLE ALFREDO B.
CONCEPCION, Presiding Judge, CFI
of Cavite, Tagaytay, Br. IV,
SOCORRO MARQUEZ VDA. DE
ZABALLERO, EUGENIA Z. LUNA,
LEONARDO M. ZABALLERO, and
ELENA FRONDA ZABALLERO,
respondents
G.R. No. 56550 October 1, 1990
FACTS:
The plaintiffs, the defendants and the
intervenor are the pro-indiviso co-
owners of the subject properties. A
part of the properties are subject to
expropriation proceedings instituted by
the National Housing Authority (NHA).
The current valuation of the land is is
at P95,132.00 per hectare
Thereafter, Plaintiffs received a written
notice from the defendants and the
intervenor that the Volcano Securities
had offered to buy the latter's share in
the properties in the amount of P12.50
per square meter.
The defendants' and intervenor's
requested that the Plaintiffs (1) to
exercise their pre-emptive right to
purchase; or (2) to agree to a physical
partition of the properties; or (3) to sell
their shares, jointly with the defendants
and the intervenor, to the Volcano
Securities in the amount stated above.
However, the plaintiffs in its replied
stated that (1) the subject properties
are incapable of physical partition; (2)
That the price of P12.50 per square
meter is grossly excessive; (3) That
they are willing to exercise their pre-
emptive right for an amount of not
more that P95,132.00 per hectare,
which is the fair and reasonable value
of said properties; (4) That the
statutory period for exercising their
pre-emptive right was suspended upon
the filing of the complaint.
The defendants' and intervenor's
stated that (1) the reasonable price of
the subject properties is P12.50 per
square meter; (2) plaintiffs' right of
legal pre-emption had lapsed upon
their failure to exercise the same within
the period prescribed in Art. 1623 of
the Civil Code of the Philippines; (3) it
would be to the best interest of the
plaintiffs to sell their shares to the
Volcano Securities; (4) the subject
properties may be physically
partitioned.

Respondent Judge issued that

petitioners did not possess a pre-
emptive right to purchase private
respondents' shares in the co-
ownership.

ISSUE:

Whether or not plaintiffs as co-owner a

pre-emptive right to purchase the pro-
indiviso shares of his co-owners.

RULING:
The legal provisions on co-
ownership do not grant to any of
the owners of a property held in
common a pre-emptive right to
purchase the pro-indiviso shares of
his co-owners.
Petitioners reliance on Article 1620 of
the New Civil code is misplaced.
Article 1620 contemplates of a Matutina, Monico Joseph L. Co
situation where a co-owner has
alienated his pro-indiviso shares to a Sales / 2B
stranger. By the very nature of the Case Digest
right of "legal redemption", a co-
owner's light to redeem is invoked only VALENTINA G. VILLANUEVA,
after the shares of the other co-owners assisted by her husband SEVERINO
are sold to a third party or stranger to FERI, ANTONIO G. VILLANUEVA,
the co-ownership ANGEL G. VILLANUEVA and
OLIMPIA G. VILLANUEVA, assisted
In the case at bar, at the time by her husband F. DAGUIMOL,
petitioners filed their complaint for Petitioners, v. HON. ALFREDO C.
injunction and damages against FLORENDO, Judge of the CFI of
private respondents, no sale of the Cagayan, Second Branch, ERLINDA
latter's pro-indiviso shares to a third V. VALLANGCA, CONCEPCION G.
party had yet been made. Thus, Article VILLANUEVA and MACARIO K.
1620 of the New Civil Code finds no VILLANUEVA, Respondents.
application to the case at bar. G.R. No. L-33158, October 17, 1985

DISPOSITION:
Petition dismissed for lack of merit
FACTS:
Basilia Garcia died intestate, leaving
her husband, Macario Villanueva and
children (herein petitioners) as her sole
and only legitimate heirs. Macario and
Basilia owned a small parcel of land.
Macario, without the subject lot having
been partitioned, sold one-half or 82.5
square meters of the lot for P1,100.00,
as evidenced by a Deed of Sale to
Erlinda Vallangca.
Petitioners signified their intention to
redeem the lot in question but
respondent vendee refused
contending that she is the wife of one
of the legal heirs and therefore
redemption will not lie against her
because she is not the "third party" or
"stranger" contemplated in the law.
Petitioners filed a complaint for
rescission of sale and legal redemption
of the portion sold to Vallangca. The
trial court rendered a decision for the
reformation of the Deed of Sale and
declaring the vendee the absolute
owner of the subject lot.
ISSUE:
Whether or not Erlinda is a third party
or stranger contemplated in Art 1620
of the Civil Code
RULING:
Erlinda is a third party or stranger
thus the petitioners may exercise
their right of redemption against her
rt. 1620 of the New Civil Code
provides:
"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."
Within the meaning of Art. 1620, the
term "third person" or "stranger" refers
to all persons who are not heirs in
succession, and by heirs are meant
only those who are called either by will
or the law to succeed the deceased
and who actually succeeds. In short, a
third person is anyone who is not a co-
owner. The vendee is related by
affinity to the deceased by reason of
her marriage to one of the heirs and
being married to Concepcion does not
entitle the vendee to inherit or succeed
in her own right. She is not an heir of
Basilia Garcia nor included in the
"family relations" of spouses
Macario and Basilia as envisioned in
Art. 217 of the Civil Code.
"Art. 217. Family relations shall include
those:
(1) Between husband and wife;
(2) Between parent and child;
(3) Among other ascendants and their
descendants;
(4) Among brothers and sisters.
Therefore, The co-owners should be
allowed to exercise their right to
redeem the property sold to Erlinda
Vallangca.
DISPOSITION:
Petition granted and that the decision
(reformation) reversed.
 Matutina, Monico Joseph When owners
L.
Sales / 2B
Case Digest Primary Structures Corp. vs. Sps. Valencia
PRIMARY STRUCTURES CORP.
represented herein by its President
ENGR. WILLIAM C. LIU, petitioner,
vs. SPS. ANTHONY S. VALENCIA
and SUSAN T. VALENCIA,
Respondents.
G.R. No. 150060, August 19, 2003
FACTS:
Petitioner is a private corporation and
the registered owner of Lot 4523
situated in Liloan, Cebu, with an area
of 22,214 square meters. Adjacent to
the lot of petitioner are parcels of land,
identified to be Lot 4527, Lot 4528,
and Lot 4529 with a total combined
area of 3,751 square meters. The
three lots have been sold by Mendoza
to respondent spouses. Petitioner
learned of the sale of the lots only in
January, 1996, when Mendoza sold to
petitioner Lot No. 4820, a parcel also
adjacent to Lot 4523 belonging to the
latter.
Forthwith, it sent a letter to
respondents, on 30 January 1996,
signifying its intention to redeem the
three lots.
Petitioner sent another letter to
respondents tendering payment of the
price paid to Mendoza by respondents
for the lots. Respondents informed
petitioner that they had no intention of
selling the parcels.
Invoking the provisions of Articles
1621 and 1623, petitioner filed an
action against respondents to compel
the latter to allow the legal redemption.
Petitioner claimed that neither
Mendoza, the previous owner, nor
respondents gave formal or even just a
verbalof notice
adjoining
of the
lands
salehave
of the
right
lots of
as
so required by Article 1623 of the Civil
Code.
After trial, the Regional Trial Court of
Cebu dismissed petitioners complaint
and respondents' counterclaim; both
parties appealed the decision of the
trial court to the Court of Appeals. The
appellate court affirmed the assailed
decision.
ISSUE:
Whether or not petitioners have a right
of legal redemption
RULING:
Under Art 1621 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
Article 1621 and Article 1623 of the
Civil Code, which read:
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.
 equivalent of the obligatory written
ART. 1623. The right of legal pre- notice prescribed by the Code.
emption or redemption shall not be
exercised except within thirty days
from the notice in writing by the DISPOSITION:
prospective vendor, or by the vendor,
as the case may be. The deed of sale Petitioner is hereby given a period of
shall not be recorded in the Registry of thirty days from finality of this decision
Property, unless accompanied by an within which to exercise its right of
affidavit of the vendor that he has legal redemption. No costs.
given written notice thereof to all
possible redemptioners.

In order that the right may arise, the

land sought to be redeemed and the
adjacent property belonging to the
person exercising the right of
redemption must both be rural lands. If
one or both are urban lands, the right
cannot be invoked. Respondents in the
instant case, however, did not dispute
before the Court of Appeals the
holding of the trial court that the lots in
question are rural lands.

Article 1621 of the Civil Code

expresses that the right of redemption
it grants to an adjoining owner of the
property conveyed may be defeated if
it can be shown that the buyer or
grantee does not own any other rural
land. The appellate court, sustaining
the trial court, has said that there has
been no evidence proffered to show
that respondents are not themselves
owners of rural lands for the
exclusionary clause of the law to
apply.

Additionally, petitioners did not comply

to the provision of Art 1623. The deed
of sale cannot be taken as a written
notice contemplated by law.
Respondents, like the appellate court,
overlook the fact that petitioner is not a
party to the deed of sale between
respondents and Mendoza and has
had no hand in the preparation and
execution of the deed of sale. It could
not thus be considered a binding
 Matutina, Monico Joseph Owner of adjoining
L.
Sales / 2B
Case Digest Sen Po Ekthousand
SEN PO EK MARKETING
CORPORATION, Petitioner, v.
TEODORA PRICE MARTINEZ,
JUANITO TIU UYPING, JR., NELSON
TIU UYPING and LEONCIO TIU
UYPING, Respondents.
G.R. No. 134117, February 9, 2000
FACTS:
Sofia P. Martinez was the registered
owner of two (2) parcels of land which
she leased to Yu Siong, father of
petitioner Sen Po Ek, for a period of
ten (10) years with the condition to
construct a commercial building on the
property which shall become the
property of Sofia upon the expiration of
the lease.
The lease contract underwent
repeated renewals with Yu Siong’s
wife upon his death.
Sofia sold the subject property to her
daughter Teodora. The deed of sale
was executed in 1979 but was only
notarized on 1985.
Thereafter, Teodora sent a letter to
petitioner Sen Po Ek informing it of her
intention to sell the leased premises
and authorizing Mrs. Petilla to
negotiate the sale "with any and all
interested parties."
Private respondent Uyping, Jr. was
informed that the subject leased
premises were for sale and went to the
office of Governor Leopoldo Petilla, the
husband of Remedios Petilla, and
inquired about the property.
Sen Poland Ek alleged
has right
thatofitpre-emption
only received
the letter on December 12. It sought to
purchase the properties at six
Marketing pesos
Corp. vs.(P6,000.00)
Teodora Price per
square meter, and the Yu Siongs were
able to contact private respondent
Teodora P. Martinez who advised
them to formalize the offer of petitioner
Sen Po Ek in writing. This was done in
a letter dated December 27, 1989 by
Consorcio Yu Siong.
Petitioner Sen Po Ek filed a verified
complaint against Teodora in the RTC
for the annulment of the Deed of Sale
executed by her mother, Sofia, in her
favour. Petitioner invoked its alleged
right of first refusal or preferential right
to buy the leased premises based on
Republic Act (R.A.) No. 1162, 16 as
amended, in relation to Presidential
Decree (P.D.) No. 1517.
Meanwhile, Teodora sold the property
to the respondent Tiu Uyping brothers.
The trial court rendered a decision in
favor of petitioner Sen Po Ek.
However, the CA reversed the said
decision.
ISSUES:
Whether or not petitioners have a right
of first refusal
RULING:
Petitioner Sen Po Ek does not have
a right of first refusal to assert
against private respondents.
Neither any law nor any contract
grants it preference in the purchase
of the leased premises.
P.D. No. 1517, otherwise known as
"The Urban Land Reform Act",
pertains to areas proclaimed as urban
land reform zones. Lot Nos. 50 and
106 are both located in Tacloban City,
which has not been declared as an The petition is hereby DENIED. No costs
urban land reform zone.

R.A. No. 1162, on the other hand, only

deals with expropriation of parcels of
land located in the City of Manila,
which the leased premises are not.

Finally, Article 1622 of the New Civil

Code, which provides that:

"Whenever 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 the adjoining land
shall have the right of redemption, also
at a reasonable price.

When two or more owners of adjoining

lands wish to exercise the right of pre-
emption or redemption, the owner
whose intended use of the land in
question appears best justified shall be
preferred,"

Article 1622 only deals with small

urban lands that are bought for
speculation where only adjoining lot
owners can exercise the right of pre-
emption or redemption. Petitioner Sen
Po Ek is not an adjoining lot owner, but
a lessee trying to buy the land that it
was leasing.

Indeed the right of first refusal may be

provided for in a lease contract.
However in this case, such right was
never stipulated in any of the several
lease contracts between petitioner and
Sofia. Such grant of the right of first
refusal must be clearly embodied in a
written contract, but there is none in
the present case.

DISPOSITION:
 Matutina, Monico Joseph Right of legal pre-emption
L. be exercised except
Sales / 2B
Case Digest Nelson Cabales, et al. vs. Court of Appeals
NELSON CABALES and RITO
CABALES, Petitioners, vs. COURT
OF APPEALS, JESUS FELIANO and
ANUNCIACION FELIANO,
Respondents..
G.R. No. 162421, August 31, 2007
FACTS:
Rufino Cabales died and left a parcel
of land to his surviving wife Saturnina
and children Bonifacio, Albino,
Francisco, Leonora, Alberto and
petitioner Rito
Brothers and co-owners Bonifacio,
Albino and Alberto sold the subject
property to Dr. Corrompido for
₱2,000.00, with right to repurchase
within eight (8) years. The three (3)
siblings divided the proceeds of the
sale among themselves, each getting
a share of ₱666.66.
The following month Alberto secured a
note ("vale") from Dr. Corrompido in
the amount of ₱300.00.
Alberto died leaving his wife and son,
petitioner Nelson.
Within the eight-year redemption
period, Bonifacio and Albino tendered
their payment of ₱666.66 each and
also Saturnina paid for the share of her
deceased son, Alberto, including his
"vale" of ₱300.00.
Subsequently, Saturnina and her four
(4) children Bonifacio, Albino,
Francisco and Leonora sold the
subject parcel of land to respondents-
spouses Jesus and Anunciacion
Feliano for ₱8,000.00. At the time of
the execution of the sale, Alberto and
Rito are still minors
or redemption
thus theirshall
sharenot
on
the payment
within thirty
would days
only from
be delivered
notice
to them upon reaching the age of 21.
24-year old petitioner Rito Cabales
acknowledged receipt of the sum of
₱1,143.00 from respondent Jesus
Feliano, representing the former’s
share in the proceeds of the sale of
subject property.
When Saturnina died, Petitioner
Nelson then learned from petitioner
Rito of the sale of subject property. He
signified his intention to redeem the
subject land during a barangay
conciliation process that he initiated.
Respondents-spouses maintained that
petitioners were estopped from
claiming any right over subject
property considering that (1) petitioner
Rito had already received the amount
corresponding to his share of the
proceeds of the sale of subject
property, and (2) that petitioner Nelson
failed to consign to the court the total
amount of the redemption price
necessary for legal redemption. They
prayed for the dismissal of the case on
the grounds of laches and prescription.
The trial court ruled against petitioners.
The CA affirmed the decision that
neither Alberto nor Rito can exercise
the right of redemption.
ISSUES:
Whether or not petitioner Nelson
Cabales and Rito Cabales as co-
owners of subject land may exercise
the right of legal redemption
RULING:
As regards to Rito, he ratified the
sale of his legal guardian when he
received his share from the sale of
the property. As regards to Nelson,
even though Saturnina was not his
legal guardian and that there was
no written notice nevertheless he
signified his intention to redeem
subject property during a barangay
conciliation process in 1993 but
only filed a complaint on 1995
hence the 30-day redemption
commenced in 1993.
The contract of sale as to the pro-
indiviso share of petitioner Rito was
unenforceable. However, when he
acknowledged receipt of the proceeds
of the sale on July 24, 1986, petitioner
Rito effectively ratified it. This act of
ratification rendered the sale valid and
binding as to him.
Art. 1623. The right of legal pre-
emption or redemption shall not be
exercised except within thirty days
from the notice in writing by the
prospective vendor, or by the vendor,
as the case may be. The deed of sale
shall not be recorded in the Registry of
Property, unless accompanied by an
affidavit of the vendor that he has
given written notice thereof to all
possible redemptioners.
The right of redemption of co-owners
excludes that of adjoining owners.
Clearly, legal redemption may only be
exercised by the co-owner or co-
owners who did not part with his or
their pro-indiviso share in the property
held in common. As demonstrated, the
sale as to the undivided share of
petitioner Rito became valid and
binding upon his ratification on July 24,
1986. As a result, he lost his right to
redeem subject property.
However, as likewise established, the
sale as to the undivided share of
petitioner Nelson and his mother was
not valid such that they were not
divested of their ownership thereto.
Necessarily, they may redeem the
subject property from respondents-
spouses. But they must do so within
thirty days from notice in writing of the
sale by their co-owners vendors
Petitioner Nelson cannot feign
ignorance of the sale of subject
property in 1978. To require strict proof
of written notice of the sale would be to
countenance an obvious false claim of
lack of knowledge thereof, thus
commending the letter of the law over
its purpose, i.e., the notification of
redemptioners.
The Court is satisfied that there was
sufficient notice of the sale to petitioner
Nelson. The thirty-day redemption
period commenced in 1993, after
petitioner Nelson sought the barangay
conciliation process to redeem his
property. By January 12, 1995, when
petitioner Nelson filed a complaint for
legal redemption and damages, it is
clear that the thirty-day period had
already expired.
DISPOSITION:
WHEREOF, the petition is DENIED.
The assailed decision and resolution of
the Court of Appeals of October 27,
2003 and February 23, 2004 are
AFFIRMED WITH MODIFICATION.
The Register of Deeds of Southern
Leyte is ORDERED to cancel Original
Certificate of Title No. 17035 and to
issue in lieu thereof a new certificate of
title in the name of respondents-
spouses Jesus and Anunciacion
Feliano for the 6/7 portion, and
petitioner Nelson Cabales and his
mother for the remaining 1/7 portion,
pro indiviso.
 Matutina, Monico Joseph Right of legal pre-emption
L. be exercised except
Sales / 2B
Case Digest
ADALIA B. FRANCISCO, Petitioner,
v. ZENAIDA F. BOISER,
Respondent..
G.R. No. 137677, May 31, 2000
FACTS:
Petitioner Adalia B. Francisco and
three of her sisters, Ester, Elizabeth
and Adeluisa, were co-owners of four
parcels of registered lands which a
building is erected. They sold 1/5 of
their undivided share of the said land
to their mother, Adela Blas.
Later on, Adela Blas sold her share to
respondent Zenaida who is another
sister of petitioner.
On August 5, 1992, Petitioner received
summons filed by respondent
demanding her share in the rentals
from the tenants of the building.
Petitioner then informed respondent
that she was exercising her right of
redemption as a co-owner of the
subject property.
On August 12, 1992, she deposited
the redemption price with the Clerk of
Court. This move to redeem the
property was interposed as a
permissive counterclaim. However,
said case was dismissed after
respondent was declared non-suited
with the result that petitioner’s
counterclaim was likewise dismissed.
Thereafter, petitioner instituted a Civil
Case before the RTC. She alleged that
the 30-day period for redemption
under Art. 1623 of the Civil Code had
not begun to run against her since the
vendor, Adela Blas, never informed
her and the other owners about the
sale to Respondent.
or redemptionSheshall
learned
not
about the
within
salethirty
only on
days
August
from5,
notice
1992,
after she received the summons.
Adalia B. Francisco vs. Zenaida F. Boiser
Respondent claimed that petitioner
knew about the sale as early as May
30, 1992, because she wrote petitioner
a letter informing the latter about the
sale and also sent with a copy of the
Deed of Sale between respondent and
Adela Blas. Additionally, to prove that
petitioner received these letters there
are letter sent by petitioner to the
tenants to disregard respondent’s
request of paying rent to her.
The RTC dismissed the petitioner’s
complaint. Likewise the CA affirmed
the decision of the CA.
ISSUE:
Whether or not the letter of May 30,
1992 sent by respondent to petitioner
notifying her of the sale of Adela Blas’
1/5 share of the property to
respondent, containing a copy of the
deed evidencing such sale, can be
considered sufficient as compliance
with the notice requirement of Art.
1623 for the purpose of legal
redemption.
RULING:
Under 1623, the law clearly states
that it should be the vendor, not
vendee, who will give the notice.
Under exceptional circumstances
the written notice is deemed
complied such as in this case when
the redemptioner received
summons regarding the sale. Hence
the 30-day period should run on
when the redemptioner received the
summons and not when she
received the notice from the vendee
of the sale.
Art. 1623 of the Civil Code provides:

The right of legal pre-emption or
redemption shall not be exercised
except within thirty days from the
notice in writing by the prospective
vendor, or by the vendor, as the
case maybe. The deed of sale shall
not be recorded in the Registry of
Property, unless accompanied by an
affidavit of the vendor that he has
given written notice thereof to all
possible redemptioners.
The right of redemption of co-owners
excludes that of adjoining owners.
"The reasons for requiring that the
notice should be given by the seller,
and not by the buyer, are easily
divined. The seller of an undivided
interest is in the best position to know
who are his co-owners that under the
law must be notified of the sale. Also,
the notice by the seller removes all
doubts as to fact of the sale, its
perfection, and its validity, the notice
being a reaffirmation thereof; so that
that party notified need not entertain
doubt that the seller may still contest
the alienation. This assurance would
not exist if the notice should be given
by the buyer."
In the present case, for instance, the
sale took place in 1986, but it was kept
secret until 1992 when vendee (herein
respondent) needed to notify petitioner
about the sale to demand 1/5 rentals
from the property sold. It is, therefore,
unjust when the subject sale has
already been established before both
lower courts and now, before this
Court, to further delay petitioner’s
exercise of her right of legal
redemption by requiring that notice be
given by the vendor before petitioner
can exercise her right. For this reason,
we rule that the receipt by petitioner of
summons in Civil Case No. 15510 on
August 5, 1992 constitutes actual
knowledge on the basis of which
petitioner may now exercise her right
of redemption within 30 days from
finality of this
In Alonzo v. Intermediate Appellate
Court, we dispensed with the need for
written notification considering that the
redemptioners lived on the same lot on
which the purchaser lived and were
thus deemed to have actual
knowledge of the sales. We stated that
the 30-day period of redemption
started, not from the date of the sales
in 1963 and 1964, but sometime
between those years and 1976, when
the first complaint for redemption was
actually filed. For 13 years, however,
none of the co-heirs moved to redeem
the property.
We thus ruled that the right of
redemption had already been
extinguished because the period for its
exercise had already expired.
In the present case, as previously
discussed, receipt by petitioner of
summons in Civil Case No. 15510 on
August 5, 1992 amounted to actual
knowledge of the sale from which the
30-day period of redemption
commenced to run. Petitioner had until
September 4, 1992 within which to
exercise her right of legal redemption,
but on August 12, 1992 she deposited
the P10,000.00 redemption price. As
petitioner’s exercise of said right was
timely, the same should be given
effect.
DISPOSITION:
Petition is GRANTED and the decision
of the Court of Appeals is REVERSED
and the Regional Trial Court, Branch
122, Caloocan City is ordered to effect
petitioner’s exercise of her right of
legal redemption in Civil Case No. C-
1705

Matutina, Monico Joseph Right of legal pre-emption
L. be exercised except
Sales / 2B
Case Digest
CARLOS ALONZO and CASIMIRA
ALONZO, petitioners, vs.
INTERMEDIATE APPELLATE
COURT and TECLA PADUA,
respondents.
G.R. No. 72873, May 28, 1987
FACTS:
Five brothers and sisters inherited in
equal pro indiviso shares a parcel of
land registered in 'the name of their
deceased parents.
In 1963, Celestino Padua transferred
his undivided share to petitioners by
way of absolute sale.
In 1964, Eustaquia Padua sold her
own share to the same vendees, in a
"Con Pacto de Retro Sale," for the
sum of P 440.00.
After which, the petitioners occupied
the area sold to them and
subsequently enclosed the same with
a fence. Their son Eduardo Alonzo
and his wife, with their consent, built a
semi-concrete house on a part of the
enclosed area.
In 1976, Mariano Padua, one of the
five coheirs, sought to redeem the
area sold to the spouses Alonzo, but
his complaint was dismissed when it
appeared that he was an American
citizen. However, in 1977, Tecla
Padua, another co-heir, filed her own
complaint invoking the same right of
redemption claimed by her brother.
The trial court also dismiss this
complaint, now on the ground that the
right had lapsed, not having been
exercised within thirty days from notice
of the sales in 1963 and 1964.
Although thereor was
redemption
no written
shall
notice,
notit
was held
within
thatthirty
actualdays
knowledge
from notice
of the
sales by the co-heirs satisfied the
requirement of the law. The court
noted that the co-heirs lived on the
same lot including that of the
petitioners. Moreover, the petitioners
and the private respondents were
close friends and neighbors whose
children went to school together. Thus,
It is highly improbable that the other
co-heirs were unaware of the sales.
Especially that petitioner erected a
permanent semi-concrete structure,
which was done without objection on
her part or of any of the other co-heirs.
of ascertaining the truth were readily
available upon inquiry, but the party
neglects to make it, he will be
chargeable with laches, the same as if
he had known the facts.

However, the CA reversed the ruling
stating that written notice must be
given by the vendor.
ISSUE:
Whether or not there the 30-day period
for redemption had expired long before
the complaint was filed in 1977
RULING:
The period run sometime between
1963 and 1964; and also in 1976
when the first complaint was filed
as the other co-heirs were actually
informed of the sale and that
thereafter the 30-day period started
running and ultimately expired.
The instant case presents no such
problem because the right of
redemption was invoked not days but
years after the sales were made in
1963 and 1964. The complaint was
filed by Tecla Padua in 1977, thirteen
years after the first sale and fourteen
years after the second sale. The delay
invoked by the petitioners extends to
more than a decade, assuming of
course that there was a valid notice
that tolled the running of the period of
redemption.
It was the perfectly natural thing for the
co-heirs to wonder why the spouses
Alonzo, who were not among them,
should enclose a portion of the
inherited lot and build thereon a house
of strong materials. This definitely was
not the act of a temporary possessor
or a mere mortgagee. This certainly
looked like an act of ownership. Yet,
given this unseemly situation, none of
the co-heirs saw fit to object or at least
inquire, to ascertain the facts, which
were readily available. It took all of
thirteen years before one of them
chose to claim the right of redemption,
but then it was already too late.
DISPOSITION:
The petition is granted. The decision of
the respondent court is REVERSED
and that of the trial court is reinstated,
without any pronouncement as to
costs. It is so ordered.

The following doctrine is also worth

noting:
While the general rule is, that to
charge a party with laches in the
assertion of an alleged right it is
essential that he should have
knowledge of the facts upon which he
bases his claim, yet if the
circumstances were such as should
have induced inquiry, and the means
 Matutina, Monico Joseph 2nd sentence respondents
L.
Sales / 2B
Case Digest Primary Structures
PRIMARY STRUCTURES CORP.
represented herein by its President
ENGR. WILLIAM C. LIU, petitioner,
vs. SPS. ANTHONY S. VALENCIA
and SUSAN T. VALENCIA,
Respondents.
G.R. No. 150060, August 19, 2003
FACTS:
Petitioner is a private corporation and
the registered owner of Lot 4523
situated in Liloan, Cebu, with an area
of 22,214 square meters. Adjacent to
the lot of petitioner are parcels of land,
identified to be Lot 4527, Lot 4528,
and Lot 4529 with a total combined
area of 3,751 square meters. The
three lots have been sold by Mendoza
to respondent spouses. Petitioner
learned of the sale of the lots only in
January, 1996, when Mendoza sold to
petitioner Lot No. 4820, a parcel also
adjacent to Lot 4523 belonging to the
latter.
Forthwith, it sent a letter to
respondents, on 30 January 1996,
signifying its intention to redeem the
three lots.
Petitioner sent another letter to
respondents tendering payment of the
price paid to Mendoza by respondents
for the lots. Respondents informed
petitioner that they had no intention of
selling the parcels.
Invoking the provisions of Articles
1621 and 1623, petitioner filed an
action against respondents to compel
the latter to allow the legal redemption.
Petitioner claimed that neither
Mendoza, the previous owner, nor
- Right of redemption
gave formaloforco-owners
even just a
verbal notice of the sale of the lots as
so required by Article 1623 of the Civil
Code. Corp. vs. Sps. Anthony and
After trial, the Regional Trial Court of
Cebu dismissed petitioners complaint
and respondents' counterclaim; both
parties appealed the decision of the
trial court to the Court of Appeals. The
appellate court affirmed the assailed
decision.
ISSUE:
Whether or not petitioners have a right
of legal redemption
RULING:
Under Art 1621 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
Article 1621 and Article 1623 of the
Civil Code, which read:
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.
ART. 1623. The right of legal pre-
emption or redemption shall not be
exercised except within thirty days
from the notice in writing by the
prospective vendor, or by the vendor,
as the case may be. The deed of sale
shall not be recorded in the Registry of
Property, unless accompanied by an
affidavit of the vendor that he has
given written notice thereof to all
possible redemptioners.
execution of the deed of sale. It could
not thus be considered a binding
equivalent of the obligatory written
notice prescribed by the Code.
DISPOSITION:
Petitioner is hereby given a period of
thirty days from finality of this decision
within which to exercise its right of
legal redemption. No costs.

In order that the right may arise, the

land sought to be redeemed and the
adjacent property belonging to the
person exercising the right of
redemption must both be rural lands. If
one or both are urban lands, the right
cannot be invoked. Respondents in the
instant case, however, did not dispute
before the Court of Appeals the
holding of the trial court that the lots in
question are rural lands.

Article 1621 of the Civil Code

expresses that the right of redemption
it grants to an adjoining owner of the
property conveyed may be defeated if
it can be shown that the buyer or
grantee does not own any other rural
land. The appellate court, sustaining
the trial court, has said that there has
been no evidence proffered to show
that respondents are not themselves
owners of rural lands for the
exclusionary clause of the law to
apply.

Additionally, petitioners did not comply

to the provision of Art 1623. The deed
of sale cannot be taken as a written
notice contemplated by law.
Respondents, like the appellate court,
overlook the fact that petitioner is not a
party to the deed of sale between
respondents and Mendoza and has
had no hand in the preparation and