EXTINGUISHMENT OF SALE Both real and personal property may be the
subject matter of pacto de retro sales or
Art. 1600. Sales are extinguished by the
sales with right to repurchase although
same causes as all other obligations, by
there are certain articles which are
those stated in the preceding articles of
applicable only to immovables.
this Title, and by conventional or legal
redemption.
Nature of conventional redemption
Causes for the extinguishment of sale:
1. Common – also means of
extinguishing all other contracts like
payment, loss, condonation, etc.
2. Special – recognized by law on
sales (1484, 1523, 1539, 1540,
1542, 1556, 1560, 1567, and 1591).
3. Extra-special – conventional
redemption and legal redemption.
CONVENTIONAL REDEMPTION
Art. 1601. Conventional redemption shall
take place when the vendor reserves
right to repurchase the thing sold, with
the obligation to comply with the
provisions of Art. 1616 and other
stipulations which may have been
agreed.
Conventional redemption
It is the right which the vendor reserves to
himself, to reacquire the property sold
provided he returns to the vendee the price
of the sale, the expenses of the contract,
any other legitimate payments made
therefor and the necessary and useful
expenses made on the thing sold (Art.
1616), and fulfills other stipulations which
may have been agreed upon.
Subject matter of conventional
redemption
1. Purely contractual: it is a right
created by virtue of an express
contract and not a mandate of law.
2. Accidental stipulation: its nullity
cannot affect the sale itself since the
latter might be entered into without
said stipulation.
3. Real right when registered: binds
third persons.
4. Potestative: it depends upon the will
of the vendor.
5. Resolutory condition: when
exercised, the right of ownership
acquired by the vendee is
extinguished.
 In a pacto de retro sale, the title
or ownership of the property
sold is immediately vested in the
vendee a retro, subject only to
the resolutory condition of
repurchase by the vendor a
retro within the stipulated period.
6. Power or privilege that the vendor
has reserved for himself and not an
obligation.
7. Reserved at the moment of the
perfection of the contract: if the right
of repurchase is agreed upon
afterwards, there is only a promise
to sell which produces different
rights and effects and is governed by
Art. 1479.
8. Owner of the property sold is the
person entitled to exercise this right.
9. It gives rise reciprocal obligation that
of returning the price of sale and
other expenses, on the part of the
vendor and that of delivery the
 property and executing a deed of Once the instrument of absolute sale is
sale therefor, on the part of the executed, the vendor no longer reserves the
vendee. right to repurchase, and any right thereafter
granted the vendor by the vendee in a
separate instrument cannot be a right of
Option to buy v. right to repurchase repurchase but some other right like the
option to buy.
Right to
Option to buy
repurchase
Generally a
Right to redeem v. right of repurchase
principal, albeit
It is not a separate
preparatory, The right to redeem becomes functus officio
contract but merely
contract and may on the date of its expiry, and its exercise
part of the main
be created after the period is not really one of
contract of sale.
independent of
redemption but a repurchase.
another contract.
It may exist prior to Redemption is by force of law and purchase
It must be
or after the is bound to accept redemption while
embedded in a
perfection of the repurchase after redemption period,
contract of sale
sale or be imposes no obligation to accept.
upon the latter’s
embedded in
perfection.
another contract. After expiry, the purchaser may or may not
It does not need a It must have a re-sell the property but no law will compel
separate consideration him to do so. And he is not bound by the bid
consideration in separate and price; it is entirely within his discretion to set
order to be valid distinct from the a higher price because the property already
and effective. purchase price.
belongs to him as owner.
The redemption
It may exceed 10
period cannot
years.
exceed 10 years.
It requires notice to Art. 1602. The contract shall be
be accompanied by presumed to be an equitable mortgage,
a tender of It requires only in any of the following cases:
payment, including notice of such
consignment when exercise be given (1) When the price of a sale with right
tender of payment to the optioner. to repurchase is unusually
cannot be inadequate;
effectively made. (2) When the vendor remains in
The valid exercise possession as lessee or
The exercise of this
of an option right otherwise;
right extinguishes
results into the (3) When upon or after the expiration
the existing
perfection of the of the right to repurchase another
contract of sale.
contract of sale. instrument extending the period
of redemption or granting a new
The right to repurchase is not a right period is executed;
granted the vendor by the vendee but a (4) When the purchaser retains for
right reserved by the vendor in the himself aa part of the purchase
instrument of sale as one of the stipulations price;
of the contract.
 (5) When the vendor binds himself to
pay the taxes on the thing sold;
(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.
In any of the foregoing cases, any
money, fruits or other benefits to be
received by the vendee as rent or
otherwise shall be considered as interest
which shall be subject to the usury laws.
Equitable mortgage
It is one which lacks the proper formalities,
form or words, or other requisites prescribed
by law for a mortgage, but shows the
intention of the parties to make the property
subject of the contract as security for a debt
and contains nothing impossible or contrary
to law.
Requisites of equitable mortgage:
1. The parties enter into what appears
to be a contract of sale; and
2. Their intention is to secure an
existing debt by way of mortgage.
Pactro de retro v. mortgage
In pacto de retro, ownership is transferred
but the ownership is subject to the condition
that the seller might recover the ownership
within a certain period of time.
In mortgage, ownership is not transferred
but the property is merely subject to a
charge or lien as security for the compliance
of a principal obligation (loan).
If the seller does not repurchase the
property upon the very day named in the
contract, he loses all interest thereon, while
the mortgagor does not lose his interest in
the property if he fails to pay the debt at its
maturity.
In the case of a pacto de retro, there is no
obligation resting upon the purchaser to
foreclose. Neither does the vendor have any
right to redeem the property after the
maturity of the debt.
On the other hand, it is the duty of the
mortgagee to foreclose the mortgage if he
wishes to secure a perfect title thereto, and
after the maturity of the debt secured by the
mortgage and before foreclosure, the
mortgagor has a right to redeem.
 A vendor who decides to redeem or
repurchase a property sold with
pacto de retro in a sense stands as
the debtor and the vendee as the
creditor of the repurchase price.
Pactum commissorium
A stipulation for automatic vesting of title
over the security in the creditor in case of
debtor’s default.
The creditor cannot appropriate the things
givens by way of pledge or mortgage or
dispose of them, otherwise that would result
in pactum commissorium. The proper
remedy is the foreclosure of the mortgage. If
there is no foreclosure, the debtors retain
the ownership.
Elements of pactum commissorium:
1. There should be a pledge or
mortgage wherein property is
pledged or mortgaged by way of
 security for the payment of the
principal obligation; and
2. Thee should be a stipulation for an
automatic appropriation by the
creditor of the thing pledged or
mortgaged in the event of non-
payment of the principal obligation
within the stipulated period.
Art. 1603. In case of doubt, a contract
purporting to be a sale with right to
repurchase shall be construed as an
equitable mortgage.
Art. 1604. The provisions of Art. 1602
shall also apply to a contract purporting
to be an absolute sale.
Art. 1606 refers to conventional
redemption
For conventional redemption to take place,
the vendor should reserve, in no uncertain
terms, the right to repurchase the thing sold.
Thus, the right to redeem must be expressly
stipulated in the contract of sale in order
that it may have legal existence.
Time to redeem
1. Express agreement – cannot exceed
10 years
2. No agreement – 4 years from date of
contract. If the 4-year period has not
yet expired, the seller cannot be
considered delinquent.

Art. 1605. In the cases referred to in Arts.

1602 and 1604, the apparent vendor may
ask for the reformation of the instrument.
Reformation
To correct the instrument so as to make it
express the true intent of the parties,
reformation may be availed of.
Art. 1606. The right referred to in Art.
1601, in the absence of an express
agreement, shall last 4 years from the
date of the contract.
Should there be an agreement,
the period cannot exceed 10 years.
However, the vendor may still
exercise the right to repurchase within
30 days from the time final judgment was
rendered in a civil action on the basis
that the contract was a true sale with
right to repurchase.
Can the period of redemption be
extended after the original period
expired?
The right to redeem later must exist at the
time of the sale and not afterwards.
Otherwise, this would merely be a promise
to sell on the part of the purchaser.
Effect of excess period
The period in exceed of 10 years is void, but
the nullity of the stipulation to repurchase on
account of the period fixed for its exercise
exceeding that permitted by law, certainly
does not affect or vitiate the validity of sale.
Said stipulation is merely accidental to the
sale, and may or may not be adopted at will
by the parties.
Consignation
The right to repurchase is not a debt, thus,
no consignation is necessary. Consignation
applies only to debts.
Right to redeem even after the final
judgment
After the courts have decided by a final or
executory judgment, the contract is a pacto
de retro and not a mortgage. The vendor
may still have the privilege of repurchasing
within 30 days.
The seller must exercise the right within the
30-day period. It is not sufficient to manifest
the desire to repurchase. There must be an
actual and simultaneous tender of payment,
unless of course, there is a definite refusal
to permit repurchase. The 30-day period
must be counted from the time of finality of
judgment.
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
Art. 1616 shall not be recorded in the
Registry of Property without a judicial
order, after the vendor has been duly
heard.
Reason
To prevent usurious transactions.
Art. 1608. The vendor may bring his
action against every possessor whose
right derived from the vendee, 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
Land Registration Law with respect to
third persons.
Art. 1609. The vendee is subrogated to
the vendor’s rights and actions.
A seller can only transfer what he has, or if
the seller was not really the owner but only
a usufructuary, the buyer only acquires this
usufructuary right.
Rights vendor can transfer to vendee:
1. Right to mortgage property
2. Right to continue prescription
3. Right to receive fruits
Art. 1610. 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.
Effect of creditor’s exercise of right of
redemption
This would merely be a case of dacion en
pago.
Art. 1611. 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 Art. 498,
may compel the vendor to redeem the
whole property, if the latter wishes to
make use of the right of redemption.
Art. 1612. If several persons, jointly and
in the same contract, should sell an
undivided immovable with a right of
repurchase, 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.
Art. 1613. In the case of the preceding
article, the vendee may demand of all the
vendors or co-heirs that they come to an
agreement upon the repurchase of the
whole thing sold; and should they fail to
do so, the vendee cannot be compelled
to consent to a partial redemption.
Art. 1614. Each 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.
Art. 1615. If the vendee should leave
several heirs, the action for redemption
cannot be brought against each of them
except for his own share, whether the
thing be undivided, or it has been
partitioned among them.
But if the inheritance has been
divided, and the thing sold has been
awarded to one of the heirs, the action
for redemption may be instituted against
him for the whole.
Art. 1616. 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, any
other legitimate payments made
by reason of the sale;
(2) The necessary and useful
expenses made on the thing sold.
What seller must give buyer if
redemption is made
1. Price
2. Expenses of contract
3. Any other legitimate payments made
by reason of the sale
4. Necessary expenses
5. Useful expenses
 The seller a retro must pay for the
useful improvements introduced by
the buyer a retro.
 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.
GR: Art. 1478. The expenses for the
execution and registration of the sale shall
be borne by the vendor, unless there is a
stipulation to the contrary.
XPN: If said expenses had been made by
the buyer a retro, said expenses must be
reimbursed.
Effect if buyer refuses redemption
Seller is not obliged to offer payment to
redeem.
BAR Q: The wife during the marriage
sold under pacto de retro her
paraphernal property consisting of a
house and lot. A few weeks later, she
died. The husband thereupon
LEGAL REDEMPTION
repurchased the property with his
exclusive capital. To whom will the Art. 1619. Legal redemption is the right
property belong: to the husband or to to be subrogated, upon the same terms
the heirs of the wife? and conditions stipulated in the contract,
in the place of one who acquires a thing
A: To the heirs of the wife, one of whom is
by purchase or dation in payment, or by
the husband himself. Being paraphernal
any other transaction whereby
property at the time of its sale under pacto
ownership is transmitted by onerous
de retro, its redemption or repurchase by
title.
the husband must be deemed as having
revested its ownership in the heirs of the
wife, subject to a lien in favor of the
husband for the amount paid out with his Legal redemption
exclusive capital. The nature of the property It is created by law. It can be exercised
repurchased is not determined by the against a transferee who gets the property
character of the money used for its because of:
repurchase, but by the ownership of the
right of redemption. a. Purchase
b. Dation in payment
c. Any other transaction whereby
Art. 1617. If at the time of the execution ownership is transmitted by onerous
of the sale there should be on the land, title (not donation or succession)
visible or growing fruits, there shall be
no reimbursement for or prorating of
those existing at the time of redemption, Pre-emption v. redemption
if no indemnity was paid by the
Pre-emption
purchaser when the sale was executed.
a. Arises before sale
Should there have been no fruits
b. No rescission because no sale as
at the time of the sale, and some exist at
yet exists
the time of redemption, they shall be
c. Action here is directed against
prorated between the redemptioner and
prospective seller
the vendee, giving the latter the part
corresponding to the time he possessed Redemption
the land in the last year, counted from
the anniversary of the date of the sale. a. Arises after sale
b. Rescission of original sale is allowed
c. Action here is directed against the
buyer
Art. 1618. The vendor who recovers the
thing sold shall receive it free from all
charges or mortgages constituted by the
vendee, but he shall respect the leases Property affected
which the latter may have executed in Movable or immovable property.
good faith, and in accordance with the
custom of the place where the land is
situated.
Art. 1620. A co-owner of a thing may
exercise the right of redemption in case
the shares of all the 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.
Who can exercise right of legal
redemption?
All co-owners of the things held in common.
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.
Against whom right can be exercised
Only against a stranger and not against
adjacent rural owner who purchases the
property. The stranger must already have
rural land (not an adjacent rural one).
Art. 1622. 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 brought
merely for speculation, is about to be re-
sold, the owner of any adjoining land has
a right of pre-emption at a reasonable
price.
If the re-sale has been perfected,
the owner of the adjoining land shall
have a 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.
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.
 EXTINGUISHMENT OF SALE governed also by the Statute of
Frauds.
Conventional redemption
 When the contract of sale has been
Conventional redemption shall take place reduced in writing, parol evidence
when the seller reserved for himself the may be adduced to prove the
right to repurchase the thing sold, with the agreement granting the seller a right
obligation to: to repurchase the property sold,
since the deed of sale and the verbal
(a) Return the price of the sale agreement allowing the right of
(b) The expenses of the contract repurchase should be considered as
(c) Any other legitimate payments made an integral whole, then the deed of
by reason of the sale; and sale relied upon by the seller is in
(d) The necessary and useful expenses itself the note or memorandum
made on the thing sold. evidencing the contract, which would
 Even when a sale is one with a right take the case outside the provisions
of repurchase, the buyer would still of the Statute of Frauds.
be subrogated to the seller’s rights  The best evidence rule would not be
and actions during the period when an obstacle to the adducement of
redemption can be made by the such parol evidence where it is
seller. shown that the parol agreement was
 The redemption feature of sale does the moving cause of the written
not prevent its full consummation. contract, and it appears that the
 The right of repurchase is not a right written contract was executed on the
of repurchase is not a right granted faith of the parol contract or
to the vendor by the vendee in a representation, and especially so
subsequent instrument, but is a right when the right of repurchase proved
reserved by the vendor in the same by parol evidence is not inconsistent
instrument of sale as one of the with the terms of the written contract.
stipulations of the contract.
 Once the instrument of absolute sale Right to
Option to buy
is executed, the vendor can no repurchase
longer reserve the right to Generally a
principal, albeit
repurchase, and any right thereafter It is not a separate
preparatory,
granted the vendor by the vendee in contract but merely
contract and may
a separate instrument cannot be a part of the main
be created
right of repurchase but some other contract of sale.
independent of
right like the option to buy in the another contract.
instant case. It may exist prior to
It must be
 If contract of sale is void, right of or after the
embedded in a
repurchase reserved is also void. perfection of the
contract of sale
sale or be
upon the latter’s
embedded in
perfection.
another contract.
Right of repurchase may be proved by
It does not need a It must have a
parol evidence
separate consideration
 Since a right to repurchase is merely consideration in separate and
a feature of the contract of sale, it is order to be valid distinct from the
and effective. purchase price.
 The redemption the contract into a mere indebtedness nor
It may exceed 10
period cannot an equitable mortgage, and since there was
years.
exceed 10 years. an agreement, although void, the provisions
It requires notice to of Art. 1606 would apply in that the seller
be accompanied by may exercise his right of redemption within
a tender of It requires only a period of 10 years from the date of
payment, including notice of such contract.
consignment when exercise be given
tender of payment to the optioner.
cannot be
effectively made. c. The Mysterious Aberration of
The valid exercise Misterio
The exercise of this
of an option right
right extinguishes Misterio v. Cebu State College of
results into the
the existing Science and Technology: a deed of sale
perfection of the
contract of sale. with right to repurchase was executed in
contract of sale.
December, 1956 over a parcel of land
“subject to the right of the vendor to
Period of redemption repurchase the property after the high
a. When no period agreed upon school shall have ceased to exist, or shall
have transferred its site elsewhere.”26
In case of stipulated right to redeem, When the condition did happen in June,
in the absence of an express agreement as 1983 (or more than twenty years from the
to the period when the right can be date of the contract), the Court ruled that
exercised, it shall last 4 years from the date since no period was agreed upon, the
of the contract. applicable period under Article 1606 of the
Civil Code should be four (4) years to be
The four year period was held to
counted, not from the “date of the contract”
begin from the happening of the stipulated
as required in the article, but within four (4)
condition contained in the covering deed of
years from the happening of the condition,
sale, rather than from the date of the
even though it would exceed the maximum
contract, and even when the entire covered
10-year limitation provided in said Article
period from the date of the contract would
1606, which has been strictly construed by
exceed 10 years.
the Supreme Court in previous rulings
discussed above. Was it oversight on the
part of the Supreme Court or does Misterio
b. When period agreed upon establish the new rule on redemption
Should there be an agreement as to period?
the period of redemption, the period cannot
exceed 10 years; if it exceeds 10 years, the
agreement is valid only for the first 10 years. d. Pendency of action tolls
redemption period
If it was stipulated in a sale a retro
that the seller cannot redeem the property The pendency of an action brought
within a period of 19 years from the in good faith and relating to the validity of a
execution of the contract, such stipulation is sale a retro tolls the running of the period of
void since is violated Art. 1601. Although redemption.
such nullity of the stipulation did not convert
 In Misterio, 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
property is not dependent upon the prior
final interpretation by the court of the said
phrase.
e. Non-payment of price does not
affect running of redemption
period
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
In a sale a retro, the buyer has a right to the
immediate possession of the property sold,
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.
How redemption is effected
The seller can avail himself of the right of
repurchase by returning to the buyer:
a. The price of the sale
b. Expenses of contract and any other
legitimate payments made by reason
of the sale
c. The necessary and useful expenses
made on the thing sold
 The seller may bring his action
against every possessor whose right
is derived from the buyer, 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.
 A seller a retro must pay for the
useful improvements introduced by
the buyer a retro.
 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.
a. How redemption exercised
In order to exercise the right to
redeem, only tender of payment is sufficient.
It is enough that a sincere or genuine tender
of payment and not a mock or deceptive
one was made.
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.
The filing of the action itself within
the period of redemption is equivalent to a
formal offer to redeem.
There is actually 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.

b. Multi-parties cases