Extinguishment of Sale1

EXT. OF SALE CAUSES: (1) Common – those causes w/c are also the means of ext, all other contracts like paymt, loss of the thing, condonation, etc. (2) Special – those causes which are recognized by the law on sales such as Arts. 1484, 1532, 1539, 1540, etc. (3) Extra-special – those causes which are given special discussion by the NCC: conventional and legal redemption SEC. 1 – CONVENTIONAL REDEMPTION ART. 1601 – CONVENTIONAL REDEMPTION - it is a right which the vendor RESERVES to himself, to reacquire the ppty sold provided he returns to the vendee the price of the sale, the exp of the contract, any other leg.paymts made therefor and the necessary and useful exp made on the thing sold (Art. 1616), and fulfils other stipulations w/c may have been agreed upon. NOTE: Both real and personal ppties may be the subject matter of pacto de retro sales or sales w/ right of repurchase. NATURE OF CONVENTIONAL REDEMPTION (1) Purely contractual because it is a right created, not by mandate of law, but by virtue of an EXPRESS contract stipulation. (2) Accidental stipulation, and therefore, its nullity CANNOT affect the sale itself since the later might be entered into w/o said stipulation. rd (3) REAL right when reg., bec. it binds 3 persons. (4) Potestative bec it depends upon the will of the vendor. (5) A resolutory condition bec. when exercised the right of ownership acquired by vendee is EXT. [NOTE: in pacto de retro sale, title or ownership of the ppty sold is IMMEDIATELY vested in the vendee a retro, s.t resolutory condition of repurchase by vendor a retro win a stipulated period. (6) Not an obl. but a powepr or privilege that vendor has reserved for himself. (7) Reserved at the moment of perfection of the contract (for there is only a promise to sell if the right to repurchase is agred upon afterwards – governed by Art. 1479)

(8) The person entitled to exercise the right is rd the OWNER of the pty sold and notp any 3 party. (9) It gives rise to a RECIPROCAL obligation that of returning the price of the sale and other exp., on the part of the vendor (Art. 1616) and that of delivering the ppty and executing a deed of sale therefor, on the part of the vendee. ILLUSTRATIVE CASE: FACTS: S, vendor a retro sold to B, a Chinese, vendee a retro, a parcel of land. The sale was made in 1932, before adoption of the old Consti. No repurchase was made by S. At the expiration of the right of repurchase, the 1935 Consti contains a PROHIBITION against aliens owning lands save in cases of hereditary succession. ISSUE: W/N prohibition applies to B, an alien who acquired the land before the 1935 Consti became effective HELD: No. Tha nature of the sale w/ right of repurchase is such that the ownership over the thing sold is transferred to the vendee upon the execution of the contract assuming the reqts of delivery present. [Since vendor a retro failed to repurchase the same, vendee now the owner]. OPTION TO BUY v RIGHT OF REPURCHASE 1. The right of repurchase is NOT a right grated the vendor by vendee BUT a right RESERVED by the vendor in the same instrument of sale as one of the stipulations of contract. 2. Once the DOAS is executed, the vendor no longer reserves the right to repurchase, and any right thereafter the vendor by the vendee in a separate inst. CANNOT be a right of repurchase, but some other right like OPTION to BUY. a. Accordingly, DOAS and an option to buy together, CANNOT be considered as evidencing contract of sale w/ pacto de retro. Such option does NOT evidence a right to repurchase. b. Similarly, it as been held that an agreement to repurchase becomes a promise to sell when made after an abs. sale bec.where sale is made w/o such agreement, the purchaser acquires the thing sold abs., and if he afterwards grants the seller the right of repurchase  new contract entered into by the purchaser.

RIGHT TO REDEEM v RIGHT TO REPURCHASE The right to redeem becomes functus officio on the date of expiry, and its exercise after the period is NOT really one of redemption but a repurchase. NOTE: Redemption is by force of law; the purchaser at public auction is bound to accept redemption. Repurchase, however, of a foreclosed ppty, after redemption period, imposes NO obl. After expiry, the purchaser may or may NOT resell the ppty but NO law WILL compel him to do so. And he is not bound by the bid price, for after all, the ppty belings to him as owner. ART. 1602 – EQUITABLE MORTGAGE An equitable mortgage is one w/c 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 ppty subj. of the COS, as security for a debt, and contains nothing impossible or contrary to law. DECISIVE FACTOR: Intention of the parties THE PACTO DE RETRO PROBLEM Art. 1602 is a new provision and is one of the suitable remedies sponsored by the Code Commission to PROVIDE SAFEGUARDS and RESTRICITONS against the evil of sales w/ a right of repurchase, commonly called pacto de retro sales OFTEN used to conceal a contract of loan secured by a mortgage.

usury laws (now legally inexeistent – 6%p.a in absence of any stipulation) PACTO DE RETRO v MORTGAGE PACTO DE RETRO Ownership is immediately transferred provided there is delivery, but such ownership is s.t condition that the seller migjht recover the owernship w/in a certain period of time. If the seller does NOT repurchase the ppty upon the very day named in contract, he loses al interest thereon title is now consolidated upon the buyer by op of law There is NO obl, resting upon the purchaser to foreclose. Neither the vendor have any right to redeem the ppty after the maturity of the debt

MORTGAGE Ownership is NOT transferred but the ppty is MERELY s.t a charge or lien as security for the compliance of a principal obl., usually a loan.

While a mortgagor does NOT lose his ppty, if he fails to pay his debt at its maturity but merely subject the ppty FORECLOSURE and PUBLIC SALE. 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 mortgage and BEFORE FORECLSURE, mortgagor has the right to redeem.

POLICY OF LAW: Discouraged/not favored pacto de retro sales and prevent circumvention of the prohibition against usury.and pactum commissorium (Creditor CANNOT appropriate things given by way of pledge or mortgage, or dispose of them; any stipulation to the contrary is null and void.

NOTE: sole right of the vendor under a pacto de retro sale is that of redemption.  But a sale SUBSEQTLY made by a vendor to an innocent purchaser for value could DEFEAT the vendee’s title and right to possession of the latter’s right is NOT properly registered or annotated.

OTHER REASONS OF UNFAVORED CONTRACT: In all so-called contracts of sale w/ right of repurchase, the real intention of the parties is that the pretended p.p is MONEY loaned, and on order to secure pymt of the loan, a contract purporting to be a sale w/ pacto de retro is drawn up.

WHEN CONTRACT w/ RIGHT TO REPURCHASE PRESUMED AN EQUITABLE MORTGAGE

It also applies to leases. Pacto de retro is drawn up as another contract purporting to be a lease of ppty to the supposed vendor, who pays in money or in crops a so-called rent. This simulated rent is in truth and in fact INTEREST on the money loaned. In many instances, interest is usurious hence violation of

REQUISITES: (a) Parties entered into a contract denominated as a COS w/ right of repurchase or purporting to be an abs sale (b) That their intention was to secure an existing debt by way of mortgage of the ppty

In EQUITABLE MORTGAGE, mortagagor retains ownership of the ppty but s.t foreclosure in case of his failure to pay his obl.

OTHER INSTANCES: c. PERIOD OF REDEMPTION IS EXTENDED AFTER EXPIRATION.

6 INSTANCES OPF EQUITABLE MORTGAGE: d. PURCHASER/BUYER RETAINS PART OF THE P.P a. PRICE OF SALE UNUSUALLY INADEQUATE The SC, in determining w/n the price of ppty is inadequate, has often referred to its ASSESSED VALUE. NOTE: The mere disproportion of the price to the value of the ppty, in the absence of other circumstances incompatible w/ the COS, CANNOT alone justify the conclusion that the transaction is a pure and simple loan. (a) Inadequacy is NOT sufficient to set aside a sale unless it is grossly inadequate or purely shocking to the conscience (Cachola v CA); or is such that the mind revolts at it and such that a reasonable man would neither directly or indirectly be likely to consent to it. (b) In the absence of evid, as to the MV of parcel of land at the time of its sale, one cannot reasonably conclude the price at which it was sold was inadequate.

e. VENDOR BINDS HIMSELF TO PAY TAXES ON THE THING SOLD. Or the alleged vendee never declared in his name for tax purposes. The fact that the land sold continued to be reg. in the name of vendor CANNOT be invoked as the same can only be neglect on part of vendee. f. PARTIES REALLY INTENDED AN EQUTIABLE MORTGAGE. Instead of sale, i.e., the transaction shall secure the paymt of a debt or the perf.of any other obl.by way of a mortgage. Must be shown by all surrounding circumstances. g. OTHERS: When vendee was given the right to appropriate fruits thereof in lieu of receiving interest on the loan. EX. An arrangement, where ownership of land is supposedly transferred to the buyer who provides for the funds to redeem the ppty from the bank but NONETHELESS allows the seller to later on buy back the ppty. HELD: Equitable mortgage

b. VENDOR REMAINS IN POSSESSION

COMPONENTS OF EQUITABLE MORTGAGE:

In a COS, the legal title to the ppty is immediately transferred to the vendee; RETENTION by the vendor of the possession of the ppty is INCONSISTENT w/ the vendee’s acquisition of ownership under a true sale.

1. The “repurchase price” paid by the apparent vendor is considered the PRINCIPAL LOAN;

(a) Thu where the contract provides: “Iy is agreed that the vendor shall have the right to possess, use and build on the ppty during the period of redemption,” there is an ACKNOWLEDGMENT by the vendee of the right of the vendor to retain possession of ppty making it CONTRACT OF LOAN GUARANTEED by MORTGAGE, and NOT a COS. [Observe that in these instances of equitable mortgage, the ownership only “purports” to pass title to another when by implication, the vendor still owns the ppty]. (b) But mere tolerated possession by the vendor of the ppty sold where vendee had good reasons why he opted NOT to assert his superior right of possession is NOT enough to prove that the transaction between the parties was an EQUITABLE MORTGAGE.

2. Any money, fruits or other benefit received thereafter by the apparent vendee, are considered INTEREST on said loan. OTHER INDICIA OF INTENTION TO EXECUTE MORTGAGE. A contract shd be construed as a mortgage or a loan instead of pacto de retro sale when its terms are AMBIGUOUS (Art. 1603) and other instances: (1) Vendor in urgent need of money (2) Automatic approp.by vendee of ppty sold stipulated – such stipulation is pactum commissorium which enables the mortgagee to acquire ownership of the mortgaged ppty w/o foreclosure - void (3) Vendee given possession of CTC – common practice of money lenders of taking phys. Possession of the CTC of other docs evidencing ownership to ensure faithful compliance w/ the obl. to pay loan.

(4) Escalation of p.p every month stipulated. It is a common characteristic of a loan to SECURE return of money invested w/ substantial profit or interest. (5) Vendor borrowed from vendee money used in buying the ppty sold (6) Vendor of low intelligence and illiterate. PRICE IN PACTO DE RETRO SALES USUALLY LOWER. The price is usually is les than an abs sale for the reason that in the former, the vendor expects to reacquire or redeem the ppty sold, or else he may sell his right to redeem and thus recover losps he claims suffered by reason of inadequacy of price. PRACTICE: to FIX a relatively reduced price to afforpd the vendor a retro every facility to redeem the ppty.

ART. 1603 – IN CASE OF DOUBT: EQUITABLE MORTAGR ART. 1604 – ART.1602 APPLIES TO CONTACT PURPORTING AS ABS SALE Equitable mortgage is favoured by law. NOTE: Where the contract is deemed an equitable mortgage, ownership of the ppty CANNOT be consolidated until after the foreclosure of the mortgage has been undertaken. RATIONALE: Equitable mprtgage effects a LESSER transmission of rights and interests than a COS, since debtor does NOT surrender all rights to his ppty but smply CONFERS upon creditor the right to collect what is owing from the value of the thing as security. In this kind of mortagage, title remains w/ vendor. REMEDY OF CREDITOR: Foreclose mortagage and sell the ppty at public auction. NOTE: no conveyance of land, even if already registered in the name of the transferee and issuance of new CTC, can be allowed w/c will enable a party to escape from the operation of equitable doctrine. “EQUITY LOOKS THRU THE FORM AND CONSIDERS THE SUBSTANCE. Again, PACTO DE RETRO SALES NOT FAVORED and will be construed as a mere loan unless the court can see that terms not unconscionable. CASE: MAGTIRA v CA (“aking inilipat, ipinagbili nag biling mabibiling muli”)

ART. 1605 – WHEN VENDOR MAY AL FOR REFORMATION REFORMATION – remedy grated by law by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties when such intention is NOT expressed in the instrument. (Art. 1359) So, if the party really intended a mortgage but the instrument states that the ppty is sold ABSOLUTELY or w/ right of repurchase, the same may be reformed so that the contract shd appear to be a mortgage and NOT an abs sale.

ART. 1606 – PERIOD FOR EXERCISE OF RIGHT OF REDEMPTION This Art. refers to conventional redemption. It does NOT apply where the contract is NOT one of sale w/ right if repurchase. For CONVENTIONAL REDEMPTION to take place: vendor should RESERVE, in no uncertain terms, the right to repurchase the thing sold. The RIGHT T REDEEM must be EXPRESSLY stipulated in COS in order that it may have legal existence. RULES: (1) No agreement granting right. – there is no right of redemption since the sale shd be considered an abs sale. (2) Agremeent merely grants right. – If parties agreed only on the right to redeem on part of vendor but there is a TOTAL absence of express stipulation as to the time w/in w/c the repurchase shd be made, then PERIOD: 4 YEARS FROM DATE OF CONTRACT. (3) Definite period of redemption agreed upon – If partie agreed on a definite period, then such right must be exercised w/in the period fixed PROVIDED it does NOT exceed 10 yrs. (4) Where the right is SUSPENDED by agreement until after a certain time, event or condition, the period shall be COUNTED from time such right could be exercised, but NOT exceeding 10 years from the execution of the contract. (5) Period agreed upon exceeds 10 years – the vendor a retro has STILL 10 years from the execution of the contact to exercise his right of redemption.

(6) Period of redemption intended but NOT specified. If parpties agreed that vendor shall have a right to redeem and they intend a period which, however, is NOT specified, then redemption per. = 10yrs. (7) FJ that contract is pacto de retro. Art. 1606 gives the vendor a retro “the right to repurchase w/in 30 days from the time FJ was rendered in a civil action, on the basis that the contract was a true sale w/ the right to repurchase.  There must be an EXPRESS finding that the transaction is one of pacto de retro. Such 30 day period is PEREMPTORY because the policy of the law is NOT to leave the purchaser’s title in uncertainty beyond said period. It is NOT prescriptive period but is more of requisite or condition precedent to the exercise of right of legal redemption. SUPPOSE: S may repurchase the ppty “at anytime he has the money.” The right of repurchase may be exercised w/in the period of 10 yrs from date of execution of contract a time having been expressly stipulated. WHEN ART. 1606, PAR. , N/A (1) Contract found to be an abs.sale. – Here, there could NOT even be a period of redemption. (2) Sale known and admitted by vendor as pacto de retro. Since in this case, he has knowledge at the time contract was perfected. (3) Partly abandoned position that transaction an equitable mortgage after judicial declaration of transaction as a pacto de retro sae. RECKONING DATES (1) Date of the contract. –Pars. 1 and 2, date must be counted from the date of the contract. It must be referred to be that w/c date from w/c the contract produces its effects. Ex. Contract is s.t a suspensive condition, date of contract must run from the time of the FULFILLMENT of the suspense condition. (2) Date of FJ – Judgment becomes FINAL after the lapse of period to perfect an appeal

NOTE: The original term may be extended provided that the extension inclduing the orig. term, shall NOT exceed 10 years; otherwise, ext. is VOID. CASE: FACTS: S sold to B a parcel of land stipulating in the deed of sale that S can repurchase the ppty w/in a per. Of 18 mos.from date of sale and that S will remain in possession of land as lessee. It also provide that in case of failure of th vendor-lessee (S) to pay rentals, the lease shall automatically terminate and the right of ownership of the vendee (B) shall become absolute. ISSUE: Is the penal clause valid? HELD: YES. The lease that S executed on the ppty may be considered as a means of delivery or tradition by constitutum possessorium. Such clause is said to be COMMON in a sale w/ pacto de retro and as such it received the sacnrion of courts. (Amigo v Teves) ART. 1607 –JUDICIAL ORDER FOR RECORDING OF CONSOLIDATION OF OWNERSHIP. (1) If real ppty is involved and the vendor failed to redeem w/in the period agreed upon, vendee’s title becomes IRREVOCABLE by operation of law BUT THE CONSOLIDATION OF OWNERSHIP in vendee shall NOT be recorded in RD w/o judicial order and until vendor has been duly heard. PURPOSE: to minimize the evils w/c pacto de retro sale has caused in the hands of the usurpers. JUDICIAL ORDER is necessary in order to det.the true nature of the transaction and to prevent the interposition of buyers in gf. ACQUISITION OF OWNERSHIP BY VENDEE A RETRO. It is plain from said Art. that the acquisition of ownership by vendee a retro is AUTOMATIC, i.e., once there is a FAILURE to redeem w/in the stipulated period, or in the absence thereof, as provided by law.  Failure of vendee a retro to consolidate his title does NOT impair scuch title and ownerhip bec. the method PRESCRIBED in this Art.is MERELY FOR REG. AND CONSOLIDATION PURPOSES of such titles.  The judicial hearing contemplated refers NOT to the consolidation itself, but merely for the purpose of REGISTERING the consolidation.

 What is the effect of failure to consolidate?Abs. ownership CANNOT be recorded in the RD (hence it will NOT affect rd 3 persons) ACTION TO CONSOLIDATE OWNERSHIP. (1) Ordinary civil actions – Consolidation shall be effected thru an ordinary civil action cognizable by RTC wherein vendor a retro is made a party defendant. This Art. contemplates a contentious proceeding wherein vendor a retro MUST be named respondent in the caption.  See RULE 63 (2) Reg. proceedings. – Where land has been sold under apcto de retro, the vendor a retro may file an app. for the orig. reg. of the land.  However, should the period of redemption expire during the pendency of reg. and ownership to ppty consolidated in the vendee a retro, the latter shall be SUBSTITUTED for the app. and may continue proceedings.

2. A right, NOT an obligation. – The right to redeem is what it is: a right, NOT an obl; therefore, consignation is NOT reqd to preserve the right to redeem. 3. Reconveyance is an obl. – The obl. to reconvey the land upon proper demand for redemption is an obligation ad rem that attaches to redeemable lands in the hands of whomsoever shd be in possession thereof, unless the action shd be barred buy some defense or excuse recognized by law. If the ACTUAL possessot is ultimately adjudged to reconvey the ppty to the plaintiffs-appellant, he may proceed against the appellees to enforce warranty against eviction, if and proper; but this right of present possessor is NOT one belonging to the would be redemptioners. (Alarcon v Esteva) ART. 1609 – RIGHTS ACQUIRED BY VENDEE A RETRO

ART. 1608 – NATURE OF RIGHT TO REDEEM

(1) Vendee SUBROGATED to vendor’s rights. – Subrogation transfers to the person subrogated the credit w/ all the rights thereto appertaining. (Art. 1303).  This art. is logical bec. a pacto de retro sale TRANSFERS OWNERSHIP to the vendee although s.t the condition of repurchase.

1. A real right. – It can be concluded on this Art. that the right to repurchase is of a real character and shd NOT be considered personal. It may be exercised against every possessor whose right is derived from the vendee a retro even if the second contract makes no mention of the right of repurchase.

 As owner, the vendee, for ex., may TRANSFER or rd ALIENATE his right to 3 p., mortgage the ppty, enjpoy the fruits thereof, recover the ppty agiasnt every possessor, and perform all other acts of ownership subj. only to the right of redemption of the vendor.

EXCEPTION: Provisions of the Mortgage Law and the rd Land Reg. Law w r.t 3 persons. It means that the vendor a retro CANNOT exercise his right of redemption against a subseq.transferee for value and in gf if his right is NOT properly reg.or annotated.

(2) Right to eject vendor. – Prior possession by the vendee a retro of the ppty is NOT a condition precedent in an UNLAWFUL DETAINER action against the vendor a retro who, after having failed to redeem, and title in the vendee a retro had been consolidated, refused to vacate the ppty.

Ex. S sold his land (NOT REG.) to B w/ right to repurchase w/in 2yrs to B. If BEFORE 2 years B sold the same land to C, a purchaser for value and in gf, S may still REPURCHASE the ppty from C even if in the sale bet. B ad C, no mention was made of the right of S.

ART. 1610 REDEEM

NOTE: If the land, however, is reg. under the Torrens Sys. and the right of S was NOT annotated on B’s CTC, S CANNOT exercise his right to redeem against C who reg. the land FREE from all liens and encumbrances NOT noted on the CTC.

- RIGHT OF VENDOR’S CREDITOR TO

The right to redeem ppty being, it is answerable for the debts of the vendor provided the vendor’s ppties are first exhausted. The exhaustion MUST be est.to the sat.of the vendee. This Art,refers to all kinds of creditors, whether ordinary or preferred, EXCEPT those in favor exist a mortgage or antichresis upon the very ppty sold recorded prior to the sale. They need not exhaust. All these latter creditors have to do is to FORECLOSE their rights, ignoring the rights of the vendee.

ART. 1611 – REDEMPTION IN SALE OF PART OF UNDIVIDED IMMOVABLE The purpose of the above Art. is to discourage coownership w/c is recognized as undesirable, since it does NOT encourage the improvement of the ppty co-owned.

4. Under Art. 1620, the right of a co-owner who chooses NOT to redeem accrues to the benefit of the others. The extent of the share of the redeeming coowner is NOT taken into account except as provided nd in the 2 par.thereof.

(1) A co-owner may demand the partition of the thing owned in common insofar as his share his concerned.

Ex. A, B, and C are co-owners of a parcel of land. If they should sell the ppty to D w/ a right to repurchase in the contract, each one of them may exercise that right only as regards his OWN share or 1/3 portion of the ppty.

(a) If the thing is essentially INDIV., it may be allotted to the co-owner who shall indemnify the others.

ART. 1614 – REDEMPTION IN SEPARATE SALES BY CO-OWNERS OF UNDIVIDED IMMOVABLE.

(b) If the co-owners CANNOT agree that the thing be allotted to one of them, it shall be sold and its proceeds distributed. (Art. 498)

Ex. If A, B, C are heirs and sold their resp.shares to D w/ right of repurchase in separate isnturments and at diff. dates, each one of them may exercise his right indep.of the others and D cannot compel him to redeem the whole ppty.

(2) In either case, the vendee who ACQUIRES the WHOLE of an undivided immovable a part of which is s.t a right to repurchase, has a right to demand that a vendore a retro, who likes to exercise phsi right of redemption, REDEEM the whole of the ppty. Ex. A, B, and C are co-owners of an undivided parcel of land. A sold his undivided portion to D w/ right to repurchase. As a result of partition, D, who is now one of the co-owners, acquired the WHOLE land after paying the portions belonging to B and C. If A would like to repurchase the portion sold by him, D may compel him to redeem the ENTIRE parcel of land so that the ppty will NOT revert again to a state of co-ownership. ART. 1612-1613 – REDEMPTION IN JOINT SALE BY CO-OWNERS/CO-HEIRS OF UNDIVIDED IMMOVABLE. 1. The co-owners of an undivided immovable sold by them jointly or collectively and in the same contract w/ the right o repurchase, can exercise such right only as regards their respective shares. 2. Co-heirs of the vendor of an undivided immovable can exercise the right of redemption only for the respecptive portions they have inherited. 3. Vendee a retro can refuse partial redemption he may require ALL vendors or all the heirs to redeem the entire ppty or to agree to its redemption by any one of them.  This right is given to the vendee in line w/ the object of the law to put an end to coownership whenever possible.

ART. 1615 – REDEMPTIO AGIANST HEIRS OF THE VENDEE The vendor a retro can exercise the right to redeem against the heirs of the vendee a retro w/ respect ONLY to their resp.shares, whether the thing be undivided or it has been partitioned among them. HOWEVER, if by partition the ENTIRE PPTY HAS BEEN AWARDED or ADJUDICATED to one of the heirs, the vendor ccan exercise the right to redeem against said heir for the whole. Ex. A sold his parcel of land to B w/ right to repurchase. Then B died leaving C, D, E, his children as heirs. In this case the right of redemption by A is against eache of the heirs only for his resp.share or for 1/3 of the ppty. If ppty has been awarded to C by partition, then action for redemption may be intituted against him for ENTIRE ppty. ART. 1616 – OBL OF VENDOR A RETRO 1. Price. The law speaks “price of the sale” and NOT the value of the thing. It is lawful, however, for the parties to agree that the price to be returned will be more or less that the orig. sum paid by vendee. 2. Exp pof the contract and other leg. Exp – Ex. Exp for execution and reg.of the sale were paid by the vendee, the same shall be reimbursed by the vendor. 3. Necessary and useful exp. First are the exp.incurred for the preservation of the thing or tose

w/c seek to prevent waste, det.or loss, while second are w/c increase the val. of the thing or create improvements thereon, such as a house. ART. 1617 – RIGHTS OF THE PARTIES AS TO THE FRUITS OF LAND This applies only when the parties have NOT provided for any sharing arrangement w/ r.t fruits exiting at the time of redemption. NOTE: It refers only to natural and civil fruits. RULES: (1) If there were fruits at the time of sale and the vendee pd for them, he must be reimbursed at the time of redemption as the paymt forms part of the p.p (2) If no indemnity was pd by the vendee for the fruits, there shall be no reimbursement for those existing at the time of redemption. (3) If the ppty had no fruits at the time of sale and some exist at the TIME OF RDEMTPION, they shall be apportioned prop.bet. redemptioner and the vendee, giving the latter a share in proportion to the time he possessed the ppty during the last yr COUNTED from the anniv.of the date of sale to compensate the vendee for his exp. (4) If there were crops at the time of the sale and B pd for them, B is entitled to reimbursement, or to the fruits for the last yr, bec. having pd for them, the effect is the same as if there were no crops on the land.

ART. 1618 – RIGHT TO VENDOR A RETRO TO RECOVER THING SOLD FREE FROM CHARGES The vendee a retro may alienate, encumber, or perform other acts of ownership over the thing sold. But his ownership being revocable upon redemption, all acts done by him are also REVOCABLE. Thus he may borrow money and mortgage the ppty but when the vendor a retro redeems, the vendee a retro is obliged to redeem the mortgage.  The vendor has the right to receive the ppty in the same condition in which it was at the time of the sale.

LEGAL REDEMPTION

ART. 1619 – LEGAL REDEMPTION - the 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 or dation in paymt, or by any other transaction whereby ownership is transmitted by onerous title. TRANSFER OF OWNERHIP BY ONEROUS TITLE NOTE: Legal redemption may take place NOT only in purchase or dation in paymt but in any other transfer of ownership by onerous title. It has been held, however, that it cannot take place in barter and in the transmission of ppty by hereditary title. The right is NOT avail.where there is only a mortgage or lease. DATION IN PAYMT – dacion en pago is the transmission of the ownership of a thing by the debtor to the creditor as the accepted equivalent of THE PERFORMANCE OF THE OBL.  In this special mode of paymt, the debtor offers another thing to the creditor who accepts it as equivalent of pymt of an outstanding debt. WHAT ACTUALLY TAKES PLACE IN DACION EN PAGO? Obj. novation of the obl.where the thing is offered as an accepted equiv.perf.of an obl. is considered as the object of the COS, while the debt is considered as the purchase price. BASIS AND NATURE REDEMPTION

OF

RIGHT

OF

LEGAL

1. The NATURE of conventional and legal rights of redemption is IDENTICAL, EXCEPT for the source of the right. While conventional redemption arises from VOL. AGREEMENTS, legal redemption proceeds from law. NOTE: the concept of legal redemption may be converted into one of conventional redemption. Ex. Thus, where there was vol. agreement as to EXTENSIONS of redemption period granted at the request of the vendors followed by commitment by them to PAY THE REDEMPTION PRICE at FIXED date, it was held that concept of legal redemption is CONVERTED into one of conventional. In such case, the period of redemption is that agreed upon by the parties (Lazo v. Rep.Surety and Insurance Co., Inc.) 2. This right is NOT predicated on proprietary right but on a bare STATUTORY PRIVILEGE to be exercised only by the person named in the statute.  In other

words the statute does NOT make actual ownership at the time of sale or redemption a condition precedent, the right ff. the person and NOT the ppty. Under Sec.30 Rule 39, the ppty sold s.t redemption may be redeemed by the judgment debtor or his successor-in-interest in the whole or any part of the ppty. In an extrajudicial foreclosure sale, the mortgagor, his successor-in-interest, judgment crediot, etc. having lien on the ppty subseq.to the mortgage, may REDEEM the same. 3. Legal redemption is in the nature of a MERE PRIVILEGE, created partly for the reason of pub. policy and partly benefit and convenience of the redemptioner to afford him way out into w/c he has been in thrust. INSTANCES OF LEGAL REDEMPTION

vendee on all lessees affected and the DAR upon reg. of sale. ART. 1620 – REDEMPTION BY CO-OWNERS Purpose: to reduce the no. of participants until the community is done away w/, as being a hindrance to the devt and better admin of the ppty. As legal redemption is intended t MINIMIZE coownership, it can no longer be invoked where there had been an actual partition of the ppty so that coownership no longer exists. RIGHT OF LEGAL REDEMPTION OF CO-OWNER The right of legal redemption among co-owner presupposes the existence of a co-ownership at the time the conveyance is made. The ff are the requisites for the right to exist:

1. Under Art. 1088 – Shd any one of the heirs sell his hereditary rights to a stranger before the partition, ANY or ALL of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, PROVIDED they do so w/in a period of 1 month from the time they were notified in writing of the sale by the vendor.

(1) There must be CO-OWNERSHIP of a thingl (2) There must be ALIENATION of the shares of all the OTHER co-owners or of any one of them; rd (3) The sale must be to a 3 PERSON or stranger, i.e., non-co-owner; (4) The sale must be BEFORE partition; (5) The right must be EXERCISED w/in period provided in Art.. 1623 (within 30 days from the notice in writing by the prospective vendor or vendor , as the case may be) (6) The vendee must be REIMBURSED for the price of the sale

NOTE: in the admin and liquidation of the estate of a deceased person, sales ordered by the probate court for pymt of debts are FINAL and NOT s.t legal redemption. 2. Under the special laws: a. RA 7160 (LGC) – redemption by owner of real ppty SOLD for delinquent taxes. b. SEC. 119, CA 141 – Repurchase by a homesteader of homestead sold

Redemption by a co-owner w/in the period prescribed by law inures to the benefit of all the other co-owners. Ex.

c. SEC. 30, RULE 39 – Redemption by judgment debtor or redemptioner of real ppty sold on execution.

1. A, B, and C are co-owners of an undivided ppty valued at P500,000. A sells his interest to D for P200,000.

d. SEC. 3, RULE 68 – Redemption by the mportgagor after mortgaged ppty has been JUDICIALLY foreclosed and sold. Period is 90 days but before confirmation of sale by the court. If EXTRAJUDICIAL foreclosure sale, mortgagor may redeem the ppty w/in 1 year from the date of reg. of the sale. (Sec. 6, Act No. 3135); and

B or C may exercise the right of redemption by reimbursing D the price of the sale. If both B and C redeem the interest sold by A, each of them shall pay P100,000 to D, which is the proportion of their resp. shares in the co-ownership. If price of P200,000 is grossly excessive, the same may be equitably reduced by the court.

e. RA No. 3844 – Redemption by an agri lessee of landholding sold by the landowner. The period is 180 days from notice of writing which shall be served by

2. The ppty inherited by A, B, and C, heirs, were mortgaged by X, decedent, during his lifetime, to D. The redemption of the whole ppty by C w/ his

personal funds does NOT vest in him sole ownership over said ppty but will inure to the benefit of all coowners.  In other words, it will NOT put an end to the lasting state of co-ownership. Redemption is NOT a mode of terminating a co-ownership. BY WHOM AND AGAINST WHOM RIGHT MAY BE EXERCISED 1. By the very nature of the right of legal redemption, a co-owner’s right to redeem is invoked only after rd the shares of the other co-owners are sold to a 3 party. 2. Co-owners have NO elgal redemption against each rd other; the right exists only if the sale is made to a 3 person A third person, within the meaning of this Art. is anyone who is NOT a co-owner. rd

NOTE: the term 3 person or stranger refers to ALL persons who are NOT heirs in succession, and by heirs are meant NOT only those who are called either by will of the law to SUCCEED the deceased and who ACTUALLY succeeds. WHEN RIGHT CANNOT BE INVOKED 1. 2. 3.

Thing owned in common partitioned. Shares of all co-owners sold Thing owned in common had been offered for sale by all co-owners.

PRICE OF REDEMPTION 1. in GENERAL, the redemption price is the P.P pd by the owner to the selling co-owners. 2. The price must be reasonable. This is to prevent collusion bet. the buyer and the selling co-owner. 3. If the amt pd is more than the redemption price, co-owner who made the repurchase can recover from the buyer the diff. ART. 1621 – RIGHT OF LEGAL RDEMPTION OF ADJACENT OWNERS OF RURAL LANDS REQUISITES: (1) Both the land of the one exercising the right of redemtiion and the land ought to be redeemed MUST be rural; (2) The land must be adjacent; (3) There ust be an alienation;

(4) The piece of rural land alienated must not exceed 1 ha.; (5) The grantee or vendee must already own any other rural land; and (6) The rural land sold must not be separated by brooks, drains, ravines, roads and other apparent servitudes from the adjoining lands. When the land exceeds 1 ha., the adjacent owners are NOT given the right of legal redemtpion bec. this may lead to the creation of big landed estates. RURAL – land adopted and used for agri’l or pastoral purposes. PURPOSE: To benefit adjacent owner and public weal as well and prevent an adjoining real estate belonging to another owner/s the area of which does not exceed 1 ha,. From passing into the hads of a person other than someone among the adjacent owners. ART. 1622 – RIGHTS OF PRE-EMPTION AND LEGAL REDEMPTION OF ADJACENT OWNERS OF URBAN LANDS (a) Pre-emption – which has been defined as the act or right of purchasing before others. It is exercised before the sale or resale agianst the would-be vendor; and (b) Redemption – exercised after the sale has been perfected against the vendee. The recognition of the right of redemption will result in the rescission of the sale. REQUISITES: (a) That the piece of land is URBAN land; (b) The land is so SMALL that a major portion thereof CANNOT be used for any practical purpose win a reasonable time; (c) It was bought merely for SPECULATION; (d) The land is ABOUT TO BE RESOLD, or that its resale has been perfected. In case 2 or more adjoining owners desire to exercise the right of legal redemption, the law prefers him whose intended use of the land appears best justified URBAN – refers to the character of the community or vicinity in which it is found. Therefor, if the land is somehow dedicated to agri, but if it is located w/in the CENTER of population or the more or less populated portion of the town, still URBAN.

CASES:

Art. 1623 stresses the need for notice in WRITING in the 3 species of legal redemption:

De Santos v City of Manila FACTS: City of Manila and Arellano University entered into the contract of exchange whereby 5 parcels of land belonging to the city were ceded to the university for 3 parcels belonging to the latter. X brought a suit, claiming the right of redemption and for pre-emption over one of the 5 city parcels w/ an area of 221.50 sqm., adjoining X’s ppty and lots of the univ. ISSUE: Does X have the right of legal redemption under Art. 1622? HELD: NO. The 2 conditions (Nos. 2 and 3) above must be alleged and proved. X not only failed to allege them but could NOT have proved them bec., in the first palce, the parcel of land in question consists of lots in Manila as found by the trial court, and in the second place, the City of Manila did NOT acquire the lot by purchase. Furthermore, it was alleged by the university that, as an educational institution whose existing site was NOT enough for its needs, it could devote the said parcel to serve PUBLIC INTEREST, which intended use entitled the univ. to preference under the last par.of Art. 1622. Del Pilar case: FACTS: Having discovered that part of her ancestral house was erected on an adjoining lot of 59 sqms., X wanted to exercise her right of pre-emption but the lot owner asked for exorbitant sum of P9,000. Later, the 59 sqm lot was sold to another adjoining owner for only P1,500.00 ISSUE: Who has better right to the lot, X or the other adjoining owner? HELD: X, bec. her intended use of the land appears best justified. Her house was occupying the lot thru no fault on her part. “SPECULATE” – to enter into business transaction or venture from w/c the profits or return are conjectural bec. the undertaking is outside the ordiinary course of business. ART. 1623 – EXERCISE OF RIGHT OF PRE-EMPTION OR REDEMPTION

(1) While the co-owners right of legal redemption is a substantipal right, it is exceptional in nature, limited in its duration and s.t strcit compliance w/ LEGAL REQTS.  One of these is that redemptioer shd tender pymt of the redemption money w/in 30 DAYS from notice of the sale by coowner. (2) The right of redemption of co-owners is preferred over that of adjoining owners. In other words, the law attaches more importance to the necessity to put an end to tenancy in common than to the purpose of encouraging the devt of agri. PERIOD FOR EXERCISE OF RIGHT 1. 2.

Abs. and non-extendible. – period provided is peremptory and non-extendible. Reason: fundamental policy of the law is to discourage the keeping for a long time of ppty in a state of uncertainty, beyond 30 day per., a sit. w/c obviusly is unjust to th purchaser and prej’l to the public interest.

NOTICE BY VENDOR OR PROSPECTIVE VENDOR (NOTICE TO CO-OWNERS). The 30 day period is counted from the NOTICE IN WRIITNG given by the prospective vendor or by the vendor, as the case may be. REASON: the seller of an undivided interest is in the best position to know who are his co-owners that under the law must be notfied of the sale. Also, the notice by the seller removes all doubts as to the fact of the sale its perfectio, and its validty, the notice being a reaffirmation thereof. In stressing the mandatory character of the reqt, the law states that the deed of sale shall NOT be recorded in the RD UNLESS the same is accompanied by an AFFIDAVIT OF THE VENDOR THAT HE HAS GIVEN WRITTEN NOTICE to all redemptioners. -

-

So long as the redemptioners are informed in wrting of the sale and the particulars thereof, the 30 days for redemption start running. Accdngly, the mere furnishing of the DOAS is = to giving of written notice.

NOTICE DISPENSED W. (a) HOWEVER, if co-owners have ACTUAL knowledge of sale, notice may be dispensed w/. Why? Bec. notice of a fact already known to them would be superfluous. (b) If the redemptioner and vendor living on same lot; (c) Receipt of summons by a co-owner has been held to constitute actual knowledge of the sale,. BUT NOTE: Not all circumstances where actual knowledge = notice. SC in Primary Structures Corp v Valencia reiterated the rule that written notice of sale is MANDATORY. HOW RIGHT EXERCISED.

Where ass.is on account of PURE LIBERALITY on the part of the assigno, the rules on donation would be peprtinent; where VALUABLE CONSIDERATION is involved, ass. partakes of the nature of a COS. rd

2. As a conseq.of the ass., the 3 party (assignee) steps into the shoesof the orig.creditor (assignor) as a SUBROGEE of the latter.  The assignee acquires NOT only the credit itself but also the right to endorse it as agianst the debtor of the assignor. 3. It nay be done gratuitusly (by donation) or onerously (by exchange or dacion en pago), whatever may be the legal cause, it is really a sale. THUS, the SUBJ MATTER: credit or right assigned; CONSIDERATION: price pd for the credit or right; and CONSENT: agreement of the parties to the ass.of the credit and other incorporeal rights.

(1) Tender or consignation – well-settled: formal offer to redeem must be accompanied by a valid tender of redemption price and that the filing of a judicial action, plus consignation of redemption price w/in the period of redemption = formal offer to redeem.

4. As in sale, the assignee CANNOT acquire a greater right than that pertaining to the assignor. Hence, the act of ass.CANNOT operate to erase liens or restriction burdening the right assigned.

(2) Consignation in court – a formal offer to redeem accompanied by a bona fide tender of the redemption price, although proper, is NOT essential where the right to redeem is exercised thru the filing of a judicial action and SIMULTANEOUS deposit of the redemption price w/ the sheriff w/in the per. Of redemption.

The ass.of credit and other incorporeal rights is perfected from the moment the parties agree upon the credit or right assigned and upon the price. (Art. 1475)

REASON FOR ALLOWING JUDICIAL CONSIGNATION: redemptioner might NOT know the vendee’s whereabouts or the latter might even conceal himself to prevent redemption.

ASSIGNMENT OF CREDITS INCORPOREAL RIGHTS

AND

OTHER

ART. 1624 – ASSIGNMENT OF CREDIT (1) Ass. Of credit – contract by w/c the owner (assignor/crediotr) of a credit and other incorporeal rights transfers, either ONEROUSLY or GRATUITOUSLY, to another (assignee) his rights and rd actions against a 3 person (debtor) NATURE OF ASS. OF CREDIT 1. Consensual, bilateral, generally onerous, and commutative or aleatory contract.

PERFECTION OF CONTRACT FOR ASS.OF CREDIT.

HOWEVER, the assignee will acquire ownership only upon delivery. Thus, when sale is made thru public inst., the EXECUTION thereof shall be equivalent to the delivery of the incorporeal right. NOTE: In an assignment of credit, the consent of th debtor is NOT necessry in order that the ass. may fully produce the legal effects. What the law requires in an ass. of credit is NOT the consent of the debtor, but merely NOTICE to him as the ass. takes effect only from the time he has knowledge thereof. Conventioal subrogation requires an agreement among the parties concerned – original creditor, debotr, and the new creditor. ASSIGNMENT DIST. FROM OTHER TERMS 1. Renunciation - the abandonment of a right w/o a transfer to another. 2. Agency - involves rep., NOT transmission wherein the agent acts for the principal. 3. Substitution – chage of previous debtor by new debtor w/ credit remianing in the same creditor

4. Subrogation – change in the person of the creditor w his credit bein transferred to the new creditor. 5. Dation in payment – alienation of ppty to the creditor in sat.of a debt in money ART. 1525 – BINDING EFFECT OF ASS. 1. AS BET. THE PARTIES, the ass.is VALID although it appears only in a PRIVATE DOC.so long as the law does NOT require a specific form for its validity. rd

2. To affect 3 persons, the ass. must appepar in a PUB. INST., and in case it involves real ppty, is it INDISPENSABE that it be recorded in the RD. 3. The assignee merely steps into the shoes of the assignor, the former acquiring the credit s.t defenses (fraud, prescription, etc.) avail.to the debtor against the assignor.  Assignee is deemed subrogated to the rights as well as to the obligations of the seller. He CANNOT acquire greater rights than those pertaining to the assignor.

(2) AFTER notice or before notice but debtor had knowledge of ass. – Payment by the debtor to the orig. creditor after the former had received notice of the ass., w/n he consented, is NOT valid as against the assignee. Even w/o notice, if debtor had already aware of such assignment, NOT released from obl. He thereby acts in bad f. He can be made to pay again by the assignee. ART. 1627- EXTENT OF ASS. OF CREDIT The ass. of credit includes NOT only the credit itself but also all rights ACCESSORY thereto. Accessory follows principal unless otherpwise stipulated. Ex. D owes C P10,000, w/ G as guarantor. C assigns his credit to T w/ notice given to D. In case D fails to pay T, the latter may enforce the guaranty of G unless the credit was transferred w/ express stipulation that G shall be released from obl.

ART. 1626 – CONSENT OF DEBTOR TO ASS. NOT REQD.

ART. 1628 – WARRANTIES OF THE ASSIGNOR OF CREDIT

In an ass. of creditm the consent of debtor is NOT essential in order that it may prduce legal effects.

Ass. of credit w/c is in the nature of sale of personal ppty produces the effects of a dation in paymt w/c may ext.the obl.

The law speaks not of consent but NOTICE to the debtor. The purpose of such by the assignee is to inform the debtor that from the date of the ass.he shd make apymt to the assignee and NOT to the orig.creditor. EFFECT OF PAYMENT BY DEBTOR AFTER ASS. OF CREDIT The consent of the debtor is NOT essential for its perfeeciton. HOWEVER, the lack thereof or lack of it affects the efficaciousness or inefficaciousness of any paymt that may have been made. (1) BEFORE notice – the notice is thus for the protection of the assignee bec. before said notice, payment to the original creditor is VALID. The law holds him exonerated. In such case, assignee has right of action agiant the assignot, the original creditor. In the absence of notice, BURDEN OF PROOF that the debtor had knowledge of the assignment is on the interested party or assignee.

(1) When a creditor assigns his credit, he warrants only (a) the existence and (b) legality of the credit at the perfection of the contract, unless the credit had been sold as doubtful. (2) There is NO warranty as to the solvency of the debtor unless it is EXPRESSLY stipulated or unless the insolvency was already existing prior to the sale and pub. knowledge at the time of the ass. pIf there be any breach of the above warranties, the assignor-vendor shall be HELD answerable therefor. LIABS OF THE ASSIGNOR OF CREDIT. 1.

2.

If vendor-assignor in GF, liab. LIMITED ONLY to the PRICE received and to the exp.of the contract, and any other leg. Paymts by reason of the ass. If in bad f., all of the above + damages. An assignor in bad f. is one who has knowledge of any of the circumstances mentioned (e.g., non-existence or illegality of the credit, insolvency of the debtor, etc) while an assignor in gf is one who is ignorant of them.

Ex. D owes C P500,000, w/c represents the p.p of the car bought by D. C assigns the credit to T. (a) C is liable to T if at the time of the ass. the credit has already PRESCRIBED OR HAS BEEN PD., or is ANULLABLE and its NULLITY is subseq.declared bec. C warrants the existence and legality of the credit. (b) But C is NOT liable if D CANNOT fulfil is obl. due to insolvency bec. insolvency has nothing to do w// the existence and legality of the credit unless expressly stipulated, OR insolvency of D is existing PRIOR to the ass.and of common or pub. knowledge although it was NOT known to C. (c) If C lacks suff. Data to det. w/n the credit is still enforceable or not, as for instance, w/n the period of prescription was interrupted and there is a full disclosure of such fact when credit was assigned, he CANNOT be held responsible even for the existence and legality of the credit. ART. 1629 – DURATION OF ASSIGNOR’S LIAB. NOTE: This provision does NOT apply if the assignor acted in bad f. In case the assignor has expressly warranted the solvency of the debtor, the duration of the assignor’s liab. shall be as follows: (1) If there is stipulation – for the term or period fixed; (2) If there is NO stipulation: a. For 1 yr FROM ass. of credit when the per. For paymt of the credit has expired; b. For 1 yr AFTER its maturity, when such period for pymt has NOT yet expired. Ex. D owes C P50,000 payable on July 1, 2014. C assigns his credits to T w/ C making himself responsible for the solvency of D. (1) If the agreement is that the duration of C’s liab.shall last for 2 yrs from July 1, 2014, then his guaranty shall last as agreed upon. (2) If there is NO stipulation, and the ass.was made on Aug. 1, 2014, the liab. is limited to 1 yr from ass. (3) However, if the ass. was made on June 1, 2014, the resp.shall CEASE exactly 1 yr after July 1, 2014 or 1 yr after the maturity of the debt.

REASONS FOR THE RULE: to prevent fraud w/c may be committed by feigning the solvency of the debtor at the time of the ass. when in fact he is insolvent; and to oblige the assignee to exert efforts in the recovery of the credit and thereby avoid that by his oversight, the assignor may suffer. ART. 1630 – SALE HEREDITARY RIGHTS

OF

SUCCESSIONAL

OR

(1) Sale of hereditary rights before partition. Pursuant to Art. 774, NCC, “the rights to the succession are transmitted from the moment of the death of the decedent.” In other words, the person concerned is an HEIR and may exercise his rights as such, from the very moment of the death of the decedent. There is NO law w/c prohibits an heir from SELLING his interests in an inheritance before partition EXCEPT that any such sale must be deemed s.t th result of the admin. Proceedings and any pending litigation. NOTE: While an heir may sell his hereditary rights BEFORE partition, the law PROHIBITS the sale of a FUTURE INHERITANCE upon w/c no contract can be made other than those making a div.inter vivos of an estate in accordance w/ Art. 1347, NCC. 2. Subj of sale is hereditary right, NOT object w/c make up inheritance. - inheritance may be sold either w/ specification of the ppties to be alienated or w/o enumerating the things comprising it, that is to say, the hereditary rights only. 3. Warranties of seller. The seller of hereditary rights warrants only the fact of his heirship but he does NOT warrant the obj.w/c make up his inheritance. The sale is, therefore, a sort of a ALEATORY contract bec. the assignee bears the risk that the estate may NOT be sufficient to pay the obl.of the deceased. Ex. H and I are the heirs of the estate leftby D, deceased. Before partition and w/o specifying his definite share in inheritance, H sold his share to B for P100,000. In this case, H only warrants the fact that he is an heir to D. But, he is NOT liable to B shd his share after partition be less than P100,000. ART. 1631 – SALE OF WHOLE OF CERTAIN RIGHTS, RENTS, OR PRODUCTS.

As a conseq,., the vendor warrants only the leg.of the whole and NOT the various parts of which it may be composed. The vendor is NOT liable for eviction of each of the various parts unless the eviction involves the whole or part of greater val. Ex. P is a partner in a partnership. He sells all his interest to B for lump sum of P150,000. Upon the dissolution of the part., B received the share of P in its assets consisting of P50,000, some office equipmt and a car. Subseq., the car was recovered by C, a creditor of the part. P is NOT liable to B bec. P does NOT warrant each of the various parts of his interest in the part.but only the legitimacy of his rights as partner taken as whole. But if value of car exceeds P75,000, P will be liable bec. B is evicted from “part of greater value.” ART. 1632 – LIAB. OF THE VENDOR OF INHERITANCE

c.

The interest on the price from date of paymt; and (6) The reimbursement must be made by debtor w/in 30 days from the date assignee demands (judicially extrajudicially) paymt from him.

the the the or

NOTE: A debtor who has pd the FULL amount of a litigated credit to one who has purchased such litigated credit CANNOT counterclaim the diff bet. the amount pd.by such dr. and the amt pd by the purchaser UNLESS such dr shall make use of his right to do so win the prescribed period. PURPOSE OF GRANT OF RIGHT TO DEBTOR. The said provision gives an advantage to the debtor bec. he will PAY less than the value of the credit assigned if he exercises his right to redeem the same. And also, rd to avoid the purchase by the 3 p.of credits in litigations merely for speculations.

Unless otherwise stipulated, the FRUITS of an inheritance are INCLUDED in the sale thereof. If vendor received fruits, he must DELIVER them o the vendee; if they have been CONSUMED, he must REIMBURSE the vendee; if they have been SOLD, deliver the price of sale.

CASE:

ART. 1633 – LIAB. OF VENDEE FOR DEBTS AND CHARGES OF ESTATE

S sold several lots to B, who after securing registration of said lots in her name, mortgaged them to C (bank). B failed to complete paymt of the p.p. The sale was rescinded (implies incomplete pymt by B to S) w/o prejudice to the right of C, which was adjudged a mortgagee in gf.

ART. 1644 – LEGAL REDEMTPTION IN SALE OF CREDIT OR OTHER INCORPOREAL RIGHT IN LITIGATION REQUISITES FOR THE EXERCISE REDEMPTION BY DEBTOR:

OF

LEGAL

(1) There must be a sale or ass.or a credit or other incorporeal right. The right CANNOT be exercised if the transaction is exchange or donation; (2) The credit or other incorporeal right must be in litigation; (3) There must be pending litigation at the time of the ass. The complaint by the assignor MUST have been filed and answered by the creditor before the sale of the credit. Art. 1634 applies only to a claim in litigation which means one which is actually litigated. (4) The assignee must have demanded payment from the debtor; (5) The debtor must reimburse the assignee: a. The price pd by him; b. The judicial costs incurred by him; and

NATIONAL INVESTMENT & DEVT CORP. v DE LOS ANGELES FACTS:

C foreclosed the mortgage. At the public auction, C was the highest bidder. Subseq., C assigned its rights as mortgagee and as the highest bidder to D. S filed a motion to cancel the encumbrance of D from the CTC concerned w/c was GRANTED by lower court on the ground that C “should have submitted the deed of assignment for approval of the court knowing that the subj matter of said deed is in custodial egis and so that the consent of S could be taken. ISSUE: Has a valid ass.been made by C to D of its rights over the lots in question? HELD: YES. There is nothing in the statutes or jurisprudence w/c prohibits a creditor w/o the consent of the dr. from making an ass.of his credit and the rights accessory thereto. Indeed, Art. 1634 definitely recognizes the likelihood that credits and other incorporeal rights in litigation may be assigned

pendent lite and, in such event, provides that debtor may ext. his liab. by REIMBURSEMENT to the assignee. NOTE: in other words, an ass. of credit pendente lite does NOT ext. the credit and accessory rights assigned, but simply CHANGES the bag into w/c the dr.must empty the money in payment. ART. 1635 – EXCEPTIONS TO DEBTOR’S RIGHT TO LEGAL REDEMPTION (1) Ass or Sale to co-heir or co-owner – This exception is based on the desire to do away w/ coownership. Moreover, if the right of redemption is granted to the debtor, it would NOT terminate litigation w/c is the purpose of this art. WHY? Bec. co-heir or co-owner may still sue for the debtor for the share that corresponds to the former in the credit. Ex. D is indebted to B and C in the amount of P10,000. For failure to pay his debt, B sues D. If B transfers his credit to C during the pendency of the litigation, D CANNOT redeem. 3.

Ass/sales to a creditor. Assignee CANNOT be considered as a vendee of a right in litigation and as a speculator. It really refers to dation in paymt.

Ex. A owes B the sum of P10,000 and B owes C P8,000. If B assigns his credit against A to C then the subj of litigation (bet. A and B), A has also NO right of legal redemption 3. Ass/sale to the possessor of ppty in question. Reason for ths is that the assignee is moved by a desire to preserve the ppty and NOT to speculate at the exp.of the dr. The ex. USUALLY given is that where a vendee (assignee) of a ppty s.t a mortgage acquires the mortgage credit of the assignor (mortgage-creditor) against the vendor (mortagage-debtor). Ex. A owes B P10,000 which is secured by a mortgage on a land owned by A. If A sells the land to C, and B assigns his credit in litigation against A to C, A is NOT entitled to redeem.

BULK SALES LAW (ACT 3952) Sec. 2. Sale and transfer in bulk. — Any sale, transfer, mortgage or assignment of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor, mortgagor, transferor, or assignor, or sale, transfer, mortgage or assignment of all, or substantially all, of the business or trade theretofore conducted by the vendor, mortgagor, transferor, or assignor, or of all, or substantially all, of the fixtures and equipment used in and about the business of the vendor, mortgagor, transferor, or assignor, shall be deemed to be a sale and transfer in bulk, in contemplation of this Act: Provided, however, That if such vendor, mortgagor, transferor or assignor, produces and delivers a written waiver of the provisions of this Act from his creditors as shown by verified statements, then, and in that case, the provisions of this section shall not apply.

Sec. 3. Statement of creditors. — It shall be the duty of every person who shall sell, mortgage, transfer, or assign any stock of goods, wares, merchandise, provisions or materials in bulk, for cash or on credit, before receiving from the vendee, mortgagee, or his, or its agent or representative any part of the purchase price thereof, or any promissory note, memorandum, or other evidence therefor, to deliver to such vendee, mortgagee, or agent, or if the vendee, mortgagee, or agent be a corporation, then to the president, vice-president, treasurer, secretary or manager of said corporation, or, if such vendee or mortgagee be a partnership firm, then to a member thereof, a written statement, sworn to substantially as hereinafter provided, of the names and addresses of all creditors to whom said vendor or mortgagor may be indebted, together with the amount of indebtedness due or owing, or to become due or owing by said vendor or mortgagor to each of said creditors, which statement shall be verified by an oath to the following effect: Sec. 4. Fraudulent and void sale, transfer or mortgage. — Whenever any person shall sell, mortgage, transfer, or assign any stock of goods, wares, merchandise, provisions or materials, in bulk, for cash or on credit, and shall receive any part of the purchase price, or any promissory note, or other evidence of indebtedness for said purchase price or advance upon mortgage, without having first delivered to the vendee or mortgagee or to his or its

agent or representative, the sworn statement provided for in section three hereof, and without applying the purchase or mortgage money of the said property to the pro rata payment of the bona fide claim or claims of the creditors of the vendor or mortgagor, as shown upon such sworn statement, he shall be deemed to have violated this Act, and any such sale, transfer or mortgage shall be fraudulent and void.