Sales Atty. Fabella Finals.pdf

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

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

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

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

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

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

It is the Seller’s obligation to deliver, but is the acceptance of the buyer a requisite to perfect delivery? What is the distinction between non-acceptance and refusal to accept? Will refusal always result to the prevention of transfer of ownership? Gen. Rule - Acceptance is NOT necessary because it is the obligation of the seller. Gen. Rule - Refusal to accept will NOT prevent completion of delivery. XPN: Justifiable reason for such refusal.

Obligations of the Buyer: 1. payment of the price 2. acceptance of the subject matter When do you pay the price? 1. at the time stipulated 2. If there is no stipulation reasonable time

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

within

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

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

What obligations remain? Warrant the thing.

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

Who is an unpaid seller? (Art. 1525) 1. when the whole of the price has not been paid or tendered 2. when a bill of exchange or other negotiable instrument has been received as conditional payment and the condition was not fulfilled * seller may still be considered an unpaid  seller even if the title to the goods has passed to the buyer, even if the seller was paid partially What is the minimum requirement for the exercise of special remedies? The goods must be at seller’s possession If still have possession of the goods, no transfer of ownership yet = possessory lien + withholding of delivery Instances when to exercise possessory lien If there is Partial delivery - possessory lien on the undelivered goods UNLESS the part delivery shows waiver of right to possessory lien. Instances where seller losses his possessory lien: 1. when he delivers the goods to a carrier for the purpose of transmission to the buyer without reservation of ownership 2. buyer already acquired possession of the goods 3. waiver of possession What is the right of STOPPAGE IN TRANSITU? Art. 1530 - Right of the seller who sold his goods on credit, to repossess them while they are in transit (while in the possession of the carrier or middleman) by reason of discovery of insolvency of the buyer What is the ground? Buyer is or becomes INSOLVENT. judicial declaration of insolvency is not required. If your petition for insolvency is sufficient in form at the start of proceedings Sufficient for the seller to show that the buyer has more liabilities than his assests.

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

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

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

09.21.2011 In all the 4 rights of the UNPAID SELLER, the minimum requirement for him to be able to exercise them is - SELLER MUST HAVE POSSESSION OF THE GOODS

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

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

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

Art. 1593 - Automatic Rescission of Sale of Movable property: 1. if the buyer upon the expiration of the period fixed for delivery of the thing purchased, refused to receive the thing without justifiable cause 2. if the buyer failed to pay the price unless granted a longer period within which to pay

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

Judicial or Notarial Act not required for movable property. WHY? - market value of personal things may easily go down because of deterioration, delay may prejudice the seller BUT for practical reasons, notification is necessary

Why do you need good faith? You need good faith to be given priority under the rules in Art. 1544

* this provision is not applicable if the subject matter is already delivered

10.04.2011 What is the rule on double sale? 1. MOVABLE property - person who may have 1st taken possession in Good Faith - longer possession in GF is preferred 2. IMMOVABLE property Requisites: a) 2 or more VALID contracts of sale b) 2 or more contracts of sale have the same subject matter c) 2 or more buyers must present conflicting interests d) the interest is regarding ownership e) 2 or more buyers, only 1 seller

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

Rules on Preference (Art. 1544): a) the one who 1 st registered in good faith b) if without registration - possessor in good faith c) one who presents the oldest title Registration  - entry of instrument of conveyance - entry in the books of registration, includes annotation, cancellation, and even the marginal notes

ART. 1544 NOT applicable, not SAME seller. Inheritance is not considered in Art. 1544. Apply : first in time, priority in right. - oldest title given preference, this may be the deed of sale or deed of conveyance Death of a person does not invalidate any contract entered into prior to the death. 2 buyers, same seller, same property 1st buyer - no registration 2nd buyer - registered property first. Who will be given preference? It depends, we have to consider now the GF in applying 1544. 6

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

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

Conditions - stipulated by the parties

- refers to the performance

- refers to the existence of an obligation

-refers to fitness/ mercantability

- refers to delivery or transfer of ownership

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

Will all affirmations or promise be considered as an express warranty? NO! Sales talk/ dealer’s talk - mere opinions, UNLESS the seller is an EXPERT and the buyer relied on that opinion to buy the subject matter. What are implied warranties? 1. seller has the right to sell 2. warranty against eviction 3. warranty against non-apparent servitude 4. warranty against hidden defects

 seller has the right to sell  - only required at the consummation stage of the sale warranty against eviction  - legal transfer of ownership and peaceful possession of the subject matter from time of transfer of ownership  5 requisites: a) buyer is evicted in whole or in part from the subject matter of the sale b) there is a final judgment c) basis of eviction is a right prior to the sale or an act imputable to the seller d) seller has been summoned in the suit for eviction at the instance of the buyer; or made 3 rd  party defendant through 3 rd  party claimant brought by the buyer e) no waiver on the part of the buyer Who shall take the lead in the defense? SELLER, he is the one who warranted the thing sold. The buyer’s only obligation is to notify the seller. Final Judgment  - Entry in the book of judgment. Without appeal within 15 days, the judgment becomes final and executory.

Breach of Express Warranty = Seller liable for damages 7

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

Failure of the buyer to appeal = he can still avail of remedies. It is the seller who has the obligation to appeal. Buyer may still enforce his right of warranty against eviction.

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

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

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

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

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

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

2. does not need a separate consideration to be valid and effective

3. may exceed 10 years

3. redemption period is up to 10 years

Prescriptive period of right to redeem: 1. by agreement of the parties but should not exceed 10 years from the date of contract 2. no agreement - 4 years from date of contract *date of contract is also date of notarization, the parties will sign the contract upon notarization 9

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

What if the parties agreed 4 years from 2010 is the period to redeem and the contract was dated year 2000? The stipulation is VOID. It exceeds 10 years. If there is stipulation as to period, apply 10 years. If no stipulation, apply 4 years. How is redemption effected? Seller returns to buyer: a. price of the sale b. expenses of the contract and any other legitimate payments c. necessary and useful expenses If seller does not want to pay necessary and useful expenses - non-payment will warrant the retention of the object of the sale by the buyer. How is redemption exercised? By tender of payment and notice What is tender of payment? Is the offer to pay sufficient? Mere intention to pay is not sufficient. You must really have the money when you offer to pay. If the tender of payment is refused, are you required to consign? NO. mere valid tender of payment is sufficient.

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

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

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

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

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

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

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Rationale for Legal Redemption: - a privilege accorded to redemptioners - to minimize co-ownership ( law frowns upon co-ownership)

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

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

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

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

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