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EXTINGUISHMENT OF SALE

Article 1600. Sales are extinguished by the same causes as all other obligations, by
those stated in the preceding articles of this Title, and by conventional or legal
redemption.

Conventional Redemption
1. Definition (Article 1601, 1616)
Conventional redemption shall take place when the seller reserved for himself
the right to repurchase the thing sold, with the obligation to:
(a) return the price of the sale,
(b) the expenses of the contract,
(c) any other legitimate payments made by reason of the sale,
(d) and the necessary and useful expenses made on the thing sold.

2. Proper Reservation of Right to Repurchase


- It held that [T]he right of repurchase is not a right granted [to] the vendor by
the vendee in a subsequent instrument, but is a right reserved by the vendor in the
same instrument of sale as one of the stipulations of the contract. (Villarica v. CA)
- Nool indicates that the valid existence of a stipulated right of repurchase is
premised upon the fact that the underlying contract of sale is valid and there has
been performance (i.e., delivery of the subject matter and transfer of ownership to
the buyer), upon which the right to repurchase can be exercised later on. (Nool v. CA)

3. Right of Repurchase May be Proved by parol Evidence


However, the Supreme Court has held that when the contract of sale has been
reduced in writing, parol evidence may be adduced to prove the agreement granting
the seller a right to repurchase the property sold, since the deed of sale and the
verbal agreement allowing the right of repurchase should be considered as an
integral whole, then the deed of sale relied upon by the seller is in itself the note or
memorandum evidencing the contract, which would take the case outside the
provisions of the Statute of Frauds.13 Parol evidence may also be admitted to prove
that a right of repurchase was part of a deed of sale, when no objection to such parol
evidence was made during trial. (MCIAA v. CA)

4. Distinguished from Option to Purchase


The differences between a right of redemption from an option right may be
summarized as follows:
(a) A right to redeem is not a separate contract, but merely part of a main
contract of sale, and in fact cannot exist unless reserved at the time of the
perfection of the contract of sale; whereas, an option to purchase is generally a
principal, albeit preparatory, contract and may be created independent of
another contract;
(b) A right to redeem must be imbedded in a contract of sale upon the
latters perfection; whereas, an option right may exist prior to or after the
perfection of the sale, or be imbedded in another contract, like a lease, upon that
contracts perfection;
(c) The right to redeem does not need a separate consideration in order to be
valid and effective; whereas, an option to purchase in order to be valid must have
a consideration separate and distinct from the purchase price;
(d) For a right to redeem, the redemption period cannot exceed ten (10)
years; whereas, the period for an option right may exceed ten (10) years;
(e) The exercise of a right of redemption requires notice to be accompanied
by a tender of payment, including consignment when tender of payment cannot
be made effectively on the buyer; whereas, the exercise of a option to purchase
requires only a notice of such exercise be given to the optioner; and
(f) The exercise of a right of redemption extinguishes an existing contract of
sale; whereas, the valid exercise of an option right results into the perfection of a
contract of sale.

5. Period of Redemption
a. When No Period agreed upon
Article 1606. The right referred to in article 1601, in the absence of an
express agreement, shall last four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty
days from the time final judgment was rendered in a civil action on the basis that
the contract was a true sale with right to repurchase.
- 4 years from the happening of the stipulated conditon contained in the covering
of deed of sale

b. When Period Agreed upon


- 10 years (1606)
- Bandong v. Austria, held that the provisions of the contract of sale which
secured to the sellers a right of repurchase in the month of March of any year after
the date of the contract, but such a right of redemption could be exercised for a
period of 10 years from the date of the contract, but wholly without force and effect
thereafter.

c. The Mysterious Aberration of Misterio


Appropriate to its name, the decision in Misterio v. Cebu State College of
Science and Technology,25 defi es practically all established jurisprudential rules
on the proper application of the statutory periods for the exercise of the
conventional right of redemption.

d. Pendency of Action Tolls Redemption Period


Ong Chua v. Carr,27 held that the pendency of an action brought in good
faith and relating to the validity of a sale a retro tolls the running of the period of
redemption, thus: Neither was it error on the part of the court to hold that the
pendency of the action tolled the term for the right of redemption; that is an old
and well established rule.

e. Non-Payment of price does not Affect Running of Redemption Period


Catangcatang v. Legayada,31 held that the non-payment of the purchase
price by itself would not serve to suspend the period of redemption, thus
The sale was consummated upon the execution of the document and the delivery of the
land subject matter thereof to the vendee, petitioner herein. It was a perfectly valid agreement,
and the non-payment of the balance of the purchase price could not have the effect of
suspending the effi cacy of the provisions thereof.

6. Possession of Subject Matter during Period of Redemption


Pending the repurchase of the property, the vendee a retro may alienate,
mortgage or encumber the same, but such alienation or encumbrance is as
revocable as is his right. If the vendor a retro repurchases the property, the right
of the vendee a retro is resolved because he has to return the property free from
all damages and encumbrances imposed by him. The vendor a retro may also
register his right to repurchase under the Land Registration Act and may be
enforced against any person deriving title from the vendee a retro. (Misterio v.
Cebu State College of S & T)

7. How Redemption Effected


Article 1616. The vendor cannot avail himself of the right of repurchase without
returning to the vendee the price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments made by reason
of the sale;
(2) The necessary and useful expenses made on the thing sold.

Article 1608. The vendor may bring his action against every possessor whose right
is derived from the vendee, even if in the second contract no mention should have
been made of the right to repurchase, without prejudice to the provisions of the
Mortgage Law and the Land Registration Law with respect to third persons.

- The exercise of redemption is not limited only to the total redemption price
enumerated in Article 1616 of the Civil Code, since said legal provision is not
restrictive nor exclusive. It should be construed with Article 1601 which provides that
legal redemption shall take place when the seller reserves the right to repurchase the
thing sold, with the obligation to comply with the provisions of Article 1616 and
other stipulations which may have been agreed upon.

a. How Redemption Exercised


- Legaspi v. Court of Appeals, held that in order to exercise the right to
redeem, only tender of payment is suffi cient. The Court further held that [S]ince
the case at bar involves the exercise of the right to repurchase, a showing that
petitioner made a valid tender of payment is suffi cient
- However, Catangcatang v. Legayada,43 held that when tender of payment
cannot be validly made, because the buyer cannot be located, it becomes
imperative for the seller a retro then to fi le a suit for consignation with the courts
of the redemption price, and failing to do so within the redemption period, his
right of redemption shall lapse.
- On the other hand, in Lee Chuy Realty Corp. v. Court of Appeals, The Court
held that In sum, the formal offer to redeem is not a distinct step or condition
sine qua non to the fi ling of the action in court for the valid exercise of the right
of legal redemption. What constitutes a condition precedent is either a formal
offer to redeem or the fi ling of an action in court together with the consignation
of the redemption price within the reglementary period.

b. In Multi-parties Cases
Article 1610. The creditors of the vendor cannot make use of the right of
redemption against the vendee, until after they have exhausted the property of
the vendor.
Article 1611. In a sale with a right to repurchase, the vendee of a part of an
undivided immovable who acquires the whole thereof in the case of article 498,
may compel the vendor to redeem the whole property, if the latter wishes to
make use of the right of redemption.
Article 1612. If several persons, jointly and in the same contract, should sell
an undivided immovable with a right of repurchase, none of them may exercise
this right for more than his respective share.
The same rule shall apply if the person who sold an immovable alone has left
several heirs, in which case each of the latter may only redeem the part which he
may have acquired.
Article 1613. In the case of the preceding article, the vendee may demand
of all the vendors or co-heirs that they come to an agreement upon the
repurchase of the whole thing sold; and should they fail to do so, the vendee
cannot be compelled to consent to a partial redemption.
Article 1614. Each one of the co-owners of an undivided immovable who
may have sold his share separately, may independently exercise the right of
repurchase as regards his own share, and the vendee cannot compel him to
redeem the whole property.

8. When Redepmtion NOT Made


Article 1607. In case of real property, the consolidation of ownership in the vendee
by virtue of the failure of the vendor to comply with the provisions of article 1616
shall not be recorded in the Registry of Property without a judicial order, after the
vendor has been duly heard.
- Notwithstanding the provisions of Article 1607, the recording in the Registry of
Deeds of the consolidation of ownership of the buyer is not a condition sine qua non
to the transfer of ownership.

9. Grant of 30-day Redemption Right in Case of Litigation and Article 1606


Article 1606. The right referred to in article 1601, in the absence of an express
agreement, shall last four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from
the time final judgment was rendered in a civil action on the basis that the contract
was a true sale with right to repurchase.

- The rationale for the grant of the 30-day period of redemption under Article 1606 is
quite clear: although a period of redemption is stated in the purported sale a retro,
nevertheless, the purported seller has placed no importance thereto since he
considers the transaction to be an equitable mortgage; being an equitable mortgage,
then the purported seller has every right to extinguish the equitable mortgage by
paying-up the loan at any time before the purported buyer has foreclosed on the
mortgage. Allowing the expiration of the stipulated redemption period is not
negligence or fault on the part of the purported seller, and is in fact consistent with
his position that the sale is not one a retro but actually an equitable mortgage.
Therefore, should a judgment be fi nally rendered upholding the transaction to be one
of sale a retro, then it is but fair to grant to the seller a fi nal 30-day period within
which to redeem from the time he is bound by the judgment fi nding the contract to
be one not of equitable mortgage.

a. Feigning Equitable Mortgage Situation to Avail of Article 1606


- Nonetheless, the Court reversed its earlier decision in Abilla and granted
the exercise of redemption under Article 1606. In reversing its earlier resolution,
the Court held that Article 1606 applies only where the nature and character of
the transaction whether as a pacto de retro sale or as an equitable mortgage
was put in issue before the court. In other words, it applies in a situation where
one of the contending parties claims that the transaction was a sale with right to
repurchase and the other counters that the same was an equitable mortgage,
and the courts declares in a final judgment that the transaction was really a sale
with pacto de retro. But the applicability of Article 1606 rests on the bona fide
intent of the seller a retro, if he honestly believed that the transaction was an
equitable mortgage, the said article applies and he can still repurchase the
property within thirty days from fi nality of the judgment declaring the
transaction as a sale with pacto de retro. Parenthetically, it matters not what the
buyer intended the transaction to be.

10. Fruits
Article 1617. If at the time of the execution of the sale there should be on the land,
visible or growing fruits, there shall be no reimbursement for or prorating of those
existing at the time of redemption, if no indemnity was paid by the purchaser when
the sale was executed.
Should there have been no fruits at the time of the sale and some exist at the time of
redemption, they shall be prorated between the redemptioner and the vendee, giving
the latter the part corresponding to the time he possessed the land in the last year,
counted from the anniversary of the date of the sale.
- Applies only when no stipulation on the contract of the sharing of parties.

11. Equitable Mortgage


a. Definition of Equitable Mortgage
Matanguihan v. Court of Appeals, defined an equitable mortgage as one
which although lacking in some formality, or form or words, or other requisites
demanded by a statute, nevertheless reveals the intention of the parties to
charge real property as security for a debt, and contains nothing impossible or
contrary to law.
It also enumerated the essential requisites of an equitable mortgage to be as
follows:
(a) That the parties entered into a contract denominated as a contract of
sale; and
(b) That the intention was to secure existing debt by way of a mortgage.
Article 1603. In case of doubt, a contract purporting to be a sale with right
to repurchase shall be construed as an equitable mortgage.

b. Pactum Commissorium
- is a stipulation for automatic vesting of title over the security in the creditor
in case of the debtors default.
Article 2088. The creditor cannot appropriate the things given by way of
pledge or mortgage, or dispose of them. Any stipulation to the contrary is null
and void.
- In other words, when a purported sale a retro is found to be an equitable
mortgage, the proper remedy in case the borrower refuses to pay the price is
to foreclose on the mortgage, and there can be no loss of the purported sellers
right to redeem since this would constitute the process as a pactum
commissorium. In such a case, the return of the redemption price would actually
be equivalent to the payment of the principal loan, which would have the legal
effect of extinguishing the equitable mortgage as an ancillary security contract.

c. Rationale Behind the provisions on Equitable Mortgages


- The provisions of the Civil Code governing equitable mortgages guised as
sale contracts are designed primarily to curtail the evils brought about by
contracts of sale with right of repurchase, such as the circumvention of usury
laws and the public policy on pactum commissorium.

d. When Presumed Equitable Mortgage


Article 1602. The contract shall be presumed to be an equitable mortgage,
in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of
the parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be
received by the vendee as rent or otherwise shall be considered as interest which
shall be subject to the usury laws.

- inadequacy of the purchase price: a consideration so far short of the real


value of the property as to startle a correct mind and has confi rmed that in
determining whether the price is inadequate, comparison should be made of the
propertys assessed value.

e. Applicability of Deeds of Absolute Sale


Article 1604. The provisions of article 1602 shall also apply to a contract
purporting to be an absolute sale.
- For the provision to apply, two requisites must be present:
(a) that the parties entered into a contract denominated as a contract of
sale; and
(b) that their intention was to secure an existing debt by way of mortgage.

f. Proof by Parole Evidence; Best Evidence Rule


Parole evidence is competent and admissible in support of the allegations
that an instrument in writing, purporting on its face to transfer the absolute title
to property, or to transfer the title with a right to repurchase under specifi ed
conditions reserved to the seller, was in truth and in fact given merely as security
for the repayment of a loan; provided that the nature of the agreement in placed
in issue by the pleadings fi led with the trial court.
In Austria v. Gonzales, Jr. the Court explained the rationale for the non-
application of the best evidence rule to equitable mortgage situations, thus:
There is no conclusive test to determine whether a deed absolute on its face is really a
simple loan accommodation secured by a mortgage. To determine whether a deed absolute in
form is a mortgage in reality, the court is not limited to the written memorials of the
transaction.

g. Effects when Sale Adjudged To be an Equitable Mortgage


(a) Any money, fruit, or other benefi t to be received by the buyer as rent or
otherwise shall be considered as interest which shall be subject to the usury
laws(1602)
(b) The apparent seller may ask for the reformation of the instrument.
(1605)
(c) For the court to decree that vendordebtor to pay his outstanding loan to
the vendee-creditor. (Banaga v. Bello)
(d) Where the trial court did not pass upon the mortgagors claim that the
had paid his mortgage obligation, a remand of the case to the trial court is in
order, only for the purpose of determining whether the mortgage obligation
had indeed been settled, and if not, how much should the mortgagor pay to
settle the same. (Banaga v. Bello)

- Balatero v. Intermediate Appellate Court,131 held that if a sale a retro is


construed to be an equitable mortgage, then the execution of an affi davit of
consolidation by the purported buyer to consolidate ownership over the
subject parcel of land is of no consequence and the constructive
possession over the parcel of land would not ripen into ownership, since
only possession acquired and enjoyed in the concept of owner can serve as
title for acquiring dominion.

Legal Redemption
1. Definition
Article 1619. Legal redemption is 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 payment, or by any other transaction whereby ownership is
transmitted by onerous title.

a. Rationale for Legal Redemption


The Court held in Basa v. Aguilar,135 that [L]egal redemption is in the
nature of a privilege created by law partly for reasons of public policy and partly
for the benefi t and convenience of the redemptioner, to afford him a way out of
what might be a disagreeable or [an] inconvenient association into which he has
been thrust. It is intended to minimize co-ownership. The law grants a co-owner
the exercise of the said right of redemption when the shares of the other owners
are sold to a third person.

2. Salient Distinctions between Conventional and Legal Rights of Redemption


(a) Strictly speaking, a right a retro can only be constituted by express reservation in
a contract of sale at time of perfection; whereas, a legal right of redemption does not
have to be expressly reserved (it is a right granted by law), and covers sales and
other onerous [transfers of] title;
(b) Right a retro is in favor of the seller; whereas, a legal right of redemption is given
to a thirdparty to the sale; and
(c) The exercise of the right a retro extinguishes the underlying contract of sale as
though there was never any contract at all; whereas, the exercise of the legal right of
redemption, although it extinguishes the original sale, actually constitutes a new sale
in substitution of the original sale.

3. Legal Redemption under Civil Code


a. Among Heirs
Article 1088. Should any 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
within the period of one month from the time they were notified in writing of the
sale by the vendor.
- There is no right of legal redemption available to the coheirs when the sale
covers a particular property of the estate, since the legal right of redemption
applies only to the sale by an heir of his hereditary right. (Plan v. IAC)
- Likewise, the heirs who participated in the execution of the extrajudicial
settlement which included the sale to a third person of their pro indiviso shares in
the property are bound by the same, which the co-heirs who did not participate
would have the right to redeem their shares pursuant to Article 1088 of the Civil
Code. (Cua v. Vargas)

b. Among Co-owners
Article 1620. A co-owner of a thing may exercise the right of redemption in
case the shares of all the other co-owners or of any of them, are sold to a third
person. If the price of the alienation is grossly excessive, the redemptioner shall
pay only a reasonable one.
Article 1623. The right of legal pre-emption or redemption shall not be
exercised except within thirty days from the notice in writing by the prospective
vendor, or by the vendor, as the case may be. The deed of sale shall not be
recorded in the Registry of Property, unless accompanied by an affidavit of the
vendor that he has given written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners
Should two or more co-owners desire to exercise the right of redemption,
they may only do so in proportion to the share they may respectively have in the
thing owned in common.
- The right of redemption may be exercised by a co-owner only when part of
the community property is sold to a stranger. When the portion is sold to another
co-owner, the right does not arise because a new participant is not added to the
coownership.

c. Effect of De Facto Partition among Co-heirs and Co-owners


Vda de Ape v. Court of Appeals, held that although an inherited property is
succeeded to by the heirs as co-owners thereof, if in fact they have partitioned it
among themselves and each have occupied and treated defi nite portions thereof
as their own, co-ownership has ceased even though the property is covered
under one title, and the sale by one of the heirs of his defi nite portion cannot
trigger the right of redemption in favor of the other heirs.
In another case, the Court held that the right of redemption to be exercised,
co-ownership must exist at the time of the conveyance is made by a co-owner
and the redemption is demanded by the other co-owner or co-owners. (Avila b.
Barabat)

d. Distingushing between the Rights of Redemption of Co-heirs and Co-owners


In Mariano v. Court of Appeals, the Court was confronted with the issue of
which redemption clause to apply when a coheir had exercised the right of legal
redemption over the sale of a parcel of land belonging to the estate of the
decedent. Mariano held that the fi ne distinction between Article 1088 and
Article 1620 is that when the sale consists of an interest in some particular
property or properties of the inheritance, the right of redemption that arises in
favor of the other co-heirs is that recognized in Article 1620. On the other hand, if
the sale is the hereditary right itself, fully or in part, in the abstract sense,
without specifying any particular object, the right recognized in Article 1088
exists. Thus, under Mariano when the subject matter sold was a particular
property of the estate and not hereditary rights, the redemption by a co-
owner/co-heir redounded to the benefi t of all other co-owners, while redemption
by a co-heir of heredetary rights sold is only for his own account.

e. Among Adjoing Owners of Rural Lands


Article 1621. The owners of adjoining lands shall also have the right of
redemption when a piece of rural land, the area of which does not exceed one
hectare, is alienated, unless the grantee does not own any rural land.
This right is not applicable to adjacent lands which are separated by brooks,
drains, ravines, roads and other apparent servitudes for the benefit of other
estates.
If two or more adjoining owners desire to exercise the right of redemption at
the same time, the owner of the adjoining land of smaller area shall be preferred;
and should both lands have the same area, the one who first requested the
redemption. (1523a)
- If two or more adjoining owners desire to exercise the right of redemption at
the same time, the owner of the adjoining land of smaller area shall be preferred;
and should both lands have the same area, the one who fi rst requested the
redemption. (Primary Structures Corp. v. Valencia)

f. Among Adjoining Owners of Urban Land


ARTICLE 1622. Whenever a piece of urban land which is so small and so
situated that a major portion thereof cannot be used for any practical purpose
within a reasonable time, having been 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.
If the re-sale has been perfected, the owner of the adjoining land shall have a
right of redemption, also at a reasonable price.
When two or more owners of adjoining lands wish to exercise the right of pre-
emption or redemption, the owner whose intended use of the land in question
appears best justified shall be preferred.

g. Sale of Credit in Litigation


ARTICLE 1634. When a credit or other incorporeal right in litigation is sold,
the debtor shall have a right to extinguish it by reimbursing the assignee for the
price the latter paid therefor, the judicial costs incurred by him, and the interest
on the price from the day on which the same was paid.
A credit or other incorporeal right shall be considered in litigation from the
time the complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date the
assignee demands payment from him.

h. When Legal Redemption Period begins to run


The right of legal pre-emption or redemption shall not be exercised except
within 30 days from the notice in writing by the prospective seller, or seller, as
the case may be. The article also provides that, the deed of sale shall not be
recorded in the Registry of Property unless accompanied by an affi davit of the
seller that he has given written notice thereof to all possible redemptioners.
(1623)

(1) Notice must cover Perfected Sale


Spouses Doromal v. Court of Appeals, held that although written notice is
given to the co-owner, the 30-day redemption period does not begin to
run from the receipt of such written notice, because the transaction
covered in the notice did not pertain to a perfected contract of sale, and
must be accompanied by the actual execution and delivery of the deed
of sale. The Court held that Art. 1619 of the Civil Code bestows unto a
coowner the right to redeem and to be subrogated under the same
terms and conditions stipulated in the contract, and to avoid any
controversy as to the terms and conditions under which the right to
redeem may be exercised, it is best that the period therefor should not
be deemed to have commenced unless the notice of the disposition is
made after the formal deed of disposal has been duly executed.

(2) Summation on Strict Rules on Notice


In Hermoso v. Court of Appeals, the Court held that Article 1623 stresses
the need for notice in writing in three (3) other species of legal
redemption namely: (a) redemption in a case where the share of all the
other co-owners or any of them are sold to a third person; (b)
redemption by owners of adjoining lands when a piece of rural land not
exceeding one hectare in area is alienated; and (c) redemption by
owners of adjoining lands in the sale of a piece of an urban land so small
and so situated that the portion thereof cannot be used for any practical
purpose within a reasonable time, having been bought merely for
speculation.

(3) Exceptions to Written Notice Requirement


- Alonzo therefore provides as an exception to the written notice required
under Article 1623 of the Civil Code, the situation when the co-heirs lived
with the purchaser in the same lot and are deemed to have received
actual notice of the sale. Laches seems to be the main principle for the
Alonzo doctrine.
- Distrito v. Court of Appeals, subsequently added another exception to
the Alonzo exception. It held that where it is the co-owner himself who
acted as a middleman or intermediary to effect the sale to a third-party,
thus having actual knowledge thereof, the written notice required under
Article 1623 is no longer necessary, and the 30-day period for
redemption begins to run from having actual knowledge of the sale, by
being present at the time the deed of sale was executed.

4. Other Instances when Right of Legal Redemption is Granted


a. Redemption of Homesteads
Under Section 119, of Public Land Act, every conveyance of land acquired
under the free patent homestead provisions, when proper, shall be subject to
repurchase by the applicant, his widow, or legal heirs, within a period of fi ve (5)
years from the date of the conveyance.
Sale of homestead within the 5-year prohibition period is void even when the
sale is in favor of the homesteaders own son or daughter.
- Section 119 of the Public Land Act should be construed with Article 1616 of
the Civil Code, which provides that the seller cannot avail himself of the right to
repurchase without returning to the buyer the price of the sale; a mere notice of
intent to redeem is not sufficient.

b. Redemption in Tax Sales


Under Section 214, National Internal Revenue Code of 1997, in case of
delinquency sale of property of a taxpayer for failure to pay tax assessments,
within one (1) year from the date of sale, the delinquent taxpayer, or anyone for
him, shall have the right of redeeming the property by paying to the Revenue
District Offi cer the amount of the public taxes, penalties, and interest thereon
from the date of delinquency to the date of sale, together with interest on the
purchase price.

c. Redemption by Judgment Debtor


Under Sections 27 and 28, Rule 39 of the Rules of Court, a judgment debtor,
or his successor-in-interests, or a creditor having a lien by attachment, judgment
or mortgage on the property sold at public auction shall have one (1) year from
date of registration of the certifi cate of sale, and not just twelve (12) months
after the sale as provided previously under the old Rules of Court, to redeem the
property by paying the purchaser at the public auction the amount of his
purchase, with interest up to the time of redemption, together with amount of
any assessments or taxes which the purchaser may have paid thereon after
purchase, with interest thereon.
In execution sales, the sheriff does not warrant the title to the property sold
by him and it is not incumbent on him to place the purchaser in possession of the
property. The rule of caveat emptor applies to execution sales.

d. Redemption in Extrajudicial Foreclosure


Under Section 6 of Act No. 3135, as amended, in all cases in which an
extrajudicial foreclosure sale has been made under a special power, the debtor,
his successors-in-interests or any judicial creditor or judgment creditor of said
debtor, or any person having a lien on the property subsequent to the mortgage
or deed of trust under which the property has been sold, may redeem the same
within one (1) year from and after the date of the sale and registration thereof.
Before the expiration of the one-year redemption period within which the
judgment-debtor or mortgagor may redeem the property, the purchaser thereof
is not entitled, as a matter of right, to the possession of the subject matter. While
the Rules of Court allow the purchaser to receive the rentals if the purchased
property is occupied by tenants, such purchaser is nevertheless accountable to
the judgment-debtor or mortgagor as the case may be, for the amount so
received and the same will be duly credited against the redemption price when
the said judgmentdebtor or mortgagor effects the redemption.
While the right of redemption of one year is retained for both judicial and
extrajudicial foreclosure, an exception is now created under Section 47 of the
General Banking Law of 2000: in the case of extrajudicial foreclosures where the
mortgagor is a juridical person redemption is available only until the registration
of the certifi cate of foreclosure sale, which shall be no more than three (3)
months after foreclosure, whichever is earlier.

e. Redemption in Judicial Foreclosure


Government Service Insurance System (GSIS) v. Court of First Instance of
Iloilo, Branch III, confirmed the long-recognized principle embodied in the our
jurisdiction that no right to redeem is granted to the debtor-mortgagor when
there has been a judicial foreclosure of a real estate mortgage, except when the
mortgagee is a bank or a banking institution.
However, GSIS also recognized the doctrine of equity of redemption which
covers the right of a defendant mortgagor to extinguish the mortgage and retain
ownership of the property by paying the secured debt within the 90-day period
after the judgment becomes fi nal, in accordance with Rule 68 of the Rules of
Court, or even after the foreclosure sale but prior to the confi rmation of such
auction sale by the court.

f. Forclosures by Banking Institutions


Under Section 47 of the General Banking Law, in the event of foreclosure of
any mortgage on real estate which is security for any loan or other credit
accommodation granted:
(a) The individual mortgator or debtor whose real property has been sold
for the full or partial payment to his obligation, whether judicially or extra-
judicially; and
(b) The corporate mortgator or debtor whose real property has been sold
for the full or partial payment to his obligation, by virtue of a judicial
foreclosure;
shall have the right within one (1) year after the sale of the real estate, to
redeem the property by paying the amount due under the mortgage deed, with
interest thereon at the rate specifi ed in the mortgage, and all the costs and
expenses incurred by the bank or institution from the sale and custody of said
property less the income derived therefrom; whereas,
(c) Notwithstanding Act 3135, judicial persons whose property is being
sold pursuant to an extrajudicial foreclosure, shall have the right to redeem
the property in accordance with this provision until, but not after, the
registration of the certifi cate of foreclosure sale with the applicable Register
of Deeds which in no case shall be more than three (3) months after
foreclosure, whichever is earlier.
The purchaser at the auction sale whether in a judicial or extrajudicial
foreclosure shall have the right to enter upon and take possession of such
property immediately after the date of the confi rmation of the auction sale
administer the same in accordance with law.
Any petition to enjoin or restrain the conduct of foreclosure proceedings shall
be given due course only upon the fi ling by the petitioner of a bond in an
amount fi xed by the conditioned that he will pay all the damages which the bank
may suffer by the enjoining or the restraint of the foreclosure proceeding.

g. Period of Redemption When Rural Bank Forecloses


If the land, previously received under patent, is mortgaged to a rural
bank under Rep. Act No. 720, the mortgagor may redeem the property within
two (2) years from the date of foreclosure or from the registration of the
sheriffs certifi cate of sale at such foreclosure if the property is not covered
or is covered, respectively, by Torrens title.
If the mortgagor fails to exercise such right, he or his heirs may still
repurchase the property within fi ve (5) years from expiration of the two (2)
year redemption period pursuant to Sec. 119 of the Public Land Act, where
the subject matter was obtained through a homestead patent.

h. Legal Right to Redeem under Agrarian Reform Code


Under Section 12 of Rep. Act No. 3844, in the event that the landholding
is sold to a third person without the knowledge of the agricultural lessee, the
latter is granted by law the right to redeem it within 180 days from notice in
writing and at a reasonable price and consideration