8. Conventional and Legal Redemption

I. Conventional Redemption (Civil Code, arts. 1601 and 1606-1618); Legal Redemption (Civil Code, arts. 1619-1623)

Civil Code, arts. 1601 and 1606-1623

Article 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other stipulations which may have been agreed upon.

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. (1508a)

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. (n)

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. (1510)

Article 1609. The vendee is subrogated to the vendor's rights and actions. (1511)

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. (1512)

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. (1513)

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. (1514)

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. (1515)

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. (1516)

Article 1615. If the vendee should leave several heirs, the action for redemption cannot be brought against each of them except for his own share, whether the thing be undivided, or it has been partitioned among them.

But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted against him for the whole. (1517)

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. (1518)

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. (1519a)

Article 1618. The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but he shall respect the leases which the latter may have executed in good faith, and in accordance with the custom of the place where the land is situated. (1520)

SECTION 2

Legal Redemption

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. (1521a)

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.

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. (1522a)

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) 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. (n)

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. (1524a)

CONVENTIONAL REDEMPTION

Seller reserves the right to repurchase thing sold coupled with the obligation to return the purchase price of the sale, expenses incurred under the contract, other legitimate payments made by reason of the sale as well as the necessary & useful expenses made on the thing sold. (NCC, Art. 1601 in relation to Art. 1616)

Other person can exercise the right to repurchase

The right to repurchase may be exercised by any person to whom the right of repurchase may be transferred, or in case of legal redemption, by the person so entitled by law.

NOTE: Right to repurchase must be reserved at the time of perfection of sale.

Instances of legal redemption

• Sale of a co-owner of his share to a stranger (NCC, Art. 1620)
• When a credit or other incorporeal right in litigation is sold (NCC, Art. 1634);
• Sale of an heir of his hereditary rights to a stranger (NCC, Art. 1088);
• Alienation of a piece of rural land not exceeding one hectare, giving a qualifying adjoining owner a right of redemption (NCC, Art. 1621); and
• Sale of adjacent small urban lands bought merely for speculation. (NCC, Art. 1622)

Right of legal redemption of adjacent owners of rural lands

Requisites:

• Both the land of the one exercising the right of redemption and the land sought to be redeemed must be rural;
• The lands must be adjacent;
• There must be an alienation
• The piece of rural land alienated must not exceed one (1) hectare;
• The grantee or vendee must already own any other rural land; and
• The rural land sold must not be separated by brooks, drains, ravines, roads, and other apparent servitudes from the adjoining lands.

NOTE: In case two or more adjacent owners desire to exercise the right of redemption, the following rules on preference is applied:

• When the lands have different land area – the owner of the adjoining land of smaller area.
• When the lands have similar land area – the owner who first requested the redemption.

Right of pre-emption and legal redemption of adjacent owners of urban lands

Requisites:

• The one exercising the right must be an adjacent owner;
• The piece of land sold must be so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time; and
• Such urban land was bought by its owner merely for speculation

NOTE: In case two or more adjoining owners desire to exercise the right of legal redemption, the law prefers the owner whose intended use of the land appears best justified.

Other instances when the right of legal redemption is also granted

Other instances when the right of legal redemption is also granted

• Redemption of homesteads;
• Redemption in tax auction sales;
• Redemption by judgment debtors;
• Redemption in extrajudicial foreclosure;
• Foreclosures by banking institutions;
• Foreclosures by rural banks; and
• Redemption under the Agrarian Reform Code.

In ordinary judicial foreclosure of mortgage under Rule 68, Rules of Court, the mortgagor has an equity of redemption before confirmation of the sale, not a statutory right of redemption. Statutory redemption exists only where a specific law provides it, such as in foreclosure by a bank (Republic Act No. 8791, Sec. 47).

Basis of legal redemption

It is created partly for reason of public policy and partly for the benefit and convenience of the redemptioner to afford him a way out of what might be a disagreeable or inconvenient association into which he has been thrust. It is intended to minimize co-ownership.

Running of period of legal redemption

The right of legal 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 deed of sale shall not be recorded in the Registry of Property unless accompanied by an affidavit of the seller that he has given written notice thereof to all possible redemptioners. (NCC, Art. 1623)

Written notice indispensable

The right of legal pre-emption or redemption shall not be exercised except within 30 days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. (NCC, Art. 1623)

NOTE: Knowledge is insufficient – the mere fact that the redemptioner – the person who has the right to redeem – is already aware of the existence of the sale will not excuse the written notice. Mere knowledge does not satisfy the requirement; there must still be written notice despite such knowledge. (Barcellano v. Banas, et al., G.R. No. 165287, September 14, 2011)

The right of redemption of co-owners excludes that of adjoining owners. (NCC, Art. 1623) This means that co-owners are preferred if the property is to be redeemed by a co-owner and an adjoining owner.

Payment of Redemption

To whom: The purchaser or redemptioner or for him to the officer who made the sale. (Rules of Court, Sec. 29, Rule 39)

Medium of Payment: In cash or in check

NOTE: In accepting a check, he undoubtedly places himself in a position where he can be held liable to the purchaser at a public auction if any damage has been suffered by the latter as a result of the medium by which payment was made. (Co v. PNB, G.R. No. L-51767, June 29, 1982)

Rentals received by the Purchaser

The purchaser or redemptioner shall not be entitled to receive the rents, earnings, and income of the property sold on execution or the value of the use and occupation thereof while the property is in the possession of the tenant. It shall belong to the judgment obligor until the expiration of the period of redemption.

The period of redemption is not a prescriptive period

The period of redemption is not a prescriptive period, but a condition precedent provided by law to restrict the right of the person exercising redemption.

If a person exercising the right of redemption has offered to redeem the property within the period fixed, he is considered to have complied with the condition precedent prescribed by law and may thereafter bring an action to enforce redemption.

On the other hand, if the period is allowed to lapse before the right of redemption is exercised, then the action to enforce redemption will not prosper, even if the action is brought within the ordinary prescriptive period.