EQUITABLE MORTGAGE What is an equitable mortgage?

One which lacks the proper formalities, form or words or other requisites prescribed by law for a mortgage, but shows the intention of the parties to make the property subject of the contract as security for a debt and contains nothing impossible or contrary to law What are the essential requisites of equitable mortgage? 1. Parties entered into a contract of sale 2. Their intention was to secure an existing debt by way of a mortgage. What is the rule on the presumption of an equitable mortgage? A sale with conventional redemption is deemed to be an equitable mortgage in any of the following cases: (Art. 1602) 1. Price of the sale with right to repurchase is unusually Inadequate 2. Seller Remains in possession as lessee or otherwise 3. 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. Purchaser Retains for himself a part of the purchase price 5. Seller binds himself to pay the Taxes on the thing sold 6. In any other case where the real intention of the parties is that the transaction shall Secure the payment of a debt or the performance of any other obligation. 7. Art. 1602 shall also apply to a contract purporting to be an Absolute sale. (Art. 1604) Note: In case of doubt in determining whether it is equitable mortgage or sale a retro (with right of repurchase); it shall be construed as equitable mortgage. Remedy is reformation An equitable mortgage is 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. CONVENTIONAL REDEMPTION What is conventional redemption? Seller reserved the right to repurchase thing sold coupled with obligation to return price of the sale, expenses of contract & other legitimate payments and the necessary & useful expenses made on the thing sold Note: Right to repurchase must be reserved at the time of perfection of sale. (Pineda, p. 333)

LEGAL REDEMPTION What is legal redemption? It is the right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires the thing by purchase or by dation in payment or by other transaction whereby ownership is transmitted by onerous title. What are the instances of legal redemption? 1. Sale of a co-owner of his share to a stranger (Art. 1620) 2. When a credit or other incorporeal right in litigation is sold (Art. 1634) 3. Sale of an heir of his hereditary rights to a stranger (Art. 1088) 4. Sale of adjacent rural lands not exceeding 1 hectare (Art. 1621) 5. Sale of adjacent small urban lands bought merely for speculation (Art. 1622) What is the period of redemption? 1. No period agreed upon 4 years from date of contract 2. When there is agreement should not exceed 10 years; but if it exceeded, valid only for the first 10 years. 3. When period to redeem has expired & there has been a previous suit on the nature of the contract seller still has 30 days from final judgment on the basis that contract was a sale with pacto de retro: Rationale: no redemption due to erroneous belief that it is equitable mortgage which can be extinguished by paying the loan. 4. When period has expired & seller allowed the period of redemption to expire seller is at fault for not having exercised his rights so should not be granted a new period Note: Tender of payment is sufficient but it is not in itself a payment that relieves the seller from his liability to pay the redemption price. When does period of redemption begin to run? 1. Right of legal pre-emption or redemption shall be exercised within 30 days from written notice by the buyer deed of sale not to be recorded in Registry of Property unless accompanied by affidavit that buyer has given notice to redemptioners 2. When there is actual knowledge, no need to give written notice; period of redemption begins to run from actual knowledge

REALTY INSTALLMENT BUYER ACT What is the Realty Installment Buyer Act? Commonly known as the Maceda Law. It is embodied in R.A. 6552 which provides for certain protection to particular buyers of real estate payable on installments. The law declares as "public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions. Note: The purpose of the law is to protect buyers in installment against oppressive conditions. What are the transactions/sale covered by the Maceda Law? The law involves the sale of immovables on installment (Maceda Law, R.A. 6552). 1. Coverage: Residential Real Estate (Villanueva, p. 431) 2. Exclude: a. Industrial lots b. Commercial buildings (and commercial lots by implication) c. Sale to tenants under agrarian laws What are the rights granted to buyers? 1. Buyer paid at least 2 years installment a. Pay without interest the balance within grace period of 1 month for every year of installment payment. Grace period to be exercised once every 5 years. b. When no payment cancelled; buyer entitled to 50% of what he has paid + 5% for every year but not exceeding 90% of payments made Note: Cancellation to be effected 30 days from notice & upon payment of cash surrender value. 2. Buyer paid less than 2 years installment a. Grace period is not less than 60 days from due date b. Cancellation if failure to pay w/in 60 days grace c. 30 days notice before final cancellation Note: buyer can still pay w/in the 30 days period with interest. INSTALLMENT SALES LAW What is the Installment Sales Law? Commonly known as the Recto Law. It is embodied in Art. 1484 of the NCC which provides for the remedies of a seller in the contracts of sale of personal property by installments. Note: Art. 1484 of the NCC incorporates the provisions of Act No. 4122 passed by the Philippine Legislature on Dec. 9, 1939, known as the "Installment Sales Law" or the "Recto Law," which then amended Art. 1454 of the Civil Code of 1889.

To what does the Recto Law apply? This law covers contracts of sale of personal property by installments (Act No. 4122). It is also applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. (PCI Leasing and Finance Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No. 142618, July 12, 2007) What are the alternative remedies in case of sale of personal property in installments? 1. Specific Performance: Exact fulfillment should the buyer fail to pay General Rule: If availed of, the unpaid seller cannot anymore choose other remedies; Exception: if after choosing, it has become impossible, rescission may be pursued 2. Rescission: Cancel the sale if buyer fails to pay 2 or more installments Deemed chosen when: a. Notice of rescission is sent b. Takes possession of subject matter of sale c. Files action for rescission 3. Foreclosure: Foreclose on chattel mortgage if buyer fails to pay 2 or more installments General Rule: Actual foreclosure is necessary to bar recovery of balance - Extent of barring effect: purchase price Exception: Mortgagor refuses to deliver property to effect foreclosure; expenses incurred in attorneys fees, etc. IMPLIED WARRANTIES What are implied warranties? Warranties deemed included in all contracts of sale by operation of law. (Art. 1547) 1. Warranty that seller has right to sell refers to consummation stage. Not applicable to sheriff, auctioneer, mortgagee, pledge 2. Warranty against eviction Requisites: a. Buyer is Evicted in whole or in part from the subject matter of sale b. Final Judgment c. Basis of eviction is a right Prior to sale or act imputable to seller d. Seller has been Summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant through 3rd party complaint brought by buyer e. No waiver on the part of the buyer Note: For eviction disturbance in law is required and not just trespass in fact.

3. Warranty against encumbrances (non-apparent) Requisites: a. immovable sold is encumbered with non- apparent burden or servitude not mentioned in the agreement b. nature of non-apparent servitude or burden is such that it must be presumed that the buyer would not have acquired it had he been aware thereof Exception: warranty not applicable when non-apparent burden or servitude is recorded in the Registry of Property unless there is expressed warranty that the thing is free from all burdens & encumbrances 4. Warranty against Hidden Defects Requisites: a. Defect is important or Serious i. The thing sold is unfit for the use which it is intended ii. Diminishes its fitness for such use or to such an extent that the buyer would not have acquired it had he been aware thereof b. Defect is Hidden c. Defect Exists at the time of the sale d. Buyer gives Notice of the defect to the seller within reasonable time e. Action for rescission or reduction of the price is brought within the proper period i. 6 months from delivery of the thing sold ii. Within 40 days from the delivery in case of animals f. There must be No waiver of warranty on the part of the buyer. When is implied warranty not applicable? 1. As is and where is sale 2. Sale of second hand articles 3. Sale by virtue of authority in fact or law 4. Sale at public auction for tax delinquency What are the effects of waiver of an implied warranty? 1. Seller in bad faith & there is waiver against eviction void 2. When buyer w/o knowledge of a particular risk, made general renunciation of warranty is not a waiver but merely limits liability of seller in case of eviction 3. When buyer with knowledge of risk of eviction assumed its consequences & made a waiver seller not liable (applicable only to waiver of warranty against eviction) REMEDIES OF AN UNPAID SELLER What are the remedies of an Unpaid Seller?

I. Ordinary 1. Action for Price Exercised when: a. ownership has passed to buyer; b. price is payable on a day certain c. goods cannot readily be resold for reasonable price and Art. 1596 is inapplicable 2. Action for Damages In case of wrongful neglect or refusal by the buyer to accept or pay for the thing sold II. Special 1. Possessory Lien Seller not bound to deliver if buyer has not paid him the price. It is exercisable only in following circumstances: a. goods sold without stipulation as to credit b. goods sold on credit but term of credit has expired c. buyer becomes insolvent Note: When part of goods delivered, may still exercise right on goods undelivered 2. Stoppage in Transitu Requisites: a. Insolvent buyer b. Seller must Surrender the negotiable document of title, if any c. Seller must bear the Expenses of delivery of the goods after the exercise of the right. d. Seller must either actually take possession of the goods sold or give Notice of his claim to the carrier or other person in possession e. Goods must be in Transit f. Unpaid seller 3. Special Right to Resell the Goods Exercised when: a. Goods are perishable, b. Stipulated the right of resale in case of default, or c. Buyer in default for unreasonable time 4. Special Right to Rescind Requisites: a. Expressly stipulated OR buyer is in default for unreasonable time b. Notice needed to be given by seller to buyer Note: Ownership of goods already with buyer but seller may still rescind; ownership is destroyed even without court intervention but in ordinary sale, need to go to court.