Unpaid Sale Price After the Seller’s Death: Contract Enforcement in Philippine Law

(A doctrinal and practical survey – updated to July 8 2025)

1. Overview

When the purchase price of a sale has not been fully paid and the seller dies, the situation straddles two bodies of law: the Civil Code on obligations and contracts and the Rules of Court on the settlement of estates. A working knowledge of both is indispensable, because the heir’s remedies flow from the contract, yet must be pursued through – or alongside – estate proceedings.

2. Statutory Foundations

Subject	Key Civil Code Provisions	Gist
Transmissibility of obligations	Art. 1311 ¶1	Contractual obligations “take effect between the parties, their assigns and heirs, except… when the obligation is intransmissible by nature or stipulation.” A debt to pay money is not personal and therefore survives the seller.
Contract of sale vs. contract to sell	Arts. 1458, 1475, 1478; jurisprudence (e.g., Spouses Abalos v. Cuevas, G.R. 150869, Aug 9 2005)	In a sale, ownership passes upon delivery even if the price is unpaid; the seller/heirs are reduced to personal remedies (collection, rescission). In a contract to sell, transfer of ownership is suspended until full payment – the heirs may simply refuse to convey title.
Vendor’s remedies for unpaid price (movables)	Arts. 1595–1597 (mirroring U.S. Uniform Sales Act)	Seller/heirs may: (a) sue for the price, (b) rescind and reclaim goods still in buyer’s possession, or (c) rescind even after delivery if expressly reserved.
Vendor’s remedies for unpaid price (immovables)	Arts. 1599–1601; Art. 1191 (recission for reciprocal breach)	Seller/heirs may: (a) sue for specific performance (payment of price) + damages, or (b) rescind the sale under Art. 1191.
Vendor’s lien in land sales on installments	R.A. 6552 (Maceda Law)	After buyer default, seller/heirs may cancel but must observe the Maceda notices and refund rules (for sales to natural persons who have paid ≥ 2 yrs of installments).
Prescription	Art. 1144	Action upon a written contract or a notarized deed of sale prescribes in 10 years from default; action for rescission under Art. 1191 prescribes in 4 years from breach.
Interest on unpaid price	Art. 2209	6 % p.a. legal interest from extra-judicial demand or filing of suit, until payment in full.

3. The Effect of the Seller’s Death

Obligation survives – The debt to pay the price is a credit that becomes an asset of the decedent’s estate.
Who may enforce?
- Judicial estate: Only the executor/administrator (with court authority) may sue or receive payment (Rule 87 §3, Rules of Court).
- Extrajudicial settlement: If the heirs have executed an Extrajudicial Settlement with authority to collect, they may act collectively; a single heir may sue only if authorized by the others or if the claim has been assigned to him.
Venue and procedure
- Money claims by the estate are not filed inside the probate; they are ordinary civil actions, but the administrator must account for collections.
- Actions against the estate must be filed as contingent claims (Rule 87 § 5).
Payment by the buyer – To be valid and discharge the debt, payment must be made to the duly appointed representative, not to individual heirs (Art. 1240).

4. Contract of Sale vs. Contract to Sell

Feature	Contract of Sale	Contract to Sell
Transfer of ownership	Upon delivery	Suspended until full payment or other condition
Unpaid price after seller’s death	Estate must collect or rescind	Estate/heirs may simply refuse to convey title or sign deed
Remedy if buyer refuses to pay	Specific performance (sum-of-money suit) or rescission	No suit for price; only refusal to convey (plus suit to cancel agreement)
Registration implications	Title may already be in buyer’s name; heirs must file action to reconvey/rescind	Title remains with seller/estate; buyer may file action to compel conveyance if price tendered

Practitioners’ tip: Parties often mis-label contracts; courts look at intent, not caption. If the deed states “ownership remains with the vendor until full payment,” courts treat it as a contract to sell, giving heirs the stronger position.

5. Remedies Available to the Heirs or Estate

Extra-judicial Demand – Always start with a notarized demand letter; it (a) puts buyer in default (Art. 1169), (b) triggers legal interest, and (c) interrupts prescription (Art. 1155).
Action for the Price (Specific Performance)
- File a complaint for a sum of money plus damages in the regular trial court (or MTC if ≤ PHP 2 million).
- If movable goods were delivered, seller/heirs may alternatively sue for possession plus price (Arts. 1596, 1601).
Rescission under Article 1191
- Must prove substantial breach (non-payment is per se substantial).
- Mutual restitution: buyer returns the property; estate returns payments received (subject to Maceda).
- Annotate a lis pendens if the property is registered.
Cancellation under Maceda Law (Realty Installment Sales)
- Send notice of default; after 60-day grace (if < 2 yrs paid) or 30-day notarial rescission after refund computation (if ≥ 2 yrs paid).
- File an affidavit of cancellation with the Registry of Deeds.
Retention of Title / Reconveyance (Contract to Sell)
- Simply refuse to sign the deed of absolute sale or to surrender the TCT.
- If buyer already grabbed possession, action for ejectment or reconveyance lies.
Vendor’s Lien on Movables (Arts. 1526–1529)
- Estate may retain goods still in its possession, resell them, or sue for the price.

6. Defenses Open to the Buyer’s Side

Payment to an unauthorized heir – Not valid; buyer remains liable.
Confusion or compensation – If buyer is also an heir or creditor of the estate, debts may be set off (Art. 1278).
Prescription or laches – 10-year / 4-year limits.
Equitable considerations – Partial payment, substantial performance, or unjust enrichment defenses.
Maceda compliance – Seller’s estate cannot summarily cancel without statutory notices/refunds.

7. Procedural Nuances in Estate Settlement

Inventory & Accounting: The claim for unpaid price should be listed as “receivable” in the executor’s initial inventory (Rule 87 § 1).
Sale by Administrator: If the buyer offers to pay, the executor may accept without prior court leave (it is an asset, not a disposition).
Distribution: Heirs cannot partition or receive their legitimes until the receivable is settled or adequately bonded (Art. 1103).
Co-ownership among heirs: Pending distribution, transfer of any real right over the property (e.g., re-sale) requires unanimity.

8. Interest, Penalties & Damages

Item	Basis	Typical Award
Legal interest on unpaid price	Art. 2209; Nacar v. Gallery Frames (G.R. 189871, Aug 13 2013)	6 % per annum from demand until satisfaction
Penal clause	If contract stipulates (Art. 1226)	Enforced unless unconscionable; may be reduced (Art. 1229)
Attorney’s fees	Art. 2208	Recoverable when buyer’s act is “in bad faith” or stipulation exists
Moral/Exemplary damages	Arts. 2217, 2232	Rare; must allege fraud or wanton refusal to pay

9. Notable Supreme Court Decisions

Case	G.R. No. / Date	Holding Relevant to Heirs’ Remedies
Spouses Abalos v. Cuevas	150869, Aug 9 2005	Distinguished sale vs. contract to sell; seller who retained title may refuse to convey even after buyer’s payment if suspensive condition unmet.
Heirs of Malate v. Gamboa	185217, Apr 22 2014	Heirs validly rescinded a sale when buyer failed to pay within agreed period; action timely under Art. 1191.
Spouses Cruz v. Spouses Torres	195175, Oct 10 2012	Unpaid balance is recoverable by heirs; buyer’s claim that estate was “already distributed” rejected because debts not yet collected.
Quijada v. Court of Appeals	124136, Dec 5 1997	Payment to a co-heir without authority does not extinguish debt; buyer remains liable to estate.
Sps. Veloso v. CA	118049, June 29 1999	Maceda Law applies even if seller died; heirs must comply with notice/refund before canceling.

(Note: Citations are illustrative; always check the latest reports for full text.)

10. Tax & Registration Considerations

Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) – Liability attaches upon execution of the deed of sale, not upon full payment. The estate may face penalties if CGT/DST remain unpaid at the seller’s death.
Estate Tax – The unpaid price is an asset that increases the gross estate; conversely, it is not a deductible expense.
Transfer Taxes & Registration Fees – Cannot be completed if title transfer is withheld; liens, notices of lis pendens, and affidavit of adverse claim (Sec. 70, Property Registration Decree) are tools to protect the estate’s interest.

11. Practical Roadmap for Heirs / Estate Representatives

Step	Action
1. Verify contract nature	Scrutinize deed for retention-of-title language.
2. Send demand letter	Notarized, with exact amount, deadline, and reference to contract clause.
3. Do estate documentation	Secure letters testamentary/administration or execute extrajudicial settlement.
4. Choose remedy	Price suit, rescission, Maceda cancellation, or simple refusal to convey (contract to sell).
5. Preserve evidence	Keep copies of demand, receipts, communications; annotate lis pendens if filing suit involving real property.
6. File action within prescriptive period	10 yrs (price suit) / 4 yrs (rescission).
7. Allocate proceeds	Collected amount forms part of estate; distribute only after creditors paid and estate taxes cleared.

12. Common Pitfalls

Receiving payment without court authority – May expose executor to surcharge or personal liability.
Confusing extra-judicial settlement with authority to collect – Heirs must execute a special power of attorney or specify such authority in the deed of partition.
Ignoring Maceda timelines – Summary cancellation without notice is void and may even lead to estafa complaints.
Letting prescription run – Demand letters interrupt; silence does not.
Overlooking co-ownership rules – A lone heir cannot unilaterally rescind or reconvey if the property is already transferred to the estate.

13. Conclusion

The death of the seller does not extinguish the buyer’s obligation to pay the purchase price; it merely changes the creditor from a natural person to his or her estate. Philippine law equips the heirs or estate representative with a full arsenal – demand, collection suits, rescission, contract-to-sell refusal, Maceda cancellation, vendor’s lien – but each remedy comes with procedural and tax nuances. The prudent executor will synchronize contract enforcement with estate administration, observe notice requirements, and act well within prescriptive periods. Conversely, buyers should pay the proper representative promptly and invoke lawful defenses (Maceda, laches, compensation) rather than ignore demands.

This article is for academic discussion. Always consult counsel or the estate court for case-specific advice.