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Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 168115 June 8, 2007
VICENTE ONG LIM SING, JR., petitioner,
vs.
E! LE"SING # IN"NCE CORPOR"TION, respondent.
D E C I S I O N
N"CHUR", J.:
This is a petition for revie on certiorari assailin! the Decision
"
dated March "#,
$%%# and the Resolution
$
dated Ma& $', $%%# of the Court of (ppeals )C(* in C(+,.R.
C- No. ../01.
The facts are as follos2
On March 0, "00#, 3E4 5easin! and 3inance Corporation )3E4* entered into a
lease
'
of e6uip7ent and 7otor vehicles ith 8-5 3ood Products )8-5*. On the sa7e
date, -icente On! 5i7 Sin!, 8r. )5i7* e9ecuted an Individual ,uarant&
(!ree7ent
/
ith 3E4 to !uarantee the pro7pt and faithful perfor7ance of the ter7s
and conditions of the aforesaid lease a!ree7ent. Correspondin! 5ease Schedules
ith Deliver& and (cceptance Certi:cates
#
over the e6uip7ent and 7otor vehicles
for7ed part of the a!ree7ent. ;nder the contract, 8-5 as obli!ed to pa& 3E4 an
a!!re!ate !ross 7onthl& rental of One <undred Sevent& Thousand 3our <undred
Ninet&+3our Pesos )P".%,/0/.%%*.
8-5 defaulted in the pa&7ent of the 7onthl& rentals. (s of 8ul& '", $%%%, the a7ount
in arrears, includin! penalt& char!es and insurance pre7iu7s, a7ounted to Three
Million 3our <undred 3ourteen Thousand 3our <undred Si9t&+Ei!ht and .#="%% Pesos
)P',/"/,/>1..#*. On (u!ust $', $%%%, 3E4 sent a letter to 8-5 de7andin! pa&7ent
of the said a7ount. <oever, 8-5 failed to pa&.
>
On Dece7ber >, $%%%, 3E4 :led a Co7plaint
.
ith the Re!ional Trial Court of Manila,
doc?eted as Civil Case No. %%+00/#", for su7 of 7one&, da7a!es, and replevin
a!ainst 8-5, 5i7, and 8ohn Doe.
In the (7ended (nser,
1
8-5 and 5i7 ad7itted the e9istence of the lease
a!ree7ent but asserted that it is in realit& a sale of e6uip7ent on install7ent basis,
ith 3E4 actin! as the :nancier. 8-5 and 5i7 clai7ed that this intention as
apparent fro7 the fact that the& ere 7ade to believe that hen full pa&7ent as
e@ected, a Deed of Sale ill be e9ecuted b& 3E4 as vendor in favor of 8-5 and 5i7 as
vendees.
0
3E4 purportedl& assured the7 that docu7entin! the transaction as a
lease a!ree7ent is Aust an industr& practice and that the proper docu7entation
ould be e@ected as soon as full pa&7ent for ever& ite7 as 7ade. The& also
contended that the lease a!ree7ent is a contract of adhesion and should, therefore,
be construed a!ainst the part& ho prepared it, i.e., 3E4.
In upholdin! 8-5 and 5i7Bs stance, the trial court stressed the contradictor& ter7s it
found in the lease a!ree7ent. The pertinent portions of the Decision dated
Nove7ber $$, $%%$ read2
( profound scrutin& of the provisions of the contract hich is a contract of adhesion
at once e9posed the use of several contradictor& ter7s. To na7e a fe, in Section 0
of the said contract C disclai7in! arrant&, it is stated that the lessor is not the
7anufacturer nor the latterBs a!ent and therefore does not !uarantee an& feature or
aspect of the obAect of the contract as to its 7erchantabilit&. Merchantabilit& is a
ter7 applied in a contract of sale of !oods here conditions and arranties are
7ade to appl&. (rticle "#/. of the Civil Code provides that unless a contrar&
intention appears an i7plied arrant& on the part of the seller that he has the ri!ht
to sell and to pass onership of the obAect is furnished b& la to!ether ith an
i7plied arrant& that the thin! shall be free fro7 hidden faults or defects or an&
char!e or encu7brance not ?non to the bu&er.
In an adhesion contract hich is drafted and printed in advance and parties are not
!iven a real ar7sB len!th opportunit& to transact, the Courts treat this ?ind of
contract strictl& a!ainst their architects for the reason that the part& enterin! into
this ?ind of contract has no choice but to accept the ter7s and conditions found
therein even if he is not in accord thereith and for that 7atter 7a& not have
understood all the ter7s and stipulations prescribed thereat. Contracts of this
character are prepared unilaterall& b& the stron!er part& ith the best le!al talents
at its disposal. It is upon that thou!ht that the Courts are called upon to anal&De
closel& said contracts so that the ea?er part& could be full& protected.
(nother instance is hen the alle!ed lessee as re6uired to insure the thin! a!ainst
loss, da7a!e or destruction.
In propert& insurance a!ainst loss or other accidental causes, the assured 7ust have
an insurable interest, '$ Corpus 8uris "%#0.
9 9 9 9
It has also been held that the test of insurable interest in propert& is hether the
assured has a ri!ht, title or interest therein that he ill be bene:ted b& its
preservation and continued e9istence or su@er a direct pecuniar& loss fro7 its
destruction or inAur& b& the peril insured a!ainst. If the defendants ere to be
re!arded as onl& a lessee, lo!icall& the lessor ho asserts onership ill be the one
directl& bene:ted or inAured and therefore the lessee is not supposed to be the
assured as he has no insurable interest.
There is also an observation fro7 the records that the actual value of each obAect of
the contract ould be the result after co7putin! the 7onthl& rentals b& 7ultipl&in!
the said rentals b& the nu7ber of 7onths speci:ed hen the rentals ou!ht to be
paid.
Still another observation is the e9istence in the records of a Deed of (bsolute Sale
b& and beteen the sa7e parties, plainti@ and defendants hich as an e9hibit of
the defendant here the plainti@ sold to the sa7e defendants one unit "00#
Mitsubishi 5+$%% STR(D( DC PICE ;P and in said Deed, The Court noticed that the
sa7e ter7s as in the alle!ed lease ere used in respect to arrant&, as ell as
liabilit& in case of loss and other conditions. This action of the plainti@ une6uivocall&
e9hibited their real intention to e9ecute the correspondin! Deed after the
defendants have paid in full and as heretofore discussed and for the sa?e of
e7phasis the obscurit& in the ritten contract cannot favor the part& ho caused
the obscurit&.
4ased on substantive Rules on Interpretation, if the ter7s are clear and leave no
doubt upon the intention of the contractin! parties, the literal 7eanin! of its
stipulations shall control. If the ords appear to be contrar& to the evident intention
of the parties, their conte7poraneous and subse6uent acts shall be principall&
considered. If the doubts are cast upon the principal obAect of the contract in such a
a& that it cannot be ?non hat 7a& have been the intention or ill of the parties,
the contract shall be null and void.
"%
Thus, the court concluded ith the folloin! disposition2
In this case, hich is held b& this Court as a sale on install7ent there is no chattel
7ort!a!e on the thin! sold, but it appears a7on!st the Co7plaintBs pra&er, that the
plainti@ elected to e9act ful:ll7ent of the obli!ation.
3or the vehicles returned, the plainti@ can onl& recover the unpaid balance of the
price because of the previous pa&7ents 7ade b& the defendants for the reasonable
use of the units, speciall& so, as it appears, these returned vehicles ere sold at
auction and that the plainti@ can appl& the proceeds to the balance. <oever, ith
respect to the unreturned units and 7achineries still in the possession of the
defendants, it is this CourtBs vie and so hold that the defendants are liable
therefore and accordin!l& are ordered Aointl& and severall& to pa& the price thereof
to the plainti@ to!ether ith attorne&Bs fee and the costs of suit in the su7 of
Php$#,%%%.%%.
SO ORDERED.
""
On Dece7ber $., $%%$, 3E4 :led its Notice of (ppeal.
"$
(ccordin!l&, on 8anuar& ".,
$%%', the court issued an Order
"'
elevatin! the entire records of the case to the C(.
3E4 averred that the trial court erred2
(. Fhen it ruled that the a!ree7ent beteen the Parties+5iti!ants is one of sale of
personal properties on install7ent and not of leaseG
4. Fhen it ruled that the applicable la on the case is (rticle "/1/ )of the Civil
Code* and not R.(. No. 1##>G
C. Fhen it ruled that the Plainti@+(ppellant can no lon!er recover the unpaid
balance of the price because of the previous pa&7ents 7ade b& the defendants for
the reasonable use of the unitsG
D. Fhen it failed to 7a?e a rulin! or Aud!7ent on the 8oint and Solidar& 5iabilit& of
-icente On! 5i7, 8r. to the Plainti@+(ppellant.
"/
On March "#, $%%#, the C( issued its Decision
"#
declarin! the transaction beteen
the parties as a :nancial lease a!ree7ent under Republic (ct )R.(.* No.
1##>.
">
The fallo of the assailed Decision reads2
$HEREORE, the instant appeal is GR"NTED and the assailed Decision dated $$
Nove7ber $%%$ rendered b& the Re!ional Trial Court of Manila, 4ranch /0 in Civil
Case No. %%+00/#" is REVERSED and SET "SIDE, and a ne Aud!7ent is
hereb& ENTERED orderin! appellees 8-5 3ood Products and -icente On! 5i7, 8r. to
solidaril& pa& appellant 3E4 5easin! and 3inance Corporation the a7ount of T%&ee
M'(('on ou& Hun)&e) ou&*een T%ou+,n) ou& Hun)&e) S'-*. E'/%* Pe+o+
,n) 750100 1P%23,414,468.755, ith interest at the rate of telve percent
)"$H* per annum startin! fro7 the date of Audicial de7and on %> Dece7ber $%%%,
until full pa&7ent thereof. Costs a!ainst appellees.
SO ORDERED.
".
5i7 :led the instant Petition for Revie on Certiorari under Rule /#
contendin! that2
I
The <onorable Court of (ppeals erred hen it failed to consider that the undated
co7plaint as :led b& Saturnino 8. ,alan!, 8r., ithout an& authorit& fro7
respondentBs 4oard of Directors and=or Secretar&Bs Certi:cate.
II
The <onorable Court of (ppeals erred hen it failed to strictl& appl& Section ., Rule
"1 of the "00. Rules of Civil Procedure and no Ite7 ", ()1* of (.M. No. %'+"+%0 SC
)8une 1, $%%/*.
III
The <onorable Court of (ppeals erred in not dis7issin! the appeal for failure of the
respondent to :le on ti7e its appellantBs brief and to separatel& rule on the
petitionerBs 7otion to dis7iss.
I-
The <onorable Court of (ppeals erred in :ndin! that the contract beteen the
parties is one of a :nancial lease and not of a contract of sale.
-
The <onorable Court of (ppeals ERRED IN rulin! that the pa&7ents paid b& the
petitioner to the respondent are IrentalsI and not install7ents paid for the purchase
price of the subAect 7otor vehicles, heav& 7achines and e6uip7ent.
-I
The <onorable Court of (ppeals erred in rulin! that the previous contract of sale
involvin! the pic?+up vehicle is of no conse6uence.
-II
The <onorable Court of (ppeals failed to ta?e into consideration that the contract of
lease, a contract of adhesion, concealed the true intention of the parties, hich is a
contract of sale.
-III
The <onorable Court of (ppeals erred in rulin! that the petitioner is a lessee ith
insurable interest over the subAect personal properties.
IJ
The <onorable Court of (ppeals erred in construin! the intentions of the Court a
quo in its usa!e of the ter7 7erchantabilit&.
"1
Fe aKr7 the rulin! of the appellate court.
3irst, 5i7 can no lon!er 6uestion ,alan!Bs authorit& as 3E4Bs authoriDed
representative in :lin! the suit a!ainst 5i7. ,alan! as the representative of 3E4 in
the proceedin!s before the trial court up to the appellate court. Petitioner never
placed in issue the validit& of ,alan!Bs representation before the trial and appellate
courts. Issues raised for the :rst ti7e on appeal are barred b& estoppel. (r!u7ents
not raised in the ori!inal proceedin!s cannot be considered on revieG otherise, it
ould violate basic principles of fair pla&.
"0
Second, there is no le!al basis for 5i7 to 6uestion the authorit& of the C( to !o
be&ond the 7atters a!reed upon durin! the pre+trial conference, or in not dis7issin!
the appeal for failure of 3E4 to :le its brief on ti7e, or in not rulin! separatel& on the
petitionerBs 7otion to dis7iss.
Courts have the prero!ative to rela9 procedural rules of even the 7ost 7andator&
character, 7indful of the dut& to reconcile both the need to speedil& put an end to
liti!ation and the partiesB ri!ht to due process. In nu7erous cases, this Court has
alloed liberal construction of the rules hen to do so ould serve the de7ands of
substantial Austice and e6uit&.
$%
In Aguam v. Court of Appeals , the Court e9plained2
The court has the discretion to dis7iss or not to dis7iss an appellantLs appeal. It is a
poer conferred on the court, not a dut&. The Idiscretion 7ust be a sound one, to be
e9ercised in accordance ith the tenets of Austice and fair pla&, havin! in 7ind the
circu7stances obtainin! in each case.I Technicalities, hoever, 7ust be avoided.
The la abhors technicalities that i7pede the cause of Austice. The courtLs pri7ar&
dut& is to render or dispense Austice. I( liti!ation is not a !a7e of technicalities.I
I5asuits unli?e duels are not to be on b& a rapierLs thrust. Technicalit&, hen it
deserts its proper oKce as an aid to Austice and beco7es its !reat hindrance and
chief ene7&, deserves scant consideration fro7 courts.I 5iti!ations 7ust be decided
on their 7erits and not on technicalit&. Ever& part& liti!ant 7ust be a@orded the
a7plest opportunit& for the proper and Aust deter7ination of his cause, free fro7 the
unacceptable plea of technicalities. Thus, dis7issal of appeals purel& on technical
!rounds is froned upon here the polic& of the court is to encoura!e hearin!s of
appeals on their 7erits and the rules of procedure ou!ht not to be applied in a ver&
ri!id, technical senseG rules of procedure are used onl& to help secure, not override
substantial Austice. It is a far better and 7ore prudent course of action for the court
to e9cuse a technical lapse and a@ord the parties a revie of the case on appeal to
attain the ends of Austice rather than dispose of the case on technicalit& and cause a
!rave inAustice to the parties, !ivin! a false i7pression of speed& disposal of cases
hile actuall& resultin! in 7ore dela&, if not a 7iscarria!e of Austice.
$"
Third, hile e aKr7 that the subAect lease a!ree7ent is a contract of adhesion,
such a contract is not void per se. It is as bindin! as an& ordinar& contract. ( part&
ho enters into an adhesion contract is free to reAect the stipulations entirel&.
$$
If the
ter7s thereof are accepted ithout obAection, then the contract serves as the la
beteen the parties.
In Section $' of the lease contract, it as e9pressl& stated that2
SECTION $'. ENTIRE (,REEMENTG SE-ER(4I5ITM C5(;SE
$'.". The 5ESSOR and the 5ESSEE a!ree this instru7ent constitute the entire
a!ree7ent beteen the7, and that no representations have been 7ade other than
as set forth herein. This (!ree7ent shall not be a7ended or altered in an& 7anner,
unless such a7end7ent be 7ade in ritin! and si!ned b& the parties hereto.
PetitionerBs clai7 that the real intention of the parties as a contract of sale of
personal propert& on install7ent basis is 7ore li?el& a 7ere afterthou!ht in order to
defeat the ri!hts of the respondent.
The 5ease Contract ith correspondin! 5ease Schedules ith Deliver& and
(cceptance Certi:cates is, in point of fact, a :nancial lease ithin the purvie of
R.(. No. 1##>. Section ')d* thereof de:nes I:nancial leasin!I as2
N(O 7ode of e9tendin! credit throu!h a non+cancelable lease contract under hich
the lessor purchases or ac6uires, at the instance of the lessee, 7achiner&,
e6uip7ent, 7otor vehicles, appliances, business and oKce 7achines, and other
7ovable or i77ovable propert& in consideration of the periodic pa&7ent b& the
lessee of a :9ed a7ount of 7one& suKcient to a7ortiDe at least sevent& ).%H* of
the purchase price or ac6uisition cost, includin! an& incidental e9penses and a
7ar!in of pro:t over an obli!ator& period of not less than to )$* &ears durin! hich
the lessee has the ri!ht to hold and use the leased propert& ith the ri!ht to
e9pense the lease rentals paid to the lessor and bears the cost of repairs,
7aintenance, insurance and preservation thereof, but ith no obli!ation or option
on his part to purchase the leased propert& fro7 the oner+lessor at the end of the
lease contract.
3E4 leased the subAect e6uip7ent and 7otor vehicles to 8-5 in consideration of a
7onthl& periodic pa&7ent ofP".%,/0/.%%. The periodic pa&7ent b& petitioner is
suKcient to a7ortiDe at least .%H of the purchase price or ac6uisition cost of the
said 7ovables in accordance ith the 5ease Schedules ith Deliver& and
(cceptance Certi:cates. IThe basic purpose of a :nancial leasin! transaction is to
enable the prospective bu&er of e6uip7ent, ho is unable to pa& for such
e6uip7ent in cash in one lu7p su7, to lease such e6uip7ent in the 7eanti7e for
his use, at a :9ed rental suKcient to a7ortiDe at least .%H of the ac6uisition cost
)includin! the e9penses and a 7ar!in of pro:t for the :nancial lessor* ith the
e9pectation that at the end of the lease period the bu&er=:nancial lessee ill be able
to pa& an& re7ainin! balance of the purchase price.I
$'
The alle!ation of petitioner that the rent for the use of each 7ovable constitutes the
value of the vehicle or e6uip7ent leased is of no 7o7ent. The la on :nancial lease
does not prohibit such a circu7stance and this alone does not 7a?e the transaction
beteen the parties a sale of personal propert& on install7ent. In fact, the value of
the lease, usuall& constitutin! the value or a7ount of the propert& involved, is a
bene:t alloed b& la to the lessor for the use of the propert& b& the lessee for the
duration of the lease. It is reco!niDed that the value of these 7ovables depreciates
throu!h ear and tear upon use b& the lessee. In 4eltran v. P(IC 3inance
Corporation,
$/
e stated that2
,enerall& spea?in!, a :nancin! co7pan& is not a bu&er or seller of !oodsG it is not a
tradin! co7pan&. Neither is it an ordinar& leasin! co7pan&G it does not 7a?e its
pro:t b& bu&in! e6uip7ent and repeatedl& leasin! out such e6uip7ent to di@erent
users thereof. 4ut a :nancial lease 7ust be preceded b& a purchase and sale
contract coverin! the e6uip7ent hich beco7es the subAect 7atter of the :nancial
lease. The :nancial lessor ta?es the role of the bu&er of the e6uip7ent leased. (nd
so the for7al or docu7entar& tie beteen the seller and the real bu&er of the
e6uip7ent, i.e., the :nancial lessee, is apparentl& severed. In econo7ic realit&,
hoever, that relationship re7ains. The sale of the e6uip7ent b& the supplier
thereof to the :nancial lessor and the latterLs le!al onership thereof are intended
to secure the repa&7ent over ti7e of the purchase price of the e6uip7ent, plus
:nancin! char!es, throu!h the pa&7ent of lease rentalsG that le!al title is the
upfront securit& held b& the :nancial lessor, a securit& probabl& superior in so7e
instances to a chattel 7ort!a!eeLs lien.
$#
3ourth, the validit& of 5ease No. $.20#2$% beteen 3E4 and 8-5 should be upheld.
8-5 entered into the lease contract ith full ?noled!e of its ter7s and conditions.
The contract as in force for 7ore than four &ears. Since its inception on March 0,
"00#, 8-5 and 5i7 never 6uestioned its provisions. The& onl& attac?ed the validit& of
the contract after the& ere Audiciall& 7ade to anser for their default in the
pa&7ent of the a!reed rentals.
It is settled that the parties are free to a!ree to such stipulations, clauses, ter7s,
and conditions as the& 7a& ant to include in a contract. (s lon! as such
a!ree7ents are not contrar& to la, 7orals, !ood custo7s, public polic&, or public
order, the& shall have the force of la beteen the parties.
$>
Contractin! parties
7a& stipulate on ter7s and conditions as the& 7a& see :t and these have the force
of la beteen the7.
$.
The stipulation in Section "/
$1
of the lease contract, that the e6uip7ent shall be
insured at the cost and e9pense of the lessee a!ainst loss, da7a!e, or destruction
fro7 :re, theft, accident, or other insurable ris? for the full ter7 of the lease, is a
bindin! and valid stipulation. Petitioner, as a lessee, has an insurable interest in the
e6uip7ent and 7otor vehicles leased. Section ". of the Insurance Code provides
that the 7easure of an insurable interest in propert& is the e9tent to hich the
insured 7i!ht be da7ni:ed b& loss or inAur& thereof. It cannot be denied that 8-5 ill
be directl& da7ni:ed in case of loss, da7a!e, or destruction of an& of the properties
leased.
5i?eise, the stipulation in Section 0." of the lease contract that the lessor does not
arrant the 7erchantabilit& of the e6uip7ent is a valid stipulation. Section 0." of
the lease contract is stated as2
0." IT IS ;NDERSTOOD 4ETFEEN T<E P(RTIES T<(T T<E 5ESSOR IS NOT T<E
M(N;3(CT;RER OR S;PP5IER O3 T<E EP;IPMENT NOR T<E (,ENT O3 T<E
M(N;3(CT;RER OR S;PP5IER T<EREO3. T<E 5ESSEE <ERE4M (CENOF5ED,ES T<(T
IT <(S SE5ECTED T<E EP;IPMENT (ND T<E S;PP5IER T<EREO3 (ND T<(T T<ERE
(RE NO F(RR(NTIES, CONDITIONS, TERMS, REPRESENT(TION OR IND;CEMENTS,
EJPRESS OR IMP5IED, ST(T;TORM OR OT<ERFISE, M(DE 4M OR ON 4E<(53 O3 T<E
5ESSOR (S TO (NM 3E(T;RE OR (SPECT O3 T<E EP;IPMENT OR (NM P(RT
T<EREO3, OR (S TO ITS 3ITNESS, S;IT(4I5ITM, C(P(CITM, CONDITION OR
MERC<(NT(4I5ITM, NOR (S TO F<ET<ER T<E EP;IPMENT FI55 MEET T<E
REP;IREMENTS O3 (NM 5(F, R;5E, SPECI3IC(TIONS OR CONTR(CT F<IC< PRO-IDE
3OR SPECI3IC M(C<INERM OR (PP(R(T;S OR SPECI(5 MET<ODS.
$0
In the :nancial lease a!ree7ent, 3E4 did not assu7e responsibilit& as to the 6ualit&,
7erchantabilit&, or capacit& of the e6uip7ent. This stipulation provides that, in case
of defect of an& ?ind that ill be found b& the lessee in an& of the e6uip7ent,
recourse should be 7ade to the 7anufacturer. IThe :nancial lessor, bein! a
:nancin! co7pan&, i.e., an e9tender of credit rather than an ordinar& e6uip7ent
rental co7pan&, does not e9tend a arrant& of the :tness of the e6uip7ent for an&
particular use. Thus, the :nancial lessee as precisel& in a position to enforce such
arrant& directl& a!ainst the supplier of the e6uip7ent and not a!ainst the :nancial
lessor. Fe :nd nothin! contra le!e7 or contrar& to public polic& in such a
contractual arran!e7ent.I
'%
3ifth, petitioner further pro@ers the vie that the real intention of the parties as to
enter into a contract of sale on install7ent in the sa7e 7anner that a previous
transaction beteen the parties over a "00# Mitsubishi 5+$%% Strada DC+Pic?+;p as
initiall& covered b& an a!ree7ent deno7inated as a lease and eventuall& beca7e
the subAect of a Deed of (bsolute Sale.
Fe Aoin the C( in reAectin! this vie because to allo the transaction involvin! the
pic?+up to be read into the ter7s of the lease a!ree7ent ould e9pand the
covera!e of the a!ree7ent, in violation of (rticle "'.$ of the Ne Civil Code.
'"
The
lease contract subAect of the co7plaint spea?s onl& of a lease. (n& a!ree7ent
beteen the parties after the lease contract has ended is a di@erent transaction
alto!ether and should not be included as part of the lease. 3urther7ore, it is a
cardinal rule in the interpretation of contracts that if the ter7s of a contract are
clear and leave no doubt as to the intention of the contractin! parties, the literal
7eanin! of its stipulations shall control. No a7ount of e9trinsic aid is necessar& in
order to deter7ine the partiesL intent.
'$
F<ERE3ORE, in the li!ht of all the fore!oin!, the petition is DENIED. The Decision of
the C( in C(+,.R. C- No. ../01 dated March "#, $%%# and Resolution dated Ma& $',
$%%# are (33IRMED. Costs a!ainst petitioner. SO ORDERED.
S'n/ 6+ e7 Le,+'n/ # 'n,n8e Co. 1C,+e !&'e95
"CTS:
3E4 5easin! and 3inance Corporation )3E4* leased e6uip7ent
and 7otor vehicles to 8-5 3ood Products ith a 7onthl& rental
of P".%,/0/
(t the sa7e date, -icente On! 5i7 Sin!, 8r. )5i7* an e9ecuted an
Individual ,uarant& (!ree7ent ith 3E4 to !uarantee the pro7pt
and faithfulperfor7ance of the ter7s and conditions of the lease
a!ree7ent
8-5 defaulted in the pa&7ent of the 7onthl& rentals resultin! to
arrears of P',/"/,/>1..# and refused to pa& despite de7ands
3E4 :led a co7plaint for da7a!es and replevin a!ainst 8-5, 5i7
and 8ohn Doe
o 8-5 and 5i7 ad7itted the e9istence of the lease
a!ree7ent but asserted that it is in realit& a sale of
e6uip7ent on install7ent basis, ith 3E4 actin! as the
:nancier
RTC2 Sale on install7ent and the 3E4 elected full pa&7ent of the
obli!ation so for the unreturned units and 7achineries the 8-5 and
5i7 are Aointl& and severall& liable to pa&
C(2 !ranted 3E4 appeal that it is a :nancial lease a!ree7ent under
Republic (ct )R.(.* No. 1##> and ordered 8-5 and 5i7 Aointl& and
severall& to pa& P',/"/,/>1..#
ISSUE: F=N 8-5 and 5i7 should Aointl& and severall& be liable for the
insured :nancial lease
HELD: ;ES. C( aKr7ed.
contract of adhesion is as bindin! as an& ordinar& contract
The 5ease Contract ith correspondin! 5ease Schedules ith
Deliver& and (cceptance Certi:cates is, in point of fact, a :nancial
lease ithin the purvie of R.(. No. 1##>
o 3E4 leased the subAect e6uip7ent and 7otor vehicles to
8-5 in consideration of a 7onthl& periodic pa&7ent of
P".%,/0/.%%. The periodic pa&7ent b& petitioner is
suKcient to a7ortiDe at least .%H of the purchase price or
ac6uisition cost of the said 7ovables in accordance ith
the 5ease Schedules ith Deliver& and (cceptance
Certi:cates.
8-5 entered into the lease contract ith full ?noled!e of its ter7s
and conditions.
5i7, as a lessee, has an insurable interest in the e6uip7ent
and 7otor vehicles leased.
In the :nancial lease a!ree7ent, 3E4 did not assu7e responsibilit&
as to the 6ualit&, 7erchantabilit&, or capacit& of the e6uip7ent.
This stipulation provides that, in case of defect of an& ?ind that
ill be found b& the lessee in an& of the e6uip7ent, recourse
should be 7ade to the 7anufacturer. QThe :nancial lessor, bein! a
:nancin! co7pan&, i.e., an e9tender of credit rather than an
ordinar& e6uip7ent rental co7pan&, does not e9tend a arrant& of
the :tness of the e6uip7ent for an& particular use. Thus, the
:nancial lessee as precisel& in a position to enforce such
arrant& directl& a!ainst the supplier of the e6uip7ent and not
a!ainst the :nancial lessor. Fe :nd nothin! contra le!e7 or
contrar& to public polic& in such a contractual arran!e7ent