Almueda, Karl Angelo C.

GR # 105649 Oct 18, 1995

FLORO ENTERPRISES, petitioner Vs.

COURT OF APPEALS and PHILIPPINE RABBIT BUS LINES, INC., respondents.

FACTS:

Petitioner (floro) and respondent (rabbit) entered into an agreement denominated as

agreement for equipment lease, service and maintenance. Floro agreed to deliver to rabbit computer
equipemnts including (4) model 85 monitors. A hand written annotation made by ernesto (sales
representative of floro) which reads after 5 years the computer becomes your property.

Down payment was made upon signing of the agreement and certain monthly payments of the
computer equipment. The computer equipment was delivered to rabbit except for the (4) model 85
monitors and instead delivered model 82 monitors with assurance made by floro that the model 85 will
be forthcoming. The model 85 monitors were never delivered to rabbit.

Subsequently rabbit asked for cancellation of the agreement, later on floro expressed its
conformity to the mutual cancellation of the agreement and demanded the return of the computer
equipment and back rentals. Rabbit answered that the computer equipment would only be returned
only upon reimbursement of the amount paid by rabbit.

RTC characterize the agreement to be one of lease which ruled in favor of floro by ordering
rabbit to pay back rentals, while the CA characterize the agreement to be one of sale on a basis of
installation based on the remarks made by Ernesto.

ISSUE:

Whether or not, agreement of lease or a sale on a basis of installment has any effect on the
cancellation of the agreement.

HELD:

None, whether the contract is characterized as a sale or a lease, the consequences of the
cancellation would be the same. The parties are to be restored to their original position as far as
practicable.

Rabbit is entitled for reimbursement and floro the return of its computer equipment. However
since rabbit had benefited from such delivery for its operation, rabbit is only entitled to partial
reimbursement since rabbit cannot be allowed to unjustly enrich itself at the expense of floro.