G.R. No.

L-27862 November 20, 1974

LORENZO PASCUAL and LEONILA TORRES, plaintiffs-appellees,

Vs.

UNIVERSAL MOTORS CORPORATION, defendant-appellant.

Cesar C. Peralejo for plaintiffs-appellees.

Francisco Carreon & Renato E. Tañada for defendant-appellant.

MAKALINTAL, C.J.:p

In the lower court the parties entered into the following stipulation of facts:

1. That the plaintiffs executed the real estate mortgage subject matter of this complaint on
December 14, 1960 to secure the payment of the indebtedness of PDP Transit, Inc. for the
purchase of five (5) units of Mercedez Benz trucks under invoices Nos. 2836, 2837, 2838, 2839
and 2840 with a total purchase price or principal obligation of P152,506.50 but plaintiffs’
guarantee is not to exceed P50,000.00 which is the value of the mortgage.

2. That the principal obligation of P152,506.50 was to bear interest at 1% a month from December
14, 1960.

3. That as of April 5, 1961 with reference to the two units mentioned above and as of May 22,
1961 with reference to the three units, PDP Transit, Inc., plaintiffs’ principal, had paid to the
defendant Universal Motors Corporation the sum of P92,964.91, thus leaving a balance of
P68,641.69 including interest due as of February 8, 1965.

4. That the aforementioned obligation guaranteed by the plaintiffs under the Real Estate
Mortgage, subject of this action, is further secured by separate deeds of chattel mortgages on
the Mercedez Benz units covered by the aforementioned invoices in favor of the defendant
Universal Motors Corporation.
 5. That on March 19, 1965, the defendant Universal Motors Corporation filed a complaint against
PDP Transit, Inc. before, the Court of First Instance of Manila docketed as Civil Case No. 60201
with a petition for a writ of Replevin, to collect the balance due under the Chattel Mortgages
and to repossess all the units to sold to plaintiffs’ principal PDP Transit, Inc. including the five (5)
units guaranteed under the subject Real (Estate) Mortgage.

In addition to the foregoing the Universal Motors Corporation admitted during the hearing that in its
suit (C.C. No. 60201) against the PDP Transit, Inc. it was able to repossess all the units sold to the latter,
including the five (5) units guaranteed by the subject real estate mortgage, and to foreclose all the
chattel mortgages constituted thereon, resulting in the sale of the trucks at public auction.

With the foregoing background, the spouses Lorenzo Pascual and Leonila Torres, the real estate
mortgagors, filed an action in the Court of First Instance of Quezon City (Civil Case No. 8189) for the
cancellation of the mortgage they constituted on two (2) parcels of land1 in favor of the Universal
Motors Corporation to guarantee the obligation of PDP Transit, Inc. to the extent of P50,000. The court
rendered judgment for the plaintiffs, ordered the cancellation of the mortgage, and directed the
defendant Universal Motors Corporation to pay attorney’s fees to the plaintiffs in the sum of P500.00.
Unsatisfied with the decision, defendant interposed the present appeal.

In rendering judgment for the plaintiffs the lower court said in part: “… there does not seem to be any
doubt that Art. 14842 of the New Civil Code may be applied in relation to a chattel mortgage constituted
upon personal property on the installment basis (as in the present case) precluding the mortgagee to
maintain any further action against the debtor for the purpose of recovering whatever balance of the
debt secured, and even adding that any agreement to the contrary shall be null and void.”

The appellant now disputes the applicability of Article 1484 of the Civil Code to the case at bar on the
ground that there is no evidence on record that the purchase by PDP Transit, Inc. of the five (5) trucks,
the payment of the price of which was partly guaranteed by the real estate mortgage in question, was
payable in installments and that the purchaser had failed to pay two or more installments. The appellant
also contends that in any event what article 1484 prohibits is for the vendor to recover from the
purchaser the unpaid balance of the price after he has foreclosed the chattel mortgage on the thing
sold, but not a recourse against the security put up by a third party.

Both arguments are without merit. The first involves an issue of fact: whether or not the sale was one on
installments; and on this issue the lower court found that it was, and that there was failure to pay two
or more installments. This finding is not subject to review by this Court. The appellant’s bare allegation
to the contrary cannot be considered at this stage of the case.

The next contention is that what article 1484 withholds from the vendor is the right to recover any
deficiency from the purchaser after the foreclosure of the chattel mortgage and not a recourse to the
additional security put up by a third party to guarantee the purchaser’s performance of his obligation. A
similar argument has been answered by this Court in this wise: “(T)o sustain appellant’s argument is to
overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the
guarantor will in turn be entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil
Code); so that ultimately, it will be the vendee who will be made to bear the payment of the balance of
the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection
given by Article 1484 would be indirectly subverted, and public policy overturned.” (Cruz vs. Filipinas
Investment & Finance Corporation, L-24772, May 27, 1968; 23 SCRA 791).

The decision appealed from is affirmed, with costs against the defendant-appellant.

SECOND DIVISION

G.R. No. L-67181 November 22, 1985

SPOUSES RESTITUTO NONATO and ESTER NONATO, petitioners,

vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT and INVESTOR'S FINANCE
CORPORATION respondents.

ESCOLIN, J.:

The issue posed in this petition for review of the decision of the respondent appellate court is
whether a vendor, or his assignee, who had cancelled the sale of a motor vehicle for failure of the
buyer to pay two or more of the stipulated installments, may also demand payment of the balance of
the purchase price.

The pertinent facts are summarized by the respondent appellate court as follows:

On June 28, 1976, defendant spouses Restituto Nonato and Ester Nonato purchased
one (1) unit of Volkswagen Sakbayan from the People's Car, Inc., on installment
basis. To secure complete payment, the defendants executed a promissory note
(Exh. A or 1) and a chattel mortgage in favor of People's Car, Inc, (Exh. B or 2).
People's Car, Inc., assigned its rights and interests over the note and mortgage in
favor of plaintiff Investor's Finance Corporation (FNCB) Finance). For failure of
defendants to pay two or more installments, despite demands, the car was
repossessed by plaintiff on March 20, 1978 (Exh. E or 4).
 Despite repossession, plaintiff demanded from defendants that they pay the balance
of the price of the car (Exhs. F and C). Finally, on June 9, 1978, plaintiff filed before
the Court of First Instance of Negros Occidental the present complaint against
defendants for the latter to pay the balance of the price of the car, with damages and
attorney's fees. (Records, pp. 36-37)

In their answer, the spouses Nonato alleged by way of defense that when the company repossessed
the vehicle, it had, by that act, effectively cancelled the sale of the vehicle. It is therefore barred from
exacting recovery of the unpaid balance of the purchase price, as mandated by the provisions of
Article 1484 of the Civil Code.

After due hearing, the trial court rendered a decision in favor of the IFC and against the Nonatos, as
follows:

PREMISES CONSIDERED, the Court hereby renders judgment ordering the

defendant to pay to the plaintiff the amount of P 17,537.60 with interest at the rate of
14% per annum from July 28, 1976 until fully paid, 10% of the amount due as
attorney's fees, litigation expenses in the amount of P 133.05 plus the costs of this
suit. No pronouncement as to other charges and damages, the same not having
been proven to the satisfaction of the Court. 1

On appeal, the respondent appellate court affirmed the j judgment.

Hence, this petition for review on certiorari.

The applicable law in the case at bar, involving as it does a sale of personal property on installment,
is Article 1484 of the Civil Code which provides:

In a contract of sale of personal property the price of which is payable in installments,

the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee's failure to pay cover two or more installments. In this case, he
shall have no further action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void.

The meaning of the aforequoted provision has been repeatedly enunciated in a long line of cases.
Thus: "Should the vendee or purchaser of a personal property default in the payment of two or more
of the agreed installments, the vendor or seller has the option to avail of any of these three
remedies-either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to
foreclose the mortgage on the purchased personal property, if one was constituted. These remedies
have been recognized as alternative, not cumulative, that the exercise of one would bar the exercise
of the others. 2

It is not disputed that the respondent company had taken possession of the car purchased by the
Nonatos on installments. But while the Nonatos maintain that the company had, by that act,
exercised its option to cancel the contract of sale, the company contends that the repossession of
the vehicle was only for the purpose of appraising its value and for storage and safekeeping pending
full payment by the Nonatos of the purchasing price. The company thus denies having exercised its
right to cancel the sale of the repossessed car. The records show otherwise.

The receipt issued by the respondent company to the Nonatos when it took possession of the
vehicle states that the vehicle could be redeemed within fifteen [151 days. 3 This could only mean
that should petitioners fail to redeem the car within the aforesaid period by paying the balance of the
purchase price, the company would retain permanent possession of the vehicle, as it did in fact. This
was confirmed by Mr. Ernesto Carmona, the company's witness, who testified, to wit:

ATTY. PAMPLONA:

So that Mr. Witness, it is clear now that, per your receipt and your
answer, the company will not return the unit without paying a sum of
money, more particularly the balance of the account?

WITNESS: Yes, sir. 4

Respondent corporation further asserts that it repossessed the vehicle merely for the purpose of
appraising its current value. The allegation is untenable, for even after it had notified the Nonatos
that the value of the car was not sufficient to cover the balance of the purchase price, there was no
attempt at all on the part of the company to return the repossessed car,

Indeed, the acts performed by the corporation are wholly consistent with the conclusion that it had
opted to cancel the contract of sale of the vehicle. It is thus barred from exacting payment from
petitioners of the balance of the price of the vehicle which it had already repossessed. It cannot have
its cake and eat it too.

WHEREFORE, the judgment of the appellate court in CA-G.R. No. 69276-R is hereby set aside and
the complaint filed by respondent Investors Finance Corporation against petitioner in Civil Case No.
13852 should be, as it is hereby, dismissed. No costs.

SO ORDERED

R. No. 82508 September 29, 1989

FILINVEST CREDIT CORPORATION, petitioner,

vs.
THE COURT OF APPEALS, JOSE SY BANG and ILUMINADA TAN SY BANG,*respondents.

Labaquis, Loyola, Angara and Associates for petitioner.

Alfredo 1. Raya for private respondents.

SARMIENTO, J.:

This is a petition for review on certiorari of the decision, 1 dated March 17, 1988, of the Court of
Appeals which affirmed with modification the decision 2 of the Regional Trial Court of Quezon,
Branch LIX, Lucena City. The controversy stemmed from the following facts: The private
respondents, the spouses Jose Sy Bang and Iluminada Tan, were engaged in the sale of gravel
produced from crushed rocks and used for construction purposes. In order to increase their
production, they engaged the services of Mr. Ruben Mercurio, the proprietor of Gemini Motor Sales
in Lucena City, to look for a rock crusher which they could buy. Mr. Mercurio referred the private
respondents to the Rizal Consolidated Corporation which then had for sale one such machinery
described as:

ONE UNIT LIPPMAN PORTABLE CRUSHING PLANT (RECONDITIONED) [sic]

JAW CRUSHER-10xl6 DOUBLE ROLL CRUSHER 16x16

3 UNITS PRODUCT CONVEYOR

75 HP ELECTRIC MOTOR

8 PCS. BRAND NEW TIRES CHASSIS NO. 19696 GOOD RUNNING CONDITION 3

Oscar Sy Bang, a brother of private respondent Jose Sy Bang, went to inspect the machine at the
Rizal Consolidated's plant site. Apparently satisfied with the machine, the private respondents
signified their intent to purchase the same. They were however confronted with a problem-the rock
crusher carried a cash price tag of P 550,000.00. Bent on acquiring the machinery, the private
respondents applied for financial assistance from the petitioner, Filinvest Credit Corporation. The
petitioner agreed to extend to the private respondents financial aid on the following conditions: that
the machinery be purchased in the petitioner's name; that it be leased (with option to purchase upon
the termination of the lease period) to the private respondents; and that the private respondents
execute a real estate mortgage in favor of the petitioner as security for the amount advanced by the
latter. Accordingly, on May 18,1981, a contract of lease of machinery (with option to purchase) was
entered into by the parties whereby the private respondents agreed to lease from the petitioner the
rock crusher for two years starting from July 5, 1 981 payable as follows:

P10,000.00 - first 3 months

23,000.00 - next 6 months

24,800.00 - next 15 months

The contract likewise stipulated that at the end of the two-year period, the machine would be owned
by the private respondents. Thus, the private respondents issued in favor of the petitioner a check
for P150,550.00, as initial rental (or guaranty deposit), and twenty-four (24) postdated checks
corresponding to the 24 monthly rentals. In addition, to guarantee their compliance with the lease
contract, the private respondents executed a real estate mortgage over two parcels of land in favor
of the petitioner. The rock crusher was delivered to the private respondents on June 9, 1981. Three
months from the date of delivery, or on September 7, 1981, however, the private respondents,
claiming that they had only tested the machine that month, sent a letter-complaint to the petitioner,
alleging that contrary to the 20 to 40 tons per hour capacity of the machine as stated in the lease
contract, the machine could only process 5 tons of rocks and stones per hour. They then demanded
that the petitioner make good the stipulation in the lease contract. They followed that up with similar
written complaints to the petitioner, but the latter did not, however, act on them. Subsequently, the
private respondents stopped payment on the remaining checks they had issued to the petitioner. 5
As a consequence of the non-payment by the private respondents of the rentals on the rock crusher
as they fell due despite the repeated written demands, the petitioner extrajudicially foreclosed the
real estate mortgage. 6 On April 18, 1983, the private respondents received a Sheriff s Notice of
Auction Sale informing them that their mortgaged properties were going to be sold at a public
auction on May 25, 1983 at 10:00 o'clock in the morning at the Office of the Provincial Sheriff in
Lucena City to satisfy their indebtedness to the petitioner. 7 To thwart the impending auction of their
properties, the private respondents filed before the Regional Trial Court of Quezon, on May 4,
1983, 8 a complaint against the petitioner, for the rescission of the contract of lease, annullment of
the real estate mortgage, and for injunction and damages, with prayer for the issuance of a writ of
preliminary injunction.9On May 23, 1983, three days before the scheduled auction sale, the trial court
issued a temporary restraining order commanding the Provincial Sheriff of Quezon, and the
petitioner, to refrain and desist from proceeding with the public auction. 10 Two years later, on
September 4, 1985, the trial court rendered a decision in favor of the private respondents, the
dispositive portion of which reads:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:

1. making the injunction permanent;

2. rescinding the contract of lease of the machinery and equipment and ordering the
plaintiffs to return to the defendant corporation the machinery subject of the lease
contract, and the defendant corporation to return to plaintiffs the sum of P470,950.00
it received from the latter as guaranty deposit and rentals with legal interest thereon
until the amount is fully restituted;

3. annulling the real estate mortgage constituted over the properties of the plaintiffs
covered by Transfer Certificate of Title Nos. T32480 and T-5779 of the Registry of
Deeds of Lucena City;

4. ordering the defendant corporation to pay plaintiffs P30,000.00 as attorney's fees

and the costs of the suit.

SO ORDERED. 11

Dissatisfied with the trial court's decision, the petitioner elevated the case to the respondent Court of
Appeals.

On March 17, 1988, the appellate court, finding no error in the appealed judgment, affirmed the
same in toto. 12 Hence, this petition.

Before us, the petitioner reasserts that the private respondents' cause of action is not against it (the
petitioner), but against either the Rizal Consolidated Corporation, the original owner-seller of the
subject rock crusher, or Gemini Motors Sales which served as a conduit facilitator of the purchase of
the said machine. The petitioner argues that it is a financing institution engaged in quasi-banking
activities, primarily the lending of money to entrepreneurs such as the private respondents and the
general public, but certainly not the leasing or selling of heavy machineries like the subject rock
crusher. The petitioner denies being the seller of the rock crusher and only admits having financed
its acquisition by the private respondents. Further, the petitioner absolves itself of any liability arising
out of the lease contract it signed with the private respondents due to the waiver of warranty made
by the latter. The petitioner likewise maintains that the private respondents being presumed to be
knowledgeable about machineries, should be held responsible for the detection of defects in the
machine they had acquired, and on account of that, they are estopped from claiming any breach of
warranty. Finally, the petitioner interposed the defense of prescription, invoking Article 1571 of the
Civil Code, which provides:

Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six
months, from the delivery of the thing sold.

We find the petitioner's first contention untenable. While it is accepted that the petitioner is a
financing institution, it is not, however, immune from any recourse by the private respondents.
Notwithstanding the testimony of private respondent Jose Sy Bang that he did not purchase the rock
crusher from the petitioner, the fact that the rock crusher was purchased from Rizal Consolidated
Corporation in the name and with the funds of the petitioner proves beyond doubt that the ownership
thereof was effectively transferred to it. It is precisely this ownership which enabled the petitioner to
enter into the "Contract of Lease of Machinery and Equipment" with the private respondents.

Be that as it may, the real intention of the parties should prevail. The nomenclature of the agreement
cannot change its true essence, i.e., a sale on installments. It is basic that a contract is what the law
defines it and the parties intend it to be, not what it is called by the parties. 13 It is apparent here
thatthe intent of the parties to the subject contract is for the so-called rentals to be the installment
payments. Upon the completion of the payments, then the rock crusher, subject matter of the
contract, would become the property of the private respondents. This form of agreement has been
criticized as a lease only in name. Thus in Vda. de Jose v. Barrueco 14 we stated:

Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a
bargain in that form, for one reason or another, have frequently resorted to the device of making
contracts in the form of leases either with options to the buyer to purchase for a small consideration
at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent
throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such
transactions are leases only in name. The so-called rent must necessarily be regarded as payment
of the price in installments since the due payment of the agreed amount results, by the terms of
bargain, in the transfer of title to the lessee. 15

The importance of the criticism is heightened in the light of Article 1484 of the new Civil Code which
provides for the remedies of an unpaid seller of movables on installment basis.

Article 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;

(3) Foreclose the chattel mortgage or the thing sold, if one has been constituted,
should the vendee's failure to pay cover two or more installments. In this case, he
shall have no further action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void.

Under the aforequoted provision, the seller of movables in installments, in case the buyer fails to pay
two or more installments may elect to pursue either of the following remedies: (1) exact fulfillment by
the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the mortgage on the purchased
property if one was constituted thereon. It is now settled that the said remedies are alternative and
not cumulative and therefore, the exercise of one bars the exercise of the others.
Indubitably, the device contract of lease with option to buy is at times resorted to as a means to
circumvent Article 1484, particularly paragraph (3) thereof.Through the set-up, the vendor, by
retaining ownership over the property in the guise of being the lessor, retains, likewise, the right to
repossess the same, without going through the process of foreclosure, in the event the vendee-
lessee defaults in the payment of the installments. There arises therefore no need to constitute a
chattel mortgage over the movable sold. More important, the vendor, after repossessing the property
and, in effect, canceling the contract of sale, gets to keep all the installments-cum-rentals already
paid. It is thus for these reasons that Article 1485 of the new Civil Code provides that:

Article 1485. The preceding article shall be applied to contracts purporting to be

leases of personal property with option to buy, when the lessor has deprived the
lessee of possession or enjoyment of the thing. (Emphasis ours.)

Unfortunately, even with the foregoing findings, we however fail to find any reason to hold the
petitioner liable for the rock crusher's failure to produce in accordance with its described capacity.
According to the petitioner, it was the private respondents who chose, inspected, and tested the
subject machinery. It was only after they had inspected and tested the machine, and found it to their
satisfaction, that the private respondents sought financial aid from the petitioner. These allegations
of the petitioner had never been rebutted by the private respondents. In fact, they were even
admitted by the private respondents in the contract they signed. Thus:

LESSEE'S SELECTION, INSPECTION AND VERIFICATION.-The LESSEE hereby confirms and

acknowledges that he has independently inspected and verified the leased property and has
selected and received the same from the Dealer of his own choosing in good order and excellent
running and operating condition and on the basis of such verification, etc. the LESSEE has agreed
to enter into this Contract." 16

Moreover, considering that between the parties, it is the private respondents, by reason of their
business, who are presumed to be more knowledgeable, if not experts, on the machinery subject of
the contract, they should not therefore be heard now to complain of any alleged deficiency of the
said machinery. It is their failure or neglect to exercise the caution and prudence of an expert, or, at
least, of a prudent man, in the selection, testing, and inspection of the rock crusher that gave rise to
their difficulty and to this conflict. A well- established principle in law is that between two parties, he,
who by his negligence caused the loss, shall bear the same.

At any rate, even if the private respondents could not be adjudged as negligent, they still are
precluded from imputing any liability on the petitioner. One of the stipulations in the contract they
entered into with the petitioner is an express waiver of warranties in favor of the latter. By so signing
the agreement, the private respondents absolved the petitioner from any liability arising from any
defect or deficiency of the machinery they bought. The stipulation on the machine's production
capacity being "typewritten" and that of the waiver being "printed" does not militate against the
latter's effectivity. As such, whether "a capacity of 20 to 40 tons per hour" is a condition or a
description is of no moment. What stands is that the private respondents had expressly exempted
the petitioner from any warranty whatsoever. Their Contract of Lease Of Machinery And Equipment
states:

WARRANTY-LESSEE absolutely releases the lessor from any liability whatsoever as to any and all
matters in relation to warranty in accordance with the provisions hereinafter stipulated. 17

Taking into account that due to the nature of its business and its mode of providing financial
assistance to clients, the petitioner deals in goods over which it has no sufficient know-how or
expertise, and the selection of a particular item is left to the client concerned, the latter, therefore,
shoulders the responsibility of protecting himself against product defects. This is where the waiver of
warranties is of paramount importance. Common sense dictates that a buyer inspects a product
before purchasing it (under the principle of caveat emptor or "buyer beware") and does not return it
for defects discovered later on, particularly if the return of the product is not covered by or stipulated
in a contract or warranty. In the case at bar, to declare the waiver as non-effective, as the lower
courts did, would impair the obligation of contracts. Certainly, the waiver in question could not be
considered a mere surplusage in the contract between the parties. Moreover, nowhere is it shown in
the records of the case that the private respondent has argued for its nullity or illegality. In any event,
we find no ambiguity in the language of the waiver or the release of warranty. There is therefore no
room for any interpretation as to its effect or applicability vis-a- vis the deficient output of the rock
crusher. Suffice it to say that the private respondents have validly excused the petitioner from any
warranty on the rock crusher. Hence, they should bear the loss for any defect found therein.

WHEREFORE, the Petition is GRANTED; the Decision of the Court of Appeals dated March 17,
1988 is hereby REVERSED AND SET ASIDE, and another one rendered DISMISSING the
complaint. Costs against the private respondents.

SO ORDERED.

G.R. No. 142618 July 12, 2007

PCI LEASING AND FINANCE, INC., Petitioner,

vs.
GIRAFFE-X CREATIVE IMAGING, INC.,Respondent.

DECISION

GARCIA, J.:

On a pure question of law involving the application of Republic Act (R.A.) No. 5980, as amended by
R.A. No. 8556¸ in relation to Articles 1484 and 1485 of the Civil Code, petitioner PCI Leasing and
Finance, Inc. (PCI LEASING, for short) has directly come to this Court via this petition for review
under Rule 45 of the Rules of Court to nullify and set aside the Decision and Resolution dated
December 28, 1998 and February 15, 2000, respectively, of the Regional Trial Court (RTC) of
Quezon City, Branch 227, in its Civil Case No. Q-98-34266, a suit for a sum of money and/or
personal property with prayer for a writ of replevin, thereat instituted by the petitioner against the
herein respondent, Giraffe-X Creative Imaging, Inc. (GIRAFFE, for brevity).

The facts:

On December 4, 1996, petitioner PCI LEASING and respondent GIRAFFE entered into a Lease
Agreement,1 whereby the former leased out to the latter one (1) set of Silicon High Impact Graphics
and accessories worth ₱3,900,00.00 and one (1) unit of Oxberry Cinescan 6400-10 worth
₱6,500,000.00. In connection with this agreement, the parties subsequently signed two (2) separate
documents, each denominated as Lease Schedule.2 Likewise forming parts of the basic lease
agreement were two (2) separate documents denominated Disclosure Statements of Loan/Credit
Transaction (Single Payment or Installment Plan)3 that GIRAFFE also executed for each of the
leased equipment. These disclosure statements inter alia described GIRAFFE, vis-à-vis the two
aforementioned equipment, as the "borrower" who acknowledged the "net proceeds of the loan," the
"net amount to be financed," the "financial charges," the "total installment payments" that it must pay
monthly for thirty-six (36) months, exclusive of the 36% per annum "late payment charges." Thus, for
the Silicon High Impact Graphics, GIRAFFE agreed to pay ₱116,878.21 monthly, and for Oxberry
Cinescan, ₱181.362.00 monthly. Hence, the total amount GIRAFFE has to pay PCI LEASING for 36
months of the lease, exclusive of monetary penalties imposable, if proper, is as indicated below:

P1
16,
87
8.2
1
@
mo
nth
(fo
r
the
Sili
co
n
Hi
gh
Im
pa
ct
Gr
ap
hic
s)
x
36
mo
nth
s= P 4,207,615.56

-- PLUS--

P1
81,
36
2.0
0
@
mo
nth
(fo
r
the
Ox
ber
ry P 6,529,032.00
Ci
 ne
sc
an)
x
36
mo
nth
s=

Tot
al
A
mo
unt
to
be
pai
d
by
GI
RA
FF
E
(or
the
NE
T
C
O
NT
RA
CT
A
M
O P 10,736,647.56
UN
T)

By the terms, too, of the Lease Agreement, GIRAFFE undertook to remit the amount of
₱3,120,000.00 by way of "guaranty deposit," a sort of performance and compliance bond for the two
equipment. Furthermore, the same agreement embodied a standard acceleration clause, operative
in the event GIRAFFE fails to pay any rental and/or other accounts due.

A year into the life of the Lease Agreement, GIRAFFE defaulted in its monthly rental-payment
obligations. And following a three-month default, PCI LEASING, through one Atty. Florecita R.
Gonzales, addressed a formal pay-or-surrender-equipment type of demand letter4 dated February
24, 1998 to GIRAFFE.

The demand went unheeded.

Hence, on May 4, 1998, in the RTC of Quezon City, PCI LEASING instituted the instant case against
GIRAFFE. In its complaint,5 docketed in said court as Civil Case No. 98-34266 and raffled to Branch
2276 thereof, PCI LEASING prayed for the issuance of a writ of replevin for the recovery of the
leased property, in addition to the following relief:

2. After trial, judgment be rendered in favor of plaintiff [PCI LEASING] and against the defendant
[GIRAFFE], as follows:

a. Declaring the plaintiff entitled to the possession of the subject properties;

b. Ordering the defendant to pay the balance of rental/obligation in the total amount of
₱8,248,657.47 inclusive of interest and charges thereon;

c. Ordering defendant to pay plaintiff the expenses of litigation and cost of suit…. (Words in
bracket added.)

Upon PCI LEASING’s posting of a replevin bond, the trial court issued a writ of replevin, paving the
way for PCI LEASING to secure the seizure and delivery of the equipment covered by the basic
lease agreement.

Instead of an answer, GIRAFFE, as defendant a quo, filed a Motion to Dismiss, therein arguing that
the seizure of the two (2) leased equipment stripped PCI LEASING of its cause of action.
Expounding on the point, GIRAFFE argues that, pursuant to Article 1484 of the Civil Code on
installment sales of personal property, PCI LEASING is barred from further pursuing any claim
arising from the lease agreement and the companion contract documents, adding that the
agreement between the parties is in reality a lease of movables with option to buy. The given
situation, GIRAFFE continues, squarely brings into applicable play Articles 1484 and 1485 of the
Civil Code, commonly referred to as the Recto Law. The cited articles respectively provide:

ART. 1484. In a contract of sale of personal property the price of which is payable in installments,
the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee's failure to pay cover two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to
the contrary shall be void. (Emphasis added.)

ART. 1485. The preceding article shall be 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.

It is thus GIRAFFE’s posture that the aforequoted Article 1484 of the Civil Code applies to its
contractual relation with PCI LEASING because the lease agreement in question, as supplemented
by the schedules documents, is really a lease with option to buy under the companion article, Article
1485. Consequently, so GIRAFFE argues, upon the seizure of the leased equipment pursuant to the
writ of replevin, which seizure is equivalent to foreclosure, PCI LEASING has no further recourse
against it. In brief, GIRAFFE asserts in its Motion to Dismiss that the civil complaint filed by PCI
LEASING is proscribed by the application to the case of Articles 1484 and 1485, supra, of the Civil
Code.

In its Opposition to the motion to dismiss, PCI LEASING maintains that its contract with GIRAFFE is
a straight lease without an option to buy. Prescinding therefrom, PCI LEASING rejects the
applicability to the suit of Article 1484 in relation to Article 1485 of the Civil Code, claiming that,
under the terms and conditions of the basic agreement, the relationship between the parties is one
between an ordinary lessor and an ordinary lessee.

In a decision7 dated December 28, 1998, the trial court granted GIRAFFE’s motion to dismiss mainly
on the interplay of the following premises: 1) the lease agreement package, as memorialized in the
contract documents, is akin to the contract contemplated in Article 1485 of the Civil Code, and 2)
GIRAFFE’s loss of possession of the leased equipment consequent to the enforcement of the writ of
replevin is "akin to foreclosure, … the condition precedent for application of Articles 1484 and 1485
[of the Civil Code]." Accordingly, the trial court dismissed Civil Case No. Q-98-34266, disposing as
follows:

WHEREFORE, premises considered, the defendant [GIRAFFE] having relinquished any claim to the
personal properties subject of replevin which are now in the possession of the plaintiff [PCI
LEASING], plaintiff is DEEMED fully satisfied pursuant to the provisions of Articles 1484 and 1485 of
the New Civil Code. By virtue of said provisions, plaintiff is DEEMED estopped from further action
against the defendant, the plaintiff having recovered thru (replevin) the personal property sought to
be payable/leased on installments, defendants being under protection of said RECTO LAW. In view
thereof, this case is hereby DISMISSED.

With its motion for reconsideration having been denied by the trial court in its resolution of February
15, 2000,8 petitioner has directly come to this Court via this petition for review raising the sole legal
issue of whether or not the underlying Lease Agreement, Lease Schedules and the Disclosure
Statements that embody the financial leasing arrangement between the parties are covered by and
subject to the consequences of Articles 1484 and 1485 of the New Civil Code.

As in the court below, petitioner contends that the financial leasing arrangement it concluded with
the respondent represents a straight lease covered by R.A. No. 5980, the Financing Company Act,
as last amended by R.A. No. 8556, otherwise known as Financing Company Act of 1998, and is
outside the application and coverage of the Recto Law. To the petitioner, R.A. No. 5980 defines and
authorizes its existence and business.

The recourse is without merit.

R.A. No. 5980, in its original shape and as amended, partakes of a supervisory or regulatory
legislation, merely providing a regulatory framework for the organization, registration, and regulation
of the operations of financing companies. As couched, it does not specifically define the rights and
obligations of parties to a financial leasing arrangement. In fact, it does not go beyond defining
commercial or transactional financial leasing and other financial leasing concepts. Thus, the
relevancy of Article 18 of the Civil Code which reads:

Article 18. - In matters which are governed by … special laws, their deficiency shall be supplied by
the provisions of this [Civil] Code.

Petitioner foists the argument that the Recto Law, i.e., the Civil Code provisions on installment sales
of movable property, does not apply to a financial leasing agreement because such agreement, by
definition, does not confer on the lessee the option to buy the property subject of the financial lease.
To the petitioner, the absence of an option-to-buy stipulation in a financial leasing agreement, as
understood under R.A. No. 8556, prevents the application thereto of Articles 1484 and 1485 of the
Civil Code.

We are not persuaded.

The Court can allow that the underlying lease agreement has the earmarks or made to appear as a
financial leasing,9 a term defined in Section 3(d) of R.A. No. 8556 as -

a mode of extending credit through a non-cancelable lease contract under which the lessor
purchases or acquires, at the instance of the lessee, machinery, equipment, … office machines, and
other movable or immovable property in consideration of the periodic payment by the lessee of a
fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price or
acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of
not less than two (2) years during which the lessee has the right to hold and use the leased property
… but with no obligation or option on his part to purchase the leased property from the owner-lessor
at the end of the lease contract.

In its previous holdings, however, the Court, taking into account the following mix: the imperatives of
equity, the contractual stipulations in question and the actuations of parties vis-à-vis their contract,
treated disguised transactions technically tagged as financing lease, like here, as creating a different
contractual relationship. Notable among the Court’s decisions because of its parallelism with this
case is BA Finance Corporation v. Court of Appeals10 which involved a motor vehicle. Thereat, the
Court has treated a purported financial lease as actually a sale of a movable property on
installments and prevented recovery beyond the buyer’s arrearages. Wrote the Court in BA Finance:

The transaction involved … is one of a "financial lease" or "financial leasing," where a financing
company would, in effect, initially purchase a mobile equipment and turn around to lease it to a client
who gets, in addition, an option to purchase the property at the expiry of the lease period. xxx.

xxx xxx xxx

The pertinent provisions of [RA] 5980, thus implemented, read:

"'Financing companies,' … are primarily organized for the purpose of extending credit facilities to
consumers … either by … leasing of motor vehicles, … and office machines and equipment, … and
other movable property."

"'Credit' shall mean any loan, … any contract to sell, or sale or contract of sale of property or service,
… under which part or all of the price is payable subsequent to the making of such sale or contract;
any rental-purchase contract; ….;"

The foregoing provisions indicate no less than a mere financing scheme extended by a financing
company to a client in acquiring a motor vehicle and allowing the latter to obtain the immediate
possession and use thereof pending full payment of the financial accommodation that is given.

In the case at bench, xxx. [T]he term of the contract [over a motor vehicle] was for thirty six (36)
months at a "monthly rental" … (P1,689.40), or for a total amount of P60,821.28. The contract also
contained [a] clause [requiring the Lessee to give a guaranty deposit in the amount of P20,800.00]
xxx
After the private respondent had paid the sum of P41,670.59, excluding the guaranty deposit of
P20,800.00, he stopped further payments. Putting the two sums together, the financing company
had in its hands the amount of P62,470.59 as against the total agreed "rentals" of P60,821.28 or an
excess of P1,649.31.

The respondent appellate court considered it only just and equitable for the guaranty deposit made
by the private respondent to be applied to his arrearages and thereafter to hold the contract
terminated. Adopting the ratiocination of the court a quo, the appellate court said:

xxx In view thereof, the guaranty deposit of P20,800.00 made by the defendant should and must be
credited in his favor, in the interest of fairness, justice and equity. The plaintiff should not be allowed
to unduly enrich itself at the expense of the defendant. xxx This is even more compelling in this case
where although the transaction, on its face, appear ostensibly, to be a contract of lease, it is actually
a financing agreement, with the plaintiff financing the purchase of defendant's automobile …. The
Court is constrained, in the interest of truth and justice, to go into this aspect of the transaction
between the plaintiff and the defendant … with all the facts and circumstances existing in this case,
and which the court must consider in deciding the case, if it is to decide the case according to all the
facts. xxx.

xxx xxx xxx

Considering the factual findings of both the court a quo and the appellate court, the only logical
conclusion is that the private respondent did opt, as he has claimed, to acquire the motor vehicle,
justifying then the application of the guarantee deposit to the balance still due and obligating the
petitioner to recognize it as an exercise of the option by the private respondent. The result would
thereby entitle said respondent to the ownership and possession of the vehicle as the buyer thereof.
We, therefore, see no reversible error in the ultimate judgment of the appellate court.11 (Italics in the
original; underscoring supplied and words in bracket added.)

In Cebu Contractors Consortium Co. v. Court of Appeals,12 the Court viewed and thus declared a
financial lease agreement as having been simulated to disguise a simple loan with security, it
appearing that the financing company purchased equipment already owned by a capital-strapped
client, with the intention of leasing it back to the latter.

In the present case, petitioner acquired the office equipment in question for their subsequent lease
to the respondent, with the latter undertaking to pay a monthly fixed rental therefor in the total
amount of ₱292,531.00, or a total of ₱10,531,116.00 for the whole 36 months. As a measure of
good faith, respondent made an up-front guarantee deposit in the amount of ₱3,120,000.00. The
basic agreement provides that in the event the respondent fails to pay any rental due or is in a
default situation, then the petitioner shall have cumulative remedies, such as, but not limited to, the
following:13

1. Obtain possession of the property/equipment;

2. Retain all amounts paid to it. In addition, the guaranty deposit may be applied towards the
payment of "liquidated damages";

3. Recover all accrued and unpaid rentals;

4. Recover all rentals for the remaining term of the lease had it not been cancelled, as
additional penalty;
 5. Recovery of any and all amounts advanced by PCI LEASING for GIRAFFE’s account xxx;

6. Recover all expenses incurred in repossessing, removing, repairing and storing the
property; and,

7. Recover all damages suffered by PCI LEASING by reason of the default.

In addition, Sec. 6.1 of the Lease Agreement states that the guaranty deposit shall be forfeited in the
event the respondent, for any reason, returns the equipment before the expiration of the lease.

At bottom, respondent had paid the equivalent of about a year’s lease rentals, or a total of
₱3,510,372.00, more or less. Throw in the guaranty deposit (₱3,120,000.00) and the respondent
had made a total cash outlay of ₱6,630,372.00 in favor of the petitioner. The replevin-seized leased
equipment had, as alleged in the complaint, an estimated residual value of ₱6,900.000.00 at the
time Civil Case No. Q-98-34266 was instituted on May 4, 1998. Adding all cash advances thus made
to the residual value of the equipment, the total value which the petitioner had actually obtained by
virtue of its lease agreement with the respondent amounts to ₱13,530,372.00 (₱3,510,372.00 +
₱3,120,000.00 + ₱6,900.000.00 = ₱13,530,372.00).

The acquisition cost for both the Silicon High Impact Graphics equipment and the Oxberry Cinescan
was, as stated in no less than the petitioner’s letter to the respondent dated November 11,
199614 approving in the latter’s favor a lease facility, was ₱8,100,000.00. Subtracting the acquisition
cost of ₱8,100,000.00 from the total amount, i.e., ₱13,530,372.00, creditable to the respondent, it
would clearly appear that petitioner realized a gross income of ₱5,430,372.00 from its lease
transaction with the respondent. The amount of ₱5,430,372.00 is not yet a final figure as it does not
include the rentals in arrears, penalties thereon, and interest earned by the guaranty deposit.

As may be noted, petitioner’s demand letter15fixed the amount of ₱8,248,657.47 as representing the
respondent’s "rental" balance which became due and demandable consequent to the application of
the acceleration and other clauses of the lease agreement. Assuming, then, that the respondent may
be compelled to pay ₱8,248,657.47, then it would end up paying a total of ₱21,779,029.47
(₱13,530,372.00 + ₱8,248,657.47 = ₱21,779,029.47) for its use - for a year and two months at the
most - of the equipment. All in all, for an investment of ₱8,100,000.00, the petitioner stands to make
in a year’s time, out of the transaction, a total of ₱21,779,029.47, or a net of ₱13,679,029.47, if we
are to believe its outlandish legal submission that the PCI LEASING-GIRAFFE Lease Agreement
was an honest-to-goodness straight lease.

A financing arrangement has a purpose which is at once practical and salutary. R.A. No. 8556 was,
in fact, precisely enacted to regulate financing companies’ operations with the end in view of
strengthening their critical role in providing credit and services to small and medium enterprises and
to curtail acts and practices prejudicial to the public interest, in general, and to their clienteles, in
particular.16 As a regulated activity, financing arrangements are not meant to quench only the thirst
for profit. They serve a higher purpose, and R.A. No. 8556 has made that abundantly clear.

We stress, however, that there is nothing in R.A. No. 8556 which defines the rights and obligations,
as between each other, of the financial lessor and the lessee. In determining the respective
responsibilities of the parties to the agreement, courts, therefore, must train a keen eye on the
attendant facts and circumstances of the case in order to ascertain the intention of the parties, in
relation to the law and the written agreement. Likewise, the public interest and policy involved should
be considered. It may not be amiss to state that, normally, financing contracts come in a standard
prepared form, unilaterally thought up and written by the financing companies requiring only the
personal circumstances and signature of the borrower or lessee; the rates and other important
covenants in these agreements are still largely imposed unilaterally by the financing companies. In
other words, these agreements are usually one-sided in favor of such companies. A perusal of the
lease agreement in question exposes the many remedies available to the petitioner, while there are
only the standard contractual prohibitions against the respondent. This is characteristic of standard
printed form contracts.

There is more. In the adverted February 24, 1998 demand letter17 sent to the respondent, petitioner
fashioned its claim in the alternative: payment of the full amount of ₱8,248,657.47, representing the
unpaid balance for the entire 36-month lease period or the surrender of the financed asset under
pain of legal action. To quote the letter:

Demand is hereby made upon you to pay in full your outstanding balance in the amount of
P8,248,657.47 on or before March 04, 1998 ORto surrender to us the one (1) set Silicon High
Impact Graphics and one (1) unit Oxberry Cinescan 6400-10…

We trust you will give this matter your serious and preferential attention. (Emphasis added).

Evidently, the letter did not make a demand for the payment of the ₱8,248,657.47 AND the return of
the equipment; only either one of the two was required. The demand letter was prepared and signed
by Atty. Florecita R. Gonzales, presumably petitioner’s counsel. As such, the use of "or" instead of
"and" in the letter could hardly be treated as a simple typographical error, bearing in mind the nature
of the demand, the amount involved, and the fact that it was made by a lawyer. Certainly Atty.
Gonzales would have known that a world of difference exists between "and" and "or" in the manner
that the word was employed in the letter.

A rule in statutory construction is that the word "or" is a disjunctive term signifying dissociation and
independence of one thing from other things enumerated unless the context requires a different
interpretation.18

In its elementary sense, "or", as used in a statute, is a disjunctive article indicating an alternative. It
often connects a series of words or propositions indicating a choice of either. When "or" is used, the
various members of the enumeration are to be taken separately.19

The word "or" is a disjunctive term signifying disassociation and independence of one thing from
each of the other things enumerated.20

The demand could only be that the respondent need not return the equipment if it paid the
₱8,248,657.47 outstanding balance, ineluctably suggesting that the respondent can keep
possession of the equipment if it exercises its option to acquire the same by paying the unpaid
balance of the purchase price. Stated otherwise, if the respondent was not minded to exercise its
option of acquiring the equipment by returning them, then it need not pay the outstanding balance.
This is the logical import of the letter: that the transaction in this case is a lease in name only. The
so-called monthly rentals are in truth monthly amortizations of the price of the leased office
equipment.

On the whole, then, we rule, as did the trial court, that the PCI LEASING- GIRAFFE lease
agreement is in reality a lease with an option to purchase the equipment. This has been made
manifest by the actions of the petitioner itself, foremost of which is the declarations made in its
demand letter to the respondent. There could be no other explanation than that if the respondent
paid the balance, then it could keep the equipment for its own; if not, then it should return them. This
is clearly an option to purchase given to the respondent. Being so, Article 1485 of the Civil Code
should apply.
The present case reflects a situation where the financing company can withhold and conceal - up to
the last moment - its intention to sell the property subject of the finance lease, in order that the
provisions of the Recto Law may be circumvented. It may be, as petitioner pointed out, that the basic
"lease agreement" does not contain a "purchase option" clause. The absence, however, does not
necessarily argue against the idea that what the parties are into is not a straight lease, but a lease
with option to purchase. This Court has, to be sure, long been aware of the practice of vendors of
personal property of denominating a contract of sale on installment as one of lease to prevent the
ownership of the object of the sale from passing to the vendee until and unless the price is fully paid.
As this Court noted in Vda. de Jose v. Barrueco:21

Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a
bargain in that form, for one reason or another, have frequently resorted to the device of making
contracts in the form of leases either with options to the buyer to purchase for a small consideration
at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent
throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such
transactions are leases only in name. The so-called rent must necessarily be regarded as payment
of the price in installments since the due payment of the agreed amount results, by the terms of the
bargain, in the transfer of title to the lessee.

In another old but still relevant case of U.S. Commercial v. Halili,22 a lease agreement was declared
to be in fact a sale of personal property by installments. Said the Court:

. . . There can hardly be any question that the so-called contracts of lease on which the present
action is based were veritable leases of personal property with option to purchase, and as such
come within the purview of the above article [Art. 1454-A of the old Civil Code on sale of personal
property by installment]. xxx

Being leases of personal property with option to purchase as contemplated in the above article, the
contracts in question are subject to the provision that when the lessor in such case "has chosen to
deprive the lessee of the enjoyment of such personal property," "he shall have no further action"
against the lessee "for the recovery of any unpaid balance" owing by the latter, "agreement to the
contrary being null and void."

In choosing, through replevin, to deprive the respondent of possession of the leased equipment, the
petitioner waived its right to bring an action to recover unpaid rentals on the said leased items.
Paragraph (3), Article 1484 in relation to Article 1485 of the Civil Code, which we are hereunder re-
reproducing, cannot be any clearer.

ART. 1484. In a contract of sale of personal property the price of which is payable in installments,
the vendor may exercise any of the following remedies:

xxx xxx xxx

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee's failure to pay cover two or more installments. In this case, he shall have no further action
against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary
shall be void.

ART. 1485. The preceding article shall be 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.
As we articulated in Elisco Tool Manufacturing Corp. v. Court of Appeals,23 the remedies provided for
in Article 1484 of the Civil Code are alternative, not cumulative. The exercise of one bars the
exercise of the others. This limitation applies to contracts purporting to be leases of personal
property with option to buy by virtue of the same Article 1485. The condition that the lessor has
deprived the lessee of possession or enjoyment of the thing for the purpose of applying Article 1485
was fulfilled in this case by the filing by petitioner of the complaint for a sum of money with prayer for
replevin to recover possession of the office equipment.24 By virtue of the writ of seizure issued by the
trial court, the petitioner has effectively deprived respondent of their use, a situation which, by force
of the Recto Law, in turn precludes the former from maintaining an action for recovery of "accrued
rentals" or the recovery of the balance of the purchase price plus interest. 25

The imperatives of honest dealings given prominence in the Civil Code under the heading: Human
Relations, provide another reason why we must hold the petitioner to its word as embodied in its
demand letter. Else, we would witness a situation where even if the respondent surrendered the
equipment voluntarily, the petitioner can still sue upon its claim. This would be most unfair for the
respondent. We cannot allow the petitioner to renege on its word. Yet more than that, the very word
"or" as used in the letter conveys distinctly its intention not to claim both the unpaid balance and the
equipment. It is not difficult to discern why: if we add up the amounts paid by the respondent, the
residual value of the property recovered, and the amount claimed by the petitioner as sued upon
herein (for a total of ₱21,779,029.47), then it would end up making an instant killing out of the
transaction at the expense of its client, the respondent. The Recto Law was precisely enacted to
prevent this kind of aberration. Moreover, due to considerations of equity, public policy and justice,
we cannot allow this to happen. Not only to the respondent, but those similarly situated who may
1avvphil.zw+

fall prey to a similar scheme.

WHEREFORE, the instant petition is DENIED and the trial court’s decision is AFFIRMED

G.R. No. 112733 October 24, 1997

PEOPLE'S INDUSTRIAL AND COMMERCIAL CORPORATION, petitioner,

vs.
COURT OF APPEALS and MAR-ICK INVESTMENT CORPORATION, respondents.

ROMERO, J.:

This petition for review on certiorari of the Decision1 of the Court of Appeals arose from the complaint
for accion publiciana de posesion over several subdivision lots that was premised on the automatic
cancellation of the contracts to sell those lots.

Private respondent Mar-ick Investment Corporation is the exclusive and registered owner of Mar-ick
Subdivision in Barrio Buli, Cainta, Rizal. On May 29, 1961, private respondent entered into six (6)
agreements with petitioner People's Industrial and Commercial Corporation whereby it agreed to sell
to petitioner six (6) subdivision lots.2 Except for Lot No. 8 that has an area of 253 square meters, all
the lots measure 240 square meters each. Five of the agreements, involving Lots Nos. 3, 4, 5, 6 and
7, similarly stipulate that the petitioner agreed to pay private respondent for each lot, the amount of
P7,333.20 with a down payment of P480.00. The balance of P6,853.20 shall be payable in 120
equal monthly installments of P57.11 every 30th of the month, for a period of ten years. With respect
to Lot No. 8, the parties agreed to the purchase price of P7,730.00 with a down payment of P506.00
and equal monthly installments of P60.20.

All the agreements have the following provisions:

9. Should the PURCHASER fail to make the payment of any of the monthly installments as
agreed herein, within One Hundred Twenty (120) days from its due date, this contract shall,
by the mere fact of nonpayment, expire by itself and become null and void without necessity
of notice to the PURCHASER or of any judicial declaration to the effect, and any and all
sums of money paid under this contract shall be considered and become rentals on the
property, and in this event, the PURCHASER should he/she be in possession of the property
shall become a mere intruder or unlawful detainer of the same and may be ejected therefrom
by the means provided by law for trespassers or unlawful detainers. Immediately after the
expiration of the 120 days provided for in this clause, the OWNER shall be at liberty to
dispose of and sell said parcel of land to any other person in the same manner as if this
contract had never been executed or entered into.

The breach by the PURCHASER of any of the conditions considered herein shall have the
same effect as non-payment of the installments of the purchase price.

In any of the above cases the PURCHASER authorizes the OWNER or her representatives
to enter into the property to take possession of the same and take whatever action is
necessary or advisable to protect its rights and interests in the property, and nothing that
may be done or made by the PURCHASER shall be considered as revoking this authority or
a denial thereof.3

After the lapse of ten years, however, petitioner still had not fully paid for the six lots; it had paid only
the down payment and eight (8) installments, even after private respondent had given petitioner a
grace period of four months to pay the arrears.4 As of May 1, 1980, the total amount due to private
respondent under the contract was P214,418.00.5

In his letter of March 30, 1980 to Mr. Tomas Siatianum (Siatianun) who signed the agreements for
petitioner, private respondent's counsel protested petitioner's encroachment upon a portion of its
subdivision particularly Lots Nos. 2, 3, 4, 5, 6, 7 and 8. A portion of the letter reads:

Examinations conducted on the records of said lots revealed that you once contracted to
purchase said lots but your contracts were cancelled for non-payment of the stipulated
installments.

Desirous of maintaining good and neighborly relations with you, we caused to send you this
formal demand for you to remove your said wall within fifteen (15) days from your receipt
hereof, otherwise, much to our regret, we shall be constrained to seek redress before the
Courts and at the same time charge you with reasonable rentals for the use of said lots at
the rate of One (P1.00) Peso per square meter per month until you shall have finally
removed said wall.6

Private respondent reiterated its protest against the encroachment in a letter dated February 16,
1981.7 It added that petitioner had failed to abide by its promise to remove the encroachment, or to
purchase the lots involved "at the current price or pay the rentals on the basis of the total area
occupied, all within a short period of time." It also demanded the removal of the illegal constructions
on the property that had prejudiced the subdivision and its neighbors.
After a series of negotiations between the parties, they agreed to enter into a new contract to
sell8 involving seven (7) lots, namely, Lots Nos. 2, 3, 4, 5, 6, 7 and 8, with a total area of 1,693
square meters. The contract stipulates that the previous contracts involving the same lots (actually
minus Lot No. 2) "have been cancelled due to the failure of the PURCHASER to pay the stipulated
installments." It states further that the new contract was entered into "to avoid litigation, considering
that the PURCHASER has already made use of the premises since 1981 to the present without
paying the stipulated installments." The parties agreed that the contract price would be P423,250.00
with a down payment of P42,325.00 payable upon the signing of the contract and the balance of
P380,925.00 payable in forty-eight (48) equal monthly amortization payments of P7,935.94.

The new contract bears the date of October 11, 1983 but neither of the parties signed it. Thereafter,
Tomas Siatianum issued the following checks in the total amount of P37,642.72 to private
respondent: (a) dated March 4, 1984 for P10,000.00; (b) dated March 31, 1984 for P10,000.00; (c)
dated April 30, 1984 for P10,000.00; (d) dated May 31, 1984 for P7,079.00, and (e) dated May 31,
1984 for P563.72.9

Private respondent received but did not encash those checks. Instead, on July 12, 1984 it filed in the
Regional Trial Court of Antipolo, Rizal, a complaint for accion publiciana de posesionagainst
petitioner and Tomas Siatianum, as president and majority stockholder of petitioner.10 It prayed that
petitioner be ordered to remove the wall on the premises and to surrender possession of Lots Nos. 2
to 8 of Block 11 of the Mar-ick Subdivision, and that petitioner and Tomas Siatianum be ordered to
pay: (a) P259,074.00 as reasonable rentals for the use of the lots from 1961, "plus P1,680.00 per
month from July 1, 1984 up to and until the premises shall have been vacated and the wall
demolished"; (b) P10,000.00 as attorney's fees; (c) moral and exemplary damages, and (d) costs of
suit. In the alternative, the complaint prayed that should the agreements be deemed not
automatically cancelled, the same agreements should be declared null and void.

In due course, the lower court11 rendered a decision finding that the original agreements of the
parties were validly cancelled in accordance with provision No. 9 of each agreement. The parties did
not enter into a new contract in accordance with Art. 1403 (2) of the Civil Code as the parties did not
sign the draft contract. Receipt by private respondent of the five checks could not amount to
perfection of the contract because private respondent never encashed and benefited from those
checks. Furthermore, there was no meeting of the minds between the parties because Art. 475 of
the Civil Code should be read with the Statute of Frauds that requires the embodiment of the
contract in a note or memorandum.

The lower court opined that the checks represented the deposit under the new contract because
petitioner failed to prove that those were monthly installments that private respondent refused to
accept. What petitioner proved instead was the fact that it was not able to pay the rest of the
installments because of a strike, fire and storm that affected its operations. Be that as it may, what
was clearly proven was that both parties negotiated a new contract after the termination of the first.
Thus, the fact that the parties tried to negotiate a new contract indicated that they considered the
first contract as "already cancelled."

With respect to petitioner's allegation on a "free right-of-way" constituted on Lot No. 2, the lower
court found that the agreement thereon was oral and not in writing. As such, it was not in
accordance with Art. 749 of the Civil Code requiring that, to be valid, a donation must be in a public
document. Consequently, because of the principle against unjust enrichment, petitioner must pay
rentals for the occupancy of the property. The lower court disposed of the case as follows:
 IN VIEW OF ALL THE FOREGOING, defendant corporation is hereby directed to return
subject Lots Nos. 2, 3, 4, 5, 6, 7 and 8 to plaintiff corporation, and to pay to the latter the
following amounts:

1. reasonable rental of P1.00 per square meter per month

from May 29, 1961, for Lots Nos. 3, 4, 5, 6, 7 and 8, and from
July 12, 1984, for Lot No. 2, up to the date they will vacate
said lots. The amount of P4,735.12 (Exhibit "R") already paid
by defendant corporation to plaintiff corporation for the six (6)
lots under the original contracts shall be deducted from the
said rental;

2. attorney's fees in the amount of P10,000.00; and

3. costs of the suit.

SO ORDERED.

Petitioner elevated the case to the Court of Appeals. However, on October 16, 1992, the Court of
Appeals affirmed in toto the lower court's decision. Petitioner's motion for reconsideration having
been denied, it instituted the instant petition for review on certiorariraising the following issues for
resolution:

(1) whether or not the lower court had jurisdiction over the subject matter of
the case in view of the provisions of Republic Act No. 6552 and Presidential
Decree No. 1344;

(2) whether or not there was a perfected and enforceable contract of sale
(sic) on October 11, 1983 which modified the earlier contracts to sell which
had not been validly rescinded;

(3) whether or not there was a valid grant of right of way involving Lot No. 2
in favor of petitioner; and

(4) whether or not there was a justification for the grant of rentals and the
award of attorney's fees in favor of private respondent.12

The issue of jurisdiction has been precluded by the principle of estoppel. It is settled that lack of
jurisdiction may be assailed at any stage of the proceedings. However, a party's participation therein
estops such party from raising the issue.13 Petitioner undoubtedly has actively participated in the
proceedings from its inception to date. In its answer to the complaint, petitioner did not assail the
lower court's jurisdiction; instead, it prayed for "affirmative relief.14 Even after the lower court had
decided against it, petitioner continued to affirm the lower court's jurisdiction by elevating the
decision to the appellate court,15 hoping to obtain a favorable decision but the Court of Appeals
affirmed the court a quo's ruling. Then and only then did petitioner raise the issue of jurisdiction — in
its motion for reconsideration of the appellate court's decision. Such a practice, according to Tijam
v. Sibonghanoy,16 cannot be countenanced for reasons of public policy.

Granting, however, that the issue was raised seasonably at the first opportunity, still, petitioner has
incorrectly considered as legal bases for its position on the issue of jurisdiction the provisions of P.D.
Nos. 957 and 1344 and Republic Act No. 6552. P.D. No. 957, the "Subdivision and Condominium
Buyers' Protective Decree" which took effect upon its approval on July 12, 1976, vests upon the
National Housing Authority (NHA) "exclusive jurisdiction to regulate the real estate trade and
business" in accordance with the provisions of the same decree.17 P.D. No. 1344, issued on April 2,
1978, empowered the National Housing Authority to issue a writ of execution in the enforcement of
its decisions under P.D. No. 957.

These decrees, however, were not yet in existence when private respondent invoked provision No. 9
of the agreements or contracts to sell and cancelled these in October 1971.18Article 4 of the Civil
Code provides that laws shall have no retroactive effect unless the contrary is provided. Thus, it is
necessary that an express provision for its retroactive application must be made in the law.19 There
being no such provision in both P.D. Nos. 957 and 1344, these decrees cannot be applied to a
situation that occurred years before their promulgation. Moreover, granting that said decrees indeed
provide for a retroactive application, still, these may not be applied in this case.

The contracts to sell of 1961 were cancelled in virtue of provision No. 9 thereof to which the parties
voluntarily bound themselves. In Manila Bay Club Corp. v. Court of Appeals,20 this Court interpreted
as requiring mandatory compliance by the parties, a provision in a lease contract that failure or
neglect to perform or comply with any of the covenants, conditions, agreements or restrictions
stipulated shall result in the automatic termination and cancellation of the lease. The Court added:

. . . . Certainly, there is nothing wrong if the parties to the lease contract agreed on certain
mandatory provisions concerning their respective rights and obligations, such as the
procurement of insurance and the rescission clause. For it is well to recall that contracts are
respected as the law between the contracting parties, and they may establish such
stipulations, clauses, terms and conditions as they may want to include. As long as such
agreements are not contrary to law, morals, good customs, public policy or public order they
shall have the force of law between them.

Consequently, when petitioner failed to abide by its obligation to pay the installments in accordance
with the contracts to sell, provision No. 9 automatically took effect. That private respondent failed to
observe Section 4 of Republic Act No. 6552, the "Realty Installment Buyer Protection Act," is of no
moment. That section provides that "(I)f the buyer fails to pay the installments due at the expiration
of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of
the notice of cancellation or the demand for rescission of the contract by a notarial act. Private
respondent's cancellation of the agreements without a duly notarized demand for rescission did not
mean that it violated said provision of law. Republic Act No. 6552 was approved on August 26, 1972,
long after provision No. 9 of the contracts to sell had become automatically operational. As with P.D.
Nos. 957 and 1344, Republic Act No. 6552 does not expressly provide for its retroactive application
and, therefore, it could not have encompassed the cancellation of the contracts to sell in this case.

At this juncture, it is apropos to stress that the 1961 agreements are contracts to sell and not
contracts of sale. The distinction between these contracts is graphically depicted in Adelfa
Properties, Inc. v. Court of
Appeals,21 as follows:

. . . . The distinction between the two is important for in a contract of sale, the title passes to
the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement
the ownership is reserved in the vendor and is not to pass until the full payment of the price.
In a contract of sale, the vendor has lost and cannot recover ownership until and unless the
contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor
until the full payment of the price, such payment being a positive suspensive condition and
failure of which is not a breach but an event that prevents the obligation of the vendor to
 convey title from becoming effective. Thus, a deed of sale is considered absolute in nature
where there is neither a stipulation in the deed that title to the property sold is reserved in the
seller until the full payment of the price, nor one giving the vendor the right to unilaterally
resolve the contract the moment the buyer fails to pay within a fixed period.

That the agreements of 1961 are contracts to sell is clear from the following provisions thereof:

3. Title to said parcel of land shall remain in the name of the OWNER until complete payment
by the PURCHASER of all obligations herein stipulated, at which time the OWNER agrees to
execute a final deed of sale in favor of the PURCHASER and cause the issuance of a
certificate of title in the name of the latter, free from liens and encumbrances except those
provided in the Land Registration Act, those imposed by the authorities, and those contained
in Clauses Nos. Five (5) and Six (6) of this agreement.

xxx xxx xxx

4. The PURCHASER shall be deemed for all legal purposes to take possession of the parcel
of land upon payment of the down or first payment; provided, however, that his/her
possession under this section shall be only that of a tenant or lessee and subject to
ejectment proceedings during all the period of this agreement.

5. The parcel of land subject of this agreement shall be used by the PURCHASER
exclusively for legal purposes, and he shall not be entitled to take or remove soil, stones, or
gravel from it or any other lots belonging to the OWNER.

Hence, being contracts to sell, Article 1592 of the Civil Code which requires rescission either by
judicial action or notarial act is not applicable.22

Neither may petitioner claim ignorance of the cancellation of the contracts. Aside from his letters of
March 30, 1980 and February 16, 1981, private respondent's counsel, Atty. Manuel Villamayor, had
sent petitioner other formal protests and demands.23 These letters adequately satisfied the notice
requirement stipulated in provision No. 9 of the contracts to sell. If petitioner had not agreed to the
automatic and extrajudicial cancellation of the contracts, it could have gone to court to impugn the
same but it did not. Instead, it sought to enter into a new contract to sell, thereby confirming its
veracity and validity of the extrajudicial rescission.24 Had not private respondent filed the accion
publiciana de posesion, petitioner would have remained silent about the whole situation. It is now
estopped from questioning the validity of the cancellation of the contracts. An unopposed rescission
of a contract has legal effects.25

Petitioner's reliance on the portion of the Court of Appeals' Decision stating that private respondent
had not made known to petitioner its supposed rescission of the contract,26 is misplaced. Moreover, it
quoted only the portion that appears favorable to its case. To be sure, the Court of Appeals quoted
provision No. 9 which requires that "actual cancellation shall take place thirty days from receipt by
the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act
and upon full payment of the cash surrender value," and added that "R.A. 6552 even more
underscored the indispensability of such notice to the defaulting buyer." However, the same
appellate court continued:

The absence of the aforesaid notice in the case at bar in the forms respectively deemed
efficacious before and after the passage of R.A. 6552 does not, however, necessarily
impress merit in the appellant's position. Extrajudicial rescission, after all, has legal effect
where the other party does not oppose it (Zulueta vs. Mariano, 111 SCRA 206; Nera vs.
 Vacante, 3 SCRA 505; Magdalena Estate vs. Myrick, 71 Phil. 344). Where it is objected to, a
judicial determination of the issue is still necessary. In other words, resolution of reciprocal
contracts may be made extrajudicially unless successfully impugned in Court. If the debtor
impugns the declaration, it shall be subject to judicial determination (Jison vs. Court of
Appeals, 164 SCRA 339, citing Palay Inc. vs. Clave, supra; Univ. of the Philippines vs.
Angeles, supra). In its July 5, 1984 complaint, the appellee had, in fact, significantly prayed
for the cancellation of the said sales agreement in the alternative (p. 4, orig.
rec.).27 (Emphasis supplied.)

Moreover, private respondent's act of cancelling the contracts to sell was not done arbitrarily. The
record shows that private respondent dealt with petitioner with admirable patience, probably in view
of the strike, the fire in 1968 that burned petitioner's factory, and the typhoon in 1970.28 If exercised
its contractual authority to cancel the agreements only after petitioner had reneged in its obligation
after paying only eight (8) installments. When the contracts matured, it still gave petitioner a grace
period of four (4) months within which to comply with its obligations. It considered the contracts
cancelled only as of October 1971 or several years after petitioner's last installment payment29 and
definitely more than ten years after the agreements were entered into.

Because the contracts to sell had long been cancelled when private respondent filed the accion
publiciana de posesion on July 12, 1984, it was the proper Regional Trial Court that had jurisdiction
over the case. By then, there was no more installment buyer and seller relationship to speak of. It
had been recuded to a mere case of an owner claiming possession of its property that had long
been illegally withheld from it by another.

Petitioner alleges that there was a "new perfected and enforceable contract of sale" between the
parties in October 1983 for two reasons. First, it paid private respondent the down payment or
"deposit of Contract"30 through the five checks. Second, the receipt signed by private respondent's
representative satisfies the requirement of a "note or memorandum" under Article 1403 (2) of the
Civil Code because it states the object of the contract (six lots of Mar-Ick Subdivision measuring
1,453 square meters), the price (P250.00 per square meter with a down payment of 10% or
P37,542.72), and the receipt itself opens with a statement referring to the "purchase" of the six lots
of Mar-Ick Subdivision.31

The contract of October 1983 which private respondent offered in evidence as Exhibit S, is entitled
"CONTRACT TO SELL." While the title of a contract is not controlling, its stipulations confirm the
nature of that contract. Thus, it provides:

5. Title to said parcels of land shall remain in the name of the OWNER until complete
payment by the PURCHASER of all obligations herein stipulated, at which time, the OWNER
agrees to execute a final deed of sale in favor of the PURCHASER and cause the issuance
of certificates of title in the name of the latter, free from all liens and encumbrances except
those provided in the Land Registration Act, those imposed by the authorities, and those
contained in the stipulations that follow.

Under the law, there is a binding contract between the parties whose minds have met on a certain
matter notwithstanding that they did not affix their signatures to its written form.

In the case at bar, it was private respondent's company lawyer and sole witness, Atty. Manuel
Villamayor, who volunteered that after the cancellation of the 1961 agreements, the parties should
negotiate and enter into "a new agreement based on the current price" or at P400.00 per square
meter. However, there was a hitch in the negotiations because after he had drafted the contract and
sent it to petitioner, the latter "deposited a check for downpayment" but its representative refused to
sign the prepared contract.32 Private respondent even offered the contract to sell as its Exhibit S.33 In
the absence of proof to the contrary, this draft contract may be deemed to embody the agreement of
the parties. Moreover, when Tomas Siatianun, petitioner's president, testified, private respondent
cross-examined him as regards the October 1983 contract.34 Private respondent did not and has not
denied the existence of that contract.

Under these facts, therefore, the parties may ideally be considered as having perfected the contract
of October 1983. Again in Adelfa Properties, Inc. v. Court of Appeals, the Court said that

. . . a contract, like a contract to sell, involves a meeting of the minds between two persons
whereby one binds himself, with respect to the other, to give something or to render some
service. Contracts, in general, are perfected by mere consent, which is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to constitute
the contract. The offer must be certain and the acceptance absolute.35

Moreover, private respondent's offer to sell and petitioner's acceptance thereof are manifest in the
documentary evidence presented by the parties. Thus, private respondent presented the five (5)
checks36 that, through Atty. Villamayor, it admitted as the down payment under the October 1983
contract. Private respondent's intentional non-encashment of the check cannot serve to belie the fact
of its tender as down payment. For its part, petitioner presented Exhibit 10, a receipt dated February
28, 1984, showing that private respondent's authorized representative received the total amount of
P37,642.72 represented by said five checks as "deposit of Contract (sic)." As this Court also held in
the Adelfa Properties case, acceptance may be evidenced by some acts or conduct communicated
to the offeror, either in a formal or an informal manner, that clearly manifest the intention or
determination to accept the offer to buy or
sell.37

Justice and equity, however, will not be served by a positive ruling on the perfection and
performance of the contract to sell. There are facts on record proving that, after all, the parties had
not arrived at a definite agreement. By Atty. Villamayor's admission, the checks were not encashed
because Tomas Siatianun did not sign the draft contract that he had prepared.38 On his part, Tomas
Siatianun explained that he did not sign the contract because it covered seven (7) lots while their
agreement was only for six (6) lots. According to him, private respondent had conceded that Lot No.
2 was meant for petitioner's right of way39 and, therefore, it could not have been part of the properties
it wanted to buy. It is on record, moreover, that the only agreement that the parties arrived at in a
conference at the Silahis Hotel was the price indicated in the draft contract.40

The number of lots to be sold is a material component of the contract to sell. Without an agreement
on the matter, the parties may not in any way be considered as having arrived at a contract under
the law. The parties' failure to agree on a fundamental provision of the contract was aggravated by
petitioner's failure to deposit the installments agreed upon. Neither did it attempt to make a
consignation of the installments. This Court's disquisition on the matter in the Adelfa Properties case
is relevant. Thus:

The mere sending of a letter by the vendee expressing the intention to pay, without the
accompanying payment, is not considered a valid tender of payment. Besides, a mere tender
of payment is not sufficient to compel private respondents to deliver the property and
execute the deed of absolute sale. It is consignation which is essential in order to extinguish
petitioner's obligation to pay the balance of the purchase price. The rule is different in case of
an option contract or in legal redemption or in a sale with right to repurchase, wherein
consignation is not necessary because these cases involve an exercise of a right or privilege
(to buy, redeem or repurchase) rather than the discharge of an obligation, hence tender of
 payment would be sufficient to preserve the right or privilege. This is because the provisions
on consignation are not applicable when there is no obligation to pay. A contract to sell, as in
the case before us, involves the performance of an obligation, not merely the exercise of a
privilege or a right. Consequently, performance or payment may be effected not by tender of
payment alone but by both tender and consignation.41 (Emphasis supplied.)

As earlier noted, petitioner did not lift a finger towards the performance of the contract other than the
tender of down payment. There is no record that it even bothered to tender payment of the
installments or to amend the contract to reflect the true intention of the parties as regards the
number of lots to be sold. Indeed, by petitioner's inaction, private respondent may not be judicially
enjoined to validate a contract that the former appeared to have taken for granted. As in the earlier
agreements, petitioner ignored opportunities to resuscitate a contract to sell that was rendered
moribund and inoperative by its inaction.

In view of the foregoing, there is no need to discuss the issue of whether or not there was a valid
grant of right of way in favor of petitioners. Suffice it to say that the documentary evidence offered by
petitioner on the matter manifests that that right of way on an unidentified propertywas granted in
April 1961 by private respondent's board of directors to W. Ick & Sons, Inc. and Julian Martinez.42 On
May 12, 1961, Fritz Ick, the president of W. Ick & Sons, Inc., in turn indorsed the unidentified
property to petitioner.43

What needs stressing is that the installments paid by the petitioner on the land should be deemed
rentals in accordance with provision No. 9, as well as by law. Article 1486 of the Civil Code provides
that a stipulation that the installments or rents paid shall not be returned to the vendee or lessee
shall be valid insofar as the same may not be unconscionable under the circumstances.44 The down
payment and the eight (8) installments paid by petitioner on the six lots under the 1961 agreements
amounted to P5,672.00. The lots, including Lot No. 2, adjoins petitioner's Vetsin and oil factories
constructed on a 20,000-square-meter land that petitioner likewise bought from private respondent.
Obviously, petitioner made use of the lots not only during the construction of the factories but also
during its operations as an oil factory. Petitioner enclosed the area with a fence and made
constructions thereon. It is, therefore, not unconscionable to allow respondent rentals on the lots as
correctly decreed by the lower court.

As to attorney's fees, Article 2208 of the Civil Code allows the award of such fees when its claimant
is compelled to litigate with third persons or to incur expenses to protect its just and valid claim. In
view of petitioner's rejection of private respondent's demands for rentals45and its unjustified refusal to
settle private respondent's claims,46 the award of attorney's fees of P10,000.00 is more than just and
reasonable.47

WHEREFORE, the instant petition for review on certiorari is hereby denied and the questioned
Decision of the Court of Appeals is AFFIRMED. This Decision is immediately executory. Costs
against petitioner.