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REBOROSO, KIRK ROBERTS P.

SALES
Polytechnic University of the Philippines vs Court of Appeals and
Firestone Ceramics
National Development Corporation vs Firestone Ceramics Inc.
[GR No. 143513 and 143590. November 14, 2001]
Bellosilo, J.:
Facts:
Petitioner National Development Corp., a government owned and controlled
corporation, had in its disposal a 10 hectares property. Sometime in May
1965, private respondent Firestone Corporation manifested its desire to lease
a portion of it for ceramic manufacturing business. On August 24, 1965, both
parties entered into a contract of lease for a term of 10 years renewable for
another 10 years. Prior to the expiration of the aforementioned contract,
Firestone wrote NDC requesting for an extension of their lease agreement. It
was renewed with an express grant to Firestone of the first option to
purchase the leased premise in the event that it was decided "to dispose and
sell the properties including the lot..."
Cognizant of the impending expiration of the leased agreement, Firestone
informed NDC through letters and calls that it was renewing its lease. No
answer was given. Firestone's predicament worsened when it learned of
NDC's supposed plans to dispose the subject property in favor of petitioner
Polytechnic University of the Philippines. PUP referred to Memorandum Order
No. 214 issued by then President Aquino ordering the transfer of the whole
NDC compound to the National Government. The order of conveyance would
automatically result in the cancellation of NDC's total obligation in favor of
the National Government.
Firestone instituted an action for specific performance to compel NDC to sell
the leased property in its favor.
Issue:
1. Whether or not there is a valid sale between NDC and PUP.
Ruling
A contract of sale, as defined in the Civil Code, is a contract where one of the
parties obligates himself to transfer the ownership of and to deliver a
determinate thing to the other or others who shall pay therefore a sum
certain in money or its equivalent. It is therefore a general requisite for the
existence of a valid and enforceable contract of sale that it be mutually
obligatory, i.e., there should be a concurrence of the promise of the vendor
to sell a determinate thing and the promise of the vendee to receive and pay
for the property so delivered and transferred. The Civil Code provision is, in
effect, a "catch-all" provision which effectively brings within its grasp a whole

gamut of transfers whereby ownership of a thing is ceded for a


consideration.
All three (3) essential elements of a valid sale, without which there can be no
sale, were attendant in the "disposition" and "transfer" of the property from
NDC to PUP - consent of the parties, determinate subject matter, and
consideration therefor.
Consent to the sale is obvious from the prefatory clauses of Memorandum
Order No. 214 which explicitly states the acquiescence of the parties to the
sale of the property. Furthermore, the cancellation of NDC's liabilities in favor
of the National Government constituted the "consideration" for the sale.
Gaite v. Fonacier
Facts:
Gaite was appointed by Fonacier as attorney-in-fact to contract any party for
the exploration and development of mining claims. Gaite executed a deed of
assignment in favor of a single proprietorship owned by him. For some
reasons, Fonacier revoked the agency, which was acceded to by Gaite,
subject to certain conditions, one of which being the transfer of ores
extracted from the mineral claims for P75,000, of which P10,000 has already
been paid upon signing of the agreement and the balance to be paid from
the first letter of credit for the first local sale of the iron ores. To secure
payment, Fonacier delivered a surety agreement with Larap Mines and some
of its stockholders, and another one with Far Eastern Insurance. When the
second surety agreement expired with no sale being made on the ores, Gaite
demanded the P65,000 balance. Defendants contended that the payment
was subject to the condition that the ores will be sold.
Issue:
(1) Whether the sale is conditional or one with a period
(2) Whether there were insufficient tons of ores
Held:
(1) The shipment or local sale of the iron ore is not a condition precedent (or
suspensive) to the payment of the balance of P65,000.00, but was only a
suspensive period or term. What characterizes a conditional obligation is the
fact that its efficacy or obligatory force (as distinguished from its
demandability) is subordinated to the happening of a future and uncertain
event; so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed.

A contract of sale is normally commutative and onerous: not only does each
one of the parties assume a correlative obligation (the seller to deliver and
transfer ownership of the thing sold and the buyer to pay the price),but each
party anticipates performance by the other from the very start. While in a
sale the obligation of one party can be lawfully subordinated to an uncertain
event, so that the other understands that he assumes the risk of receiving
nothing for what he gives (as in the case of a sale of hopes or
expectations,emptio spei), it is not in the usual course of business to do so;
hence, the contingent character of the obligation must clearly appear.
Nothing is found in the record to evidence that Gaite desired or assumed to
run the risk of losing his right over the ore without getting paid for it, or that
Fonacier understood that Gaite assumed any such risk. This is proved by the
fact that Gaite insisted on a bond a to guarantee payment of the P65,000.00,
an not only upon a bond by Fonacier, the Larap Mines & Smelting Co., and
the company's stockholders, but also on one by a surety company; and the
fact that appellants did put up such bonds indicates that they admitted the
definite existence of their obligation to pay the balance of P65,000.00.
The appellant have forfeited the right court below that the appellants have
forfeited the right to compel Gaite to wait for the sale of the ore before
receiving payment of the balance of P65,000.00, because of their failure to
renew the bond of the Far Eastern Surety Company or else replace it with an
equivalent guarantee. The expiration of the bonding company's undertaking
on December 8, 1955 substantially reduced the security of the vendor's
rights as creditor for the unpaid P65,000.00, a security that Gaite considered
essential and upon which he had insisted when he executed the deed of sale
of the ore to Fonacier.
(2) The sale between the parties is a sale of a specific mass or iron ore
because no provision was made in their contract for the measuring or
weighing of the ore sold in order to complete or perfect the sale, nor was the
price of P75,000,00 agreed upon by the parties based upon any such
measurement.(see Art. 1480, second par., New Civil Code). The subject
matter of the sale is, therefore, a determinate object, the mass, and not the
actual number of units or tons contained therein, so that all that was
required of the seller Gaite was to deliver in good faith to his buyer all of the
ore found in the mass, notwithstanding that the quantity delivered is less
than the amount estimated by them.

COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS


G.R. No. 115349 April 18, 1997
Facts:

ADMU Institute of Philippine Culture is engaged in social science studies of


Philippine society and culture. Occasionally, it accepts sponsorships for its
research activities from international organizations, private foundations and
government agencies.
On July 1983, CIR sent a demand letter assessing the sum of P174,043.97 for
alleged deficiency contractors tax. Accdg to CIR, ADMU falls under the
purview of independent contractor pursuant to Sec 205 of Tax Code and is
also subject to 3% contractors tax under Sec 205 of the same code.
(Independent Contractor means any person whose activity consists
essentially of the sale of all kinds of services for a fee regardless of whether
or not the performance of the service calls for the exercise or use of the
physical or mental faculties of such contractors or their employees.)
Issue:
1) WON ADMU is an independent contractor hence liable for tax? NO.
2) WON the acceptance of research projects by the IPC of ADMU a contract of
sale or a contract for a piece of work? NEITHER.
Held:
1)
Hence, to impose the three percent contractors tax on Ateneos Institute of
Philippine Culture, it should be sufficiently proven that the private
respondent is indeed selling its services for a fee in pursuit of an
independent business.
2)
Records do not show that Ateneos IPC in fact contracted to sell its research
services for a fee. In the first place, the petitioner has presented no evidence
to prove its bare contention that, indeed, contracts for sale of services were
ever entered into by the private respondent. Funds received by the Ateneo
de Manila University are technically not a fee. They may however fall as gifts
or donations which are tax-exempt. Another fact that supports this
contention is that for about 30 years, IPC had continuously operated at a
loss, which means that sponsored funds are less than actual expenses for its
research projects.

In fact, private respondent is mandated by law to undertake research


activities to maintain its university status. In fact, the research activities
being carried out by the IPC is focused not on business or profit but on social
sciences studies of Philippine society and culture. Since it can only finance a
limited number of IPCs research projects, private respondent occasionally
accepts sponsorship for unfunded IPC research projects from international
organizations, private foundations and governmental agencies. However,
such sponsorships are subject to private respondents terms and conditions,
among which are, that the research is confined to topics consistent with the
private respondents academic agenda; that no proprietary or commercial
purpose research is done; and that private respondent retains not only the
absolute right to publish but also the ownership of the results of the research
conducted by the IPC.
SALE vs. CONTRACT FOR PIECE OF WORK
By the contract of sale, one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other
to pay therefore a price certain in money or its equivalent. By its very nature,
a contract of sale requires a transfer of ownership. In the case of a contract
for a piece of work, the contractor binds himself to execute a piece of work
for the employer, in consideration of a certain price or compensation. If the
contractor agrees to produce the work from materials furnished by him, he
shall deliver the thing produced to the employer and transfer dominion over
the thing. Whether the contract be one of sale or one for a piece of work, a
transfer of ownership is involved and a party necessarily walks away with an
object. In this case, there was no sale either of objects or services because
there was no transfer of ownership over the research data obtained or the
results of research projects undertaken by the Institute of Philippine Culture.

CELESTINO CO & Co. v Collector of Internal Revenue (99 SCRA 1956)


FACTS:
Celestino Co & Company is the owner ofOriental Sash Factory. It paid
percentage taxes of 7% on the gross receipts of its sash, door and window
factory, in accordance with rule of the National Internal Revenue Code which
is a tax on the original sales of articles by manufacturer, producer or
importer. However, in 1952 it began to claim only 3% tax under which is a
tax on sales of services. Petitioner claims that it does not manufacture readymade doors, sash and windows for the public, but only upon special orders

from the customers, hence, they contend that they were selling service
rather than the item.
BIR was not impressed with the contention of petitioner. Petitioner then
filed a case on Court of Tax Appeal. CTA rule in favor of BIR and contends
that by putting the word factory in their name, they were out to do
business in a larger scale rather than rendering service. CTA ruled that even
if we were to believe petitioners claim that it does not manufacture readymade items for the public and that it makes these articles only special order
of its customers that does not make it a contractor.
ISSUE:
I. Is petitioner engaged in the manufacturing business?
HELD:
I. Yes. The fact that windows and doors are made by it only when
customers place their orders, does not alter the nature of the establishment,
it makes petitioner a habitual manufacturer. Petitioner does nothing more
than sell the goods that it mass-produces or habitually makes.
Appellant invokes Article 1467 of the New Civil Code to defend its
contention that it did not sell, but merely contracted for particular pieces of
work or sold its services. SC however ruled that the factory accepts a job that
requires the does not use of extraordinary or additional equipment, or
involves services not generally performed by it. The orders herein exhibited
were not shown to be special. They were merely orders for work nothing is
shown to call them special services. The Supreme Court affirms the assailed
decision by the CTA.

Quiroga vs Parsons
G.R. No. L-11491

Subject: Sales
Doctrine: Contract of Agency to Sell vs Contract of Sale
Facts: On Jan 24, 1911, plaintiff and the respondent entered into a contract
making the latter an agent of the former. The contract stipulates that Don
Andres Quiroga, here in petitioner, grants exclusive rights to sell his beds in
the Visayan region to J. Parsons. The contract only stipulates that J.Parsons

should pay Quiroga within 6 months upon the delivery of beds.


Quiroga files a case against Parsons for allegedly violating the following
stipulations: not to sell the beds at higher prices than those of the invoices;
to have an open establishment in Iloilo; itself to conduct the agency; to keep
the beds on public exhibition, and to pay for the advertisement expenses for
the same; and to order the beds by the dozen and in no other manner. With
the exception of the obligation on the part of the defendant to order the beds
by the dozen and in no other manner, none of the obligations imputed to the
defendant in the two causes of action are expressly set forth in the contract.
But the plaintiff alleged that the defendant was his agent for the sale of his
beds in Iloilo, and that said obligations are implied in a contract of
commercial agency. The whole question, therefore, reduced itself to a
determination as to whether the defendant, by reason of the contract
hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the
sale of his beds.
Issue: Whether the contract is a contract of agency or of sale.
Held: In order to classify a contract, due attention must be given to its
essential clauses. In the contract in question, what was essential, as
constituting its cause and subject matter, is that the plaintiff was to furnish
the defendant with the beds which the latter might order, at the price
stipulated, and that the defendant was to pay the price in the manner
stipulated. Payment was to be made at the end of sixty days, or before, at
the plaintiffs request, or in cash, if the defendant so preferred, and in these
last two cases an additional discount was to be allowed for prompt payment.
These are precisely the essential features of a contract of purchase and sale.
There was the obligation on the part of the plaintiff to supply the beds, and,
on the part of the defendant, to pay their price. These features exclude the
legal conception of an agency or order to sell whereby the mandatory or
agent received the thing to sell it, and does not pay its price, but delivers to
the principal the price he obtains from the sale of the thing to a third person,
and if he does not succeed in selling it, he returns it. By virtue of the contract
between the plaintiff and the defendant, the latter, on receiving the beds,
was necessarily obliged to pay their price within the term fixed, without any
other consideration and regardless as to whether he had or had not sold the
beds.
In respect to the defendants obligation to order by the dozen, the only one
expressly imposed by the contract, the effect of its breach would only entitle
the plaintiff to disregard the orders which the defendant might place under

other conditions; but if the plaintiff consents to fill them, he waives his right
and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and
between the plaintiff and the defendant was one of purchase and sale, and
that the obligations the breach of which is alleged as a cause of action are
not imposed upon the defendant, either by agreement or by law.

Gonzalo Puyat & Sons, Inc. vs Arco Amusement Company (former


Teatro Arco)
Facts:

Arco is engaged in the business of cinematographs here in the country.


Gonzalo Puyat & Sons was also doing business here in the country and
also acting as agent of Starr Piano Co. of Richmond, Indiana, USA.
Arco approached Gonzalo and made an agreement that Gonzalo would
order sound reproducing equipment from Starr Piano and that Arco
would just pay Gonzalo plus a 10% commission. Gonzalo received a list
price of $1700 for the order. The equipment arrived and was delivered
to Arco. Arco paid Gonzalo $1700 plus the commission.
Then, Arco placed another order for the same equipment with Gonzalo.
$1600 was the price quoted by Starr Piano for the equipment. It was
delivered and Arco paid $1600 for it with commission.
3 years later, a civil case was filed in Vigan by Fidel Reyes against
Gonzalo. There, Arco discovered that the price quoted to them with
regard to the 2 orders was not the net price but the list price, and that
Gonzalo obtained a discount from Starr Piano in ordering the
equipment. Moreover, by reading reviews on prices of machinery and
cinematograph equipment, Arco was convinced that the prices charged
by Gonzalo were too high.
Arco filed a case for recovery of sum of money. Trial court held that the
contract between Arco and Gonzalo is one of sale so it absolved
Gonzalo. CA reversed the ruling holding that the contract was one of
agency and that Gonzalo should return the overpayment to Arco.

Issue: WON the contract is a contract of agency or is one of sale.


Held: The contract between the petitioner and the respondent was one of
sale.

The contract is the law between the parties and should include all the
things they are supposed to have been agreed upon. What does not
appear on the face of the contract should be regarded merely as
"dealer's" or "trader's talk", which can not bind either party.

Arco admitted in its complaint filed with Manila CFI that Gonzalo
agreed to sell to it the first sound reproducing equipment and
machinery.
While Gonzalo was to receive a 10% commission, this does not
necessarily make Gonzalo an agent of Arco as this provision is only an
additional price which Arco bound itself to pay, and which stipulation is
not incompatible with the contract of purchase and sale.
Whatever unforeseen events might have taken place unfavorable to
Arco such as change in prices, mistake in their quotation, Gonzalo
might still legally hold Arco to the prices fixed at $1,700 and $1,600.
This is incompatible with the pretended relation of agency between the
petitioner and the respondent, because in agency, the agent is
exempted from all liability in the discharge of his commission provided
he acts in accordance with the instructions received from his principal
and the principal must indemnify the agent for all damages which the
latter may incur in carrying out the agency without fault or imprudence
on his part.
It follows that the petitioner as vendor is not bound to reimburse the
respondent as vendee for any difference between the cost price and
the sales price which represents the profit realized by the vendor out of
the transaction.
Moreover, the 25% discount granted by the Starr piano to the Gonzalo
is available only to the latter as the former's exclusive agent in the
Philippines. Arco could not have secured this discount from the Starr
Piano and neither was Gonzalo willing to waive that discount in favor of
Arco. Not every concealment is fraud; and short of fraud, it were better
that, within certain limits, business acumen permit of the loosening of
the sleeves and of the sharpening of the intellect of men and women in
the business world.

PHILIPPINE LAWIN BUS, CO., MASTER TOURS & TRAVEL CORP.,


MARCIANO TAN, ISIDRO TAN, ESTEBAN TAN and HENRY TAN,
Petitioners, v. COURT OF APPEALS and ADVANCE CAPITAL
CORPORATION, Respondents.
[G.R. No. 130972. January 23, 2002]

In dacion en pago, property is alienated to the creditor in satisfaction


of a debt in money. It is "the delivery and transmission of ownership of a
thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation."

It extinguishes the obligation to the extent of the value of the thing


delivered, either as agreed upon by the parties or as may be proved, unless
the parties by agreement, express or implied, or by their silence, consider
the thing as equivalent to the obligation, in which case the obligation is
totally extinguished.

Article 1245 of the Civil Code provides that the law on sales shall
govern an agreement of dacion en pago.

The Facts

On 7 August 1990 plaintiff Advance Capital Corporation, a licensed


lending investor, extended a loan to defendant Philippine Lawin Bus
Company (LAWIN), in the amount of P8,000,000.00 payable within a period
of one (1) year. The defendant, through Marciano Tan, its Executive Vice
President, executed Promissory Note No. 003, for the amount of
P8,000,000.00

To guarantee payment of the loan, defendant Lawin executed in favor


of plaintiff the following documents: (1) A Deed of Chattel Mortgage wherein
9 units of buses were constituted as collaterals; (2) A joint and several
UNDERTAKING of defendant Master Tours and Travel Corporation, signed by
Isidro Tan and Marciano Tan; and (3) A joint and several UNDERTAKING,
executed and signed by Esteban, Isidro, Marciano and Henry, all surnamed
Tan.

Only P1,800,000.00 was paid from the loan. Thus, defendant Bus
Company was able to avail an additional loan of P2,000,000.00 for one (1)
month under Promissory Note 00028. Defendant LAWIN failed to pay the
aforementioned promissory note and the same was renewed under a
separate Promissory Note, 037. Still having not able to pay, defendants offer
for re-structuring for another two months which in turn was still not paid.
Thus, defendants foreclose the buses and as sole bidder attain the sale
which P2, 000, 000 was credited to the account of LAWIN.

Thereafter, identical demand letters were sent to the defendants to

pay their obligation, despite repeated demands, the defendants failed to pay
their indebtedness which totaled of P16,484,992.42

Thus, the suit for sum of money, wherein the plaintiff prays that
defendants solidarily pay plaintiff as of July 31, 1992 the sum of (a)
P16,484,994.12 as principal obligation under the two promissory notes Nos.
003 and 00037, plus interests and penalties along with loss of good will of
business, litigation expenses and exemplary damages. In answer to the
complaint, defendants-appellees assert by way of special and affirmative
defense, that there was already an arrangement as to the full settlement of
the loan obligation by way of:jgc:chanrobles.com.ph

A. Sale of the nine (9) units passenger buses the proceeds of


which will be credited against the loan amount as full payment thereof;
or in the alternative.

B. Plaintiff will shoulder and bear the cost of rehabilitating the


buses, with the amount thereof to be included in the total obligation of
defendant Lawin and the bus operated, with the earnings thereof to be
applied to the loan obligation of defendant Lawin.

Defendants further assert that the foreclosure sale was in violation of


the aforequoted arrangement and prayed for the nullification of the same
and the dismissal of the complaint.

The Trial court favored the defendants, dismissing the complaint and
declaring the foreclosure as null and void. With their pleaded defenses it also
considered the obligation of indebtedness, extinguished. On appeal, the
Court of appeals reversed the earlier ruling, thus the appeal.

The Issue

The issue raised is whether there was dacion en pago between the parties
upon the surrender or transfer of the mortgaged buses to the Respondent.

The Courts Ruling

We deny the petition

Nonetheless, we agree with the Court of Appeals that there was no


dacion en pago that took place between the parties.

In dacion en pago, property is alienated to the creditor in satisfaction


of a debt in money. It is "the delivery and transmission of ownership of a
thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation." It "extinguishes the obligation to the extent
of the value of the thing delivered, either as agreed upon by the parties or as
may be proved, unless the parties by agreement, express or implied, or by
their silence, consider the thing as equivalent to the obligation, in which case
the obligation is totally extinguished.

Article 1245 of the Civil Code provides that the law on sales shall govern an
agreement of dacion en pago. A contract of sale is perfected at the moment
there is a meeting of the minds of the parties thereto upon the thing which is
the object of the contract and upon the price.

In Filinvest Credit Corporation v. Philippine Acetylene Co., Inc., we said:

". . . In dacion en pago, as a special mode of payment, the debtor offers


another thing to the creditor who accepts it as equivalent of payment of an
outstanding obligation. The undertaking really partakes in one sense of the
nature of sale, that is, the creditor is really buying the thing or property of
the debtor, payment for which is to be charged against the debtors debt. As
such, the essential elements of a contract of sale, namely, consent, object
certain, and cause or consideration must be present. In its modern concept,
what actually takes place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted equivalent of the
performance of an obligation is considered as the object of the contract of
sale, while the debt is considered as the purchase price. In any case,
common consent is an essential prerequisite, be it sale or novation,
to have the effect of totally extinguishing the debt or obligation.

In this case, there was no meeting of the minds between the parties on
whether the loan of the petitioners would be extinguished by dacion en pago.
The petitioners anchor their claim solely on the testimony of Marciano Tan
that he proposed to extinguish petitioners obligation by the surrender of the
nine buses to the respondent acceded to as shown by receipts its
representative made.

However, the receipts executed by respondents representative as


proof of an agreement of the parties that delivery of the buses to private
respondent would result in extinguishing petitioners obligation do not in any
way reflect the intention of the parties that ownership thereof by respondent
would be complete and absolute. The receipts show that the two buses were
delivered to respondent in order that it would take custody for the purpose of
selling the same. The receipts themselves in fact show that petitioners
deemed respondent as their agent in the sale of the two vehicles whereby
the proceeds thereof would be applied in payment of petitioners
indebtedness to Respondent. Such an agreement negates transfer of
absolute ownership over the property to respondent, as in a sale.

Thus, in Philippine National Bank v. Pineda 22 we held that where


machinery and equipment were repossessed to secure the payment of a loan
obligation and not for the purpose of transferring ownership thereof to the
creditor in satisfaction of said loan, no dacion en pago was ever
accomplished.
178
SCRA
September 29, 1989

188,

G.R.

No.

82508

FILINVEST
CREDIT
CORPORATION, petitioner,
vs.
THE COURT OF APPEALS, JOSE SY BANG and ILUMINADA TAN SY BANG,
respondents
FACTS:
Herein private respondents spouses Jose Sy Bang and Iluminada Tan
were engaged in the sale of gravel produced from crushed rocks and used for
construction purposes. They intended to buy rock crusher from Rizal
Consolidated Corporation which carried a cash price tag of P550,000.00.
They applied for financial assistance from herein petitioner Filinvest Credit
Corporation, who agreed to extend financial aid on the certain conditions.

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, 1981, payable
as follows: P10,000.00 first 3 months, P23,000.00 next 6 months,
P24,800.00 next 15 months. It was likewise stipulated that at the end of the
two-year period, the machine would be owned by the private respondents.
Thus the private respondent issued in favor of the petitioner a check for
P150,550.00, as initial rental (or guaranty deposit), and 24 postdated checks
corresponding to the 24 monthly rentals. In addition, to guarantee their
compliance with the lease contract, the private respondent executed a real
estate mortgage over two parcels of land in favor of the petitioner. The rock
crusher was delivered to the spouses.
However, 3 months later, the spouses stopped payment when
petitioner had not acted on the complaints of the spouses about the
machine. As a consequence, petitioner extra-judicially foreclosed the real
estate mortgage. The spouses filed a complaint before the RTC. The RTC
rendered a decision in favor of private respondent. The petitioner elevated
the case to CA which affirmed the decision in toto. Hence, this petition.
ISSUES:
1. Whether or not the nature of the contract is one of a contract of sale.
2. Whether or not the remedies of the seller provided for in Article 1484 are
cumulative.
HELD:
1. Yes. The 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.
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 restored 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.

2. No, it is alternative. The seller of movable in installments, in case the


buyer fails to pay 2 or more installments, may elect to pursue either of the
following remedies: (1) exact fulfilment 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, cancelling the contract of sale, gets
to keep all the installments-cum-rentals already paid.