BRYAN IDMILAO

257. X signed a car plan in 2009 under which he was given a Toyota Wigo worth P600,000 for which he
would pay a monthly rental of P10,000 through salary deduction for 5 years. He was given the option of
buying the car at the end of the period with the rentals applied to the payment; he could also exercise this
option by paying the rentals in advance. On the same day, he signed a promissory note promising to pay
P600,000 plus interest with a provision for 2% a month as penalty. After a year, the company ceased
operations and although he was laid off, X was allowed to continue paying rental. In 2015, the company
sued X for P390,000 for back rentals inclusive of interest and penalty, and succeeded in repossessing the
car through replevin. In defense, X claimed that he had paid P605,000 in all.

A) Should the car plan be considered a lease contract or contract of sale?

No. Under a typical car plan, the company advances the purchase price of a car to be paid back by the
employee through monthly deductions from his salary. The company retains ownership of the motor
vehicle until it shall have been fully paid for. However, retention of registration of the car in the companys
name is only a form of a lien on the vehicle in the event that the employee would abscond before he has
fully paid for it. There are also stipulations in car plan agreements to the effect that should the employment
of the employee concerned be terminated before all installments are fully paid, the vehicle will be taken by
the employer and all installments paid shall be considered rentals per agreement. (ELISCO TOOL
MANUFACTURING CORPORATION, vs. COURT OF APPEALS, ROLANDO LANTAN, and RINA LANTAN)

This Court has 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: 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.

B) Is X liable for interest and penalty under the promissory note?

No. The promissory note in which the 2% monthly interest on delayed payments appears does not form
part of the contract. There is no consideration for the promissory note.
 In the case of ELISCO TOOL MANUFACTURING CORPORATION, vs. COURT OF APPEALS,
ROLANDO LANTAN, and RINA LANTAN the Court held that there is nothing show that plaintiff advanced
the purchase price of the vehicle for defendant so as to make the latter indebted to the former for the
amount stated in the promissory note. Thus, as stated in the complaint: "That defendant entered into an
agreement with the plaintiff for the lease of a motor vehicle supplied by the latter, with the option to
purchase at the end of the period of lease .." In other words, plaintiff did not buy the vehicle for defendant,
advancing the purchase price for that purpose. There is nothing in the complaint or in the evidence to show
such arrangement. Therefore, there was no indebtedness secured by a promissory note to speak of. There
being no Consideration for the promissory note, the same, including the penalty clause contained thereon,
has no binding effect

258. X signed a deed of sale for P50,000 of an unregistered parcel of land with an area of 1,000 sq.m more
or less, in favor of Y. It turned out that the land contained 1,500 sq.m. Must Y pay for the excess of 500
sq.m?

In Dichoso, supra, the Court held that xxx In a contract of sale of land in mass, it is well established
that the specific boundaries stated in the contract must control over any statement with respect to the area
contained within its boundaries. It is not of vital consequence that a deed or contract of sale of land should
disclose the area with mathematical accuracy. It is sufficient that its extent is objectively indicated with
sufficient precision to enable one to identify it. An error as to the superficial area is immaterial. Hence, the
vendors are obligated to deliver all the land included within the boundaries, regardless of whether the real
area should be greater or smaller than that recited in the deed. This is particularly true where the area is
described as more or less. These conclusions are drawn from Art. 1542 of the Civil code which states In
the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or
number, there shall be no increase or decrease of the price, although there be a greater or less are or
number than that stated in the contract.
Applying such in the case, Y must not pay for the excess of 500 square meter being small and
insignificant.

259. X purchased a car from Y on a where is as is basis. After, Z proved ownership of the car, X sought
reimbursement from Y. Is Y liable under warranty against eviction despite the where is as is condition?

No. Warranty against eviction- is an implied warranty on the part of the seller that he has a right to
sell at the time when ownership is to pass and that the buyer shall from that time have and enjoy the legal
and peaceful possession of the thing However such is not applicable in where is as is basis. The effect of
"as is, where is" clause in an option to purchase property is that the seller gives no warranty as to the
warranty against eviction of the property. Consequently, the buyer bears the responsibility to conduct proper
checks and inspect the property thoroughly beforehand, for the buyer shall be regarded as having
inspected and accepted the property in its actual state and condition once the property is purchase.