GR 109966; (May, 1999) (Digest)
G.R. No. 109966. May 31, 1999.
ELISCO TOOL MANUFACTURING CORPORATION, petitioner, vs. COURT OF APPEALS, ROLANDO LANTAN, and RINA LANTAN, respondents.
FACTS
Private respondent Rolando Lantan, an employee of petitioner Elisco Tool Manufacturing Corporation, entered into a “Lease Agreement” on January 9, 1980, covering a 1979 Colt Lancer. The contract stipulated a five-year lease with a monthly rental of P1,010.65, deductible from his salary. It provided that upon payment of the 60th monthly rental, Lantan could exercise an option to purchase the vehicle, with all rentals applied to the full purchase price. He also executed a promissory note for P60,639.00. Elisco ceased operations in 1981, and Lantan was laid off. Despite his termination, he continued making payments, totaling P61,070.94 by December 1984.
In 1986, Elisco filed a complaint for replevin and sum of money against the Lantan spouses, alleging failure to pay monthly rentals totaling P39,054.86 as of May 1986 and seeking recovery of the car or its value. The Regional Trial Court ruled in favor of the Lantans, declaring them the owners of the car. The Court of Appeals affirmed this decision in toto.
ISSUE
Whether the contract between the parties is a contract of lease with an option to purchase or a contract of sale on installment.
RULING
The Supreme Court affirmed the Court of Appeals. The contract, despite being denominated as a lease, is a contract of sale on installment. The legal logic hinges on the determination of the true nature of the agreement from its stipulations and the parties’ intent. The so-called “rentals” were fixed installments for the price, payable over five years, with the total amount equaling the car’s value. The option to purchase at the end of the term for no additional consideration, with all prior payments credited to the price, indicates the “rentals” were actually installment payments. This makes the agreement a sale, not a lease.
Consequently, Article 1484 of the Civil Code on installment sales applies. Since the Lantans had already paid installments equivalent to more than the total purchase price (P61,070.94 exceeding the P60,639.00 promissory note amount), they are deemed to have fully paid. Petitioner lost any right to exact further payment or to repossess the vehicle. The awards for moral and exemplary damages and attorney’s fees were upheld due to petitioner’s unfounded and oppressive suit to recover an already fully paid asset.