G.R. No. 46378. December 17, 1938.
MANILA GAS CORPORATION, plaintiff-appellee, vs. ALFREDO B. CALUPITAN, defendant-appellant.

FACTS*
The Manila Gas Corporation and Alfredo B. Calupitan entered into two contracts styled as “Lease Agreements” for a Krefft stove and a Piccolo water heater. The contracts required an advance payment and monthly payments termed as “rental,” and gave Calupitan the option to purchase the items before the lease term expired by paying the agreed value less all payments made. Calupitan made payments, which were recorded in his account and receipts as partial payments on the appliance’s bill, reducing the balance. After ceasing payments, Manila Gas Corporation demanded either payment of unpaid “rentals” or return of the items. Upon Calupitan’s refusal, the corporation filed an action for recovery of the items and unpaid rentals.

ISSUE

*
Whether the contracts (Exhibits A and B) are contracts of lease or contracts of sale on installment.

RULING

*
The contracts are contracts of sale on installment, not lease agreements. The Court found that the advance and monthly payments, though termed “rental,” were in reality installment payments on the purchase price, as evidenced by the accounts and receipts showing the payments were applied to reduce the balance of the appliance’s value. The option to purchase by paying the agreed value less all payments made, coupled with the lack of a fixed lease term and the fact the payment periods corresponded to the time needed to pay the full price via the monthly amounts, indicated the true intent was a sale on installment. Consequently, the trial court’s decision was reversed, and the case was remanded for the plaintiff to elect between enforcing the sale or seeking rescission for breach.

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