G.R. No. 142618 – PCI LEASING AND FINANCE, INC., petitioner, vs. GIRAFFE-X CREATIVE IMAGING, INC., respondent.
GARCIA, J.
Rule Synopsis
Sales of personal property purporting to be leases (lease with option to buy or finance lease) are covered by the Recto Law. Where in case of default, the lessee is given the option to either: a) pay the rent for the full lease term without the obligation of surrendering the subject property, or b) surrender the same, the lease is said to be one with an option to purchase.
Facts
PCI Leasing and Finance, Inc. (PCI) and Giraffe-X Creative Imaging, Inc. entered into a lease agreement whereby the former leased to the latter several equipment for 36 months. The agreement provided, among others, that in case of Giraffe’s default, PCI may recover the rentals for the remaining term, and obtain possession of the equipment (cumulative remedies). Giraffe defaulted after a year. PCI sent a letter to Giraffe demanding payment of the rentals for the remaining term of the lease OR surrender of the subject equipment. Giraffe did not heed the demand.
Thus, PCI filed a complaint against Giraffe, praying for the issuance of a writ of replevin for the recovery of the leased property, and in addition, to pay the balance of the rental obligation (P8M).
Giraffe sought for the dismissal of the case arguing that the subject transaction fall within the coverage of Art. 1484 (Recto Law), being in actuality, a lease with an option to buy. And that PCI’s recovery of the possession of the subject property was tantamount to a foreclosure thereof which bars recovery of the balance.
The RTC ruled in favor of Giraffe and dismissed the complaint. The SC affirmed.
Issue
Were the Lease Agreement, Lease Schedules and the Disclosure Statements that embody the financial leasing arrangement between the parties covered by and subject to the consequences of Articles 1484 and 1485 of the New Civil Code (Recto Law)?
Ruling and Discussion
Yes. The Lease Agreement, Lease Schedules and the Disclosure Statements that embody the financial leasing arrangement between the parties were covered by and subject to the consequences of Articles 1484 and 1485 of the New Civil Code (Recto Law).
There is nothing in R.A. No. 8556 (Financing Company Act) which defines the rights and obligations, as between each other, of the financial lessor and the lessee.
Also, the demand letter sent by PCI to Giraffe was fashioned in the alternative, i.e. payment of the full amount of the unpaid balance for the entire lease period or the surrender of the financed asset. In other words, should Giraffe opted to pay the balance stated, it need not return the subject equipment. Likewise, if Giraffe opted not the exercise its option of acquiring the equipment by returning them, then it need not pay the outstanding balance. The legal import is that the transaction at hand is a lease in name only. The so-called monthly rentals are in truth monthly amortizations of the price of the equipment. The absence of a “purchase option” in the lease agreement, does not negate the fact that the true nature of the transaction is really a lease with an option to buy.
Given the above, the Recto Law should apply. And PCI in choosing to deprive Giraffe of the possession of the equipment waived its right to bring an action to recover unpaid rentals, under par. 3 of Art. 1484.
Dispositive
Petition denied. Decision affirmed.