THIRD DIVISION
|
VICENTE ONG LIM SING, JR., Petitioner, - versus - FEB LEASING & FINANCE
CORPORATION, Respondent. |
G.R.
No. 168115
Present: YNARES-SANTIAGO, J.,
Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, and NACHURA, JJ. Promulgated: |
x------------------------------------------------------------------------------------x
D E C I S I O N
NACHURA, J.:
This is a petition for review on
certiorari assailing the Decision[1]
dated
The facts are as follows:
On
P170,494.00).
JVL
defaulted in the payment of the monthly rentals. As of P3,414,468.75). On
On
In the Amended Answer,[8] JVL
and Lim admitted the existence of the lease agreement but asserted that it is
in reality a sale of equipment on installment basis, with FEB acting as the
financier. JVL and Lim claimed that this
intention was apparent from the fact that they were made to believe that when
full payment was effected, a Deed of Sale will be executed by FEB as vendor in
favor of JVL and Lim as vendees.[9] FEB purportedly assured them that documenting
the transaction as a lease agreement is just an industry practice and that the
proper documentation would be effected as soon as full payment for every item was
made. They also contended that the lease
agreement is a contract of adhesion and should, therefore, be construed against
the party who prepared it, i.e., FEB.
In upholding JVL and Lim’s stance,
the trial court stressed the contradictory terms it found in the lease
agreement. The pertinent portions of the Decision dated
A profound scrutiny of the
provisions of the contract which is a contract of adhesion at once exposed the
use of several contradictory terms. To name a few, in Section 9 of the said
contract – disclaiming warranty, it is stated that the lessor is not the
manufacturer nor the latter’s agent and therefore does not guarantee any feature or aspect of the object
of the contract as to its merchantability. Merchantability is a term applied in
a contract of sale of goods where conditions and warranties are made to apply.
Article 1547 of the Civil Code provides that unless a contrary intention
appears an implied warranty on the part of the seller that he has the right to
sell and to pass ownership of the object is furnished by law together with an
implied warranty that the thing shall be free from hidden faults or defects or
any charge or encumbrance not known to the buyer.
In an adhesion contract which is
drafted and printed in advance and parties are not given a real arms’ length
opportunity to transact, the Courts treat this kind of contract strictly
against their architects for the reason that the party entering into this kind
of contract has no choice but to accept the terms and conditions found therein
even if he is not in accord therewith and for that matter may not have
understood all the terms and stipulations prescribed thereat.
Contracts of this character are prepared unilaterally by the stronger
party with the best legal talents at its
disposal. It is upon that thought that
the Courts are called upon to analyze closely said contracts so that the weaker
party could be fully protected.
Another instance is when the alleged
lessee was required to insure the thing against loss, damage or destruction.
In property insurance against loss
or other accidental causes, the assured must have an insurable interest, 32
Corpus Juris 1059.
x x x x
It has also been held that the test
of insurable interest in property is whether the assured has a right, title or
interest therein that he will be benefited by its preservation and continued
existence or suffer a direct pecuniary loss from its destruction or injury by
the peril insured against. If the defendants were to be regarded as only a
lessee, logically the lessor who asserts ownership will be the one directly
benefited or injured and therefore the lessee is not supposed to be the assured
as he has no insurable interest.
There is also an observation from
the records that the actual value of each object of the contract would be the
result after computing the monthly rentals by multiplying the said rentals by
the number of months specified when the rentals ought to be paid.
Still another observation is the
existence in the records of a Deed of Absolute Sale by and between the same
parties, plaintiff and defendants which was an exhibit of the defendant where
the plaintiff sold to the same defendants one unit 1995 Mitsubishi L-200 STRADA
DC PICK UP and in said Deed, The Court noticed that the same terms as in the
alleged lease were used in respect to warranty, as well as liability in case of
loss and other conditions. This action of the plaintiff unequivocally exhibited
their real intention to execute the corresponding Deed after the defendants
have paid in full and as heretofore discussed and for the sake of emphasis the
obscurity in the written contract cannot favor the party who caused the
obscurity.
Based on substantive Rules on Interpretation, if the terms are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. If the words appear to be contrary to the evident intention of the parties, their contemporaneous and subsequent acts shall be principally considered. If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may have been the intention or will of the parties, the contract shall be null and void.[10]
Thus, the court concluded with the
following disposition:
In this case, which is held by this
Court as a sale on installment there is no chattel mortgage on the thing sold,
but it appears amongst the Complaint’s prayer, that the plaintiff elected to
exact fulfillment of the obligation.
For the vehicles returned, the
plaintiff can only recover the unpaid balance of the price because of the
previous payments made by the defendants for the reasonable use of the units,
specially so, as it appears, these returned vehicles were sold at auction and
that the plaintiff can apply the proceeds to the balance. However, with respect
to the unreturned units and machineries still in the possession of the
defendants, it is this Court’s view and so hold that the defendants are liable
therefore and accordingly are ordered jointly and severally to pay the price
thereof to the plaintiff together with attorney’s fee and the costs of suit in
the sum of Php25,000.00.
SO ORDERED.[11]
On
A. When it ruled that the agreement between
the Parties-Litigants is one of sale of personal properties on installment and
not of lease;
B. When it ruled that the applicable law
on the case is Article 1484 (of the Civil Code) and not R.A. No. 8556;
C. When it ruled that the Plaintiff-Appellant can no longer recover the unpaid balance of the price because of the previous payments made by the defendants for the reasonable use of the units;
D. When it failed to make a ruling or judgment on the Joint and Solidary Liability of Vicente Ong Lim, Jr. to the Plaintiff-Appellant.[14]
On
WHEREFORE, the instant appeal
is GRANTED and the assailed Decision dated 22 November 2002 rendered by
the Regional Trial Court of Manila, Branch 49 in Civil Case No. 00-99451 is REVERSED
and SET ASIDE, and a new judgment is hereby ENTERED ordering
appellees JVL Food Products and Vicente Ong Lim, Jr. to solidarily pay
appellant FEB Leasing and Finance Corporation the amount of Three Million
Four Hundred Fourteen Thousand Four Hundred Sixty Eight Pesos and 75/100
(Php3,414,468.75), with interest at the rate of twelve percent (12%) per
annum starting from the date of judicial demand on 06 December 2000, until
full payment thereof. Costs against appellees.
SO ORDERED.[17]
Lim filed the instant Petition for Review on Certiorari under
Rule 45
contending that:
I
The
Honorable Court of Appeals erred when it failed to consider that the undated complaint was filed by Saturnino J. Galang,
Jr., without any authority from respondent’s Board of Directors and/or
Secretary’s Certificate.
II
The
Honorable Court of Appeals erred when it failed to strictly apply Section 7, Rule 18 of the 1997 Rules of Civil Procedure
and now Item 1, A(8) of A.M. No.
III
The
Honorable Court of Appeals erred in not dismissing the appeal for failure of
the respondent to
IV
The
Honorable Court of Appeals erred in finding that the contract between the
parties is one of a financial lease and not of a contract of
V
The
Honorable Court of Appeals ERRED IN ruling
that the payments paid by the petitioner to the respondent are “rentals” and
not installments paid for the purchase price of the subject motor vehicles,
heavy machines and equipment.
VI
The
Honorable Court of Appeals erred in ruling that the previous contract of
VII
The
Honorable Court of Appeals failed to take into consideration that the contract
of lease, a
contract of adhesion, concealed the true intention of the parties, which is a
contract of
VIII
The
Honorable Court of Appeals erred in ruling that the petitioner is a lessee with
insurable interest over the subject personal properties.
IX
The
Honorable Court of Appeals erred in construing the intentions of the Court a
quo in its usage of the term merchantability.[18]
We affirm the
ruling of the appellate court.
First, Lim can
no longer question Galang’s authority as FEB’s authorized representative in
filing the suit against Lim. Galang was
the representative of FEB in the proceedings before the trial court up to the
appellate court. Petitioner never placed
in issue the validity of Galang’s representation before the trial and appellate
courts. Issues raised for the first time
on appeal are barred by estoppel. Arguments
not raised in the original proceedings cannot be considered on review; otherwise,
it would violate basic principles of fair play.[19]
Second, there
is no legal basis for Lim to question the authority of the CA to go beyond the matters agreed upon
during the pre-trial conference, or in not dismissing the appeal for failure of
FEB to file its brief on time, or in not ruling separately on the petitioner’s
motion to dismiss.
Courts have the
prerogative to relax procedural rules of even the most mandatory character,
mindful of the duty to reconcile both the need to speedily put an
end to litigation and the parties’ right to due process. In
numerous cases, this Court has allowed liberal construction of the rules when to do so would
serve the demands of substantial justice and equity.[20] In Aguam v. Court of
Appeals, the Court explained:
The court has the discretion to dismiss or not to dismiss
an appellant's appeal. It is a power
conferred on the court, not a duty. The "discretion must be a sound
one, to be exercised in accordance with the tenets of justice and fair play,
having in mind the circumstances obtaining in each case."
Technicalities, however, must be avoided. The law abhors technicalities
that impede the cause of justice. The court's primary duty is to render
or dispense justice. "A litigation is not a game of
technicalities." "Lawsuits unlike duels are not to be won by a
rapier's thrust. Technicality, when it deserts its proper office as an
aid to justice and becomes its great hindrance and chief enemy, deserves scant
consideration from courts."
Litigations must be decided on their merits and not on
technicality. Every party litigant must be afforded the amplest
opportunity for the proper and just determination of his cause, free from the
unacceptable plea of technicalities. Thus, dismissal of appeals purely on
technical grounds is frowned upon where the policy of the court is to encourage
hearings of appeals on their merits and the rules of procedure ought not to be
applied in a very rigid, technical sense; rules of procedure are used only to
help secure, not override substantial justice. It is a far better and
more prudent course of action for the court to excuse a technical lapse and
afford the parties a review of the case on appeal to attain the ends of justice
rather than dispose of the case on technicality and cause a grave injustice to
the parties, giving a false impression of speedy disposal of cases while
actually resulting in more delay, if not a miscarriage of justice.[21]
Third, while we affirm that the subject
lease agreement is a contract of adhesion, such a contract is not void per se.
It is as binding as any ordinary contract. A party who enters into an adhesion contract is
free to reject the stipulations entirely.[22] If
the terms thereof are accepted without objection, then the contract serves as
the law between the parties.
In Section 23 of the lease contract,
it was expressly stated that:
SECTION 23. ENTIRE
AGREEMENT; SEVERABILITY CLAUSE
23.1. The LESSOR and the LESSEE agree this instrument constitute the entire agreement between them, and that no representations have been made other than as set forth herein. This Agreement shall not be amended or altered in any manner, unless such amendment be made in writing and signed by the parties hereto.
Petitioner’s claim that the real
intention of the parties was a contract of sale of personal property on
installment basis is more likely a mere afterthought in order to defeat the
rights of the respondent.
The
Lease Contract with corresponding Lease Schedules with Delivery and Acceptance
Certificates is, in point of fact, a financial lease within the purview of R.A.
No. 8556. Section 3(d) thereof defines “financial
leasing” as:
[A] mode of extending credit through a non-cancelable lease contract under which the lessor purchases or acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business and office machines, and other movable or immovable property in consideration of the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of not less than two (2) years during which the lessee has the right to hold and use the leased property with the right to expense the lease rentals paid to the lessor and bears the cost of repairs, maintenance, insurance and preservation thereof, but with no obligation or option on his part to purchase the leased property from the owner-lessor at the end of the lease contract.
FEB leased the subject equipment and
motor vehicles to JVL in consideration of a monthly periodic payment of P170,494.00. The periodic payment by petitioner is
sufficient to amortize at least 70% of the purchase price or acquisition cost
of the said movables in accordance with the Lease Schedules with Delivery and Acceptance
Certificates. “The
basic purpose of a financial leasing transaction is to enable the
prospective buyer of equipment, who is unable to pay for such equipment in cash
in one lump sum, to lease such equipment in the meantime for his use, at a
fixed rental sufficient to amortize at least 70% of the acquisition cost
(including the expenses and a margin of profit for the financial lessor) with
the expectation that at the end of the lease period the buyer/financial lessee
will be able to pay any remaining balance of the purchase price.”[23]
The allegation of petitioner that the rent for the use of each movable
constitutes the value of the vehicle or equipment leased is of no moment. The
law on financial lease does not prohibit such a circumstance and this alone
does not make the transaction between the parties a sale of personal property
on installment. In fact, the value of
the lease, usually constituting the value or amount of the property involved,
is a benefit allowed by law to the lessor for the use of the property by the lessee
for the duration of the lease. It is recognized that the value of these
movables depreciates through wear and tear upon use by the lessee. In Beltran
v. PAIC Finance Corporation,[24] we stated that:
Generally speaking, a financing company is not a buyer or seller of goods; it is not a trading company. Neither is it an ordinary leasing company; it does not make its profit by buying equipment and repeatedly leasing out such equipment to different users thereof. But a financial lease must be preceded by a purchase and sale contract covering the equipment which becomes the subject matter of the financial lease. The financial lessor takes the role of the buyer of the equipment leased. And so the formal or documentary tie between the seller and the real buyer of the equipment, i.e., the financial lessee, is apparently severed. In economic reality, however, that relationship remains. The sale of the equipment by the supplier thereof to the financial lessor and the latter's legal ownership thereof are intended to secure the repayment over time of the purchase price of the equipment, plus financing charges, through the payment of lease rentals; that legal title is the upfront security held by the financial lessor, a security probably superior in some instances to a chattel mortgagee's lien.[25]
Fourth, the validity
of Lease No. 27:95:20 between FEB and JVL should be upheld. JVL entered into the
lease contract with full knowledge of its terms and conditions. The contract was in force for more than four
years. Since its inception on
It is settled that the parties are
free to agree to such stipulations, clauses, terms, and conditions as they may
want to include in a contract. As long as such agreements are not contrary to
law, morals, good customs, public policy, or public order, they shall have the
force of law between the parties.[26] Contracting
parties may stipulate on terms and conditions as they may see fit and these
have the force of law between them.[27]
The stipulation in Section 14[28]
of the lease contract, that the equipment shall be insured at the cost and
expense of the lessee against loss, damage, or destruction from fire, theft,
accident, or other insurable risk for the full term of the lease, is a binding
and valid stipulation. Petitioner, as a
lessee, has an insurable interest in the equipment and motor vehicles
leased. Section
17 of the Insurance Code provides that the measure of an insurable
interest in property is the extent to which the insured might be damnified by
loss or injury thereof. It cannot be
denied that JVL will be directly damnified in case of loss, damage, or
destruction of any of the properties leased.
Likewise, the stipulation
in Section 9.1 of the lease contract that the lessor does not warrant the
merchantability of the equipment is a valid stipulation. Section 9.1 of the lease contract is stated
as:
9.1 IT IS
UNDERSTOOD BETWEEN THE PARTIES THAT THE LESSOR IS NOT THE MANUFACTURER OR
SUPPLIER OF THE EQUIPMENT NOR THE AGENT OF THE MANUFACTURER OR SUPPLIER
THEREOF. THE LESSEE HEREBY ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT AND
THE SUPPLIER THEREOF AND THAT THERE
ARE NO WARRANTIES, CONDITIONS, TERMS, REPRESENTATION
OR INDUCEMENTS, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, MADE BY OR ON
BEHALF OF THE LESSOR AS TO ANY FEATURE OR ASPECT OF THE EQUIPMENT OR ANY PART
THEREOF, OR AS TO ITS FITNESS, SUITABILITY, CAPACITY, CONDITION OR
MERCHANTABILITY, NOR AS TO WHETHER THE EQUIPMENT WILL MEET THE REQUIREMENTS OF ANY
LAW, RULE, SPECIFICATIONS OR CONTRACT WHICH
PROVIDE FOR SPECIFIC MACHINERY OR APPARATUS OR SPECIAL METHODS.[29]
In the financial lease
agreement, FEB did not assume responsibility as to the quality, merchantability,
or capacity of the equipment. This
stipulation provides that, in case of defect of any kind that will be found by
the lessee in any of the equipment, recourse should be made to the manufacturer.
“The financial lessor, being a
financing company, i.e., an extender of credit rather than an ordinary
equipment rental company, does not extend a warranty of the fitness of the equipment
for any particular use. Thus, the financial
lessee was precisely in a position to enforce such warranty directly against
the supplier of the equipment and not against the financial lessor. We find nothing contra legem or contrary to public policy in such a contractual
arrangement.”[30]
Fifth, petitioner further proffers the view that the real intention
of the parties was to enter into a contract of sale on installment in the same
manner that a previous transaction between the parties over a 1995 Mitsubishi
L-200 Strada DC-Pick-Up was initially covered by an agreement denominated as a
lease and eventually became the subject of a Deed of Absolute Sale.
We join the CA in
rejecting this view because to allow the transaction involving the pick-up to
be read into the terms of the lease agreement would expand the coverage of the
agreement, in violation of Article 1372 of the New Civil Code. [31] The lease contract subject of the complaint speaks
only of a lease. Any agreement between the parties after the lease contract has
ended is a different transaction altogether and should not be included as part
of the lease. Furthermore, it is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear
and leave no doubt as to the intention of the contracting parties, the literal
meaning of its stipulations shall control.
No amount of extrinsic aid is necessary in order to determine the
parties' intent.[32]
WHEREFORE, in the light of all the foregoing, the petition is DENIED. The Decision of the CA in
CA-G.R. CV No. 77498 dated
SO
ORDERED.
ANTONIO
EDUARDO B. NACHURA
Associate
Justice
WE
CONCUR:
CONSUELO YNARES-SANTIAGO
Associate
Justice
Chairperson
|
MA. ALICIA
AUSTRIA-MARTINEZ Associate Justice |
MINITA V. CHICO-NAZARIO Associate Justice |
A T T E S T A T I O N
I attest that the
conclusions in the above decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
CONSUELO
YNARES-SANTIAGO
Associate
Justice
Chairperson,
Second Division
C E R T I F I C A T I O
N
Pursuant to Article VIII,
Section 13 of the Constitution, and the Division Chairperson's Attestation, it
is hereby certified that the conclusions in the above decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court.
LEONARDO
A. QUISUMBING
Acting Chief
Justice
[1] Rollo, pp. 72-104.
[2]
[3] Lease No. 27:95:20; id. at pp. 121-126.
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15] Penned by Associate Justice Celia C.
Librea-Leagogo.
[16] An Act Amending Republic Act No.
5980, as amended, otherwise known as The Financing Company Act.
.
[17] Rollo, pp. 101-102.
[18]
[19] Cruz
v. Fernando, Sr., G.R. No. 145470,
[20] Barnes v. Padilla, G. R. No. 160753,
[21] G.R. No. 137672,
[22] Fabrigas
v. San Francisco Del Monte, Inc., G.R. No. 152346,
[23] Beltran
v. PAIC Finance Corporation, G.R. No. 83113,
[24]
[25]
[26] Herrera
v. Petrophil Corporation, G.R. No. L-48349,
[27] Philippine
Communications Satellite Corporation v. Globe Telecom, Inc., G.R. No.
147324, May 25, 2004, 429 SCRA 153.
[28] Rollo, p. 123.
[29]
[30] Beltran v. PAIC Finance Corporation, supra, p. 119.
[31] Article 1372. However general the
terms of a contract may be, they shall not be understood to comprehend things
that are distinct and cases that are different from those upon which the
parties intended to agree.
[32] Inter-Asia Services Corp. (International) v.
Court of Appeals, G.R. No. 106427,