H. E. HEACOCK COMPANY, PLAINTIFF AND APPELLEE, VS. BUNTAL MANUFACTURING COMPANY, GREGORIO NIEVA, AND MARIA A. DE NIEVA, DEFENDANTS AND APPELLANTS.

The
main, if not the sole, question raised by the appeal taken by
defendants from the judgment of the lower court is the following:

Is the document Exhibit A which plaintiff and the first two defendants
executed on May 12, 1931 a contract for the lease of an adding and
calculating machine therein described, with option to purchase by
defendants; or is it, on the contrary, a contract of purchase and sale
on installments in which said defendants were vendees and plaintiff,
vendor?

The lower court held that it was one of lease and
mere after decided that since defendants failed to pay plaintiff the
rents which they had bound themselves to pay it, at the rate of P35 a
month from August, 1931, and which then amounted to P555, they should
deliver to plaintiff the aforesaid sum with costs. This it resolved
notwithstanding that it had been shown at the trial that upon
plaintiff’s demand in its complaint for preliminary attachment,
defendants had to return to it the said machine which it accepted to
its satisfaction, without the necessity of making use of the writ of
attachment. Said acts of defendants constituted compliance with the
prayer in plaintiff’s complaint that one of these things, and not both
at the same time, be done: “The delivery of said personal property, and
if delivery cannot be effected then judgment for the rents in arrears.”
Defendants chose to make delivery so as to dispose of the question in
this manner.

Defendants maintain that in deciding the case in the way it has done, the lower court erred in the following respects:

1. In granting plaintiffs petition that it be allowed to file an amended
   complaint after defendants had been declared in default with respect to
   the original complaint.

2. In
   granting plaintiff the two alternative remedies for which it had prayed
   in its original complaint upon its asking for both in the amended
   complaint.

3. In not holding that the
   contract entered into between the parties was one of purchase and sale
   on installments and that once the same was rescinded by plaintiff upon
   its taking the machine which is the subject matter thereof, it lost all
   right to recover from them the balance of its price.

1. Two hearings were held in the case: The first took place in the absence
   and default of defendants, and the second after the original complaint
   had been amended and the answer of defendants filed. Upon the objection
   of the latter’s attorney, who appeared in the first trial, upon the
   ground that plaintiff could have no other relief than the confirmation
   of its possession of the machine in question after it had taken and
   received the same from defendants for the reason that the prayer for
   relief in the complaint did not ask for more than “the delivery of said
   personal property” (referring to the machine in question), or for
   “judgment for the rents in arrears,” “if delivery cannot be effected
   then,” plaintiff decided to ask for, which it did and obtained, leave
   from the lower court to amend its complaint in the sense of eliminating
   from the prayer thereof the phrase “if delivery cannot be effected
   then.” This it did, no doubt, so as to be able to secure two things at
   the same time: The return of its machine and the amount it claimed as
   rents. After amendment of the complaint a second hearing was held in
   which the lower court rendered the judgment appealed from. We find no
   error in the act of the lower court granting leave to plaintiff to
   amend its complaint, which error may be considered prejudicial to
   defendants. There was no attempt to amend an essential part of the
   complaint, but only a part of its prayer for relief; and it is known
   that the prayer for relief is not the complaint itself nor is it a part
   of the allegations which state the cause or causes of action submitted
   to the consideration of the court for its resolution. (Aguilar vs. Rubiato and Gonzalez Vila, 40 Phil., 570; Campomanes vs. Bartolome and Germann & Co., 38 Phil., 808; Rosales vs.
   Reyes and Ordoveza, 25 Phil., 495.) Moreover, the amendment was made
   substantially in accordance with the provisions of sections 109 and 110
   of Act No. 190. The first error attributed to the lower court, is
   therefore, without merit.

2. The determination of
   the other errors alleged to have been committed by the lower court
   depends upon our consideration of the nature of the contract Exhibit A
   and upon the conclusion which we may reach with respect thereto. If it
   is a lease, then said errors can not exist.

Among the clauses appearing
in the contract in question, there are several showing that it is not
really a contract of lease but of purchase and sale on installments.
Said clauses are the following:

	“That the owner hereby leases unto the hirer and the hirer hereby hires from the owner one Dalton adding, calculating and posting machine, Multiplex Model 490-180 Serial No. 4-103493 ……………………………………………………………………………………………		P860.00
	“To credit one Dalton adding machine S. H. Serial No. 116182 for P110 and by cash P50. Initial payment ………………………………………………………………………………..		160.00
______
		“Balance due ……………………………………………………	700.00

which the hirer acknowledges having, received in good state and
condition, for the term of 20 calendar months from the date hereof at
the rental of P35 per calendar month, and * * * calendar months at the
rental * * * subject to the following terms and conditions:

“1. The hirer agrees with the owner as follows:

“(a)
To pay the owner at its office at 122 Escolta, the said hire monthly on
the 12th day of every month within three days thereafter.

“6.
In consideration of the sum of P160 to it in hand paid by the hirer,
the owner hereby grants to the hirer the option to purchase, while the
present lease is in force and effect, the property made the subject of
this agreement, at the purchase price of P860. In the event of the
exercise of said option, the hirer shall be entitled to a credit on the
purchase price for an amount equal to the rentals actually paid
hereunder and the payment made under this paragraph; it being expressly
understood and agreed, however, that the said chattel shall remain the
property of the owner until after the complete exercise of such option,
and the payment in full of the purchase price agreed upon, and, until
such time the hirer shall not have any property right in said chattel
or be deemed to have purchased or obligated to purchase the same.
Should the hirer not exercise the option herein granted, the amount
paid by him for said option under this paragraph shall become forfeited
to the owner.”

In the first clause
above-quoted it appears that defendants paid the amount of P160 on
account of the price of the machine which was fixed at P860. It is
therein stated that said amount was delivered to plaintiff as “initial
payment.” It was for this reason that upon the signing of the contract
care was taken to express therein that the balance which defendants
were bound to pay to plaintiff for the machine was only P700. So as to
facilitate the payment of this amount by defendants, it was agreed
between them and plaintiff that the former would complete the same in
twenty monthly installments of P35. Dividing P700 by 20, the resulting
amount is exactly P35.

It is true that in the contract
it is often stated that plaintiff leased the machine to defendants,
giving them the option to buy it upon their paying it the sum of P860
and crediting them with so much as they might be able to pay as rents
at the above rate of P35 a month. It should be noted, however, that in
the clause aforementioned, it is clearly stated that defendant paid the
sum of P160 on account of the price of the machine. This payment shows
that the real contract between the parties was that of purchase and
sale on installments and not a lease. In spite of any effort to prove
the contrary, the aforesaid amount of P160 can not be understood to
constitute payment in advance of the rents agreed upon for there is
nothing in the contract to indicate that it was and because, according
to the contract itself, the rents could not be more nor less than P35 a
month, payable monthly. Following the theory of plaintiff and in
accordance with the sound principles of accounting, the amount of P160
can not be considered as payment of rents in advance; otherwise we
would reach the conclusion that defendants, without being bound to do
so and in violation of the terms of the contract, paid plaintiff rents
not monthly but from day to day inasmuch as said sum corresponds to
four months and twenty days. Furthermore, it must be borne in mind that
the mention in the aforesaid contract of the fact that the sum of P160
constituted an “initial payment” on account of the price of the machine
in question can have no other effect than to contradict and nullify
that stated in clause 6, which is one of those above-quoted, to the
effect that the same is the consideration by virtue of which plaintiff
granted defendants the option to buy the machine. Defendants did not
have to pay anything for the option for the reason that they made the
payment of P160 to buy the machine on installments, binding themselves
to pay the balance by delivering to plaintiff the sum of P35 a month.
It should be stated, moreover, that the fact that the price of the
machine was fixed in the contract makes the latter not a lease but a
purchase and sale because in contracts of lease, as distinguished from
those of purchase and sale, it is plain redundancy to fix or make any
mention of the price of the thing given in lease (articles 1445, 1543,
Civil Code). When the terms of a contract are not clear or conflict
with each other, as those appearing in Exhibit A, effect must be given
to the intention of the parties (article 1281, Civil Code); and the
intention of plaintiff and defendants in this case as we gather it from
Exhibit A, considered in connection with all its terms and clauses, is
that the contract entered into between them is one of purchase and sale
on installments and not a lease.

Accordingly, the act
of plaintiff in requiring, as it did, the return of the machine in
question, receiving and accepting the same thereafter from defendants
when the latter voluntarily returned it, shows that plaintiff not only
consented to, but desired the rescission of the contract it had entered
with defendants, specially when it is taken into consideration that it
thus expressed itself in its original complaint wherein it prayed not
for the return of the machine and payment of supposed rents due at the
same time, but only for one of these things. Upon taking the machine
under such circumstances plaintiff performed a positive act indicating
its intention to rescind the contract, and having done so and retained
what defendants had up to then paid to it, amounting to P205 without
any objection on their part, it can not and must not have any right to
anything more. Its right was reduced to demanding compliance with the
terms of Exhibit A as contract of purchase and sale or to rescind the
same, and it chose the latter alternative and to retain the aforesaid
sum of P305 (articles 1506 and 1124, Civil Code).

In
conclusion we hold that the contract Exhibit A is that of purchase and
sale on installments; that said contract was rescinded without
objection on the part of defendants; and that the appeal of the latter
is well taken.

Wherefore, declaring Exhibit A
rescinded, the judgment appealed from is reversed, absolving defendants
from the complaint and sentencing plaintiff to pay the costs in both
instances. So ordered.

Avanceña, C. J., Villa-Real, Abad Santos, Imperial, Laurel, and Concepcion, JJ., concur.