MANILA GAS CORPORATION, PLAINTIFF AND APPELLEE, VS. ALFREDO B. CALUPITAN, DEFENDANT AND APPELLANT.

The
defendant, Alfredo B. Calupitan, appeals to this court from the
decision of the Court of First Instance of Manila, the dispositive part
of which reads:

“Judgment is therefore
rendered, sentencing the defendant to return the stove and the gas
water heater described in the complaint, and to pay for the use of the
gas water heater the sum of P5 a month from June, 1934, and for the use
of the Krefft Stove the sum of P4 a month from January, 1934, until
they are returned, with costs of suit.”

In
support of his appeal the appellant assigns six errors allegedly
committed by the trial court in its decision, on which we shall dwell
in the course of this decision.

From the evidence of record are gathered the following facts:

On May 3, 1933, the Manila Gas Corporation and the defendant-appellant,
Alfredo B. Calupitan, entered into a contract (Exhibit A), containing
the following pertinent recitals:

“LEASE AGREEMENT

“This
agreement, made in the City of Manila, P. I., this 3rd day of May,
1933, between the Manila Gas Corporation, a domestic corporation duly
organized and existing under and by virtue of the laws of the
Philippine Islands, and having its principal place of business therein
in the City of Manila, with its main office at Calle Otis, Paco, in
said City of Manila, hereinafter called the ‘owner’, and Alfredo B.
Calupitan, of age and a resident of No. 9 Baldwin, Sta. Cruz, P. I.,
hereinafter called the ‘LESSEE’

“WITNESSETH: That

“1.
The Owner hereby leases unto the Lessee and the Lessee hereby hires
from the Owner, for a term of………… months, which term may be
extended at the will of the Owner, the following described personal
property, to wit:

“1. No. 234 Krefft stove of 4 brs. S. H.
which the Lessee acknowledges having received in good state and
condition, and the value of which is hereby mutually agreed to be P60,
subject to and under the terms and conditions hereinafter specified.

“2. The Lessee hereby agrees—

“(a)
To pay to the Owner, at its office above stated, for the use of the
above described property, the sum of P5, upon the signing of this
agreement, and a monthly rental of P4, on, or before the 5th day of
each succeeding month, beginning with the month next ensuing the date
thereof.

* * * * * * *

“4. The
Owner agrees that at any time before the expiration of the terms of
this lease, the Lessee may purchase the said property by paying to the
owner, in cash, the full value thereof as above fixed, less all
payments theretofore made under this agreement, for the use of said
property.”

On March 3, 1934, that is, ten
months after the execution of the contract Exhibit A, above-quoted, the
same parties entered into another contract (Exhibit B) of the same
tenor, except with respect to the article and the terms of payment,
which are as follows:

“1. No. 400 Piccolo
Inst. Water Heater which the Lessee acknowledges having received in
good state and condition, and the value of which is hereby mutually
agreed to be P95, subject to and under the terms and conditions
hereinafter specified.

“2. The Lessee hereby agrees—

“(1) To pay to the Owner, at its office above stated, for the use of
the above described property, the sum of P5 upon the signing of this
agreement, and a monthly rental of P5, on or before the 5th day of each
succeeding month, beginning with the month next ensuing the date
thereof.”

In accordance with the terms of
both contracts, the said defendant paid to the plaintiff, when the
latter delivered to him the stove, the sum of P5, and another sum of P5
when the water heater “Piccolo Inst. Water Heater” was delivered to
him, and monthly thereafter, the total of said payments amounting to
P42: P27 by virtue of the contract Exhibit A and “P15 by virtue of the
contract Exhibit B, for which receipts were issued in the following
form (Exhibit 1):

“Received from Mr.
Alfredo Calupitan …………………… pesos (P…………….) as
partial payment on Gas appliance Bill No……………..leaving a
balance thereon of T…………….

	“MANILA GAS CORPORATION
	_____________________
	“Cashier
	_____________________
	“Collector“

Notwithstanding
repeated demands to pay alleged rentals, due and unpaid for months, or
to return the stove and the water heater, the said defendant paid no
heed to said demands and continued to make use of the said articles for
more than five years without compensation of any kind.
Inasmuch as
the said defendant neither paid what he owed to the plaintiff for the
stove and the water heater nor returned them to the latter, the said
plaintiff filed the re-amended complaint found in the bill of
exceptions, with the following prayer:

“Wherefore,
the plaintiff demands judgment against the defendant for the delivery
to the plaintiff of said stove and Piccolo Water Heater above described
and for the sum of 9267 as rentals for the use of the same by the
plaintiff, or for their values in the total sum of P155 in case
delivery cannot he made, and for costs of this suit and for such
further and other relief as this court may deem just and equitable.”

Being one of procedure, we shall first consider the question raised in
the fourth assignment of error, wherein it is alleged that the trial
court erred in taking cognizance of the present case and in not
dismissing the same despite the fact that the amount involved in each
contract is within the exclusive jurisdiction of the municipal court of
Manila.

Upon the said ground the defendant interposed a
demurrer which was overruled1 by the lower court, this action of the
court being the subject matter of the assignment of error under
consideration.

By the filing of the said demurrer the
defendant admitted hypothetically that the contract entered into
between him and the plaintiff is one of lease of personal property;
that the kitchen stove and the water heater belong to the said
plaintiff; and that he has neither paid the stipulated rentals nor
returned the said goods.

The complaint has to do not only
with the collection of rentals, but also, implicitly, with the
rescission of the two contracts of lease of personal property for
non-compliance with the obligation to pay rentals (art. 1124, Civil
Code), and the personal delivery thereof (sec. 262, Act No. 190). With
respect to the complaint for the rescission of the contract of lease of
personal property and the personal delivery thereof, the Court of First
Instance of Manila has original exclusive jurisdiction to take
cognizance thereof irrespective of the amount of the due and unpaid
rentals.

The trial court, therefore, had original jurisdiction to take cognizance of the complaint.

As to the first assignment of error, wherein it is alleged that the
trial court erred in holding that the two contracts Exhibits A and B
are contracts of lease and not of sale of personal property on
installment, we have seen above that in both contracts the defendant,
Alfredo B. Calupitan, paid in advance P5 for the kitchen stove (Exhibit
A) and another P5 for the water heater (Exhibit B), plus P4 and P5
every month for said stove and water heater, respectively. The price of
the stove is P60 and that of the water heater, P95, the said defendant
being able to purchase said goods at said prices, respectively, before
the expiration of the period of the alleged lease, deducting in each
case the amounts already paid therefor. The periods of the alleged
leases have not been fixed in the contracts; but considering the prices
of the goods and monthly payments to be made, said periods are the
number of months which would result by dividing P60 by P4, which is the
supposed monthly rental of the stove, and P95 by P5, which is supposed
to be the monthly rental of the water heater, that is, 15 and 18
months, respectively. In the accounts Exhibits A-1 and B-1 of the said
defendant, which the plaintiff carries, the monthly payments made by
the former to the latter for said goods were made to appear as paid
upon the account of their values and were deducted therefrom, stating
the balances after each monthly payment; and in the receipt issued to
the said defendant on March 8, 1935 (Exhibit 1) there was noted the
payment of P3 made by him as “partial payment on Gas Appliance Bill No.
63781 leaving a balance of 933.” None of the advance and monthly
payments made by Alfredo B. Calupitan has been stated as having been
made by way of advance payment of rentals, or of deposit to secure said
payment, or of monthly rentals. The P5 which the plaintiff demanded of
the defendant to pay upon signing the contract Exhibit A could not be
by way of advance payment of rentals, inasmuch as the rental for the
use of the stove was P4. Neither could it be by way of deposit to
secure the payment of rental, as it does not appear that such was the
intention of the parties. Moreover, according to the contracts, in case
the defendant should elect to purchase the goods, the said amount of P5
would be deducted from the cost of the stove and that of the water
heater, together with the alleged monthly rentals which had been paid
for each of them. The P4 which the defendant should pay on or before
the 5th of each month for the stove and the P5 for the water heater,
while they are said to be for rentals in the respective contracts, are
in reality part payments of the prices of the respective kitchen and
bathroom articles, as shown by the lists of payment Exhibits A-1 and
6-1 and the receipt Exhibit 1 which we have above described.

What has gone before shows that the contracts entered into between the
plaintiff and the defendant with respect to the kitchen stove and the
water heater are those of sale on installment rather than of lease.

The first assignment of alleged error is, therefore, well-founded.

Having reached this conclusion, we do not find it necessary to discuss
the remaining assignments of error which have been impliedly resolved.

For the foregoing considerations, we are of the opinion and so hold,
that when in a so-called contract of lease of personal property it is
stipulated that the alleged lessee shall pay a certain amount upon
signing the contract, and on or before the 5th of every month, another
specific amount, by way of rental, giving the alleged lessee the right
of option to buy the said personal property before the expiration of
the period of lease, which is the period necessary for the payment of
the said amount at the rate of so much a month, deducting the payments
made by way of advance and alleged monthly rentals, and the said
alleged lessee makes the advance payment and other monthly
installments, noting in his account and in the receipts issued to him
that said payments are on account of the price of the personal property
allegedly leased, said contract is one of sale on installment and not
of lease.

Wherefore, the appealed decision is reversed and
it is held that the contracts Exhibits A and B, entered into between
the plaintiff, Manila Gas Corporation, and the defendant, Alfredo B.
Calupitan, are those of sale on installment; and the said defendant
having failed to comply with the terms of payment, the plaintiff may
elect between compliance with or rescission of the obligation, with
indemnity for damages and interest in either case, without special
pronouncement as to the costs. So ordered.

Avanceña, C. J., Imperial, Diaz, Laurel, and Concepcion, JJ., concur.