Facts:

The case involves Lucio Tan Alim as the petitioner and Pacific Coast Timber Products, Inc. as the respondent. The events leading to the case began with a Lease Contract with Option to Buy dated January 5, 1977, wherein Pacific Coast Timber Products, Inc. leased a tractor to Alim for a term of fifteen months at a monthly rental of P10,000.00. After five months of rental payments, Alim was given the option to purchase the tractor for P150,000.00, with the rental payments considered as part of the purchase price. The tractor was delivered to Alim on January 15, 1977, but was found to be defective. Alim promptly notified the respondent's manager about the defect and requested repairs or a replacement. A certification confirming the tractor's defect was issued by the Logging Manager of the respondent on June 11, 1977.

The respondent paid Alim P5,000.00 for repairs on January 29, 1977, but Alim incurred additional repair costs amounting to P36,130.60. On July 1, 1977, th...

Facts:

1. Lease Contract with Option to Buy:

• On January 5, 1977, petitioner Lucio Tan Alim and respondent Pacific Coast Timber Products, Inc. entered into a Lease Contract with Option to Buy for a tractor. The lease term was 15 months, with a monthly rental of P10,000.00. After paying five months of rent, Alim had the option to purchase the tractor for P150,000.00, with the rental payments credited toward the purchase price.

2. Defective Tractor Delivery:

• The tractor was delivered on January 15, 1977, but it was found to be defective. Alim informed the respondent’s manager and requested reconditioning or replacement. The respondent paid P5,000.00 for repairs, but Alim spent P36,130.60 for repairs and reconditioning.

3. Amended Lease Contract:

• On July 1, 1977, the parties amended the lease contract. Alim was required to execute a Deed of Chattel Mortgage for his three motor vehicles to secure his obligations under the amended contract. Payment of rentals commenced in August 1977.

4. Default in Rentals:

• On March 16, 1978, respondent’s counsel informed Alim that he had failed to pay rentals for seven months (September 1977 to February 1978), amounting to P70,000.00. The respondent terminated the lease contract and the option to buy, and initiated foreclosure proceedings on the chattel mortgage.

5. Replevin and Seizure:

• The respondent filed a complaint for recovery of possession with replevin and secured a writ of replevin. The tractor was seized on April 16, 1978, and delivered to the respondent on April 26, 1978.

6. Trial Court Decision:

• The trial court dismissed the respondent’s complaint but allowed Alim to exercise his option to buy the tractor by paying the balance of P90,000.00 (after deducting rentals paid). The court also ordered the respondent to reimburse Alim P36,130.60 for repair expenses and awarded P5,000.00 in attorney’s fees.

7. Modified Decision:

• Upon Alim’s motion for reconsideration, the trial court modified its decision, reducing the balance to P80,000.00 and maintaining the reimbursement for repairs.

8. Appeal to the Court of Appeals:

• Alim appealed, claiming damages for the wrongful seizure of the tractor. The Court of Appeals affirmed the trial court’s decision, ruling that the lease contract had expired, and the respondent was entitled to possession of the tractor.

Issue:

• (Unlock)

Ruling:

• (Unlock)

Ratio:

1. Interpretation of Contracts:

   • The terms of a written contract are binding on the parties. The courts must follow the literal meaning of the stipulations unless the intent of the parties is clear. The amended contract did not extend the lease period but only modified the option to buy.

2. Right to Possession:

   • After the expiration of the lease period, the respondent, as the owner, was entitled to possession of the tractor. The writ of replevin was lawfully issued to restore possession to the respondent.

3. Damages:

   • Alim failed to prove that the seizure was wrongful or that he suffered damages as a result. Moral and exemplary damages cannot be awarded in the absence of bad faith, gross negligence, or wanton conduct.

4. Replevin Bond:

   • The replevin bond is intended to indemnify the defendant for loss of possession during the trial. It does not cover damages unrelated to the deprivation of possession or punitive damages for wrongful acts.