Facts:

The case involves H. E. Heacock Company as the plaintiff and Buntal Manufacturing Company, Gregorio Nieva, and Maria A. de Nieva as the defendants. The events leading to the case began on May 12, 1931, when the parties executed a document referred to as Exhibit A. This document described a transaction concerning an adding and calculating machine, which the plaintiff claimed was a lease with an option to purchase. The defendants, however, contended that it was a contract of purchase and sale on installments. The lower court ruled in favor of the plaintiff, determining that the contract was indeed a lease and that the defendants owed the plaintiff P555 in unpaid rents, which had accumulated at a rate of P35 per month since August 1931. The court ordered the defendants to pay this amount along with costs. During the trial, it was revealed that the defendants had returned the machine to the plaintiff upon the latter's demand, which the plaintiff accepted without needing to en...

Facts:

Parties Involved:

• Plaintiff and Appellee: H. E. Heacock Company
• Defendants and Appellants: Buntal Manufacturing Company, Gregorio Nieva, and Maria A. de Nieva

Contract in Question:

• The dispute centers on a document, Exhibit A, executed on May 12, 1931, between the plaintiff and the first two defendants. The document pertains to an adding and calculating machine.

Nature of the Dispute:

• The primary issue is whether Exhibit A constitutes a lease contract with an option to purchase or a contract of purchase and sale on installments.
• The lower court ruled that it was a lease contract and ordered the defendants to pay unpaid rents amounting to P555.

Key Events:

1. Initial Payment: Defendants paid P160 as an "initial payment" for the machine, with the total price fixed at P860.
2. Payment Terms: The balance of P700 was to be paid in 20 monthly installments of P35.
3. Return of Machine: Upon plaintiff's demand, defendants returned the machine, which the plaintiff accepted without resorting to a writ of attachment.
4. Amended Complaint: The plaintiff amended its complaint to seek both the return of the machine and the payment of unpaid rents.

Defendants' Arguments:

• The contract was a purchase and sale on installments, not a lease.
• The plaintiff's act of accepting the machine constituted rescission of the contract, thereby extinguishing any claim for unpaid rents.

Issue:

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Ruling:

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Ratio:

1. Interpretation of Contract Terms:

   • The contract contained clauses indicating that the defendants made an "initial payment" of P160, which was applied to the purchase price of the machine. This payment, along with the fixed price of P860 and the installment plan, clearly points to a purchase and sale agreement, not a lease.
   • The mention of a fixed price for the machine is inconsistent with a lease contract, as leases do not typically fix a price for the leased item.

2. Rescission by Plaintiff:

   • By accepting the return of the machine, the plaintiff effectively rescinded the contract. This act was consistent with the plaintiff's original complaint, which sought either the return of the machine or payment of unpaid rents, but not both.
   • Rescission of the contract extinguished any further obligations, including the claim for unpaid rents.

3. Amendment of Complaint:

   • The amendment of the complaint was procedural and did not prejudice the defendants. The amendment merely clarified the relief sought by the plaintiff and was in line with the provisions of the law.

4. Intention of the Parties:

   • The Supreme Court emphasized that the intention of the parties, as gathered from the terms of the contract, was to enter into a purchase and sale agreement. When contract terms are unclear or conflicting, the court must give effect to the parties' intention.

Conclusion:

The Supreme Court concluded that the contract in question was a purchase and sale on installments, not a lease. The plaintiff's acceptance of the machine constituted rescission of the contract, thereby barring any claim for unpaid rents. The lower court's decision was reversed, and the defendants were absolved from the complaint.