LORENZO PASCUAL and LEONILA TORRES, plaintiffs-appellees, vs. UNIVERSAL MOTORS CORPORATION, defendant-appellant. Cesar C. Peralejo for plaintiffs-appellees.

Francisco Carreon & Renato E. Taada for defendant-appellant.

MAKALINTAL, C.J.:p In the lower court the parties entered into the following stipulation of facts: 1. That the plaintiffs executed the real estate mortgage subject matter of this complaint on December 14, 1960 to secure the payment of the indebtedness of PDP Transit, Inc. for the purchase of five (5) units of Mercedez Benz trucks under invoices Nos. 2836, 2837, 2838, 2839 and 2840 with a total purchase price or principal obligation of P152,506.50 but plaintiffs' guarantee is not to exceed P50,000.00 which is the value of the mortgage. 2. That the principal obligation of P152,506.50 was to bear interest at 1% a month from December 14, 1960. 3. That as of April 5, 1961 with reference to the two units mentioned above and as of May 22, 1961 with reference to the three units, PDP Transit, Inc., plaintiffs' principal, had paid to the defendant Universal Motors Corporation the sum of P92,964.91, thus leaving a balance of P68,641.69 including interest due as of February 8, 1965. 4. That the aforementioned obligation guaranteed by the plaintiffs under the Real Estate Mortgage, subject of this action, is further secured by separate deeds of chattel mortgages on the Mercedez Benz units covered by the aforementioned invoices in favor of the defendant Universal Motors Corporation. 5. That on March 19, 1965, the defendant Universal Motors Corporation filed a complaint against PDP Transit, Inc. before, the Court of First Instance of Manila docketed as Civil Case No. 60201 with a petition for a writ of Replevin, to collect the balance due under the Chattel Mortgages and to repossess all the units to sold to plaintiffs' principal PDP Transit, Inc. including the five (5) units guaranteed under the subject Real (Estate) Mortgage. In addition to the foregoing the Universal Motors Corporation admitted during the hearing that in its suit (C.C. No. 60201) against the PDP Transit, Inc. it was able to repossess all the units sold to the latter, including the five (5) units guaranteed by the subject real estate mortgage, and to foreclose all the chattel mortgages constituted thereon, resulting in the sale of the trucks at public auction. With the foregoing background, the spouses Lorenzo Pascual and Leonila Torres, the real estate mortgagors, filed an action in the Court of First Instance of Quezon City (Civil Case No. 8189) for the cancellation of the mortgage they constituted on two (2) parcels of land 1 in favor of the Universal Motors Corporation to guarantee the obligation of PDP Transit, Inc. to the extent of P50,000. The court rendered judgment for the plaintiffs, ordered the cancellation of the mortgage, and directed the

defendant Universal Motors Corporation to pay attorney's fees to the plaintiffs in the sum of P500.00. Unsatisfied with the decision, defendant interposed the present appeal. In rendering judgment for the plaintiffs the lower court said in part: "... there does not seem to be any doubt that Art. 1484 2 of the New Civil Code may be applied in relation to a chattel mortgage constituted upon personal property on the installment basis (as in the present case) precluding the mortgagee to maintain any further action against the debtor for the purpose of recovering whatever balance of the debt secured, and even adding that any agreement to the contrary shall be null and void." The appellant now disputes the applicability of Article 1484 of the Civil Code to the case at bar on the ground that there is no evidence on record that the purchase by PDP Transit, Inc. of the five (5) trucks, the payment of the price of which was partly guaranteed by the real estate mortgage in question, was payable in installments and that the purchaser had failed to pay two or more installments. The appellant also contends that in any event what article 1484 prohibits is for the vendor to recover from the purchaser the unpaid balance of the price after he has foreclosed the chattel mortgage on the thing sold, but not a recourse against the security put up by a third party. Both arguments are without merit. The first involves an issue of fact: whether or not the sale was one on installments; and on this issue the lower court found that it was, and that there was failure to pay two or more installments. This finding is not subject to review by this Court. The appellant's bare allegation to the contrary cannot be considered at this stage of the case. The next contention is that what article 1484 withholds from the vendor is the right to recover any deficiency from the purchaser after the foreclosure of the chattel mortgage and not a recourse to the additional security put up by a third party to guarantee the purchaser's performance of his obligation. A similar argument has been answered by this Court in this wise: "(T)o sustain appellant's argument is to overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned." (Cruz vs. Filipinas Investment & Finance Corporation, L-24772, May 27, 1968; 23 SCRA 791). The decision appealed from is affirmed, with costs against the defendant-appellant

ACTIVE REALTY & DEVELOPMENT CORPORATION, petitioner, vs. NECITA G. DAROYA, represented by Attorney-In-Fact Shirley Daroya-Quinones, respondents. PUNO, J.: This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court which seeks to reverse and set aside the Resolution of the Court of Appeals, dated August 3, 1999, denying due course to petitioners appeal for insufficiency of form and substance.
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Petitioner ACTIVE REALTY & DEVELOPMENT CORPORATION is the owner and developer of Town & Country Hills Executive Village in Antipolo, Rizal. On January 2, 1985, it entered into a Contract to Sell1 with respondent NECITA DAROYA, a contract worker in the Middle East, whereby the latter agreed to buy a 515 sq. m. lot forP224,025.00 in petitioners subdivision. The contract to sell stipulated that the respondent shall pay the initial amount of P53,766.00 upon execution of the contract and the balance of P170,259.00 in sixty (60) monthly installments of P4,893.35. Adding the down payment and installment payments, it would appear that the total amount is P346,367.00, a figure higher than that stated as the contract price. On May 5, 1989, petitioner accepted respondents amortization in the amount of P40,000.00. By August 8, 1989, respondent was in default of P15,282.85 representing three (3) monthly amortizations. Petitioner sent respondent a notice of cancellation2 of their contract to sell, to take effect thirty (30) days from receipt of the letter. It does not appear from the records, however, when respondent received the letter. Nonetheless, when respondent offered to pay for the balance of the contract price, petitioner refused as it has allegedly sold the lot to another buyer. On August 26, 1991, respondent filed a complaint for specific performance and damages3 against petitioner before the Arbitration Branch of the Housing and Land Use Regulatory Board (HLURB). It sought to compel the petitioner to execute a final Deed of Absolute Sale in respondents favor after she pays any balance that may still be due from her. Respondent claimed that she is entitled to the final deed of sale after she offered to pay the balance of P24,048.47, considering that she has already paid the total sum of P314,816.76, which amount isP90,835.76 more than the total contract price of P224,025.00. On June 14, 1993, HLURB Arbiter Alfredo M. Tan II found for the respondent. He ruled that the cancellation of the contract to sell was void as petitioner failed to pay the cash surrender value to respondent as mandated by law. However, as the subject lot was already sold to a third party and the respondent had agreed to a full refund of her installment payments, petitioner was ordered to refund to respondent all her payments in the amount ofP314,816.70, with 12% interest per annum from August 26, 1991 (the date of the filing of the complaint) until fully paid and to pay P10,000.00 as attorneys fees.4 On appeal, the HLURB Board of Commissioners set aside the Arbiters Decision. The Board refused to apply the remedies provided under the Maceda Law and instead deemed it fit to formulate an "equitable" solution to the case. It ruled that, as both parties were at fault, i.e., respondent incurred in delay in her installment payments and respondent failed to send a notarized notice of cancellation, petitioner was ordered to refund to the respondent one half of the total amount she has paid or P157,408.35, which was allegedly akin to the remedy provided under the Maceda Law.5 Respondent appealed to the Office of the President. On June 2, 1998, then Chief Presidential Counsel Renato C. Corona, acting by authority of the President, modified the Decision of the HLURB as he found that it was not in accord with the provisions of the Maceda Law. He held that as petitioner did not comply with the legal requisites for a valid cancellation of the contract, the contract to sell between the parties subsisted and concluded that respondent was entitled to the lot after payment of her outstanding balance. However, as the petitioner disclosed that the lot was already sold to another person and that the actual value of the lot as of the date of the contract was P1,700.00 per square meter, petitioner was ordered to refund to the respondent the amount of P875,000.00, the true and actual value of the lot as of the date of the contract, with interest at 12% per annum computed from August 26, 1991 until fully paid, or to deliver a substitute lot at the choice of respondent.6

Upon denial of its motion for reconsideration, petitioner assailed the Decision in the Court of Appeals. However, its petition for review7 was denied due course for insufficiency in form and substance,8 because: 1) no affidavit of service was attached to the petition; 2) except for certified true copies of the decision and resolution of the Office of the President, no other material portions of the record, as would support the allegations in the petition, were attached; and, 3) the certification of forum-shopping was signed by the head counsel and vice-president of the petitioner corporation who was not authorized by a Board Resolution to represent petitioner. Petitioner moved for reconsideration. The Court of Appeals denied it on an entirely new ground, i.e., for untimely filing of the petition for review.9 Petitioner now impugns the decision of the Court of Appeals and raises the following procedural issues: I THE HONORABLE COURT OF APPEALS GROSSLY ERRED IN RELYING TOO MUCH ON FORM RATHER THAN ON THE MERITS OF THE PETITION THEREBY DENYING PETITIONER OF ITS RIGHT TO DUE PROCESS. II THE HONORABLE COURT OF APPEALS ANCHORED THE DENIAL OF PETITIONERS MOTION FOR RECONSIDERATION ON INCONSISTENT AND CONFLICTING RULINGS NOT BORNE BY THE FACTS AND THE RECORDS OF THE CASE. On the procedural points raised, we find for the petitioner. Our perusal of the record reveals that petitioner substantially complied with the formal requirements of Rule 43 of the Rules of Court.10 First, as to the non-attachment of the affidavit of service, the records bear that the petition was accompanied by the original registry receipts issued by the post office, showing that the petition and its annexes were served upon the parties. Moreover, respondents counsel of record, Atty. Sergio Guadiz, actually received a copy of the petition.11 Second, petitioner likewise complied with Section 6 (c) of Rule 43 requiring the submission of copies of the award, judgment, final order and resolution appealed from. Its petition was accompanied by the duplicate original of the appealed Decision of the Chief Presidential Legal Counsel and his Resolution denying petitioners motion for reconsideration, the Decision of the HLURB Board of Commissioners and that of the HLURB arbiter. A perusal of these documents will reveal that they contained all the relevant facts of the case from which the appellate body can form its own decision. Its failure to submit the other documents, like the Complaint, Answer, Position Papers and Appeal Memoranda of the parties before the HLURB, was due to the refusal of the Office of the President to give them a certified true copy of these documents which were submitted with said Office. Third, as to the lack of Board Resolution by petitioner corporation authorizing Atty. Rene Katigbak, its Chief Legal Counsel and Vice-President for Legal Affairs, to represent it in the filing of the appeal, petitioner admits that this was due to its honest belief that such authority is not required as it was not mentioned in Section 6(c) of Rule 43.12 To make up for such omission, petitioner submitted a Secretarys Certificate13confirming and ratifying the authority of Atty. Katigbak to represent petitioner. Finally, we find that the Court of Appeals erred in denying petitioners motion for reconsideration due to untimely filing as the records clearly show that it was filed on June 25, 1999, a day before the expiration of the period to appeal granted by the Court of Appeals.14

In denying due course to the petition, the appellate court gave premium to form and failed to consider the important rights of the parties in the case at bar.15 At the very least, petitioner substantially complied with the procedural requirements for appeal, hence, it is best to give due course to the petition at bar to clarify the rights and duties of a buyer in contracts to sell real estate on installment basis. The issue to be resolved is whether or not the petitioner can be compelled to refund to the respondent the value of the lot or to deliver a substitute lot at respondents option. We find for the respondent and rule in the affirmative.
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The contract to sell in the case at bar is governed by Republic Act No. 6552 -- "The Realty Installment Buyer Protection Act," or more popularly known as the Maceda Law -- which came into effect in September 1972. Its declared public policy is to protect buyers of real estate on installment basis against onerous and oppressive conditions.16 The law seeks to address the acute housing shortage problem in our country that has prompted thousands of middle and lower class buyers of houses, lots and condominium units to enter into all sorts of contracts with private housing developers involving installment schemes. Lot buyers, mostly low income earners eager to acquire a lot upon which to build their homes, readily affix their signatures on these contracts, without an opportunity to question the onerous provisions therein as the contract is offered to them on a "take it or leave it" basis.17 Most of these contracts of adhesion, drawn exclusively by the developers, entrap innocent buyers by requiring cash deposits for reservation agreements which oftentimes include, in fine print, onerous default clauses where all the installment payments made will be forfeited upon failure to pay any installment due even if the buyers had made payments for several years.18 Real estate developers thus enjoy an unnecessary advantage over lot buyers who they often exploit with iniquitous results. They get to forfeit all the installment payments of defaulting buyers and resell the same lot to another buyer with the same exigent conditions. To help especially the low income lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies of lot buyers and protect them from one-sided and pernicious contract stipulations. More specifically, Section 3 of R.A. No. 6552 provided for the rights of the buyer in case of default in the payment of succeeding installments, where he has already paid at least two (2) years of installments, thus: "(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made; x x x (b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made; provided, that the actualcancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer." In this case, respondent has already paid in four (4) years a total of P314,860.76 or P90,835.76 more than the contract price of P224,035.00. In April 1989, petitioner decided to cancel the contract when the respondent incurred in delay in the payment of P15,282.85, representing three (3) monthly amortizations. Petitioner refused to accept respondents subsequent tender of payment of the outstanding balance alleging that it has already cancelled the contract and sold the subject lot to another buyer. However, the records clearly show that the petitioner failed to comply with the mandatory twin requirements for a valid and effective cancellation under the law,19 i.e., he

failed to send a notarized notice of cancellation and refund the cash surrender value. At no time, from the date it gave a notice of cancellation up to the time immediately before the respondent filed the case against petitioner, did the latter exert effort to pay the cash surrender value. In fact, the records disclose that it was only during the preliminary hearing of the case before the HLURB arbiter when petitioner offered to pay the cash surrender value. Petitioner justifies its inaction on the ground that the respondent was always out of the country. Even then, the records are bereft of evidence to show that petitioner attempted to pay the cash surrender value to respondent through her last known address. The omission is surprising considering that even during the times respondent was out of the country, petitioner has been sending her written notices to remind her to pay her installment arrears through her last known address. Clearly, had respondent not filed a case demanding a final deed of sale in her favor, petitioner would not have lifted a finger to give respondent what was due her actual payment of the cash surrender value, among others. In disregard of basic equitable principles, petitioners stance would enable it to resell the property, keep respondents installment payments, not to mention the cash surrender value which it was obligated to return. The Layug20 case cited by petitioner is inapropos. In Layug, the lot buyer did not pay for the outstanding balance of his account and the Court found that notarial rescission or cancellation was no longer necessary as the seller has already filed in court a case for rescission of the contract to sell. In the case at bar, respondent offered to pay for her outstanding balance of the contract price but respondent refused to accept it. Neither did petitioner adduce proof that the respondents offer to pay was made after the effectivity date stated in its notice of cancellation. Moreover, there was no formal notice of cancellation or court action to rescind the contract. Given the circumstances, we find it illegal and iniquitous that petitioner, without complying with the mandatory legal requirements for canceling the contract, forfeited both respondents land and hard-earned money after she has paid for, not just the contract price, but more than the consideration stated in the contract to sell. Thus, for failure to cancel the contract in accordance with the procedure provided by law, we hold that the contract to sell between the parties remains valid and subsisting. Following Section 3(a) of R.A. No. 6552, respondent has the right to offer to pay for the balance of the purchase price, without interest, which she did in this case. Ordinarily, petitioner would have had no other recourse but to accept payment. However, respondent can no longer exercise this right as the subject lot was already sold by the petitioner to another buyer which lot, as admitted by the petitioner, was valued at P1,700.00 per square meter. As respondent lost her chance to pay for the balance of the P875,000.00 lot, it is only just and equitable that the petitioner be ordered to refund to respondent the actual value of the lot resold, i.e., P875,000.00, with 12% interest per annum computed from August 26, 1991 until fully paid or to deliver a substitute lot at the option of the respondent. On a final note, it would not be amiss to stress that the HLURB Board Decision ordering petitioner to refund to respondent one half of her total payments is not an equitable solution as it punished the respondent for her delinquent payments but totally disregarded petitioners failure to comply with the mandatory requisites for a valid cancellation of the contract to sell. The Board failed to consider that the Maceda law was enacted to remedy the plight of low and middle-income lot buyers, save them from the exacting default clauses in real estate sales and assure them of a home they can call their own. Neither would the Decision of the HLURB Arbiter ordering a full refund of the installment payments of respondent in the amount of P314,816.70 be justified as, under the law, respondent is entitled to the lot she purchased after payment of her outstanding balance which she was ready and willing to do. Thus, to penalize the petitioner for failing in its obligation to deliver the subject lot and to give the respondent what is rightly hers, the petitioner was correctly ordered to refund to the respondent the actual value of the land (P875,000.00) she lost to another buyer, plus interest at the rate of 12% per annum from August 26, 1991 until fully paid or to deliver a substitute lot at the choice of the respondent.
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FILINVEST CREDIT CORPORATION, petitioner, vs. THE COURT OF APPEALS, JOSE SY BANG and ILUMINADA TAN SY BANG,*respondents. Labaquis, Loyola, Angara and Associates for petitioner. Alfredo 1. Raya for private respondents.

SARMIENTO, J.: This is a petition for review on certiorari of the decision, 1 dated March 17, 1988, of the Court of Appeals which affirmed with modification the decision 2 of the Regional Trial Court of Quezon, Branch LIX, Lucena City. The controversy stemmed from the following facts: The private respondents, the spouses Jose Sy Bang and Iluminada Tan, were engaged in the sale of gravel produced from crushed rocks and used for construction purposes. In order to increase their production, they engaged the services of Mr. Ruben Mercurio, the proprietor of Gemini Motor Sales in Lucena City, to look for a rock crusher which they could buy. Mr. Mercurio referred the private respondents to the Rizal Consolidated Corporation which then had for sale one such machinery described as: ONE UNIT LIPPMAN PORTABLE CRUSHING PLANT (RECONDITIONED) [sic] JAW CRUSHER-10xl6 DOUBLE ROLL CRUSHER 16x16 3 UNITS PRODUCT CONVEYOR 75 HP ELECTRIC MOTOR
8 PCS. BRAND NEW TIRES CHASSIS NO. 19696 GOOD RUNNING CONDITION
3

Oscar Sy Bang, a brother of private respondent Jose Sy Bang, went to inspect the machine at the Rizal Consolidated's plant site. Apparently satisfied with the machine, the private respondents signified their intent to purchase the same. They were however confronted with a problem-the rock crusher carried a cash price tag of P 550,000.00. Bent on acquiring the machinery, the private respondents applied for financial assistance from the petitioner, Filinvest Credit Corporation. The petitioner agreed to extend to the private respondents financial aid on the following conditions: that the machinery be purchased in the petitioner's name; that it be leased (with option to purchase upon the termination of the lease period) to the private respondents; and that the private respondents execute a real estate mortgage in favor of the petitioner as security for the amount advanced by the latter. Accordingly, on May 18,1981, a contract of lease of machinery (with option to purchase) was entered into by the parties whereby the private respondents agreed to lease from the petitioner the rock crusher for two years starting from July 5, 1 981 payable as follows: P10,000.00 - first 3 months 23,000.00 - next 6 months 24,800.00 - next 15 months

The contract likewise stipulated that at the end of the two-year period, the machine would be owned by the private respondents. Thus, the private respondents issued in favor of the petitioner a check for P150,550.00, as initial rental (or guaranty deposit), and twenty-four (24) postdated checks corresponding to the 24 monthly rentals. In addition, to guarantee their compliance with the lease contract, the private respondents executed a real estate mortgage over two parcels of land in favor of the petitioner. The rock crusher was delivered to the private respondents on June 9, 1981. Three months from the date of delivery, or on September 7, 1981, however, the private respondents, claiming that they had only tested the machine that month, sent a letter-complaint to the petitioner, alleging that contrary to the 20 to 40 tons per hour capacity of the machine as stated in the lease contract, the machine could only process 5 tons of rocks and stones per hour. They then demanded that the petitioner make good the stipulation in the lease contract. They followed that up with similar written complaints to the petitioner, but the latter did not, however, act on them. Subsequently, the private respondents stopped payment on the remaining checks they had issued to the petitioner. 5 As a consequence of the non-payment by the private respondents of the rentals on the rock crusher as they fell due despite the repeated written demands, the petitioner extrajudicially foreclosed the real estate mortgage. 6 On April 18, 1983, the private respondents received a Sheriff s Notice of Auction Sale informing them that their mortgaged properties were going to be sold at a public auction on May 25, 1983 at 10:00 o'clock in the morning at the Office of the Provincial Sheriff in Lucena City to satisfy their indebtedness to the petitioner. 7 To thwart the impending auction of their properties, the private respondents filed before the Regional Trial Court of Quezon, on May 4, 1983, 8 a complaint against the petitioner, for the rescission of the contract of lease, annullment of the real estate mortgage, and for injunction and damages, with prayer for the issuance of a writ of preliminary injunction. 9On May 23, 1983, three days before the scheduled auction sale, the trial court issued a temporary restraining order commanding the Provincial Sheriff of Quezon, and the petitioner, to refrain and desist from proceeding with the public auction. 10 Two years later, on September 4, 1985, the trial court rendered a decision in favor of the private respondents, the dispositive portion of which reads: WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered: 1. making the injunction permanent; 2. rescinding the contract of lease of the machinery and equipment and ordering the plaintiffs to return to the defendant corporation the machinery subject of the lease contract, and the defendant corporation to return to plaintiffs the sum of P470,950.00 it received from the latter as guaranty deposit and rentals with legal interest thereon until the amount is fully restituted; 3. annulling the real estate mortgage constituted over the properties of the plaintiffs covered by Transfer Certificate of Title Nos. T32480 and T-5779 of the Registry of Deeds of Lucena City; 4. ordering the defendant corporation to pay plaintiffs P30,000.00 as attorney's fees and the costs of the suit. SO ORDERED. 11 Dissatisfied with the trial court's decision, the petitioner elevated the case to the respondent Court of Appeals.

On March 17, 1988, the appellate court, finding no error in the appealed judgment, affirmed the same in toto. 12Hence, this petition. Before us, the petitioner reasserts that the private respondents' cause of action is not against it (the petitioner), but against either the Rizal Consolidated Corporation, the original owner-seller of the subject rock crusher, or Gemini Motors Sales which served as a conduit facilitator of the purchase of the said machine. The petitioner argues that it is a financing institution engaged in quasi-banking activities, primarily the lending of money to entrepreneurs such as the private respondents and the general public, but certainly not the leasing or selling of heavy machineries like the subject rock crusher. The petitioner denies being the seller of the rock crusher and only admits having financed its acquisition by the private respondents. Further, the petitioner absolves itself of any liability arising out of the lease contract it signed with the private respondents due to the waiver of warranty made by the latter. The petitioner likewise maintains that the private respondents being presumed to be knowledgeable about machineries, should be held responsible for the detection of defects in the machine they had acquired, and on account of that, they are estopped from claiming any breach of warranty. Finally, the petitioner interposed the defense of prescription, invoking Article 1571 of the Civil Code, which provides: Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing sold. We find the petitioner's first contention untenable. While it is accepted that the petitioner is a financing institution, it is not, however, immune from any recourse by the private respondents. Notwithstanding the testimony of private respondent Jose Sy Bang that he did not purchase the rock crusher from the petitioner, the fact that the rock crusher was purchased from Rizal Consolidated Corporation in the name and with the funds of the petitioner proves beyond doubt that the ownership thereof was effectively transferred to it. It is precisely this ownership which enabled the petitioner to enter into the "Contract of Lease of Machinery and Equipment" with the private respondents. Be that as it may, the real intention of the parties should prevail. The nomenclature of the agreement cannot change its true essence, i.e., a sale on installments. It is basic that a contract is what the law defines it and the parties intend it to be, not what it is called by the parties. 13 It is apparent here thatthe intent of the parties to the subject contract is for the so-called rentals to be the installment payments. Upon the completion of the payments, then the rock crusher, subject matter of the contract, would become the property of the private respondents. This form of agreement has been criticized as a lease only in name. Thus in Vda. de Jose v. Barrueco 14 we stated: Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of bargain, in the transfer of title to the lessee. 15 The importance of the criticism is heightened in the light of Article 1484 of the new Civil Code which provides for the remedies of an unpaid seller of movables on installment basis. Article 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage or the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. Under the aforequoted provision, the seller of movables in installments, in case the buyer fails to pay two or more installments may elect to pursue either of the following remedies: (1) exact fulfillment by the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the mortgage on the purchased property if one was constituted thereon. It is now settled that the said remedies are alternative and not cumulative and therefore, the exercise of one bars the exercise of the others. Indubitably, the device contract of lease with option to buy is at times resorted to as a means to circumvent Article 1484, particularly paragraph (3) thereof.Through the set-up, the vendor, by retaining ownership over the property in the guise of being the lessor, retains, likewise, the right to repossess the same, without going through the process of foreclosure, in the event the vendeelessee defaults in the payment of the installments. There arises therefore no need to constitute a chattel mortgage over the movable sold. More important, the vendor, after repossessing the property and, in effect, canceling the contract of sale, gets to keep all the installments-cum-rentals already paid. It is thus for these reasons that Article 1485 of the new Civil Code provides that: Article 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of possession or enjoyment of the thing. (Emphasis ours.) Unfortunately, even with the foregoing findings, we however fail to find any reason to hold the petitioner liable for the rock crusher's failure to produce in accordance with its described capacity. According to the petitioner, it was the private respondents who chose, inspected, and tested the subject machinery. It was only after they had inspected and tested the machine, and found it to their satisfaction, that the private respondents sought financial aid from the petitioner. These allegations of the petitioner had never been rebutted by the private respondents. In fact, they were even admitted by the private respondents in the contract they signed. Thus: LESSEE'S SELECTION, INSPECTION AND VERIFICATION.-The LESSEE hereby confirms and acknowledges that he has independently inspected and verified the leased property and has selected and received the same from the Dealer of his own choosing in good order and excellent running and operating condition and on the basis of such verification, etc. the LESSEE has agreed to enter into this Contract." 16 Moreover, considering that between the parties, it is the private respondents, by reason of their business, who are presumed to be more knowledgeable, if not experts, on the machinery subject of the contract, they should not therefore be heard now to complain of any alleged deficiency of the said machinery. It is their failure or neglect to exercise the caution and prudence of an expert, or, at least, of a prudent man, in the selection, testing, and inspection of the rock crusher that gave rise to their difficulty and to this conflict. A well- established principle in law is that between two parties, he, who by his negligence caused the loss, shall bear the same.

At any rate, even if the private respondents could not be adjudged as negligent, they still are precluded from imputing any liability on the petitioner. One of the stipulations in the contract they entered into with the petitioner is an express waiver of warranties in favor of the latter. By so signing the agreement, the private respondents absolved the petitioner from any liability arising from any defect or deficiency of the machinery they bought. The stipulation on the machine's production capacity being "typewritten" and that of the waiver being "printed" does not militate against the latter's effectivity. As such, whether "a capacity of 20 to 40 tons per hour" is a condition or a description is of no moment. What stands is that the private respondents had expressly exempted the petitioner from any warranty whatsoever. Their Contract of Lease Of Machinery And Equipment states: WARRANTY-LESSEE absolutely releases the lessor from any liability whatsoever as to any and all matters in relation to warranty in accordance with the provisions hereinafter stipulated. 17 Taking into account that due to the nature of its business and its mode of providing financial assistance to clients, the petitioner deals in goods over which it has no sufficient know-how or expertise, and the selection of a particular item is left to the client concerned, the latter, therefore, shoulders the responsibility of protecting himself against product defects. This is where the waiver of warranties is of paramount importance. Common sense dictates that a buyer inspects a product before purchasing it (under the principle of caveat emptor or "buyer beware") and does not return it for defects discovered later on, particularly if the return of the product is not covered by or stipulated in a contract or warranty. In the case at bar, to declare the waiver as non-effective, as the lower courts did, would impair the obligation of contracts. Certainly, the waiver in question could not be considered a mere surplusage in the contract between the parties. Moreover, nowhere is it shown in the records of the case that the private respondent has argued for its nullity or illegality. In any event, we find no ambiguity in the language of the waiver or the release of warranty. There is therefore no room for any interpretation as to its effect or applicability vis-a- vis the deficient output of the rock crusher. Suffice it to say that the private respondents have validly excused the petitioner from any warranty on the rock crusher. Hence, they should bear the loss for any defect found therein. WHEREFORE, the Petition is GRANTED; the Decision of the Court of Appeals dated March 17, 1988 is hereby REVERSED AND SET ASIDE, and another one rendered DISMISSING the complaint. Costs against the private respondents