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However, to obtain additional loan from another financing * "Where the client already owned the equipment, but
company, TMI used the leased equipment as temporary needed additional working capital and the finance
collateral. company purchased such equipment with the intention of
leasing it back to him, the lease agreement was simulated
PCI considered the 2nd mortgage a violation of the lease to disguise the true transaction that was a loan with
agreement. PCI sent TMI a demand letter for payment of security."
the latter's outstanding obligation, which was unheeded.
* "The intention of the parties was not to enable the client
PCI filed in the RTC a complaint against TMI and sps. to acquire and use the equipment, but to extend to him a
Dizon for recovery of sum of money and personal loan."
property, with prayer for the issuance of a writ of replevin.
* Financial leasing contemplates the extension of credit to
RTC issued the writ of replevin. PCI sold the leased assist a buyer in acquiring movable property which he can
equipment to a third party and collected the proceeds use and eventually own.
amounting to P1.025M
The transaction between the parties was simply a
Respondent claimed that the sale with lease agreement loan secured by chattel mortgage. Thus upon TMI's
was a mere scheme to facilitate the financial lease default, PCI was entitled to seize the mortgaged
between PCI and TMI, and that the true agreement equipment, not as owner but as creditor-mortgagee for
between them was a loan secured by a chattel mortgage. the purpose of foreclosing the chattel mortgage.
RTC: Lease agreement is valid; judgment in favor of PCI PCI's sale to a third party of the mortgaged equipment and
collection of the proceeds of the sale can be deemed in
CA: Set aside the decision of the RTC; sale with lease was the exercise of its right to foreclose the chattel mortgage
a loan secured by chattel mortgage as creditor-mortagee.
Directed PCI to refund P1.1M to TMI