Short answer. Yes. Article 1485 extends the Recto Law's protection 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. Calling the arrangement a lease does not remove the protection if it functions as an installment sale.
What the law says
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 the possession or enjoyment of the thing.
Civil Code, Article 1485 — Recto Law Extends to Leases With Option to Buy. Read the full provision →
The label on the contract does not control
Article 1485 exists to stop the Recto Law's protections for installment buyers from being avoided by simply calling the arrangement something else. It provides that 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 the possession or enjoyment of the thing. A finance or sale arrangement structured as a lease with an option to purchase, where the buyer effectively pays the price in installments disguised as rent, is treated the same as an ordinary sale on installments once the lessor repossesses or otherwise takes the item back.
What triggers the protection
The key event the article points to is the lessor depriving the lessee of possession or enjoyment of the thing, typically by repossessing it after missed payments. Once that happens, the arrangement is no longer treated as a simple lease where the lessor just takes back leased property; it is evaluated under the same rules that apply when a seller of personal property on installments elects to cancel the sale and recover the item, because that is, in substance, what actually took place.
Why the law looks past the label
The Recto Law was designed to keep sellers of movable property on installments from stacking remedies against a buyer who defaults, forcing a choice between exact fulfillment, rescission, or foreclosure rather than all three combined. If parties could escape those limits merely by drafting the transaction as a lease with an option to buy instead of an outright installment sale, the protection would be easy to defeat with careful wording alone. Article 1485 closes that gap by looking at what the arrangement actually does, not what it calls itself.
What this means if your lease-option was repossessed
If you were effectively paying for personal property in installments under a contract labeled as a lease with an option to buy, and the lessor has taken the property back for nonpayment, the protections that apply to installment buyers under Philippine law are relevant to your situation, whatever the contract calls itself. Whether the specific remedy the lessor already pursued limits what else can be demanded from you depends on the facts of the transaction, but the label alone does not decide the question.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- PCI Leasing & Finance InC. vs. Giraffe-X Creative Imaging, Inc, G.R. No. 142618, July 12, 2007 — read the decision on LawPhil →
- Delfin Tan vs. Erlinda C. Benolirao, Andrew C. Benolirao, Romano C. Benolirao, Dion C. Benolirao, Sps. Reynaldo Taningco and Norma D. Benolirao, Evelyn T. Monreal and Ann Karina Taningco, G.R. No. 153820, October 16, 2009 — read the decision on LawPhil →
- PCI Leasing & Finance Inc. vs. UCPB General Insurance Co. Inc, G.R. No. 162267, July 4, 2008 — read the decision on LawPhil →