Floro Enterprises v. Court of Appeals

Summary

Floro Enterprises and Philippine Rabbit entered into a computer equipment agreement with a handwritten annotation stating ownership would transfer after five years. When Floro failed to deliver specified Model 85 monitors, Phil. Rabbit requested cancellation, which Floro accepted. Floro then filed replevin to recover equipment and rentals. The RTC characterized it as a lease, but the CA found it was a sale on installment. The Supreme Court affirmed the CA, holding that regardless of contract characterization, the mutual cancellation required restoration to status quo ante. Phil. Rabbit was entitled to reimbursement of payments made (P295,169.00) minus compensation for six months' equipment use (P120,564.00), with Floro returning the balance (P174,605.00). The decision established principles for mutual contract cancellation and prevention of unjust enrichment, while clarifying the proper legal basis for restoration obligations.