Singson v Caltex (Phils.)

G.R. No. 137798 October 4, 2000

Art. 1250 – Extraordinary inflation or deflation

Facts:

·          Singson and Caltex entered into a contract of lease over a parcel of land in Quezon City to be used by respondent as a gasoline service station.

·          The contract of lease provides that the lease shall run for a period of 20 years, and that the monthly rental was fixed at P3,500.00 for the first 10 years, and at P4,200.00 for the succeeding 10 years of the lease.

·          Five years before the expiration of the lease contract, Singson asked Caltex to adjust or increase the amount of rentals citing that the country was experiencing extraordinary inflation.

·          Respondent refused on the basis of the clear provisions of rental fees.

·          Petitioner instituted a complaint to adjust rentals, invoked Article 1250 of the Civil Code, since the contract of lease was executed during extraordinary inflation.

·          The RTC, as affirmed by the CA, dismissed the complaint for lack of merit.

Issue:

WoN there existed an extraordinary inflation when the executed the contract that would call for the application of Article 1250 of the Civil Code and justify an adjustment or increase of the rentals between the parties.

Held:

            No, the Court holds that Article 1250 of the Civil Code is inapplicable in the instant case because such economic inflation during that period did not contemplate of a normal or ordinary decline in the purchasing power of the peso, and there was no even an official declaration thereof by competent authorities.

            It decrees that extraordinary inflation to exist when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value of said currency, and such increase or decrease could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation.

            Thus, the petition is DENIED.

Palanca v CA

G.R. No. 106685 December 2, 1994

Art. 1250 – Extraordinary inflation or deflation

Facts:

·          Petitioner Palanca, as vendor, and Jose Sanicas, as vendee, entered into a Contract to Sell on Installment of a parcel of land.

·          Under the terms of the contract, Jose agreed to pay Palanca the amount of P9,851.00 as downpayment and the balance of P88,659.00 in 120 monthly installments with 14% interest per annum on the outstanding balance.

·          Jose further agreed to pay the annual real property taxes, and that should he fail to pay the said taxes, he would have to pay a yearly surcharge or penalty of 50% of the taxes due plus 12% compounded interest per annum.

·          Respondent Edgardo later assumed the account of his brother Jose and he designated the latter as his authorized representative in dealing with petitioner.

·          Paragraph 11 of the contract contained escalator clause:

That it is further agreed and understood by the VENDEE that in the event of monetary fluctuation, the unpaid balance account of the herein VENDEE on the aforecited subdivision lot shall be increased proportionately on the basis of the present value of P6.72 to $1.00 US dollar.

·         Respondent tendered supposed balance payment (44k), but petitioner rejected it, which prompted the former make a judicial consignment of the amount.

·         Petitioner justified his refusal by asserting the escalator clause in paragraph 11 of the contract (155k).

Issue:

WoN the contract has been visited by an "extraordinary inflation" as to trigger the operation of Article 1250.

Held:

            No, the Court holds that while the contract may contain an "escalator clause” still the autonomy of the parties to provide such escalator clauses may be limited by law.

            Article 1250 of the Civil Code of the Philippines is not the basis herein, but R.A. No. 529, as amended, as a ground for violation of said clause.

            In the case at bench, the clear understanding of the parties is that there should be an upward adjustment of the purchase price the moment there is a deterioration of the Philippine peso with the U.S. dollar. This is the "monetary fluctuation" contemplated by them as would justify the adjustment, and not "extraordinary inflation" described in Art.1250.

            Thus, the petition is DENIED.

Phil. Manpower Services v NLRC

G.R. No. 98450 July 21, 1993

Art. 1250 – Extraordinary inflation or deflation

Facts:

·          Respondent Pangan was dismissed without cause by his employer Adawliah Union Electronics and Afisco Insurance Corporation (Adawliah, for short) based in Alkhobar, Saudi Arabia.

·          He entered into a two-year contract of employment with Adawliah, as a data entry clerk technician.

·          He rendered overtime work of 14 hours and another 24 hours without having received any compensation therefor; worse, he has ordered to work as programmer in addition to his work as data entry clerk technician without any offer to correspondingly increase his salary

·          That Pangan's demand for salary adjustment irked Mr. Ahmed Yosul, Administrative Manager of Adawliah, who thus ordered Pangan's termination on grounds of incompetence.

·          Petitioner Philman justified Pangan's termination as a valid exercise by his employer Adawliah, of its management prerogative to fire employees who proved to be incompetent while still under probation.

·          The POEA found Pangan's complaint meritorious and ordered the petitioners to pay in solidum Pangan's salary for the unexpired portion of his contract and attorney's fees, which the conversion rate to be used shall be that prevailing at the time of payment.

·           But the NLRC modified the rate of exchange to be applied in converting the award, i.e. at the rate of exchange prevailing at the time the complainant's cause of action accrued or at the time he was illegally dismissed because of the erratic devaluation of the Philippine Peso with the US Dollars.

Issue:

WoN the rate of exchange to be applied should be that prevailing at the time the complainant's cause of action or at the time he was illegally dismissed because of deflation.

Held:

            No, the Court disagrees with the NLRC that the proper rate of exchange to be applied in converting the award is NOT that prevailing at the time complainant's cause of action accrued, but that at the time of actual payment as ruled by the POEA.

In similar cases decided by the Court in relation to Art. 1250 of the Civil Code or jurisprudence decrees that the rate of exchange to be applied should be that prevailing at the time of payment.

            In the given case, the proper rate of exchange to be applied in converting the award is that prevailing at the time of payment.

            However, the petition is DISMISSED.