GR 137798; (October, 2000) (Digest)
G.R. No. 137798 ; October 4, 2000
LUCIA R. SINGSON, petitioner, vs. CALTEX (PHILIPPINES), INC., respondent.
FACTS
Petitioner Lucia R. Singson and respondent Caltex (Philippines), Inc. entered into a 20-year contract of lease on July 16, 1968, for a parcel of land in Cubao, Quezon City, to be used as a gasoline station. The contract fixed the rental at P2.50 per square meter per month for the first ten years and P3.00 per square meter per month for the next ten years, with a stipulation that this constituted “the maximum rental” collectible during the lease term. In 1983, five years before the contract’s expiration, petitioner demanded an adjustment or increase in rentals, citing extraordinary inflation since 1968. Respondent refused, invoking the clear terms of the contract.
ISSUE
Whether Article 1250 of the Civil Code on extraordinary inflation applies to justify an adjustment of the contractually stipulated rentals.
RULING
No, Article 1250 does not apply. The Supreme Court affirmed the decisions of the lower courts, holding that petitioner failed to prove the existence of “extraordinary inflation” as required by law. Article 1250 applies only to “extraordinary” or “supervening” inflation, which is an uncommon, violent, and sudden change in the price level, not the normal, gradual erosion of a currency’s purchasing power. The Court examined the official inflation data from 1966 to 1986 presented by petitioner. While it acknowledged a decline in the peso’s value, it found the trend to be a normal, universal economic phenomenon and not the exceptional circumstance contemplated by Article 1250. The highest recorded rate was 50.34% in 1984, and over the 21-year period, the country experienced single-digit inflation in ten years. The average of the double-digit years was only 20.88%. Furthermore, the contract is the law between the parties. Its rental provisions are clear, specific, and expressly stated to be the maximum collectible. Absent any vitiation of consent or violation of law, morals, or public policy, the contract’s terms must be upheld. The principle of rebus sic stantibus, invoked by petitioner, is not a principle of Philippine law. The binding force of contracts must be respected.