Case Digest (G.R. No. 150806)
Facts:
Eufemia Almeda and Romel Almeda v. Bathala Marketing Industries, Inc., G.R. No. 150806, January 28, 2008, Supreme Court Third Division, Nachura, J., writing for the Court.Petitioners Eufemia Almeda and Romel Almeda are heirs/representatives of Ponciano L. Almeda, lessor of a portion of the Almeda Compound in Makati; respondent Bathala Marketing Industries, Inc. is the lessee. In May 1997 the parties renewed a four‑year lease (effective May 1, 1997) for 7,348.25 square meters at a monthly rent of P1,107,348.69. Two lease clauses are central: Clause Six allowed the lessor to pass on to the lessee increases in taxes or charges imposed after the contract’s effectivity; Clause Seven provided that in case of “extraordinary inflation or devaluation” the value of the peso at the time of contract would be the basis of payment.
After Ponciano’s death, petitioners began dealing with respondent. By letter dated December 29, 1997 petitioners advised respondent they would assess and collect Value‑Added Tax (VAT) on rentals; respondent replied that VAT could not be imposed retroactively because the lease was executed when the VAT law was already in force. On January 26, 1998 petitioners demanded a 73% increase in monthly rent, invoking Clause Seven and Article 1250 of the Civil Code. Respondent refused both the VAT and the adjustment but continued to pay the contractually stipulated rent.
On February 18, 1998 respondent filed a declaratory relief action in the Regional Trial Court (RTC), Makati, Civil Case No. 98‑411, seeking judicial construction of Clauses Six and Seven. Petitioners filed a separate ejectment/rescission/damages suit; they later dismissed and refiled that suit in the Metropolitan Trial Court. The RTC denied petitioners’ motion to dismiss the declaratory relief action and, after trial, on May 9, 2000 rendered judgment declaring respondent not liable for VAT or for rental adjustment, and ordering restitution to respondent for payments erroneously made (including a rental deposit balance).
Petitioners appealed. The Court of Appeals (CA), in CA‑G.R. CV No. 67784, affirmed the RTC’s legal conclusions but modified the judgment by deleting the trial court’s order for restitution of the rental deposit and...(Pro-only)
Issues:
- Is the petition for declaratory relief proper under the circumstances of this case?
- Is respondent liable to pay 10% VAT on the lease under R.A. No. 7716 (amending Sec. 99 of the NIRC)?
- Is petitioners’ demand for rental adjustment justified by “extraordinary inflation or devaluation” so as to invoke Article 1250...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)