G.R. No. 101251 - Sinon vs. Civil Service Commission

On September 20, 1960, Simeon Del Rosario (plaintiff-appellant) and The Shell Company of the Philippines Limited (defendant-appellee) entered into a lease agreement for a parcel of land identified as Lot No. 2191 of the Cadastral Survey of Ligao, Albay.
The agreed monthly rental for the land was set at P250.00.

Paragraph 14 of the lease contract provided that if an official devaluation or appreciation of the Philippine currency occurred, the rental amount would be adjusted accordingly.
The clause anticipated changes resulting from fluctuations in the value of the peso, ensuring that the rental remained in proportion to the currency’s worth.

On November 6, 1965, President Diosdado Macapagal issued Executive Order No. 195, which modified the par value of the peso from US$0.50 to US$0.2564103 effective November 8, 1965, at noon.
Although the order did not explicitly alter the gold value of the peso, it adjusted the par value as per the official directive.

As a consequence of the reduction in the par value (interpreted by the plaintiff as a devaluation or depreciation), the plaintiff demanded an increase in the monthly rental from P250.00 to P487.50.
The defendant-appellee refused to pay the higher rental rate, leading to a dispute over the application of the contractual adjustment clause.

On January 16, 1967, the plaintiff filed a complaint (Civil Case No. 68154) with the Court of First Instance (CFI) of Manila, Branch XVII.
The complaint sought:

The enforcement of the adjusted rental rate of P487.50 per month, effective from November 8, 1965.
Payment for the arrears calculated as the difference between the increased and the original rental rates.
Additional moral damages of P20,000.00, exemplary damages of P10,000.00, and attorney’s fees and costs amounting to P10,000.00.

On January 8, 1968, the trial court dismissed the complaint, holding that Executive Order No. 195 merely modified the par value, without officially devaluing the peso by changing its gold content.

That the trial court erred by holding that Executive Order No. 195 did not constitute an official devaluation of the Philippine peso.
That the trial court erred in dismissing the complaint seeking a proportional increase in rental.

The appeal argued that, even if there was no technical devaluation (in terms of metallic content), the reduction in the peso’s purchasing power (depreciation) fulfilled the contractual condition for adjusting the rental.

Whether Executive Order No. 195, by decreasing the par value of the peso, should be interpreted as having officially devalued the Philippine currency under the terms of the lease agreement.
Whether the trial court erred in dismissing the plaintiff’s complaint for a proportional increase in the rental, given that the reduction in the peso’s value (whether termed devaluation or depreciation) was an event contemplated by the lease contract’s adjustment clause.