G.R. No. 137798 - Singson vs. Caltex , Incorporated

On July 16, 1968, petitioner Lucia R. Singson and respondent Caltex (Philippines), Inc. entered into a contract of lease concerning a 1,400-square-meter parcel of land in Cubao, Quezon City, covered by Transfer Certificates of Title Nos. 43329 and 81636.
The lease was for a term of twenty (20) years intended for use as a gasoline service station by the respondent.
The rental rates were fixed at P2.50 per square meter per month for the first ten years, and P3.00 per square meter per month for the succeeding ten years, with monthly payments made in advance.
The contract expressly provided that these rental rates constituted the maximum rentals the lessor could collect during the lease term or any renewal thereof.
Additional terms included a P6,000 demolition expense payment by the lessee and a provision allowing the lessor to terminate the lease upon default after written notice.

On June 23, 1983, petitioner requested respondent to increase the rentals due to extraordinary inflation in the country.
Respondent refused this request by letter dated August 3, 1983, reiterating the stipulated maximum rental under the lease contract.
Petitioner filed a complaint on September 21, 1983, seeking reformation of contract and adjustment of rentals, invoking Article 1250 of the Civil Code, citing extraordinary inflation as an unforeseen circumstance warranting rental adjustment.
Evidence presented by petitioner included testimony from Narciso Uy, Assistant Director at the Central Bank, attesting to inflation rates that increased abruptly between 1982 and 1985 primarily due to peso devaluation.
Petitioner also submitted NEDA certifications on inflation showing rates: 2.06% in 1968, rising to 34.51% in 1974, and peaking at 50.34% in 1984.

The Regional Trial Court (RTC) dismissed the complaint for lack of merit on July 15, 1991, holding petitioner failed to prove extraordinary inflation under Article 1250 was present from 1968 to 1983.
The Court of Appeals affirmed the RTC decision, ruling that inflation during the period was ordinary and did not justify applying Article 1250.
The Court of Appeals emphasized the clear and binding nature of the agreed maximum rental in the lease contract.
The Court applied the precedent in Filipino Pipe and Foundry Corporation vs. NAWASA, which held that normal or ordinary inflation is not extraordinary as contemplated by Article 1250.
Petitioner’s motion for reconsideration was denied on March 10, 1999.

Article 1250 should apply given the extraordinary inflation evidenced.
The principle of rebus sic stantibus (change of circumstances) justifies rental adjustment.
The cases cited by respondents, including Filipino Pipe, are factually distinct and inapplicable.

Petitioner stressed the inequity of the nominal rental amount (P3.00/sq.m.), arguing rental should be adjusted to reflect peso value at the time of contracting.
Petitioner pointed to extraordinary historical events affecting the economy (martial law in 1972, OPEC oil price increases in 1973, Aquino assassination in 1983) as unforeseeable circumstances impacting inflation.
She claimed respondent, given its resources and expertise, was better positioned to analyze lease feasibility under economic conditions than petitioner.

Whether extraordinary inflation occurred from 1968 to 1983 justifying the application of Article 1250 of the Civil Code for rental adjustment in the lease contract.
Whether the principle of rebus sic stantibus applies to warrant reformation of the lease contract based on changed economic circumstances.
Whether the precedent set in Filipino Pipe and Foundry Corporation vs. NAWASA is applicable to the present case.