Case Summary (G.R. No. L-28776)
Lease Agreement Provisions
The Lease Agreement included a significant provision in Paragraph 14 that stipulated that in the event of an official devaluation or appreciation of the Philippine currency, the rental rate would be adjusted according to laws or decrees specifically applicable to rentals. This provision became pertinent following a change in the par value of the Philippine peso caused by Executive Order No. 195, promulgated by President Diosdado Macapagal on November 6, 1965.
Background of the Dispute
After the issuance of Executive Order No. 195, which effectively modified the par value of the peso from US$0.50 to US$0.25, Del Rosario sought to increase the monthly rent to P487.50. Shell refused to comply with this demand, leading Del Rosario to file a complaint with the Court of First Instance of Manila (CFI) on January 16, 1967. He sought the additional rental amount, as well as moral damages, exemplary damages, attorney's fees, and costs.
Trial Court's Decision
On January 8, 1968, the trial court dismissed Del Rosario's complaint, arguing that Executive Order No. 195 did not constitute an official devaluation of the peso. The court opined that the Executive Order merely modified the par value and did not affect the gold value of the currency as defined by the Central Bank Act.
Appellate Contentions
In response to the trial court's decision, Del Rosario filed an appeal, asserting two main errors: first, the trial court erred by failing to recognize that Executive Order No. 195 constituted an official devaluation of the peso, and second, the court erred in dismissing his complaint. He maintained that the Executive Order resulted in a decrease in the monetary value of the peso, which justified an increase in the rent under the Lease Agreement.
Definition of Terms: Devaluation and Depreciation
The court reviewed the definitions of "devaluation" and "depreciation." It noted that devaluation is an official act that reduces the metallic content of currency, impacting its value in terms of other currencies, while depreciation refers to a decrease in currency value that can occur with or without official action. The court emphasized that, regardless of the official terminology, the economic reality was that the purchasing power of the peso had diminished.
Court's Findings and Conclusion
The court found that the reduction in the par value of the peso as a result
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Case Citation
- 247 Phil. 520 SECOND DIVISION [ G.R. No. L-28776. August 19, 1988]
Parties Involved
- Plaintiff-Appellant: Simeon Del Rosario
- Defendant-Appellee: The Shell Company of the Philippines Limited
Background Facts
- On September 20, 1960, the parties entered into a Lease Agreement where Del Rosario leased a parcel of land (Lot No. 2191 of the Cadastral Survey of Ligao, Albay) to Shell at a monthly rental of P250.00.
- The lease included a provision (Paragraph 14) addressing the adjustment of rental fees in the event of currency devaluation or appreciation, stating:
- "In the event of an official devaluation or appreciation of the Philippine currency, the rental specified herein shall be adjusted in accordance with the provisions of any law or decree declaring such devaluation or appreciation as may specifically apply to rentals."
- On November 6, 1965, President Diosdado Macapagal issued Executive Order No. 195, changing the par value of the peso from US$0.50 to US$0.2564103, effective noon of November 8, 1965.
- Following this, Del Rosario demanded an increase in monthly rentals from P250.00 to P487.50 due to the impact of the Executive Order.
- Shell refused to comply with the increased rental demand.
Legal Proceedings
- On January 16, 1967, Del Rosario filed a complaint (Civil Case No. 68154) with the CFI of Manila, Branch XVII, seeking:
- Payment of the adjusted rent (P487.50) retroactively,
- P20,000.00 in moral damages,
- P10,000.00 in exemplary damages,
- P10,000.00 fo