SIMEON DEL ROSARIO VS. SHELL Fineness in Effect on July 1, 1944).
This took effect at noon of
1988 | Paras | Art. 1250 Extraordinary Inflation or Deflation
PETITIONERS: Simeon Del Rosario (Plaintiff-Appellant)
RESPONDENTS: The Shell Company of the Philippines Limited
(Defendant-Appellee)
SUMMARY:
Del Rosario leased a parcel of land to Shell. It was stipulated in the Lease
Agreement that the rental specified shall be adjusted in accordance with
the devaluation or appreciation of the Philippine Currency.
President Macapagal promulgated EO 1951 titled "Changing the Par
Value of the Peso from US$0.50 to US$0.2564103”.
Del Rosario demanded an increase in the monthly rentals, Shell refused.
Del Rosario prayed to the CFI That Shell be ordered to pay the increased
rental. CFI dismissed and said that the EO did not devalue the peso but
merely modified the per value of peso.
SC differentiated “devaluation” and “depreciation” and concluded that
both mean a decrease in the value as applied in this case. Art.1250 is
applied making the increase in rentals valid.
DOCTRINE:
Art. 1250. In case an extraordinary inflation or deflation of the currency
stipulated should supervene, the value of the currency at the time of the
establishment of the obligation shall be the basis of payment, unless there
is an agreement to the contrary
FACTS:
1. On September 20, 1960 the parties entered into a Lease Agreement
whereby the plaintiff- appellant leased a parcel of land in Ligao,
Albay to the defendant-appellee at a monthly rental of Two Hundred
Fifty Pesos (P250.00).
2. Paragraph 14 of said contract of lease provides: "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."
3. On November 6, 1965, President Diosdado Macapagal promulgated
Executive Order No. 195 1 titled "Changing the Par Value of the
Peso from US$0.50 to US$0.2564103 (U.S. Dollar of the Weight and
November 8, 1965.
4. By the reason of the EO, plaintiff-appellant demanded from the
defendant-appellee an increase in the monthly rentals to 487.5 pesos
a month in which the defendant-appellee refused to do so.
5. Plaintiff prayed to the CFI that defendant be ordered to pay the
increase in the monthly rental and likewise asked for damages. The
CFI dismissed the petition because according to the CFI, the said EO
did not officially devalue the peso but merely modified the par value
of the peso.
6. Petitioner still believes that the EO decreased the value of peso that
would justify the increase in rent, thus the case before the SC.
ISSUE: WoN the decrease in the par value of the peso by virtue of EO 195
is precisely the event contemplated by the parties in paragraph 14 of their
lease contract. – YES
HELD:
 The Court defined the word devaluation since it was used in the lease
contract. It will be noted that devaluation is an official act of the
government and refers to a reduction in metallic content while
depreciation can take place with or without an official act and does
not depend on metallic content.
 In the case at bar, while no express reference has been made to
metallic content, there nonetheless is a reduction in par value or in
the purchasing power of Philippine currency.
 Even assuming there has been no official devaluation as the term is
technically understood, the fact is that there has been a diminution or
lessening in the purchasing power of the peso, thus, there has been a
"depreciation" (opposite of "appreciation").
 Moreover, when laymen unskilled in the semantics of economics use
the terms "devaluation" or "depreciation" they certainly mean them
in their ordinary signification — decrease in value.
 Hence as contemplated currency the parties herein in their lease
agreement, the term "devaluation" may be regarded as synonymous
with "depreciation," for certainly both refer to a decrease in the value
of the currency. The rentals should therefore by their agreement be
proportionately increased
WHEREFORE, the lower court decision is reversed.