Del Rosario v. Shell Company of the Philippines Limited
NEW DOCTRINEFacts
The Antecedents: The parties entered into a Lease Agreement on September 20, 1960, for a parcel of land at a monthly rental of P250.00. Paragraph 14 of the contract stipulated that in the event of an official devaluation or appreciation of the Philippine peso, the rental would be adjusted accordingly. Procedural History: On November 6, 1965, President Macapagal issued Executive Order No. 195, changing the par value of the peso. The plaintiff-appellant demanded an increase in monthly rentals to P487.50, which the defendant-appellee refused to pay. Consequently, the plaintiff-appellant filed a complaint seeking payment of the increased rentals, moral and exemplary damages, attorney's fees, and costs. The trial court dismissed the complaint, opining that Executive Order No. 195 did not officially devalue the peso but merely modified its par value without affecting its gold value as set forth in the Central Bank Act. The Petition: The plaintiff-appellant appealed the trial court's decision, arguing that the trial court erred in holding that Executive Order No. 195 did not officially devalue the Philippine peso and in dismissing the complaint.
Issue(s)
Whether Executive Order No. 195 officially devalued the Philippine peso, thus triggering the rental adjustment clause in the lease agreement. Whether the trial court erred in dismissing the complaint, considering the proper interpretation of the term 'devaluation' in the context of the lease agreement and Executive Order No. 195.
Ruling
The judgment appealed from is REVERSED and SET ASIDE. The rental prayed for by the plaintiff-appellant is GRANTED, effective on the date the complaint was filed. No award of damages and no costs.
Ratio Decidendi
On the issue of whether Executive Order No. 195 officially devalued the Philippine peso, thus triggering the rental adjustment clause in the lease agreement: The Supreme Court held that the resultant decrease in the par value of the peso, as effected by Executive Order No. 195, is precisely the situation contemplated by the parties in their contract. While the term 'devaluation' is technically understood as a reduction in metallic content, the Court noted that the Executive Order did result in a reduction in the par value or purchasing power of the Philippine currency. Even if it were not an official devaluation in the strictest technical sense, it constituted a 'depreciation' (the opposite of 'appreciation' used in the contract). The Court emphasized that in ordinary signification, both 'devaluation' and 'depreciation' refer to a decrease in the value of the currency. Therefore, the parties' contemplation of 'devaluation' in their lease agreement should be regarded as synonymous with 'depreciation' in this context, justifying a proportionate increase in rent. On the issue of whether the trial court erred in dismissing the complaint, considering the proper interpretation of the term 'devaluation' in the context of the lease agreement and Executive Order No. 195: The Supreme Court found that the trial court erred in dismissing the complaint. Based on the interpretation of 'devaluation' and 'depreciation' as encompassing the change brought about by Executive Order No. 195, the Court concluded that the plaintiff-appellant was entitled to the adjusted rental payments. The Court reversed the trial court's decision and granted the plaintiff-appellant's prayer for increased rentals.
Main Doctrine
A decrease in the par value of the Philippine peso, as effected by an executive order, constitutes 'devaluation' or 'depreciation' contemplated in a lease agreement provision allowing for rental adjustment in the event of official devaluation or appreciation of the currency, thereby justifying a proportionate increase in rent.