2 Singson Vs Caltex Digest

Credit Transaction
Simple Loan or Mutuum

[2 Singson vs Caltex
G.R. No. 137798 October 4, 2000
GONZAGA-REYES, J
Digested by: Abs
DOCTRINE: Extraordinary inflation exists when there is a decrease or increase in the purchasing power
of the Philippine currency which is unusual or beyond the common fluctuation in the value of said
currency and such increase or decrease could not have been reasonably foreseen or was manifestly
beyond the contemplation of the parties at the time of the establishment of the obligation.
FACTS:
 Singson and Caltex entered into a contract of lease on 1968 over a parcel of land in Cubao,
Quezon City. The land was to be used by respondent as a gasoline service station.
 The contract of lease provides that the lease shall run for a period of twenty (20) years and shall
abide by the following rental rates:
 Five years before the expiration of the lease contract, Singson asked respondent to adjust or
increase the amount of rentals citing that the country was experiencing extraordinary
inflation. In a letter dated August 3, 1983, Caltex refused to Singson’s request and declared that
the terms of the lease contract are clear as to the rental amounts therein provided being "the
maximum rental which the lessor may collect during the term of the lease."
 Singson instituted a complaint before the RTC praying for the payment of the adjusted rentals
based on the value of the PH peso at the time the contract of lease was executed. The complaint
invoked Article 1250 of the Civil Code, stating that since the execution of the contract of lease in
1968 an extraordinary inflation had supervened resulting from the deterioration of worldwide
economic conditions, a circumstance that was not foreseen and could not have been reasonably
foreseen by the parties at the time they entered into contract.
 The RTC dismissed the complaint for lack of merit.

This judgment was affirmed by the Court of Appeals..
Petitioner Respondent
Claimed that there is an extraordinary inflation and The terms of the lease contract are clear as to the
invoked Article 1250 of the Civil Code, stating that rental amounts therein provided being "the
since the execution of the contract of lease in maximum rental which the lessor may collect
1968 an extraordinary inflation had supervened during the term of the lease."
resulting from the deterioration of worldwide
economic conditions, a circumstance that was not
foreseen and could not have been reasonably
foreseen by the parties at the time they entered
into contract.
Credit Transaction
Simple Loan or Mutuum
ISSUE: WON there existed an extraordinary inflation during the period 1968 to 1983 that would call for
the application of Article 1250 of the Civil Code and justify an adjustment or increase of the rentals
between the parties.
RULING: NO. The SC held that there is no legal or factual basis to support Singson’s allegation of the
existence of extraordinary inflation during this period, or, for that matter, the entire time frame of 1968 to
1983, to merit the adjustment of the rentals in the lease contract. Although by Singson's evidence there
was a decided decline in the purchasing power of the PH peso throughout this period, we are hard put to
treat this as an "extraordinary inflation" within the meaning and intent of Article 1250. Rather, we adopt
with approval the following observations of the CA on Singson's evidence, especially the NEDA
certification of inflation rates based on consumer price index:
xxx (a) from the period 1966 to 1986, the official inflation rate never exceeded 100% in any single year; (b) the
highest official inflation rate recorded was in 1984 which reached only 50.34%; (c) over a twenty one (21) year period,
the Philippines experienced a single-digit inflation in ten (10) years (i.e., 1966, 1967, 1968, 1969, 1975, 1976, 1977,
1978, 1983 and 1986); (d) in other years (i.e., 1970, 1971, 1972, 1973, 1974, 1979, 1980, 1981, 1982, 1984 and
1989) when the Philippines experienced double-digit inflation rates, the average of those rates was only 20.88%; (e)
while there was a decline in the purchasing power of the Philippine currency from the period 1966 to 1986,
such cannot be considered as extraordinary; rather, it is a normal erosion of the value of the Philippine peso
which is a characteristic of most currencies.
ADDITIONAL NOTES:
(LAW) Article 1250. In case an extraordinary inflation or deflation of the currency stipulated should
intervene, 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.
- Article 1250 of the Civil Code is inapplicable in the instant case because such economic inflation during
that period did not contemplate of an extraordinary decline in the purchasing power of the peso, and there
was no even an official declaration thereof by competent authorities.
"Erosion" is indeed an accurate description of the trend of decline in the value of the peso in the past
three to four decades. Unfortunate as this trend may be, it is certainly distinct from the phenomenon
contemplated by Article 1250.
WHY IS THIS CASE AND ART. 1250 RELEVANT TO SIMPLE LOAN OR MUTUUM?
-because one of the general concepts of simple loan is found in art. 1955 and if you read 1955, it must be
read side by side with 1250.

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Credit Transaction

Simple Loan or Mutuum

 The RTC dismissed the complaint for lack of merit.

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