Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. Nos. 173654-765

August 28, 2008

PEOPLE OF THE PHILIPPINES, petitioner,

vs.
TERESITA PUIG and ROMEO PORRAS, respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review under Rule 45 of the Revised Rules of Court with
petitioner People of the Philippines, represented by the Office of the Solicitor
General, praying for the reversal of the Orders dated 30 January 2006 and 9
June 2006 of the Regional Trial Court (RTC) of the 6th Judicial Region, Branch
68, Dumangas, Iloilo, dismissing the 112 cases of Qualified Theft filed against
respondents Teresita Puig and Romeo Porras, and denying petitioners Motion
for Reconsideration, in Criminal Cases No. 05-3054 to 05-3165.
The following are the factual antecedents:
On 7 November 2005, the Iloilo Provincial Prosecutors Office filed before
Branch 68 of the RTC in Dumangas, Iloilo, 112 cases of Qualified Theft
against respondents Teresita Puig (Puig) and Romeo Porras (Porras) who
were the Cashier and Bookkeeper, respectively, of private complainant Rural
Bank of Pototan, Inc. The cases were docketed as Criminal Cases No. 053054 to 05-3165.
The allegations in the Informations1 filed before the RTC were uniform and
pro-forma, except for the amounts, date and time of commission, to wit:
INFORMATION
That on or about the 1st day of August, 2002, in the Municipality of
Pototan, Province of Iloilo, Philippines, and within the jurisdiction of this
Honorable Court, above-named [respondents], conspiring,

confederating, and helping one another, with grave abuse of

confidence, being the Cashier and Bookkeeper of the Rural Bank of
Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of
the management of the Bank and with intent of gain, did then and there
willfully, unlawfully and feloniously take, steal and carry away the sum of
FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency, to
the damage and prejudice of the said bank in the aforesaid amount.
After perusing the Informations in these cases, the trial court did not find the
existence of probable cause that would have necessitated the issuance of a
warrant of arrest based on the following grounds:
(1) the element of taking without the consent of the owners was
missing on the ground that it is the depositors-clients, and not the Bank,
which filed the complaint in these cases, who are the owners of the
money allegedly taken by respondents and hence, are the real partiesin-interest; and
(2) the Informations are bereft of the phrase alleging "dependence,
guardianship or vigilance between the respondents and the
offended party that would have created a high degree of
confidence between them which the respondents could have
abused."
It added that allowing the 112 cases for Qualified Theft filed against the
respondents to push through would be violative of the right of the respondents
under Section 14(2), Article III of the 1987 Constitution which states that in all
criminal prosecutions, the accused shall enjoy the right to be informed of the
nature and cause of the accusation against him. Following Section 6, Rule
112 of the Revised Rules of Criminal Procedure, the RTC dismissed the cases
on 30 January 2006 and refused to issue a warrant of arrest against Puig and
Porras.
A Motion for Reconsideration2 was filed on 17 April 2006, by the petitioner.
On 9 June 2006, an Order3 denying petitioners Motion for Reconsideration
was issued by the RTC, finding as follows:
Accordingly, the prosecutions Motion for Reconsideration should be, as
it hereby, DENIED. The Order dated January 30, 2006 STANDS in all
respects.

Petitioner went directly to this Court via Petition for Review on Certiorari under
Rule 45, raising the sole legal issue of:
WHETHER OR NOT THE 112 INFORMATIONS FOR QUALIFIED
THEFT SUFFICIENTLY ALLEGE THE ELEMENT OF TAKING
WITHOUT THE CONSENT OF THE OWNER, AND THE QUALIFYING
CIRCUMSTANCE OF GRAVE ABUSE OF CONFIDENCE.
Petitioner prays that judgment be rendered annulling and setting aside the
Orders dated 30 January 2006 and 9 June 2006 issued by the trial court, and
that it be directed to proceed with Criminal Cases No. 05-3054 to 05-3165.
Petitioner explains that under Article 1980 of the New Civil Code, "fixed,
savings, and current deposits of money in banks and similar institutions shall
be governed by the provisions concerning simple loans." Corollary thereto,
Article 1953 of the same Code provides that "a person who receives a loan of
money or any other fungible thing acquires the ownership thereof, and is
bound to pay to the creditor an equal amount of the same kind and quality."
Thus, it posits that the depositors who place their money with the bank are
considered creditors of the bank. The bank acquires ownership of the money
deposited by its clients, making the money taken by respondents as belonging
to the bank.
Petitioner also insists that the Informations sufficiently allege all the elements
of the crime of qualified theft, citing that a perusal of the Informations will show
that they specifically allege that the respondents were the Cashier and
Bookkeeper of the Rural Bank of Pototan, Inc., respectively, and that they took
various amounts of money with grave abuse of confidence, and without the
knowledge and consent of the bank, to the damage and prejudice of the bank.
Parenthetically, respondents raise procedural issues. They challenge the
petition on the ground that a Petition for Review on Certiorari via Rule 45 is
the wrong mode of appeal because a finding of probable cause for the
issuance of a warrant of arrest presupposes evaluation of facts and
circumstances, which is not proper under said Rule.
Respondents further claim that the Department of Justice (DOJ), through the
Secretary of Justice, is the principal party to file a Petition for Review on
Certiorari, considering that the incident was indorsed by the DOJ.
We find merit in the petition.

The dismissal by the RTC of the criminal cases was allegedly due to
insufficiency of the Informations and, therefore, because of this defect, there is
no basis for the existence of probable cause which will justify the issuance of
the warrant of arrest. Petitioner assails the dismissal contending that the
Informations for Qualified Theft sufficiently state facts which constitute (a) the
qualifying circumstance of grave abuse of confidence; and (b) the element of
taking, with intent to gain and without the consent of the owner, which is the
Bank.
In determining the existence of probable cause to issue a warrant of arrest,
the RTC judge found the allegations in the Information inadequate. He ruled
that the Information failed to state facts constituting the qualifying
circumstance of grave abuse of confidence and the element of taking without
the consent of the owner, since the owner of the money is not the Bank, but
the depositors therein. He also cites People v. Koc Song,4 in which this Court
held:
There must be allegation in the information and proof of a relation, by
reason of dependence, guardianship or vigilance, between the
respondents and the offended party that has created a high degree of
confidence between them, which the respondents abused.
At this point, it needs stressing that the RTC Judge based his conclusion that
there was no probable cause simply on the insufficiency of the allegations in
the Informations concerning the facts constitutive of the elements of the
offense charged. This, therefore, makes the issue of sufficiency of the
allegations in the Informations the focal point of discussion.
Qualified Theft, as defined and punished under Article 310 of the Revised
Penal Code, is committed as follows, viz:
ART. 310. Qualified Theft. The crime of theft shall be punished by the
penalties next higher by two degrees than those respectively specified
in the next preceding article, if committed by a domestic servant, or with
grave abuse of confidence, or if the property stolen is motor vehicle,
mail matter or large cattle or consists of coconuts taken from the
premises of a plantation, fish taken from a fishpond or fishery or if
property is taken on the occasion of fire, earthquake, typhoon, volcanic
eruption, or any other calamity, vehicular accident or civil disturbance.
(Emphasis supplied.)

Theft, as defined in Article 308 of the Revised Penal Code, requires the
physical taking of anothers property without violence or intimidation against
persons or force upon things. The elements of the crime under this Article are:
1. Intent to gain;
2. Unlawful taking;
3. Personal property belonging to another;
4. Absence of violence or intimidation against persons or force upon
things.
To fall under the crime of Qualified Theft, the following elements must concur:
1. Taking of personal property;
2. That the said property belongs to another;
3. That the said taking be done with intent to gain;
4. That it be done without the owners consent;
5. That it be accomplished without the use of violence or intimidation
against persons, nor of force upon things;
6. That it be done with grave abuse of confidence.
On the sufficiency of the Information, Section 6, Rule 110 of the Rules of Court
requires, inter alia, that the information must state the acts or omissions
complained of as constitutive of the offense.
On the manner of how the Information should be worded, Section 9, Rule 110
of the Rules of Court, is enlightening:
Section 9. Cause of the accusation. The acts or omissions complained
of as constituting the offense and the qualifying and aggravating
circumstances must be stated in ordinary and concise language and not
necessarily in the language used in the statute but in terms sufficient to
enable a person of common understanding to know what offense is
being charged as well as its qualifying and aggravating circumstances
and for the court to pronounce judgment.

It is evident that the Information need not use the exact language of the
statute in alleging the acts or omissions complained of as constituting the
offense. The test is whether it enables a person of common understanding to
know the charge against him, and the court to render judgment properly.5
The portion of the Information relevant to this discussion reads:
A]bove-named [respondents], conspiring, confederating, and helping one another, with grave abuse of confidence, being
the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of the
management of the Bank x x x.

It is beyond doubt that tellers, Cashiers, Bookkeepers and other employees of

a Bank who come into possession of the monies deposited therein enjoy the
confidence reposed in them by their employer. Banks, on the other hand,
where monies are deposited, are considered the owners thereof. This is very
clear not only from the express provisions of the law, but from established
jurisprudence. The relationship between banks and depositors has been held
to be that of creditor and debtor. Articles 1953 and 1980 of the New Civil
Code, as appropriately pointed out by petitioner, provide as follows:
Article 1953. A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay to the
creditor an equal amount of the same kind and quality.
Article 1980. Fixed, savings, and current deposits of money in banks
and similar institutions shall be governed by the provisions concerning
loan.
In a long line of cases involving Qualified Theft, this Court has firmly
established the nature of possession by the Bank of the money deposits
therein, and the duties being performed by its employees who have custody of
the money or have come into possession of it. The Court has consistently
considered the allegations in the Information that such employees acted with
grave abuse of confidence, to the damage and prejudice of the Bank, without
particularly referring to it as owner of the money deposits, as sufficient to
make out a case of Qualified Theft. For a graphic illustration, we cite Roque v.
People,6 where the accused teller was convicted for Qualified Theft based on
this Information:
That on or about the 16th day of November, 1989, in the municipality of
Floridablanca, province of Pampanga, Philippines and within the
jurisdiction of his Honorable Court, the above-named accused

ASUNCION GALANG ROQUE, being then employed as teller of the

Basa Air Base Savings and Loan Association Inc. (BABSLA) with office
address at Basa Air Base, Floridablanca, Pampanga, and as such was
authorized and reposed with the responsibility to receive and collect
capital contributions from its member/contributors of said corporation,
and having collected and received in her capacity as teller of the
BABSLA the sum of TEN THOUSAND PESOS (P10,000.00), said
accused, with intent of gain, with grave abuse of confidence and
without the knowledge and consent of said corporation, did then
and there willfully, unlawfully and feloniously take, steal and carry away
the amount of P10,000.00, Philippine currency, by making it appear that
a certain depositor by the name of Antonio Salazar withdrew from his
Savings Account No. 1359, when in truth and in fact said Antonio
Salazar did not withdr[a]w the said amount of P10,000.00 to the
damage and prejudice of BABSLA in the total amount of P10,000.00,
Philippine currency.
In convicting the therein appellant, the Court held that:
[S]ince the teller occupies a position of confidence, and the bank places
money in the tellers possession due to the confidence reposed on the
teller, the felony of qualified theft would be committed.7
Also in People v. Sison,8 the Branch Operations Officer was convicted of the
crime of Qualified Theft based on the Information as herein cited:
That in or about and during the period compressed between January
24, 1992 and February 13, 1992, both dates inclusive, in the City of
Manila, Philippines, the said accused did then and there wilfully,
unlawfully and feloniously, with intent of gain and without the knowledge
and consent of the owner thereof, take, steal and carry away the
following, to wit:
Cash money amounting to P6,000,000.00 in different denominations
belonging to the PHILIPPINE COMMERCIAL INTERNATIONAL BANK
(PCIBank for brevity), Luneta Branch, Manila represented by its Branch
Manager, HELEN U. FARGAS, to the damage and prejudice of the said
owner in the aforesaid amount of P6,000,000.00, Philippine Currency.
That in the commission of the said offense, herein accused acted with
grave abuse of confidence and unfaithfulness, he being the Branch

Operation Officer of the said complainant and as such he had free

access to the place where the said amount of money was kept.
The judgment of conviction elaborated thus:
The crime perpetuated by appellant against his employer, the Philippine
Commercial and Industrial Bank (PCIB), is Qualified Theft. Appellant
could not have committed the crime had he not been holding the
position of Luneta Branch Operation Officer which gave him not only
sole access to the bank vault xxx. The management of the PCIB
reposed its trust and confidence in the appellant as its Luneta Branch
Operation Officer, and it was this trust and confidence which he
exploited to enrich himself to the damage and prejudice of PCIB x x x.9
From another end, People v. Locson,10 in addition to People v. Sison,
described the nature of possession by the Bank. The money in this case was
in the possession of the defendant as receiving teller of the bank, and the
possession of the defendant was the possession of the Bank. The Court held
therein that when the defendant, with grave abuse of confidence, removed the
money and appropriated it to his own use without the consent of the Bank,
there was taking as contemplated in the crime of Qualified Theft.11
Conspicuously, in all of the foregoing cases, where the Informations merely
alleged the positions of the respondents; that the crime was committed with
grave abuse of confidence, with intent to gain and without the knowledge and
consent of the Bank, without necessarily stating the phrase being assiduously
insisted upon by respondents, "of a relation by reason of dependence,
guardianship or vigilance, between the respondents and the offended
party that has created a high degree of confidence between them, which
respondents abused,"12 and without employing the word "owner" in lieu of
the "Bank" were considered to have satisfied the test of sufficiency of
allegations.
As regards the respondents who were employed as Cashier and Bookkeeper
of the Bank in this case, there is even no reason to quibble on the allegation in
the Informations that they acted with grave abuse of confidence. In fact, the
Information which alleged grave abuse of confidence by accused herein is
even more precise, as this is exactly the requirement of the law in qualifying
the crime of Theft.
In summary, the Bank acquires ownership of the money deposited by its
clients; and the employees of the Bank, who are entrusted with the

possession of money of the Bank due to the confidence reposed in them,

occupy positions of confidence. The Informations, therefore, sufficiently allege
all the essential elements constituting the crime of Qualified Theft.
On the theory of the defense that the DOJ is the principal party who may file
the instant petition, the ruling in Mobilia Products, Inc. v. Hajime Umezawa13 is
instructive. The Court thus enunciated:
In a criminal case in which the offended party is the State, the interest of
the private complainant or the offended party is limited to the civil liability
arising therefrom. Hence, if a criminal case is dismissed by the trial
court or if there is an acquittal, a reconsideration of the order of
dismissal or acquittal may be undertaken, whenever legally feasible,
insofar as the criminal aspect thereof is concerned and may be made
only by the public prosecutor; or in the case of an appeal, by the State
only, through the OSG. x x x.
On the alleged wrong mode of appeal by petitioner, suffice it to state that the
rule is well-settled that in appeals by certiorari under Rule 45 of the Rules of
Court, only errors of law may be raised,14 and herein petitioner certainly raised
a question of law.
As an aside, even if we go beyond the allegations of the Informations in these
cases, a closer look at the records of the preliminary investigation conducted
will show that, indeed, probable cause exists for the indictment of herein
respondents. Pursuant to Section 6, Rule 112 of the Rules of Court, the judge
shall issue a warrant of arrest only upon a finding of probable cause after
personally evaluating the resolution of the prosecutor and its supporting
evidence. Soliven v. Makasiar,15 as reiterated inAllado v.
Driokno,16 explained that probable cause for the issuance of a warrant of
arrest is the existence of such facts and circumstances that would lead a
reasonably discreet and prudent person to believe that an offense has been
committed by the person sought to be arrested.17 The records reasonably
indicate that the respondents may have, indeed, committed the offense
charged.
Before closing, let it be stated that while it is truly imperative upon the fiscal or
the judge, as the case may be, to relieve the respondents from the pain of
going through a trial once it is ascertained that no probable cause exists to
form a sufficient belief as to the guilt of the respondents, conversely, it is also
equally imperative upon the judge to proceed with the case upon a showing
that there is a prima facie case against the respondents.

WHEREFORE, premises considered, the Petition for Review on Certiorari is

hereby GRANTED. The Orders dated 30 January 2006 and 9 June 2006 of
the RTC dismissing Criminal Cases No. 05-3054 to 053165 are REVERSED and SET ASIDE. Let the corresponding Warrants of
Arrest issue against herein respondents TERESITA PUIG and ROMEO
PORRAS. The RTC Judge of Branch 68, in Dumangas, Iloilo, is directed to
proceed with the trial of Criminal Cases No. 05-3054 to 05-3165, inclusive,
with reasonable dispatch. No pronouncement as to costs.
SO ORDERED.

LUCIA R. SINGSON, petitioner,

INC. respondent.

vs.

CALTEX

(PHILIPPINES),

DECISION
GONZAGA-REYES, J.:

Petitioner seeks a review on certiorari of the decision of the former Special Second
Division of the Court of Appeals dated November 27, 1998, [1] affirming the decision of
the Regional Trial Court of Manila, Branch 25 [2] which dismissed petitioner's action for
reformation of contract and adjustment of rentals.
The facts of the case are undisputed --Petitioner and respondent entered into a contract of lease on July 16, 1968 over a
parcel of land in Cubao, Quezon City. The land, which had an area of 1,400 square
meters and was covered by Transfer Certificates of Title No. 43329 and 81636 issued
by the Register of Deeds of Quezon City, 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:
xxx xxx xxx xxx

Rental. --- The LESSEE agrees to pay the following rental for said premises:
P2.50/sq.m. per month from the 1st to 10th years and P3.00/sq.m. per month from the
11th to 20th years, payable monthly in advance within the 1st 15 days of each month;
provided that the rentals for the 1st 5 years less a discount of eleven (11) percent per
annum computed on a monthly diminishing balance, shall be paid to LESSOR upon
compliance of the three (3) conditions provided in clause (2) above.

LESSEE also agrees to pay lessor, the sum of Six Thousand Pesos (P6,000.00) as
demolition expenses, upon effectivity of this lease.
The rental herein provided for is in any event the maximum rental which LESSOR
may collect during the term of this lease or any renewal or extension thereof. LESSEE
further agrees for thirty (30) days after written notice of such default has actually been
delivered to the General Manager of Caltex (Philippines), Inc. LESSOR shall then
have the right to terminate this lease on thirty (30) days written notice to
LESSEE. xxx xxx xxx [3]
Thus, based on the foregoing provisions of the lease contract, the monthly rental
was fixed at P3,500.00 for the first ten years, and at P4,200.00 for the succeeding ten
years of the lease.
On June 23, 1983, or five years before the expiration of the lease contract,
petitioner 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,
respondent refused petitioner'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." [4]
On September 21, 1983, petitioner instituted a complaint before the RTC praying
for, among other things, the payment by respondent of adjusted rentals based on the
value of the Philippine 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.
To substantiate its allegation of extraordinary inflation, petitioner presented as
witness Mr. Narciso Uy, Assistant Director of the Supervising and Examining Sector of
the Central Bank, who attested that the inflation rate increased abruptly during the
period 1982 to 1985, caused mainly by the devaluation of the peso. [5] Petitioner also
submitted into evidence a certification of the official inflation rates from 1966 to 1986
prepared by the National Economic Development Authority ("NEDA") based on
consumer price index, which reflected that at the time the parties entered into the
subject contract, the inflation rate was only 2.06%; then, it soared to 34.51% in 1974,
and in 1984, reached a high of 50.34%.[6]
In a decision rendered on July 15, 1991, the RTC dismissed the complaint for lack
of merit. This judgment was affirmed by the Court of Appeals. Both courts found that
petitioner was unable to prove the existence of extraordinary inflation from 1968 to 1983
(or from the year of the execution of the contract up to the year of the filing of the

complaint before the RTC) as to justify an adjustment or increase in the rentals based
upon the provisions of Article 1250 of the Civil Code.
The Court of Appeals declared that although, admittedly, there was an economic
inflation during the period in question, it was not such as to call for the application of
Article 1250 which is made to apply only to "violent and sudden changes in the price
level or uncommon or unusual decrease of the value of the currency. (It) does not
contemplate of a normal or ordinary decline in the purchasing power of the peso." [7]
The Court of Appeals also found similarly with the trial court that the terms of rental
in the contract of lease dated July 16, 1968 are clear and unequivocal as to the specific
amount of the rental rates and the fact that the rentals therein provided shall be the
"maximum rental" which petitioner as lessor may collect. Absent any showing that such
contractual provisions are contrary to law, morals, good customs, public order or public
policy, the Court of Appeals held that there was no basis for not acknowledging their
binding effect upon the parties. It also upheld the application by the trial court of the
ruling in Filipino Pipe and Foundry Corporation vs. National Waterworks and Sewerage
Authority, 161 SCRA 32, where the Court held that although there has been a decline in
the purchasing power of the Philippine peso during the period 1961 to 1971, such
downward fall of the currency could not be considered "extraordinary" and was simply a
universal trend that has not spared the Philippines.
Thus, the dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, in view of the foregoing, the appeal is hereby DISMISSED and the
decision appealed from is hereby AFFIRMED.
SO ORDERED.[8]
Petitioner's motion for reconsideration of the above decision was denied by the
Court of Appeals in a resolution dated March 10, 1999.
Aggrieved, petitioner filed this petition for review on certiorari where she assails as
erroneous the decision of the Court of Appeals, specifically, (1) in ruling that Article 1250
of the Civil Code is inapplicable to the instant case, (2) in not recognizing the
applicability of the principle of rebus sic stantibus, and (3) in applying the ruling
in Filipino Pipe and Foundry Corporation vs. NAWASA.
Petitioner contends that the monthly rental of P3.00 per square meter is patently
inequitable. Based on the inflation rates supplied by NEDA, there was an unusual
increase in inflation that could not have been foreseen by the parties; otherwise, they
would not have entered into a relatively long-term contract of lease. She argued that the
rentals in this case should not be regarded by their quantitative or nominal value, but as
"debts of value", that is, the rental rates should be adjusted to reflect the value of the
peso at the time the lease was contracted.[9]

Petitioner also insists that the factual milieu of the present case is distinct from that
in Filipino Pipe and Foundry Corporation vs. NAWASA. She pointed out that the inflation
experienced by the country during the period 1961 to 1971 (the pertinent time period in
the Filipino Pipe case) had a lowest of 1.35% in 1969 and a highest of 15.03% in 1971,
whereas in the instant case, involving the period 1968 to 1983, there had been highly
abnormal inflation rates like 34.51% in 1974 (triggered by the OPEC oil price increases
in 1973) and 50.34% in 1984 (caused by the assassination of Benigno Aquino, Jr. in
1983). Petitioner argues that the placing of the country under martial rule in 1972, the
OPEC oil price increases in 1973, and the Aquino assassination which triggered the
EDSA revolution, were fortuitous events that drastically affected the Philippine economy
and were beyond the reasonable contemplation of the parties.
To further bolster her arguments, petitioner invokes by analogy the principle
of rebus sic stantibus in public international law, under which a vital change of
circumstances justifies a state's unilateral withdrawal from a treaty. In the herein case,
petitioner posits that in pegging the monthly rental rates of P2.50 and P3.00 per square
meter, respectively, the parties were guided by the economic conditions prevalent in
1968, when the Philippines faced robust economic prospects. Petitioner contends that
between her and respondent, a corporation engaged in high stakes business and
employing economic and business experts, it is the latter who had the unmistakable
advantage to analyze the feasibility of entering into a 20-year lease contract at such
meager rates.
The only issue crucial to the present appeal is whether 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.
Article 1250 of the Civil Code states:

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.
Article 1250 was inserted in the Civil Code of 1950 to abate the uncertainty and
confusion that affected contracts entered into or payments made during World War II,
and to help provide a just solution to future cases. [10] The Court has, in more than one
occasion, been asked to interpret the provisions of Article 1250, and to expound on the
scope and limits of "extraordinary inflation".
We have held extraordinary inflation to exist 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. [11]

An example of extraordinary inflation, as cited by the Court in Filipino Pipe and

Foundry Corporation vs. NAWASA, supra, is that which happened to the deutschmark in
1920. Thus:

"More recently, in the 1920s, Germany experienced a case of hyperinflation. In early

1921, the value of the German mark was 4.2 to the U.S. dollar. By May of the same
year, it had stumbled to 62 to the U.S. dollar. And as prices went up rapidly, so that by
October 1923, it had reached 4.2 trillion to the U.S. dollar!" (Bernardo M. Villegas &
Victor R. Abola, Economics, An Introduction [Third Edition]).
As reported, "prices were going up every week, then every day, then every
hour. Women were paid several times a day so that they could rush out and exchange
their money for something of value before what little purchasing power was left
dissolved in their hands. Some workers tried to beat the constantly rising prices by
throwing their money out of the windows to their waiting wives, who would rush to
unload the nearly worthless paper. A postage stamp cost millions of marks and a loaf
of bread, billions." (Sidney Rutberg, "The Money Balloon", New York: Simon and
Schuster, 1975, p. 19, cited in "Economics, An Introduction" by Villegas & Abola, 3rd
Ed.)
The supervening of extraordinary inflation is never assumed. [12] The party alleging it
must lay down the factual basis for the application of Article 1250.
Thus, in the Filipino Pipe case, the Court acknowledged that the voluminous
records and statistics submitted by plaintiff-appellant proved that there has been a
decline in the purchasing power of the Philippine peso, but this downward fall cannot be
considered "extraordinary" but was simply a universal trend that has not spared our
country.[13] Similarly, in Huibonhoa vs. Court of Appeals,[14] the Court dismissed plaintiffappellant's unsubstantiated allegation that the Aquino assassination in 1983 caused
building and construction costs to double during the period July 1983 to February
1984. In Serra vs. Court of Appeals,[15] the Court again did not consider the decline in the
peso's purchasing power from 1983 to 1985 to be so great as to result in an
extraordinary inflation.
Like the Serra and Huibonhoa cases, the instant case also raises as basis for the
application of Article 1250 the Philippine economic crisis in the early 1980s --- when,
based on petitioner's evidence, the inflation rate rose to 50.34% in 1984. We hold that
there is no legal or factual basis to support petitioner'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 dated July 16,
1968. Although by petitioner's evidence there was a decided decline in the purchasing
power of the Philippine 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 Court of Appeals on petitioner'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.[16]
"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.
Moreover, this Court has held that the effects of extraordinary inflation are not to be
applied without an official declaration thereof by competent authorities. [17]
Lastly, the provisions on rentals in the lease contract dated July 16, 1968 between
petitioner and respondent are clear and categorical, and we have no reason to suppose
that such lease contract does not reflect or express their true intention and
agreement. The contract is the law between the parties and if there is indeed reason to
adjust the rent, the parties could have by themselves negotiated the amendment of the
contract.[18]
WHEREFORE, the petition seeking the reversal of the decision of the Court of
Appeals in CA-G.R. CV No. 54115 is DENIED.
SO ORDERED.