Palanca v. CA

Facts:

On January 22, 1977, petitioner, as vendor, and Jose S. Sanicas, as vendee, entered into a Contract to Sell on Installment of a parcel of land. Private respondent agreed to pay petitioner the amount of P9,851.00 as downpayment and the balance of P88,659.00 in 120 monthly installments with 14% interest per annum on the outstanding balance. Sanicas further agreed to pay the annual real property taxes, and that should he fail to pay the said taxes, he would have to pay a yearly surcharge or penalty of 50% of the taxes due plus 12% compounded interest per annum.

Sanicas later assumed the account of his brother Jose and he designated the latter as his authorized representative in dealing with petitioner.

Private respondent requested a detailed statement but petitioner failed to furnish him with the statement. Private respondent hired an accountant to compute his obligations under the contract. Thereafter, he tendered the amount of P44,955.87 in cash upon petitioner, which amount included interest at 12% per annum.

Petitioner, however, refused to receive the amount tendered, prompting private respondent to make a judicial consignment of the amount on May 29, 1987.

Applying Article 1250 of the New Civil Code, the trial court ruled that for an agreement providing for the adjustment of the purchase price in case of a diminution of the value of the peso to come into effect, there should be an "extraordinary inflation or deflation." It was the position of the trial court that inasmuch as there was no extraordinary inflation or deflation, paragraph 11 of the contract should not be taken into account in the computation of the amount payable under the contract.

Furthermore, the trial court ruled that it was unconscionable to peg the unpaid balance in the event of monetary fluctuation at 100.398% aside from the agreed interest rate of 14%.

Petitioner appealed to the Court of Appeals wherein CA modified the judgment of the trial court.

Issue:

Whether or not petitioner is entitled to a proportionate increase in payment on the balance of the purchase price for a piece of real property bought on installment, pursuant to paragraph 11 of the subject Contract To Sell on Installment.

Held:

Petition is denied.

In the case at bench, the clear understanding of the parties is that there should be an upward adjustment of the purchase price the moment there is a deterioration of the Philippine peso vis-a-vis the U.S. dollar. This is the "monetary fluctuation" contemplated by them as would justify the adjustment. Under this scenario, it is an idle task to determine whether the contract has been visited by an "extraordinary inflation" as to trigger the operation of Article 1250.

While the contract may contain an "escalator clause" providing that in the occurrence of certain events, the contract price shall be increased to a fixed percentage of the base price ("Escalator" price adjustment clauses, 63 ALR 2d 1337 [1959], still the autonomy of the parties to provide such escalator clauses may be limited by law.

The stipulation of the parties is in violation of R.A. No. 529, as amended, entitled "An Act to Assure Uniform Value To Philippine Coin and Currency," otherwise as the Cuenco Law.

Central Bank Circular cannot repeal a law. Only a law can repeal another law. Article 7 of the Civil Code of the Philippines provides:

Laws are repealed only by subsequent ones and their violation or non-observance shall not be excused by disuse, or custom or practice to the contrary.