EUFEMIA and ROMEL ALMEDA v.

vBATHALA MARKETING

G.R.No. 150806, January 28, 2008

FACTS

In May 1997, Bathala Marketng, renewed its Contract of Lease with Ponciano Almeda.
Under the contract, Ponciano agreed to lease a porton of Almeda Compound for a monthly
rental of P1,107,348.69 for four years. On January 26, 1998, petitioner informed respondent that
its monthly rental be increased by 73% pursuant to the condition No. 7 of the contract and
Article 1250. Respondent refused the demand and insisted that there was no extraordinary
inflation to warrant such application. Respondent refused to pay the VAT and adjusted rentals as
demanded by the petitioners but continually paid the stipulated amount. RTC ruled in favor of
the respondent and declared that plaintiff is not liable for the payment of VAT and the
adjustment rental, there being no extraordinary inflation or devaluation. CA affirmed the
decision deleting the amounts representing 10% VAT and rental adjustment.

ISSUE

Whether the amount of rentals due the petitioners should be adjusted by reason of
extraordinary inflation or devaluation

RULING

Petitioners are stopped from shifting to respondent the burden of paying the VAT. 6th
Condition states that respondent can only be held liable for new taxes imposed after the
effectivity of the contract of lease, after 1977, VAT cannot be considered a “new tax”. Neither
can petitioners legitimately demand rental adjustment because of extraordinary inflation or
devaluation. Absent an official pronouncement or declaration by competent authorities of its
existence, its effects are not to be applied.

Petition is denied. CA decision is affirmed.