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FIRST DIVISION
right. The purpose of [this rule] is to require the plaintiff to be the real
party in interest, or, in other words, he must be the person to whom the
proceeds of the action shall belong, and to prevent actions by persons
who have no interest in the result of the same. xxx
Thus, an agent, in his own behalf, may bring an action founded on a
contract made for his principal, as an assignee of such contract. We find
the following declaration in Section 372 (1) of the Restatement of the
Law on Agency (Second):[11]
Section 372. Agent as Owner of Contract Right
(1) Unless otherwise agreed, an agent who has or who acquires an
interest in a contract which he makes on behalf of his principal can,
although not a promisee, maintain such action thereon as might a
transferee having a similar interest.
The Comment on subsection (1) states:
a. Agent a transferee. One who has made a contract on behalf of
another may become an assignee of the contract and bring suit against
the other party to it, as any other transferee. The customs of business or
the course of conduct between the principal and the agent may indicate
that an agent who ordinarily has merely a security interest is a
transferee of the principals rights under the contract and as such is
permitted to bring suit. If the agent has settled with his principal with
the understanding that he is to collect the claim against the obligor by
way of reimbursing himself for his advances and commissions, the agent
is in the position of an assignee who is the beneficial owner of the chose
in action. He has an irrevocable power to sue in his principals name. x x
x. And, under the statutes which permit the real party in interest to sue,
he can maintain an action in his own name. This power to sue is not
affected by a settlement between the principal and the obligor if the
latter has notice of the agents interest. x x x. Even though the agent has
not settled with his principal, he may, by agreement with the principal,
have a right to receive payment and out of the proceeds to reimburse
himself for advances and commissions before turning the balance over
to the principal. In such a case, although there is no formal assignment,
the agent is in the position of a transferee of the whole claim for
security; he has an irrevocable power to sue in his principals name and,
under statutes which permit the real party in interest to sue, he can
maintain an action in his own name.
In this case, the NHA did not rescind the contract. Indeed, it did not
have the right to do so for the other parties to the contract, the vendors,
did not commit any breach, much less a substantial breach, [18]of their
obligation. Their obligation was merely to deliver the parcels of land to
the NHA, an obligation that they fulfilled. The NHA did not suffer any
injury by the performance thereof.
The cancellation, therefore, was not a rescission under Article
1191. Rather, the cancellation was based on the negation of the cause
arising from the realization that the lands, which were the object of the
sale, were not suitable for housing.
Cause is the essential reason which moves the contracting parties
to enter into it.[19] In other words, the cause is the immediate, direct and
proximate reason which justifies the creation of an obligation through
the will of the contracting parties. [20] Cause, which is the essential reason
for the contract, should be distinguished from motive, which is the
particular reason of a contracting party which does not affect the other
party.[21]
For example, in a contract of sale of a piece of land, such as in this
case, the cause of the vendor (petitioners principals) in entering into the
contract is to obtain the price. For the vendee, NHA, it is the acquisition
of the land.[22] The motive of the NHA, on the other hand, is to use said
lands for housing. This is apparent from the portion of the Deeds of
Absolute Sale[23] stating:
WHEREAS, under the Executive Order No. 90 dated December 17, 1986,
the VENDEE is mandated to focus and concentrate its efforts and
resources in providing housing assistance to the lowest thirty percent
(30%) of urban income earners, thru slum upgrading and development
of sites and services projects;
WHEREAS, Letters of Instructions Nos. 555 and 557 [as] amended by
Letter of Instruction No. 630, prescribed slum improvement and
upgrading, as well as the development of sites and services as the
principal housing strategy for dealing with slum, squatter and other
blighted communities;
xxx
WHEREAS, the VENDEE, in pursuit of and in compliance with the abovestated purposes offers to buy and the VENDORS, in a gesture of their
SO ORDERED.
CONCEPCION, J.:
BELLOSILLO, J.:
MANUEL LIM and ROSITA LIM, spouses, were charged before the
Regional Trial Court of Malabon with estafa on three (3) counts under
Art. 315, par. 2 (d), of The Revised Penal Code, docketed as Crim. Cases
Nos. 1696-MN to 1698-MN. The Informations substantially alleged that
Manuel and Rosita, conspiring together, purchased goods from Linton
Commercial Company, Inc. (LINTON), and with deceit issued seven
Consolidated Bank and Trust Company (SOLIDBANK) checks
simultaneously with the delivery as payment therefor. When presented
to the drawee bank for payment the checks were dishonored as
payment on the checks had been stopped and/or for insufficiency of
funds to cover the amounts. Despite repeated notice and demand the
Lim spouses failed and refused to pay the checks or the value of the
goods.
On the basis of the same checks, Manuel and Rosita Lim were also
charged with seven (7) counts of violation of B.P. Blg. 22, otherwise
known as the Bouncing Checks Law, docketed as Crim. Cases Nos. 1699MN to 1705-MN. In substance, the Informations alleged that the Lims
issued the checks with knowledge that they did not have sufficient funds
or credit with the drawee bank for payment in full of such checks upon
presentment. When presented for payment within ninety (90) days from
date thereof the checks were dishonored by the drawee bank for
insufficiency of funds. Despite receipt of notices of such dishonor the
Lims failed to pay the amounts of the checks or to make arrangements
for full payment within five (5) banking days.
Manuel Lim and Rosita Lim are the president and treasurer, respectively,
of Rigi Bilt Industries, Inc. (RIGI). RIGI had been transacting business
with LINTON for years, the latter supplying the former with steel plates,
steel bars, flat bars and purlin sticks which it uses in the fabrication,
installation and building of steel structures. As officers of RIGI the Lim
spouses were allowed 30, 60 and sometimes even up to 90 days credit.
On 27 May 1983 the Lims ordered 100 pieces of mild steel plates worth
P51,815.00 from LINTON which were delivered on the same day at their
place of business at 666 7th Avenue, 8th Street, Kalookan City. To pay
LINTON for the delivery the Lims issued SOLIDBANK Check No. 027700
postdated 3 September 1983 in the amount of P51,800.00. 1
On 30 May 1983 the Lims ordered another 65 pieces of mild steel plates
worth P63,455.00 from LINTON which were delivered at their place of
business on the same day. They issued as payment SOLIDBANK Check
No. 027699 in the amount of P63,455.00 postdated 20 August 1983. 2
The Lim spouses also ordered 2,600 "Z" purlins worth P241,800.00
which were delivered to them on various dates, to wit: 15 and 22 April
1983; 11, 14, 20, 23, 25, 28 and 30 May 1983; and, 2 and 9 June 1983.
To pay for the deliveries, they issued seven SOLIDBANK checks, five of
which were
Check No. Date of Issue Amount
027683
027684
027719
027720
027721
account or for value, knowing at the time of issue that he does not have
sufficient funds in or credit with the drawee bank for the payment of
such check in full upon its presentment, which check is subsequently
dishonored by the drawee bank for insufficiency of funds or credit or
would have been dishonored for the same reason had not the drawer,
without any valid reason, ordered the bank to stop payment . . ." The
gravamen of the offense is knowingly issuing a worthless check. 19 Thus,
a fundamental element is knowledge on the part of the drawer of the
insufficiency of his funds in 20 or credit with the drawee bank for the
payment of such check in full upon presentment. Another essential
element is subsequent dishonor of the check by the drawee bank for
insufficiency of funds or credit or would have been dishonored for the
same reason had not the drawer, without any valid reason, ordered the
bank to stop payment. 21
It is settled that venue in criminal cases is a vital ingredient of
jurisdiction. 22 Section 14, par. (a), Rule 110, of the Revised Rules of
Court, which has been carried over in Sec. 15, par. (a), Rule 110 of the
1985 Rules on Criminal Procedure, specifically provides:
Sec. 14. Place where action is to be instituted. (a) In all
criminal prosecutions the action shall be instituted and
tried in the court of the municipality or province wherein
the offense was committed or anyone of the essential
ingredients thereof took place.
If all the acts material and essential to the crime and requisite of its
consummation occurred in one municipality or territory, the court
therein has the sole jurisdiction to try the case. 23 There are certain
crimes in which some acts material and essential to the crimes and
requisite to their consummation occur in one municipality or territory
and some in another, in which event, the court of either has jurisdiction
to try the cases, it being understood that the first court taking
cognizance of the case excludes the other. 24 These are the so-called
transitory or continuing crimes under which violation of B.P. Blg. 22 is
categorized. In other words, a person charged with a transitory crime
-----------------------------
L-22971:
Rafael Dinglasan for petitioner.
Vicente A. Rafael and Associates for respondents.
Mariano B. Tuason for respondent Court of Industrial Relations.
BENGZON, J.P., J.:
The three cases before this Court are the respective appeals separately
taken by the parties hereto from an order1 of the Court of Industrial
Relations en banc affirming its trial judge's decision, rendered on
November 4, 1963, in CIR Case 175-MC and CIR Case 426-ULP. Thus L22971 is the appeal of MARITIMA2 in CIR Case 175-MC; L-22952
is AFWU's appeal in the same case; and L-22951 refers to AFWU's3
appeal in CIR Case 426-ULP. Since these cases were jointly tried and
decided in the court a quo and they involve the same fundamental issue
the presence or absence of employer-employee relationship they
are jointly considered herein.
gave rise to the two other proceedings which have previously reached
Us here.
On January 6, 1961, upon motion of MARITIMA ,an order of execution
pending appeal and a writ of injunction against AFWU was issued by the
trial court in the civil case. This enabled MARITIMA to engage the
services of the Mindanao Arrastre Service to do the arrastre and
stevedoring work on January 8, 1961. However, AFWU filed a petition
for certiorari, injunction and prohibition 13 here and on January 18, 1961,
was able to secure a writ of preliminary injunction ordering the
maintenance of the status quo prior to January 6, 1961. Thus, after
January 18, 1961, AFWU laborers were again back doing the same work
as before.
The third incident that reached US 14 involved an order of the same trial
court in the same civil case, dated January 11, 1961, which amended
some clerical errors in the original decision of December 5, 1960. Upon
motion of MARITIMA, the trial court, on March 24, 1962, issued an order
for the execution of the decision of January 11, 1961, since AFWU did
not appeal therefrom, and on March 31, 1962, a writ of execution
ousting the 225 AFWUmembers-laborers from their work in connection
with the loading and unloading of cargoes was issued and a levy on
execution upon the properties of AFWU was effected. Accordingly, on
April 1, 1962, MARITIMA was again able to engage the services of the
Mindanao Arrastre Service.
On April 16, 1962, upon the institution of the petition for certiorari,
injunction, prohibition and mandamus, a preliminary injunction was
issued by Us against the orders of March 24 and 31, 1962. But then, on
May 16, 1962, upon motion of MARITIMA this preliminary injunction was
lifted by Us insofar as it related to the execution of the order ousting
the AFWU laborers from the stevedoring and arrastre work in connection
with the MARITIMAvessels. 15 Such then was the status of things.
On November 4, 1963, after almost 10 years of hearing the two cases
jointly, the Industrial Court finally rendered its decision. The dispositive
part provided:
IN VIEW OF ALL THE FOREGOING CIRCUMSTANCES, the complaint
of the union for unfair labor practices against the
Compaia MARITIMA and/or its agent Jose C. Teves and the Iligan
by the union, the invoice number, the name of the vessel and the
number of bills of lading covering the cargoes to be delivered.
Those delivery receipts are different and separate from the bills
of lading and delivery receipts issued by the company to the
consignees or shippers. Cargoes carried from the warehouses to
the boat or from the boat to the consignees were always
accompanied by the union checker who hand-carry the
"conduci". Once goods are delivered to their destination the
union through its bill collectors prepare the bills of collection and
the charges thereon are collected by the union bill collectors who
are employees of the union and not of the respondent. The
respondent had no intervention whatsoever in the collection of
those charges as the same are clearly indicated and described in
the laborCONTRACT , Exhibit "A". There were, however, instances
when the respondents were requested to help the union in the
collection of charges for services rendered by members of the
union when fertilizers and gasoline drums were loaded aboard
the Compaia MARITIMA boats. This was necessary in order to
facilitate the collection of freight and handling charges from the
government for auditing purposes. When cargoes are to be
loaded, the shipper usually notifies the petitioner union when to
load their cargoes aboard Compaia MARITIMA boats calling in
the port of Iligan City; and when a boat docks in said port, the
union undertakes to haul the said shipper's goods to the boat. In
doing this work, the union employs their own trucks or other
vehicles or conveyance from shipper's warehouse to the boat or
vice-versa. The respondent has no truck of any kind for the
service of hauling cargoes because such service is included in
the CONTRACT executed between the parties. (See Exh. "A").
9. The union members who were hired by the union to perform
arrastre and stevedoring work on respondents' vessels at Iligan
port were being supervised and controlled by the general
foreman of the petitioner union or by any union assistant or
capataz responsible for the execution of the labor
CONTRACTwhen performing arrastre and/or stevedoring work
aboard vessels of the Compaia MARITIMA docking at Iligan City.
The foreman assigned their laborers to perform the required work
aboard vessels of the respondent. For instance, when a boat
arrives, the general foreman requests the cargo report from the
chief mate of the vessel in order to determine where the cargoes
are located in the hold of the boat and to know the destination of
these cargoes. All the laborers and/or workers hired for said work
are union members and are only responsible to their immediate
chief who are officers and/or employees of the union. The
respondent firm have their own separate representatives like
checkers who extend aid to the union officers and members in
checking the different cargoes unloaded or loaded aboard vessels
of the Compaia MARITIMA. There were no instances where
offices and employees of the respondent Compaia MARITIMA
and/or its agent had interferred in the giving of instructions to
the laborers performing the arrastre and/or stevedoring work
either aboard vessels or at the wharf of Iligan City. As contractor,
the union does not receive instructions as to what to do, how to
do, and works without specific instructions. They have no fixed
hours of work required by the MARITIMA.
10. While cargoes were in transit either from the warehouse to
the boat or from the boat to the different consignees, any losses
or damages caused with the said cargoes were charged to the
account of the union; and the union likewise imposed the penalty
or fine to any employee who caused or committed the damages
to cargoes in transit. Other disciplinary measures imposed on
laborers performing the said work were exercised by the general
foreman of the union who has blanket authority from the union
general manager to exercise disciplinary control over their
members who were assigned to perform the work in a group of
laborers assigned by the union to perform loading or unloading
cargoes when a Compaia MARITIMA boat docked at Iligan City.
The respondents have not at any time interferred in the
imposition of disciplinary action upon the laborers who are
members of the union. In one instance, under this situation, the
president of the union himself dismissed one inefficient laborer
found to have been performing inefficient service at the
time (t.s.n. pp. 17-18, February 15, 1961).
xxx
xxx
xxx
13. Erring laborers and/or workers who are affiliates of the union
were directly responsible to the union and never to the
respondent. Respondent cannot, therefore, discipline and/or
dismiss these erring workers of the union. (Emphasis supplied)
And in absolving MARITIMA of the unfair labor charge on this point, the
court a quo concluded:
From the foregoing circumstances and findings, the Court is of
the opinion that no substantial evidence has been presented to
sustain the charge of unfair labor practice acts as alleged to have
been committed by herein respondent. The Court finds no
interference in the union activities, if any, of the members of the
Allied Free Workers Union as these persons engaged in the
stevedoring and arrastre service were employed by the Allied
Free Workers Union as independent contractor subject to the
terms and conditions of their then existing labor CONTRACT
Exhibit "A". To construe the CONTRACT otherwise would tend to
disregard the rights and privileges of the parties intended by
them in their CONTRACT . (Exhibit "A"). This Court believes that it
may not interfere in the implementation of the said
labor CONTRACT in the absence of abuse by one party to the
prejudice of the other. ...
Further, the Court finds that the petitioner, aside from its labor
CONTRACT (See Exhibit "A") with the respondent Compaia
MARITIMA also has other labor contracts with other shipping
firms on the stevedoring and arrastre work; and that this
CONTRACT obligated the petitioner as an independent labor
contractor to undertake the arrastre and stevedoring service on
Compaia MARITIMA boats docking at Iligan City Port. The
petitioner is an independent contractor as defined in
the CONTRACT Exhibit "A" and in the evidence submitted by the
parties. "An independent contractor is one who, in rendering
services, exercises an independent employment or occupation
and represents the will of his employer only as to the results of
his work and not as to the means whereby it is accomplished;
one who exercising an independent employment, contracts to do
a piece of work according to his own methods, without being
subject to the control of his employer except as to the result of
his work; and who engaged to perform a certain service for
another, according to his own manner and methods, free from
the control and direction of his employer in all matters connected
with the performance of the service except as to the result of the
work." (see 56 C.J.S. pp. 41-43; Cruz, et al. vs. Manila Hotel et al.,
G.R. No. L-9110, April 30, 1957). These factors were present in
xxx
xxx
In Viaa vs. Al Lagadan et al., G.R. No. L-8967, May 31, 1956, the
Supreme Court states the rule as follows.
'In determining the existence of employer-employee
relationship, the following elements are generally
considered, namely: (1) the selection and engagement of
the employees; (2) the payment of wages; (3) the power
of dismissal; and (4) the power to control the employee's
conduct although the latter is the most important
element (35 Am. Jur. 445). Assuming that the share
received by the deceased could partake of the nature of
wages on which we need not and do not express our
view and that the second element, therefore, exists in
the case at bar, the record does not contain any specific
data regarding the third and fourth elements.'
The clear implication of the decision of the Supreme Court is that
if the defendant has no power of control which, according to
the Supreme Court, is the "most important element" there is
no employer-employee relationship. (Emphasis supplied)
The conclusion thus reached by the court a quo is in full accord with the
facts and the applicable jurisprudence. We totally agree with the court a
quo that AFWU was an independent contractor. And an independent
contractor is not an "employee".17
Neither is there any direct employment relationship
between MARITIMA and the laborers. The latter have no separate
individual contracts with MARITIMA. In fact, the court a quo found that it
was AFWU that hired them. Their only possible connection
with MARITIMA is through AFWU which contracted with the latter. Hence,
they could not possibly be in a better class than AFWU which dealt
with MARITIMA.18
In this connection, it is interesting to note that the facts as found by the
court a quo strongly indicate that it isAFWU itself who is the "employer"
to the latter part of 1953 when the Compaia MARITIMA and its
branch manager agent complained to the union of the
unsatisfactory service of the union laborers hired to load and
unload cargoes aboard Compaia MARITIMA boats. This
deteriorating situation was admitted as a fact by the union
president (See Exhs. "3", "3-A" and "3-B"; See also t.s.n. pp. 6566, August 9, 1960).
12. There was a showing that the laborers employed by the
union were inefficient in performing their jobs, and the business
of the respondent company in Iligan City suffered adversely
during the year 1954; and this was due to the fact that
respondents' vessels were forced to leave cargoes behind in
order not to disrupt the schedule of departures. The Union
laborers were slow in loading and/or unloading freight from
which the respondent Compaia MARITIMA secured its income
and/or profits. At times, cargoes were left behind because of the
union's failure to load them before vessel's departure. In order to
solve this inefficiency of the complaining union, the branch
manager of the Compaia MARITIMA was forced to hire extra
laborers from among 'stand-by' workers not affiliated to any
union for the purpose of helping in the stevedoring and arrastre
work on their vessels because, at that time, the union was not
performing and/or rendering efficient service in the loading and
unloading of cargoes. ...
xxx
xxx
xxx
Exhibit "N"). This step was taken after the company found the
union lagging behind their work under the CONTRACT , so much
so that MARITIMA boats have to leave on schedule without
loading cargoes already contacted to be transported. (Emphasis
supplied)
Perhaps, AFWU might say that this right to terminate appearing in
paragraph 4 of the CONTRACT is contrary to law, morals, good customs,
public order, or public policy. 22 However, it has not adduced any
argument to demonstrate such point. Moreover, there is authority to the
effect that the insertion in a CONTRACT for personal services of a
resolutory condition permitting the cancellation of the CONTRACT by one
of the contracting parties is valid. 23 Neither would the termination
constitute "union-busting". Oceanic Air Products vs. CIR, 24 cited
byAFWU is not in point. That case presupposes an employer-employee
relationship between the parties disputants a basis absolutely
wanting in this case.
AFWU's third point is again that MARITIMA's act of terminating
the CONTRACT constituted union interference. As stated, the court a
quo found as a fact that there is no sufficient evidence of union
interference. And no reason or argument has been advanced to show
that the fact of said termination alone constituted union interference.
THE CERTIFICATION ELECTION CASE
(L-22952 ** & L-22971 [CIR Case No. 175-MC]).
In the certification ejection case, the court a quo directed the holding of
a certification election among the laborers then doing arrastre and
stevedoring work. Both MARITIMA and AFWU have appealed from that
ruling. The latter maintains that the lower court should have directly
certified it as the majority union, entitled to represent all the workers in
the arrastre and stevedoring work unit, whereas MARITIMA contends
that said court could not even have correctly ordered a certification
election considering that there was an absence of employer-employee
relationship between it and said laborers.
There is no question that certification election could not have been
proper during the existence of the CONTRACTin view of the court a quo's
finding that there was no employment relationship thereunder between
the parties. But after the termination of the CONTRACT on August 31,
1954, what was the nature of the relationship betweenMARITIMA and the
laborers-members of AFWU?
From the finding that after the rescission of
the CONTRACT , MARITIMA continued to avail of the services ofAFWU the
court a quo concluded that there came about an implied employeremployee relationship between the parties. This conclusion cannot be
sustained.
First of all, it is contradicted by the established facts. In its findings of
fact, the court a quo observed that after the rescission,
the AFWU laborers continued working in accordance with the "cabo"
system, which was the prevailing custom in the place. Said the court:
20. After the rescission of the CONTRACT Exhibit "A" on August
31, 1954, the Allied Free Workers Union and its members were
working or performing the work of arrastre and stevedoring
service aboard 'vessels of the Compaia MARITIMA docking at
Iligan City port under the 'cabo system' then prevailing in that
teritory; and the customs and conditions then prevailing were
observed by the parties without resorting to the conditions of the
former labor contract Exhibit "A". (Emphasis supplied)
Under the "Cabo" system, the union was an independent contractor. This
is shown by the court a quo's own finding that prior to
the CONTRACT between MARITIMA and AFWU, the former had an oral
arrastre and stevedoring agreement with another union. This agreement
was also based on the "cabo" system. As found by the court a quo:
4. That prior to the execution of Exhibit "A", the arrastre and
stevedoring work was performed by the Iligan Wharf Laborers
Union headed by one Raymundo Labayos under a verbal
agreement similar to the nature and contents of Exhibit "A"; and
this work continued from 1949 to 1952.
5. Under the oral CONTRACT , the Iligan Laborers Union acting as
an independent labor contractor engaged [in] the services of its
members as laborers to perform the contract work of arrastre
and stevedoring service aboard vessels of the Compaia
MARITIMA calling and docking at Iligan City; and for the services
therein rendered the union charged shippers and/or consignees
de Escao, 29the remedy against the "cabo" system need not be sought
in the courts but in the laborers themselves who should organize into a
closely-knit union "which would secure the privileges that the members
desire thru the election of officers among themselves who would not
exploit them."
Wherefore, the appealed decision of the Court of Industrial Relations is
hereby affirmed insofar as it dismissed the charge of unfair labor
practice in CIR Case 426-ULP, but reversed and set aside insofar as it
ordered the holding of a certification election in CIR Case No. 175-MC,
and the petition for certification in said case should be, as it is hereby,
dismissed. No costs. So ordered.
Does the evidence on record show that these two conditions had existed
which may justify the conclusion that the management agreement had
been suspended in the sense entertained by appellant? Let us go to the
evidence.
It is a matter that this Court can take judicial notice of that war
supervened in our country and that the mines in the Philippines were
either destroyed or taken over by the occupation forces with a view to
their operation. The Lepanto mines were no exception for not was the
mine itself destroyed but the mill, power plant, supplies on hand,
equipment and the like that were being used there were destroyed as
well. Thus, the following is what appears in the Lepanto Company Mining
Report dated March 13, 1946 submitted by its President C. A. DeWitt to
the defendant:1 "In February of 1942, our mill, power plant, supplies on
hand, equipment, concentrates on hand, and mine, were destroyed upon
orders of the U.S. Army to prevent their utilization by the enemy." The
report also mentions the report submitted by Mr. Blessing, an official of
Nielson, that "the original mill was destroyed in 1942" and "the original
power plant and all the installed equipment were destroyed in 1942." It
is then undeniable that beginning February, 1942 the operation of the
Lepanto mines stopped or became suspended as a result of the
destruction of the mill, power plant and other important equipment
necessary for such operation in view of a cause which was clearly
beyond the control of Nielson and that as a consequence such
destruction adversely affected the work of mining and milling which the
latter was called upon to undertake under the management contract.
Consequently, by virtue of the very terms of said contract the same may
be deemed suspended from February, 1942 and as of that month the
contract still had 60 months to go.
On the other hand, the record shows that the defendant admitted that
the occupation forces operated its mining properties subject of the
management contract,2 and from the very report submitted by President
DeWitt it appears that the date of the liberation of the mine was August
1, 1945 although at the time there were still many booby
traps.3 Similarly, in a report submitted by the defendant to its
stockholders dated August 25, 1948, the following appears: "Your
Directors take pleasure in reporting that June 26, 1948 marked the
official return to operations of this Company of its properties in
Mankayan, Mountain Province, Philippines."4
It is, therefore, clear from the foregoing that the Lepanto mines were
liberated on August 1, 1945, but because of the period of rehabilitation
and reconstruction that had to be made as a result of the destruction of
the mill, power plant and other necessary equipment for its operation it
cannot be said that the suspension of the contract ended on that date.
Hence, the contract must still be deemed suspended during the
succeeding years of reconstruction and rehabilitation, and this period
can only be said to have ended on June 26, 1948 when, as reported by
the defendant, the company officially resumed the mining operations of
the Lepanto. It should here be stated that this period of suspension from
February, 1942 to June 26, 1948 is the one urged by plaintiff. 5
It having been shown that the operation of the Lepanto mines on the
part of Nielson had been suspended during the period set out above
within the purview of the management contract, the next question that
needs to be determined is the effect of such suspension. Stated in
another way, the question now to be determined is whether such
suspension had the effect of extending the period of the management
contract for the period of said suspension. To elucidate this matter, we
again need to resort to the evidence.
For appellant Nielson two witnesses testified, declaring that the
suspension had the effect of extending the period of the contract,
namely, George T. Scholey and Mark Nestle. Scholey was a mining
engineer since 1929, an incorporator, general manager and director of
Nielson and Company; and for some time he was also the vice-president
and director of the Lepanto Company during the pre-war days and, as
such, he was an officer of both appellant and appellee companies. As
vice-president of Lepanto and general manager of Nielson, Scholey
participated in the negotiation of the management contract to the
extent that he initialed the same both as witness and as an officer of
both corporations. This witness testified in this case to the effect that
the standard force majeure clause embodied in the management
contract was taken from similar mining contracts regarding mining
operations and the understanding regarding the nature and effect of
said clause was that when there is suspension of the operation that
suspension meant the extension of the contract. Thus, to the question,
"Before the war, what was the understanding of the people in the
particular trend of business with respect to the force majeure clause?",
Scholey answered: "That was our understanding that the suspension
meant the extension of time lost."6
Mark Nestle, the other witness, testified along similar line. He had been
connected with Nielson since 1937 until the time he took the witness
stand and had been a director, manager, and president of the same
company. When he was propounded the question: "Do you know what
was the custom or usage at that time in connection withforce
majeure clause?", Nestle answered, "In the mining world the force
majeure clause is generally considered. When a calamity comes up and
stops the work like in war, flood, inundation or fire, etc., the work is
suspended for the duration of the calamity, and the period of the
contract is extended after the calamity is over to enable the person to
do the big work or recover his money which he has invested, or
accomplish what his obligation is to a third person ."7
And the above testimonial evidence finds support in the very minutes of
the special meeting of the Board of Directors of the Lepanto Company
issued on March 10, 1945 which was then chairmaned by Atty. C. A.
DeWitt. We read the following from said report:
The Chairman also stated that the contract with Nielson and
Company would soon expire if the obligations were not
suspended, in which case we should have to pay them the
retaining fee of P2,500.00 a month. He believes however, that
there is a provision in the contract suspending the effects thereof
in cases like the present, and that even if it were not there, the
law itself would suspend the operations of the contract on
account of the war. Anyhow, he stated, we shall have no difficulty
in solving satisfactorily any problem we may have with Nielson
and Company.8
Thus, we can see from the above that even in the opinion of Mr. DeWitt
himself, who at the time was the chairman of the Board of Directors of
the Lepanto Company, the management contract would then expire
unless the period therein rated is suspended but that, however, he
expressed the belief that the period was extended because of the
provision contained therein suspending the effects thereof should any of
the case of force majeure happen like in the present case, and that even
if such provision did not exist the law would have the effect of
suspending it on account of the war. In substance, Atty. DeWitt
expressed the opinion that as a result of the suspension of the mining
operation because of the effects of the war the period of the contract
had been extended.
the lease, but this was overruled by this Court, reasoning that such
dispossession was merely a simple "perturbacion de merohecho y de la
cual no responde el arrendador" under Article 1560 of the old Civil Code
Art. 1664). This ruling is also not applicable in the instant case because
in that case there was no evidence of the intention of the parties that
any suspension of the lease by force majeure would be understood to
extend the period of the agreement.
In resume, there is sufficient justification for Us to conclude that the
cases cited by appellee are inapplicable because the facts therein
involved do not run parallel to those obtaining in the present case.
We shall now consider appellee's defense of laches. Appellee is correct
in its contention that the defense of laches applies independently of
prescription. Laches is different from the statute of limitations.
Prescription is concerned with the fact of delay, whereas laches is
concerned with the effect of delay. Prescription is a matter of time;
laches is principally a question of inequity of permitting a claim to be
enforced, this inequity being founded on some change in the condition
of the property or the relation of the parties. Prescription is statutory;
laches is not. Laches applies in equity, whereas prescription applies at
law. Prescription is based on fixed time, laches is not. (30 C.J.S., p.
522; See also Pomeroy's Equity Jurisprudence, Vol. 2, 5th ed., p. 177).
The question to determine is whether appellant Nielson is guilty of
laches within the meaning contemplated by the authorities on the
matter. In the leading case of Go Chi Gun, et al. vs. Go Cho, et al., 96
Phil. 622, this Court enumerated the essential elements of laches as
follows:
(1) conduct on the part of the defendant, or of one under whom
he claims, giving rise to the situation of which complaint is made
and for which the complaint seeks a remedy; (2) delay in
asserting the complainant's rights, the complainant having had
knowledge or notice of the defendant's conduct and having been
afforded an opportunity to institute a suit; (3) lack of knowledge
or notice on the part of the defendant that the complainant
would assert the right on which he bases his suit; and (4) injury
or prejudice to the defendant in the event relief is accorded to
the complainant, or the suit is not held barred.
and at the end of each year, (2) 10% of any depletion reserve that may
be set up, and (3) 10% of any amount expended during the year out of
surplus earnings for capital account. 20 Counsel for the appellee
admitted during the trial that the extract of the minutes as found in
Exhibit B is a faithful copy from the original. 21 Mr. George Scholey
testified that the foregoing modification was agreed upon. 22
Lepanto claims that this new basis of computation should be rejected (1)
because the contract was clear on the point of the 10% share and it was
so alleged by Nielson in its complaint, and (2) the minutes of the special
meeting held on August 21, 1940 was not signed.
It appearing that the issue concerning the sharing of the profits had
been raised in appellant's complaint and evidence on the matter was
introduced 23 the same can be taken into account even if no amendment
of the pleading to make it conform to the evidence has been made, for
the same is authorized by Section 4, Rule 17, of the old Rules of Court
(now Section 5, Rule 10, of the new Rules of Court).
Coming now to the question of prescription raised by defendant
Lepanto, it is contended by the latter that the period to be considered
for the prescription of the claim regarding participation in the profits is
only four years, because the modification of the sharing embodied in the
management contract is merely verbal, no written document to that
effect having been presented. This contention is untenable. The
modification appears in the minutes of the special meeting of the Board
of Directors of Lepanto held on August 21, 1940, it having been made
upon the authority of its President, and in said minutes the terms of the
modification had been specified. This is sufficient to have the agreement
considered, for the purpose of applying the statute of limitations, as a
written contract even if the minutes were not signed by the parties (3
A.L.R., 2d, p. 831). It has been held that a writing containing the terms
of a contract if adopted by two persons may constitute a contract in
writing even if the same is not signed by either of the parties (3 A.L.R.,
2d, pp. 812-813). Another authority says that an unsigned agreement
the terms of which are embodied in a document unconditionally
accepted by both parties is a written contract (Corbin on Contracts, Vol.
1, p. 85)
The modification, therefore, made in the management contract relative
to the participation in the profits by appellant, as contained in the
It is true that the claim of management fee for January, 1942 was not
among the causes of action in the complaint, but inasmuch as the
contract was suspended in February, 1942 and the management fees
asked for included that of January, 1942, the fact that such claim was
not included in a specific manner in the complaint is of no moment
because an appellate court may treat the pleading as amended to
conform to the evidence where the facts show that the plaintiff is
entitled to relief other than what is asked for in the complaint (Alonzo vs.
Villamor, 16 Phil. 315). The evidence shows that the last payment made
by Lepanto for management fee was for November and December,
1941. 33 If, as We have declared, the management contract was
suspended beginning February 1942, it follows that Nielson is entitled to
the management fee for January, 1942.
Let us now come to the management fees claimed by Nielson for
the period of extension. In this respect, it has been shown that the
management contract was extended from June 27, 1948 to June 26,
1953, or for a period of sixty (60) months. During this period Nielson had
a right to continue in the management of the mining properties of
Lepanto and Lepanto was under obligation to let Nielson do it and to pay
the corresponding management fees. Appellant Nielson insisted in
performing its part of the contract but Lepanto prevented it from doing
so. Hence, by virtue of Article 1186 of the Civil Code, there was a
constructive fulfillment an the part of Nielson of its obligation to manage
said mining properties in accordance with the contract and Lepanto had
the reciprocal obligation to pay the corresponding management fees and
other benefits that would have accrued to Nielson if Lepanto allowed it
(Nielson) to continue in the management of the mines during the
extended period of five (5) years.
We find that the preponderance of evidence is to the effect that Nielson
had insisted in managing the mining properties soon after liberation. In
the report 34 of Lepanto, submitted to its stockholders for the period
from 1941 to March 13, 1946, are stated the activities of Nielson's
officials in relation to Nielson's insistence in continuing the
management. This report was admitted in evidence without objection.
We find the following in the report:
Mr. Blessing, in May, 1945, accompanied Clark and Stanford to San
Fernando (La Union) to await the liberation of the mines. (Mr. Blessing
was the Treasurer and Metallurgist of Nielson). Blessing with Clark and
Stanford went to the property on July 16 and found that while the mill
site had been cleared of the enemy the latter was still holding the area
around the staff houses and putting up a strong defense. As a result,
they returned to San Fernando and later went back to the mines on July
26. Mr. Blessing made the report, dated August 6, recommending a
program of operation. Mr. Nielson himself spent a day in the mine early
in December, 1945 and reiterated the program which Mr. Blessing had
outlined. Two or three weeks before the date of the report, Mr. Coldren of
the Nielson organization also visited the mine and told President C. A.
DeWitt of Lepanto that he thought that the mine could be put in
condition for the delivery of the ore within ten (10) days. And according
to Mark Nestle, a witness of appellant, Nielson had several men
including engineers to do the job in the mines and to resume the work.
These engineers were in fact sent to the mine site and submitted reports
of what they had done. 35
On the other hand, appellee claims that Nielson was not ready and able
to resume the work in the mines, relying mainly on the testimony of Dr.
Juan Nabong, former secretary of both Nielson and Lepanto, given in the
separate case of Nancy Irving Romero vs. Lepanto Consolidated Mining
Company (Civil Case No. 652, CFI, Baguio), to the effect that as far as he
knew "Nielson and Company had not attempted to operate the Lepanto
Consolidated Mining Company because Mr. Nielson was not here in the
Philippines after the last war. He came back later," and that Nielson and
Company had no money nor stocks with which to start the operation. He
was asked by counsel for the appellee if he had testified that way in Civil
Case No. 652 of the Court of First Instance of Baguio, and he answered
that he did not confirm it fully. When this witness was asked by the same
counsel whether he confirmed that testimony, he said that when he
testified in that case he was not fully aware of what happened and that
after he learned more about the officials of the corporation it was only
then that he became aware that Nielson had really sent his men to the
mines along with Mr. Blessing and that he was aware of this fact
personally. He further said that Mr. Nielson was here in 1945 and "he
was going out and contacting his people." 36
Lepanto admits, in its own brief, that Nielson had really insisted in taking
over the management and operation of the mines but that it (Lepanto)
unequivocally refuse to allow it. The following is what appears in the
brief of the appellee:
It was while defendant was in the midst of the rehabilitation work
which was fully described earlier, still reeling under the terrible
10%
November
1949
P 200,000.00
10%
July
1950
300,000.00
10
10%
October
1950
500,000.00
11
20%
December
1950
1,000,000.00
12
20%
March
1951
1,000,000.00
13
20%
June
1951
1,000,000.00
14
20%
September
1951
1,000,000.00
15
40%
December
1951
2,000,000.00
16
20%
March
1952
1,000,000.00
17
20%
May
1952
1,000,000.00
stock dividends worth P1,000,000.00; and on August 22, 1950, the stock
dividends declared was 66-2/3% of the standing authorized capital of
P3,000,000.00 of the company, or stock dividends worth
P2,000,000.00. 40
18
20%
July
1952
1,000,000.00
19
20%
September
1952
1,000,000.00
20
20%
December
1952
1,000,000.00
21
20%
March
1953
1,000,000.00
22
20%
June
1953
1,000,000.0
0
TOTAL
P14,000,000.0
0
Appellant's claim that it should be given 10% of the cash value of said
stock dividends with interest thereon at 6% from February 6, 1958
cannot be granted for that would not be in accordance with the
management contract which entitles Nielson to 10% of any dividends
declared paid, when and as paid. Nielson, therefore, is entitled to 10% of
the stock dividends and to the fruits that may have accrued to said
stock dividends pursuant to Article 1164 of the Civil Code. Hence to
Nielson is due shares of stock worth P100,000.00, as per stock dividends
declared on November 28, 1949 and all the fruits accruing to said shares
after said date; and also shares of stock worth P200,000.00 as per stock
dividends declared on August 20, 1950 and all fruits accruing thereto
after said date.
Anent the third category, the depletion reserve appearing in the
statement of income and surplus submitted by Lepanto corresponding to
the years covered by the period of extension of the contract, may be
itemized as follows:
In 1948, as per Exh. F, p. 36 and Exh. Q, p. 5, the depletion
reserve set up was P11,602.80.
In 1949, as per Exh. G, p. 49 and Exh. Q, p. 5, the depletion
reserve set up was P33,556.07.
In 1950, as per Exh. H, p. 37, Exh. Q, p. 6 and Exh. I, p. 37, the
depletion reserve set up was P84,963.30.
In 1951, as per Exh. I, p. 45, Exh. Q, p. 6, and Exh. J, p. 45, the
depletion reserve set up was P129,089.88.
In 1952, as per Exh. J, p. 45, Exh. Q, p. 6 and Exh. K p. 41, the
depletion reserve was P147,141.54.
In 1953, as per Exh. K, p. 41, and Exh. Q, p. 6, the depletion
reserve set up as P277,493.25.
The increase, therefore, of the value of the fixed assets of Lepanto from
June, 1948 to June, 1953 is P6,943,647.69, which amount represents the
difference between the value of the fixed assets of Lepanto in the year
1948 and in the year 1953, as stated above. On this amount Nielson is
entitled to a share of 10% or to the amount of P694,364.76.
Likewise, the amount of depletion reserve for the year 1953 was for the
whole year and since the contract was extended only until the first half
of the year, said amount of P277,493.25 should be divided by two, and
so Nielson is only entitled to 10% of the half amounting to P138,746.62.
Summing up the entire depletion reserves, from the middle of 1948 to
the middle of 1953, we would have a total of P539,298.81, of which
Nielson is entitled to 10%, or to the sum of P53,928.88.
(6) 10% of the expenses for capital account during the period of
extension, amounting to P694,364.76, with legal interest thereon from
the date of the filing of the complaint;
(7) to issue and deliver to Nielson and Co., Inc. shares of stock of
Lepanto Consolidated Mining Co. at par value equivalent to the total of
Nielson's l0% share in the stock dividends declared on November 28,
1949 and August 22, 1950, together with all cash and stock dividends, if
any, as may have been declared and issued subsequent to November
28, 1949 and August 22, 1950, as fruits that accrued to said shares;