Case Digest (G.R. No. L-33466-67) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Nielson & Company, Inc. v. Lepanto Consolidated Mining Company (G.R. No. L-21601, December 28, 1968), the plaintiff-appellant Nielson & Company, Inc. (“Nielson”) and the defendant-appellee Lepanto Consolidated Mining Company (“Lepanto”) entered into a detailed operating contract on January 30, 1937 in Manila under which Nielson was to explore, develop and operate Lepanto’s Mankayan mining properties for an initial five-year term (renewable for another five years), receiving a fixed monthly fee and a 10% participation in profits. Paragraph II provided that force majeure events—including war—would suspend the contract “wholly or partially,” while paragraph XI permitted cancellation by Lepanto upon 90 days’ notice only if Nielson ceased to prosecute operations in bad faith. In February 1942 U.S. forces destroyed the mine and mill to deny use by the enemy, suspending Nielson’s work until rehabilitation concluded on June 26, 1948. Lepanto then assumed management without giving Case Digest (G.R. No. L-33466-67) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Context and Parties
- Nielson & Company, Inc. (plaintiff‐appellant) and Lepanto Consolidated Mining Company (defendant‐appellee) entered into a management contract on January 30, 1937, whereby Nielson would explore, develop, operate and mill Lepanto’s copper mines and market the ores.
- The original term was five years (renewable for another five). Compensation was set at P2,500 per month plus 10% of net profits, later modified in August 1940 to 10% of dividends declared and paid, 10% of any depletion reserve set up, and 10% of any surplus‐earnings capital expenditures.
- Force Majeure and Suspension
- In February 1942, U.S. forces destroyed the mine, mill, power plant, supplies and installations to prevent enemy use, wholly suspending mining and milling operations under the contract’s force majeure clause (paragraph II).
- After liberation from Japanese occupation in August 1945, rehabilitation continued until June 26, 1948, when operations resumed; by contract terms this five‐year period was to be restored.
- Procedural History
- On February 6, 1958, Nielson sued Lepanto for unpaid participation in dividends (10% of P175,000 declared December 1941), the January 1942 management fee (P2,500), management fees and profit participations during the extended term, and stock dividends.
- Trial court dismissed certain claims as prescribed; on appeal, the Supreme Court reversed. Lepanto then moved for reconsideration on nine principal and alternative grounds raising new agency theory, suspension and extension issues, prescription, damages proof, stock dividends, and attorney’s fees.
Issues:
- Nature and Revocability of Contract
- Was the management contract an agency (revocable at will under Art. 1733, Old Code) or a lease of services (Art. 1544)?
- If it were an agency, did Lepanto validly revoke it in 1945 without cause?
- Suspension and Extension by Force Majeure
- Did paragraph II suspend only the parties’ obligations or also the contract term, and did it automatically extend the term?
- What was the proper duration of suspension—February 1942 to August 1945 (liberation) or to June 26, 1948 (resumption)?
- Prescription of Claims
- Did Nielson’s claims for dividend participation, management fees and extended‐term participations prescribe before the 1958 complaint, given the wartime moratorium?
- Damages and Relief
- Were the sums claimed (10% of December 1941 dividends; January 1942 fee; management fees, dividend participations, depletion reserve and capex participations during extension) properly pleaded, proved and allowable?
- Could Nielson be awarded shares of stock as payment of stock dividends?
- Was the award of attorney’s fees proper and reasonable?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)