G.R. No.

L-21601 December 17, 1966

NIELSON & COMPANY, INC., plaintiff-appellant,

vs.
LEPANTO CONSOLIDATED MINING COMPANY, defendant-appellee.

FACTS:

An operating agreement was executed between plaintiff NIELSON and the defendant
LEPANTO whereby the former operated and managed the mining properties owned by the
latter. The contract was made by the parties on January 30, 1937 for a period of five (5)
years. In the latter part of 1941, the parties agreed to renew the contract for another period
of five (5) years, but a war broke out.

In January, 1942 operation of the mining properties was disrupted on account of the war.
After the mining properties were liberated from the Japanese forces, LEPANTO took
possession thereof and embarked in rebuilding and reconstructing the mines. On June
26,1948, the mines resumed operation under the exclusive management of LEPANTO.

A disagreement arose between NIELSON and LEPANTO over the status of the operating
contract in question which as renewed expired in 1947. Under the terms thereof, the
management contract shall remain in suspense in case fortuitous event or force majeure,
such as war or civil commotion, adversely affects the work of mining and milling.

On February 6, 1958, plaintiff brought this action against defendant before the Court of First
Instance of Manila to recover certain sums of money representing damages allegedly
suffered by LEPANTO in view of the refusal of the latter to comply with the terms of a
management contract entered into between them on January 30, 1937.

Defendant in its answer denied the material allegations of the complaint and set up certain
special defenses, among them, prescription and laches, as bars against the institution of the
present action.

ISSUE:

Whether or not Nielsons claim is barred by prescription and laches.

HELD:

No. Prescription is concerned with the fact of delay, whereas laches is concerned with
the effect of delay. Under the terms thereof, the management jcontract shall remain in
suspense in case of fortuitous event or force majeure, such as war or civil commotion. On
account of war, the contract was suspended, hence the life of the contract should be
considered extended for such time of the period of suspension and still deemed suspended
during the succeeding years of reconstruction and rehabilitation, and this period can only be
said to have ended on June 26, 1948.

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