G.R. No. 25853 , December 31, 1926
BACHRACH MOTOR CO., INC., plaintiff-appellant, vs. CIPRIANO E. UNSON, as Secretary of Commerce and Communications, A. D. WILLIAMS, as Director of Public Works, and JORGE B. VARGAS, as Director of Lands, defendants-appellees.

FACTS

Bachrach Motor Co., Inc. (plaintiff) entered into a 25-year lease contract with the Director of Lands over a parcel of reclaimed land in the Port Area. The contract required the plaintiff to commence construction of permanent buildings within six months and complete them by May 3, 1923. The plaintiff failed to commence construction within the stipulated period. On March 9, 1923, the Director of Lands demanded an explanation and threatened rescission. The plaintiff replied, citing financial difficulties, and proposed either an immediate cancellation of the lease or an indefinite extension until the law changed. On March 27, 1923, the Director of Lands responded, stating that “proper consideration will be given your request for an extension.” Relying on this response, the plaintiff continued paying rent (which was accepted) and made improvements to the land at considerable expense. On December 3, 1924, the Director of Lands issued an order cancelling the lease application and terminating the contract, citing the plaintiff’s non-compliance with the construction clause and a new government need to reserve the area for railroad purposes. The plaintiff refused to consent, arguing the cancellation was illegal. The plaintiff filed a complaint seeking to declare the cancellation null and void and to compel officials to approve its building plans. The Court of First Instance sustained a demurrer to the complaint for failure to state a cause of action and dismissed the case.

ISSUE

1. Whether the letter of the Director of Lands dated March 27, 1923, promising “proper consideration” of the extension request, estopped the government from canceling the lease for the plaintiff’s initial failure to construct.
2. Whether the complaint stated a sufficient cause of action for annulment of the cancellation and for mandamus.

RULING

NO, on both issues. The demurrer was correctly sustained, and the complaint was properly dismissed.

1. No Estoppel Against the Government: The Supreme Court held that the Director of Lands’ letter did not constitute a waiver of the government’s right to demand forfeiture. The letter held out no definite promise; it merely stated that the request for extension would be given “proper consideration.” Furthermore, the Director of Lands had no authority to grant such an extension under Section 61 of Act No. 2874 , as that power resided solely with the Secretary of Agriculture and Natural Resources upon recommendation of the Secretary of Commerce and Communications. The plaintiff is presumed to know the law and the limits of the official’s authority. The Court also ruled that the delay in acting on the request and the acceptance of rent did not create an estoppel, as the neglect or omissions of public officers in their public duties cannot work an estoppel against the State.

2. Insufficient Cause of Action: Given the above, the complaint failed to allege facts showing a clear legal right to the reliefs sought (annulment and mandamus). The cancellation order was issued based on a valid contractual breach and a supervening public purpose (railroad reservation). However, the Court noted in *obiter dictum* that, in equity, the government should refund the rent paid for the period after the cancellation was effected (from November 3, 1925), as the rescission was already contemplated at the time of payment. Since the Government was not a party to the action and the issue was not properly pleaded, the Court could not order such a refund in this case.

The judgment of the lower court was affirmed.