G.R. No. L-8170; August 27, 1913
L. O. HIBBERD, plaintiff-appellant, vs. ESTATE OF JAMES P. MCELROY, defendant-appellee.

FACTS

L. O. Hibberd and James P. McElroy entered into a contract on November 25, 1910, concerning ten mining claims. Under the contract, Hibberd had the exclusive right to possess, exploit, and take all profits from the claims for one year, and was obligated to perform all required assessment work. After the first year, if McElroy was in good health, he would assume co-management with Hibberd. If McElroy was not in good health, Hibberd would continue exclusive management, paying half of the net proceeds to McElroy after expenses. The first year’s operation resulted in a loss, making further profitable operation impossible. After the first year, Hibberd demanded that the administrator of McElroy’s estate (McElroy having died) perform the estate’s share of the assessment work for the subsequent period. The administrator refused. Hibberd performed the work himself to protect the claims and filed a claim for P1,000 (the estate’s share) against the estate. The Court of First Instance disallowed the claim, interpreting the contract as obligating Hibberd to perform all assessment work indefinitely at his own expense.

ISSUE

Whether, under the contract, Hibberd was obligated to perform and bear the entire cost of the annual assessment work on the mining claims for periods after the first year, or whether the estate of McElroy was liable to reimburse him for one-half of that cost.

RULING

The Supreme Court reversed the judgment of the Court of First Instance and allowed Hibberd’s claim. The contract did not obligate Hibberd to bear the entire cost of assessment work beyond the first year unconditionally. Interpreting the contract as a whole, and applying Articles 1283, 1284, and 1285 of the Civil Code, the Court found it was intended that Hibberd would perform the assessment work for the first year unconditionally. For any subsequent period where he managed the property exclusively due to McElroy’s incapacity or death, the assessment work was an expense of administration and exploitation, to be paid from the proceeds of operation. Since there were no proceeds, the obligation to perform the work necessary to protect the common property fell upon both co-owners under Article 395 of the Civil Code. By refusing to contribute, the administrator did not renounce the estate’s interest in the property. Therefore, Hibberd, who performed the work to preserve the common asset, was entitled to reimbursement from the estate for one-half of the expense incurred.