CHAPTER 5.

 INTERPRETATION OF CONTRACTS Interpretation of a contract is the determination of the meaning

Art. 1370-1379 of the terms or words used by the parties in their contract.
RULE: Intention of the parties prevails
It is a cardinal rule in the interpretation of contracts that if the terms
RULES WHEN IT CANNOT BE ASCERTAINED of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall
Several meanings Most adequate to render the contract effective
control. The Court must not read into any other intention of the
Various stipulations Interpreted together. contracting parties contradictory to the plain meaning.

Different Which is the most in keeping with the nature and Example:
significations object of the contract. A contract was executed between Shiela and Bon. The
Obscure words/ WILL NOT FAVOR the one who caused the contract recites that it is a sale of parcel of land belonging to
stipulations obscurity Shiela for Php100,000.00. In the contract Shiela described as
the vendor and Bon, the vendee. The terms of the contract
are clear, and it does not appear from the circumstances that
the intention of the parties is contrary to the literal meaning
ABSOLUTELY IMPOSSIBLE to LEAST possible transmission of
of said terms.
ascertain rights. If onerous, greatest
reciprocity of interests.

ABSOLUTELY IMPOSSIBLE to VOID. Article 1371. In order to judge the intention of the
ascertain the PRINCIPAL contracting parties, their contemporaneous and
OBJECT
subsequent acts shall be principally considered.

Article 1370. If the terms of a contract are clear and

leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall
control.
If the words appear to be contrary to the evident
intention of the parties, the latter shall prevail over the
former. (1281)
Example:
Kristia and Bryan entered into a contract entitled Contract of
Lease. Although the contract refers to Kristia as lessor and to
Bryan as Lessee, it states that possession and ownership of
the land are transferred to Bryan. The title to the land was
given by Kristia to Bryan who registered the land in his
name. Before the date of the contract, Bryan wrote a letter to
Kristia offering to buy the land.
 By their acts, the party clearly indicate that their evident
intention is to make Bryan the owner of the land. Hence, the
contract should be interpreted as one of sale.
Article 1372. However general the terms of a contract
may be, they shall not be understood to comprehend
things that are distinct and cases that are different from
those upon which the parties intended to agree.
Article 1372 NCC | speaks of…
Special intent over general intent
 Even if the terms used in the contract/agreement may be
general, the interpretation should NOT ever be far from the
intention of the parties; that intention to be determined
according to circumstances.
 GENERAL RULE: Where in a contract there are general
and special provisions covering the same subject matter that
are inconsistent, special provisions prevail over general
provisions when the two CANNOT stand together.
Article 1372 NCC | example:
 Charlie is building a house on a 350 sqm. lot with an existing
structure that was less than 350 sqm. in area.
 Ben protested alleging that Charlie could occupy ONLY the
space where the existing structure lies.
 Charlie, however, argued that accd. to their agreement, he
could occupy the lot.
 Ben’s interpretation is erroneous because if that was the
intention, they could have used the words “portion” or “part”
and not the word “lot”.
Article 1373. If some stipulation of any contract
should admit of several meanings, it shall be
understood as bearing that import which is most
adequate to render it effectual.
Interpretation of stipulation with several meanings.
When an agreement is susceptible of several meanings, one of
which would render it effectual, it should be given that
interpretation. Thus, if one interpretation makes a contract valid or
effective and the other makes it illegal or meaningless, the former
interpretation is one which is warranted by the rule stated in Article
1373.
Illustration:
Sabit Singson owns two lands, one he owns exclusively and
one he co-owns with Irap Estrada. Without specifying, Sabit
sells “his parcel of land” to Ate Glow. Irap did not give his
consent to the sale.
In this case, the sale should refer to the land owned by Sabit
Singson alone as this would make the contract effectual.
Article 1374. The various stipulations of a contract
shall be interpreted together, attributing to the doubtful
ones that sense which may result from all of them
taken jointly.
Interpretations of Various Stipulations of a Contract.
A contract must be interpreted as a whole, and the intention of the
parties is to be gathered from the entire instrument and not from
particular words, phrases, or clauses. All provisions should, if
possible, be so interpreted as to harmonize with each other.  Ruling:
CASE: THE BANK OF THE PHILIPPINE ISLANDS vs TY
CAMCO SOBRINO, ET AL.
Facts:
Ty Camco Sobrino is the registered owner of two parcels of
land situated in the municipality of Rosario, Province of
Pangasinan, described in Transfer Certificates of Title Nos.
1803 and 1804.
On April 12, 1924 Ty Camco Sobrino executed a deed of
first mortgage on these parcels of land in favor of the
Philippine National Bank, and the mortgage was noted on
the back of the transfer certificates of title.
On February 21, 1930, Ty Camco Sobrino executed a deed
of second mortgage on the same properties in favor of Cu
Yeg Keng and Simon A. Chan Bona, without having secured
the written consent of the Philippine National Bank. The
mortgagor obtained the certificates of title from this bank.
The register of deeds for Pangasinan registered and noted on
the Transfer Certificate of Title Nos. 1803 ad 1804 the
second mortgage.
On April 14, 1931, the Philippine National Bank filed in the
Court of First Instance of Pangasinan, a petition praying that
the annotation or inscription of the second mortgage be
declared null and void and ordered cancelled.
Issue: Whether or not that the 2nd mortgage is valid in favor of the
appellees.
The mortgage contract should be read in its entirely. If so
read, it is at once seen that while the making of the 2nd
mortgage except with the written consent of the mortgage is
prohibited, the contract continues and states the penalty for
such violation namely, it gives to the mortgage the right
immediately foreclose mortgage. It does not give the
mortgages the right to treat the second mortgage as null and
void.
The orders of CFI of Pangasinan are affirmed with cost
against the appellant.
Article 1375. Words which may have different
significations shall be understood in that which is most
in keeping with the nature and object of the contract.
Comment:
Words used in a contract which are susceptible to two or more
meanings shall be understood to follow that meaning which is most
in keeping with the nature and object of the agreement.
Illustration:
Romeo leased to Elena a roof for the purpose of erecting and
advertising sign. The contract provides for the termination of
the lease by Elena if a building should be constructed on an
adjoining property of such height and to obscure the view of
Elena’s sign. There was erected on the roof of an adjoining
 building a sign which obstructed the view of Elena’s sign. In
this case, the term building as the term used in the contract
may be interpreted as to include the obstructing sign having
in mind the nature and object of the contract.
Article 1376. The usage or custom of the place shall be
borne in mind in the interpretation of the ambiguities
of a contract, and shall fill the omission of stipulations
which are ordinarily established.
   
Comment:
1) Effect of Usage or Custom of the Place
Examples:  Contracts of adhesion-all their provisions have been drafted by one
a) Rona made a contract with Ferdy regarding “pesetas”.
In the place where the contract was made, Mexican
pesetas were more commonly used than Spanish
pesetas. The Supreme Court held that the term
“pesetas” should be construed to mean Mexican
pesetas. 
b) If a contract for a lease of services does not state how
much compensation should be given, the custom of
the place where the services were rendered should
determine the amount. (Arroyo versus Azur)
2) Pleading and Proof of Customs and Usages
Should customs and usages be pleaded (alleged in the
pleading)?
Answer: Distinguish: If the customs and usages are general,
they need not be pleaded. Hence, even without previously
being alleged, they may be proved in court.
Article 1377. The interpretation of obscure words or
stipulations in a contract shall not favor the party who
caused the obscurity.
It is just fair not to favor the party who causes any trouble arising
from the contract.
Contra proferentem-be interpreted strictly against the party who has
drawn it or be given an interpretation which will be favorable to the
other who, upon faith of which, has incurred an obligation.
party, and the only participation of the other is signing of his
signature or his “adhesion” thereto on the “take it or leave it” basis,
without the right to modify it.
The ambiguity is in the application for insurance. 
Facts: A provision in the application for insurance with the
GSIS states this condition: “That any policy shall be made
effective on the first day of the month next following the
month the first premium is paid.” Another provision states:
“That failure to deduct from my salary the monthly
premiums shall not make that policy lapse,” and that, “the
premium account shall be considered as indebtedness which
I bind myself to pay the System.”
 Elsa, an employee of the Bureau of Public Works died in an
airplane crash. It appears, however, that the Bureau had not
remitted to GSIS even a single premium.
Issue: Has the insurance taken effect?
Held: Yes. The ambiguity created by the operation of the
conditions stated in the application should be interpreted
adversely against the GSIS. (Landicho vs. GSIS, 44 SCRA 7
[1972].)
Article 1378. When it is absolutely impossible to settle
doubts by the rules established in the preceding
articles, and the doubts refer to incidental
circumstances of a gratuitous contract, the least
transmission of rights and interests shall prevail. If the
contract is onerous, the doubt shall be settled in favor
of the greatest reciprocity of interests.
If the doubts are cast upon the principal object of the
contract in such a way that it cannot be known what
may have been the intention or will of the parties, the
contract shall be null and void.
Doubts in contract refer only to incidental circumstances but cannot
be settled in accordance with previous provisions.
If doubts refer to incidental circumstances of a gratuitous
contract, such interpretation should be made which would result in
the least transmission of rights and interests.  the parties have not entered into any contract at all.
Example:
Ana gave her car to Ben. It is not clear in the contract
whether it is commodatum or a pure donation.
The Contract should be presumed as a mere commodatum
because it would transmit lesser rights than a donation since
Ana retains ownership of her car.
If the contract in question is onerous, the doubt should be
settled in favor of the greatest reciprocity of interests.
Example:
Ana borrowed from Ben P 5,000.00 at 12% interest. It
cannot be determined from the terms of contract whether the
loan is payable in six months or in one year.
It must be assumed that the period agreed upon is one year
which results in a greater reciprocity of interests since Ana
can use the money for one year, and Ben, on the other hand,
can earn interest due for one year instead of only six months.
If the doubt refers to the principal object of the contract and
such doubt cannot be resolved thereby leaving the intention
of the parties unknown, the contract shall be null and void.
Example:
Ana sold her land to Ben. Ana has many lands. It cannot be
determined which land was intended by the parties to be the
subject of the sale.
Therefore, the contract shall be null, and void and it is as if
CASE: FERNANDO A. GAITE vs. ISABELO FONACIER
This appeal comes to us directly from the Court of First
Instance because the claims involved aggregate more than
P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or
holder, either by himself or in a representative capacity, of
11 iron lode mineral claims, known as the Dawahan Group,
situated in the municipality of Jose Panganiban, province of
Camarines Norte.
By a “Deed of Assignment” dated September 29,
1952(Exhibit “3”), Fonacier constituted and appointed
plaintiff-appellee Fernando A. Gaite as his true and lawful
attorney-in-fact to enter into a contract with any individual
or juridical person for the exploration and development of
the mining claims aforementioned on a royalty basis of not
less than P0.50 per ton of ore that might be extracted
therefrom. On March 19, 1954, Gaite in turn executed a
general assignment (Record on Appeal, pp. 17-19)
conveying the development and exploitation of said mining
claims into the Larap Iron Mines, a single proprietorship
owned solely by and belonging to him, on the same royalty
basis provided for in Exhibit “3”. Thereafter, Gaite
embarked upon the development and exploitation of the
mining claims in question, opening and paving roads within
and outside their boundaries, making other improvements
and installing facilities therein for use in the development of
the mines, and in time extracted therefrom what he claims
and estimated to be approximately 24,000 metric tons of iron
ore.
For some reason or another, Isabelo Fonacier decided to
revoke the authority granted by him to Gaite to exploit and
develop the mining claims in question, and Gaite assented
thereto subject to certain conditions. As a result, a document
entitled “Revocation of Power of Attorney and Contract”
was executed on December 8, 1954 (Exhibit “A”),wherein
Gaite transferred to Fonacier, for the consideration of
P20,000.00, plus 10% of the royalties that Fonacier would
receive from the mining claims, all his rights and interests on
all the roads, improvements, and facilities in or outside said
claims, the right to use the business name “Larap Iron
Mines” and its goodwill, and all the records and documents
relative to the mines. In the same document, Gaite
transferred to Fonacier all his rights and interests over the
“24,000 tons of iron ore, more or less” that the former had
already extracted from the mineral claims, in consideration
of the sum of P75,000.00, P10,000.00 of which was paid
upon the signing of the agreement, and the balance of
SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be
paid from and out of the first letter of credit covering the
first shipment of iron ores and of the first amount derived
from the local sale of iron ore made by the Larap Mines &
Smelting Co. Inc., its assigns, administrators, or successors
in interests.
To secure the payment of the said balance of P65,000.00,
Fonacier promised to execute in favor of Gaite a surety
bond, and pursuant to the promise, Fonacier delivered to
Gaite a surety bond dated December 8, 1954 with himself
(Fonacier) as principal and the Larap Mines and Smelting
Co. and its stockholders George Krakower, Segundina
Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty
as sureties (Exhibit “A-1”). Gaite testified, however, that
when this bond was presented to him by Fonacier together
with the “Revocation of Power of Attorney and Contract”,
Exhibit “A”, on December 8, 1954, he refused to sign said
Exhibit “A” unless another bond underwritten by a bonding
company was put up by defendants to secure the payment of
the P65,000.00 balance of their price of the iron ore in the
stockpiles in the mining claims. Hence, a second bond, also
dated December 8, 1954 (Exhibit “B”),was executed by the
same parties to the first bond Exhibit “A-1”, with the Far
Eastern Surety and Insurance Co. as additional surety, but it
provided that the liability of the surety company would
attach only when there had been an actual sale of iron ore by
the Larap Mines & Smelting Co. for an amount of not less
than P65,000.00, and that, furthermore, the liability of said
surety company would automatically expire on December 8,
1955. Both bonds were attached to the “Revocation of Power
of Attorney and Contract”, Exhibit “A”, and made integral
parts thereof.
On the same day that Fonacier revoked the power of attorney
he gave to Gaite and the two executed and signed the
“Revocation of Power of Attorney and Contract”, Exhibit
“A”, Fonacier entered into a “Contract of Mining
Operation”, ceding, transferring, and conveying unto the
Larap Mines and Smelting Co., Inc. the right to develop,
exploit, and explore the mining claims in question, together
with the improvements therein and the use of the name
“Larap Iron Mines” and its good will, in consideration of
certain royalties. Fonacier likewise transferred, in the same
document, the complete title to the approximately 24,000
tons of iron ore which he acquired from Gaite, to the Larap
& Smelting Co., in consideration for the signing by the
company and its stockholders of the surety bonds delivered
by Fonacier to Gaite (Record on Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit “B” expired
with respect to the Far Eastern Surety and Insurance
Company, no sale of the approximately 24,000 tons of iron
ore had been made by the Larap Mines & Smelting Co., Inc.,
nor had the P65,000.00 balance of the price of said ore been
paid to Gaite by Fonacier and his sureties payment of said
amount, on the theory that they had lost right to make use of
the period given them when their bond, Exhibit “B”
automatically expired (Exhibits “C” to “C-24”). And when
Fonacier and his sureties failed to pay as demanded by Gaite,
the latter filed the present complaint against them in the
Court of First Instance of Manila (Civil Case No. 29310) for
the payment of the P65,000.00 balance of the price of the
ore, consequential damages, and attorney’s fees.
All the defendants except Francisco Dante set up the uniform
defense that the obligation sued upon by Gaite was subject to
a condition that the amount of P65,000.00 would be payable
out of the first letter of credit covering the first shipment of
iron ore and/or the first amount derived from the local sale of
the iron ore by the Larap Mines & Smelting Co., Inc.; that up
to the time of the filing of the complaint, no sale of the iron
ore had been made, hence the condition had not yet been
fulfilled; and that consequently, the obligation was not yet
due and demandable. Defendant Fonacier also contended
that only 7,573 tons of the estimated 24,000 tons of iron ore
sold to him by Gaite was actually delivered, and
counterclaimed for more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the
presentation of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his
sureties to pay Gaite P65,000.00 become due and
demandable when the defendants failed to renew the
surety bond underwritten by the Far Eastern Surety
and Insurance Co., Inc. (Exhibit “B”), which expired
on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by
plaintiff Gaite to defendant Fonacier were actually in
existence in the mining claims when these parties
executed the “Revocation of Power of Attorney and
Contract”, Exhibit “A.”
On the first question, the lower court held that the obligation
of the defendants to pay plaintiff the P65,000.00 balance of
the price of the approximately 24,000 tons of iron ore was
one with a term: i.e., that it would be paid upon the sale of
sufficient iron ore by defendants, such sale to be effected
within one year or before December 8, 1955; that the giving
of security was a condition precedent to Gait’s giving of
credit to defendants; and that as the latter failed to put up a
good and sufficient security in lieu of the Far Eastern Surety
bond (Exhibit “B”) which expired on December 8, 1955, the
obligation became due and demandable under Article 1198
of the New Civil Code.
As to the second question, the lower court found that
plaintiff Gaite did have approximately 24,000 tons of iron
ore at the mining claims in question at the time of the
execution of the contract Exhibit “A.”
Judgment was, accordingly, rendered in favor of plaintiff
Gaite ordering defendants to pay him, jointly and severally,
P65,000.00 with interest at 6% per annum from December 9,
1955 until payment, plus costs. From this judgment,
defendants jointly appealed to this Court.
During the pendency of this appeal, several incidental
motions were presented for resolution: a motion to declare
the appellants Larap Mines & Smelting Co., Inc. and George
Krakower in contempt, filed by appellant Fonacier, and two
motions to dismiss the appeal as having become academic
and a motion for new trial and/or to take judicial notice of
certain documents, filed by appellee Gaite. The motion for
contempt is unmeritorious because the main allegation
therein that the appellants Larap Mines & Smelting Co., Inc.
and Krakower had sold the iron ore here in question, which
allegedly is “property in litigation”, has not been
substantiated; and even if true, does not make these
appellants guilty of contempt, because what is under
litigation in this appeal is appellee Gaite’s right to the
payment of the balance of the price of the ore, and not the
iron ore itself. As for the several motions presented by
appellee Gaite, it is unnecessary to resolve these motions in
view of the results that we have reached in this case, which
we shall hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the
obligation of appellant Fonacier to pay appellee Gaite
the P65,000.00 (balance of the price of the iron ore in
question) is one with a period or term and not one
with a suspensive condition, and that the term expired
on December 8, 1955; and
 (2) that the lower court erred in not holding that there
were only 10,954.5 tons in the stockpiles of iron ore
sold by appellee Gaite to appellant Fonacier.
The first issue involves an interpretation of the following
provision in the contract Exhibit “A”:
That Fernando Gaite or Larap Iron Mines hereby transfers to
Isabelo F. Fonacier all his rights and interests over the
24,000 tons of iron ore, more or less, above-referred to
together with all his rights and interests to operate the mine
in consideration of the sum of SEVENTY-FIVE
THOUSAND PESOS (P75,000.00) which the latter binds to
pay as follows:
TEN THOUSAND PESOS (P10,000.00) will be paid
upon the signing of this agreement.
The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00) will be paid from and out of the first
letter of credit covering the first shipment of iron ore
made by the Larap Mines & Smelting Co., Inc., its
assigns, administrators, or successors in interest.
We find the court below to be legally correct in holding that
the shipment or local sale of the iron ore is not a condition
precedent (or suspensive) to the payment of the balance of
P65,000.00, but was only a suspensive period or term. What
characterizes a conditional obligation is the fact that its
efficacy or obligatory force (as distinguished from its
demandability) is subordinated to the happening of a future
and uncertain event; so that if the suspensive condition does
not take place, the parties would stand as if the conditional
obligation had never existed. That the parties to the contract
Exhibit “A” did not intend any such state of things to prevail
is supported by several circumstances:
1) The words of the contract express no contingency in
the buyer’s obligation to pay: “The balance of Sixty-
Five Thousand Pesos (P65,000.00) will be paid out of
the first letter of credit covering the first shipment of
iron ores . . .” etc. There is no uncertainty that the
payment will have to be made sooner or later; what is
undetermined is merely the exact date at which it will
be made. By the very terms of the contract, therefore,
the existence of the obligation to pay is recognized;
only its maturity or demandability is deferred.
2) A contract of sale is normally commutative and
onerous: not only does each one of the parties assume
a correlative obligation (the seller to deliver and
transfer ownership of the thing sold and the buyer to
pay the price),but each party anticipates performance
by the other from the very start. While in a sale the
obligation of one party can be lawfully subordinated
to an uncertain event, so that the other understands
that he assumes the risk of receiving nothing for what
he gives (as in the case of a sale of hopes or
expectations, emptio spei), it is not in the usual course
of business to do so; hence, the contingent character
of the obligation must clearly appear. Nothing is
found in the record to evidence that Gaite desired or
assumed to run the risk of losing his right over the ore
without getting paid for it, or that Fonacier understood
that Gaite assumed any such risk. This is proved by
the fact that Gaite insisted on a bond a to guarantee
payment of the P65,000.00, an not only upon a bond
by Fonacier, the Larap Mines & Smelting Co., and the
 company’s stockholders, but also on one by a surety
company; and the fact that appellants did put up such
bonds indicates that they admitted the definite
existence of their obligation to pay the balance of
P65,000.00.
3) To subordinate the obligation to pay the remaining
P65,000.00 to the sale or shipment of the ore as a
condition precedent, would be tantamount to leaving
the payment at the discretion of the debtor, for the sale
or shipment could not be made unless the appellants
took steps to sell the ore. Appellants would thus be
able to postpone payment indefinitely. The
desireability of avoiding such a construction of the
contract Exhibit “A” needs no stressing.
4) Assuming that there could be doubt whether by the
wording of the contract the parties indented a
suspensive condition or a suspensive period (dies ad
quem) for the payment of the P65,000.00, the rules of
interpretation would incline the scales in favor of “the
greater reciprocity of interests”, since sale is
essentially onerous. The Civil Code of the Philippines,
Article 1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in
favor of the greatest reciprocity of interests and there
can be no question that greater reciprocity obtains if
the buyer’ obligation is deemed to be actually
existing, with only its maturity (due date) postponed
or deferred, that if such obligation were viewed as
non-existent or not binding until the ore was sold.
The only rational view that can be taken is that the
sale of the ore to Fonacier was a sale on credit, and
not an aleatory contract where the transferor, Gaite,
would assume the risk of not being paid at all; and
that the previous sale or shipment of the ore was not a
suspensive condition for the payment of the balance
of the agreed price, but was intended merely to fix the
future date of the payment.
This issue settled, the next point of inquiry is whether
appellants, Fonacier and his sureties, still have the right to
insist that Gaite should wait for the sale or shipment of the
ore before receiving payment; or, in other words, whether or
not they are entitled to take full advantage of the period
granted them for making the payment.
We agree with the court below that the appellant have
forfeited the right court below that the appellants have
forfeited the right to compel Gaite to wait for the sale of the
ore before receiving payment of the balance of P65,000.00,
because of their failure to renew the bond of the Far Eastern
Surety Company or else replace it with an equivalent
guarantee. The expiration of the bonding company’s
undertaking on December 8, 1955 substantially reduced the
security of the vendor’s rights as creditor for the unpaid
P65,000.00, a security that Gaite considered essential and
upon which he had insisted when he executed the deed of
sale of the ore to Fonacier (Exhibit “A”). The case squarely
comes under paragraphs 2 and 3 of Article 1198 of the Civil
Code of the Philippines:
“ART. 1198. The debtor shall lose every right to make use of
the period:
(1) . . .
(2) When he does not furnish to the creditor the
guaranties or securities which he has promised.
 (3) When by his own acts he has impaired said
guaranties or securities after their establishment,
and when through fortuitous event they disappear,
unless he immediately gives new ones equally
satisfactory.
Appellants’ failure to renew or extend the surety company’s
bond upon its expiration plainly impaired the securities
given to the creditor (appellee Gaite), unless immediately
renewed or replaced.
There is no merit in appellants’ argument that Gaite’s
acceptance of the surety company’s bond with full
knowledge that on its face it would automatically expire
within one year was a waiver of its renewal after the
expiration date. No such waiver could have been intended,
for Gaite stood to lose and had nothing to gain barely; and if
there was any, it could be rationally explained only if the
appellants had agreed to sell the ore and pay Gaite before the
surety company’s bond expired on December 8, 1955. But in
the latter case the defendants-appellants’ obligation to pay
became absolute after one year from the transfer of the ore to
Fonacier by virtue of the deed Exhibit “A.”.
All the alternatives, therefore, lead to the same result: that
Gaite acted within his rights in demanding payment and
instituting this action one year from and after the contract
(Exhibit “A”) was executed, either because the appellant
debtors had impaired the securities originally given and
thereby forfeited any further time within which to pay; or
because the term of payment was originally of no more than
one year, and the balance of P65,000.00 became due and
payable thereafter.
Coming now to the second issue in this appeal, which is
whether there were really 24,000 tons of iron ore in the
stockpiles sold by appellee Gaite to appellant Fonacier, and
whether, if there had been a short-delivery as claimed by
appellants, they are entitled to the payment of damages, we
must, at the outset, stress two things: first, that this is a case
of a sale of a specific mass of fungible goods for a single
price or a lump sum, the quantity of “24,000 tons of iron ore,
more or less,” stated in the contract Exhibit “A,” being a
mere estimate by the parties of the total tonnage weight of
the mass; and second, that the evidence shows that neither of
the parties had actually measured of weighed the mass, so
that they both tried to arrive at the total quantity by making
an estimate of the volume thereof in cubic meters and then
multiplying it by the estimated weight per ton of each cubic
meter.
The sale between the parties is a sale of a specific mass or
iron ore because no provision was made in their contract for
the measuring or weighing of the ore sold in order to
complete or perfect the sale, nor was the price of P75,000,00
agreed upon by the parties based upon any such
measurement. (see Art. 1480, second par., New Civil Code).
The subject matter of the sale is, therefore, a determinate
object, the mass, and not the actual number of units or tons
contained therein, so that all that was required of the seller
Gaite was to deliver in good faith to his buyer all of the ore
found in the mass, notwithstanding that the quantity
delivered is less than the amount estimated by them (Mobile
Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co.,
Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil
Code). There is no charge in this case that Gaite did not
deliver to appellants all the ore found in the stockpiles in the
mining claims in questions; Gaite had, therefore, complied
with his promise to deliver, and appellants in turn are bound
to pay the lump price.
But assuming that plaintiff Gaite undertook to sell, and
appellants undertook to buy, not a definite mass, but
approximately 24,000 tons of ore, so that any substantial
difference in this quantity delivered would entitle the buyers
to recover damages for the short-delivery, was there really a
short-delivery in this case?
We think not. As already stated, neither of the parties had
actually measured or weighed the whole mass of ore cubic
meter by cubic meter, or ton by ton. Both parties predicate
their respective claims only upon an estimated number of
cubic meters of ore multiplied by the average tonnage factor
per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375
cubic meters in the stockpiles of ore that he sold to Fonacier,
while appellants contend that by actual measurement, their
witness Cirpriano Manlañgit found the total volume of ore in
the stockpiles to be only 6.609 cubic meters. As to the
average weight in tons per cubic meter, the parties are again
in disagreement, with appellants claiming the correct
tonnage factor to be 2.18 tons to a cubic meter, while
appellee Gaite claims that the correct tonnage factor is about
3.7.
In the face of the conflict of evidence, we take as the most
reliable estimate of the tonnage factor of iron ore in this case
to be that made by Leopoldo F. Abad, chief of the Mines and
Metallurgical Division of the Bureau of Mines, a
government pensionado to the States and a mining
engineering graduate of the Universities of Nevada and
California, with almost 22 years of experience in the Bureau
of Mines. This witness placed the tonnage factor of every
cubic meter of iron ore at between 3 metric tons as minimum
to 5 metric tons as maximum. This estimate, in turn, closely
corresponds to the average tonnage factor of 3.3 adopted in
his corrected report (Exhibits “FF” and FF-1″) by engineer
Nemesio Gamatero, who was sent by the Bureau of Mines to
the mining claims involved at the request of appellant
Krakower, precisely to make an official estimate of the
amount of iron ore in Gaite’s stockpiles after the dispute
arose.
Even granting, then, that the estimate of 6,609 cubic meters
of ore in the stockpiles made by appellant’s witness Cipriano
Manlañgit is correct, if we multiply it by the average tonnage
factor of 3.3 tons to a cubic meter, the product is 21,809.7
tons, which is not very far from the estimate of 24,000 tons
made by appellee Gaite, considering that actual weighing of
each unit of the mass was practically impossible, so that a
reasonable percentage of error should be allowed anyone
making an estimate of the exact quantity in tons found in the
mass. It must not be forgotten that the contract Exhibit “A”
expressly stated the amount to be 24,000 tons, more or less.
(ch. Pine River Logging & Improvement Co. vs U.S., 279,
46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as
would entitle appellants to the payment of damages, nor
could Gaite have been guilty of any fraud in making any
misrepresentation to appellants as to the total quantity of ore
 in the stockpiles of the mining claims in question, as charged
by appellants, since Gaite’s estimate appears to be
substantially correct.
Article 1379. The principles of interpretation stated in
Rule 123 of the Rules of Court shall likewise be
observed in the construction of contracts.   Section 15. Written words control printed. — When an
Article 1379 NCC | speaks of…
Interpretation of Documents under Rule 130
 Section 10. Interpretation of a writing according to its legal
meaning. — The language of a writing is to be interpreted
according to the legal meaning it bears in the place of its
execution, unless the parties intended otherwise.
 Section 11. Instrument construed so as to give effect to all
provisions. — In the construction of an instrument, where
there are several provisions or particulars, such a
construction is, if possible, to be adopted as will give effect
to all.
 Section 12. Interpretation according to intention; general
and particular provisions. — In the construction of an
instrument, the intention of the parties is to be pursued; and
when a general and a particular provision are inconsistent,
the latter is paramount to the former. So a particular intent
will control a general one that is inconsistent with it.
 Section 13. Interpretation according to circumstances. —
For the proper construction of an instrument, the
circumstances under which it was made, including the
situation of the subject thereof and of the parties to it, may
be shown, so that the judge may be placed in the position of
those who language he is to interpret.
 Section 14. Peculiar signification of terms. — The terms of
a writing are presumed to have been used in their primary
and general acceptation, but evidence is admissible to show
that they have a local, technical, or otherwise peculiar
signification, and were so used and understood in the
particular instance, in which case the agreement must be
construed accordingly.
instrument consists partly of written words and partly of a
printed form, and the two are inconsistent, the former
controls the latter.
 Section 16. Experts and interpreters to be used in explaining
certain writings. — When the characters in which an
instrument is written are difficult to be deciphered, or the
language is not understood by the court, the evidence of
persons skilled in deciphering the characters, or who
understand the language, is admissible to declare the
characters or the meaning of the language.
 Section 17. Of two constructions, which preferred. — When
the terms of an agreement have been intended in a different
sense by the different parties to it, that sense is to prevail
against either party in which he supposed the other
understood it, and when different constructions of a
provision are otherwise equally proper, that is to be taken
which is the most favorable to the party in whose favor the
provision was made.
 Section 18. Construction in favor of natural right. — When
an instrument is equally susceptible of two interpretations,
one in favor of natural right and the other against it, the
former is to be adopted.
 Section 19. Interpretation according to usage. — An
instrument may be construed according to usage, in order to
determine its true character.
Article 1379 NCC | example:
 Genjo and Deshi are both Chinese immigrants who
acquired Filipino citizenship.
 Genjo wants to buy the parcel of land of Deshi for the
construction of his commercial building.
 Being both ethnically and culturally Chinese, they wrote
their document of sale in Cantonese.
 If ever there will be a litigation between the two parties
with regards to this contract, experts and interpreters may
be asked to declare the characters or the meaning of the
language used as it is NOT understood by the court (Sec
10, Rule 130).