G.R. No.

L-11827             July 31, 1961

FERNANDO A. GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES & SMELTING CO.,
INC., SEGUNDINA VIVAS, FRNACISCO DANTE, PACIFICO ESCANDOR and
FERNANDO TY, defendants-appellants.

SUSPENSIVE PERIOD OR TERM; NOT SUSPENSIVE CONDITION

SALE ON CREDIT; NOT ALEATORY CONTRACT
SUBJECT MATTER IS DETERMINATE

FACTS:
Isabelo Fonacier, herein defendant-appellant, was the owner of 11 iron lode mineral
claims, known as the Dawahan Group. By a "Deed of Assignment". Fonacier constituted and
appointed Fernando A. Gaite, herein plaintiff-appellee, as his lawful attorney-in-fact to enter into
a contract with any individual or juridical person for the exploration and development of the
mining claims on royalty basis. The latter in turn executed a general assignment conveying the
development and exploitation of said mining claims into the Larap Iron Mines owned by him.
Gaite claimed that an estimated 24,000 metric tons of iron ore was extracted by his company
through exploitation.

Isabelo Fonacier revoke the authority granted by him to Gaite to exploit and develop the
mining claims in question. Gaite executed a document “Revocation of Power of Attorney and
Contract" wherein the latter transferred to Fonacier for the consideration of P200,000, plus 10
percent of royalties that Fonacier would receive from mining claims. In addition, Gaite
transferred to Fonacier all his rights and interest over the 24,000 tons of iron ore extracted in
consideration of P75,000 in which P10,000 was paid upon signing the agreement, and the rest of
the P65,000 will be paid upon first shipment of iron ores and first amount derived from the local
sale of iron ore made by the Larap Mines & Smelting Co. Inc.

Fonacier promised to execute in favor of Gaite a surety bond, and pursuant to the promise
which was delivered to the latter with the former as a principal and with Larap Mines and
Smelting Co. and its stockholders as sureties. However, Gaite refused to sign unless there is
another bonding company to secure the payment of P65,000. A second bond was executed with
the Far Eastern Surety and Insurance Co. as additional surety. It stated 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., and the said liability would expire on December 8, 1955.

However, no sale of the approximately 24,000 tons of iron ore had been made by
the company until the day of December 8, 1955 when the surety bond expired, and no payment
of the amount of P65,000 made to Gaite. Thereon, Gaite filed a complaint against Fonacier and
its stockholders for the payment of P65,000 balance, damages, and attorney’s fees.

The defendants contends that the obligation was not yet due and demandable for the fact
that no shipment of iron ore has been made, nor a sale by the company has been executed.
Therefore, the condition had not yet been fulfilled. In addition, Fonacier claims that only 7,573
tons of the estimated 24,000 tons of iron ore sold to him by Gaite was actually delivered.

The Court of First Instance ruled that the defendant’s obligation to pay P65,000 to Gaite
became due and demandable, due to the fact that the former failed to put up a good and sufficient
security which expired on December 8, 1955 under Article 1198.

The Court decided in favor of Gaite ordering the defendants to pay 65,000 with 6 percent
interest per annum until payment.

ISSUE: WON, the defendant-appellant is obliged to pay the P65,000 to Gaite when the surety
bond expired?

RULING:

YES. The defendant-appellant is obliged to pay the P65,000 to Gaite.

The shipment or local sale of the iron ore is not a suspensive condition (condition
precendent) to the payment of the balance of P65,000.00, but was only a suspensive period or
term. By the very terms of the contract, the existence of the obligation to pay is recognized; only
its maturity or demandability is deferred. 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 evidenced by surety bond by a third
party surety company that was requested by Gaite, that was put up by the defendant which
indicates that they admitted the definite existence of their obligation to pay the balance of
P65,000.00.

The rules of interpretation would incline the scales in favor of "the greater reciprocity of
interests", since sale is essentially onerous. Article 1378, paragraph 1 of NCC provides: “If the
contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.”

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.

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
(Article 1198 NCC). 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. Gaite acted within his rights in demanding payment and
instituting this action one year from and after the contract was executed.
ISSUE OF ACTUAL NUMBER OF TONS SOLD:

- The subject matter of the sale is 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,
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.
- Gaite had, therefore, complied with his promise to deliver, and appellants in turn are
bound to pay the lump price.

DECISION:

- Affirmed lower court’s decision.

- Contract of sale is commutative and onerous

When a suspensive condition is left exclusively to the will of the debtor, the very existence of the
obligation is affected. Moreover, there are two kinds of period. [2] When an obligation is
demandable after the lapse of a period, it is a suspensive period 

An aleatory contract is a contract where performance of the promise is dependent on the
occurrence of a fortuitous event.  (Ex. Fire Insurance Company, Life Insurance Company)

GAITE VS FONACIER

- Suspensive condition vs Suspensive period / term

- Sale on credit vs aleatory contract of sale
- Article 1378 NCC
- Article 1198 NCC