Case Digest: GAITE vs FONACIER, G.R. No. L-11827

GAITE vs FONACIER, G.R. No. L-11827, July 31, 1961, 2 SCRA 831

Subject: Obligations and Contracts

FACTS

Fonacier, owner of mining claims, constituted Gaite as his attorney-in-fact. Gaite was authorized to enter into a contract with other persons with respect to the mining claims. Gaite then entered into a contract with Larap Iron Mines, a company Gaite solely owned, to develop the mining claims. Later, Fonacier abruptly decided to revoke Gaite’s authority as attorney-in-fact. Afterwards, Gaite sold the developments his company made in the mining claims areas and the ore already mined for a sum of money to Fonacier. Fonacier secured the sale with a surety company. Part of the money was paid upon sale while the other part was payable out of the first loan of credit covering the first shipment of iron ore and the first amount derived from the local sale of the iron ore. After the surety expired, Gaite demanded payment of the remainder of the purchase price but Fonacier refused arguing no sale of ironore had yet taken place.

ISSUE

WON the selling of the iron ores is a suspensive condition for paying Gaite.

RULING

NO, the selling of the iron ores is not a suspensive condition for paying Gaite.

Under the law (Art 1181), in conditional obligations, the acquisition of the rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

In this case, the sale is not a suspensive condition but is only a suspensive period or term. This interpretation is supported by: (1) the contract expresses no contingency in the buyer ’s obligation to pay. The contract recognizes the existence of an obligation to pay and only the maturity is deferred; (2) Gaite never desired or assumed to run the risk of losing his right over the ore without getting paid for it as shown by his insistence on a surety; (3) Treating the condition as a suspensive condition would leave payment at the debtor’s discretion because the ore will be sold only when the debtor wants it to be sold; and, (4) in onerous contracts the rules of interpretation favor the greater reciprocity of interest and because sale is onerous this rule applies. Greater reciprocity is obtained if the buyer’s obligation to pay is deemed existing compared to such obligation non-existing until the ore was sold.