Gaite v Fonacier Facts: Fonacier was the owner of an 11 lode mineral claim situated in Camarines Norte.

. Through a Deed of Assignment, he appointed plaintiff Gaite as his true and lawful attorney-in-fact to enter into contract with any individual or juridical person for the exploration and development of the mining claims Gaite exected a general assignment conveying the development and exploration to Larap Iron Mines, a sigle proprietorship that he himself owns. o He then embarked on developing and exploiting the mining claims. o He opened and paved roads within and outside the boundaries; he made other improvements and installations o In time, he extracted approximately 24 000 metric tons of iron ore. For some reason, Fonacier decided to revoke the authority he gave to Gaite. Gaite agreed, but for several conditions. As a results, they executed a document entitled A Revocation of Power of Attorney and Conract o In this contract, Gaite transferred to Fonacier all his rights and interests on all the roads, improvements, and installations, as well as the right for the business name, Larap Iron Mines. o In return, Fonacier is to pay P75,000 where P10, 000 will be paid at the signing of the agreement while the remaining P65, 000 will be paid from and out of the first letter of credit covering the first shipment of iron ores nad the first amount derived from the local sale of iron made by Larap Mines. o To secure the P65, 000, a surety bond was delivered by Fonacier to Gaite. o But Gaite wanted to make sure, so Fonacier executed a second surety bond, with the Far Eastern Surety Insurance as additional surety (a contract that is to expire in one year) December 1955 came and the bond between Fonacier and Far Eastern expired. At the same time, no sale of the iron ore had been made by the Larap Mines, nor had the P65, 000 balance been paid to Gaite. With Fonaciers failure to pay, Gaite instituted the present action at the Court of First Instance. According to the defendants (Fonacier and his sureties), the onligation sued upon by Gaite was subject to a condition that the amount of P65, 000 would be payable out of the first amount derived from the local sale. o Since there is no sale yet, that condition has not yet been fulfilled and consequently, the obligation to pay has not yet become due and demandable. (Suspensive condition) Trial court ruled that Fonaciers obligation to pay Gaite is one with a term and not one with a suspensive condition.

Issue: W/N the obligation of Fonacier to pay Gaite is one with a term and not one with a suspensive condition. Held: The obligation of Fonacier is one with a term, not a suspensive condition. Doctrine: 1. Interpretation of Exhibit A Revocation of Power of Attorney and Contract The lower court is right in saying that the shipment or local sale of the iron is not a condition precedent (or suspensive) but was only a term. o It is not a conditional obligation because in a conditional obligation, the onligatory force is subordinated to the happening of a future and uncertain event; so that if the event does not take place, the parties would stand as if the conditional obligation never existed. o The parties did not intend such state of things to prevail: The words in the contract express no contingency in the buyers obligation to pay (P65, 000 will be paid out of). It is certain that the payment will be made. What is uncertain is the exact date at which it will be made. Nothing is found in the contract that Gaite assumed to run a risk of losing his right over the ore without getting paid for it. This is proved by the fact that Gaite insisted on a bond to guarantee the payment of P65, 000 o To subordinate the obligation to pay the remaining P65, 000 to the sale or shipment of the ore as a condition would be tantamount to leaving the payment to the discretion of the debtor. Fonacier could thus be able to postpone payment indefinitely. 2. Do Fonacier and his sureties still have the right to insist that Gaite should wait for the sale or shipment of ore before receiving the payment? No. They have forfeited their right to compel Gaite to wait for the sale or shipment because they failed to renew their bond with far Eastern Surety Company. This reduced the security on the part of Gaite as creditor for the unpaid P65, 000. This comes squarely under paragraphs 2 and 3 of Article 1198 of the Civil Code o The debtor shall lose right to make use of the period: (2) When he does not furnish to the creditor the guaranties and securities which he has promised; and

(3) When by his own acts he has impaired said guarantees after their establishment... o Fonaciers failure to renew the surety companys bond upon its expiration plainly impaired the securities of the creditor.