Gaite v.

Fonacier
2 SCRA 830
Commutative v. Aleatory

Facts:
Fonacier, Respondent, is the owner and holder or 11 iron lode mineral claims known as the Dawahan
Group
Respondent constituted and appointed petitioner, Gaite, as his true and lawful attorney-in-fact to enter
into a contract with any individual or judicial person for the exploration and development of the mining
claims on a royalty basis
Petitioner then executed a general assignment conveying the development and exploitation of said
mining claims into the Larap Iron Mine, a single proprietorship belonging to him
o From this, petitioner extracted 24,000 metric tons of iron ore
Respondent decided to revoke the authority granted by him to petitioner to exploit and develop the
mining claimspetitioner conceded but subject to certain conditions
A document entitled Revocation of Power of Attorney and Contract was thereafter executed:
o Gaite would transfer to Fonacier, for 20,000 pesos plus 10% of the royalties the:
Mining claims
Rights and interests on all the facilities built therein
The use of the business name Larap Iron Mines and its goodwill
All the documents and records relative to the mines
o In the same document, Gaite transferred to Fonacier all rights and interests over the 24,000
tons of iron ore, more or less, that the former had already extracted from the mineral claims for
the sum of P75,000, P10,000 of which was paid upon signing the agreement
The 65,00 balance will be paid at the first letter credit upon the shipment of iron ore or
the sufficient sale of such
Fonacier executed 2 surety bonds in favor of Gaite to secure the payment of remaining P65,000
o One of the bonds was executed with the Far Eastern Surety and Insurance Co (as an additional
surety)
However, insurance company provided that its liability will only attach 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 and that the bond will automatically expire on
Dec. 8, 1955
The bond with Far Eastern expired. No sale of the approximately 24,000 tons of iron ore had been
made by the Larap Mines. The P65k balance of the price of the said ore has not been paid to Gaite by
Fonacier.
Respondents argue that the obligation sued upon by Gaite was subject to a condition that the
amount of P65K 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 Larap Mines
RTC held that the obligation of defendant to pay the plaintiff the amount of P65K for ores was one with
a termthat it would be paid upon the sale of sufficient iron ore by defendants to be effected within
effected one year
o The giving of security was a condition precedent to Gaites giving of credit to defendants
o Fonacier failed to put up a good and sufficient security in lieu of the Far Eastern Surety bond
which expired. Thereafter the obligation became due and demandable under Art. 1198 of CC
o The RTC also found that 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

Issue:
1. W/N the RTC erred in holding that the obligation of Fonacier was one with a period or termNO
- The words of the contract express no contingency in the buyers obligation to paythere is no
uncertainty that the payment will have to be made sooner or later
i. What is undermined is merely the exact date at which it will be made ONLY THE
MATURITY OR DEMANDABILITY IS DEFERRED
- A contract of sale is normally COMMUTATIVE and ONEROUS
 i. Not only does each party assume a correlative obligation, but each party
ANTICIPATES PERFORMANCE by the other from the very start
ii. While in a sale, the obligation of one party can be lawfully subordinated to an uncertain
event, so that the other understands he assumes the risk, IT IS NOT IN THE USUAL
COURSE OF BUSINESS TO DO SOTHE CONTINGENT CHARACTER OF THE
OBLIGATION MUST CLEARLY APPEAR
- In the case at bar
i. Nothing is found in the record to evidence that Gaite desired to assume the risk of losing
his right over the ore without getting paid for it, or that Fonacier understood that Gaite
assumed any such risk
1. Shown when Gaite insisted on a bond to guarantee payment
ii. To subordinate the obligation to pay the remaining P65K 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
- SINCE SALE IS ONEROUS, THE RULES OF INTERPRETATION WOULD INCLINE THE
SCALES IN FAVOR OF THE GREATER RECIPROCITY OF INTERESTS
i. Greater reciprocity obtains if they buyers obligation is deemed to be actually existing,
with only its maturity postponed or deferred
ii. 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 Court also held that the appellants have forfeited the right to compel Gaite to wait for the
sale of the ore before receiving payment because of their failure to renew the Far Eastern bond
or replace it with an equivalent guarantee
2. W/N the RTC erred in not holding that there were only 10,954.5 tons in stockpiles of iron ore
sold by Gaite to appellant Fonacier
- The Court held that the sale between the parties is a sale of a specific mass of iron ore,
because no provision was made in their contract measuring or weighing of the ore sold in order
to complete or perfect the sale, nor the price of P75K agreed upon by the parties based on any
such measurement
- The subject matter of the sale, is therefore, a determinate object, the mass, and not the
actual number of units or tons contained therein
i. Therefore all that Gaite was required to deliver in good faith was all of the ore
found in the mass
ii. GAITE HAD THEREFORE COMPLIED WITH HIS PROMISE TO DELIVER, AND
APPELLANTS IN TURN ARE BOUND TO PAY THE LUMP PRICE
Lam v. Kodak Phils.
778 SCRA 926
Bilateral and Reciprocal

Facts:
The Lam Spouses argue that respondent Kodak Philippines breach of their contract of sale entitles
them to damages more than the amount awarded by the CA
The Lam Spouses and Kodak entered into an agreement for the sale of 3 units of Kodak Minilab
System 22XL in the amount of P1.7M per unit
Kodak delivered one unit of the Minilab Equipment in Tagum, Davao Province. The Lam Spouses
issued PDCs amounting to P35K each for 12 months as payment for the 1st delivered unit, with the 1st
check due on March 31,1992
The Lam Spouses requested Kodak to not negotiate the check dated March 31, 1992 allegedly due to
insufficiency of funds
o However, both checks were negotiated by Kodak, and were honored by the bank
o The 10 other check were subsequently dishonored after the Lam Spouses ordered the bank to
stop payment
Kodak cancelled the sale and demanded that the Lam Spouses to return the unit it delivered together
with its accessories
The Lam Spouses ignored the demand but also rescinded the contract on account of Kodaks failure to
deliver the 2 remaining Minilab Equipment units
The RTC issued a decision in favor of Kodak ordering the seizure of the equipment which included the
lone delivered unit, its standard accessories, and a separate generator set
The Lam Spouses filed a petition in the CA to set aside the orders issued by the RTC. The case was
then remanded back to the RTC
The RTC found that Kodak defaulted in the performance of its obligations under its agreement with the
Lam Spouses
o It held that Kodaks failure to deliver 2 out of 3 units of the equipment cause the Lam Spouses to
stop paying for the rest of the installments
o The RTC invoked Art. 1521 of the CC: where by a contract of sale the seller is bound to send
the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them
within a reasonable time
What constitutes reasonable times is dependent on the circumstances availing both on
the part of the seller and the buyer
o Kodak failed to give sufficient explanation for its failure to deliver all 3 units within a reasonable
time
o The trial court found:
There should have been simultaneous delivery on account of the circumstances
surrounding the transaction
Even after the 1st delivery no delivery was made despite repeated demands from
the defendants and despite the fact no installments were due
It was implicit in the letter of agreement that delivery within a reasonable time was of the
essence
At least 2 checks were honored
o HOWEVER, the RTC also ruled that when the Lam Spouses accepted the delivery of the 1st
unit, they became liable for the fair value of the goods received
Art. 1522: in the event the buyer accepts incomplete delivery and uses the goods so
delivered, not then knowing that there would not be any further delivery by the seller, the
buyer is still liable for the value of the property received
Failure of delivery of the other units did not thereby give unto them the right to suspend
payment of the unit delivered
CA agreed with RTC but with modifications due to the obligation being divisible
 o Art. 1225: In determining the divisibility of an obligation, the following factors may be
considered, to wit: (1) the will or intention of the parties, (2) objective or purpose of the
stipulated prestation, (3) nature of the thing, (4) provisions of the law affecting the prestation
o CA found that the intention of the parties is to be bound separately for each equipment as
shown by the separate purchase price for each unit
It was evident in the contract that it was severable in character as demonstrated by the
separate purchase price for each of the equipment
Under this premise, Sps. Lam shall be liable for the entire amount of the purchase price
of the equipment delivered considering that Kodak had already fulfilled its obligation to
deliver
o CA invoked Article 1191: the power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him
The CA ruled that both parties must be restored to their original situation, as far as
practicable, as if the contract was never entered into
o The Sps. Lam were ordered to relinquish possession of the equipment and its standard
accessories, while Kodak was ordered to return the amount of P270K tendered by the Sps. Lam
as partial payment

Issue: W/N the contract between petitioners and respondent are severable, divisible and susceptible of partial
performanceNO
The Letter Agreement contemplated a package deal involving 3 units of Kodak Minilab System 22XL
o The intention of the parties is for there to be a single transaction covering all 3 units of the
Minilab Equipmentrespondents obligation was to deliver all products purchased under a
package:
There was only 1 agreement covering all 3 units of the equipment and their accessories
The letter agreement specified only 1 purpose of the buyer, which was to obtain these
units for 3 different outlets
The 19% multiple discount order discount was applied to all 3 acquired units, as well as
the no downpayment term
The Court held that the intent must prevail even though the articles involved are physically separable
and capable of being paid for and delivered individually (Art. 1225)
o There was no indication in the Letter Agreement that the units petitioners ordered were covered
by 3 separate transactions
o In turn, respondent was entitled to payment of all 3 Minilab Equipment units, payable by
installments
The CA correctly ordered for restitution since both parties opted for rescission under Art. 1191
o The contract between the parties is one of sale, where one party obligates himself to
transfer the ownership and deliver a determinate thing, while the other pays a certain
price in money or its equivalent
o A contract of sale is perfected upon the meeting of minds as to the object and the price,
and the parties may reciprocally demand the performance of their respective obligations
from that point on
Art. 1191 has the effect of mutual restitution
o Rescission abrogates the contract from its inception and requires a mutual restitution of
benefits received
o IN THE CASE AT BAR:
Petitioners must relinquish possession of the delivered equipment and
accessories, while respondent must return the amount tendered by petitioners as
partial payment for the unit received
o Rescission need not be judicially invokedimplied in RECIPROCAL OBLIGATIONS
The right to resolve allows an injured party to minimize the damages he may
suffer on account of the other partys failure to perform what is incumbent upon
him
However, the Court also held that the damages sought by petitioners must be equally tempered on
account of their own failure to pay the rest of the installments for the delivered unit