G.R. No. L-11827. July 31, 1961.
FERNANDO A. GAITE, plaintiff-appellee, vs. ISABELO FONACIER, et al., defendants-appellants.

FACTS

Defendant Isabelo Fonacier owned mining claims and appointed plaintiff Fernando Gaite as his attorney-in-fact to develop them on a royalty basis. Gaite developed the mines and extracted an estimated 24,000 metric tons of iron ore. Fonacier later revoked Gaite’s authority, leading to an agreement dated December 8, 1954. Under this “Revocation of Power of Attorney and Contract,” Gaite transferred his rights, including the extracted ore, to Fonacier for P75,000. A down payment of P10,000 was made, with the P65,000 balance payable from the proceeds of the first shipment or local sale of the ore by Fonacier’s company. This payment was secured by a surety bond from Fonacier, his company Larap Mines & Smelting Co., Inc., its stockholders, and the Far Eastern Surety and Insurance Company, which was to expire on December 8, 1955.
No sale of the ore occurred by December 8, 1955. Gaite demanded payment of the P65,000, arguing the defendants lost their right to the period granted when the surety bond expired. Upon refusal, Gaite filed a complaint for collection. The defendants uniformly defended that their obligation was conditional, payable only from the first sale proceeds, and since no sale occurred, the debt was not yet due and demandable. Fonacier also counterclaimed, alleging Gaite delivered only 7,573 tons, not 24,000, constituting fraud.

ISSUE

The primary issue is whether the obligation to pay the P65,000 balance became due and demandable upon the expiration of the surety bond on December 8, 1955, despite no sale of the iron ore having been made.

RULING

The Supreme Court affirmed the lower court’s decision, ordering defendants to pay the balance. The Court ruled the obligation became due and demandable. The agreement created a period for payment, not a suspensive condition. The bond’s expiration date, December 8, 1955, was set for the benefit of the debtors (Fonacier and his sureties). Under Article 1197 of the Civil Code, when a period is established for the benefit of the debtor, the creditor may demand fulfillment after the period expires. By fixing the bond’s expiry, the debtors chose a definite date for the obligation to mature. Their failure to pay by that date, regardless of a sale, made the debt immediately demandable. The Court rejected the defense of a suspensive condition, noting the parties intended a period, as the bond itself contemplated expiration. On the counterclaim for short delivery, the Court found Gaite’s estimate of 24,000 tons “more or less” was substantially correct based on expert testimony on tonnage factors, and thus no fraud or breach was proven.