CHAPTER 5.

 INTERPRETATION OF CONTRACTS Interpretation of a contract is the determination of the meaning

Art. 1370-1379 of the terms or words used by the parties in their contract.
RULE: Intention of the parties prevails
It is a cardinal rule in the interpretation of contracts that if the terms
RULES WHEN IT CANNOT BE ASCERTAINED of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall
Several meanings Most adequate to render the contract effective
control. The Court must not read into any other intention of the
Various stipulations Interpreted together. contracting parties contradictory to the plain meaning.

Different Which is the most in keeping with the nature and Example:
significations object of the contract. A contract was executed between Shiela and Bon. The
Obscure words/ WILL NOT FAVOR the one who caused the contract recites that it is a sale of parcel of land belonging to
stipulations obscurity Shiela for Php100,000.00. In the contract Shiela described as
the vendor and Bon, the vendee. The terms of the contract
are clear, and it does not appear from the circumstances that
the intention of the parties is contrary to the literal meaning
ABSOLUTELY IMPOSSIBLE to LEAST possible transmission of
of said terms.
ascertain rights. If onerous, greatest
reciprocity of interests.

ABSOLUTELY IMPOSSIBLE to VOID. Article 1371. In order to judge the intention of the
ascertain the PRINCIPAL contracting parties, their contemporaneous and
OBJECT
subsequent acts shall be principally considered.

Article 1370. If the terms of a contract are clear and

leave no doubt upon the intention of the contracting Example:
parties, the literal meaning of its stipulations shall Kristia and Bryan entered into a contract entitled Contract of
control. Lease. Although the contract refers to Kristia as lessor and to
Bryan as Lessee, it states that possession and ownership of
If the words appear to be contrary to the evident the land are transferred to Bryan. The title to the land was
intention of the parties, the latter shall prevail over the given by Kristia to Bryan who registered the land in his
former. (1281) name. Before the date of the contract, Bryan wrote a letter to
Kristia offering to buy the land.
 By their acts, the party clearly indicate that their evident
intention is to make Bryan the owner of the land. Hence, the Article 1373. If some stipulation of any contract
contract should be interpreted as one of sale. should admit of several meanings, it shall be
understood as bearing that import which is most
adequate to render it effectual.
Article 1372. However general the terms of a contract
may be, they shall not be understood to comprehend
things that are distinct and cases that are different from Interpretation of stipulation with several meanings.
those upon which the parties intended to agree. When an agreement is susceptible of several meanings, one of
which would render it effectual, it should be given that
Article 1372 NCC | speaks of… interpretation. Thus, if one interpretation makes a contract valid or
effective and the other makes it illegal or meaningless, the former
Special intent over general intent interpretation is one which is warranted by the rule stated in Article
 Even if the terms used in the contract/agreement may be 1373.
general, the interpretation should NOT ever be far from the
intention of the parties; that intention to be determined Illustration:
according to circumstances. Sabit Singson owns two lands, one he owns exclusively and
 GENERAL RULE: Where in a contract there are general one he co-owns with Irap Estrada. Without specifying, Sabit
and special provisions covering the same subject matter that sells “his parcel of land” to Ate Glow. Irap did not give his
are inconsistent, special provisions prevail over general consent to the sale.
provisions when the two CANNOT stand together.
In this case, the sale should refer to the land owned by Sabit
Article 1372 NCC | example: Singson alone as this would make the contract effectual.
 Charlie is building a house on a 350 sqm. lot with an existing
structure that was less than 350 sqm. in area.
 Ben protested alleging that Charlie could occupy ONLY the Article 1374. The various stipulations of a contract
space where the existing structure lies. shall be interpreted together, attributing to the doubtful
 Charlie, however, argued that accd. to their agreement, he ones that sense which may result from all of them
could occupy the lot. taken jointly.
 Ben’s interpretation is erroneous because if that was the
intention, they could have used the words “portion” or “part”
and not the word “lot”. Interpretations of Various Stipulations of a Contract.
A contract must be interpreted as a whole, and the intention of the Issue: Whether or not that the 2nd mortgage is valid in favor of the
parties is to be gathered from the entire instrument and not from appellees.
particular words, phrases, or clauses. All provisions should, if
possible, be so interpreted as to harmonize with each other.  Ruling:
The mortgage contract should be read in its entirely. If so
CASE: THE BANK OF THE PHILIPPINE ISLANDS vs TY read, it is at once seen that while the making of the 2nd
CAMCO SOBRINO, ET AL. mortgage except with the written consent of the mortgage is
prohibited, the contract continues and states the penalty for
Facts: such violation namely, it gives to the mortgage the right
Ty Camco Sobrino is the registered owner of two parcels of immediately foreclose mortgage. It does not give the
land situated in the municipality of Rosario, Province of mortgages the right to treat the second mortgage as null and
Pangasinan, described in Transfer Certificates of Title Nos. void.
1803 and 1804.
The orders of CFI of Pangasinan are affirmed with cost
On April 12, 1924 Ty Camco Sobrino executed a deed of against the appellant.
first mortgage on these parcels of land in favor of the
Philippine National Bank, and the mortgage was noted on
the back of the transfer certificates of title. Article 1375. Words which may have different
significations shall be understood in that which is most
On February 21, 1930, Ty Camco Sobrino executed a deed in keeping with the nature and object of the contract.
of second mortgage on the same properties in favor of Cu
Yeg Keng and Simon A. Chan Bona, without having secured
the written consent of the Philippine National Bank. The Comment:
mortgagor obtained the certificates of title from this bank. Words used in a contract which are susceptible to two or more
The register of deeds for Pangasinan registered and noted on meanings shall be understood to follow that meaning which is most
the Transfer Certificate of Title Nos. 1803 ad 1804 the in keeping with the nature and object of the agreement.
second mortgage.
Illustration:
On April 14, 1931, the Philippine National Bank filed in the Romeo leased to Elena a roof for the purpose of erecting and
Court of First Instance of Pangasinan, a petition praying that advertising sign. The contract provides for the termination of
the annotation or inscription of the second mortgage be the lease by Elena if a building should be constructed on an
declared null and void and ordered cancelled. adjoining property of such height and to obscure the view of
Elena’s sign. There was erected on the roof of an adjoining
 building a sign which obstructed the view of Elena’s sign. In Answer: Distinguish: If the customs and usages are general,
this case, the term building as the term used in the contract they need not be pleaded. Hence, even without previously
may be interpreted as to include the obstructing sign having being alleged, they may be proved in court.
in mind the nature and object of the contract. Article 1377. The interpretation of obscure words or
stipulations in a contract shall not favor the party who
caused the obscurity.
Article 1376. The usage or custom of the place shall be
borne in mind in the interpretation of the ambiguities
of a contract, and shall fill the omission of stipulations It is just fair not to favor the party who causes any trouble arising
which are ordinarily established. from the contract.

    Contra proferentem-be interpreted strictly against the party who has
Comment: drawn it or be given an interpretation which will be favorable to the
1) Effect of Usage or Custom of the Place other who, upon faith of which, has incurred an obligation.

Examples:  Contracts of adhesion-all their provisions have been drafted by one

a) Rona made a contract with Ferdy regarding “pesetas”. party, and the only participation of the other is signing of his
In the place where the contract was made, Mexican signature or his “adhesion” thereto on the “take it or leave it” basis,
pesetas were more commonly used than Spanish without the right to modify it.
pesetas. The Supreme Court held that the term
“pesetas” should be construed to mean Mexican The ambiguity is in the application for insurance. 
pesetas. 
b) If a contract for a lease of services does not state how Facts: A provision in the application for insurance with the
much compensation should be given, the custom of GSIS states this condition: “That any policy shall be made
the place where the services were rendered should effective on the first day of the month next following the
determine the amount. (Arroyo versus Azur) month the first premium is paid.” Another provision states:
“That failure to deduct from my salary the monthly
2) Pleading and Proof of Customs and Usages premiums shall not make that policy lapse,” and that, “the
premium account shall be considered as indebtedness which
Should customs and usages be pleaded (alleged in the I bind myself to pay the System.”
pleading)?
 Elsa, an employee of the Bureau of Public Works died in an Example:
airplane crash. It appears, however, that the Bureau had not Ana gave her car to Ben. It is not clear in the contract
remitted to GSIS even a single premium. whether it is commodatum or a pure donation.

Issue: Has the insurance taken effect? The Contract should be presumed as a mere commodatum
because it would transmit lesser rights than a donation since
Held: Yes. The ambiguity created by the operation of the Ana retains ownership of her car.
conditions stated in the application should be interpreted
adversely against the GSIS. (Landicho vs. GSIS, 44 SCRA 7 If the contract in question is onerous, the doubt should be
[1972].) settled in favor of the greatest reciprocity of interests.

Example:
Article 1378. When it is absolutely impossible to settle Ana borrowed from Ben P 5,000.00 at 12% interest. It
doubts by the rules established in the preceding cannot be determined from the terms of contract whether the
articles, and the doubts refer to incidental loan is payable in six months or in one year.
circumstances of a gratuitous contract, the least
transmission of rights and interests shall prevail. If the It must be assumed that the period agreed upon is one year
contract is onerous, the doubt shall be settled in favor which results in a greater reciprocity of interests since Ana
of the greatest reciprocity of interests. can use the money for one year, and Ben, on the other hand,
can earn interest due for one year instead of only six months.
If the doubts are cast upon the principal object of the
contract in such a way that it cannot be known what If the doubt refers to the principal object of the contract and
such doubt cannot be resolved thereby leaving the intention
may have been the intention or will of the parties, the
of the parties unknown, the contract shall be null and void.
contract shall be null and void.
Example:
Doubts in contract refer only to incidental circumstances but cannot Ana sold her land to Ben. Ana has many lands. It cannot be
be settled in accordance with previous provisions. determined which land was intended by the parties to be the
subject of the sale.
If doubts refer to incidental circumstances of a gratuitous
contract, such interpretation should be made which would result in Therefore, the contract shall be null, and void and it is as if
the least transmission of rights and interests.  the parties have not entered into any contract at all.
CASE: FERNANDO A. GAITE vs. ISABELO FONACIER For some reason or another, Isabelo Fonacier decided to
This appeal comes to us directly from the Court of First revoke the authority granted by him to Gaite to exploit and
Instance because the claims involved aggregate more than develop the mining claims in question, and Gaite assented
P200,000.00. thereto subject to certain conditions. As a result, a document
entitled “Revocation of Power of Attorney and Contract”
Defendant-appellant Isabelo Fonacier was the owner and/or was executed on December 8, 1954 (Exhibit “A”),wherein
holder, either by himself or in a representative capacity, of Gaite transferred to Fonacier, for the consideration of
11 iron lode mineral claims, known as the Dawahan Group, P20,000.00, plus 10% of the royalties that Fonacier would
situated in the municipality of Jose Panganiban, province of receive from the mining claims, all his rights and interests on
Camarines Norte. all the roads, improvements, and facilities in or outside said
claims, the right to use the business name “Larap Iron
By a “Deed of Assignment” dated September 29, Mines” and its goodwill, and all the records and documents
1952(Exhibit “3”), Fonacier constituted and appointed relative to the mines. In the same document, Gaite
plaintiff-appellee Fernando A. Gaite as his true and lawful transferred to Fonacier all his rights and interests over the
attorney-in-fact to enter into a contract with any individual “24,000 tons of iron ore, more or less” that the former had
or juridical person for the exploration and development of already extracted from the mineral claims, in consideration
the mining claims aforementioned on a royalty basis of not of the sum of P75,000.00, P10,000.00 of which was paid
less than P0.50 per ton of ore that might be extracted upon the signing of the agreement, and the balance of
therefrom. On March 19, 1954, Gaite in turn executed a SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be
general assignment (Record on Appeal, pp. 17-19) paid from and out of the first letter of credit covering the
conveying the development and exploitation of said mining first shipment of iron ores and of the first amount derived
claims into the Larap Iron Mines, a single proprietorship from the local sale of iron ore made by the Larap Mines &
owned solely by and belonging to him, on the same royalty Smelting Co. Inc., its assigns, administrators, or successors
basis provided for in Exhibit “3”. Thereafter, Gaite in interests.
embarked upon the development and exploitation of the
mining claims in question, opening and paving roads within To secure the payment of the said balance of P65,000.00,
and outside their boundaries, making other improvements Fonacier promised to execute in favor of Gaite a surety
and installing facilities therein for use in the development of bond, and pursuant to the promise, Fonacier delivered to
the mines, and in time extracted therefrom what he claims Gaite a surety bond dated December 8, 1954 with himself
and estimated to be approximately 24,000 metric tons of iron (Fonacier) as principal and the Larap Mines and Smelting
ore. Co. and its stockholders George Krakower, Segundina
Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty
as sureties (Exhibit “A-1”). Gaite testified, however, that
when this bond was presented to him by Fonacier together company and its stockholders of the surety bonds delivered
with the “Revocation of Power of Attorney and Contract”, by Fonacier to Gaite (Record on Appeal, pp. 82-94).
Exhibit “A”, on December 8, 1954, he refused to sign said
Exhibit “A” unless another bond underwritten by a bonding Up to December 8, 1955, when the bond Exhibit “B” expired
company was put up by defendants to secure the payment of with respect to the Far Eastern Surety and Insurance
the P65,000.00 balance of their price of the iron ore in the Company, no sale of the approximately 24,000 tons of iron
stockpiles in the mining claims. Hence, a second bond, also ore had been made by the Larap Mines & Smelting Co., Inc.,
dated December 8, 1954 (Exhibit “B”),was executed by the nor had the P65,000.00 balance of the price of said ore been
same parties to the first bond Exhibit “A-1”, with the Far paid to Gaite by Fonacier and his sureties payment of said
Eastern Surety and Insurance Co. as additional surety, but it amount, on the theory that they had lost right to make use of
provided that the liability of the surety company would the period given them when their bond, Exhibit “B”
attach only when there had been an actual sale of iron ore by automatically expired (Exhibits “C” to “C-24”). And when
the Larap Mines & Smelting Co. for an amount of not less Fonacier and his sureties failed to pay as demanded by Gaite,
than P65,000.00, and that, furthermore, the liability of said the latter filed the present complaint against them in the
surety company would automatically expire on December 8, Court of First Instance of Manila (Civil Case No. 29310) for
1955. Both bonds were attached to the “Revocation of Power the payment of the P65,000.00 balance of the price of the
of Attorney and Contract”, Exhibit “A”, and made integral ore, consequential damages, and attorney’s fees.
parts thereof.
All the defendants except Francisco Dante set up the uniform
On the same day that Fonacier revoked the power of attorney defense that the obligation sued upon by Gaite was subject to
he gave to Gaite and the two executed and signed the a condition that the amount of P65,000.00 would be payable
“Revocation of Power of Attorney and Contract”, Exhibit out of the first letter of credit covering the first shipment of
“A”, Fonacier entered into a “Contract of Mining iron ore and/or the first amount derived from the local sale of
Operation”, ceding, transferring, and conveying unto the the iron ore by the Larap Mines & Smelting Co., Inc.; that up
Larap Mines and Smelting Co., Inc. the right to develop, to the time of the filing of the complaint, no sale of the iron
exploit, and explore the mining claims in question, together ore had been made, hence the condition had not yet been
with the improvements therein and the use of the name fulfilled; and that consequently, the obligation was not yet
“Larap Iron Mines” and its good will, in consideration of due and demandable. Defendant Fonacier also contended
certain royalties. Fonacier likewise transferred, in the same that only 7,573 tons of the estimated 24,000 tons of iron ore
document, the complete title to the approximately 24,000 sold to him by Gaite was actually delivered, and
tons of iron ore which he acquired from Gaite, to the Larap counterclaimed for more than P200,000.00 damages.
& Smelting Co., in consideration for the signing by the
At the trial of the case, the parties agreed to limit the Judgment was, accordingly, rendered in favor of plaintiff
presentation of evidence to two issues: Gaite ordering defendants to pay him, jointly and severally,
(1) Whether or not the obligation of Fonacier and his P65,000.00 with interest at 6% per annum from December 9,
sureties to pay Gaite P65,000.00 become due and 1955 until payment, plus costs. From this judgment,
demandable when the defendants failed to renew the defendants jointly appealed to this Court.
surety bond underwritten by the Far Eastern Surety
and Insurance Co., Inc. (Exhibit “B”), which expired During the pendency of this appeal, several incidental
on December 8, 1955; and motions were presented for resolution: a motion to declare
(2) Whether the estimated 24,000 tons of iron ore sold by the appellants Larap Mines & Smelting Co., Inc. and George
plaintiff Gaite to defendant Fonacier were actually in Krakower in contempt, filed by appellant Fonacier, and two
existence in the mining claims when these parties motions to dismiss the appeal as having become academic
executed the “Revocation of Power of Attorney and and a motion for new trial and/or to take judicial notice of
Contract”, Exhibit “A.” certain documents, filed by appellee Gaite. The motion for
contempt is unmeritorious because the main allegation
On the first question, the lower court held that the obligation therein that the appellants Larap Mines & Smelting Co., Inc.
of the defendants to pay plaintiff the P65,000.00 balance of and Krakower had sold the iron ore here in question, which
the price of the approximately 24,000 tons of iron ore was allegedly is “property in litigation”, has not been
one with a term: i.e., that it would be paid upon the sale of substantiated; and even if true, does not make these
sufficient iron ore by defendants, such sale to be effected appellants guilty of contempt, because what is under
within one year or before December 8, 1955; that the giving litigation in this appeal is appellee Gaite’s right to the
of security was a condition precedent to Gait’s giving of payment of the balance of the price of the ore, and not the
credit to defendants; and that as the latter failed to put up a iron ore itself. As for the several motions presented by
good and sufficient security in lieu of the Far Eastern Surety appellee Gaite, it is unnecessary to resolve these motions in
bond (Exhibit “B”) which expired on December 8, 1955, the view of the results that we have reached in this case, which
obligation became due and demandable under Article 1198 we shall hereafter discuss.
of the New Civil Code.
The main issues presented by appellants in this appeal are:
As to the second question, the lower court found that (1) that the lower court erred in holding that the
plaintiff Gaite did have approximately 24,000 tons of iron obligation of appellant Fonacier to pay appellee Gaite
ore at the mining claims in question at the time of the the P65,000.00 (balance of the price of the iron ore in
execution of the contract Exhibit “A.” question) is one with a period or term and not one
with a suspensive condition, and that the term expired
on December 8, 1955; and
 (2) that the lower court erred in not holding that there obligation had never existed. That the parties to the contract
were only 10,954.5 tons in the stockpiles of iron ore Exhibit “A” did not intend any such state of things to prevail
sold by appellee Gaite to appellant Fonacier. is supported by several circumstances:
1) The words of the contract express no contingency in
The first issue involves an interpretation of the following the buyer’s obligation to pay: “The balance of Sixty-
provision in the contract Exhibit “A”: Five Thousand Pesos (P65,000.00) will be paid out of
the first letter of credit covering the first shipment of
That Fernando Gaite or Larap Iron Mines hereby transfers to iron ores . . .” etc. There is no uncertainty that the
Isabelo F. Fonacier all his rights and interests over the payment will have to be made sooner or later; what is
24,000 tons of iron ore, more or less, above-referred to undetermined is merely the exact date at which it will
together with all his rights and interests to operate the mine be made. By the very terms of the contract, therefore,
in consideration of the sum of SEVENTY-FIVE the existence of the obligation to pay is recognized;
THOUSAND PESOS (P75,000.00) which the latter binds to only its maturity or demandability is deferred.
pay as follows: 2) A contract of sale is normally commutative and
onerous: not only does each one of the parties assume
TEN THOUSAND PESOS (P10,000.00) will be paid a correlative obligation (the seller to deliver and
upon the signing of this agreement. transfer ownership of the thing sold and the buyer to
pay the price),but each party anticipates performance
The balance of SIXTY-FIVE THOUSAND PESOS by the other from the very start. While in a sale the
(P65,000.00) will be paid from and out of the first obligation of one party can be lawfully subordinated
letter of credit covering the first shipment of iron ore to an uncertain event, so that the other understands
made by the Larap Mines & Smelting Co., Inc., its that he assumes the risk of receiving nothing for what
assigns, administrators, or successors in interest. he gives (as in the case of a sale of hopes or
expectations, emptio spei), it is not in the usual course
We find the court below to be legally correct in holding that of business to do so; hence, the contingent character
the shipment or local sale of the iron ore is not a condition of the obligation must clearly appear. Nothing is
precedent (or suspensive) to the payment of the balance of found in the record to evidence that Gaite desired or
P65,000.00, but was only a suspensive period or term. What assumed to run the risk of losing his right over the ore
characterizes a conditional obligation is the fact that its without getting paid for it, or that Fonacier understood
efficacy or obligatory force (as distinguished from its that Gaite assumed any such risk. This is proved by
demandability) is subordinated to the happening of a future the fact that Gaite insisted on a bond a to guarantee
and uncertain event; so that if the suspensive condition does payment of the P65,000.00, an not only upon a bond
not take place, the parties would stand as if the conditional by Fonacier, the Larap Mines & Smelting Co., and the
 company’s stockholders, but also on one by a surety would assume the risk of not being paid at all; and
company; and the fact that appellants did put up such that the previous sale or shipment of the ore was not a
bonds indicates that they admitted the definite suspensive condition for the payment of the balance
existence of their obligation to pay the balance of of the agreed price, but was intended merely to fix the
P65,000.00. future date of the payment.
3) To subordinate the obligation to pay the remaining
P65,000.00 to the sale or shipment of the ore as a This issue settled, the next point of inquiry is whether
condition precedent, would be tantamount to leaving appellants, Fonacier and his sureties, still have the right to
the payment at the discretion of the debtor, for the sale insist that Gaite should wait for the sale or shipment of the
or shipment could not be made unless the appellants ore before receiving payment; or, in other words, whether or
took steps to sell the ore. Appellants would thus be not they are entitled to take full advantage of the period
able to postpone payment indefinitely. The granted them for making the payment.
desireability of avoiding such a construction of the
contract Exhibit “A” needs no stressing. We agree with the court below that the appellant have
4) Assuming that there could be doubt whether by the forfeited the right court below that the appellants have
wording of the contract the parties indented a forfeited the right to compel Gaite to wait for the sale of the
suspensive condition or a suspensive period (dies ad ore before receiving payment of the balance of P65,000.00,
quem) for the payment of the P65,000.00, the rules of because of their failure to renew the bond of the Far Eastern
interpretation would incline the scales in favor of “the Surety Company or else replace it with an equivalent
greater reciprocity of interests”, since sale is guarantee. The expiration of the bonding company’s
essentially onerous. The Civil Code of the Philippines, undertaking on December 8, 1955 substantially reduced the
Article 1378, paragraph 1, in fine, provides: security of the vendor’s rights as creditor for the unpaid
If the contract is onerous, the doubt shall be settled in P65,000.00, a security that Gaite considered essential and
favor of the greatest reciprocity of interests and there upon which he had insisted when he executed the deed of
can be no question that greater reciprocity obtains if sale of the ore to Fonacier (Exhibit “A”). The case squarely
the buyer’ obligation is deemed to be actually comes under paragraphs 2 and 3 of Article 1198 of the Civil
existing, with only its maturity (due date) postponed Code of the Philippines:
or deferred, that if such obligation were viewed as
non-existent or not binding until the ore was sold. “ART. 1198. The debtor shall lose every right to make use of
the period:
The only rational view that can be taken is that the (1) . . .
sale of the ore to Fonacier was a sale on credit, and (2) When he does not furnish to the creditor the
not an aleatory contract where the transferor, Gaite, guaranties or securities which he has promised.
 (3) When by his own acts he has impaired said
guaranties or securities after their establishment, Coming now to the second issue in this appeal, which is
and when through fortuitous event they disappear, whether there were really 24,000 tons of iron ore in the
unless he immediately gives new ones equally stockpiles sold by appellee Gaite to appellant Fonacier, and
satisfactory. whether, if there had been a short-delivery as claimed by
appellants, they are entitled to the payment of damages, we
Appellants’ failure to renew or extend the surety company’s must, at the outset, stress two things: first, that this is a case
bond upon its expiration plainly impaired the securities of a sale of a specific mass of fungible goods for a single
given to the creditor (appellee Gaite), unless immediately price or a lump sum, the quantity of “24,000 tons of iron ore,
renewed or replaced. more or less,” stated in the contract Exhibit “A,” being a
mere estimate by the parties of the total tonnage weight of
There is no merit in appellants’ argument that Gaite’s the mass; and second, that the evidence shows that neither of
acceptance of the surety company’s bond with full the parties had actually measured of weighed the mass, so
knowledge that on its face it would automatically expire that they both tried to arrive at the total quantity by making
within one year was a waiver of its renewal after the an estimate of the volume thereof in cubic meters and then
expiration date. No such waiver could have been intended, multiplying it by the estimated weight per ton of each cubic
for Gaite stood to lose and had nothing to gain barely; and if meter.
there was any, it could be rationally explained only if the
appellants had agreed to sell the ore and pay Gaite before the The sale between the parties is a sale of a specific mass or
surety company’s bond expired on December 8, 1955. But in iron ore because no provision was made in their contract for
the latter case the defendants-appellants’ obligation to pay the measuring or weighing of the ore sold in order to
became absolute after one year from the transfer of the ore to complete or perfect the sale, nor was the price of P75,000,00
Fonacier by virtue of the deed Exhibit “A.”. agreed upon by the parties based upon any such
measurement. (see Art. 1480, second par., New Civil Code).
All the alternatives, therefore, lead to the same result: that The subject matter of the sale is, therefore, a determinate
Gaite acted within his rights in demanding payment and object, the mass, and not the actual number of units or tons
instituting this action one year from and after the contract contained therein, so that all that was required of the seller
(Exhibit “A”) was executed, either because the appellant Gaite was to deliver in good faith to his buyer all of the ore
debtors had impaired the securities originally given and found in the mass, notwithstanding that the quantity
thereby forfeited any further time within which to pay; or delivered is less than the amount estimated by them (Mobile
because the term of payment was originally of no more than Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co.,
one year, and the balance of P65,000.00 became due and Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil
payable thereafter. Code). There is no charge in this case that Gaite did not
deliver to appellants all the ore found in the stockpiles in the Metallurgical Division of the Bureau of Mines, a
mining claims in questions; Gaite had, therefore, complied government pensionado to the States and a mining
with his promise to deliver, and appellants in turn are bound engineering graduate of the Universities of Nevada and
to pay the lump price. California, with almost 22 years of experience in the Bureau
of Mines. This witness placed the tonnage factor of every
But assuming that plaintiff Gaite undertook to sell, and cubic meter of iron ore at between 3 metric tons as minimum
appellants undertook to buy, not a definite mass, but to 5 metric tons as maximum. This estimate, in turn, closely
approximately 24,000 tons of ore, so that any substantial corresponds to the average tonnage factor of 3.3 adopted in
difference in this quantity delivered would entitle the buyers his corrected report (Exhibits “FF” and FF-1″) by engineer
to recover damages for the short-delivery, was there really a Nemesio Gamatero, who was sent by the Bureau of Mines to
short-delivery in this case? the mining claims involved at the request of appellant
Krakower, precisely to make an official estimate of the
We think not. As already stated, neither of the parties had amount of iron ore in Gaite’s stockpiles after the dispute
actually measured or weighed the whole mass of ore cubic arose.
meter by cubic meter, or ton by ton. Both parties predicate
their respective claims only upon an estimated number of Even granting, then, that the estimate of 6,609 cubic meters
cubic meters of ore multiplied by the average tonnage factor of ore in the stockpiles made by appellant’s witness Cipriano
per cubic meter. Manlañgit is correct, if we multiply it by the average tonnage
factor of 3.3 tons to a cubic meter, the product is 21,809.7
Now, appellee Gaite asserts that there was a total of 7,375 tons, which is not very far from the estimate of 24,000 tons
cubic meters in the stockpiles of ore that he sold to Fonacier, made by appellee Gaite, considering that actual weighing of
while appellants contend that by actual measurement, their each unit of the mass was practically impossible, so that a
witness Cirpriano Manlañgit found the total volume of ore in reasonable percentage of error should be allowed anyone
the stockpiles to be only 6.609 cubic meters. As to the making an estimate of the exact quantity in tons found in the
average weight in tons per cubic meter, the parties are again mass. It must not be forgotten that the contract Exhibit “A”
in disagreement, with appellants claiming the correct expressly stated the amount to be 24,000 tons, more or less.
tonnage factor to be 2.18 tons to a cubic meter, while (ch. Pine River Logging & Improvement Co. vs U.S., 279,
appellee Gaite claims that the correct tonnage factor is about 46 L. Ed. 1164).
3.7.
There was, consequently, no short-delivery in this case as
In the face of the conflict of evidence, we take as the most would entitle appellants to the payment of damages, nor
reliable estimate of the tonnage factor of iron ore in this case could Gaite have been guilty of any fraud in making any
to be that made by Leopoldo F. Abad, chief of the Mines and misrepresentation to appellants as to the total quantity of ore
 in the stockpiles of the mining claims in question, as charged  Section 14. Peculiar signification of terms. — The terms of
by appellants, since Gaite’s estimate appears to be a writing are presumed to have been used in their primary
substantially correct. and general acceptation, but evidence is admissible to show
that they have a local, technical, or otherwise peculiar
signification, and were so used and understood in the
Article 1379. The principles of interpretation stated in particular instance, in which case the agreement must be
Rule 123 of the Rules of Court shall likewise be construed accordingly.
observed in the construction of contracts.   Section 15. Written words control printed. — When an
instrument consists partly of written words and partly of a
Article 1379 NCC | speaks of… printed form, and the two are inconsistent, the former
Interpretation of Documents under Rule 130 controls the latter.
 Section 10. Interpretation of a writing according to its legal  Section 16. Experts and interpreters to be used in explaining
meaning. — The language of a writing is to be interpreted certain writings. — When the characters in which an
according to the legal meaning it bears in the place of its instrument is written are difficult to be deciphered, or the
execution, unless the parties intended otherwise. language is not understood by the court, the evidence of
 Section 11. Instrument construed so as to give effect to all persons skilled in deciphering the characters, or who
provisions. — In the construction of an instrument, where understand the language, is admissible to declare the
there are several provisions or particulars, such a characters or the meaning of the language.
construction is, if possible, to be adopted as will give effect  Section 17. Of two constructions, which preferred. — When
to all. the terms of an agreement have been intended in a different
 Section 12. Interpretation according to intention; general sense by the different parties to it, that sense is to prevail
and particular provisions. — In the construction of an against either party in which he supposed the other
instrument, the intention of the parties is to be pursued; and understood it, and when different constructions of a
when a general and a particular provision are inconsistent, provision are otherwise equally proper, that is to be taken
the latter is paramount to the former. So a particular intent which is the most favorable to the party in whose favor the
will control a general one that is inconsistent with it. provision was made.
 Section 13. Interpretation according to circumstances. —  Section 18. Construction in favor of natural right. — When
For the proper construction of an instrument, the an instrument is equally susceptible of two interpretations,
circumstances under which it was made, including the one in favor of natural right and the other against it, the
situation of the subject thereof and of the parties to it, may former is to be adopted.
be shown, so that the judge may be placed in the position of  Section 19. Interpretation according to usage. — An
those who language he is to interpret. instrument may be construed according to usage, in order to
determine its true character.
Article 1379 NCC | example:
 Genjo and Deshi are both Chinese immigrants who
acquired Filipino citizenship.
 Genjo wants to buy the parcel of land of Deshi for the
construction of his commercial building.
 Being both ethnically and culturally Chinese, they wrote
their document of sale in Cantonese.
 If ever there will be a litigation between the two parties
with regards to this contract, experts and interpreters may
be asked to declare the characters or the meaning of the
language used as it is NOT understood by the court (Sec
10, Rule 130).