CASE DIGEST

G.R. No. L-48194 March 15, 1990

JOSE M. JAVIER and ESTRELLA F. JAVIER, petitioners,
vs.
COURT OF APPEALS and LEONARDO TIRO, respondents.

REGALADO, J.:

FACTS:
Private respondent is a holder of an ordinary timber license

covering 2,535 hectares in the town of Medina, Misamis Oriental.

On February 15, 1966 he executed a "Deed of Assignment” in

favour of the petitioners to assign, transfer and convey his shares of

stocks in the TIMBERWEALTH CORPORATION in the total amount of

P120, 000.00 in which P20, 000.00 shall be paid upon signing of the

contract and the balance of P100, 000.00 shall be paid in P10, 000.00

every shipment of export logs actually produced from the forest

concession.

At the time the said deed of assignment was executed, private

respondent had a pending application for an additional forest

concession southwest of and adjoining the area of the concession

subject of the deed of assignment. Hence, on February 28, 1966,

private respondent and petitioners entered into another "Agreement"

which stipulates that in the event of the approval of the additional

concession, the former’s rights shall be transferred to the latter in

consideration for the sum of P30, 000.00.

On November 18, 1966, the private respondent’s forest

concession was renewed up to May 12, 1967, but since the concession
 consisted of only 2,535 hectares, he was therein informed that he is

given until May 12, 1967 to form an organization such as a

cooperative, partnership or corporation with other adjoining licensees

so as to have a total holding area of 20,000.00

On April 10, 1967, the petitioners, now acting as timber license

holders by virtue of the deed of assignment, entered into a Forest

Consolidation Agreement with other ordinary timber license holders.

On July 16, 1968, for failure of petitioners to pay the balance

due under the two deeds of assignment, private respondent filed an

action against petitioners. The petitioners contend that private

respondent failed his contractual obligations and the conditions for the

enforceability of the obligations did not materialize. Private respondent

then replied that the deed of assignment did not only transfer his

shares of stocks but his rights and interest in the logging concession.

The trial court rendered judgment for the petitioners, however

the Court of Appeals reversed the decision. Hence, this petition.

ISSUE:

1. Whether or not the deed of assignment dated February 15, 1966 is null

and void because of the total absence of consideration.

2. Whether or not the agreement of February 28, 1966 is null and void for

non-fulfilment of the conditions stated therein.

RULING:
1. No. As found by the Court of Appeals, the true cause or

consideration of said deed was the transfer of the forest concession

 of private respondent to petitioners for P120,000.00. The

contemporaneous and subsequent acts of the petitioners and

private respondent revealed that the cause stated in the questioned

deed of assignment is false. It is settled that the previous and

simultaneous and subsequent acts of the parties are properly

cognizable indica of their true intention. The deed of assignment of

February 15, 1966 is a relatively simulated contract which states a

false cause or consideration, or one where the parties conceal their

true agreement. A contract with a false consideration is not null and

void per se. Under Article 1346 of the Civil Code, a relatively

simulated contract, when it does not prejudice a third person and is

not intended for any purpose contrary to law, morals, good customs,

public order or public policy binds the parties to their real

agreement.

2. As to the alleged nullity of the agreement dated February 28, 1966,

the Supreme Court agreed with petitioners that they cannot be held

liable thereon. The efficacy of said deed of assignment is subject to

the condition that the application of private respondent for an

additional area for forest concession be approved by the Bureau of

Forestry. Since private respondent did not obtain that approval, said

deed produces no effect. When a contract is subject to a

suspensive condition, its birth or effectivity can take place only if

and when the event which constitutes the condition happens or is

fulfilled. 28 If the suspensive condition does not take place, the

parties would stand as if the conditional obligation had never

existed. The said agreement is a bilateral contract which gave rise

to reciprocal obligations, that is, the obligation of private respondent

to transfer his rights in the forest concession over the additional

area and, on the other hand, the obligation of petitioners to pay

P30,000.00. The demandability of the obligation of one party

depends upon the fulfillment of the obligation of the other. In this

case, the failure of private respondent to comply with his obligation

negates his right to demand performance from petitioners.

Moreover, under the second paragraph of Article 1461 of the Civil

Code, the efficacy of the sale of a mere hope or expectancy is

deemed subject to the condition that the thing will come into

existence. In this case, since private respondent never acquired any

right over the additional area for failure to secure the approval of the

Bureau of Forestry, the agreement executed therefor, which had for

its object the transfer of said right to petitioners, never became

effective or enforceable.