Pages v. Basilan Lumber Company
REITERATIONFacts
The Antecedents: Plaintiff Abelardo Pages, owner of a lumber concession and holder of Forest License No. 24-F, entered into a contract (Exhibit B) with defendant Basilan Lumber Company. The contract stipulated that Pages would sell all logs produced from his concession to Basilan Lumber at specified prices, for a term of ten years, subject to the duration of his license. Basilan Lumber agreed to buy the logs, transport Pages' equipment for overhaul and repair at its own expense, lend its equipment to Pages' area, advance P10,000.00, and reimburse Pages for operational expenses in addition to the purchase price of the logs. The contract was approved by the Bureau of Forestry. Procedural History: Pages filed a complaint against Basilan Lumber for breach of contract and damages, alleging that the defendant removed logging equipment and technical men, thereby stopping operations. The defendant moved for dismissal, arguing that the contract was void for not expressing the true intent of the parties and for having an illegal cause and consideration contrary to Bureau of Forestry regulations. The trial court granted the motion and dismissed the complaint. The Petition: Plaintiff-appellant appealed the dismissal, claiming the trial court erred in dismissing the complaint.
Issue(s)
Whether a contract that does not express the true intent of the parties and is simulated to circumvent administrative regulations can be the basis for a breach of contract claim. Whether an action for breach of contract can be maintained when the agreement fails to fix a period for performance. Whether the defendant was in breach for failing to purchase logs that had not yet been scaled or delivered to the agreed location.
Ruling
The Supreme Court affirmed the order of the trial court dismissing the complaint, holding that the contract was void and invalid, and that the plaintiff could not demand performance without first having a period fixed by the court.
Ratio Decidendi
On Issue 1: The Court found that Exhibit B was a simulated contract that did not express the true intent of the parties. The evidence showed that while the written agreement made it appear that Pages was the operator, the actual arrangement—consented to by Pages—was for Basilan Lumber to conduct and finance all logging operations. This simulation was performed to deceive the Bureau of Forestry, which had previously rejected a direct operation agreement. Because the contract was simulated to bypass government policy and forestry regulations, the Court gave weight to the actual conduct of the parties over the written terms. On Issue 2: Under Article 1197 of the Civil Code, if an obligation does not fix a period but from its nature it can be inferred that a period was intended, the court must be asked to fix the duration. The Court ruled that since no time limit was fixed for the purchase of logs or the duration of operations, Pages could not demand performance or claim breach without first petitioning the court to fix the period. Following the rule in Ungson v. Lopez, the fulfillment of an obligation cannot be demanded until the court has fixed the period and that period has arrived. The failure of Pages to first seek a judicial fixing of the term rendered his claim for damages for breach premature. On Issue 3: Regarding the claim that the defendant refused to buy 2,000 cubic feet of logs, the Court noted that under the agreement, the logs were to be scaled by a forest officer and placed at the seashore before the purchase obligation attached. Pages admitted that the logs in question were still in the forest and had not been scaled. Since the conditions precedent for the purchase (scaling and delivery to the seashore) were not met, the defendant was not yet legally obligated to purchase them. There can be no breach of an obligation to buy when the goods have not been prepared for sale according to the contract's own specifications.
Main Doctrine
A contract that does not express the true intent of the parties and has a cause or consideration contrary to law, existing rules, and regulations is void and invalid. Furthermore, an action to demand performance of an obligation where no period is fixed cannot be maintained until the court has fixed the period for compliance.