Javier v. Court of Appeals
REITERATIONFacts
The Antecedents: This case originated from a Deed of Assignment executed on February 15, 1966, wherein Leonardo Tiro assigned his shares in Timberwealth Corporation, valued at P120,000.00, to Jose M. Javier and Estrella F. Javier. The payment was structured with P20,000.00 upon signing and the remaining P100,000.00 to be paid at P10,000.00 per shipment of export logs. Concurrently, on February 28, 1966, an Agreement was made wherein Tiro agreed to transfer rights to an additional forest concession, pending approval, to the Javiers for P30,000.00, which would form part of their paid-up capital in Timberwealth Corporation. The Javiers subsequently assumed operation of Tiro's logging concessions and entered into a Forest Consolidation Agreement with other license holders, forming North Mindanao Timber Corporation. However, the Javiers failed to pay the balance due under the assignments. Procedural History: On July 16, 1968, Leonardo Tiro filed a complaint against Jose M. Javier and Estrella F. Javier for the unpaid balance of P83,138.15 plus attorney's fees. The Javiers admitted the contracts but argued they were void due to Tiro's non-compliance and the failure of conditions. They also counterclaimed for P55,586.00 allegedly paid under a management agreement. The trial court dismissed Tiro's complaint and ordered him to pay the Javiers P33,161.85. Tiro appealed to the Court of Appeals, which reversed the lower court's decision, ordering the Javiers to pay Tiro P79,338.15 with interest and attorney's fees. The Javiers filed a motion for reconsideration, which was denied by the Court of Appeals. They then sought review from the Supreme Court. The Petition: The petitioners, Jose M. Javier and Estrella F. Javier, filed a petition for review on certiorari with the Supreme Court, seeking to reverse the decision of the Court of Appeals. Their primary contention is that the Deed of Assignment dated February 15, 1966, is void for lack of consideration, as Timberwealth Corporation, the stated assignee, never came into existence. They also argue the Agreement of February 28, 1966, is ineffective because the condition of approval for the additional forest concession was not met. The petitioners argue that the Court of Appeals erred in holding them liable and that their petition raises substantive legal questions meriting determination, despite a one-day delay in filing a motion for extension, which they claim was excusable due to a change in counsel and intervening holidays.
Issue(s)
Whether the Deed of Assignment dated February 15, 1966, is null and void for lack of consideration; if not, are petitioners liable for the unpaid balance under the Deed of Assignment. Whether the Agreement dated February 28, 1966, is null and void for non-fulfillment of its conditions.
Ruling
The Supreme Court modified the decision of the Court of Appeals. It declared the Agreement dated February 28, 1966, without force and effect and ordered the P30,000.00 to be deducted from the award. In all other respects, the decision of the Court of Appeals was affirmed.
Ratio Decidendi
On the Deed of Assignment dated February 15, 1966, and the liability for the unpaid balance: The Court disagreed with petitioners' contention that the Deed of Assignment was void for lack of consideration. It found that the true consideration was the transfer of the forest concession. The Court held that the Deed of Assignment was a relatively simulated contract with a false consideration, which, under Article 1346 of the Civil Code, binds the parties to their real agreement. Therefore, petitioners were liable under this deed for the unpaid balance, which became demandable when the concessions were consolidated. On the Agreement dated February 28, 1966: The Court agreed with the petitioners that they could not be held liable under this agreement. The efficacy of this agreement was subject to the suspensive condition that private respondent's application for an additional forest concession be approved by the Bureau of Forestry. Since this approval was not obtained, the agreement produced no effect, and the parties were to stand as if the obligation had never existed. As private respondent never acquired rights over the additional area, the agreement for its transfer never became effective or enforceable. Consequently, the P30,000.00 stipulated therein was ordered to be deducted from the award.
Main Doctrine
A relatively simulated contract, where the parties conceal their true agreement by stating a false cause or consideration, is not void per se but binds the parties to their real agreement, provided it does not prejudice third persons or violate law, morals, good customs, public order, or public policy. The efficacy of a contract subject to a suspensive condition depends on the fulfillment of that condition; if it does not occur, the contract produces no effect.