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Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

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

JOSE M. JAVIER a! ESTRELLA ". JAVIER, petitioners,vs.COURT O" APPEALS a! LEONAR#O TIRO, respondents.

Eddie Tamondong for petitioners.

Lope Adriano and Emmanuel Pelaez, Jr. for private respondent.

REGALA#O, J.:

Petitioners pra for the reversal of the decision of respondent Court of !ppeals in C!"#.R.No. $%%&'"R, dated March ', (&)*, 1 the dispositive portion +hereof decrees

-ERE/ORE, the 0ud12ent appealed fro2 is hereb set aside and another oneentered orderin1 the defendants"appellees, 0ointl and solidaril, to pa plaintiff"appellant the su2 of P)&,33*.($ +ith le1al interest thereon fro2 the filin1 of theco2plaint, plus attorne4s fees in the a2ount of P*,555.55. Costs a1ainstdefendants"appellees. $

!s found b respondent court or disclosed b the records, % this case +as 1enerated b the

follo+in1 antecedent facts.

Private respondent is a holder of an ordinar ti2ber license issued b the 6ureau of /orestrcoverin1 %,$3$ hectares in the to+n of Medina, Misa2is Oriental. On /ebruar ($, (&'' hee7ecuted a 8Deed of !ssi1n2ent8 4 in favor of herein petitioners the 2aterial parts of +hichread as follo+s

777 777 777

I, 9EON!RDO !. :IRO, of le1al a1e, 2arried and a resident of Medina,Misa2is Oriental, for and in consideration of the su2 of ONE ;NDRED:-EN:< :O;S!ND PESOS =P(%5,555.55>, Philippine Currenc, do b

these presents, !SSI#N, :R!NS/ER !ND CONVE<, absolutel and foreverunto ?OSE M. ?!VIER and ES:RE99! /. ?!VIER, spouses, of le1al a1e anda resident =sic > of %*&) /.6. arrison, Pasa Cit, 2 shares of stoc@s in the:IM6ER-E!9: CORPOR!:ION in the total a2ount of P(%5,555.55,pa2ent of +hich shall be 2ade in the follo+in1 2anner

(. :+ent thousand =P%5,555.55> Pesos upon si1nin1 of thiscontractA



%. :he balance of P(55,555.55 shall be paid P(5,555.55ever ship2ent of e7port lo1s actuall produced fro2 theforest concession of :i2ber+ealth Corporation.

:hat I hereb a1ree to si1n and endorse the stoc@ certificate in favor of Mr. BMrs. ?ose M. ?avier, as soon as stoc@ certificates are issued.

777 777 777

!t the ti2e the said deed of assi1n2ent +as e7ecuted, private respondent had a pendin1application, dated October %(, (&'$, for an additional forest concession coverin1 an area of%,555 hectares south+est of and ad0oinin1 the area of the concession sub0ect of the deed ofassi1n2ent. ence, on /ebruar %*, (&'', private respondent and petitioners entered intoanother 8!1ree2ent8 5 +ith the follo+in1 stipulations

777 777 777

(. :hat 9EON!RDO :IRO hereb a1rees and binds hi2self to transfer, cede

and conve +hatever ri1hts he 2a acuire, absolutel and forever, to:IM6ER-E!9: CORPOR!:ION, a corporation dul or1anied ande7istin1 under the la+s of the Philippines, over a forest concession +hich isno+ pendin1 application and approval as additional area to his e7istin1licensed area under O.:. 9icense No. 3&("(53('', situated at Medina,Misa2is OrientalA

%. :hat for and in consideration of the afore2entioned transfer of ri1hts oversaid additional area to :IM6ER-E!9: CORPOR!:ION, ES:RE99! /.?!VIER and ?OSE M. ?!VIER, both directors and stoc@holders of saidcorporation, do hereb underta@e to pa 9EON!RDO :IRO, as soon as saidadditional area is approved and transferred to :IM6ER-E!9:

CORPOR!:ION the su2 of :IR:< :O;S!ND PESOS =P35,555.55>,+hich a2ount of 2one shall for2 part of their paid up capital stoc@ in:IM6ER-E!9: CORPOR!:IONA

3. :hat this !1ree2ent is sub0ect to the approval of the 2e2bers of the6oard of Directors of the :IM6ER-E!9: CORPOR!:ION.

777 777 777

On Nove2ber (*, (&'', the !ctin1 Director of /orestr +rote private respondent that hisforest concession +as rene+ed up to Ma (%, (&') under O.:.9. No. 3&("$(%'), but sincethe concession consisted of onl %,$3$ hectares, he +as therein infor2ed that

In pursuance of the Presidential directive of Ma (3, (&'', ou are hereb 1ivenuntil Ma (%, (&') to for2 an or1aniation such as a cooperative, partnership orcorporation +ith other ad0oinin1 licensees so as to have a total holdin1 area ofnot less than %5,555 hectares of conti1uous and co2pact territor and ana11re1ate allo+able annual cut of not less than %$,555 cubic 2eters, other+ise,our license +ill not be further rene+ed.&

Conseuentl, petitioners, no+ actin1 as ti2ber license holders b virtue of the deed ofassi1n2ent e7ecuted b private respondent in their favor, entered into a /orest



Consolidation !1ree2ent ' on !pril (5, (&') +ith other ordinar ti2ber license holders inMisa2is Oriental, na2el, Vicente 9. De 9ara, ?r., Salustiano R. Oca and San11aa 9o11in1Co2pan. ;nder this consolidation a1ree2ent, the all a1reed to pool to1ether and 2er1etheir respective forest concessions into a +or@in1 unit, as envisioned b the afore2entioneddirectives. :his consolidation a1ree2ent +as approved b the Director of /orestr on Ma(5, (&'). 8 :he +or@in1 unit +as subseuentl incorporated as the North Mindanao :i2ber

Corporation, +ith the petitioners and the other si1natories of the aforesaid /orestConsolidation !1ree2ent as incorporators. 9

On ?ul (', (&'*, for failure of petitioners to pa the balance due under the t+o deeds ofassi1n2ent, private respondent filed an action a1ainst petitioners, based on the saidcontracts, for the pa2ent of the a2ount of P*3,(3*.($ +ith interest at ' per annu2 fro2

!pril (5, (&') until full pa2ent, plus P(%,555.55 for attorne4s fees and costs.

On Septe2ber %3, (&'*, petitioners filed their ans+er ad2ittin1 the due e7ecution of thecontracts but interposin1 the special defense of nullit thereof since private respondent failedto co2pl +ith his contractual obli1ations and, further, that the conditions for theenforceabilit of the obli1ations of the parties failed to 2aterialie. !s a counterclai2,

petitioners sou1ht the return of P$$,$*'.55 +hich private respondent had received fro2the2 pursuant to an alle1ed 2ana1e2ent a1ree2ent, plus attorne4s fees and costs.

On October ), (&'*, private respondent filed his repl refutin1 the defense of nullit of thecontracts in this +ise

-hat +ere actuall transferred and assi1ned to the defendants +ere plaintiff4sri1hts and interest in a lo11in1 concession described in the deed of assi1n2ent,attached to the co2plaint and 2ar@ed as !nne7 !, and a1ree2ent !nne7 EA thatthe 8shares of stoc@s8 referred to in para1raph II of the co2plaint are ter2s usedtherein 2erel to desi1nate or identif those ri1hts and interests in said lo11in1concession. :he defendants actuall 2ade use of or en0oed not the 8shares ofstoc@s8 but the lo11in1 concession itselfA that since the proposed :i2ber+ealth

Corporation +as o+ned solel and entirel b defendants, the personalities of thefor2er and the latter are one and the sa2e. 6esides, before the lo11in1concession of the plaintiff or the latter4s ri1hts and interests therein +ereassi1ned or transferred to defendants, the never beca2e the propert or assetsof the :i2ber+ealth Corporation +hich is at 2ost onl an association of personsco2posed of the defendants. 10

and contendin1 that the counterclai2 of petitioners in the a2ount of P$$,$*'.3& is actuallonl a part of the su2 of P'&,''(.*$ paid b the latter to the for2er in partial satisfaction ofthe latter4s clai2. 11

!fter trial, the lo+er court rendered 0ud12ent dis2issin1 private respondent4s co2plaint andorderin1 hi2 to pa petitioners the su2 of P33,('(.*$ +ith le1al interest at si7 percent per

annu2 fro2 the date of the filin1 of the ans+er until co2plete pa2ent. 1$

!s earlier stated, an appeal +as interposed b private respondent to the Court of !ppeals+hich reversed the decision of the court of a quo.

On March %*, (&)*, petitioners filed a 2otion in respondent court for e7tension of ti2e to filea 2otion for reconsideration, for the reason that the needed to chan1ecounsel. 1% Respondent court, in its resolution dated March 3(, (&)*, 1ave petitioners fifteen



=($> das fro2 March %*, (&)* +ithin +hich to file said 2otion for reconsideration, providedthat the sub0ect 2otion for e7tension +as filed on ti2e. 14 On !pril ((, (&)*, petitioners filedtheir 2otion for reconsideration in the Court of !ppeals. 15 On !pril %(, (&)*, privaterespondent filed a consolidated opposition to said 2otion for reconsideration on the 1roundthat the decision of respondent court had beco2e final on March %), (&)*, hence the 2otionfor e7tension filed on March %*, (&)* +as filed out of ti2e and there +as no 2ore period to

e7tend. o+ever, this +as not acted upon b the Court of !ppeals for the reason that on !pril %5, (&)*, prior to its receipt of said opposition, a resolution +as issued denin1petitioners4 2otion for reconsideration, thus

:he 2otion for reconsideration filed on !pril ((, (&)* b counsel for defendants"appellees is denied. :he did not file an brief in this case. !s a 2atter of factthis case +as sub2itted for decision +ithout appellees4 brief. In their said 2otion,the 2erel tried to refute the rationale of the Court in decidin1 to reverse theappealed 0ud12ent. 1&

Petitioners then sou1ht relief in this Court in the present petition for revie+ on certiorari .Private respondent filed his co22ent, reiteratin1 his stand that the decision of the Court of

!ppeals under revie+ is alread final and e7ecutor.

Petitioners countered in their repl that their petition for revie+ presents substantive andfunda2ental uestions of la+ that full 2erit 0udicial deter2ination, instead of bein1suppressed on technical and insubstantial reasons. Moreover, the aforesaid one =(> dadela in the filin1 of their 2otion for e7tension is e7cusable, considerin1 that petitioners hadto chan1e their for2er counsel +ho failed to file their brief in the appellate court, +hichsubstitution of counsel too@ place at a ti2e +hen there +ere 2an successive intervenin1holidas.

On ?ul %', (&)*, +e resolved to 1ive due course to the petition.

:he one =(> da dela in the filin1 of the said 2otion for e7tension can 0ustifiabl be e7cused,

considerin1 that aside fro2 the chan1e of counsel, the last da for filin1 the said 2otion fellon a holida follo+in1 another holida, hence, under such circu2stances, an outri1htdis2issal of the petition +ould be too harsh. 9iti1ations should, as 2uch as possible, bedecided on their 2erits and not on technicalities. In a nu2ber of cases, this Court, in thee7ercise of euit 0urisdiction, has rela7ed the strin1ent application of technical rules in orderto resolve the case on its 2erits. 1' Rules of procedure are intended to pro2ote, not todefeat, substantial 0ustice and, therefore, the should not be applied in a ver ri1id andtechnical sense.

-e no+ proceed to the resolution of this case on the 2erits.

:he assi1n2ent of errors of petitioners hin1es on the central issue of +hether the deed of

assi1n2ent dated /ebruar ($, (&'' and the a1ree2ent of /ebruar %*, (&'' are null andvoid, the for2er for total absence of consideration and the latter for non"fulfill2ent of theconditions stated therein.

Petitioners contend that the deed of assi1n2ent conveed to the2 the shares of stoc@s ofprivate respondent in :i2ber+ealth Corporation, as stated in the deed itself. Since saidcorporation never ca2e into e7istence, no share of stoc@s +as ever transferred to the2,hence the said deed is null and void for lac@ of cause or consideration.



-e do not a1ree. !s found b the Court of !ppeals, the true cause or consideration of saiddeed +as the transfer of the forest concession of private respondent to petitioners forP(%5,555.55. :his findin1 is supported b the follo+in1 considerations, viz

(. 6oth parties, at the ti2e of the e7ecution of the deed of assi1n2ent @ne+ that the:i2ber+ealth Corporation stated therein +as non"e7istent. 18

%. In their subseuent a1ree2ent, private respondent conveed to petitioners his inchoateri1ht over a forest concession coverin1 an additional area for his e7istin1 forest concession,+hich area he had applied for, and his application +as then pendin1 in the 6ureau of/orestr for approval.

3. Petitioners, after the e7ecution of the deed of assi1n2ent, assu2ed the operation of thelo11in1 concessions of private respondent. 19

F. :he state2ent of advances to respondent prepared b petitioners stated 8P$$,(*'.3&advances to 9.!. :iro be applied to succeedin1 ship2ents. 6ased on the a1ree2ent, +e paP(5,555.55 ever after =sic > ship2ent. -e had onl % ship2ents8 $0

$. Petitioners entered into a /orest Consolidation !1ree2ent +ith other holders of forestconcessions on the stren1th of the uestioned deed of assi1n2ent. $1

:he aforesaid conte2poraneous and subseuent acts of petitioners and private respondentreveal that the cause stated in the uestioned deed of assi1n2ent is false. It is settled thatthe previous and si2ultaneous and subseuent acts of the parties are properlco1niable indica of their true intention. $$ -here the parties to a contract have 1iven it apractical construction b their conduct as b acts in partial perfor2ance, such construction2a be considered b the court in construin1 the contract, deter2inin1 its 2eanin1 andascertainin1 the 2utual intention of the parties at the ti2e of contractin1. $% :he parties4practical construction of their contract has been characteried as a clue or inde7 to, or as

evidence of, their intention or 2eanin1 and as an i2portant, si1nificant, convincin1,persuasive, or influential factor in deter2inin1 the proper construction of the a1ree2ent. $4

:he deed of assi1n2ent of /ebruar ($, (&'' is a relativel si2ulated contract +hich statesa false cause or consideration, or one +here the parties conceal their true a1ree2ent. $5 !contract +ith a false consideration is not null and void per se. $& ;nder !rticle (3F' of theCivil Code, a relativel si2ulated contract, +hen it does not pre0udice a third person and isnot intended for an purpose contrar to la+, 2orals, 1ood custo2s, public order or publicpolic binds the parties to their real a1ree2ent.

:he Court of !ppeals, therefore, did not err in holdin1 petitioners liable under the said deedand in rulin1 that G

. . . In vie+ of the analsis of the first and second assi1n2ent of errors, thedefendants"appellees are liable to the plaintiff"appellant for the sale and transferin their favor of the latter4s forest concessions. ;nder the ter2s of the contract,the parties a1reed on a consideration of P(%5,555.55. P%5,555.55 of +hich +aspaid, upon the si1nin1 of the contract and the balance of P(55,555.55 to be paidat the rate of P(5,555.55 for ever ship2ent of e7port lo1s actuall producedfro2 the forest concessions of the appellant sold to the appellees. Since plaintiff"appellant4s forest concessions +ere consolidated or 2er1ed +ith those of theother ti2ber license holders b appellees4 voluntar act under the /orest



Consolidation !1ree2ent =E7hibit D>, approved b the 6ureau of /orestr=E7hibit D"3>, then the unpaid balance of PF&,33*.($ =the a2ount of P)5,''(.*$havin1 been received b the plaintiff"appellant fro2 the defendants"appellees>beca2e due and de2andable. $'

!s to the alle1ed nullit of the a1ree2ent dated /ebruar %*, (&'', +e a1ree +ith petitioners

that the cannot be held liable thereon. :he efficac of said deed of assi1n2ent is sub0ect tothe condition that the application of private respondent for an additional area for forestconcession be approved b the 6ureau of /orestr. Since private respondent did not obtainthat approval, said deed produces no effect. -hen a contract is sub0ect to a suspensivecondition, its birth or effectivit can ta@e place onl if and +hen the event +hich constitutesthe condition happens or is fulfilled. $8 If the suspensive condition does not ta@e place, theparties +ould stand as if the conditional obli1ation had never e7isted. $9

:he said a1ree2ent is a bilateral contract +hich 1ave rise to reciprocal obli1ations, that is,the obli1ation of private respondent to transfer his ri1hts in the forest concession over theadditional area and, on the other hand, the obli1ation of petitioners to pa P35,555.55. :hede2andabilit of the obli1ation of one part depends upon the fulfill2ent of the obli1ation ofthe other. In this case, the failure of private respondent to co2pl +ith his obli1ation ne1ateshis ri1ht to de2and perfor2ance fro2 petitioners. Deliver and pa2ent in a contract of sale,are so interrelated and intert+ined +ith each other that +ithout deliver of the 1oods there isno correspondin1 obli1ation to pa. :he t+o co2ple2ent each other. %0

Moreover, under the second para1raph of !rticle (F'( of the Civil Code, the efficac of thesale of a 2ere hope or e7pectanc is dee2ed sub0ect to the condition that the thin1 +illco2e into e7istence. In this case, since private respondent never acuired an ri1ht over theadditional area for failure to secure the approval of the 6ureau of /orestr, the a1ree2ente7ecuted therefor, +hich had for its ob0ect the transfer of said ri1ht to petitioners, neverbeca2e effective or enforceable.

-ERE/ORE, the decision of respondent Court of !ppeals is hereb MODI/IED. :he

a1ree2ent of the parties dated /ebruar %*, (&'' is declared +ithout force and effect andthe a2ount of P35,555.55 is hereb ordered to be deducted fro2 the su2 a+arded brespondent court to private respondent. In all other respects, said decision of respondentcourt is affir2ed.

SO ORDERED.

Melencio-Herrera, Paras, Padilla and armiento JJ., concur.

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