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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

L-48194 March 15, 1990 JOSE M. JAVIER and ESTRELLA F. JAVIER, petitioners, vs. O!RT OF A""EALS and LEONAR#O TIRO, respondents. Eddie Tamondong for petitioners. Lope Adriano and Emmanuel Pelaez, Jr. for private respondent.

REGALA#O, J.: Petitioners pray for the reversal of the decision of respondent Court of Appeals in CAG.R. No. 52296-R, dated arch 6, !9"#, 1 the dispositive portion $hereof decrees%
&'(R()*R(, the +ud,-ent appealed fro- is here.y set aside and another one entered orderin, the defendants-appellees, +ointly and solidarily, to pay plaintiff-appellant the suof P"9,//#.!5 $ith le,al interest thereon fro- the filin, of the co-plaint, plus attorney0s fees in the a-ount of P#,111.11. Costs a,ainst defendants-appellees. $

As found .y respondent court or disclosed .y the records, % this case $as ,enerated .y the follo$in, antecedent facts. Private respondent is a holder of an ordinary ti-.er license issued .y the 2ureau of )orestry coverin, 2,5/5 hectares in the to$n of edina, isa-is *riental. *n )e.ruary !5, !966 he e3ecuted a 45eed of Assi,n-ent4 4 in favor of herein petitioners the -aterial parts of $hich read as follo$s%
333 333 333 6, 7(*NAR5* A. 86R*, of le,al a,e, -arried and a resident of edina, isa-is *riental, for and in consideration of the su- of *N( '9N5R(5 8&(N8: 8'*9;AN5 P(;*; <P!21,111.11=, Philippine Currency, do .y these presents, A;;6GN, 8RAN;)(R AN5 C*N>(:, a.solutely and forever unto ?*;( . ?A>6(R and (;8R(77A ). ?A>6(R, spouses, of le,al a,e and a resident <sic= of 2#9" ).2. 'arrison, Pasay City, -y shares of stoc@s in the 86 2(R&(A78' C*RP*RA86*N in the total a-ount of P!21,111.11, pay-ent of $hich shall .e -ade in the follo$in, -anner% !. 8$enty thousand <P21,111.11= Pesos upon si,nin, of this contractA

2. 8he .alance of P!11,111.11 shall .e paid P!1,111.11 every ship-ent of e3port lo,s actually produced fro- the forest concession of 8i-.er$ealth Corporation. 8hat 6 here.y a,ree to si,n and endorse the stoc@ certificate in favor of . ?avier, as soon as stoc@ certificates are issued. 333 333 333 r. B rs. ?ose

At the ti-e the said deed of assi,n-ent $as e3ecuted, private respondent had a pendin, application, dated *cto.er 2!, !965, for an additional forest concession coverin, an area of 2,111 hectares south$est of and ad+oinin, the area of the concession su.+ect of the deed of assi,n-ent. 'ence, on )e.ruary 2#, !966, private respondent and petitioners entered into another 4A,ree-ent4 5 $ith the follo$in, stipulations%
333 333 333 !. 8hat 7(*NAR5* 86R* here.y a,rees and .inds hi-self to transfer, cede and convey $hatever ri,hts he -ay acCuire, a.solutely and forever, to 86 2(R&(A78' C*RP*RA86*N, a corporation duly or,aniDed and e3istin, under the la$s of the Philippines, over a forest concession $hich is no$ pendin, application and approval as additional area to his e3istin, licensed area under *.8. 7icense No. /9!-!1/!66, situated at edina, isa-is *rientalA 2. 8hat for and in consideration of the afore-entioned transfer of ri,hts over said additional area to 86 2(R&(A78' C*RP*RA86*N, (;8R(77A ). ?A>6(R and ?*;( . ?A>6(R, .oth directors and stoc@holders of said corporation, do here.y underta@e to pay 7(*NAR5* 86R*, as soon as said additional area is approved and transferred to 86 2(R&(A78' C*RP*RA86*N the su- of 8'6R8: 8'*9;AN5 P(;*; <P/1,111.11=, $hich a-ount of -oney shall for- part of their paid up capital stoc@ in 86 2(R&(A78' C*RP*RA86*NA /. 8hat this A,ree-ent is su.+ect to the approval of the -e-.ers of the 2oard of 5irectors of the 86 2(R&(A78' C*RP*RA86*N. 333 333 333

*n Nove-.er !#, !966, the Actin, 5irector of )orestry $rote private respondent that his forest concession $as rene$ed up to ay !2, !96" under *.8.7. No. /9!-5!26", .ut since the concession consisted of only 2,5/5 hectares, he $as therein infor-ed that%
6n pursuance of the Presidential directive of ay !/, !966, you are here.y ,iven until ay !2, !96" to for- an or,aniDation such as a cooperative, partnership or corporation $ith other ad+oinin, licensees so as to have a total holdin, area of not less than 21,111 hectares of conti,uous and co-pact territory and an a,,re,ate allo$a.le annual cut of not less than 25,111 cu.ic -eters, other$ise, your license $ill not .e further rene$ed. &

ConseCuently, petitioners, no$ actin, as ti-.er license holders .y virtue of the deed of assi,n-ent e3ecuted .y private respondent in their favor, entered into a )orest

Consolidation A,ree-ent ' on April !1, !96" $ith other ordinary ti-.er license holders in isa-is *riental, na-ely, >icente 7. 5e 7ara, ?r., ;alustiano R. *ca and ;an,,aya 7o,,in, Co-pany. 9nder this consolidation a,ree-ent, they all a,reed to pool to,ether and -er,e their respective forest concessions into a $or@in, unit, as envisioned .y the afore-entioned directives. 8his consolidation a,ree-ent $as approved .y the 5irector of )orestry on ay !1, !96". 8 8he $or@in, unit $as su.seCuently incorporated as the North indanao 8i-.er Corporation, $ith the petitioners and the other si,natories of the aforesaid )orest Consolidation A,ree-ent as incorporators. 9 *n ?uly !6, !96#, for failure of petitioners to pay the .alance due under the t$o deeds of assi,n-ent, private respondent filed an action a,ainst petitioners, .ased on the said contracts, for the pay-ent of the a-ount of P#/,!/#.!5 $ith interest at 6E per annufro- April !1, !96" until full pay-ent, plus P!2,111.11 for attorney0s fees and costs. *n ;epte-.er 2/, !96#, petitioners filed their ans$er ad-ittin, the due e3ecution of the contracts .ut interposin, the special defense of nullity thereof since private respondent failed to co-ply $ith his contractual o.li,ations and, further, that the conditions for the enforcea.ility of the o.li,ations of the parties failed to -aterialiDe. As a counterclai-, petitioners sou,ht the return of P55,5#6.11 $hich private respondent had received frothe- pursuant to an alle,ed -ana,e-ent a,ree-ent, plus attorney0s fees and costs. *n *cto.er ", !96#, private respondent filed his reply refutin, the defense of nullity of the contracts in this $ise%
&hat $ere actually transferred and assi,ned to the defendants $ere plaintiff0s ri,hts and interest in a lo,,in, concession descri.ed in the deed of assi,n-ent, attached to the co-plaint and -ar@ed as Anne3 A, and a,ree-ent Anne3 (A that the 4shares of stoc@s4 referred to in para,raph 66 of the co-plaint are ter-s used therein -erely to desi,nate or identify those ri,hts and interests in said lo,,in, concession. 8he defendants actually -ade use of or en+oyed not the 4shares of stoc@s4 .ut the lo,,in, concession itselfA that since the proposed 8i-.er$ealth Corporation $as o$ned solely and entirely .y defendants, the personalities of the for-er and the latter are one and the sa-e. 2esides, .efore the lo,,in, concession of the plaintiff or the latter0s ri,hts and interests therein $ere assi,ned or transferred to defendants, they never .eca-e the property or assets of the 8i-.er$ealth Corporation $hich is at -ost only an association of persons co-posed of the defendants. 10

and contendin, that the counterclai- of petitioners in the a-ount of P55,5#6./9 is actually only a part of the su- of P69,66!.#5 paid .y the latter to the for-er in partial satisfaction of the latter0s clai-. 11 After trial, the lo$er court rendered +ud,-ent dis-issin, private respondent0s co-plaint and orderin, hi- to pay petitioners the su- of P//,!6!.#5 $ith le,al interest at si3 percent per annu- fro- the date of the filin, of the ans$er until co-plete pay-ent. 1$ As earlier stated, an appeal $as interposed .y private respondent to the Court of Appeals $hich reversed the decision of the court of a quo.

*n arch 2#, !9"#, petitioners filed a -otion in respondent court for e3tension of ti-e to file a -otion for reconsideration, for the reason that they needed to chan,e counsel. 1% Respondent court, in its resolution dated arch /!, !9"#, ,ave petitioners fifteen <!5= days fro- arch 2#, !9"# $ithin $hich to file said -otion for reconsideration, provided that the su.+ect -otion for e3tension $as filed on ti-e. 14 *n April !!, !9"#, petitioners filed their -otion for reconsideration in the Court of Appeals. 15 *n April 2!, !9"#, private respondent filed a consolidated opposition to said -otion for reconsideration on the ,round that the decision of respondent court had .eco-e final on arch 2", !9"#, hence the -otion for e3tension filed on arch 2#, !9"# $as filed out of ti-e and there $as no -ore period to e3tend. 'o$ever, this $as not acted upon .y the Court of Appeals for the reason that on April 21, !9"#, prior to its receipt of said opposition, a resolution $as issued denyin, petitioners0 -otion for reconsideration, thus%
8he -otion for reconsideration filed on April !!, !9"# .y counsel for defendantsappellees is denied. 8hey did not file any .rief in this case. As a -atter of fact this case $as su.-itted for decision $ithout appellees0 .rief. 6n their said -otion, they -erely tried to refute the rationale of the Court in decidin, to reverse the appealed +ud,-ent. 1&

Petitioners then sou,ht relief in this Court in the present petition for revie$ on certiorari. Private respondent filed his co--ent, reiteratin, his stand that the decision of the Court of Appeals under revie$ is already final and e3ecutory. Petitioners countered in their reply that their petition for revie$ presents su.stantive and funda-ental Cuestions of la$ that fully -erit +udicial deter-ination, instead of .ein, suppressed on technical and insu.stantial reasons. oreover, the aforesaid one <!= day delay in the filin, of their -otion for e3tension is e3cusa.le, considerin, that petitioners had to chan,e their for-er counsel $ho failed to file their .rief in the appellate court, $hich su.stitution of counsel too@ place at a ti-e $hen there $ere -any successive intervenin, holidays. *n ?uly 26, !9"#, $e resolved to ,ive due course to the petition. 8he one <!= day delay in the filin, of the said -otion for e3tension can +ustifia.ly .e e3cused, considerin, that aside fro- the chan,e of counsel, the last day for filin, the said -otion fell on a holiday follo$in, another holiday, hence, under such circu-stances, an outri,ht dis-issal of the petition $ould .e too harsh. 7iti,ations should, as -uch as possi.le, .e decided on their -erits and not on technicalities. 6n a nu-.er of cases, this Court, in the e3ercise of eCuity +urisdiction, has rela3ed the strin,ent application of technical rules in order to resolve the case on its -erits. 1' Rules of procedure are intended to pro-ote, not to defeat, su.stantial +ustice and, therefore, they should not .e applied in a very ri,id and technical sense. &e no$ proceed to the resolution of this case on the -erits. 8he assi,n-ent of errors of petitioners hin,es on the central issue of $hether the deed of assi,n-ent dated )e.ruary !5, !966 and the a,ree-ent of )e.ruary 2#, !966 are

null and void, the for-er for total a.sence of consideration and the latter for nonfulfill-ent of the conditions stated therein. Petitioners contend that the deed of assi,n-ent conveyed to the- the shares of stoc@s of private respondent in 8i-.er$ealth Corporation, as stated in the deed itself. ;ince said corporation never ca-e into e3istence, no share of stoc@s $as ever transferred to the-, hence the said deed is null and void for lac@ of cause or consideration. &e do not a,ree. As found .y the Court of Appeals, the true cause or consideration of said deed $as the transfer of the forest concession of private respondent to petitioners for P!21,111.11. 8his findin, is supported .y the follo$in, considerations, viz% !. 2oth parties, at the ti-e of the e3ecution of the deed of assi,n-ent @ne$ that the 8i-.er$ealth Corporation stated therein $as non-e3istent. 18 2. 6n their su.seCuent a,ree-ent, private respondent conveyed to petitioners his inchoate ri,ht over a forest concession coverin, an additional area for his e3istin, forest concession, $hich area he had applied for, and his application $as then pendin, in the 2ureau of )orestry for approval. /. Petitioners, after the e3ecution of the deed of assi,n-ent, assu-ed the operation of the lo,,in, concessions of private respondent. 19 F. 8he state-ent of advances to respondent prepared .y petitioners stated% 4P55,!#6./9 advances to 7.A. 8iro .e applied to succeedin, ship-ents. 2ased on the a,ree-ent, $e pay P!1,111.11 every after <sic= ship-ent. &e had only 2 ship-ents4 $0 5. Petitioners entered into a )orest Consolidation A,ree-ent $ith other holders of forest concessions on the stren,th of the Cuestioned deed of assi,n-ent. $1 8he aforesaid conte-poraneous and su.seCuent acts of petitioners and private respondent reveal that the cause stated in the Cuestioned deed of assi,n-ent is false. 6t is settled that the previous and si-ultaneous and su.seCuent acts of the parties are properly co,niDa.le indica of their true intention. $$ &here the parties to a contract have ,iven it a practical construction .y their conduct as .y acts in partial perfor-ance, such construction -ay .e considered .y the court in construin, the contract, deter-inin, its -eanin, and ascertainin, the -utual intention of the parties at the ti-e of contractin,. $% 8he parties0 practical construction of their contract has .een characteriDed as a clue or inde3 to, or as evidence of, their intention or -eanin, and as an i-portant, si,nificant, convincin,, persuasive, or influential factor in deter-inin, the proper construction of the a,ree-ent. $4 8he deed of assi,n-ent of )e.ruary !5, !966 is a relatively si-ulated contract $hich states a false cause or consideration, or one $here the parties conceal their true a,ree-ent. $5 A contract $ith a false consideration is not null and void per se. $& 9nder Article !/F6 of the Civil Code, a relatively si-ulated contract, $hen it does not pre+udice

a third person and is not intended for any purpose contrary to la$, -orals, ,ood custo-s, pu.lic order or pu.lic policy .inds the parties to their real a,ree-ent. 8he Court of Appeals, therefore, did not err in holdin, petitioners lia.le under the said deed and in rulin, that G
. . . 6n vie$ of the analysis of the first and second assi,n-ent of errors, the defendantsappellees are lia.le to the plaintiff-appellant for the sale and transfer in their favor of the latter0s forest concessions. 9nder the ter-s of the contract, the parties a,reed on a consideration of P!21,111.11. P21,111.11 of $hich $as paid, upon the si,nin, of the contract and the .alance of P!11,111.11 to .e paid at the rate of P!1,111.11 for every ship-ent of e3port lo,s actually produced fro- the forest concessions of the appellant sold to the appellees. ;ince plaintiff-appellant0s forest concessions $ere consolidated or -er,ed $ith those of the other ti-.er license holders .y appellees0 voluntary act under the )orest Consolidation A,ree-ent <(3hi.it 5=, approved .y the 2ureau of )orestry <(3hi.it 5-/=, then the unpaid .alance of PF9,//#.!5 <the a-ount of P"1,66!.#5 havin, .een received .y the plaintiff-appellant fro- the defendants-appellees= .eca-e due and de-anda.le. $'

As to the alle,ed nullity of the a,ree-ent dated )e.ruary 2#, !966, $e a,ree $ith petitioners that they cannot .e held lia.le thereon. 8he efficacy of said deed of assi,n-ent is su.+ect to the condition that the application of private respondent for an additional area for forest concession .e approved .y the 2ureau of )orestry. ;ince private respondent did not o.tain that approval, said deed produces no effect. &hen a contract is su.+ect to a suspensive condition, its .irth or effectivity can ta@e place only if and $hen the event $hich constitutes the condition happens or is fulfilled. $8 6f the suspensive condition does not ta@e place, the parties $ould stand as if the conditional o.li,ation had never e3isted. $9 8he said a,ree-ent is a .ilateral contract $hich ,ave rise to reciprocal o.li,ations, that is, the o.li,ation of private respondent to transfer his ri,hts in the forest concession over the additional area and, on the other hand, the o.li,ation of petitioners to pay P/1,111.11. 8he de-anda.ility of the o.li,ation of one party depends upon the fulfill-ent of the o.li,ation of the other. 6n this case, the failure of private respondent to co-ply $ith his o.li,ation ne,ates his ri,ht to de-and perfor-ance fro- petitioners. 5elivery and pay-ent in a contract of sale, are so interrelated and intert$ined $ith each other that $ithout delivery of the ,oods there is no correspondin, o.li,ation to pay. 8he t$o co-ple-ent each other. %0 oreover, under the second para,raph of Article !F6! of the Civil Code, the efficacy of the sale of a -ere hope or e3pectancy is dee-ed su.+ect to the condition that the thin, $ill co-e into e3istence. 6n this case, since private respondent never acCuired any ri,ht over the additional area for failure to secure the approval of the 2ureau of )orestry, the a,ree-ent e3ecuted therefor, $hich had for its o.+ect the transfer of said ri,ht to petitioners, never .eca-e effective or enforcea.le. &'(R()*R(, the decision of respondent Court of Appeals is here.y *56)6(5. 8he a,ree-ent of the parties dated )e.ruary 2#, !966 is declared $ithout force and effect

and the a-ount of P/1,111.11 is here.y ordered to .e deducted fro- the su- a$arded .y respondent court to private respondent. 6n all other respects, said decision of respondent court is affir-ed. ;* *R5(R(5. Melencio-Herrera, Paras, Padilla and armiento JJ., concur.

! Penned .y ?ustice Crisolito Pascual, $ith ?ustices ;a-uel ). Reyes and Rafael C. Cli-aco concurrin,. 2 !ollo, 61. / "#id., F9-55. F "#id., F9-55. 5 "#id., !6-!". 6 )older of *ri,inal (3hi.its for Plaintiff, (3h. A. " "d., (3h. 5, 5-! to 5-2. # "d., (3h. 5-/. 9 )older of *ri,inal (3hi.its for 5efendants, (3h. !#. !1 !ollo, "/A Record on Appeal, CA-G.R. No. 52296-R, /5-/6. !! "#id., id., id., /6-/". !2 "#id., id., id., !1/-!!F. !/ !ollo, CA-G.R. No. 52296-R, "/-"F. !F "#id., id., "5. !5 "#id., id., "6-#6. !6 "#id., id., #". !" 'el-uth, ?r. vs. People of the Philippines, et al., !!2 ;CRA 5"/ <!9#2=A ;t. Peter e-orial Par@, 6nc., et al. vs. Cleofas, et al., !2! ;CRA 2#" <!9#/=A ;errano vs. Court of Appeals, et al., !/9 ;CRA !"9 <!9#5=. !# !ollo, /F.

!9 "#id., 5F. 21 )older of *ri,inal (3hi.its for 5efendants, (3h. 9. 2! )older of *ri,inal (3hi.its for Plaintiff, (3h. 5. 22 >elasCueD, et al. vs. 8eodoro, et al., !6 Phil. "5" <!92/=A 2acordo vs. Alcantara, et al., !F ;CRA "/1 <!965=. 2/ !"A C.?.;. 22#. 2F $p. cit., 2//-2/!. 25 Art. !/F5, Civil Code. 26 Concepcion vs. ;ta. Ana, #" Phil. "#" <!951=. 2" !ollo, 5#-59. 2# Art. !!#!, Civil CodeA Araneta vs. Rural Pro,ress Ad-inistration, 92 Phil. 9# <!952=. 29 Gaite vs. )onacier, et al., 2 ;CRA #/1 <!96!=. /1 Pio 2arretto ;ons, 6nc. vs. Co-pania ariti-a, 62 ;CRA !F" <!9"5=.

8he 7a$phil Pro+ect - Arellano 7a$ )oundation