Javier V CA 7

Martin, Michael Alexey D.R.
Things having potential existence

Sales / 2B Article 1461
Case Digest Javier v. CA
Jose Javier vs. Court of Appeals and Leonardo Tiro

G.R. No. L-46892, 30 September 1981
FACTS:
Leonardo Tiro is a holder of a timber license issued by Bureau of Forestry covering 2,535 hectares
in Misamis Oriental. Tiro executed a Deed of Assignment in favor Spouses Javier. In the Deed of
Assignment, Tiro will give his stocks of Timberwealth Corporation in exchange for P120,000.00.
At the time of the Deed of Assignment, Tiro had a pending application for an additional forest
concession adjoining to his previous timber license.
Tiro and the Spouses Javier entered into another Agreement where
1. Tiro will transfer whatever rights he has to Timberwealth Corporation
2. in exchange for the rights of Tiro, Timberwealth Corporation and Spouses Javier will pay
Tiro P30,000.00 as soon as the additional area is transferred to Timberwealth Corporation
Director of Forestry wrote to Tiro that his forest concession is approved subject to the condition
that he expands his territory to 20,000 hectares by joining cooperatives and other licensees.
Spouses Javier as timber license holders due to their Agreement with Tiro, entered into a Forest
Consolidation Agreement with other timber license holders. With this Agreement, they formed the
North Mindanao Timber Corporation.
For failure of the spouses to pay Tiro, he filed an action for the payment of P83,138.15.
Spouses Javier filed an answer stating the defense of nullity since Tiro failed to comply with his
contractual obligation and the condition imposed on their contract has not materialized. They also
claimed that their payment should be returned from the first agreement.
Lower court ruled dismissing Tiro’s claims and ordering him to pay Spouses Javier
CA reversed the decision of the lower court
Spouses Javier contend that deed of assignment conveyed to them the shares of stocks in
Timberwealth Corporation. Since the Corporation never came into existence, no share of stocks
was transferred to them.
ISSUES:
1. Whether the first Agreement is null and void due to total absence of consideration
2. Whether the second Agreement is null and void due to non-fulfillment of conditions
RULING:
1|Page
Martin, Michael Alexey D.R. Things having potential existence
Sales / 2B Article 1461
Case Digest Javier v. CA
1. No. The first agreement is valid

The Court does not agree with the Spouses contention. The consideration in the first agreement
was the transfer of the forest concession. This is supported by:
a. Both parties knew at the time that TImberwealth was non-existent
b. Tiro offered to the Spouses his expected right of a forest concession subject to approval
of BOF
c. Spouses joined a Forest Consolidation Agreement as owners of the logging concessions
The actions by both parties indicate that the cause in their contract is false. It is settled that actions
of the parties indicate their true intentions. The first contract by both parties is deemed to be a
simulated contract. A contract with false consideration is not null and void in accordance to Article
1346 of the Civil Code. It is valid as long as it does not prejudice third persons and is not contrary
to law and public morals.
2. Yes. The second agreement is null and void
The efficacy of the second contract was reliant on the condition that the application of Tiro for an
additional forest concession be approved by BOF. Since that condition did not occur, the second
contract produces no effect. When a contract is subject to a suspensive condition, its effectivity
can take place only if and when the event which constitutes the condition happens. If the
suspensive condition does not take place then it is as if the conditional obligation never existed.
The second contract was a bilateral contract which gives rise to a reciprocal obligation. The
obligation of Tiro to transfer his rights to the forest concession would give rise to the payment of
the Spouses Javier.
According to Article 1461 of the Civil Code 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.
CA decision is Modified. The second agreement of the parties is null and void
DISPOSITION:
1. P30,000 deducted from respondent award to petitioners
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Martin, Michael Alexey D.R.

Things having potential existence

Jose Javier vs. Court of Appeals and Leonardo Tiro

1. No. The first agreement is valid

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