G.R. No. L-10679; November 29, 1958
ABELARDO PAGES, plaintiff-appellant, vs. BASILAN LUMBER COMPANY, defendant-appellee.

FACTS

Plaintiff Abelardo Pages, the grantee of a lumber concession (Port Santa Maria Lumber) under a Bureau of Forestry license, entered into a contract (Exhibit B) with defendant Basilan Lumber Company on September 4, 1950. 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 renewal and the continuance of his forestry license. Basilan Lumber agreed to buy all logs, advance P10,000 upon the contract’s approval by the Director of Forestry, transport and repair Pages’ equipment at its own cost, and send technical men and equipment to the concession area. Pages was to bear logging operational expenses but would be reimbursed monthly by Basilan Lumber, with such reimbursement being in addition to the log purchase price.
The contract was approved by the Director of Forestry. However, the trial court found that this approved contract (Exhibit B) was simulated and did not express the true intent of the parties. The real agreement, contrary to forestry rules, was for Basilan Lumber to actually conduct and finance the logging operations—which it did from December 1950 until operations were suspended in June 1952. Pages never advanced any operational expenses. The simulation was intended to secure forestry approval, as initial agreements were rejected by the Bureau, which insisted that only the licensee could conduct operations and must personally hire any technical help.
Pages sued for breach of contract and damages, alleging that Basilan Lumber, around June 1952, removed equipment and withdrew technical men, stopping operations, and refused to purchase about 2,000 cubic feet of logs. After Pages presented his evidence, Basilan Lumber moved to dismiss the complaint. The trial court granted the motion, dismissing the complaint on grounds that Pages had no cause of action, the contract was void for not expressing the true intent of the parties, and its cause/consideration was contrary to law and forestry regulations.

ISSUE

Whether the trial court correctly dismissed the complaint on the grounds that (1) the contract sued upon was simulated and void for not expressing the true intent of the parties and for being contrary to forestry rules and regulations, and (2) the plaintiff failed to establish a cause of action for breach of contract.

RULING

Yes, the trial court’s order of dismissal is affirmed.
1. On the Validity of the Contract: The Supreme Court agreed with the trial court’s finding that the contract (Exhibit B) was simulated and did not express the true agreement of the parties. The evidence showed the real intention was for Basilan Lumber to operate and finance the logging concession, which it did from December 1950 to June 1952, with Pages never advancing any expenses. This true arrangement violated the rules and regulations of the Bureau of Forestry and the policy of the Government, as it effectively allowed a non-licensee to conduct operations—a scheme contrary to what was presented to and approved by the Director of Forestry. Therefore, the contract was void.
2. On the Absence of a Cause of Action for Breach:
* Withdrawal of Equipment and Men: The evidence indicated the equipment was removed with Pages’ knowledge and consent for repair, as per the contract, and due to weather conditions and needed resurvey. Furthermore, the technical men were never hired by Pages as required by the forestry bureau, but were merely supplied by Basilan Lumber, contravening the approved terms.
* Failure to Purchase Logs: Pages admitted the logs in question were not at the seashore and had not been scaled by a forest officer, conditions precedent for purchase under the contract. Thus, Basilan Lumber’s obligation to buy had not yet arisen.
* Lack of a Fixed Period: The Court noted that even under the parties’ private understanding, no time limit was fixed for Basilan Lumber to conduct logging operations or purchase logs. In the absence of a fixed period, Pages could not demand performance without first securing a judicial determination of that period under Article 1197 of the New Civil Code. Since Pages did not ask the trial court to fix a period, no breach could be declared.
In view of the simulated and void nature of the contract and the plaintiff’s failure to prove a breach, the dismissal of the complaint was proper.