Ckh Industrial v. The Court of Appeals

Summary

This Supreme Court case involved the rescission of a real estate sale contract due to failure of consideration. CKH Corporation sought to annul the sale of two parcels of land to Century-Well Corporation, claiming the P800,000.00 purchase price was never paid. The respondents argued payment was made through P100,000.00 cash plus P700,000.00 compensation against existing debts owed to the deceased owner's sons. The Court of Appeals initially found valid compensation, but the Supreme Court reversed, ruling that valid compensation requires the contracting parties themselves to be mutually bound as creditors and debtors. Since the promissory notes showed CKH's debt to individual stockholders rather than to Century-Well corporation, and applying the doctrine of separate corporate personality, no valid compensation existed. The decision reinforces fundamental principles of obligations and contracts, particularly the requisites for legal compensation and the parol evidence rule in contract interpretation.