Buenaventura v.

Court of Appeals
416 SCRA 263

RELEVANT ISSUE: Whether the Deeds of Sale are void for lack of consideration. NO.

SALIENT FACTS: The Joaquin spouses sold their properties to six of their children.
U f a el , hei f he child e ee ha i h hei a e deci i
ell he e ie hei he ibli g , clai i g ha he ed ale f he
properties [ ] was the result of a deliberate conspiracy designed to unjustly deprive the
e f he c l hei [ ] f hei legi i e. Th , he agg ie ed J a i child e
filed a civil action praying that the Court declare the Deeds of Sale covering the
properties as void ab initio f lack f c ide a i a d g i ade ac f ice
beca e he ice i he aid i e e e allegedl ab l el i la ed.

In the trial court stage, the trial court dismissed the petition of the aggrieved Joaquin
children by giving more weight to the testimony of the Joaquin patriarch compared to
the negative allegation of the aggrieved Joaquin children. In the appellate stage, the
Court of Appeals likewise dismissed the petition but the court did not rule on the merits
c ce i g he alidi f [ he] deed ei he f g i ade ac lack f
c ide a i f fail e e e he e i e f he a ie , i g i ead
rule that the aggrieved Joaquin children who brought the claim did not have a cause
f ac i beca e hei igh a e e el i ch a e a d e l he la e
dea h. He ce, hi e i i .

HELD: The Supreme Court sustained the validity of the Deeds of Sale by holding that
[a] a c e al c ac , a c ac f ale becomes a binding and valid contract
upon the meeting of the minds as to price. If there is a meeting of the minds of the
parties as to the price, the contract of sale is valid, despite the manner of payment, or
e e he b each f ha a e f a e . Th s, the Court rejected the aggrieved
J a i child e clai ha he Deed f Sale e e id f lack f c ide a i .

Moreover, the Court provided the following consequences of the existence of certain
defec i a c ac f ale: [i]f he eal ice is not stated in the contract, then the
c ac f ale i alid b bjec ef a i [,] a d [i]f he e i ee i g f he
minds of the parties as to the price, because the price stipulated in the contract is
simulated, then the contract is void. N abl , he C led ha he e a a ee i g
of mind between the Joaquin spouses as seller and their children as buyers, as
reflected by the purchase price indicated in the Deeds of Sale.

MY CRITIQUE AND ANALYSIS: The Buenaventura v. Court of Appeals

(Buenaventura) ca e ill a e he legal effec f he c e al cha ac e f
contracts of sale. The petitioners in Buenaventura (the aggrieved Joaquin children)
assumed that allegations that the Deeds of Sale were not supported by any
consideration sufficed at avoiding the entirety of the contract of sale. However, this is
i c ec beca e c ac f ale a e c e al a d he eb e fec ed he
ee i g f he i d f he a ie hich i h he C held ha [i]f he e i a
meeting of the minds of the parties as to the price, the contract of sale is valid, despite
he a e f a e , e e he b each f ha a e f a e . Si ce he
contract of sale is already perfected by the meeting of the minds of the parties to the

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c ac , he b e fail e a he c ide a i d e e de he c ac f
sale as void.

Evidently, the Buenaventura ca e e ha ba e allega i f - a e

fail e a he c ide a i d ffice a llif i g a c act of sale. As held
by the Court and consistent with the consensual character of contracts of sale, it is
l ed clai f lack f c ide a i hich e e he e i e ce f a
alid c ac .

Lam v. Kodak Philippines

778 SCRA 96 (2016)

RELEVANT ISSUE: Whether the parties to the contract of sale were entitled to mutual
restitution. YES.

SALIENT FACTS: The Lam Spouses, as buyer, and Kodak, as seller, entered into a
Letter Agreement for the sale of 3 units of a Kodak Minilab Equipment. Ten months
later, the seller cancelled the sale through letter because 10 of the 12 post-dated
checks issued by the buyer as payment were dishonored by the depository back
caused by the order of the buyer to the bank to stop payment of the post-dated checks.
Conversely and the following month, the buyer likewise cancelled the sale through
letter on account of he elle failure to deliver 2 remaining units of the purchased
equipment.

Thereafter, the buyer filed a complaint for replevin and recovery of sum of money,
which was initially granted by the trial court until it was reversed by another trial court,
which was again sustained in the appellate level. Hence, this petition.

HELD: The C ai ed he l e c deci i a d held that [ ]e ci i de

Article 1191 has the effect of mutual restitution. Thus, both parties must be restored
to their original situation as far as practicable, as if the contract was never entered
into. Furthermore, the Court explained that
[w]hen rescission is sought under Article 1191 of the Civil Code, it need not be
judicially invoked because the power to resolve is implied in reciprocal
obligations. [ ] When a party fails to comply with his or her obligation, the other
party's right to resolve the contract is triggered. The resolution immediately
produces legal effects if the non-performing party does not question the
resolution. Court intervention only becomes necessary when the party who
allegedly failed to comply with his or her obligation disputes the resolution of
the contract.

Thus, the C held ha [ ]ince both parties in this case have exercised their right to
resolve under Article 1191 [by sending the letters of cancellation to one another], there
is no need for a judicial decree before the resolution produces effects.

MY CRITIQUE AND ANALYSIS: The Lam v. Kodak Philippines (Kodak) case

illustrates the legal effects of the eci cal cha ac e f a contract of sale. In the
Kodak case, both buyer and seller (1) failed to fulfill their obligations arising from the
contract of sale and (2) manifested their intentions to cancel the contract of sale
through a letter that they sent one another. B ea f he eci cal cha ac e f

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the contract of sale, the parties validly rescinded the contract of sale pursuant to Article
1191 of the Civil Code which provides ha [t]he power to rescind obligations is implied
in reciprocal ones, in case one of the obligors should not comply with what is
incumbent upon him. Thus, the Court correctly ruled that the rescission had the effect
of mutual restitution.

Gaite v. Fonacier
2 SCRA 830 (1961)

RELEVANT ISSUE: Whether the failure of the buyer to put up a sufficient security
rendered its obligation due and demandable. YES.

SALIENT FACTS: By reason of a series of transactions involving the appointment of

Gaite as the attorney-in-fact of Fonacier, Gaite, as the seller, obtained iron ores which
it eventually sold to Fonacier and his company, as buyer. The seller required that the
buyer execute two surety bonds in favor of the buyer: one from the buyer, and the
other form a surety bond company. Unfortunately, the second surety bond provides
that the liability of the surety company would attach only when there had been an
actual sale f he b e c a a d ha i e i a e a a fi ed da e.

When the second security bond expired, the seller demanded payment from the buyer
on the theory that [the buyer] had lost every right to make use of the period given
them when their bond [ ] automatically expired. Thereafter, the buyer failed to pay.
Hence, this petition.

HELD: In refuting the b e clai ha the -occurrence of the supposed

suspensive conditions to the guaranty rendered payment of the contract of sale as
non-de a dable, he C held he e a d c ai e a e f a
contract of sale. Specifically, the Court held that
[a] contract of sale is normally commutative and onerous: not only does each
one of the parties assume a correlative obligation [ ], but each party anticipates
performance by the other from the very start. [I]t is not in the usual course of
business to [subordinate the obligation of one party to an uncertain event];
hence, the contingent character of the obligation must clearly appear [on the
instrument or surrounding circumstances].

The Court held that based on the facts and circumstances of the ca e, [ ]othing is
found in the record to evidence that [the seller] desired or assumed to run the risk of
losing his rights over the ore without getting paid for it, or that [the buyer] understood
that [the seller] assumed any such risk. The C k note of the fact that the seller
insisted on a bond to guarantee payment[,] not only upon a bond by [the buyer] but
also on one by a surety company; and the fact that [the buyer] did put up such bonds
indicates that they admitted the definite existence of their obligation to pay the balance
of [the contract of sale].

MY CRITIQUE AND ANALYSIS: The Gaite v. Fonacier case illustrates the e

a dc a i e a e f a contract of sale. The Court in the Gaite case correctly
denied the allegation of the buyers to the iron ore that demandability of the payment
for the sale was conditioned on the suspensive conditions of the guaranty. The Court
observed that it was unusual that a seller would agree to such terms, considering that

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c ac f ale a e e a d c ai e i a e such that the buyer is
bound to pay a price certain in money or its equivalent and the transaction involves
the exchanges of values between the seller and the buyer.

Celestino & Co. v. Collector

99 Phil. 841 (1956)

RELEVANT ISSUE: Whether the copartnership is engaged in the sales of services as

a contractor and not in the sale of manufactured articles. NO.

SALIENT FACTS: The Celestino Co & Company is a general copartnership which

e e e ed i elf i i c a a i a a [ ]anufacturers of all kinds of doors,
windows, sashes, furnitures. Initially, the business paid percentage taxes on the
gross receipts of its sash, door and window factory. H e e , the business
e e all began to claim liability only to the contractor's [ ] tax beca e he windows
and doors are made by it only when customers place their [special] orders.
Consequently, the business brought the matter to the Bureau of International Revenue
(BIR) who refused he b i e c e i ha i i a di a c ac . Having
failed its petition before the BIR, the business also filed an appeal to the Court of Tax
Appeals which also denied its claims. Hence, this petition.

HELD: The Court held that the business should be taxed on the original sales of
articles as a manufacturer and not on the percentage tax imposed on contractors. It
b e ed ha [ ]he fact that windows and doors are made by it only when customers
place their orders, does not alter the nature of the establishment. The Court noted
that the b i e did not merely sell its services [ ] because it also sold the materials
[ ] although in such form or combination as suited the fancy of the purchaser. Such
new form does not divest the Oriental Sash Factory of its character as manufacturer.

Thereafter, the Court held that c ac f a iece f k involve extraordinary

services of the factory. Thus
when this Factory accepts a job that requires the use of extraordinary or
additional equipment, or involves services not generally performed by it it
thereby contracts for a piece of work filling special orders within the meaning
of Article 1467. The orders herein exhibited were not shown to be special. They
were merely orders for work nothing is shown to call them special requiring
extraordinary service of the factory.

MY CRITIQUE AND ANALYSIS: The Celestino v. Collector case provides an

illustration of a circumstance wherein the Court was asked to determine whether the
b i e ac i i a c ide ed a a ale a c ac f a iece f k.
Notably, the determination is relevant in establishing the tax liability of a business. In
the end, the Court correctly ruled that the business was engaged in the sale of its
goods because he alleged ecial de did e ail e f a ce f
e a di a e ice f he fac . This ruling provides more clarity to Article 1467
f he Ci il C de hich ide ha if the goods are to be manufactured specially
for the customer and upon his special order, and not for the general market, it is
contract for a piece of work.

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