Case Digest (G.R. No. 167519)
Facts:
The Wellex Group, Inc. v. U-Land Airlines, Co., Ltd., G.R. No. 167519, January 14, 2015, the Supreme Court Second Division, Leonen, J., writing for the Court.Wellex Group, Inc. (Wellex), a Philippine corporation with airline interests, and U-Land Airlines Co., Ltd. (U-Land), a Taiwanese airline registered to do business in the Philippines, executed a Memorandum of Agreement on May 16, 1998 (the First Memorandum of Agreement) to develop joint airline and property ventures and to implement those ventures through a future Share Purchase Agreement (SHPA) and a Joint Development Agreement (JDA). The First Memorandum set out broad terms — percentages and minimum share numbers for APIC and PEC, an indicative per-share price, a 40‑day period to conclude the SHPA, and a clause (Section 9) that the MOA would cease to be effective if the SHPA/JDA were not agreed within 40 days (unless the parties mutually agreed to extend). Annex A (the Second Memorandum) was attached as a disclosure regarding Wellex’s dealings with APIC/APC but was undated and not notarized.
The parties never executed the SHPA. Notwithstanding that, U-Land remitted a total of US$7,499,945 to Wellex in varying amounts between June and September 1998; Wellex acknowledged receipt and delivered to U-Land stock certificates (APIC and PEC) and various land titles purportedly as security. U-Land later discovered that APIC did not in fact own APC shares as the First Memorandum’s preamble had suggested. Negotiations continued informally but did not produce an SHPA or JDA; U-Land demanded return of its remittances by letter dated July 22, 1999 and thereafter filed a complaint (July 30, 1999) seeking rescission of the First Memorandum of Agreement, return of the remittances, and damages, and sought a writ of preliminary attachment.
At trial the Regional Trial Court (Makati, Branch 62) found for U-Land: it held that the preambular misrepresentation that APIC owned APC vitiated Wellex’s consent and that Wellex misrepresented its ability to effect the APC→APIC transfer, inducing U-Land to remit funds; the RTC granted rescission and ordered...(Subscriber-Only)
Issues:
- Did the Court of Appeals err in affirming the RTC’s rescission of the First Memorandum of Agreement?
- Did the First Memorandum of Agreement require execution of a final Share Purchase Agreement before U-Land was obliged to remit the full purchase price?
- Was there novation (express or implied) or other subsequent agreement that altered the parties’ original obligations?
- Was rescission properly sought under Article 1191 (reciprocal obligations) rather than under Articles 1380–1385 (rescissible contracts), and what are the restitutory consequences?
- Did Wellex commit actionable fraud justifying rescission, or at least breach the duty of good faith?
- Was U-Land obligated to exhaust the securities delivered ...(Subscriber-Only)
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)