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The Wellex Group, Inc. V. U-Land Airlines, Co., Ltd. G.R. No. 167519, January 14, 2015 Leonen, J. Doctrine

This case involves a memorandum of agreement between Wellex Group and U-Land Airlines to expand their airline operations in Asia. The agreement stipulated that within 40 days, the parties would execute a share purchase agreement for U-Land's acquisition of Wellex shares. The 40-day period lapsed without an agreement. Article 1185 provides that if an event does not occur by a determinate time, the parties are obligated. Here, the non-execution of the share purchase agreement within 40 days triggered the parties' obligations to return what they received to be freed from their undertakings.

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672 views2 pages

The Wellex Group, Inc. V. U-Land Airlines, Co., Ltd. G.R. No. 167519, January 14, 2015 Leonen, J. Doctrine

This case involves a memorandum of agreement between Wellex Group and U-Land Airlines to expand their airline operations in Asia. The agreement stipulated that within 40 days, the parties would execute a share purchase agreement for U-Land's acquisition of Wellex shares. The 40-day period lapsed without an agreement. Article 1185 provides that if an event does not occur by a determinate time, the parties are obligated. Here, the non-execution of the share purchase agreement within 40 days triggered the parties' obligations to return what they received to be freed from their undertakings.

Uploaded by

Michael Vincent Bautista
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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THE WELLEX GROUP, INC. v. U-LAND AIRLINES, CO., LTD.

G.R. No. 167519, January 14, 2015

LEONEN, J.

DOCTRINE:

Article 1185 provides that if an obligation is conditioned on the non-occurrence


of a particular event at a determinate time, that obligation arises (a) at the
lapse of the indicated time, or (b) if it has become evident that the event cannot
occur.

FACTS:

On May 16, 1998, Wellex and U-Land entered into a memorandum of


agreement to expand their respective airline operations in Asia. In the
agreement, it was indicated that within 40 days from its execution date, Wellex
and U-Land would execute a share purchase agreement covering U-Land’s
acquisition of the shares of stock of both Air Philippines International
Corporation (APIC) and Philippine Estates Corporation (PEC) shares owned by
Wellex.

Both parties agreed that the purchase price of APIC shares and PEC
shares would be paid upon the execution of the share purchase agreement and
Wellex’s delivery of the stock certificates covering the shares of stock.

The 40-day period lapsed but the parties were not able to enter into any
share purchase agreement.

Despite the absence of a share purchase agreement, U-Land remitted to


Wellex a total of US$7,499,945.00. After the receipt of such, Wellex delivered to
U-Land stock certificates representing PEC shares and APIC shares. In
addition, Wellex delivered to U-Land Transfer Certificates of Title covering
properties owned by Westland Pacific Properties Corporation; and Transfer
Certificates of Title covering properties owned by Rexlon Realty Group, Inc as
security for the amount remitted by U-Land.
Despite these transactions, Wellex and U-Land still failed to enter into
the share purchase agreement and the joint development agreement.

U-Land then filed a complaint praying for rescission of the Memorandum


of Agreement and damages against Wellex. It alleged that it repeatedly
requested that the parties enter into the share purchase agreement. However,
the 40-day period lapsed, and no share purchase agreement was finalized.

ISSUE:

Is the non-occurrence or non-execution of the share purchase agreement


a condition that would give rise to the obligation of both Wellex and U-land?

RULING:

Yes.

ART. 1185 of the Civil Code provides that the condition that some event
will not happen at a determinate time shall render the obligation effective from
the moment the time indicated has elapsed, or if it has become evident that the
event cannot occur.

At the lapse of the 40-day period, the parties failed to enter into a share
purchase agreement. Applying Article 1185, the parties were then obligated to
return to each other all that they had received in order to be freed from their
respective undertakings.

However, the parties continued their negotiations after the lapse of the
40-day period but they still failed to enter into such. Communication between
the parties ceased, and no further transactions took place. It became evident
then, that, once again, the parties would not enter into the share purchase
agreement. Thus, the obligation to free each other from their respective
undertakings remained.

As such, Wellex is obligated to return the remittances made by


respondent U-Land, in the same way that respondent U-Land is obligated to
return the certificates of shares of stock and the land titles to petitioner Wellex.

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