THE WELLEX GROUP, INC v. U-LAND AIRLINES, CO.

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

FACTS:
Wellex and U-Land entered into a Memorandum of Agreement (MOA) whereby
it stated that Wellex and U-Land would execute a share purchase agreement covering
U-Land’s acquisition of the shares of stock of both APIC (APIC shares) and PEC (PEC
shares) both owned by Wellex. The purchase was in order for U-Land to expand their
airline operations. The transfer was conditioned on the full remittance of the final
purchase price as reflected in the share purchase agreement.

Consequently, U-Land agreed to remit $7 million dollars for the initial funding
and in turn, Wellex would deliver stock certificates representing 60,770,000 PEC
shares and 72,601,000 APIC shares.

Despite these transactions, Wellex and U-Land still failed to enter into the share
purchase agreement and the joint development agreement. As such, U-Land offered to
return all the stock certificates covering APIC shares and PEC shares as well as the
titles to real property given by Wellex as security for the amount remitted by U-Land

Subsequently, U-Land filed a Complaint praying for rescission of the agreement

and damages against Wellex. It alleged that its primary reason for purchasing APIC
shares from Wellex was APIC’s majority ownership of shares of stock in APC (APC
shares). After verification with the SEC, U-Land discovered that "APIC did not own a
single share of stock in APC.”

Wellex argued that it stated in the MOA that the shares in APC is still under
consolidation. Further, it contends that it was obliged to be the owner of the shares
only when the time came to deliver these to respondent U-Land and not during the
perfection of the contract itself. Lastly, it argues that respondent U-Land could have
recovered through the securities (shares) given to the latter.

ISSUE:
Is respondent U-Land obligated to exhaust the "securities" given by petitioner
Wellex?

RULING:
No. Respondent U-Land was not obligated to exhaust the "securities" given by
petitioner Wellex. The principal obligation is not a loan or an obligation subject to the
conditions of sureties or guarantors under the Civil Code. Thus, there is no need to
exhaust the securities given to respondent U-Land, and there is no need for a legal
condition where respondent U-Land should pursue other remedies.

Neither petitioner Wellex nor respondent U-Land stated that there was already
a transfer of ownership of the shares of stock or the land titles. Respondent U-Land
itself maintained that the delivery of the shares of stock and the land titles were not in
the nature of a pledge or mortgage. It received the certificates of shares of stock and
the land titles with an understanding that the parties would subsequently enter a
share purchase agreement. There being no share purchase agreement, respondent U-
Land is obligated to return the certificates of shares of stock and the land titles to
petitioner Wellex.