enrique yuchengco vs velayo

8/19/2019 Enrique Yuchengco vs Velayo

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G.R. No. L-50439 July 20, 1982

ENRIQUE T. YUCHENGCO, INC., A. T. YUCHENGCO, INC., ANNAELLE Y. !UEY "#$ %ONA

LI&A Y. AAYA,plaintiffs-appellees,

vs.

CONRA'O %. (ELAYO, defendant-appellant.

Flavio P. Gutierrez and Angara, Abello, Concepcion, Regala & Cruz Law Offices for plaintiff

appellees.

Ra!on ". #ela$o for defendantappellant.

'E CA&TRO, J.:

This case is certified to Us by the Court of Appeals in its Resolution dated March 6, 196, on the!round that it involves purely "uestion of la#, as raised in the appeal of the decision of the Court of

$irst %nstance of Ri&al '(asi! )ranch* in Civil Case +o. 11, the dispositive portion of #hich reads

as follo#s/

$R0M T2 $0R230%+3, this Court rules that the 4toc5 (urchase A!reeent, 27hibit

8A8, is not erely annulable, but null and void ab initio, and it is hereby so declared, and

as a conse"uence, defendant is ordered to return to the plaintiffs the su of (6,.

to!ether #ith its interests at the le!al rate fro :uly , 19;, #hich is the date of the

4toc5 (urchase A!reeent, 27hibit 8A8. <efendant is also ordered to pay attorney=s fees

of (1,., and the costs. 1

The records sho# that soetie in :une 19;, defendant-appellant Conrado M. >elayo offered to

sell to the plaintiffs-appellees ,6 shares of coon stoc5 of the R%C Tours (hilippines, %nc. '8Ric

Tours (hil., for short* a (hilippine Corporation then duly licensed as a tourist operator, constitutin!

? of the subscribed and outstandin! capital stoc5 of the said corporation. Appellees paid the

entire purchase price of (6,. to appellant >elayo, and the latter, on his part, delivered to the

forer all the ,6 shares of stoc5 of Ric Tours (hil. 0n :uly , 19;, appellees too5 possession of

all the assets of Ric Tours (hil.

0n Au!ust , 19, appellant received a letter fro the <irector of )ureau of 4pecial 4ervices,

<epartent of Touris 'no# Ministry of Touris* directin! hi 8to e7plain #ithin seventy-t#o '*

hours fro receipt of said letter #hy the <epartent of touris should not cancel the @ocal Tour

0perator=s @icense of Ric Tours (hil. for havin! sold to another !roup the shares of stoc5 of Ric

Tours (hil. #ithout prior notice and approval fro the <epartent of Touris #hich is a violation of

(art %%, 4ec. 1, (art %>, 4ec. ; of the Rules and Re!ulations 3overnin! the business of Tour

0perators and Tour 3uides.8

%n his ans#er, appellant clais that the shares of stoc5 of Ric Tours (hil. #ere sold to another !roup

#ithout previous clearance fro the <epartent of Touris because he really #as not a#are of the



rule re"uirin! prior approval by the <epartent of Touris for the validity of transfers of shares of

local tour operators. 0n Au!ust 1, 19;, appellant received a letter fro <irector :ose Cleente of

the )ureau of 4pecial 4ervices, inforin! hi that 8the license to operate the business as Tour

0perator of the Ric Tours (hil. is cancelled effective upon receipt of this letter.8 0n Au!ust 1, 19;,

appellant #rote a letter addressed to on. :ose Aspiras, 4ecretary of Touris, re"uestin! for a

reconsideration of the order of Au!ust 1, 19; of <irector :ose Cleente. 0n Au!ust , 19;,<irector :ose Cleente issued Circular +o. 11 inforin! all concerned 8that the provisional license

of Ric Tours (hil. has been cancelled as of Au!ust 1, 19; for violation of the Rules and

Re!ulations 3overnin! the )usiness of Tour 0perators and that by virtue of said cancellation, Ric

Tours (hil. has been ordered to close shop and to cease fro further en!a!in! in any business

transaction iediately.8

0n 4epteber , 19;, appellees #rote a letter to appellant deandin! rescission of the contract,

the restitution of the su of (6,. representin! the purchase price of ,6 shares of Ric

Tours (hil. and offerin! delivery of the certificates of stoc5 representin! the ,6 shares upon

receipt of the (6,.. 0n 4epteber 1, 19;, appellant received a letter fro the <epartent

of Touris denyin! his re"uest for reconsideration. 0n 4epteber 1, 19;, appellant filed a foralappeal to the 4ecretary of Touris fro the order dated $ebruary , 19.

0n $ebruary ;, 196, appellant filed a foral appeal to the 0ffice of the (resident, #hich, ho#ever

affired the decisions and orders of the <irector of 4pecial 4ervices and the 4ecretary of Touris

cancellin! the license of Ric Tours (hil. as a tour operator.

0n April ;, 19, appellees brou!ht a coplaint before the Court of $irst %nstance of Ri&al '(asi!

)ranch* prayin! for the annulent of contract, the return of (6,. plus interest and the

payent of daa!es. 0n 0ctober ;, 196, the parties a!reed to subit the case for decision on the

basis of their :oint 4tipulation of $acts #herein they aditted the facts set forth above, and the

pleadin!s on record #ithout the necessity of oral evidence. 0n March 1, 19, the trial courtrendered its decision favorable to appellees. ence, this appeal.

The only issue presented in this case is #hether or not the 84toc5 (urchase A!reeent8 entered into

by the appellees and appellant >elayo should be annulled, or in the alternative, declared void ab

initio.

Appellant contends that appellees have no ri!ht to rescind the contract since the o#nership of Ric

Tours (hil. and its license to operate as tour operator #ere transferred to appellees upon delivery to

the of all the shares of stoc5 to!ether #ith all the other assets of the corporation/ conse"uently

under the doctrine of res suo do!ino perit , appellees as buyers in a consuated sale should suffer

the loss #hen the license #as cancelled.

Appellant=s contention is devoid of erit. The provision !overnin! the A!reeent sou!ht to be

annuled is 4ec ;, (art %> of the Rules and Re!ulations 3overnin! the )usiness of Tour 0perators

and Tour 3uides, #hich recites as follo#s/



4ec. ;. +o transfer of ri!hts to a license of a tour operator or o#nership of shares or

interests in the a!ency shall be valid unless ade #ith the prior approval of the

<epartent. '2phasis supplied*.

The above-"uoted rule is clear and andatory. %t re"uires the prior approval of the <epartent of

Touris for the validity of any transfer of ri!hts to a license of a tour operator or o#nership of sharesor interests in any tour a!ency. %n the case at bar, it #as aditted by both parties, that the 4toc5

(urchase A!reeent #as ade #ithout the prior approval of the <epartent of Touris. (ursuant to

para!raph , article 1;9 of the +e# Civil Code, such a!reeent #ould be ine7istent and null and

void fro the be!innin!. $or it is #ell-settled that any contract entered into ust be in accordance

#ith, and not repu!nant to, an applicable statute #hose ters are deeed ebodied therein 2 and

#ithout the need for the parties of e7pressly a5in! reference to it. 3 %nasuch as the a!reeent

bet#een the parties is null and void fro the be!innin!, it produces no le!al effect. +o valid transfer

of o#nership of Ric Tours (hil., to the appellees, therefore, too5 place upon delivery to the by the

appellant of the shares of stoc5 of said corporation as to a5e the suffer the conse"uence of the

subse"uent revocation by the <epartent of Touris of the license of Ric Tours (hil., as they #ould

indeed suffer uch loss after partin! #ith their oney for #hich they #ould receive nothin!. Thedoctrine of res suo do!ino perit advanced by the defendant cannot, therefore, be applied.

Appellant #ould further contend that both parties are presued to 5no# the rule re"uirin! prior

approval by the <epartent of Touris of sales of shares of stoc5 of tour operators, and both are

!uilty of havin! violated said ruleB that they are, therefore, in pari delicto and the la# #ill not aid

either party but leave the #here they are.

e, li5e#ise, see no erit in this contention. Appellant as the vendor in the sale of the shares of

stoc5 of R%C Tours (hil. is obli!ated not only to transfer the o#nership of and deliver, but also to

#arrant the thin! #hich is the obDect of the sale, i.e., the ,6 shares of stoc5 of Ric Tours (hil.,

pursuant to article 1;9 of the +e# Civil Code. <elivery, alone, of said shares of stoc5 is notsufficient, for the appellant, as the vendor, ust also #arrant clear title to the sae, in accordance

#ith the aforesaid provision. Conse"uently, only appellant is char!ed #ith 5no#led!e of the rule

re"uirin! prior approval by the <epartent of Touris of an sales of shares of stoc5 of tour

operators, for it is he as the vendor, #ho is under obli!ation to !ive the appellees-vendees clear title

to the property he is conveyin!. As aptly stated by the trial court/ 8The obli!ation to secure prior

<epartent of Touris approval devolved upon the defendant 'herein appellant* for it #as he as the

o#ner vendor #ho had the duty to !ive clear title to the properties he #as conveyin!. %t #as he alone

#ho #as char!ed #ith 5no#in! about the rules attendant to a sale of the assets or shares of his

tourist-oriented or!ani&ation. e should- have 5no#n that under said rules and re!ulations, on pain

of nullity, shares of stoc5 in his copany could not be transferred #ithout prior approval fro the

<epartent of Touris. The failure to secure this approval is attributable to hi alone.8 The paridelicto doctrine, therefore, can neither be applied.

2ven assuin! that both parties #ere !uilty of the violation, it does not al#ays follo#, as is

appellant=s contention , that both parties bein! in pari delicto, should be left #here they are. %t has

been held that 8althou!h the parties are in pari delicto, yet the court ay interfere and !rant relief at

the suit of one of the, #here public policy re"uires its intervention, even thou!h the result ay be

that a benefit #ill be derived by a plaintiff #ho is in e"ual !uilt #ith defendant.8 4 %n the case at bar,



there is no "uestion that contracts and a!reeents concernin! the transfer of ri!hts or o#nership of

shares of stoc5 in a tour operator or a!ency should be as #ould assure the best protection of the

public, for as aditted by the appellant hiself, the 8<epartent of Touris #ould li5e to assure

itself that the shares of stoc5 #ould not be sold to persons unfit to en!a!e in the business of tour

operation,8 in line #ith the policy of the 3overnent to a5e the tourist industry a positive instruent

to#ards accelerated national developent. (ursuant thereto, (residential <ecree +o. 19, creatin!the <epartent of Touris, e7pressly confers upon it the function of licensin!, re!ulatin! and

supervisin! travel a!ents, tour operators and tour !uides,5 to see to it that only those persons and

entities #ho are fit and responsible should en!a!e in tour operation business. Accordin!ly, the

<epartent of Touris proul!ated its 8Rules and Re!ulations 3overnin! the )usiness of Tour

0perators and Tour 3uides,8 ) providin!, aon! others, that prior approval of the <epartent of

Touris is a re"uisite for the validity of transfers of ri!hts, of o#nership of shares of stoc5 in a tour

operator or a!ency, and that a violation of this rule and re!ulation is a !round for

suspensionEcancellation of license andEor forfeiture of bond.

%t is a failiar doctrine in adinistrative la#, that the 8Rules and Re!ulations 3overnin! the )usiness

of Tour 0perators and Tour 3uides8 issued by the Ministry of Touris, proul!ated pursuant to theauthority vested upon it by (.<. +os. 19 and 9, to accoplish the obDectives of the statute of

a5in! the tourist industry a positive instruent to#ards accelerated national developent, have the

force and effect of la#, are bindin! on all persons subDect to the and copliance there#ith ay be

enforced by a penal sanction provided in the la#. * Thus, 4ection ;-) of (.<. +o. 19, as aended

by (.<. +o. 9, coands that/

4ec. ;-). Any person violatin! or causin! to violate any provision of this <ecree or of

the rules and re!ulations or circulars proul!ated by the <epartent of Touris

pursuant to its po#er to license, classify, re!ulate andEor supervise the operation of

all persons, businesses, establishents, facilities and services that cater to, or have

any thin! to do #ith travelers and tourists, both international and doestic, shallupon, conviction by a court of copetent Durisdiction, suffer the penalty of

iprisonent of not less than t#o '* years nor ore than five '* years or a fine of

not less than t#o thousand pesos nor ore than five thousand pesos or both, at the

discretion of the Court. %n addition thereto suc% violation s%all ipso facto constitute a

valid ground for t%e revocation of all privileges, per!its and aut%orization granted to

suc% persons or entit$ under t%is ecree b$ t%e epart!ent of 'ouris!. ...

'2aphasis supplied*.

$ro the fore!oin!, e hold that the transfer to plantiffs-appellees of ri!hts of o#nership of shares

of st c5 of Ric Tours (hil. is void, and since the a!reeent concernin! the sale or transfer le!ally did

not e7ist, appellant has no title #hatsoever to the oney received by hi by virtue thereof, #hich heand should accordin!ly refund to appellees, #ith interest thereon at the le!al rate until filly paid. 8

2R2$0R2, the decision appealed fro bein! in accordance #ith la#, is hereby A$$%RM2<,

#ithout special pronounceent as to costs.

40 0R<2R2<.

enrique yuchengco vs velayo

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