Enrique T. Yuchengco, Inc.

July 20, 1982 | De Castro, J. | Implications WHEREFORE, the decision appealed from being in accordance with law, is hereby
AFFIRMED, without special pronouncement as to costs.
PETITIONER: ENRIQUE T. YUCHENGCO, INC., A. T. YUCHENGCO,
INC., ANNABELLE Y. PUEY and MONA LISA Y. ABAYA SO ORDERED.
RESPONDENTS: CONRADO M. VELAYO
Concepcion Jr. and Guerrero, JJ., concur.
SUMMARY: Velayo sold shares to Yuchengco et al.; however, Secretary of
Department of Tourism asserted that the action is invalid as Rules and Barredo (Chairman), J., I concur in the opinion of Justice Aquino.
Regulations Governing the Business of Tour Operations and Tour Guides
requires express approval of the department for any change in ownership to be Aquino, J., see concurring opinion.
valid.
Abad Santos, J., in the result.
Both parties sought to annul the contract, but Department of Tourism declined.
The Court, however, sided with both parties as the non-compliance with the Escolin J., I reserve my vote.
requirement renders the contract to be void ab initio without any produced legal
effect. RATIO:

DOCTRINE: Implications – Laws that are clear and mandatory take immediate 1. Sec. 4, Part IV of the Rules and Regulations Governing the Business of
effect and serve as a prerequisite for any action made by applying parties. In Tour Operators and Tour Guides cites that all forms of transfer of rights and
effect, actions made that do not meet the requirement are implied to be null and ownership of shares are invalid without prior approval of the Department of
void, without any legal effect produced. Tourism.

Pursuant to paragraph 7, article 1409 of the New Civil Code, such

agreement would be inexistent and null and void from the beginning.
FACTS:
Herein, there is no legal effect produced by the contract as it does not
1. Velayo offered to sell 2,265 shares of common stock of the RIC Tours
meet the stipulated requirements. In effect, there is no actual transfer of
Philippines, Inc, which amounts to 70% of overall subscribed and
rights that occurred despite payment and formalization of contract.
outstanding capital stock.
2. Yuchengco et al. paid 367,500.00 PHP to purchase the shares. The transfer
More so, even if both parties are considered to be at fault or pari delicto, the
was completed within 1 month of the transaction.
law should still be applied and the contract should still be considered void
3. After 1 year and 1 month, Department of Tourism called RIC Tours
ab initio.
Philippines for an explanation as to why their Local Tour Operator’s
License should not be cancelled following its transfer of shares without
prior notice.
4. Yuchengco et al. filed for rescission of contract following the issue under
the condition that their payment be returned in exchange for the transfer of
shares. Secretary of Department of Tourism denied the request for
reconsideration.
5. Appeal was filed to the Office of the President but petition was still not
granted. The case was also brought to CFI of Rizal to annul the contract.

ISSUE/s:
1. WoN "Stock Purchase Agreement" entered into by both parties should be
annulled - YES

RULING: