Caltex (Philippines), Inc. v. PNOC Shipping and Transport Corp., G. R. No. 1!

"11,
#$g$st 1!, %!!&.
The Case

Before the Court is a petition for review
[1]
assailing the 31 May 2001 Decision
[2]
and 9
ove!"er 2001 #esolution
[3]
of the Court of $ppeals in C$%&'#' C( o' )*09+' ,he Court of
$ppeals reversed the 1 -une 199) Decision
[)]
of the #egional ,rial Court of Manila. Branch /1
01trial court23. and dis!issed the co!plaint filed "y Calte4 05hilippines3. 6nc' 01Calte423 against
57C 8hipping and ,ransport Corporation 058,C3'

The #ntecedent 'acts

7n * -uly 19+9. 58,C and 9u:on 8tevedoring Corporation 019;8,<(<C723 entered into
an $gree!ent of $ssu!ption of 7"ligations 01$gree!ent23' ,he $gree!ent provides that 58,C
shall assu!e all the o"ligations of 9;8,<(<C7 with respect to the clai!s enu!erated in
$nne4es 1$2 and 1B2 01$nne4es23 of the $gree!ent' ,he $gree!ent also provides that 58,C
shall control the conduct of any litigation pending or which !ay "e filed with respect to the
clai!s in the $nne4es' ,he $gree!ent further provides that 9;8,<(<C7 shall deliver to
58,C all papers and records of the clai!s in the $nne4es' =inally. the $gree!ent provides that
9;8,<(<C7 appoints and constitutes 58,C as its attorney%in%fact to de!and and receive any
clai! out of the countersuits and counterclai!s arising fro! the clai!s in the $nne4es'

$!ong the actions enu!erated in the $nne4es is Caltex (Phils.), Inc. v. Luzon
Stevedoring Corporation doc>eted as $C%&'#' C( o' *2*13 which at that ti!e was pending
"efore the then 6nter!ediate $ppellate Court 06$C3' ,he case was an appeal fro! the Decision
"y the then Court of =irst 6nstance of Manila 0C=63 directing 9;8,<(<C7 to pay
Calte4 5103.*/9')) with legal interest fro! the filing of the action until full pay!ent' 6n its 12
ove!"er 19?/ Decision.
[/]
the 6$C affir!ed with !odification the Decision of the C=6' ,he
dispositive portion of the Decision reads@

AB<#<=7#<. the decision appealed fro! is here"y M7D6=6<D and
Cudg!ent is rendered ordering the defendant [9;8,<(<C7] to pay plaintiff
[Calte4]@

0a3 512*.++1'22 under the first cause of action. with legal interest until
fully paidD

0"3 5103.*/9')) under the second cause of action with legal interest until
fully paidD

0c3 10E of the su!s due as and for attorneyFs feesD

0d3 costs of the suit'

87 7#D<#<D'
[*]

,he Decision of the 6$C "eca!e final and e4ecutory'

,he #egional ,rial Court of Manila. Branch 12. issued a writ of e4ecution in favor of
Calte4' Bowever. the Cudg!ent was not satisfied "ecause of the prior foreclosure of
9;8,<(<C7Fs properties' ,he Manila Ban> 6ntra!uros Branch and the ,raders #oyal Ban>
$duana Branch did not respond to the notices of garnish!ent'

Calte4 su"seGuently learned of the $gree!ent "etween 58,C and 9;8,<(<C7' Calte4
sent successive de!ands to 58,C as>ing for the satisfaction of the Cudg!ent rendered "y the
C=6' 58,C reGuested for the copy of the records of $C%&'#' C( o' *2*13' 9ater. 58,C
infor!ed Calte4 that it was not a party to $C%&'#' C( o' *2*13 and thus. 58,C would not pay
9;8,<(<C7Fs Cudg!ent de"t' 58,C advised Calte4 to de!and satisfaction of the Cudg!ent
directly fro! 9;8,<(<C7'

Calte4 continued to send several de!and letters to 58,C' 7n / =e"ruary 1992.
Calte4 filed a co!plaint for su! of !oney against 58,C' ,he case was doc>eted as Civil Case
o' 91%/9/12'

7n 1 -une 199). the trial court rendered its Decision. the dispositive portion of which
reads@


AB<#<=7#<. in view of the foregoing. Cudg!ent is here"y rendered in
favor of the plaintiff. ordering defendant to pay plaintiff the su!s due the latter in
the decision rendered "y the Court of $ppeals in C$%&'#' o' *2*13. C$9,<H
vs' 9;8,<(<C7. or to pay plaintiff 0<4hi"it 1C23@

0a3 512*.++1'22 under the first cause of action. with legal interest fro!
the date of the pro!ulgation of the decision on ove!"er 12.
19?/until fully paidD

0"3 5103.*/9')) under the second cause of action with legal
interest fro! the date of the pro!ulgation of the decision
onove!"er 12. 19?/ until fully paidD

0c3 10E of the su!s due as and for attorneyFs feesD and

0d3 Costs of suit'

87 7#D<#<D'
[+]

58,C appealed the trial courtFs Decision'


The R$ling o( the Co$rt o( #ppeals

6n its 31 May 2001 Decision. the Court of $ppeals found the appeal !eritorious' ,he
Court of $ppeals ruled that Calte4 has no personality to sue 58,C' ,he Court of $ppeals held
that non%co!pliance with the $gree!ent could only "e Guestioned "y the signatories to the
contract. na!ely. 9;8,<(<C7 and 58,C' ,he Court of $ppeals stated that 9;8,<(<C7 and
58,C are the only parties who can file an action to enforce the $gree!ent' ,he Court of
$ppeals considered fatal the o!ission of 9;8,<(<C7. the real party in interest. as a party
defendant in the case' ,he Court of $ppeals further ruled that Calte4 is not a "eneficiary of a
stipulation pour autrui "ecause there is no stipulation in the $gree!ent which clearly and
deli"erately favors Calte4'

,he dispositive portion of the Decision of the Court of $ppeals reads@

AB<#<=7#<. pre!ises considered. the appealed Decision dated -une 1.
199). rendered "y the #egional ,rial Court of Manila. Branch /1. is here"y
#<(<#8<D and 8<, $86D< and a new one entered D68M6886& the co!plaint
filed "y appellee [Calte4]. against appellant [58,C]. for want of cause of action'

87 7#D<#<D'
[?]

Calte4 filed a !otion for reconsideration of the 31 May 2001 Decision' 6n a #esolution
pro!ulgated on 9 ove!"er 2001. the Court of $ppeals denied the !otion for lac> of !erit'

Bence. this petition "efore this Court'


The Iss$es

,he issues in this case are@

1' Ahether 58,C is "ound "y the $gree!ent when it assu!ed all
the o"ligations of 9;8,<(<C7D and

2' Ahether Calte4 is a real party in interest to file an action to recover fro! 58,C
the Cudg!ent de"t against 9;8,<(<C7'



The R$ling o( this Co$rt

,he petition is !eritorious'




Caltex May Recover from PSTC Under the Terms of the Agreement

Calte4 !ay recover the Cudg!ent de"t fro! 58,C not "ecause of a stipulation in Calte4Fs
favor "ut "ecause the $gree!ent provides that 58,C shall assu!e all the o"ligations of
9;8,<(<C7'

6n this case. 9;8,<(<C7 transferred. conveyed and assigned to 58,C all of
9;8,<(<C7Fs "usiness. properties and assets pertaining to its tan>er and "ul> "usiness
1together with all the o"ligations relating to the said "usiness. properties and assets'2 ,he
$gree!ent. reproduced here in full. provides@

$&#<<M<, 7= $88;M5,67
7= 7B96&$,678

I7A $99 M< BJ ,B<8< 5#<8<,8@

,his $gree!ent of $ssu!ption of 7"ligations !ade and e4ecuted this
*
th
day of -uly 19+9. in the City of Manila. "y and "etween@

9;K7 8,<(<D7#6& C7#57#$,67. a corporation
duly organi:ed and e4isting under and "y virtue of 5hilippine 9aws.
with offices at ,aco!a and 8econd 8treets. 5ort $rea. Manila.
represented "y &<#76M7 K' (<9$8C7. in his capacity as
Chair!an of the Board. hereinafter referred to as $886&7#.

% and %
57C 8B6556& $D ,#$857#, C7#57#$,67. a
corporation duly organi:ed and e4isting under and "y virtue of
5hilippine 9aws. with offices at Ma>ati $venue. Ma>ati. Metro
Manila. represented "y M$#67 (' ,6$7L;6. in his capacity as
(ice%5resident. hereinafter referred to as $886&<<.




A6,<88<,B @ , h a t %

AB<#<$8. on $pril 1. 19+9. $886&7#. for valua"le consideration.
e4ecuted an $gree!ent of ,ransfer with $886&<< where"y#SSIGNOR
trans(erred, conve)ed and assigned $nto #SSIGN** all o( #SSIGNOR+s
,$siness, properties and assets appertaining to its tan-er and ,$l-
all 0sic3 depart.ents, together /ith all the o,ligations relating to said
,$siness, properties and assetsD

AB<#<$8. relative to the conduct. operation and !anage!ent of the
"usiness. properties and assets transferred. conveyed and assigned "y
$886&7# to $886&<< certain actions and clai!s particularly descri"ed in
$nne4 1$2 consisting of four 0)3 pages and $nne4 1B2. consisting of one 013 page.
attached hereto and !ade integral parts hereof. have "een filed. either with
$886&7# or with appropriate courts and ad!inistrative tri"unals'

AB<#<$8. under the ter!s and conditions hereinafter !entioned.
$886&<< agree[s] to assu!e the o"ligations incident and relative to the actions
and clai!s enu!erated and descri"ed in $nne4es 1$2 and 1B2 hereof'

7A. ,B<#<=7#<. for and in consideration of the foregoing pre!ises.
the parties hereto have agreed as follows@

1' #SSIGN** shall ass$.e, as it here,) ass$.es all the o,ligations
o( #SSIGNOR in respect to the actions and clai.s and descri,ed in
#nnexes 0#1 and 021D

2' $886&<< shall have co!plete control in the conduct of any and all
litigations now pending or !ay "e filed with respect to the actions and
clai!s enu!erated and descri"ed in $nne4es 1$2 and 1B2D

3' $886&7# shall deliver and convey unto $886&<< all papers.
docu!ents. files and any other records appertaining to the actions and
clai!s enu!erated and descri"ed in $nne4es 1$2 and 1B2D

)' $886&7# here"y constitutes and appoints $886&<<. its successors
and assigns. the true and lawful attorney of $886&7#. with full power of
su"stitution. for it and in its na!e. place and stead or otherwise. "ut on
"ehalf and for the "enefit of $886&<<. its successors and assigns. to
de!and and receive any and all clai![s] out of countersuits or
counterclai!s arising fro! the actions and clai!s enu!erated and
descri"ed in $nne4es 1$2 and 1B2'
[9]
0<!phasis supplied3



Ahen 58,C assu!ed all the properties. "usiness and assets of 9;8,<(<C7 pertaining
to 9;8,<(<C7Fs tan>er and "ul> "usiness. 58,C also assu!ed all of 9;8,<(<C7Fs
o"ligations pertaining to such "usiness' ,he assu!ption of o"ligations was stipulated not only
in the $gree!ent of $ssu!ption of 7"ligations "ut also in the $gree!ent of ,ransfer' The
#gree.ent speci(icall) .entions the case ,et/een 34ST*5*CO and Caltex, doc-eted as
#C6G.R. C5 No. &%&17, then pending ,e(ore the I#C' ,he $gree!ent provides that 58,C
!ay de!and and receive any clai! out of counter%suits or counterclai!s arising fro! the
actions enu!erated in the $nne4es'

58,C is "ound "y the $gree!ent' 58,C cannot accept the "enefits without assu!ing the
o"ligations under the sa!e $gree!ent' 58,C cannot repudiate its co!!it!ent to assu!e the
o"ligations after ta>ing over the assets for that will a!ount to defrauding the creditors of
9;8,<(<C7' 6t will also result in failure of consideration since the assu!ption of o"ligations is
part of the consideration for the transfer of the assets fro! 9;8,<(<C7 to 58,C' =ailure of
consideration will revert the assets to 9;8,<(<C7 for the "enefit of the creditors of
9;8,<(<C7' ,hus. 58,C cannot escape fro! its underta>ing to assu!e the o"ligations of
9;8,<(<C7 as stated in the $gree!ent'

Disposition of Assets should not Prejudice Creditors

<ven without the $gree!ent. 58,C is still lia"le to Calte4'

,he disposition of all or su"stantially all of the assets of a corporation is allowed under
8ection )0 of Batas Pambansa Blg' *?. otherwise >nown as ,he Corporation Code of the
5hilippines 01Corporation Code23' 8ection )0 provides@
8<C' )0' Sale or other disposition o assets' 8u"Cect to the provisions of
e4isting laws on illegal co!"inations and !onopolies. a corporation !ay. "y a
!aCority vote of its "oard of directors. or trustees. sell. lease. e4change.
!ortgage. pledge or otherwise dispose of all or su"stantially all of its property
and assets. including its goodwill. upon such ter!s and conditions and for such
consideration. which !ay "e !oney. stoc>s. "onds or other instru!ents for the
pay!ent of !oney or other property or consideration. as its "oard of directors or
trustees !ay dee! e4pedient. when authori:ed "y the vote of the stoc>holders
representing at least two%thirds 02M33 of the outstanding capital stoc>D or in case of
non%stoc> corporation. "y the vote of at least two%thirds 02M33 of the !e!"ers. in a
stoc>holdersF or !e!"ersF !eeting duly called for the purpose' Aritten notice of
the proposed action and of the ti!e and place of the !eeting shall "e addressed
to each stoc>holder or !e!"er at his place of residence as shown on the "oo>s
of the corporation and deposited to the addressee in the post office with postage
prepaid. or served personally@Provided. ,hat any dissenting stoc>holder !ay
e4ercise his appraisal right under the conditions provided in this Code'

$ sale or other disposition shall "e dee!ed to cover su"stantially all the
corporate property and assets. if there"y the corporation would "e rendered
incapa"le of continuing the "usiness or acco!plishing the purposes for which it
was incorporated'

4 4 4 4


Ahile the Corporation Code allows the transfer of all or su"stantially all the properties and
assets of a corporation. the transfer should not preCudice the creditors of the assignor' ,he only
way the transfer can proceed without preCudice to the creditors is to hold the assignee lia"le for
the o"ligations of the assignor' ,he acGuisition "y the assignee of all or su"stantially all of the
assets of the assignor necessarily includes the assu!ption of the assignorFs lia"ilities.
[10]
unless
the creditors who did not consent to the transfer choose to rescind the transfer on the ground of
fraud'
[11]
,o allow an assignor to transfer all its "usiness. properties and assets without the
consent of its creditors and without reGuiring the assignee to assu!e the assignorFs o"ligations
will defraud the creditors' ,he assign!ent will place the assignorFs assets "eyond the reach of
its creditors'

Bere. Calte4 could not enforce the Cudg!ent de"t against 9;8,<(<C7' ,he writ of
e4ecution could not "e satisfied "ecause 9;8,<(<C7Fs re!aining properties had "een
foreclosed "y lienholders' 6n addition. all of 9;8,<(<C7Fs "usiness. properties and assets
pertaining to its tan>er and "ul> "usiness had "een assigned to 58,C without the >nowledge of
its creditors' Calte4 now has no other !eans of enforcing the Cudg!ent de"t e4cept against
58,C'

6f 58,C refuses to honor its written co!!it!ent to assu!e the o"ligations of
9;8,<(<C7. there will "e fraud on the creditors of 9;8,<(<C7' 58,C agreed to ta>e over.
and in fact too> over. all the assets of 9;8,<(<C7 upon its e4press written co!!it!ent to pay
all o"ligations of 9;8,<(<C7 pertaining to those assets. including specifically the clai! of
Calte4' 9;8,<(<C7 no longer infor!ed its creditors of the transfer of all of its assets
presu!a"ly "ecause 58,C co!!itted to pay all such creditors' 8uch transfer. leaving the
clai!s of creditors unenforcea"le against the de"tor. is fraudulent and rescissi"le'
[12]
,o allow
58,C now to welsh on its co!!it!ent is to sanction a fraud on 9;8,<(<C7Fs creditors'
[13]


6n ria v! McMic"ing. the Court enu!erated the "adges of fraud as follows@

1' ,he fact that the consideration of the conveyance is fictitious or is
inadeGuate'

2' # trans(er .ade ,) a de,tor a(ter s$it has ,een ,eg$n and /hile it
is pending against hi.'

3' $ sale upon credit "y an insolvent de"tor'

)' <vidence of large inde"tedness or co!plete insolvency'


/' The trans(er o( all or nearl) all o( his propert) ,) a de,tor,
especiall) /hen he is insolvent or greatl) e.,arrassed (inanciall)'

*' ,he fact that the transfer is !ade "etween father and son. when there
are present other of the a"ove circu!stances'

+' ,he failure of the vendee to ta>e e4clusive possession of all the
property'
[1)]
0<!phasis supplied3


6n Pepsi#Cola $ottling Co! v! %&RC.
[1/]
which involved the illegal dis!issal of the
e!ployees of 5epsi%Cola Distri"utors of the 5hilippines 05CD3. the Court has ruled that 5epsi%
Cola 5roducts 5hilippines. 6nc' 05C5563 which acGuired the franchise of 5CD is lia"le for the
reinstate!ent of 5CDFs e!ployees' ,he Court reCected 5C556Fs argu!ent that it is a co!pany
separate and distinct fro! 5CD' ,he Court ruled that the co!plaint was filed when 5CD was
still in e4istence' =urther. there was no evidence that 5C556. as the new entity or purchasing
co!pany. was free fro! any lia"ilities incurred "y 5CD'

6n this case. 58,C was aware of the pendency of the case "etween Calte4 and
9;8,<(<C7' 58,C assu!ed 9;8,<(<C7Fs o"ligations. including specifically any o"ligation
that !ight arise fro! Calte4Fs suit against 9;8,<(<C7' ,he $gree!ent transferred the
unencu!"ered assets of 9;8,<(<C7 to 58,C. !a>ing any !oney Cudg!ent in favor of Calte4
unenforcea"le against 9;8,<(<C7' ,o allow 58,C to renege on its o"ligation under the
$gree!ent will allow 58,C to defraud Calte4' ,his !ilitates against the statutory policy of
protecting creditors fro! fraudulent contracts'



$rticle 1313 of the Civil Code provides that 1[c]reditors are protected in cases of contracts
intended to defraud the!'2 =urther. $rticle 13?1 of the Civil Code provides that contracts
entered into in fraud of creditors !ay "e rescinded when the creditors cannot in any !anner
collect the clai!s due the!'
[1*]
#rticle 1781 applies to contracts /here the creditors are not
parties, (or s$ch contracts are $s$all) .ade /itho$t their -no/ledge'

,hus. a creditor
who is not a party to a contract can sue to rescind the contract to prevent fraud upon hi!' 7r.
the sa!e creditor can instead choose to enforce the contract if a specific provision in the
contract allows hi! to collect his clai!. and thus protect hi! fro! fraud'

6f 58,C does not assu!e the o"ligations of 9;8,<(<C7 as 58,C had co!!itted under
the $gree!ent. the creditors of 9;8,<(<C7 could no longer collect the de"ts of
9;8,<(<C7' ,he assign!ent "eco!es a fraud on the part of 58,C. "ecause 58,C would
then have inveigled 9;8,<(<C7 to transfer the assets on the pro!ise to pay 9;8,<(<C7Fs
creditors' Bowever. after ta>ing over the assets. 58,C would now turn around and renege on
its pro!ise'

,he $gree!ent. under $rticle 1291 of the Civil Code.
[1+]
is also a novation of
9;8,<(<C7Fs o"ligations "y su"stituting the person of the de"tor' ;nder $rticle 1293 of the
Civil Code. a novation which consists in su"stituting a new de"tor in place of the original de"tor
cannot "e !ade without the consent of the creditor'
[1?]
Bere. since the $gree!ent novated the
de"t without the >nowledge and consent of Calte4. the $gree!ent cannot preCudice
Calte4' ,hus. the assets that 9;8,<(<C7 transferred to 58,C in consideration. a!ong
others. of the novation. or the value of such assets. re!ain even in the hands of 58,C su"Cect
to e4ecution to satisfy the Cudg!ent clai! of Calte4'


Caltex is a Real Party in 'nterest

8ection 2. #ule 3 of the 199+ #ules of Civil 5rocedure provides@

8<C' 2' Parties in interest. $ real party in interest is the party who stands
to "e "enefited or inCured "y the Cudg!ent in the suit. or the party entitled to the
avails of the suit' ;nless otherwise authori:ed "y law or these #ules. every
action !ust "e prosecuted or defended in the na!e of the real party in
interest'


7rdinarily. one who is not a privy to a contract !ay not "ring an action to enforce
it' Bowever. this case falls under the e4ception' 6n co v! &im(aring. we ruled@

,he parties to a contract are the real parties in interest in an action upon it.
as consistently held "y the Court' 7nly the contracting parties are "ound "y the
stipulation in the contractD they are the ones who would "enefit fro! and could
violate it' ,hus. one who is not a party to a contract. and for whose "enefit it was
not e4pressly !ade. cannot !aintain an action on it' 7ne cannot do so. even if
the contract perfor!ed "y the contracting parties would incidentally inure to oneFs
"enefit'

$s an exception. parties who have not ta>en part in a contract !ay show
that they have a real interest affected "y its perfor!ance or annul!ent' In other
/ords, those /ho are not principall) or s$,sidiaril) o,ligated in a contract,
in /hich the) had no intervention, .a) sho/ their detri.ent that co$ld
res$lt (ro. it' 4 4 4
[19]
0<!phasis supplied3


Calte4 !ay enforce its cause of action against 58,C "ecause 58,C e4pressly assu!ed
all the o"ligations of 9;8(<,<C7 pertaining to its tan>er and "ul> "usiness and specifically.
those relating to $C%&'#' C( o' *2*13' Ahile Calte4 is not a party to the $gree!ent. it has a
real interest in the perfor!ance of 58,CFs o"ligations under the $gree!ent "ecause the non%
perfor!ance of 58,CFs o"ligations will defraud Calte4'

<ven if 58,C did not e4pressly assu!e to pay the creditors of 9;8,<(<C7. 58,C
would still "e lia"le to Calte4 up to the value of the assets transferred' ,he transfer of all or
su"stantially all of the unencu!"ered assets of 9;8,<(<C7 to 58,C cannot wor> to defraud
the creditors of 9;8,<(<C7' $ creditor has a real interest to go after any person to who! the
de"tor fraudulently transferred its assets'

9:*R*'OR*. we R*5*RS* and S*T #SI;* the 31 May 2001 Decision and 9
ove!"er 2001 #esolution of the Court of $ppeals in C$%&'#' C( o' )*09+' Ae #''IR< the
1 -une 199) Decision of the #egional ,rial Court of Manila. Branch /1. in Civil Case o' 91%
/9/12' Costs against respondent'

SO OR;*R*;'