Case Summary (G.R. No. 150711)
Key Dates
• April 1, 1979 – Agreement of Transfer executed by LUSTEVECO in favor of PSTC
• July 6, 1979 – Agreement of Assumption of Obligations between LUSTEVECO and PSTC
• November 12, 1985 – IAC decision affirming and modifying CFI decision in Caltex v. LUSTEVECO
• February 5, 1992 – Caltex files against PSTC for sum of money (Civil Case No. 91-59512)
• June 1, 1994 – RTC Decision in favor of Caltex
• May 31, 2001 – CA reverses and dismisses Caltex’s complaint
• November 9, 2001 – CA denies motion for reconsideration
• August 10, 2006 – Supreme Court decision
Applicable Law
• 1987 Philippine Constitution (decision after 1990)
• Rules of Court, Rule 45 (Petitions for Review)
• Civil Code of the Philippines (Articles 1291, 1293, 1313, 1381)
• Corporation Code, Section 40 (Disposition of Assets)
• 1997 Rules of Civil Procedure, Rule 3, Section 2 (Real Party in Interest)
Antecedent Facts
LUSTEVECO was ordered by the Court of First Instance to pay Caltex for unpaid stevedoring services. The Intermediate Appellate Court, on November 12, 1985, affirmed with modification the trial court’s judgment, rendering LUSTEVECO liable for P126,771.22 and P103,659.44 with legal interest, attorney’s fees, and costs. Execution was frustrated by foreclosure of LUSTEVECO assets and non-response of garnishees.
Contractual Arrangement
On April 1, 1979, LUSTEVECO transferred its tanker and bulk business—including assets, properties, and associated obligations—to PSTC. On July 6, 1979, LUSTEVECO and PSTC executed an Agreement of Assumption of Obligations by which PSTC expressly assumed all LUSTEVECO’s liabilities, controlled pending litigation described in annexes (including Caltex v. LUSTEVECO), and was appointed attorney-in-fact to enforce or receive claims.
Trial Court Ruling
The Regional Trial Court (Branch 51, Manila) on June 1, 1994, held PSTC bound by the Agreement and ordered payment of the Caltex judgment debt (P126,771.22 and P103,659.44 plus interest, attorney’s fees, and costs). PSTC appealed.
Court of Appeals Ruling
On May 31, 2001, the Court of Appeals dismissed Caltex’s complaint for lack of personality to sue. It held only LUSTEVECO and PSTC, as contracting parties, could enforce the Agreement, and found no stipulation pour autrui benefiting Caltex. A November 9, 2001 resolution denied Caltex’s motion for reconsideration.
Issues
- Whether PSTC, having assumed LUSTEVECO’s obligations under the Agreement, is bound to satisfy the Caltex judgment debt.
- Whether Caltex is a real party in interest allowed to enforce PSTC’s assumed obligations.
Legal Basis
• Novation by Substitution (Civil Code Articles 1291, 1293): PSTC’s assumption of LUSTEVECO’s obligations constitutes a novation requiring creditor’s consent; absent Caltex’s consent, PSTC cannot prejudice Caltex.
• Protection of Creditors (Civil Code Articles 1313, 1381): Contracts entered in fraud of creditors are rescissible; creditors may enforce or rescind to prevent fraud.
• Disposition of Assets (Corporation Code § 40): Assignment of all assets triggers assumption of liabilities to protect creditors; otherwise transfer is fra
Case Syllabus (G.R. No. 150711)
Antecedent Facts
- On 6 July 1979, PNOC Shipping and Transport Corporation (PSTC) and Luzon Stevedoring Corporation (LUSTEVECO) executed an Agreement of Assumption of Obligations.
- Under the Agreement, PSTC assumed all obligations of LUSTEVECO with respect to claims enumerated in Annexes “A” and “B,” took control of any pending or future litigation on those claims, and received all related papers and records.
- LUSTEVECO appointed PSTC as its attorney-in-fact to demand and receive any counterclaims arising from the enumerated actions.
- Included in the Annexes was Caltex (Philippines), Inc. v. Luzon Stevedoring Corporation (AC-G.R. CV No. 62613), an appeal then pending before the Intermediate Appellate Court (IAC).
- The Court of First Instance (CFI) of Manila had directed LUSTEVECO to pay Caltex ₱103,659.44 with legal interest.
- On 12 November 1985, the IAC affirmed with modification, ordering LUSTEVECO to pay:
• ₱126,771.22 under the first cause of action, with interest;
• ₱103,659.44 under the second cause of action, with interest;
• 10% attorney’s fees; and costs of suit. - The IAC decision became final and executory; a writ of execution issued but remained unsatisfied due to prior foreclosure of LUSTEVECO’s properties and non-response to garnishment.
- Caltex discovered the PSTC–LUSTEVECO Agreement and repeatedly demanded satisfaction from PSTC, which refused, claiming no liability under the judgment.
- On 5 February 1992, Caltex filed a complaint against PSTC (Civil Case No. 91-59512) to recover the judgment debt.
Procedural History
- 1 June 1994: The Regional Trial Court (Manila, Branch 51) rendered judgment in favor of Caltex, ordering PSTC to pay the sums awarded by the Court of Appeals in AC-G.R. CV No. 62613, plus legal interest, attorney’s fees (10%), and costs.
- PSTC appealed to the Court of Appeals (CA-G.R. CV No. 46097).
- 31 May 2001: The Court of Appeals reversed and set aside the RTC decision, dismissing Caltex’s c