4. Caltex (Phils), Inc. v.

PNOC Shipping and Transport Corporation

Facts:

PSTC and Luzon Stevedoring Corporation (LUSTEVECO) entered into an Agreement of Assumption
of Obligations, which provides that PSTC shall assume all obligations of LUSTEVECO with respect to certain
claims enumerated in the Annexes of the Agreement. This Agreement also provides that PSTC shall
control the conduct of any litigation pending which may be filed with respect to such claims, and that
LUSTEVECO appoints and constitutes PSTC as its attorney-in-fact to demand and receive any claim out of
the countersuits and counterclaims arising from said claims. Among the actions mentioned is Caltex (Phils)
v. Luzon Stevedoring Corporation, which was then pending appeal before the IAC. The IAC affirmed the
decision of the CFI ordering LUSTEVECO to pay Caltex P103,659.44 with legal interest. When the decision
became final and executor, a writ of execution was issued in favor of Caltex but such judgment was not
satisfied because of the prior foreclosure of LESTEVECOs properties.
Upon learning of the Agreement between PSTC and LUSTEVECO, Caltex demanded payment from
PSTC and brought the action. The RTC ruled in favor of Caltex but the CA reversed on appeal. CA ruled
that Caltex has no personality to sue PSTC, that non-compliance with the Agreement could only be
questioned by signatories of the contract, and that only LUSTEVECO and PSTC who can enforce
Agreement. The CA also rendered fatal the omission of LUSTEVECO, as real party in interest, as party
defendant, and that Caltex is not a beneficiary of a stipulation pour atrui because there is no stipulation
which clearly and deliberately favors Caltex.

Issues:

1. Whether PSTC is bound by the Agreement when it assumed all the obligations of LUSTEVECO;
and
2. Whether Caltex is a real party in interest to file an action to recover from PSTC the judgment
debt against LUSTEVECO.

Held:

1. Yes. Caltex may recover the judgment debt from PSTC not because of a stipulation in Caltexs
favor but because the Agreement provides that PSTC shall assume all the obligations of
LUSTEVECO. LUSTEVECO transferred, conveyed and assigned to PSTC all of LUSTEVECOs
business, properties and assets pertaining to its tanker and bulk business together with all the
obligations relating to the said business, properties and assets. The assumption of obligations
was stipulated not only in the Agreement of Assumption of Obligations but also in the
Agreement of Transfer.
Even without the Agreement, PSTC is still liable. While the Corporation Code allows the
transfer of all or substantially all the properties and assets of a corporation, the transfer should
not prejudice the creditors of the assignor by holding the assignee liable for the formers
obligations. To allow an assignor to make a transfer without the consent of its creditors and
without requiring the assignee to assume the formers obligations will defraud creditors. In the
case of Oria v. McMicking, the Court enumerated the badges of fraud including a transfer made
by a debtor after suit has been begun and while it is pending against him, and the transfer of all
or nearly all of his property by a debtor, especially when he is insolvent or greatly embarrassed
financially.
The Agreement also constitutes a novation of LUSTEVECOs obligations by substituting
the person of the debtor. And because it was done without the consent of Caltex, the assets
transferred remain even in the hands of PSTC still subject to execution to satisfy the judgment
claim of Caltex.
2. Yes. Ordinarily, one who is not privy to a contract may not bring an action to enforce it. But this
case falls under the exception when those who are not principally or subsidiarily obligated in a
contract may show their detriment that could result from it. In this case, non-performance of
PSTCs obligations will defraud Caltex.

14. Paper Industries Corporation of the Philippines v. Court of Appeals

Facts:

Picop is a Philippine corporation registered with the Board of Investments as a preferred pioneer
enterprise with respect to its integrated pulp and paper mill, and as a preferred non-pioneer enterprise
with respect to its integrated plywood and veneer mills. On April 1983, CIR assessed and demanded from
Picop the following: (a) deficiency for transaction tax and for documentary and science stamp tax; and (b)
deficiency income tax for 1977. Picop protested but was denied by CIR. On appeal, CTA modified the
findings of CIR and reduced the aggregate amount, which was further reduced by the CA. Among the
contentions of Picop was its claim as deductible expense the net operating loss of Rustan Pulp and Paper
Mills (RPPM).

It was shown that on 18 January 1977, Picop entered into a merger agreement with RPPM and Rustan
Manufacturing Corporation (RMC) where the rights, properties, privileges, powers and franchises of RPPM
And RMC were to be transferred and conveyed to Picop as surviving corporation. RPPM and RMC were
likewise BOI-registered and that immediately before the mergers effectivity, RPPM had over preceding
years accumulated losses of P81M, which Picop is now claiming as deduction. Picop relies on RA 5186
which provided incentives of a net operating loss carry-over (NOLCO) that can be claimed as deduction six
years after the loss.

Picop secured a letter-opinion from BOI allowing it carry over the losses of Rustan upon effectivity of the
merger. The CIR disallowed because the losses were incurred by another taxpayer, RPPM. CTA and CA
allowed the deduction because, by such time, RPPM and Picop were no longer separate and different
taxpayers.

Issue:

Whether Picop is entitled to deductions against income of net operating losses incurred by RPPM.

Held:

No. The ordinary rule with respect to corporations NOT registered with the BOI as a preferred pioneer
enterprise is that net operating losses cannot be carried over. Under our Tax Code, both in 1977 and at
present, losses may only be claimed as deduction if such losses were actually sustained in the same year
that they are deducted or charged off. It is thus clear that under our law and outside the special realm of
BOI-registered enterprises, there is no such thing as NOLCO. It is that Section 7(c) of RA 5186 introduced
the NOLCO as a very special incentive to be granted only to registered pioneer enterprises and only with
respect to their registered operations. The Court considers that the statutory purpose can be served only
if the accumulated operating losses are carried over and charged off against income subsequently earned
and accumulated by the same enterprise engaged in the same registered operations. Picops claim for
deduction is not only bereft of statutory basis but also does violence to the legislative intent which
animates the tax incentive granted by Section 7(c) of RA 5186.

18. MDII Supervisors & Confidential Employees Association (FFW) v. Presidential Assistance on Legal
Affairs

Facts:

The employees of Marikina Dairy Industries, Inc. (MDII), a corporation engaged in the manufacture of
dairy products, were affiliated with two unions: MDII Supervisors & Confidential Association and MDII
Employees & Workers Organization. The MDIIs stockholders passed a resolution amending its articles of
incorporation by shortening its corporate life (same month and year) on the ground of heavy losses. The
SEC approved such amendment. Because of this, MDII filed an application for clearance to terminate the
employment of all its personnel with the Secretary of Labor. The two unions opposed the application,
stating that the financial losses were imaginary and the dissolution was a scheme to escape legal and
social obligations with its employees and filed a case against MDII. The trustees in liquidation sold the
plant of MDII and part of its assets to GF Equity ad Holland Milk Products. The unions then filed a motion
seeking to restrain GF Equity and Holland Milk Products from operating the plan unless the members of
the unions were the ones hired to operate the plant under the terms and conditions specified in the CBA.
The NLRC found that the dissolution of MDII was a legitimate act brought about by continued operating
losses. It granted the clearance for the termination of the services of the MDII employees and made
provisions for the retirement pay and the commutation of unused sick and vacation leaves of the
dismissed employees. It likewise directed Holland Milk Products and GF Equity to give preference in
employment to all separated employees. This was affirmed by the Secretary of Labor and the Presidential
Assistant for Legal Affairs. The two unions filed a petition for review of the Presidential decision and
prayed that GF Equity and Holland Milk Products be ordered to reinstate the members of the unions with
full back wages.

Issue:

Whether the Presidential Assistant on Legal Affairs committed grave abuse of discretion in affirming the
conclusion of the NLRC that MDII complied substantially with the legal requirements for the termination
of the services of its employees.

Held:

No. There is no law requiring that the purchases of MDIIs assets should absorb its employees. As there is
no such law, the most that the NLRC could do, for reasons of public policy and social justice, was to direct
GF Equity to give preference to the qualified separated employees of MDII in filling up of vacancies in the
facilities of GF Equity.