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. 2. Whether PSTC is bound by the Agreement when it assumed all the obligations of LUSTEVECO; and 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. 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

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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.