G.R. No. 175284 ; September 19, 2012
BP PHILIPPINES, INC. (FORMERLY BURMAH CASTROL PHILIPPINES, INC.), Petitioner, vs. CLARK TRADING CORPORATION, Respondent.

FACTS

Petitioner BP Philippines, Inc., the exclusive distributor of Castrol products in the Philippines per agreements with Castrol Limited U.K., filed a complaint for injunction and damages against respondent Clark Trading Corporation, which operates the Parkson Duty Free shop inside the Clark Special Economic Zone (CSEZ). Petitioner alleged that respondent’s sale of imported, duty-free Castrol products not sourced from it violated its exclusive distribution rights, which were clarified in 1998 to include duty-free zones. Despite a cease-and-desist letter, respondent continued sales, prompting petitioner to seek injunctive relief based on potential damage to its goodwill, citing Yu v. Court of Appeals.
Respondent, in its defense, asserted it was not a party to the distribution agreements between petitioner and Castrol Limited and thus could not be bound by their terms. It contended that its operations were lawful under relevant executive orders governing duty-free stores within the CSEZ, a zone where petitioner itself was not authorized to operate. The Regional Trial Court (RTC) dismissed the complaint, finding no violation as respondent’s sales were confined legally within the CSEZ.

ISSUE

Whether respondent’s sale of Castrol products within the Clark Special Economic Zone violates petitioner’s exclusive distribution rights, warranting the issuance of an injunction.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ dismissal. The legal logic rests on the principle of relativity of contracts under Article 1311 of the Civil Code, which stipulates that contracts are binding only upon the parties and their successors. Respondent Clark Trading was a stranger to the agreements between petitioner and Castrol Limited; therefore, it incurred no contractual obligation to source products from petitioner. Petitioner’s exclusive rights, while valid against the licensor Castrol Limited, do not automatically extend to third parties like respondent absent a showing of a specific legal right enforceable against them.
Furthermore, for a writ of injunction to issue, a clear and unmistakable right must be established. Petitioner failed to prove that respondent’s activities within the legally sanctioned confines of the CSEZ constituted an actionable invasion of such a right. The Court distinguished the cited Yu case, noting it involved a preliminary injunction ruling in a pending main case, not a final determination of rights. Here, the final evaluation found respondent’s sales to be legal under the special regulatory regime of the CSEZ. Without a demonstrated legal right enforceable against respondent and the absence of unlawful acts on respondent’s part, the remedy of injunction is not available.