Kuwait Court of Cassation principle number 105

Summary: - A creditor's exercise of the debtor's rights in the latter's name. Its condition. The creditor claiming the debtor's right must bring an action in the debtor's name and in the capacity of the debtor's creditor, so that the award is a right belonging to the debtor and forms part of the debtor's general assets. The reason: to secure the rights of the debtor's creditors and enable them to share it proportionately as creditors. A creditor's bringing an action in the creditor's own name seeking judgment in the creditor's favor rather than the debtor's. Its effect: it is deemed a direct action brought by the former in the former's own name and interest. Articles 308 and 309 of the Civil Code. - Determining the true intent of the claims. Within the authority of the trial court. Its condition: not departing from the substance of those claims. - The creditor company's bringing an action seeking to oblige the appellant and respondents, jointly and severally and concurrently, to pay a sum of money and to release the bank guarantee issued in favor of the second respondent against the bank, on the ground that it supplied materials and equipment to sites belonging to the appellant pursuant to 2 supply contracts concluded with the latter as subcontractor, which refused to pay the value of the supplies, being the amount claimed. Its effect: it is deemed a direct action in the plaintiff's own name and interest. The challenged judgment's departure from this view and characterization of it as an indirect action intended to protect the rights of its debtor, the latter. An error in understanding and applying the law requiring its cassation. Rule: Article 308 of the Civil Code, contained in Chapter Two concerning creditors' general security and the means of preserving it, provides: “1- Every creditor, even if the creditor's right is not due for payment, may exercise in the debtor's name that debtor's financial rights, except those connected exclusively with the debtor's person or not subject to attachment, if it is established that the debtor has not exercised those rights and that failure to exercise them would cause or increase the debtor's insolvency. 2- A creditor's exercise of the debtor's rights does not require formal notice to the debtor, but if an action is brought in the debtor's name, the debtor must be joined therein; otherwise it shall be inadmissible.” Article (309) of the same Code provides that a creditor exercising the debtor's rights is deemed the debtor's representative. This indicates that, in permitting every creditor to exercise in the debtor's name all that debtor's rights except those connected with the debtor's person or not subject to attachment, the legislature required the creditor claiming the debtor's right to bring the action in the debtor's name, so that the award is a right belonging to that debtor and forms part of the debtor's general assets as security for the rights of the debtor's creditors, who share it proportionately as creditors. If the creditor does not bring it in the capacity of creditor, but instead brings it in exercise of a direct right of the creditor and seeks judgment in the creditor's own interest, not the debtor's, it is a direct action brought in the creditor's own name and interest. It is established in this Court's jurisprudence that, although the trial court has authority to determine the true intent of claims submitted in an action, this is conditional upon its not departing from the substance of those claims. That being so, the first respondent company brought the original action against the appellant and the second through fourth respondents, seeking judgment obliging them, jointly and severally and concurrently, to pay it ................. Kuwaiti dinars and to release bank guarantee No. (212766/5-02533-01-21), issued in favor of the second respondent company against the Commercial Bank, on the ground that it supplied ready-mixed concrete and 4 cranes to the sites of 2 projects belonging to the appellant pursuant to the 2 supply contracts concluded with the second respondent company on 11/11/2000 and 27/4/2002, the latter being the subcontractor, which refused to pay the value of the supplies, being the amount claimed. The bank guarantee secured the supply of the equipment (cranes) forming the subject of the contract dated 27/4/2002. Accordingly, the first respondent company brought the action in its own name, not as representative of its debtor, the second respondent company, and its action is therefore direct, not indirect. Since the challenged judgment departed from this view and characterized the action as an indirect action by which the first respondent sought to protect the rights of its debtor—the second respondent—against the appellant, it erred in understanding the facts of the action, which led it to err in applying the law, requiring its cassation.