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NATIONAL MARKETING vs. FEDERATION OF

UNITED NAMARCO DISTRIBUTORS

7 12 2010

NATIONAL MARKETING vs. FEDERATION OF UNITED NAMARCO DISTRIBUTORSG.R. No. L-22578 January 31, 1973Facts:

NAMARCO and the FEDERATION entered into a Contract of Sale. NAMARCO wasauthorized to import the following items with the corresponding dollar value totalling$2,001,031.00. Among the goods covered by the Contract of Sale were 2,000 cartons of PKChewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, 500 cartons of Adams Chicklets,168 cartons of Blue Denims, and 138 bales of Khaki Twill.

To insure the payment of those goods by the FEDERATION, the NAMARCO accepted threedomestic letters of credit.

FEDERATION received from the NAMARCO the 2,000 cartons of PK Chewing Gums, 1,000cartons of Juicy Fruit Chewing Gums, and 500 cartons of Adams Chicklets, all with a total valueof P277,357.91, under the condition that the cost thereof would be paid in cash through PNBDomestic L/C No. 600570; and on February 20, 1960, the FEDERATION received from theNAMARCO the 168 cartons of Blue Denims and 183 bales of Khaki Twill, with a total value ofP135,891.82 and P197,804.12, respectively, under the condition that the cost thereof would bepaid in cash through PNB Domestic L/C Nos. 600606 and 600586, respectively.

FEDERATION filed a complaint against the NAMARCO for specific performance and damages,alleging that after the NAMARCO had delivered a great portion of the goods listed in theContract of Sale, it refused to deliver the other goods mentioned in the said contract.NAMARCO has refused and declined to accept the cash payments by the FEDERATION.According to NAMARCO, the Contract of Sale was not validly entered into by the NAMARCOand, therefore, it is not bound by the provisions thereof.

PNB informed NAMARCO that it could not negotiate and effect payment on the sight draftsdrawn under PNB Domestic L/Cs as the requirements of the covering letters of credit had notbeen complied with. The common condition of the three letters of credit is that the sight draftsdrawn on them must be duly accepted by the FEDERATION before they will be honored by thePhilippine National Bank. But the said drafts were not presented to the FEDERATION foracceptance.

NAMARCO demanded from the FEDERATION the payment of the total amount ofP611,053.35, but the latter failed and refused to pay the said amount. CFI Manila promulgated itsdecision ordering the NAMARCO to specifically perform its obligation in the Contract of Sale,by delivering to the FEDERATION the undelivered goods.

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Issue: WON the mere delivery by the FEDERATION of the domestic letters of credit toNAMARCO operate to discharge the debt of the FEDERATION?

Held:

No. Mere delivery by the FEDERATION of the domestic letters of credit to NAMARCO did notoperate to discharge the debt of the FEDERATION. As shown by the appealed judgmentNAMARCO accepted the three letters of credit to insure the payment of those goods by the

FEDERATION. It was given therefore as a mere guarantee for the payment of the merchandise.

The delivery of promissory notes payable to order, or bills of exchange or drafts or othermercantile document shall produce the effect of payment (1) only when realized, or (2) when bythe fault of the creditor, the privileges inherent in their negotiable character have been impaired.(Art. 1249 New Civil Code.)

The clause of Article 1249 relative to the impairment of the negotiable character of the

commercial paper by the fault of the creditor, is applicable only to instruments executed by thirdpersons and delivered by the debtor to the creditor, and does not apply to instruments executedby the debtor himself and delivered to the creditor.

In the case at bar it is not even pretended that the negotiable character of the sight drafts wasimpaired as a result of the fault of NAMARCO. The fact that NAMARCO attempted to collectfrom the Philippine National Bank on the sight drafts on March 10, 1960, is of no materialsignificance. As heretofore stated they were never taken, in the first instance as payment. Therewas no agreement that they should be accepted as payment. The mere fact that NAMARCOproceeded in good faith to try to collect payments thereon, did not amount to an appropriation byit of the amounts mentioned in the sight drafts so as to release its claims against the

FEDERATION. A mere attempt to collect or enforce a bill or note from which no paymentresults is not such an appropriation of it as to discharge the debt.

NATIONAL MARKETING CORPORATION VS.

FEDERATION OF UNITED NAMARCO

DISTRIBUTORS, INC.

49 SCRA 238

FACTS:

On November 16, 1959, the NAMARCO and the

FEDERATION entered into a Contract of Sale stipulating

among others that Two Hundred Thousand Pesos

(P200,000.00) be paid as part payment, and

FEDERATION deposits with the NAMARCO upon signing

of the items and/or merchandise a cash basis payment

upon delivery of the duly indorsed negotiable shipping

document covering the same. To insure payment of the

goods by the FEDERATION, the NAMARCO accepted

three domestic letters of credit which is an accepted draft

and duly executed trust receipt approved by the Philippine

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National Bank.

Upon arrival of the goods in Manila in January,

1960, the NAMARCO billed FEDERATION Statement of

Account for P277,357.91, covering shipment of the 2,000

cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit

Chewing Gums, and 500 cartons of Adams Chicklets;

Statement of Account of P135,891.32, covering shipment of

the 168 cartons of Blue Denims; and Statement of Account

of P197,824.12, covering shipment of the 183 bales of

Khaki Twill, or a total of P611,053.35. Subsequently, it was

received by FEDERATION on January 29, 1960. However,

on March 2, 1960 FEDERATION filed a complaint against

Namarco for undelivery of some items contained in the

contract of sale. FEDERATION refuses to pay

acknowledge the domestic letters of credit until full

delivery is done by NAMARCO.

ISSUE:

Should FEDERATION be obliged to pay the

amount of the merchandise even if there was still

incomplete delivery of items by NAMARCO?

RULING:

Yes. The right of the NAMARCO to the cost of the

goods existed upon delivery of the said goods to the

FEDERATION which, under the Contract of Sale, had to

pay for them. Therefore, the claim of the NAMARCO for

the cost of the goods delivered arose out of the failure ofthe FEDERATION to pay for the said goods, and not out of

the refusal of the NAMARCO to deliver the other goods to

the FEDERATION. Furthermore, FEDERATIONs nonpayment

would result to it being unjustly enriched.

However, the lower court erred in imposing interest at the

legal rate on the amount due, "from date of delivery of the

merchandise", and not from extra-judicial demand. In the

absence of any stipulations on the matter, the rule is that

the obligor is considered in default only from the time the

obligee judicially or extra-judicially demands fulfillment of

the obligation and interest is recoverable only from the

time such demand is made. There being no stipulation as

to when the aforesaid payments were to be made, the

FEDERATION is therefore liable to pay interest at the legal

rate only from June 7, 1960, the date when NAMARCO

made the extra-judicial demand upon said party.

CASE: Far East Bank & Trust Company vs. Diaz Realty, Inc.

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I. FACTS

In August 1973, Diaz and company contracted a loan from Pacific Banking Corporation (PaBC)amounting to P 720,000, with interest of 12% per annum which was later increased to 14%, 16%,18% and 20% respectively. The loan was secured by a real estate mortgage over two parcels of

land owned by Diaz Realty both located in Davao City. In 1981, Allied Company rented anoffice space in the building constructed in the land mortgaged; it was further agreed that themonthly rental payments of Allied Company shall be directly paid to the mortgagee [PaBC] forthe lessors account. Allied bank paid the monthly rentals to PaBC in conformance with thecontract. On July 5, 1985, Central Bank closed PaBC, placed it under receivership, andappointed Renan Santos as its liquidator. In December 1986, Far East Bank Trust Companypurchased the credit of Diaz & Company in favor of PaBc. However, it was only in March 23,1988 that Diaz was informed about the said purchase of credit.

According to FEBTC, on March 23, 1988, Antonio Diaz (President of Diaz & Company andVice-President of Diaz Realty) went to PaBCs office which by then housed FEBTC and was

told that the latter had acquired PaBC. Diaz was told by cashier Ramon Lim that as of the saiddate, his outstanding balance with his loan is P 1,447,142.03. Diaz asked the defendant to makean accounting of Allied Banks monthly rental payments. In December 14, 1988, Diaz furnisheda check to FEBTC in the amount of P 1,450, 000 to avoid further payments of interests and otherpenalties. However, FEBTC did not accept it as payment, instead, Diaz was asked to deposit thesame to defendants Davao City Branch Office, pending the approval of Central Bank liquidator

Renan Santos. In the meantime, Diaz asked the defendant to reduce the interest from 20% to12% per annum; no reply was received from FEBTC. The defendant asked Diaz to change the P1,450,000 payment to a money market placement which he obeyed and that which expired inApril 14, 1989. When there was still no response from the defendant on whether or not it willaccept his tender of payment, he filed his case at the Davao Regional Trial Court.

In its responsive pleading, the defendant set up the following affirmative defenses: that inDecember 1986, FEBTC purchased from PaBC the account of Diaz for a total consideration of P1,828, 875 and that despite the purchase PaBC Davao branch continued to collect interests andpenalty charges on the loan from January 6, 1988 to July 8, 1988. It was not FEBTC but PaBCthat collected the interest rates mentioned in the complaint and it is not true that FEBTC imposedexorbitant interest rates. That as a matter of fact, FEBTC tried to negotiate with the plaintiffs andthat FEBTC has no knowledge of the rates imposed previously by PaBC. Therefore, FEBTCcould not be held responsible for transactions which took place before the purchase and thatdefendant acted at the right time to settle the account.

II. ISSUES

A. Whether or not the CA correctly ruled that the validity of the tender of payment was notproperly raised in the RTC and could not thus be raised in the appeal.

B. Whether or not the CA erred in failing to apply settled jurisprudential principles militatingagainst the private respondents contention that a valid tender ofpayment had been made by it.

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C. Whether or not the CA correctly found that the transaction between petitioner and PaBC wasan innefective novation and that the consent of private respondents was necessary therefor.

D. Whether or not the CA erred in refusing to apply the rate of interest freely stipulated upon bythe parties to the respondents obligation.

E. Whether or not the CA committed an irreconcilable error in ordering the parties to re-negotiate the terms of the contract while finding at the same time that the mortgage contractcontaining the lease was valid.

F. Whether or not the petition, as argued by private respondent raises questions of fact notreviewable by certiorari.

III. RESOLUTION

A. A check does not constitute legal tender, and that a creditor may validly refuse it. It must be

emphasized, however, that this dictum does not prevent a creditor from accepting a check aspayment. Meaning, the creditor has the option and the discretion of refusing or accepting it.Therefore, since the petitioner bank did not refuse respondents check, and since the check wascleared, it served as a valid tender of payment.

B. The transfer of credit from PaBC to FEBTC is not an ineffective novation but instead a mereassignment of credit. Even so, FEBTC had the right to collect the full value of the credit fromDiaz, ubject to the terms as originally agreed upon in the Promissory Note.

C. Petitioner bank as assignee of respondents credit is entitled to the full interest rate of 20% in

the computation of debt of Diaz as stipulated in the August 26, 1983 agreement. However, since

there was a valid tender f payment made on November 14, 1988, the accrual of interest shall stopat that date. Thus, Diaz should pay FEBTC the principal amount of P 1,067,000 plus accruedinteret thereon at 20% until November 14, 1988 less interest payments given to PaBc fromDecember 1986-July 8, 1988. After that, interest should be computed at 12% per annum until fullpayment.

D. The petition is hereby denied. The decision of the CA is affirmed with the followingmodifications: respondent Diaz Realty is ordered to pay FEBTC its principal obligationamounting to P 1,067,000 with interest thereon computed ar 20% per annum until November 14,1988 less any interest payments made to PaBC. Thereafter, interest shall be computed at 12% perannum until fully paid.