FEDERATION OF UNITED NAMARCO DISTRIBUTORS (FEDERATION) v. NATIONAL MARKETING CORPORATION (NAMARCO) G.R. No.

L-17819/L-17768, March 31, 1962 FACTS With the view of forcing down the escalation of commodity prices, the President directed NAMARCO to purchase and distribute such commodities in short supply, with a special non-recurring dollar allocation from the Central Bank. However, the workers of NAMARCO were on strike which threatened the plan to force down the prices of commodities. Upon the recommendation of NAMARCO to the President, NAMARCO was allowed to import commodities through various associations composed of regular NAMARCO distributors and/or retailers, by way of trade assistance, pursuant to the issuance of Resolution No. 524. On November 16, 1959, NAMARCO and the FEDERATION entered into a Contract of Sale for the importation of USD2M worth of controlled goods, and stipulating in the said contract the partial payment of Php 200,000. The contract also stated that the FEDERATION shall pay NAMARCO the procurement cost plus 5% and that all handling and storage costs shall be for the account of the FEDERATION. Three days later, the Board of Directors of NAMARCO approved Resolution No. 530 which prohibited the usage of the forward sales method and that distribution of said goods should only to regular NAMARCO outlets. Beginning December, the goods arrived in Manila and FEDERATION proceeded to pay to the NAMARCO all through the months of December and January the full value of the merchandise that had been arriving. However, a new set of BoD and General Manager took over the management of NAMARCO, who sought to discontinue compliance under the contract when delivery of the goods was a little over halfway completed, alleging that the contract was not formally approved by the BoD because its terms were different from the conditions laid down in the previous Resolutions of the BoD. On March 2, 1960, the FEDERATION filed a complaint to compel NAMARCO to deliver the remaining goods.

On the date the Complaint was filed, upon application of the FEDERATION, the trial court issued a writ of preliminary injunction against NAMARCO from allocating the commodities to distributors who are not members of the FEDERATION. FEDERATION opposed the motion dissolve the injunction by NAMARCO and expressed that they were still willing to take deliveries. On March 26, 1960, the trial court, upon motion of the FEDERATION, ordered the release to the FEDERATION 2,400 cases of mandarin oranges provided they are in good condition, or only so much thereof that are in good condition" against payment already made by the FEDERATION to the NAMARCO. Only 445 cases of the oranges ordered were in good condition and were delivered as allowed by the trial court. to the FEDERATION were in good condition, the trial court allowed the FEDERATION to take delivery of such 445 cases only, and made the corresponding adjustments in the application of the payments made by the FEDERATION to the NAMARCO. Thereafter, NAMARCO appealed. FEDERATION in turn filed a motion for execution for the previous decision, alleging that delaying shall entail the further deterioration of the goods at the expense of FEDERATION and the public. ISSUE: (1) Whether or not the contract of sale was valid. (2) Whether or not the trial court erred in allowing FEDERATION to take delivery of 445 cases of oranges only, instead of 2,400 cases, in effect, charging NAMARCO for the loss of 1,955 cases. (3) Who should bear the storage charges from the date of filing of the complaint of FEDERATION? HELD/RATIO: (1) Yes. The Contract of Sale was valid. Contrary to the allegations of the new management of NAMARCO, the clarification made by its own Auditor on whether Resolution No 530 nullified the contract to which the Board issued Resolution No. 14 approving the contract despite the inconsistencies with previous resolutions, supported the fact that the contract of sale was valid in the eyes of the previous set of BoD.

Moreover, at the time the new BoD refused to recognize the validity of the contract of sale, more than half of the goods had already been delivered by NAMARCO to the FEDERATION, and for which NAMARCO has accepted partial payments. All these took place before and after the adoption of Resolution No. 14 on January 12, 1960. Appellant's acceptance of said benefit under the contract of sale constituted an implied ratification by its board of directors of the contract in question, and precludes the rejection of the binding effect of said contract. (2) No, NAMARCO should bear the loss. While FEDERATION did get an injunction to restrain NAMARCO from distributing the goods to other distributors/retailers, it was willing to accept deliveries, but NAMARCO refused to deliver. Delivery was only done upon order of the trial court. Thus NAMARCO must bear the loss of the oranges that got spoiled during that period. (3) NAMARCO should be charged the storage costs. While, it is true that under the contract of sale the handling and storage charges of the commodities covered thereby are for the account of FEDERATION, the storage charges that became due from the date the goods had to remain in the warehouse because of the refusal of NAMARCO to deliver the same to the FEDERATION which had been demanding the surrender thereof to it cannot be charged to the FEDERATION, but to NAMARCO as the one who, in the performance of its obligation under the contract, has been guilty of delay in the delivery of the goods subject matter thereof.