G.R. No. L-17819. March 31, 1962
FEDERATION OF UNITED NAMARCO DISTRIBUTORS, INC., JUSTO MANALO, ET AL., PLAINTIFFS-APPELLEES, VS. NATIONAL MARKETING CORPORATION, DEFENDANT-APPELLANT.
BARRERA, J.:
extent that the President, in consultation with some officials, sought
means to force down such prices. One solution was for the National
Marketing Corporation (NAMARCO) to procure, buy, and distribute such
commodities as were in short supply, with a special nonrecurring dollar
allocation from the Central Bank. But, unfortunately at the time, the
activities of the NAMARCO were paralyzed by the picketing of its
workers, who were on strike, of the movement of NAMARCO goods. The
goods discharged on the Manila piers as well as those in NAMARCO
warehouses could not be removed, so much so, that the NAMARCO was
unable to distribute them. Should the strike continue, the goods to be
imported under said dollar allocation to the NAMARCO would, upon their
arrival, be in the same predicament, and the plan to force down the
prices of commodities would be frustrated. To forestall such an
eventuality, NAMARCO General Manager Benjamin F. Estrella proposed to
the President that the importation of commodities be effected for and
in the names of various associations composed of regular namarco
distributors and/or retailers, to be previously arranged as the
beneficiaries of said commodities, by way of trade assistance to each
group. Thus, when the goods would arrive, the labor union in the
NAMARCO would not prevent their movement, as they would not be NAMARCO
goods but of the beneficiary associations.
Various associations of NAMARCO distributors and retailers learned
of said plan, which had been concurred in by the President. They
therefore submitted to the President their petition for trade
assistance for their members. One of these associations is the
Federation of United NAMARCO Distributors, Inc., a non-stock
corporation wholly composed of recognized regular distributors and
retailers of the NAMARCO.
On August 8, 1959, the FEDERATION, through its directors, addressed
a letter to the President, soliciting his intervention for the
importation, out of the aforementioned dollar allocation of the
NAMARCO, and then the allocation to the FEDERATION, of the commodities
specified in the annex to said letter, in the aggregate value of
$2,001,031.00. In the same letter, the FEDERATION proposed that it
would pay on cash basis the cost of the commodities, plus 5% mark-up
payable to the NAMARCO The commodities would then be distributed among
its members and retailers under the NAMARCO’s rules and regulations
governing the distribution of its goods, and the handling and storage
charges thereof would be for the account of the FEDERATION. Acting on
said request, the President, on October 27, 1959 noted on top of said
letter his approval, thus:
“In line with the general directive sent to arrest
rise prices specially with the approach of Christmas, this proposition
is O. K. It is desired that the NAMARCO Board pass it.”
The NAMARCO Board of Directors, taking cognizance of the letter and
of the notation thereon of the President, adopted on November 3, 19£9,
Resolution No. 524 (Exh. J) reading as follows:
“RESOLUTION NO. 524
“WHEREAS the President of the Philippines, in his
desire to bring down the prices of commodities, especially during the
coming Christmas season, issued a directive to the Chairman of the
Monetary Board urging that an additional allocation of 10 million
dollars be made available for use by the NAMARCO;“WHEREAS on
October 17, 1959, the President of the Philippines issued a directive
addressed to Chairman Hernaez and General Manager Estrella directing
the NAMARCO to expedite the utilization of 4 million dollars for trade
assistance and 6 million dollars for foodstuffs;“WHEREAS in
another directive dated October 27, 1959, in connection with a petition
for assistance presented to His Excellency by the Federation of United
NAMARCO Distributors, President Garcia expressed his desire that the
NAMARCO Board approve the corresponding Resolution; now, therefore, be
it“RESOLVED that the Board of Directors approve as it
hereby approves the immediate importation of the following items in the
quantities herein mentioned, subject to the approval of the said items
by the Central Bank:“Total………………….. $2,001,031.00
x x x (Here follows the list of items authorized to be imported.)
In pursuance to this resolution, the NAMARCO (through its President
Manalo), executed the following Contract of Sale (Exh. O) on November
16, 1959:
“CONTRACT OF SALE
“KNOW ALL MEN BY THESE PRESENTS:
“This
Contract entered into this 16th day of November, 1959 by and between
the NATIONAL MARKETING CORPORATION, a private corporation organized and
existing under the laws of the Philippines and owned by the Government,
represented in this act by its General Manager, BENJAMIN F. ESTRELLA,
and herein referred to as the NAMARCO, and the FEDERATION OF UNITED
NAMARCO DISTRIBUTORS, INC., a corporation duly organized and existing
under and by virtue of the laws of the Philippines with postal and
office address at Room 300 F. C. I. Building, Dasmarinas, Manila,
Philippines, and represented in this act by its President, JUSTO
MANALO, and herein referred to as the FEDERATION
“WITNESSETH:
“That, WHEREAS, by virtue of NAMARCO Board
Resolution dated November 3, 1959, the Management of NAMARCO was
authorized to import the following items with the corresponding dollar
value totaling TWO MILLION ONE THOUSAND THIRTY ONE DOLLARS
($2,001,031. 00); to wit: x x x (here follows the list)“That,
WHEREAS, for and in consideration of the sum of TWO HUNDRED THOUSAND
PESOS (P200,000.00) as part payment of the items and/or merchandise
above-mentioned, and deposited by the FEDERATION with the NAMARCO upon
signing of this Contract, and the balance of the enumerated items
and/or merchandise shall be paid on cash basis’ upon delivery of the
duly Endorsed negotiable shipping documents covering the same, the
NAMARCO agrees to sell the said items and/or merchandise subject to the
following terms and conditions:“1. That the FEDERATION shall
pay the NAMARCO the value of the goods equivalent to the procurement
cost plus 5% mark-up, provided, however, that should there be any
adjustment in the procurement cost the same shall be refunded to the
FEDERATION;“2. That all handling and storage charges of the goods sold shall be for the account of the FEDERATION:
“3.
That the FEDERATION waives its right to claim for any loss or damage
that may be suffered due to force majeure such as war, riots, strikes,
etc., except when such incident is directly or indirectly due to the
negligence of the NAMARCO or its representative;“4. That the
items and/or merchandise sold by NAMARCO to the FEDERATION shall be
distributed among its members and retailers in accordance with
NAMARCO’s existing rules and regulations governing the distribution of
NAMARCO goods and at wholesale and retail prices to be determined by
NAMARCO;“5. That if it should be necessary ta file a suit
for the violation of any of the terms and conditions of this Contract,
such action shall be presented only in the Court of First Instance of
Manila.“IN WITNESS WHEREOF, the parties hereto have executed
these presents the FEDERATION through JUSTO MANALO in his capacity as
President of the FEDERATION OF UNITED NAMARCO DISTRIBUTORS and the
NAMARCO, through BENJAMIN F. ESTRELLA, in his capacity as Manager of
the NATIONAL MARKETING CORPORATION hereunto duly authorized this 16th
day of November, 1959 in the City of Manila, Philippines.
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NATIONAL MARKETING
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FEDERATION OF UNITED
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CORPORATION
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NAMARCO DISTRIBUTORS
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(SELLER)
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(BUYER)
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BY: (SGD.) BENJAMIN F. ESTRELLA
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BY: (SGD.) JUSTO MANALO
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Manager
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President
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Three days later, or on November 19, 1959, the NAMARCO Board of Directors approved Resolution No. 530 (ExK 10-A),to wit:
“RESOLUTION NO. 530
“RESOLVED that, in connection with the importation
of $2,001,031.00 worth of controlled goods, authorized under a Board
Resolution of November 3, 1959 (82nd regular meeting the Board,
amends, as it hereby amends said Resolution, by adding to the same the
following provision:“RESOLVED FURTHER that:
“1. In
the procurement and distribution of the goods to be imported, the
forward sales method or any other similar method shall not be used;“2. This importation shall be a regular importation of the NAMARCO; and
“3.
The goods shall be distributed and allocated only to regular NAMARCO
outlets in accordance with regular practices and rules and regulations
of the NAMARCO governing distributors and allocation of goods.”
In implementation of paragraph 2 of said Contract of Sale (Exh. 0)
which provides that the handling and storage charges of the goods sold
shall be for the account of the FEDERATION, the latter on the same date
(November 19) made arrangements with the owner of the Pasig River
Bodegas for such purpose. The FEDERATION submitted to the NAMARCO a
signed copy of the agreement (Exh. P), with the request that the
NAMARCO give its consent thereto and to inform the warehouse of that
fact (Exh. P-l). On December 8, 1959, the NAMARCO, by letter (Exh. P-2)
addressed to the Pasig River Bodegas, copies of which were furnished
the FEDERATION and the NAMARCO’s Traffic Storage Department, signified
it confirmation of said agreement (Exh. P) and directed the Pasig River
Bodegas not to release any of the commodities “without the approval of
the proper authorities which in this case will be the receipt of
payment made by the abovementioned Federation” to the NAMARCO.
On December 17, 1959, the Federation, pursuant to the terms of the
contract of sale, deposited with the NAMARCO the sum of P200,000.00 as
part payment of the purchase price of the commodities. On that same
date, General Manager Estrella endorsed to NAMARCO Auditor Liboro “for
examination and review, the Contract of Sale entered into between the
NAMARCO” and the FEDERATION. In a 1st Indorsement dated December 21,
1959 (Exh, a) to the NAMARCO Board of Directors, Liboro requested for
information—
“x x x as to whether Resolution No. 530, nullifies
the attached contract of sale executed in accordance with Resolution
No. 524 in relation to the directive of the President, dated Octobar
27, 1959, approving the petition of the Federation of United Namarco
Distributors, Inc., if not, then it is requested that the contract be
first approved by the Board before it is forwarded to the
Auditor-General for examination and review, pursuant to Office
Memorandum No. 140, of the General Auditing Office, dated February 5,
1959.”
Acting on the above indorsement, of the NAMARCO Auditor, the NAMARCO
Board of Directors, on January 12, 1960, approved Resolution No. 14
(Exh. II), which states:
“RESOLUTION NO. 14
“Resolved that the Board of Directors approve, as it
hereby approves, the contract entered into by and between the NAMARCO
and the Federation of United NAMARCO Distributors, Inc., for the sale
of $2,001,031.00 worth of NAMARCO commodities, executed on November 16,
1959, which contract is the subject of an inquiry of the Auditor in his
1st indorsement dated December 21, 1950, the approval hereof to be
subject to the terms and conditions laid down by the Board in
Resolution No. 524 adopted on November 3, 1959, and in Resolution No.
530 adopted on November 19, 1959.”
Subsequently, on January 22, 1960, the contract of sale (Exh. O) in
question was forwarded to the Auditor General (Exhs. 5, 6, and 7) for
examination and review, in accordance with the provisions of
Administrative Order No. 290 dated February 3, 1959 of the President.
In the meantime, beginning on December 12, the commodities started
to arrive (Exhs. S, S-1, S-2, S-3, T, T-1, T-2, T-3, U, U-1, U-2, U-3,
V, V-1, V-2, V-3, W, W-1, W-2, W-3, X, S-1, X-2, Y, Y-1, Y-2, Z, Z-1,
Z-2, AA, AA-1, AA-2, BB, BB-1, BB-2, LL, LL-1, to LL-21), and the
FEDERATION, in compliance with the terms of the contract of sale
proceeded to pay to the NAMARCO all through the months of December and
January the full value of the merchandise that had been arriving (Exhs.
EE-1 to EE-7, FF-1, FF-4, FF-7, FF-12, FF-15, FF-18, FF-20, FF-24,
FF-26, FF-30, FF-33, FF-35, FF-37, FF-39, FF-40, FF-42, FF-43, FF-45,
and FF-47), the total amount of which payments aggregated to P2,452,020.00. In consideration of such payments, the NAMARCO also in
accordance with the contract of sale invoiced to the FEDERATION such
items as had been paid for, setting forth in each invoice the items
covered, the purchase price due the namarco, and the amount applied
thereto, with indication of the numbers of the latter’s official
receipts of the respective deposits from which that amount was taken
(Exhs. FF, FF-2, FF-3, FF-5, FF-6, FF-8, FF-9, FF-10, FF-11, FF-13,
FF-14, FF-15, FF-16, FF-17, FF-19, FF-21, FF22, FF-23 FF-25, FF-27,
FF-28, FF-29, FF-31, FF-32, FF-34, FF-36, FF-38, FF-41, and FF-46). On
the faith of these invoices, upon their presentation to the Pasig River
Bodegas, and in accordance with the prior direction by the NAMARCO to
said bodegas that the approval of the NAMARCO to release the
commodities stored would be the receipt of the payment made to the
NAMARCO by the FEDERATION (Exh. P-2), the Pasig River Bodegas released
to the FEDERATION the commodities covered by the above-mentioned
invoices (Exhs. MM, MM-1 to MM27).
On January 25, 1960, a new Board of Directors and General Manager
took over the management of the NAMARCO, and this new management
decided to discontinue compliance by NAMARCO of the contract of sale
(Exh. O) with respect to the commodities not actually delivered, and it
so notified the FEDERATION (Exh. GG and GG-1).
The FEDERATION, therefore, on March 2, 1960 filed a complaint (Civil
Case No. 42684) in the Court of First Instance of Manila against the
NAMARCO, to compel the latter to perform the Contract of Sale (Exh. O)
as to what was left of the commodities subject matter thereof, after
the aforementioned releases of nearly over one-half of the entire
quantity of the commodities to the federation by the NAMARCO. The
complaint described the remaining commodities, being therefore the
subject matter of the FEDERATION’s action, as follows: 1,059 bags of
Cocoa Beans, 17 bales of Khaki Twill, 350 cases of Transformers, 1,400
cases of Oranges, 1,000 cases of Oranges, 73 bales of Blue Denims, 17
bales of Textiles (which at the time of the filing of the complaint
were stored in the Pasig River Bodegas), 112 cases of Cotton Khaki
Twill And 14,210 cases of Vetrified Tiles (which arrived in Manila a
few days before the filing of the complaint), and 999,071 yards Blue
Denims, 236,700 yards De Luxe Khaki, 200,000 yards Bostann Khaki, 123
cases of Flashlight cases and bulbs, 80,000 yards Halcoluxe Khaki,
637,755 Labs. Jalco Petrolatum, 235,800 pieces Electric Transformers,
3,000 kilos Monofilament Lines (which according to the complaint, were
due to arrive in Manila).
On motion of the FEDERATION and upon order of the trial court in
which the NAMARCO acquiesced (Exhs. R, R-I to R-II), the aforementioned
last two groups of commodities were transferred to the Pasig River
Bodegas from the Manila piers.
Defendant NAMARCO under the entirely new Board of Directors and
General Manager, set up the defense in its answer dated March 19 that
the Contract of Sale (Exh. O) in question was executed by then NAMARCO
General Manager Estrella without the authority of the former Board of
Directors; that the contract lacks the approval of that body; that it
was not approved by the Auditor General; that under Resolution No. 530,
adopted on November 19, 1959, the commodities specified under
Resolution No. 524 adopted on November 3, 1959 by the former board of
directors, should be distributed and allocated only to regular outlets
of the defendant in accordance with the defendant’s regular practices,
rules and regulations governing distribution and allocation of goods;
that the defendant adopted a program of trade assistance by virtue of
which distribution of defendant’s goods should be made through duly
designated or appointed distributors or by trailers by the defendant,
as prescribed in its Administrative Order No. 44-A, dated December
5,1956; and that assuming that the contract of sale was validly entered
into by the defendant, the latter is no longer obligated to perform its
obligations thereunder for the reason that the plaintiff FEDERATION has
violated its terms and conditions.
On the same date the complaint was filed, upon application of the
FEDERATION, the trial court issued a writ of preliminary injunction,
enjoining the NAMARCO or any of its representatives from allocating the
commodities listed in the complaint to distributors other than those
who are members of the FEDERATION. The NAMARCO filed a motion to
dissolve the injunction issued by the trial court, which motion was
opposed by the FEDERATION who reiterated, among others, that they “have
always been and still are willing to take deliveries” of the
commodities covered by the injunction and to pay for them through the
NAMARCO, in accordance with the terms and conditions bf the contract of
sale (Exh. O).
On March 26, 1960, the trial court, upon motion of FEDERATION,
ordered the release to the latter of among others, “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. After examination by a disinterested third
party, as directed by the trial court wherein it was found that only
445 cases of the oranges ordered delivered 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.
After trial, the court rendered judgment on October 15, 1960, the dispositive part of which reads:
“IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, the defendant (NAMARCO) is hereby sentenced:
“To specifically perform the contract of sale, Exhibit ‘O’, by delivering the following commodities:
1,059 bags of Cocoa Beans
17 bales of Khaki Twill
350 cases of Transformers
1,400 cases of Oranges
1,000 cases of Oranges
73 bales of Blue Denims
17 bales of Textiles
113 cases Cotton Khaki Twill
14,200 cases Vetrifled Tiles
999,071 yards Blue Denims
236,700 yards De Luxe Khaki
200,000 yards Bostann Khaki
128 cases of Flashlight cases and bulbs
80,000 yards Halcoluxe Khaki
637,755 Labs. Jalco Petrolatum
235,800 pcs. Electric Transformers
3,000 kilos Monofilament Linesto plaintiff FEDERATION, upon the payment of the procurement cost, plus 5% mark-up, of such commodities;
“To
pay to the plaintiffs the sum equivalent to 5% of said procurement
cost, in Philippine Currency, as attorney’s fees, and the costs of this
suit;“To reimburse plaintiff FEDERATION the storage charges
at the agreed rate upon under Exhibit ‘P7 from March 2, 1960 until the
date or dates of deliveries thereof to said plaintiff under this
decision.“The writ of preliminary prohibitive injunction issued in this case is hereby declared permanent.
“SO ORDERED”
Within the reglamentary period, the namarco perfected its appeal
from said decision to this Court (docketed as G. R. No. L-17819).
On October 31, 1960, the FEDERATION filed a motion for execution of
said decision, invoking Section 2, Rule 39 of the Rules of Court,
alleging that the commodities subject matter of said decision will
deteriorate by mere lapse of time, and may be destroyed by elements of
nature and insect pests during the pendency of the appeal; that
marketing of the commodities would help stabilize the selling prices
thereof; that the public service function of the NAMARCO will be
accomplished if the commodities would be sold to the public through the
FEDERATION; and that delivery of the commodities to the FEDERATION
pending appeal would not cause injury to the NAMARCO, because payment
thereof would be made, thereby enabling the NAMARCO, to utilize the
proceeds of the sale for the duration of the appeal.
The NAMARCO vigorously objected to said motion for execution, on the
grounds that the commodities in question would not by their very nature
deteriorate through storage during the pendency of the appeal; that the
public service function of the NAMARCO cannot be substituted by private
entities or individuals; that release to and marketing by the
FEDERATION of said commodities pending appeal, will defeat the purpose
for which the NAMARCO was organized, because if the decision of
respondent Judge appealed from be reversed, there would be no
merchandise to be distributed by it to Filipino retailers and
businessmen; that there is no circumstance justifying immediate
execution of the judgment appealed from; that special execution would
render academic the appeal, and that the NAMARCO is willing and ready
to file the necessary supersedeas bond to be approved by the court, in
order to stay the execution cf the judgment appealed from.
Notwithstanding said opposition by the NAMARCO the trial judge, on
November 15, 1960, issued a special order denying the NAMARCO’s offer
to file supersedeas bond and directing the special execution of the
judgment (of October 15, 1960). Said special order reads, in part, as
follows:
“This Court takes judicial notice of the fact that
the President of the Philippines had declared the existence of a state
of public calamity in Manila, Quezon City, Pasay City, and the
provinces of Rizal, Bulacan, Nueva Ecija, Tarlac, and a few other
provinces. Even assuming that the plaintiffs (herein respondents
FEDERATION, et al.) have their places of business in Manila, as
defendant (herein petitioner NAMARCO) claims, the consumers, not only
in Manila, but also in the neighboring cities and provinces mentioned
will be benefited by the marketing of the goods subject matter of the
judgment, because of the proximity of those cities and provinces to
Manila.“The ground of the opposition that to allow
plaintiffs to distribute the goods in question now will defeat the
purpose for which defendant was created, is without merit. By law, the
defendant must market its merchandise through duly appointed
distributors or retailers. There is no question that the plaintiffs
(other than plaintiff corporation) and the other members of the
plaintiff corporation, are duly appointed Filipino distributors or
retailers of the defendant, and no others have made any claim to
participate in the distribution of such goods. The public service which
the defendant is required to render by the law will thus be
accomplished by the distribution of said goods through the plaintiffs.“The
goods subject matter of the judgment will deteriorate during the
pendency of the appeal. Even a relatively slight deterioration would,
undoubtedly, be sufficient to impair their market value as first hand
goods, hence, keeping these goods in storage while defendant’s appeal
is pending will render the judgment in favor of plaintiff’s
ineffectual, as their interest in such goods is not that of consuming,
but of marketing them.“Defendant also contends that damages
will be sustained by it and by the public, if the judgment is executed
and it is reversed on appeal. It appears, however, that the only
pecuniary interest of the defendant in the goods subject matter of the
judgment is the recovery of the landed cost, plus 5% mark-up. This
amount will, by the terms of the judgment, be paid to defendant upon
delivery of the goods to the plaintiffs. As to the damage that will
allegedly be caused to the public, defendant has not shown what such
damage would be. On the contrary, the public will be benefited by the
immediate execution of the judgment, as stated in plaintiff’s motion,
because such goods will be made available to them at the time of their
greatest need, and will greatly assist in keeping the prices of such
commodities at reasonable levels.“It appears to the Court
that the appeal is frivolous and is being taken only for the purpose of
delay. Admittedly, the defendant had already taken advantage of the
benefits of said contract of sale, namely, the receipt by the defendant
of the payment in the amount of P830,000.00 and P1,628,242,96 from
plaintiff FEDERATION prior to the institution of this action, and the
defendant’s agreement that the handling and storage charges of the
commodities are for the account of plaintiff FEDERATION as stipulated
in the contract of sale, which the latter has been paying. Admittedly
also, the contract of sale had been formally approved by defendant’s
board of directors and, therefore, the defendant’s challenge that said
contract is without approval of that body is gratuitous. This is
another good and sufficient reason for the special execution of the
judgment regarding the specific performance of the contract.“The
defendant’s Administrative Order No. 44-A which is exhibited, provides
that the selling prices of its distributors or retailers shall be ‘at
predetermined ranges of percentage below current wholesale and retail
market prices taking into account consumer purchasing power that such
prices ‘shall be subject to re-examination’ dependent on certain
reports of indentors, expected arrivals of merchandise, existing
stocks, and existence of locally manufactured products. There is,
therefore, no way of determining the prices at which the plaintiffs
will sell the goods subject matter of this judgment, nor, consequently,
of determining their profits. Hence, there is no way of determining the
amount of damage that plaintiffs may suffer by the stay of special
execution. No amount can, therefore, be fixed for, a supersedeas bond.
Besides, the compelling, urgent reason for the special execution of the
judgment outweigh the stay thereof by a supersedeas bond.“Finding
the reasons given by plaintiffs in their motion which are reproduced
above, to be well-taken, the Court, therefore, considers the special
execution of the judgment (of October 15, 1960) justified.“WHEREFORE,
plaintiffs motion is hereby granted; defendant’s offer to file a
supersede as bond is hereby denied; and the special execution of the
judgment, insofar as it orders the defendant to specifically perform
the contract of sale, Exhibit ‘O’ by delivering the commodities of
United NAMARCO Distributors, Inc., upon the payment of the procurement
costs, plus 5% mark-up, of such commodities, is hereby ordered. “SO
ORDERED.”
From said special order of execution (of November 15, 1960), the
namarco instituted in this Court (G. K. No. L-17768) a petition for
certiorari with preliminary injunction. In due time, we issued the
preliminary injunction prayed for, enjoining respondent Judge from
carrying out said special order of execution and respondent sheriff of
Manila from executing the judgment of October 15, 1960, upon the
NAMARCO’s filing a bond of P50,000.00.
G. R. No. L-17819:
The prinicpal issue to be resolved in this appeal is whether the
Contract of Sale (Exh, O) in question is binding on appellant NAMARCO.
There is no dispute that on January. 12, I960, appellant’s Board of
Directors adopted Resolution No. 14, formally approving said contract.
Appellant, however, maintains that said resolution did not approve said
contract, because the latter is inconsistent with the terms and
conditions laid down by the Board of Directors in its Resolution No.
530 (Exh. 10-A) adopted on November 19, 1959. The alleged inconsistency
lies in the facts that while Resolution No. 530 prohibits “forward
sales”, said contract partakes of the nature of a “forward sale”, as it
is a sale of merchandise before its arrival; and under paragraph 3 of
Resolution No. 530, it is appellant that should distribute and allocate
the merchandise in question to regular NAMARCO outlets, whereas under
paragraph 4 of said contract, appellee FEDERATION is the one authorized
to distribute the merchandise among its members and retailers.
It is to be noted that precisely because of this seeming
discrepancy, the NAMARCO’s own auditor Liboro requested clarification
from appellant’s Board of Directors in his communication of December 21
(Exh. “2”), asking specifically if Resolution No. 530 “nullifies the
attached contract of sale executed in accordance with Resolution No.
524 in relation to the directive of the President, dated October 27,
1959, approving the petition of the Federation of United NAMARCO
Distributors, Inc., if not, then it is requested that the contract be
first approved by the Board before it is forwarded to the
Auditor General for examination and review, pursuant to Office
Memorandum No. 140, of the General Auditing Office, dated February 5,
1959.” Acting upon this inquiry, appellant’s Board of Directors
approved and adopted, as heretofore stated, its Resolution No. 14,
specifically approving the contract of sale (See Resolution No. 14,
supra). As a result of said resolution, appellant’s Auditor Liboro, on
January 22,1960, forwarded the contract of sale to the Auditor General,
with the comment that—
“On January 12, 1960, the Board, in its Resolution No. 14, approved the said contract of sale subject
to the terms and conditions laid down by the Board in its Resolution
No. 524, dated November S, 1959, and its Resolution No. 530 Dated
November 1959 (Italics supplied). In other words the Board believes
that instead of being conflicting, Resolution No. 530 compliments only
Resolution No. 524.” (See Exh. 5)
In other words, the General Manager, the auditor and the Board of
Directors itself, of appellant NAMARCO, all understood the contract of
sale to be in accordance with the resolution of its governing body and
is, therefore, binding upon it.
To subscribe to appellant’s theory that its then Board of Directors
had not, by Resolution No. 14 approved said contract because of its
inconsistencies with the conditions laid down in Resolution No. 530, to
which the approval was made subject, would be to ascribe to said board
a gross inconsistency and a meaningless and inutile act. For, it is
illogical and unreasonable to suppose that the board would, in the last
part of Resolution No. 14, impliedly take away what in the first part
of the same resolution it had expressly given, namely, its approval of
the contract of sale. Conformably to the rule in interpretation of
contracts, Resolution No. 14 should be construed in such a manner as to
render effectual its approval of the contract (Art. 1373, Civil Code).
The provisions of paragraph 1 of Resolution No. 530 which prohibits
“forward sales” should be considered applicable only to the
distribution of the goods to the retailers. In other words, appellee
FEDERATION should not allocate or distribute the merchandise covered by
the contract of sale to its members-retailers prior to the arrival of
the merchandise in the Philippines. As this requirement was complied
with, the namarco had no reason to suspend carrying out the contract on
this score.
As to the other contention of appellant that under paragraph 3 of
Resolution No. 530, the distribution of the goods should be made by the
NAMARCO and not by the FEDERATION, a reading of this paragraph will
readily show that the only requirement is that,, “the goods shall be
distributed and allocated in accordance with regular practices, rules
and regulations of the NAMARCO governing distribution and allocation of
goods.” There is no mention as to who will allocate them. This
requirement is satisfied by the fact that all the members of appellee
federation are regular outlets of appellant in good standing, as the
latter itself had admitted (Exhs. D-l, F, G, G-l, and G-4). On this
point, the trial court correctly observed:
“Counsel for the defendant NAMARCO argued that,
according to the testimony of Rodolfo E. Tecson, supervisor of
defendant’s MarketingDepartment, who was a witness for the defendant,
it is a regular practice of defendant corporation that goods imported
should be allocated and distributed to all regular NAMARCO outlets or
distributors who are willing to purchase and market the same. The
witness said so. But with respect to the importation now under
consideration, the fact is that it is an exception to such regular
practice, in that it was recommended to the defendant’s board of
directors by the President of the Philippines to be distributed,
through the FEDERATION, among the defendant’s distributors and
retailers who are members of the FEDERATION, the defendant’s board of
directors acquiesced in that recommendation as its Resolution No. 524
shows, and it was implemented with the execution of the contract of
sale so as to defeat the effects of the strike on the defendant against
the distribution of its goods. On the other hand, it is not shown that
other distributors or retailers of the defendant, who are not members
of the FEDERATION also are willing to purchase and market said
commodities. x x x. Resolution No. 530 does not require that the
commodities subject matter of said contract of sale should be
distributed to all regular outlets of the defendant; it states that the
goods shall be distributed and allocated only to regular NAMARCO
outlets x x x, meaning that, considering the fact that Resolution No.
530 is but amendatory to Resolution No. 524, only the FEDERATION’S
members who are defendant’s regular outlets should participate in the
distribution of said commodities. The requirement is satisfied by the
fact that all the FEDERATION’S members are defendant’s regular outlets
as the defendant itself has admitted. At any rate, the contract of sale
in question having been formally approved by defendant’s board of
directors and the defendant thereby is bound, the provisions of said
contract should be followed, one of which provides ‘that the items
and/or merchandise sold by NAMARCO to the FEDERATION shall be
distributed among its members and retailers in accordance with
NAMARCO’s existing rules and regulations governing the distribution of
NAMARCO goods x x x.”
Moreover, at the time the new Board of Directors 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 who
already disposed of them, and for which NAMARCO has accepted partial
payments of the purchase price of the commodities amounting to P2,452,020.00. 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, constitutes an implied ratification
by its board of directors of the contract in question, and precludes
the rejection of the binding effect of said contract.
Appellant next contends that the contract of sale in question has
not yet been perfected or consummated, because it had not been approved
by the Auditor General, in accordance with Administrative Order No.
290, dated February 3, 1959 which in part reads;
“In the interest of public service, and as a
provisional measure pending enactment by the Congress of appropriate
legislation on the matter, If Carlos P. Garcia, President of the
Philippines, pursuant to the powers vested in me by law, do hereby
require that all contracts of whatever nature involving P10,000.00 or
more to be entered into by all bureaus and offices, agencies and
instrumentalities of the National Government, and those of government
owned and controlled corporations, x x x be submitted to the Auditor
General for examination and review before the same are perfected and/or
consummated.“If the Auditor General interposes any objection
to the proposed contract, the matter shall be submitted to the
President for final decision.”
There seems to be no basis for this contention. In the first place,
the administrative order appears to refer to contracts, in general,
ordinarily entered into by government offices and government-owned or
controlled corporations. The contract here involved is for a special
purpose, to meet a special situation and entered into in implementation
of a Presidential directive issued to solve an emergency created by
rising prices of commodities. In other words^ it was a previously
authorized specific transaction already bearing, as it does, the
approval of the President who, under the administrative order invoked,
has the final say.
In the second place, there appears no reason for the rejection of
the contract, as the NAMARCO Auditor himself, in his 3rd endorsement of
January 22, 1960 (Exh. 5) found no objection to the same.
Thirdly, as already stated, payments to an aggregate of over
P2,000,000.00 had been accepted with the evident approval of the
Auditor, in compliance with the contract.
Appellant also claims that the trial court erred in allowing to take
delivery of 445 cases of oranges only, instead of 2,400 cases, in
effect, charging it (appellant) for the loss of 1955 cases.
The claim is unmeritorious. Let it be remembered that as early as
January 25, 1960, appellant had refused to deliver the Imported
commodities to appellee. It is true that on March 2, 1960, the
FEDERATION, upon filing its complaint, obtained a writ of preliminary
injunction to prevent NAMARCO from disposing of these goods through
other distributors or retailers, but the FEDERATION was willing to
accept, and in fact has been requesting, the delivery of the
same to it or its members for sale to the general public, but NAMARCO
refused to make such delivery. It was onlfy on March 26, 1960, that the
trial court, upon appellee’s motion, ordered the release to it of,
among others, “2,400 cases of mandarin oranges provided they are in
good condition, or only so much thereof that are in good condition.”
Consequently, the FEDERATION could not be blamed for refusing to take
delivery of the oranges that had in the meantime become spoiled during
the period of from January 25 to March 26. In the circumstances, it is
but proper that appellant must bear the loss (the rotting of 1955 cases
of oranges) occasioned by its own fault.
Appellant asserts that the trial court likewise erred in holding it
liable for storage charges from March 2, 1960 (date of filing of
appellee’s complaint in the lower court) of the commodities covered by
the contract of sale in question.
The argument merits no serious consideration. It is true that under
the contract of sale the handling and storage charges of the
commodities covered thereby are for the account of appellee FEDERATION.
However, 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, can not be charged to the FEDERATION, but to
NAMARCO as the one who, in the performance of its obligations under the
contract, has been guilty of delay in the delivery of the goods subject
matter thereof. (Arts. 1169 and 1170, Civil Code).
Lastly, appellant claims that the trial court erred in holding it
liable to pay to appellees a sum equivalent to 5fo of the procurement
cost as attorney’s fees.
The claim has some merit. We have repeatedly held (Jimenez vs.
Bucoy, 103 Phil., 40; 54 Off. Gaz., [32] 7560; Castillo vs. Samonte,
(106 Phil., 1023), that to justify allowance of attorney’s fees, the
trial court must state in its decision the reason why such fees are
being awarded to the winning party. As it does not appear that
appellant had acted in gross and evident bad faith in refusing to
perform the contract of sale in question, and there are in the text of
the decision appealed from no reasonable or equitable grounds for
allowing award of attorney’s fees to appellees, the same are disallowed.
G.R. No. L-17768:
The sole issue for determination in this case is whether respondent
Judge acted with grave abuse of discretion amounting to lack of
jurisdiction in issuing the special order of execution in question.
We have repeatedly held that there is grave abuse of discretion
justifying the issuance of the writ of certiorari, when there is a
capricious and whimsical exercise of judgment as is equivalent to lack
of jurisdiction (Hamoy vs. Secretary, 106 Phil., 1046, citing Abad
Santos vs. Province of Tarlac, 67 Phil., 480; Tan vs. People, 88 Phil.,
609; Rueda vs. CAR, 106 Phil., 300; 59 Off. Gaz. [5] 708; and Liwanag
vs. Castillo, 106 Phil., 375; 57 Off Gaz. 1962), as where the power is
exercised in an arbitrary or despotic manner by reason of passion,
prejudice, or personal hostility amounting to an evasion of positive
duty or to a virtual refusal to perform the duty enjoined, or to act at
all in contemplation of law (TaveraLuna, Inc. vs. Nable, 67 Phil. 340;
Alafriz vs. Nable, 72 Phil. 278).
Section 2, Rule 39 of the Rules of Court, provides:
“Sec. 2. Execution discretionary.—Before the
expiration of the time to appeal, execution may issue, in the
discretion of the court, on motion of the prevailing party with notice
to the adverse party, upon good reason to be stated in a special order.
x x x.”
Under this provision, it is quite clear that prior to the expiration
of the time to appeal, the court may issue execution on motion of the
prevailing party and with notice to the adverse party, upon good
reasons to be stated in a special order (Papa vs. Castelo, Lr-3891,
July 30, 1951). The power to grant or deny a motion for execution is
discretionary with the court (Federal Films vs. Ocampo, 78 Phil., 472,
479; 44 Off. Gaz. 3819). Accordingly, the appellate court will not
interfere to modify, control, or inquire into the exercise of this
discretion, unless it be shown that there has been an abuse thereof
(Calvo vs. Gutierrez, 4 Phil., 203; Case vs.. Metropole Hotel, 5 Phil.,
49; Gamay vs. Gutierrez David, 48 Phil., 768; Buenaventura vs. Pena, 78
Phil., 795; 44 Off. Gaz., 4923; Ong Sit vs. Piccio, 78 Phil., 785; 44
Off. Gaz., 4915; Naredo vs. Yatco, 80 Phil., 220; 45 Off. Gaz., 3390).
In granting the special execution of the judgment in question,
respondent Judge stated good reasons, in his special order of
execution, as required by the above-quoted provision of the Rules of
Court, namely: (1) consumers, not only in Manila, but also in the
neighboring provinces and cities will be benefited by the marketing of
the goods subject matter of the judgment; (2) the public service which
petitioner NAMARCO is required by law to render, will be accomplished
by the distribution of said goods through respondents FEDERATION, et
al.; (3) the goods subject matter of the judgment will deteriorate
during the pendency of the appeal; (4) a slignt deterioration of said
goods will be sufficient to impair their market value as first hand
goods, hence, keeping them in storage while petitioner namarco’s appeal
in Civil Case No. 42684 (G. R. No. L-17819) will render the judgment in
favor of respondents FEDERATION, et al. ineffectual, as their interest
in such goods is not that of consuming, but of marketing them; (5) and
the appeal in Civil Case No. 42684 (G. R. No. L-17819) is frivolous and
is being taken only for the purpose of delay.[1]
And, in refusing petitioner NAMARCO’s offer to put up a supersedeas
bond to stay said special execution, the trial court reasoned out, and
we “believe correctly, that there is no way of determining the prices
at which respondents FEDERATION, et al., will sell the goods subject
matter of the judgment, or of determining their profits; consequently,
there is no way of determining the amount of damage that respondents
FEDERATION, et al. may suffer by the stay of the special execution, and
no amount can, therefore, be fixed for the supersedeas bond. The trial
court went on to say that ¦”the compelling urgent reasons for the
special execution of the judgment outweigh the stay thereof by a
supersedeas bond.”
For all the foregoing, we are of the opinion and so hold, that the
trial Judge, in issuing the special execution of its decision (of
October 15, 1960), did not act with grave abuse of discretion amounting
to lack of jurisdiction.
JUDGMENT
G. R. No. L-17819: The decision of the trial Judge appealed
from, except that portion awarding attorney’s 1 See Presbitero vs.
Bodas, 73 Phil., 300, Iloilo Trading Center vs. Bodas, 73 Phil., 327,
which hold that when the appeal is being taken for purposes of delay,
the trial court may properly deny stay of execution fees to appellees
FEDERATION, et al., is affirmed in all respects, with costs against
appellant NAMARCO.
G. R. No. L-17768: The special order of execution (of
November 15, 1960) is affirmed. Writ of certiorari is denied and the
preliminary injunction heretofore issued by this Court is ordered
dissolved. With costs against petitioner NAMARCO. So ordered.
Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Paredes, Dizon, and De Leon, JJ., concur.
Padilla, J., took no part.
[1] See Presbitero v. Rodas, 73
Phil. 300 ; Iloilo Trading Center v. Rodas, 73 Phil. 327, which hold
that when the appeal is being taken for purposes of delay, the trial
court may property deny stay of execution.