Federation of United Namarco Distributors, Inc. vs. National Marketing Corporation

No. L-17819. March 31, 1962.

FACTS

NAMARCO and the FEDERATION entered into a Contract of Sale for the importation of USD2M worth of controlled goods. Pursuant to the terms, Federation deposited 200,000.00 as partial payment. The new Board of Directors and General Manager of NAMARCO decided to discontinue compliance of the contract of sale. NAMARCO contends that the contract lacks the approval of that body; that it was not approved by the Auditor General; that the contract of sale is inconsistent with Resolution No. 530. The FEDERATION, filed a complaint to compel the latter to perform the Contract of Sale as to what was left after the aforementioned releases of nearly over one-half of the entire quantity of the commodities. After trial, the court rendered judgment obliging NAMARCO to specifically perform the contract of sale to plaintiff FEDERATION’, upon the payment of the procurement cost, plus 5% mark-up.

ISSUE

Whether or not the contract of sale is binding.

HELD

Yes, the Contract of Sale was valid and binding. The General Manager, the auditor and the Board of Directors itself, of the NAMARCO, all understood the contract of sale to be in accordance with the resolutions of its governing body and is, therefore, binding upon said corporation. NAMARCO estopped from questioning validity of contract. It is illogical and unreasonable to suppose that the Board of Directors of the NAMARCO would, in the last part of the resolution in question, impliedly take away what in the first part of the same resolution it had expressly given, namely, its approval of the contract of sale. 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. 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.

APPLICABLE ARTICLES

ART. 1233. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. (1157)

ART. 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, and without ex- pressing any protest or objection, the obligation is deemed fully complied with. (n)

DISCUSSION AND APPLICATIONS

General Rule – Article 1233 –Integrity of Prestation – an obligation to give shall be understood to have been paid when the debtor or obligor has completely delivered the thing which he had obligated himself to deliver; an obligation to do shall be understood to have been performed when the obligor has completely rendered the service which he had obligated himself to render; an obligation not to do shall be understood to have been complied with when the obligor has completely refrained from doing that which he had obligated himself not to do.

The above rule, however, is not absolute in character, Article 1235 is the other exceptions. It is founded on the principle of estoppel. When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection. When a creditor receives partial payment, he is not ipso facto deemed to have abandoned his prior demand for full payment. To imply that a creditor accepts partial payment as complete performance, his acceptance must be made under circumstances that indicate his intention to consider the performance complete and to renounce his claim arising from the defect. In this case, the acceptance of NAMARCO of the partial payment, knowing the inconsistencies and incompleteness of the contract, and without expressing any protest or objection shall ratify the validity of the contract. The law considers that the creditor waives his right.