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    53 Namarco vs. Federation

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    Erwin Salosagcol
    NAMARCO and the FEDERATION entered into a contract where NAMARCO would import and sell various goods to the FEDERATION totaling $2,001,031. To ensure payment, the FEDERATION provided NAMARCO with three domestic letters of credit. While some goods were delivered, NAMARCO refused to deliver the remaining goods and refused the FEDERATION's cash payments, arguing the contract was invalid. The court had to determine if the letters of credit discharged the FEDERATION's debt. The court ruled that the mere delivery of the letters of credit did not discharge the debt, as they were provided only as a guarantee of payment, not as actual payment

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    53 Namarco vs. Federation

    Uploaded by

    Erwin Salosagcol
    140 views2 pages
    NAMARCO and the FEDERATION entered into a contract where NAMARCO would import and sell various goods to the FEDERATION totaling $2,001,031. To ensure payment, the FEDERATION provided NAMARCO with three domestic letters of credit. While some goods were delivered, NAMARCO refused to deliver the remaining goods and refused the FEDERATION's cash payments, arguing the contract was invalid. The court had to determine if the letters of credit discharged the FEDERATION's debt. The court ruled that the mere delivery of the letters of credit did not discharge the debt, as they were provided only as a guarantee of payment, not as actual payment

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    NAMARCO and the FEDERATION entered into a contract where NAMARCO would import and sell various goods to the FEDERATION totaling $2,001,031. To ensure payment, the FEDERATION provided NAMARCO with three domestic letters of credit. While some goods were delivered, NAMARCO refused to deliver the remaining goods and refused the FEDERATION's cash payments, arguing the contract was invalid. The court had to determine if the letters of credit discharged the FEDERATION's debt. The court ruled that the mere delivery of the letters of credit did not discharge the debt, as they were provided only as a guarantee of payment, not as actual payment

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    140 views2 pages

    53 Namarco vs. Federation

    Uploaded by

    Erwin Salosagcol
    NAMARCO and the FEDERATION entered into a contract where NAMARCO would import and sell various goods to the FEDERATION totaling $2,001,031. To ensure payment, the FEDERATION provided NAMARCO with three domestic letters of credit. While some goods were delivered, NAMARCO refused to deliver the remaining goods and refused the FEDERATION's cash payments, arguing the contract was invalid. The court had to determine if the letters of credit discharged the FEDERATION's debt. The court ruled that the mere delivery of the letters of credit did not discharge the debt, as they were provided only as a guarantee of payment, not as actual payment

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    NATIONAL MARKETING vs.

    FEDERATION OF UNITED NAMARCO DISTRIBUTORS


    G.R. No. L-22578 January 31, 1973
    Facts:

    NAMARCO and the FEDERATION entered into a Contract of Sale. NAMARCO was authorized 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 PK Chewing 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 three domestic
    letters of credit.

    FEDERATION received from the NAMARCO the 2,000 cartons of PK Chewing Gums, 1,000 cartons of
    Juicy Fruit Chewing Gums, and 500 cartons of Adams Chicklets, all with a total value of P277,357.91,
    under the condition that the cost thereof would be paid in cash through PNB Domestic L/C No. 600570;
    and on February 20, 1960, the FEDERATION received from the NAMARCO the 168 cartons of Blue
    Denims and 183 bales of Khaki Twill, with a total value of P135,891.82 and P197,804.12, respectively,
    under the condition that the cost thereof would be paid 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 the Contract 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 NAMARCO and, therefore, it is not bound by the provisions thereof.

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

    NAMARCO demanded from the FEDERATION the payment of the total amount of P611,053.35, but the
    latter failed and refused to pay the said amount. CFI Manila promulgated its decision ordering the
    NAMARCO to specifically perform its obligation in the Contract of Sale, by delivering to the FEDERATION
    the undelivered goods.

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

    Held: No. Mere delivery by the FEDERATION of the domestic letters of credit to NAMARCO did not
    operate to discharge the debt of the FEDERATION. As shown by the appealed judgment NAMARCO
    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 other mercantile
    document shall produce the effect of payment (1) only when realized, or (2) when by the 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 third persons and
    delivered by the debtor to the creditor, and does not apply to instruments executed by 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 was
    impaired as a result of the fault of NAMARCO. The fact that NAMARCO attempted to collect from the
    Philippine National Bank on the sight drafts on March 10, 1960, is of no material significance. As
    heretofore stated they were never taken, in the first instance as payment. There was no agreement
    that they should be accepted as payment. The mere fact that NAMARCO proceeded in good faith to try
    to collect payments thereon, did not amount to an appropriation by it 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 payment results is not such an appropriation of it as to discharge the debt.

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