G.R. No. L-17074 - National Marketing Corp. vs. Tan

Petitioner: National Marketing Corporation (NAMARCO), a government-owned and controlled corporation organized under Republic Act 1345.
Respondents: Federation of United NAMARCO Distributors, Inc. (the Federation), a private corporation composed of bona fide distributors and retailers of NAMARCO goods, and its individual members.
Case Origin: The Federation filed an action for specific performance in the Court of First Instance of Manila (Civil Case No. 42684) to compel NAMARCO to release goods imported under a contract of sale.

On August 8, 1959, the Federation requested through letter to the President of the Philippines that NAMARCO set aside $2,001,031 out of a $10,000,000 special allocation from the Central Bank for the importation of specified commodities to be allocated to the Federation members.
Conditions for allocation included:

Payment on a cash basis of procurement cost plus 5% mark-up.
The Federation to cover handling and storage charges.
Distribution of goods among Federation members/retailers according to NAMARCO's rules.

The President endorsed the request favorably.
On November 3, 1959, NAMARCO’s Board of Directors passed Resolution No. 524 authorizing the importation pursuant to the request.
On November 16, 1959, NAMARCO executed a contract of sale with the Federation upon payment of a P200,000 partial advance, identifying items and prices, and embodying the conditions from Resolution No. 524.

The Federation contracted with the owner of "Pasig River Bodegas" for handling and storage, with NAMARCO's approval.
Commodities were deposited in the bodegas on arrival and the Federation paid the storage charges.
After initial and subsequent payments totaling over P2,000,000, NAMARCO invoiced the Federation, and the bodegas released the commodities based on invoices.

Around the end of January 1960, NAMARCO’s new Board and General Manager refused to release further imported goods and allocated them to distribution outlets other than Federation members.
The Federation and its members filed suit for specific performance to enforce the contract and sought a preliminary injunction to prohibit NAMARCO from reallocating the goods or removing them from storage.
The injunction was granted upon a bond of P20,000.

The Federation filed several "Motions and Consignations", depositing sums with the Court representing procurement cost plus 5% mark-up to facilitate the release of the goods.
NAMARCO opposed these motions; however, the Court issued orders releasing the goods to the Federation.
NAMARCO filed motions for reconsideration which were denied.

NAMARCO filed a petition alleging grave abuse of discretion by the Court of First Instance in issuing the writ of preliminary injunction and various orders releasing the goods, and questioned the validity of the consignations.
The Supreme Court issued a writ of preliminary injunction to restrain respondents from executing the orders.
Respondents countered with statements regarding the Court of First Instance’s final decision in their favor and the permanent injunction issued on October 15, 1960.
The Federation filed a second supplement alleging that NAMARCO itself filed a complaint to enforce the contract of sale, acknowledging its validity.

The contract was entered without authority of its Board (specifically by former General Manager Benjamin F. Estrella).
The contract lacked approval by the Auditor General as required by Administrative Order No. 290.
Resolution No. 530 adopted October 19, 1959 prohibited "forward sales" and required distribution only through regular NAMARCO outlets, allegedly conflicting with the contract.
The Federation violated terms of the contract.

Contract authorization was by Board Resolution No. 524, pursuant to Presidential endorsement.
Subsequent Board Resolution No. 14 (January 12, 1960) formally approved the contract, subject to Resolutions No. 524 and 530.
Resolution No. 530 did not nullify but amended distribution procedures, allowing distribution through Federation members who were regular NAMARCO outlets.
Auditor General did not disapprove the contract but deferred action pending court resolution.
No proof was offered that the Federation breached contract terms.
NAMARCO’s prior voluntary compliance and later suits to collect payments further recognized contract validity.

Was the contract of sale between NAMARCO and the Federation valid and binding, given allegations that it was unauthorized and lacked Auditor General’s approval?
Did the resolution by NAMARCO’s new management to withhold release of goods and allocate commodities to non-Federation outlets violate the contract or applicable resolutions?
Was the issuance of the writ of preliminary injunction and the orders releasing the goods to the Federation a grave abuse of discretion by the Court of First Instance?
Were the motions and consignations by the Federation legally sufficient and proper to warrant the release of the goods?