NAMARCO vs FEDERATION

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

DOCTRINE:
NO DEMAND, NO PAY- If no stipulations were made the rule is that the obligor is
considered in default from the time the obligee judicially or extrajudicially demands fulfillment of the
obligation and interest is recoverable only from the time such demand is made.

FACTS:
● National Marketing Corporation(plaintiff): a government owned and controlled
corporation, seller of the mentioned merchandise
● Federation of United NAMARCO Distributors(defendants): a non-stock corporation, buyer
and distributor of the mentioned merchandise

On November 16, 1959, the NAMARCO and the FEDERATION entered into a Contract
of Sale. In the contract it is mentioned that NAMARCO is authorized to import goods to the
FEDERATION and the merchandise shall be paid on a cash basis upon delivery of goods.
Covered in the contract 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. As a guarantee of payment of goods NAMARCO accepted three domestic letters of
credit amounting to 611, 053.35 by the FEDERATION.

Upon arrival of merchandise, NAMARCO sent a statement of account amounting to

611,053.35 demanding the FEDERATION TO PAY. Later on FEDERATION filed a complaint for
specific performance and damages for failure to deliver the goods mentioned in the contract and for
not accepting the cash payment. Basing from the Article 1249 of the Civil Code the domestic letters
of credit are not considered as payment as there was no agreement that the promissory note will be
considered as a discharge of debt.

The NAMARCO then demanded the FEDERATION to pay 611, 053.35 but the latter
refused to do so. Then NAMARCO instituted the present action where it is rooted in the
non-payment of FEDERATION for the NAMARCO's valid, just and demandable claim.
NAMARCO prayed that the FEDERATION be ordered to pay the NAMARCO the sum of
P611,053.35 for the cost of merchandise, with interest at the legal rate from the date of delivery of
the merchandise, until the whole obligation is paid; P20,000.00 as attorney's fees. The Court agreed
with the NAMARCO therefore ordering the defendant to pay NAMARCO the cost of the merchandise
with interest from the date of delivery of the merchandise until the whole obligation is paid and
attorney's fee of 5,000.

Appeal was made by the FEDERATION based on this decision.

ISSUE:
Is the lower court correct in imposing interest from the date of delivery of the merchandise
and not from the date of the extrajudicial demand?
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RULING:
No, the lower court erred in imposing interest at legal rate on the amount due," from the date
of delivery of the merchandise" and not from the date of the extra-judicial demand. Since no
stipulations were made the rule is that the obligor is considered in default from the time the
obligeejudicially or extrajudicially demands fulfillment of the obligation and interest is recoverable
only from the time such demand is made. Therefore the FEDERATION shall pay the interest only
from June 7, 1960 when the NAMARCO'S made the extrajudicial demand. The appealed judgment
is hereby affirmed with modification.