plaintiff received at its Hong Kong

Republic of the Philippines

terminal a sealed container, Container
SUPREME COURT
No. SEAU 67523, containing seventy-
Manila
six bales of "unsorted waste paper"
FIRST DIVISION for shipment to defendant (herein
petitioner), Keng Hua Paper Products,
Co. in Manila. A bill of lading (Exh. A)
G.R. No. 116863 February 12, 1998 to cover the shipment was issued by
KENG HUA PAPER PRODUCTS CO. INC., the plaintiff.
petitioner, On July 9, 1982, the shipment was
vs. discharged at the Manila International
COURT OF APPEALS; REGIONAL TRIAL COURT Container Port. Notices of arrival were
OF MANILA, BR. 21; and SEA-LAND SERVICE, transmitted to the defendant but the
INC., respondents. latter failed to discharge the shipment
from the container during the "free
time" period or grace period. The said
PANGANIBAN, J.: shipment remained inside the
What is the nature of a bill of lading? When does a plaintiff's container from the moment
bill of lading become binding on a consignee? Will the free time period expired on July
an alleged overshipment justify the consignee's 29, 1982 until the time when the
refusal to receive the goods described in the bill of shipment was unloaded from the
lading? When may interest be computed on unpaid container on November 22, 1983, or a
demurrage charges? total of four hundred eighty-one (481)
days. During the 481-day period,
Statement of the Case
demurrage charges accrued. Within
These are the main questions raised in this petition the same period, letters demanding
assailing the Decision 1 of the Court of Appeals 2 payment were sent by the plaintiff to
promulgated on May 20, 1994 in C.A.-G.R. CV No. the defendant who, however, refused
29953 affirming in toto the decision 3 dated to settle its obligation which
September 28, 1990 in Civil Case No. 85-33269 of eventually amounted to P67,340.00.
the Regional Trial Court of Manila, Branch 21. The Numerous demands were made on
dispositive portion of the said RTC decision reads: the defendant but the obligation
WHEREFORE, the Court finds by remained unpaid. Plaintiff thereafter
preponderance of evidence that commenced this civil action for
Plaintiff has proved its cause of action collection and damages.
and right to relief. Accordingly, In its answer, defendant, by way of
judgment is hereby rendered in favor special and affirmative defense,
of the Plaintiff and against Defendant, alleged that it purchased fifty (50)
ordering the Defendant to pay tons of waste paper from the shipper
plaintiff: in Hong Kong, Ho Kee Waste Paper, as
1. The sum of P67,340.00 as manifested in Letter of Credit No.
demurrage charges, with interest at 824858 (Exh. 7. p. 110. Original
the legal rate from the date of the Record) issued by Equitable Banking
extrajudicial demand until fully paid; Corporation, with partial shipment
permitted; that under the letter of
2. A sum equivalent to ten (10%) credit, the remaining balance of the
percent of the total amount due as shipment was only ten (10) metric
Attorney's fees and litigation tons as shown in Invoice No. H-15/82
expenses. (Exh. 8, p. 111, Original Record); that
Send copy to respective counsel of the shipment plaintiff was asking
the parties. defendant to accept was twenty (20)
metric tons which is ten (10) metric
SO ORDERED. 4 tons more than the remaining
The Facts balance; that if defendant were to
accept the shipment, it would be
The factual antecedents of this case as found by the
violating Central Bank rules and
Court of Appeals are as follows:
regulations and custom and tariff
Plaintiff (herein private respondent), a laws; that plaintiff had no cause of
shipping company, is a foreign action against the defendant because
corporation licensed to do business in the latter did not hire the former to
the Philippines. On June 29, 1982,
 carry the merchandise; that the cause A bill of lading serves two functions. First, it is a
of action should be against the receipt for the goods shipped. Second, it is a
shipper which contracted the contract by which three parties, namely, the
plaintiff's services and not against shipper, the carrier, and the consignee undertake
defendant; and that the defendant specific responsibilities and assume stipulated
duly notified the plaintiff about the obligations. 9 A "bill of lading delivered and
wrong shipment through a letter accepted constitutes the contract of carriage even
dated January 24, 1983 (Exh. D for though not signed," 10 because the "(a)cceptance of
plaintiff, Exh. 4 for defendant, p. 5. a paper containing the terms of a proposed contract
Folder of Exhibits). generally constitutes an acceptance of the contract
and of all of its terms and conditions of which the
As previously mentioned, the RTC found petitioner
acceptor has actual or constructive notice." 11 In a
liable for demurrage; attorney's fees and expenses
nutshell, the acceptance of a bill of lading by the
of litigation. The petitioner appealed to the Court of
shipper and the consignee, with full knowledge of its
Appeals, arguing that the lower court erred in (1)
contents, gives rise to the presumption that the
awarding the sum of P67,340 in favor of the private
respondent, (2) rejecting petitioner's contention that same was a perfected and binding contract.
12

there was overshipment, (3) ruling that petitioner's In the case at bar, both lower courts held that the
recourse was against the shipper, and (4) bill of lading was a valid and perfected contract
computing legal interest from date of extrajudicial between the shipper (Ho Kee), the consignee
demand. 5 (Petitioner Keng Hua), and the carrier (Private
Respondent Court of Appeals denied the appeal and Respondent Sea-Land). Section 17 of the bill of
lading provided that the shipper and the consignee
affirmed the lower court's decision in toto. In a
were liable for the payment of demurrage charges
6
subsequent resolution, it also denied the
for the failure to discharge the containerized
petitioner's motion for reconsideration.
shipment beyond the grace period allowed by tariff
Hence, this petition for review. 7 rules. Applying said stipulation, both lower courts
The Issues found petitioner liable. The aforementioned section
of the bill of lading reads:
In its memorandum, petitioner submits the following
issues: 17. COOPERAGE FINES. The shipper
and consignee shall be liable for,
I. Whether or not indemnify the carrier and ship and
petitioner had accepted hold them harmless against, and the
the bill of lading; carrier shall have a lien on the goods
II. Whether or not the for, all expenses and charges for
award of the sum of mending cooperage, baling, repairing
P67,340.00 to private or reconditioning the goods, or the
respondent was proper; van, trailers or containers, and all
expenses incurred in protecting,
III. Whether or not caring for or otherwise made for the
petitioner was correct benefit of the goods, whether the
in not accepting the goods be damaged or not, and for any
overshipment; payment, expense, penalty fine, dues,
IV. Whether or not the duty, tax or impost, loss, damage,
award of legal interest detention, demurrage, or liability of
from the date of private whatsoever nature, sustained or
respondent's incurred by or levied upon the carrier
extrajudicial demand or the ship in connection with the
was proper; 8 goods or by reason of the goods being
or having been on board, or because
In the main, the case revolves around the question
of shipper's failure to procure
of whether petitioner bound by the bill of lading. We
consular or other proper permits,
shall, thus, discuss the above four issues as they
certificates or any papers that may be
intertwine with this main question.
required at any port or place or
The Court's Ruling shipper's failure to supply information
The petition is partly meritorious. We affirm or otherwise to comply with all laws,
petitioner's liability for demurrage, but modify the regulations and requirements of law
interest rate thereon. in connection with the goods of from
any other act or omission of the
Main Issue: Liability Under the Bill of Lading shipper or consignee: (Emphasis
supplied.)
Petitioner contends, however, that it should not be findings of the two lower courts that the bill of
bound by the bill of lading because it never gave its lading was impliedly accepted by petitioner.
consent thereto. Although petitioner admits As aptly stated by Respondent Court of Appeals:
"physical acceptance" of the bill of lading, it argues
that its subsequent actions belie the finding that it In the instant case, (herein petitioner)
accepted the terms and conditions printed therein. cannot and did not allege non-receipt
13
Petitioner cites as support the "Notice of Refused of its copy of the bill of lading from
or On Hand Freight" it received on November 2, the shipper. Hence, the terms and
1982 from private respondent, which acknowledged conditions as well as the various
that petitioner declined to accept the shipment. entries contained therein were
Petitioner adds that it sent a copy of the said notice brought to its knowledge. (Herein
to the shipper on December 23, 1982. Petitioner petitioner) accepted the bill of lading
points to its January 24, 1983 letter to the private without interposing any objection as
respondent, stressing "that its acceptance of the bill to its contents. This raises the
of lading would be tantamount to an act of presumption that (herein petitioner)
smuggling as the amount it had imported (with full agreed to the entries and stipulations
documentary support) was only (at that time) for imposed therein.
10,000 kilograms and not for 20,313 kilograms as Moreover, it is puzzling that (herein
stated in the bill of lading" and "could lay them petitioner) allowed months to pass,
vulnerable to legal sanctions for violation of customs six (6) months to be exact, before
and tariff as well as Central Bank laws." 14 Petitioner notifying (herein private respondent)
further argues that the demurrage "was a of the "wrong shipment". It was only
consequence of the shipper's mistake" of shipping on January 24, 1983 that (herein
more than what was bought. The discrepancy in the petitioner) sent (herein private
amount of waste paper it actually purchased, as respondent) such a letter of
reflected in the invoice vis-a-vis the excess amount notification (Exh D for plaintiff, Exh. 4
in the bill of lading, allegedly justifies its refusal to for defendant; p. 5, Folder of
accept the shipment. 15 Exhibits). Thus, for the duration of
Petitioner Bound by those six months (herein private
the Bill of Lading respondent never knew the reason for
(herein petitioner's) refusal to
We are not persuaded. Petitioner admits that it discharge the shipment.
"received the bill of lading immediately after the
arrival of the shipment" 16 on July 8, 1982. 17 Having After accepting the bill of lading,
been afforded an opportunity to examine the said receiving notices of arrival of the
document, petitioner did not immediately object to shipment, failing to object thereto,
or dissent from any term or stipulation therein. It (herein petitioner) cannot now deny
was only six months later, on January 24, 1983, that that it is bound by the terms in the bill
petitioner sent a letter to private respondent saying of lading. If it did not intend to be
that it could not accept the shipment. Petitioner's bound, (herein petitioner) would not
inaction for such a long period conveys the clear have waited for six months to lapse
inference that it accepted the terms and conditions before finally bringing the matter to
of the bill of lading. Moreover, said letter spoke only (herein private respondent's
of petitioner's inability to use the delivery permit, attention. The most logical reaction in
i.e. to pick up the cargo, due to the shipper's failure such a case would be to immediately
to comply with the terms and conditions of the letter verify the matter with the other
of credit, for which reason the bill of lading and parties involved. In this case,
other shipping documents were returned by the however, (herein petitioner)
"banks" to the shipper. 18 The letter merely proved unreasonably detained (herein private
petitioner's refusal to pick up the cargo, not its respondent's) vessel to the latter's
rejection of the bill of lading. prejudice. 19
Petitioner's reliance on the Notice of Refused or On Petitioner's attempt to evade its obligation to
Hand Freight, as proof of its nonacceptance of the receive the shipment on the pretext that this may
bill of lading, is of no consequence. Said notice was cause it to violate customs, tariff and central bank
not written by petitioner; it was sent by private laws must likewise fail. Mere apprehension of
respondent to petitioner in November 1982, or four violating said laws, without a clear demonstration
months after petitioner received the bill of lading. If that taking delivery of the shipment has become
the notice has any legal significance at all, it is to legally impossible, 20 cannot defeat the petitioner's
highlight petitioner's prolonged failure to object to contractual obligation and liability under the bill of
the bill of lading. Contrary to petitioner's contention, lading.
the notice and the letter support — not belie — the
In any event, the issue of whether petitioner discrepancy was a result of the variance of the
accepted the bill of lading was raised for the first dates when the two demands were made.
time only in petitioner's memorandum before this Necessarily, the longer the cargo remained
Court. Clearly, we cannot now entertain an issue unclaimed, the higher the demurrage. Thus, while in
raised for the very first time on appeal, in deference his letter dated April 24, 1983, 26 private
to the well-settled doctrine that "(a)n issue raised respondent's counsel demanded payment of only
for the first time on appeal and not raised timely in P37,800, the additional demurrage incurred
the proceedings in the lower court is barred by petitioner due to its continued refusal to receive
estoppel. Questions raised on appeal must be within delivery of the cargo ballooned to P67,340 by
the issues framed by the parties and, consequently, November 22, 1983. The testimony of Counsel
issues not raised in the trial court cannot be raised Sofronio Larcia as regards said letter of April 24,
for the first time on appeal." 21 1983 elucidates, viz:
In the case at bar, the prolonged failure of petitioner Q Now, after you sent
to receive and discharge the cargo from the private this letter, do you know
respondent's vessel constitutes a violation of the what happened?
terms of the bill of lading. It should thus be liable for A Defendant continued
demurrage to the former. to refuse to take
In The Apollon, 22 Justice Story made the following delivery of the
relevant comment on the nature of demurrage: shipment and the
In truth, demurrage is merely an shipment stayed at the
port for a longer period.
allowance or compensation for the
delay or detention of a vessel. It is Q So, what happened to
often a matter of contract, but not the shipment?
necessarily so. The very circumstance A The shipment
that in ordinary commercial voyages, incurred additional
a particular sum is deemed by the demurrage charges
parties a fair compensation for delays, which amounted to
is the very reason why it is, and ought P67,340.00 as of
to be, adopted as a measure of November 22, 1983 or
compensation, in cases ex delicto. more than a year after
What fairer rule can be adopted than — almost a year after
that which founds itself upon the shipment arrived at
mercantile usage as to indemnity, and the port.
fixes a recompense upon the
deliberate consideration of all the Q So, what did you do?
circumstances attending the usual A We requested our
earnings and expenditures in common collection agency to
voyages? It appears to us that an pursue the collection of
allowance, by way of demurrage, is this amount. 27
the true measure of damages in all
cases of mere detention, for that Bill of Lading Separate from
allowance has reference to the ship's Other Letter of Credit Arrangements
expenses, wear and tear, and In a letter of credit, there are three distinct and
common employment. 23 independent contracts:
Amount of Demurrage Charges (1) the contract of sale between the buyer and the
Petitioner argues that it is not obligated to pay any seller, (2) the contract of the buyer with the issuing
demurrage charges because, prior to the filing of bank, and (3) the letter of credit proper in which the
the complaint, private respondent made no demand bank promises to pay the seller pursuant to the
for the sum of P67,340. Moreover, private terms and conditions stated therein. "Few things are
respondent's loss and prevention manager, Loi more clearly settled in law than that the three
Gillera, demanded P50,260; but its counsel, Sofronio contracts which make up the letter of credit
Larcia, subsequently asked for a different amount of arrangement are to be 28 maintained in a state of
P37,800. perpetual separation." A transaction involving the
purchase of goods may also require, apart from a
Petitioner's position is puerile. The amount of letter of credit, a contract of transportation specially
demurrage charges in the sum of P67,340 is a when the seller and the buyer are not in the same
factual conclusion of the trial court that was locale or country, and the goods purchased have to
affirmed by the Court of Appeals and, thus, binding be transported to the latter.
on this Court. 24 Besides, such factual finding is
supported by the extant evidence. 25 The apparent
Hence, the contract of carriage, as stipulated in the the judgment of the court is made (at
bill of lading in the present case, must be treated which time the quantification of
independently of the contract of sale between the damages may be deemed to have
seller and the buyer, and the contract for the been reasonably ascertained). The
issuance of a letter of credit between the buyer and actual base for the computation of
the issuing bank. Any discrepancy between the legal interest shall, in any case, be on
amount of the goods described in the commercial the amount finally adjudged.
invoice in the contract of sale and the amount 3. When the judgment of the court
allowed in the letter of credit will not affect the awarding a sum of money becomes
validity and enforceability of the contract of carriage final and executory, the rate of legal
as embodied in the bill of lading. As the bank cannot interest, whether the case falls under
be expected to look beyond the documents paragraph 1 or paragraph 2, above,
presented to it by the seller pursuant to the letter of shall be 12% per annum from such
credit, 29 neither can the carrier be expected to go finality until its satisfaction, this
beyond the representations of the shipper in the bill interim period being deemed to be by
of lading and to verify their accuracy vis-a-viz the then an equivalent to a forbearance
commercial invoice and the letter of a credit. Thus, of credit. 31
the discrepancy between the amount of goods
indicated in the invoice and the amount in the bill of The case before us involves an obligation not arising
lading cannot negate petitioner's obligation to from a loan or forbearance of money; thus, pursuant
private respondent arising from the contract of to Article 2209 of the Civil Code, the applicable
transportation. Furthermore, private respondent, as interest rate is six percent per annum. Since the bill
carrier, had no knowledge of the contents of the of lading did not specify the amount of demurrage,
container. The contract of carriage was under the and the sum claimed by private respondent
arrangement known as "Shipper's Load And Count," increased as the days went by, the total amount
and shipper was solely responsible for the loading of demanded cannot be deemed to have been
the container while carrier was oblivious to the established with reasonable certainty until the trial
contents of the shipment. Petitioner's remedy in court rendered its judgment. Indeed, "(u)nliquidated
case of overshipment lies against the seller/shipper, damages or claims, it is said, are those which are
not against the carrier. not or cannot be known until definitely ascertained,
assessed and determined by the courts after
Payment of Interest presentation of proof. " 32 Consequently, the legal
Petitioner posits that it "first knew" of the interest rate is six percent, to be computed from
demurrage claim of P67,340 only when it received, September 28, 1990, the date of the trial court's
by summons, private respondent's complaint. decision. And in accordance with Philippine National
Hence, interest may not be allowed to run from the Bank 33 and Eastern Shipping, 34 the rate of twelve
date of private respondent's extrajudicial demands percent per annum shall be charged on the total
on March 8, 1983 for P50,260 or on April 24, 1983 then outstanding, from the time the judgment
for P37,800, considering that, in both cases, "there becomes final and executory until its satisfaction.
was no demand for interest." 30 We agree. Finally, the Court notes that the matter of attorney's
Jurisprudence teaches us: fees was taken up only in the dispositive portion of
the trial court's decision. This falls short of the
2. When an obligation, not
settled requirement that the text of the decision
constituting a loan or forbearance of
should state the reason for the award of attorney's
money, is breached, an interest on
fees, for without such justification, its award would
the amount of damages awarded may
be a "conclusion without a premise, its basis being
be imposed at the discretion of the
improperly left to speculation and conjecture." 35
court at the rate of 6% per annum. No
interest, however, shall be adjudged WHEREFORE, the assailed Decision is hereby
on unliquidated claims or damages AFFIRMED with the MODIFICATION that the legal
except when or until the demand can interest of six percent per annum shall be computed
be established with reasonable from September 28, 1990 until its full payment
certainty. Accordingly, where the before finality of judgment. The rate of interest shall
demand is established with be adjusted to twelve percent per annum, computed
reasonable certainty, the interest from the time said judgment became final and
shall begin to run from the time the executory until full satisfaction. The award of
claim is made judicially or attorney's fees is DELETED.
extrajudicially (Art. 1169, Civil Code) SO ORDERED.
but when such certainty cannot be so
reasonably established at the time Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ.,
the demand is made, the interest concur.
shall begin to run only from the date
Footnotes prestation becomes legally or
physically impossible without the fault
1 Rollo, pp. 20-32.
of the obligor.
2 Tenth Division, composed of J.
21 Sanchez vs. Court of Appeals, G.R.
Fermin A. Martin, Jr., ponente; and JJ.
No. 108947, p. 28, September 29,
Emeterio C. Cui (chairman) and
1997, per Panganiban, J.; quoting
Eugenio S. Labitoria, concurring.
Caltex (Philippines), Inc. vs. Court of
3 Rollo, pp. 15-18. The RTC decision Appeals, 212 SCRA 448, 461, August
was penned by Judge Lourdes K. 10, 1992, per Regalado, J.
Tayao-Jaguros, who was later
22 22 U.S. (9 Wheat.) 362; 6 L. Ed.
appointed to the Court of Appeals,
111 (1824).
from where she has now retired.
23 22 U.S. at 378.
4 Ibid., pp. 17-18.
24 Fuentes vs. Court of Appeals, G.R.
5 Petitioner's brief before the Court of
No. 109849, p. 9, February 26, 1997,
Appeals, pp. 5-8; record of the Court
per Panganiban, J.
of Appeals, pp. 21-24.
25 See computation of CBCS
6 Rollo, p. 35.
Guaranteed Fast Collection Services,
7 The case was deemed submitted for Exh. F-1, Folder of Exhibits, p. 8.
resolution on June 3, 1996 upon this
26 Exh. E, Folder of Exhibits, p. 6.
Court's receipt of petitioner's
memorandum. 27 TSN, pp. 5-6, August 31, 1988.
8 Petitioner's memorandum, p. 4; 28 Gilmore, Grant and Black, Charles,
rollo, p. 87. The Law of Admiralty, p. 120, 2nd ed.
(1975).
9 Magellan Mftg. Marketing Corp. vs.
Court of Appeals, 201 SCRA 102, 110, 29 See Irrevocable Letter of Credit No.
August 22, 1991, per Regalado, J. 82-1858, rollo, p. 11.
10 13 C.J.S. 239. See also Pan 30 Petitioner's memorandum, p. 10;
American World Airways, Inc. vs. IAC, rollo, p. 93.
164 SCRA 268, 275, August 11, 1988; 31 Eastern Shipping Lines, Inc. vs.
citing Ong Yiu vs. Court of Appeals, 91 Court of Appeals, 234 SCRA 88, July
SCRA 223, 231, June 29, 1979. 12, 1994, per Vitug, J. See also
11 17 C.J.S. 672. Philippine National Bank vs. Court of
Appeals, 263 SCRA 766, 770, October
12 Saludo, Jr. vs. Court of Appeals,
30, 1996.
207 SCRA 498, 527-528, March 23,
1992. 32 Central Azucena de Bais vs. Court
Appeals, 188 SCRA 328, 339, August
13 Ibid., p. 5; rollo, p. 88.
3, 1990, per Rgalado, J.:
14 Ibid., pp. 5-6; rollo, pp. 88-89.
33 263 SCRA at 772.
15 Petitioner's memorandum, pp. 9-
34 234 SCRA at 97.
10; rollo, pp. 92-93.
35 Francel Realty Corporation vs.
16 See petitioner's motion for
Court of Appeals, 252 SCRA 127, 134,
reconsideration before the Court of
January 22, 1996, per Mendoza, J.:
Appeals, p. 2; record of the Court of
citing Buan vs. Camaganacan, 16
Appeals, p. 81.
SCRA 321, February 28, 1996.
17 See Exhibit B, Folder of Exhibits, p.
2.
18 See Exhibit D, Folder of Exhibits, p.
5.
19 Decision of the Court of Appeals,
pp. 4-5; rollo, pp. 23-24.
20 Art. 1266 of the Civil Code
provides:
Art. 1266. The debtor in obligations to
do shall also be released when the