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Keng Hua Paper Products vs. CA (GR 116863, 12 February 1998)First Division, Panganiban (J): 4 concur

Facts: Sea-Land Service, a shipping company, is a foreign corporation licensed to do business inthe Philippines. On 29 June 1982, SeaLand received at its Hong Kong terminal a sealedcontainer, Container SEAU 67523, containing 76 bales of unsorted waste paper for shipment

to Keng Hua Paper Products, Co. in Manila. A bill of lading to cover the shipment was issued bySea-Land. On 9 July 1982, the shipment was discharged at the Manila International ContainerPort. Notices of arrival were transmitted to Keng Hua but the latter failed to discharge theshipment from the container during the free time period or grace period. The said shipmentremained inside the Sea-Lands container from the moment the free time period expired on 29July 1982 until the time when the shipment was unloaded from the container on 22 November1983, or a total of 481 days. During the 481-day period, demurrage charges accrued. Within thesame period, letters demanding payment were sent by Sea-Land to Keng Hua who, however,refused to settle its obligation which eventually amounted to P67,340.00. Numerous demandswere made on Keng Hua but the obligation remained unpaid.

Sea Land thereafter commenced the civil action for collection and damages. The RTC found

Keng Hua liable for demurrage, attorneys fees and expenses of litigation.

Keng Hua appealed to the Court of Appeals, which denied the appeal and affirmed the lowercourts decision in toto. In a subsequent resolution, it also denied Keng Huas motion forreconsideration. Hence, the petition for review.

The Supreme Court affirmed the assailed Decision with the modification that the legal interest of6% per annum shall be computed from 28 September 1990 until its full payment before finalityof judgment. The rate of interest shall be adjusted to 12% per annum, computed from the timesaid judgment became final and executory until full satisfaction. The award of attorneys fees isdeleted.

1. Nature of bill of ladingA bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is acontract by which three parties, namely, the shipper, the carrier, and the consignee undertakespecific responsibilities and assume stipulated obligations. A bill of lading delivered andaccepted constitutes the contract of carriage even though not signed, because the (a)cceptanceof a paper containing the terms of a proposed contract generally constitutes an acceptance of thecontract and of all of its terms and conditions of which the acceptor has actual or constructivenotice. In a nutshell, the acceptance of a bill of lading by the shipper and the consignee, withfull knowledge of its contents, gives rise to the presumption that the same was a perfected andbinding contract.

2. Shipper and consignee were liable for payment of demurrer charges; Section 17 of the

bill of ladingSection 17 of the bill of lading provided that the shipper and the consignee were liable for thepayment of demurrage charges for the failure to discharge the containerized shipment beyond thegrace period allowed by tariff rules. Section 17 of the bill of lading provided Cooperage Fines.The shipper and consignee shall be liable for, indemnify the carrier and ship and hold themharmless against, and the carrier shall have a lien on the goods for, all expenses and charges formending cooperage, baling, repairing or reconditioning the goods, or the van, trailers orcontainers, and all expenses incurred in protecting, caring for or otherwise made for the benefitof the goods, whether the goods be damaged or not, and for any payment, expense, penalty fine,

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dues, duty, tax or impost, loss, damage, detention, demurrage, or liability of whatsoever nature,sustained or incurred by or levied upon the carrier or the ship in connection with the goods or byreason of the goods being or having been on board, or because of shippers failure to procureconsular or other proper permits, certificates or any papers that may be required at any port orplace or shippers failure to supply information or otherwise to comply with all laws, regulationsand requirements of law in connection with the goods of from any other act or omission of theshipper or consignee. Keng Huas prolonged failure to receive and discharge the cargo from theSea-Lands vessel constitutes a violation of the terms of the bill of lading. It should thus be liablefor demurrage to the former.

3. Keng Huas letter proved refusal to pick up cargo and not rejection of bill of lading;Implied acceptanceKeng Hua received the bill of lading immediately after the arrival of the shipment on 8 July1982. Having been afforded an opportunity to examine the said document, it did not immediatelyobject to or dissent from any term or stipulation therein. It was only six months later, on 24January 1983, that it sent a letter to private respondent saying that it could not accept theshipment. Its inaction for such a long period conveys the clear inference that it accepted theterms and conditions of the bill of lading. Moreover, said letter spoke only of petitionersinability to use the delivery permit, i.e. to pick up the cargo, due to the shippers failure tocomply with the terms and conditions of the letter of credit, for which reason the bill of ladingand other shipping documents were returned by the banks to the shipper. The letter merelyproved its refusal to pick up the cargo, not its rejection of the bill of lading.

4. Apprehension of violating laws cannot defeat contractual obligation and liabilityKeng Huas attempt to evade its obligation to receive the shipment on the pretext that this maycause it to violate customs, tariff and central bank laws must fail. Mere apprehension of violatingsaid laws, without a clear demonstration that taking delivery of the shipment has become legallyimpossible, cannot defeat the petitioners contractual obligation and liability under the bill oflading.

5. Issue raised for first time on appeal cannot be entertainedAn issue raised for the first time on appeal and not raised timely in the proceedings in the lowercourt is barred by estoppel. Questions raised on appeal must be within the issues framed by theparties and, consequently, issues not raised in the trial court cannot be raised for the first time onappeal. Herein, the issue of whether or not Keng Hua accepted the bill of lading was raised forthe first time only in its memorandum before the Supreme Court.

6. Nature of demurrageDemurrage is merely an allowance or compensation for the delay or detention of a vessel. It isoften a matter of contract, but not necessarily so. The very circumstance that in ordinarycommercial voyages, a particular sum is deemed by the parties a fair compensation for delays, isthe very reason why it is, and ought to be, adopted as a measure of compensation, in cases exdelicto. What fairer rule can be adopted than that which founds itself upon mercantile usage as toindemnity, and fixes a recompense upon the deliberate consideration of all the circumstancesattending the usual earnings and expenditures in common voyages? It appears to us that anallowance, by way of demurrage, is the true measure of damages in all cases of mere detention,for that allowance has reference to the ships expenses, wear and tear, and common employment.

7. Amount of Demurrage Charges supported by extant evidenceThe amount of demurrage charges in the sum of P67,340 is a factual conclusion of the trial courtthat was affirmed by the Court of Appeals and, thus, binding on the Supreme Court. Besides,

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such factual finding is supported by the extant evidence. The apparent discrepancy was a resultof the variance of the dates when the two demands were made. Necessarily, the longer the cargoremained unclaimed, the higher the demurrage. Thus, while in his letter dated 24 April 1983,Sea-Lands counsel demanded payment of only P37,800, the additional demurrage incurred byKeng Hua due to its continued refusal to receive delivery of the cargo ballooned to P67,340 by22 November 1983.

8. Three contracts in a letter of creditIn a letter of credit, there are three distinct and independent contracts: (1) the contract of salebetween the buyer and the seller, (2) the contract of the buyer with the issuing bank, and (3) theletter of credit proper in which the bank promises to pay the seller pursuant to the terms andconditions stated therein. Few things are more clearly settled in law than that the three contractswhich make up the letter of credit arrangement are to be maintained in a state of perpetualseparation. A transaction involving the purchase of goods may also require, apart from a letterof credit, a contract of transportation specially when the seller and the buyer are not in the samelocale or country, and the goods purchased have to be transported to the latter.

9. Contract of carriage in bill of lading to be treated independently of contract of sale and

the contract for the issuance of creditThe contract of carriage, as stipulated in the bill of lading in the present case, must be treatedindependently of the contract of sale between the seller and the buyer, and the contract for theissuance of a letter of credit between the buyer and the issuing bank. Any discrepancy betweenthe amount of the goods described in the commercial invoice in the contract of sale and theamount allowed in the letter of credit will not affect the validity and enforceability of the contractof carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond thedocuments presented to it by the seller pursuant to the letter of credit, neither can the carrier beexpected to go beyond the representations of the shipper in the bill of lading and to verify theiraccuracy vis-a-vis the commercial invoice and the letter of credit. Thus, the discrepancy betweenthe amount of goods indicated in the invoice and the amount in the bill of lading cannot negateKeng Huas obligation to private respondent arising from the contract of transportation.

10. Remedy of alleged overshipment lies against the shipper and not against the carrierThe contract of carriage was under the arrangement known as Shippers Load And Count, andthe shipper was solely responsible for the loading of the container while the carrier was obliviousto the contents of the shipment. Keng Huas remedy in case of overshipment lies against theseller/shipper, not against the carrier.

11. Computation of legal interesta. When an obligation, not constituting a loan or forbearance of money, is breached, an intereston the amount of damages awarded may be imposed at the discretion of the court at the rate of6% per annum. No interest, however, shall be adjudged on unliquidated claims or damagesexcept when or until the demand can be established with reasonable certainty. Accordingly,where the demand is established with reasonable certainty, the interest shall begin to run fromthe time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when suchcertainty cannot be so reasonably established at the time the demand is made, the interest shallbegin to run only from the date the judgment of the court is made (at which time thequantification of damages may be deemed to have been reasonably ascertained). The actual basefor the computation of legal interest shall, in any case, be on the amount finally adjudged.b. When the judgment of the court awarding a sum of money becomes final and executory, therate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be

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12% per annum from such finality until its satisfaction, this interim period being deemed to beby then an equivalent to a forbearance of credit.

12. Obligation one not arising from loan or forbearance of money; Legal interest in thepresent caseThe case involves an obligation not arising from a loan or forbearance of money; thus, pursuant

to Article 2209 of the Civil Code, the applicable interest rate is 6% per annum. Since the bill oflading did not specify the amount of demurrage, and the sum claimed by Sea-Land increased asthe days went by, the total amount demanded cannot be deemed to have been established withreasonable certainty until the trial court rendered its judgment. Indeed, unliquidated damages orclaims, it is said, are those which are not or cannot be known until definitely ascertained,assessed and determined by the courts after presentation of proof. Consequently, the legalinterest rate is 6%, to be computed from 28 September 1990, the date of the trial courts decision.And in accordance with the cases of PNB and Eastern Shipping, the rate of 12% per annum shallbe charged on the total then outstanding, from the time the judgment becomes final andexecutory until its satisfaction.

13. Attorneys fees denied due to lack of justification

The matter of attorneys fees was taken up only in the dispositive portion of the trial courtsdecision. This falls short of the settled requirement that the text of the decision should state thereason for the award of attorneys fees, for without such justification, its award would be aconclusion without a premise, its basis being improperly left to speculation and conjecture.