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Keng Hua vs. CA

Facts:1. Sea-Land Service, a shipping

company, is a foreign corporationlicensed to do business in thePhilippines.

2.Sea Land received at its HongKong terminal a sealed containerfro shipment to Keng Hua.

3. In spite of the notice previouslysent by Sea Land, Keng Hua failedto discharge the cargo during thefree period.

4. Keng Hua was only able todischarge the cargo 481 daysafter the free period, as a result ofwhich demurrage charges

accrued. The said fees were paidby Sea Land.5. Sea Land then asked Keng Hua for

the reimbursement of thedemurrage charges since underthe Bill of Lading executedbetween Keng Hua (consignee),Ho Kee Wee (shipper) and SeaLand (carrier), both the consigneeand the shipper is liable foraccruing demurrage fees should

the cargo be discharged beyondthe grace period allowed by tariffrules.

6. Keng Hua however refused to payprompting Sea Land to sue KengHua for collection of said fees.

Keng Huas Defense:

Bill of Lading is only a Contract betweenHo Kee Wee and Sea Land. It is not

binding on Keng Hua.

Under the Letter of Credit issued byEquitable Banking for Ho Kee WeeWaste Paper (seller of Keng Huasmerchandise and the shipper of thecargo), the remaining balance of theshipment was only 10 metric tons whileSea Land is asking Keng Hua to accept20 Metric tons. Thus, if Keng Hua

accepted the cargo, Keng Hua will beviolating customs laws.

RTC:Keng hua is laible to pay demurragefees

CA:Affirmed the liability of Keng Hua

ISSUE: WON Keng Hua is liable fordemurrage fee

HELD: Yes

RATIO:1. Bill of Lading binding on Ho Kee

Wee, Keng Hua and Sea Land as

found by CA. Though Keng Huanever expressly consented to theprovisions of the Bill of Lading,there was an implied consentsince Keng Hua only objectedthereto after 6 months after it hasreceived a copy of the Bill ofLading.

2. In a letter of credit, there arethree distinct and independent

contracts: (1) the contract ofsale between the buyer and theseller, (2) the contract of thebuyer with the issuing bank, and(3) the letter of credit proper inwhich the bank promises to paythe seller pursuant to the termsand conditions stated therein.Few things are more clearlysettled in law than that the threecontracts which make up the

letter of credit arrangement are tobe maintained in a state ofperpetual separation.

3. Hence, the contract of carriage,as stipulated in the bill of lading inthe present case, must be treatedindependently of the contract ofsale between the seller and thebuyer, and the contract for theissuance of a letter of credit

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between the buyer and theissuing bank. Any discrepancybetween the amount of the goodsdescribed in the commercialinvoice in the contract of sale andthe amount allowed in the letterof credit will not affect the validity

and enforceability of the contractof carriage as embodied in the billof lading. As the bank cannot beexpected to look beyond thedocuments presented to it by theseller pursuant to the letter ofcredit, neither can the carrier beexpected to go beyond therepresentations of the shipper inthe bill of lading and to verifytheir accuracy vis--vis the

commercial invoice and the letterof credit. Thus, the discrepancybetween the amount of goodsindicated in the invoice and theamount in the bill of ladingcannot negate Keng Huasobligation to Sea Land arisingfrom the contract of transportation.

4. Furthermore, Sea Land, as carrier,

had no knowledge of the contentsof the container. The contract ofcarriage was under thearrangement known as ShippersLoad And Count, and the shipperwas solely responsible for theloading of the container while thecarrier was oblivious to thecontents of the shipment. KengHuas remedy in case ofovershipment lies against the

seller/shipper, not against thecarrier.