BILL OF LADING

Keng Hua Products v. CA

G.R No. 116863, 12 February 1998

FACTS:

Plaintiff (herein private respondent), a shipping company, is a foreign corporation licensed to do business in the
Philippines. On June 29, 1982, plaintiff received at its Hong Kong terminal a sealed container, containing seventy-six
bales of unsorted waste paper for shipment to defendant (herein petitioner), Keng Hua Paper Products, Co. in Manila.
A bill of lading to cover the shipment was issued by the plaintiff.

On July 9, 1982, the shipment was discharged at the Manila International Container Port. Notices of arrival were
transmitted to the defendant but the latter failed to discharge the shipment from the container during the free time
period or grace period. The said shipment remained inside the plaintiffs container from the moment the free time
period expired on July 29, 1982 until the time when the shipment was unloaded from the container on November 22,
1983, or a total of four hundred eighty-one (481) days. During the 481-day period, demurrage charges accrued. Within
the same period, letters demanding payment were sent by the plaintiff to the defendant who, however, refused to
settle its obligation which eventually amounted to P67,340.00. Numerous demands were made on the defendant but
the obligation remained unpaid. Plaintiff thereafter commenced this civil action for collection and damages.

In its answer, defendant, by way of special and affirmative defense, alleged that it purchased fifty (50) tons of waste
paper from the shipper in Hong Kong, Ho Kee Waste Paper, as manifested in Letter of Credit issued by Equitable
Banking Corporation, with partial shipment permitted; that under the letter of credit, the remaining balance of the
shipment was only ten (10) metric tons as shown in Invoice that the shipment plaintiff was asking defendant to accept
was twenty (20) metric tons which is ten (10) metric tons more than the remaining balance; that if defendant were to
accept the shipment, it would be violating Central Bank rules and regulations and custom and tariff laws; that plaintiff
had no cause of action against the defendant because the latter did not hire the former to carry the merchandise; that
the cause of action should be against the shipper which contracted the plaintiffs services and not against defendant;
and that the defendant duly notified the plaintiff about the wrong shipment through a letter dated January 24, 1983.

ISSUE:

1. Whether or not the petitioner was bound by the bill of lading.

2. Whether or not interest may not be allowed to run from the date of private respondents extrajudicial demands on
March 8, 1983 for P50,260 or on April 24, 1983 for P37,800, considering that, in both cases, there was no demand
for interest.

RULING:

A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is a contract by which three
parties, namely, the shipper, the carrier, and the consignee undertake specific responsibilities and assume stipulated
obligations.

Petitioner admits that it received the bill of lading immediately after the arrival of the shipment on July 8, 1982. Having
been afforded an opportunity to examine the said document, petitioner did not immediately object to or dissent from
any term or stipulation therein. It was only six months later, on January 24, 1983, that petitioner sent a letter to private
respondent saying that it could not accept the shipment. Petitioners inaction for such a long period conveys the clear
inference that it accepted the terms and conditions of the bill of lading. Moreover, said letter spoke only of petitioner’s
inability to use the delivery permit, i.e. to pick up the cargo, due to the shippers failure to comply with the terms and
conditions of the letter of credit, for which reason the bill of lading and other shipping documents were returned by the
banks to the shipper. The letter merely proved petitioners refusal to pick up the cargo, not its rejection of the bill of
lading.

In the case at bar, the prolonged failure of petitioner to receive and discharge the cargo from the private respondent’s
vessel constitutes a violation of the terms of the bill of lading. It should thus be liable for demurrage to the former.

On behalf of the interest jurisprudence teaches us:

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except 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 from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot
be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally
adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

The case before us 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 six percent per annum. Since the bill of lading did not specify the
amount of demurrage, and the sum claimed by private respondent increased as the days went by, the total amount
demanded cannot be deemed to have been established with reasonable certainty until the trial court rendered its
judgment. Indeed, (u)nliquidated damages or claims, 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 legal
interest rate is six percent, to be computed from September 28, 1990, the date of the trial court’s decision. And in
accordance with Philippine Natonal Bank and Eastern Shipping, the rate of twelve percent per annum shall be charged
on the total then outstanding, from the time the judgment becomes final and executory until its satisfaction.
Telengtan Bros. (La Suerte Cigarette) vs. CA 286 SCRA 257
Va Reekum Paper – shipper;
K-Line – carrier; Smith, Bell & Co – shipping agent
La Suerte – consignee; Island Brokerage Co – consignee’s agent;

Facts:
Shipper contracted K-line for the shipment of container board liners. A bill of lading was issued. The shipment
was loaded on two vessels of K-Line. But because the customs arrastre refused to act on the shipment due to
a discrepancy in the bill of lading and the manifest, the consignee was not able to discharge the shipment.
Thus demmurage charges accrued. Consignee paid all the demurrage charges but was not able to obtain all of
the shipment. Thus, it demands refund contending that the bill of lading does not provide for the payment of
container demurrage but only for a demurrage referring to damages for detention of vessels.
Issue:
WON the consignee should pay the demurrage charges.
Held:
Yes, because of its failure to remove the cargoes from the containers.
Whatever may be the interpretation of the consignee for the word “demurrage,” the fact is that the bill of lading
provides for the payment of a demurrage for the detention of containers and other equipments for the so-called
“free-time.” And because a bill of lading is both a receipt and a contract, its terms and conditions are conclusive
on the parties, including the consignee.
------------------------------------
Here, the consignee should pay only from the time of the arrival of the shipment up to the time when the
customs arrastre refused action. This is so because customs arrastre’s ground for refusal was not due to the
fault of the consignee but because of the fault of the carrier/shipping agent.
Demurrage, in its strict sense, is the compensation provided for in the contract of affreightment for the
detention of the vessel beyond the time agreed on for loading and unloading. Essentially, demurrage is the
claim for damages for failure to accept delivery.
Maersk Line vs. CA 222 SCRA 108
Facts:
Castillo ordered from Eli Lilly gelatin capsules. The shipment was boarded on a vessel owned by Maersk Line.
However, due to a misshipment, there had been a delay of two months in the delivery. Thus, Castillo rejected
the entire shipment and asked for damages, among others. Negligence was attributed to Maersk Line. But the
carrier denied liability alleging that there was no special contract under which it undertook to deliver the
shipment on or before a specified date. Trial court found Maersk Line liable relying on the character of the bill
of lading as a contract of adhesion which is void.
Issue:
WON Maersk Line should be liable.
Held:
Yes, the two-month delay is not reasonable.
The provision of the bill of lading is a contract of adhesion. Nevertheless, such contract is not entirely
prohibited. One who adheres to the contract is in reality free to reject it in its entirety.
In this case, the questioned provision in the bill of lading has the effect of practically leaving the date of arrival
of the subject shipment on the sole determination and will of the carrier. While it is true that common carriers
are not obligated by law to carry and to deliver merchandise…unless such common carriers previously assume
the obligation to deliver at a given date or time, delivery of shipment or cargo should at least be made within a
reasonable time.
Magellan Manufacturing (MMMC) vs. CA & OOLC 201 SCRA 102
Facts:
MMMC entered into a contract with Co in Japan for the export of anahaw fans. MMMC then contracted with
OOLC to ship the anahaw fans, specifying that the letter of credit issued to them by Co needed an on-board bill
of lading and that transshipment is not allowed. The buyer, however, refused to accept. Thus, the shipment
was brought back to Manila by OOLC. OOLC then demanded payment of such transport from MMMC. MMMC
however, wants to acquire from OOLC, whatever amount they failed to obtain from the buyer Co, alleging that
it is OOLC’s fault why the buyer refused the acceptance of the shipment. OOLC however alleges that the bill of
lading clearly states that there will be a transshipment and that petitioner consented to such agreement. Thus,
in effect, the buyer’s refusal due to a transshipment was due to MMMC.
Issue:
WON OOLC should be held liable.
Held:
No.
MMMC had full knowledge of, and actually consented to, the terms and conditions of the bill of lading thereby
making the same conclusive as to it, and it cannot now be heard to deny having assented thereto.
The acceptance of the bill without dissent raises the presumption that all the terms therein were brought to the
knowledge of the shipper and agreed to by him and, in the absence of fraud or mistake, he is estopped from
thereafter denying that he assented to such terms. This rule applies with particular force where a shipper
accepts a bill of lading with full knowledge of its contents and acceptance under such circumstances makes it a
binding contract.
Everett Steamship Corp vs. CA & Hernandez Trading 297 SCRA 496
Facts:
Hernandez Trading imported spare parts marked as MARCO from its supplier. The parts were shipped
through Everett Steamship Corp. Upon arrival in Manila, it was discovered that the shipment was missing.
Everett offered to pay only 100,000 Yen invoking the bill of lading limiting its liability.
Issue:
WON the limitation provided in the bill of lading is valid.
Held:
Yes.
A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a
certain sum, unless the shipper or owner declares a greater value, is sanctioned by law. It is required that the
stipulation limiting the common carrier's liability for loss must be reasonable and just under the circumstances,
and has been freely and fairly agreed upon.

It was found that the stipulation in the bill of lading was reasonable and just under the circumstances. The
shipper/supplier had the option to declare a higher valuation if the value of its cargo was higher than the limited
liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for
not complying with the stipulations.
PhilAm Gen vs. Sweet Lines 212 SCRA 194
Facts:
A foreign common carrier took on board cargoes for shipment to Manila and later on for transshipment to
Davao. The consignee, Tagum, insured the cargoes with PhilAm Gen. Upon discharge, it was found out that
there was shortages in the cargo, while some were damaged. After trial, the TC ordered Sweet Lines, among
others, liable to PhilAm Gen & Tagum. CA however reversed the decision, on the ground that the action of Phil
Am Gen & Tagum prescribed relying on the stipulations of the bill of lading as to the shortened periods in the
institution of an action in case of damage, loss, etc. on the cargo. PhilAm Gen & Tagum asserts that such
stipulation is void, being a contract of adhesion.
Issue:
WON the stipulation as to the shortened period is valid.
Held:
Yes.
In this jurisdiction, this time limitation is actually a condition precedent to the accrual of a right of action against
a carrier for damages caused to the merchandise. The shipper or the consignee must allege and prove the
fulfillment of the condition and if he omits such allegations and proof, no right of action against the carrier can
accrue in his favor.
These are reasonable conditions precedent, they are not limitations of action. Being conditions precedent, their
performance must precede a suit for enforcement and the vesting of the right to file spit does not take place
until the happening of these conditions.
------------------------------------------
In this case, the action was filed way beyond the stipulated period of filing in the bill of lading.

The validity of a contractual limitation of time for filing the suit itself against a carrier shorter than the statutory period therefor has generally been upheld
as such stipulation merely affects the shipper's remedy and does not affect the liability of the carrier. In the absence of any statutory limitation and
subject only to the requirement on the reasonableness of the stipulated limitation period, the parties to a contract of carriage may fix by agreement a
shorter time for the bringing of suit on a claim for the loss of or damage to the shipment than that provided by the statute of limitations. Such limitation is
not contrary to public policy for it does not in any way defeat the complete vestiture of the right to recover, but merely requires the assertion of that right
by action at an earlier period than would be necessary to defeat it through the operation of the ordinary statute of limitations.
MOF Company v. Shin Yang

Facts: Halla shipped to Manila secondhand cars and other articles on board the vessel Hanjin Busan. The bill of
lading was prepared by the carrier Hanjin where Shin Yang was named as the consignee and indicated that payment
was on a "Freight Collect" basis( meaning the consignee/receiver of the goods would be the one to pay for the freight
and other charges). When the shipment arrived in Manila MOF, Hanjin’s exclusive general agent in the Philippines,
demanded the payment from Shin Yang. Shin Yang refused to pay the freight and other charges. Shin Yang is saying
that it is not the ultimate consignee but merely the consolidator/forwarder. Shin Yang contends that the fact that its
name was mentioned as the consignee of the cargoes did not make it automatically liable for the freightage because
it never benefited from the shipment. It never claimed or accepted the goods, it was not the shipper’s agent, it was
not aware of its designation as consignee and the original bill of lading was never endorsed to it.

Issue:

Whether a consignee, who is not a signatory to the bill of lading, is bound by the stipulations thereof? Yes.

Whether Shin Yang, who was not an agent of the shipper and who did not make any demand for the fulfillment of the
stipulations of the bill of lading drawn in its favor, is liable to pay the corresponding freight and handling charges? No.

Held: While it is true that a bill of lading serves two (2) functions: first, it is a receipt for the goods shipped; second, it
is a contract by which three parties, namely, the shipper, the carrier and the consignee who undertake specific
responsibilities and assume stipulated obligations.

The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the intervention of the
consignee. However, the latter can be bound by the stipulations of the bill of lading when a) there is a relation of
agency between the shipper or consignor and the consignee or b) when the consignee demands fulfillment of the
stipulation of the bill of lading which was drawn up in its favor.

In sum, a consignee, although not a signatory to the contract of carriage between the shipper and the carrier, becomes
a party to the contract by reason of either a) the relationship of agency between the consignee and the shipper/
consignor; b) the unequivocal acceptance of the bill of lading delivered to the consignee, with full knowledge of its
contents or c) availment of the stipulation pour autrui, i.e., when the consignee, a third person, demands before the
carrier the fulfillment of the stipulation made by the consignor/shipper in the consignee’s favor, specifically the delivery
of the goods/cargoes shipped.

In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized Halla Trading, Co. to ship
the goods on its behalf; or that it got hold of the bill of lading covering the shipment or that it demanded the release of
the cargo. Basic is the rule in evidence that the burden of proof lies upon him who asserts it, not upon him who denies,
since, by the nature of things, he who denies a fact cannot produce any proof of it. Thus, MOF has the burden to
controvert all these denials, it being insistent that Shin Yang asserted itself as the consignee and the one that caused
the shipment of the goods to the Philippines.

In civil cases, the party having the burden of proof must establish his case by preponderance of evidence, which
means evidence which is of greater weight, or more convincing than that which is offered in opposition to it. Here,
MOF failed to meet the required quantum of proof. Other than presenting the bill of lading, which, at most, proves that
the carrier acknowledged receipt of the subject cargo from the shipper and that the consignee named is to shoulder
the freightage, MOF has not adduced any other credible evidence to strengthen its cause of action. It did not even
present any witness in support of its allegation that it was Shin Yang which furnished all the details indicated in the
bill of lading and that Shin Yang consented to shoulder the shipment costs. There is also nothing in the records which
would indicate that Shin Yang was an agent of Halla Trading Co. or that it exercised any act that would bind it as a
named consignee. Thus, the CA correctly dismissed the suit for failure of petitioner to establish its cause against
respondent