Myline Cordial

Keng Hua Paper Products Co. Inc. vs. Court of Appeals, RTC Manila and Sea-land Service, Inc.
G.R. No. 116863, February 12, 1998
286 SCRA 257

FACTS:
Shipper – Ho Kee Waste Paper
Consignee – Petitioner, Keng Hua Paper Products, Co.
Carrier – Private Respondent Sea-land Service, Inc.

On June 29, 1982, the carrier received at its Hong Kong terminal a sealed container containing seventy-six bales of “unsorted waste paper” for shipment to consignee in Manila. The shipment was covered by a bill of lading which the consignee received immediately after arrival but it refused to accept the shipment because the merchandise was in excess of 10 metric tons.

The shipment was discharged at the Manila International Container Port. However, the consignee failed to discharge the shipment from the container during the grace period despite notices of arrival. The shipment remained inside the shipper’s container for four hundred eighty-one (481) days – from the moment the grace period expired until the time when the shipment was unloaded from the container. During the 481-day period, demurrage charges accrued. Meanwhile, the shipper demanded payment but the consignee refused to settle its obligation.

ISSUES and RULING:

What is the nature of bill of lading? When does a bill of lading become binding on a consignee?
A bill of lading serves two functions.
1. It is a receipt for the goods shipped.
2. It is a contract by which three parties, namely, the shipper, the carrier, and the consignee undertake specific responsibilities and assume stipulated obligations.
A “bill of lading delivered and accepted constitutes the contract of carriage even though not signed,” because the “acceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of the contract and of all of its terms and conditions of which the acceptor has actual or constructive notice.” The acceptance of a bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that the same was a perfected and binding contract.

Was the bill of lading a valid and perfected contract between the shipper, the consignee and the carier?
Yes. Both lower courts held that the bill of lading was a valid and perfected contract between the shipper, the consignee, and the carrier. Section 17 of the bill of lading provided that the shipper and the consignee were liable for the payment of demurrage charges for the failure to discharge the containerized shipment beyond the grace period allowed by tariff rules.

Will an alleged overshipment justify the consignee’s refusal to receive the goods described in the bill of lading?
No. The consignee’s remedy in case of overshipment lies against the seller/shipper, not against the carrier. The contract of carriage, as stipulated in the bill of lading is separate and distinct from the contract of sale between the seller and the buyer in which the amount of goods is indicated. In the present case, the contract of carriage was under the arrangement known as “Shipper’s Load And Count,” and the shipper was solely responsible for the loading of the container while the carrier was oblivious to the contents of the shipment. The carrier had no knowledge of the contents of the container.

When may interest be computed on unpaid demurrage charges?
The legal interest of six percent per annum shall be computed from September 28, 1990, the date of the trial court’s decision until its full payment before finality of judgment. The rate of interest shall be adjusted to twelve percent per annum, computed from the time said judgment became final and executory until full satisfaction.

NOTES:

LETTERS OF CREDIT
In a letter of credit, there are three distinct and independent contracts:
(1) the contract of sale between the buyer and the seller,
(2) the contract of the buyer with the issuing bank, and
(3) the letter of credit proper in which the bank promises to pay the seller pursuant to the terms and conditions stated therein. “Few things are more clearly settled in law than that the three contracts which make up the letter of credit arrangement are to be maintained in a state of perpetual separation.” A transaction involving the purchase of goods may also require, apart from a letter of credit, a contract of transportation specially when the seller and the buyer are not in the same locale or country, and the goods purchased have to be transported to the latter.

APPEAL
Questions raised on appeal must be within the issues framed by the parties and, consequently, issues not raised in the trial court cannot be raised for the first time on appeal.

ATTORNEY’S FEES
The text of the decision should state the reason for the award of attorney’s fees – The Court notes that the matter of attorney’s fees was taken up only in the dispositive portion of the trial court’s decision. This falls short of the settled requirement that the text of the decision should state the reason for the award of attorney’s fees, for without such justification, its award would be a “conclusion without a premise, its basis being improperly left to speculation and conjecture.

Case Summary and Full Text: Keng Hua Paper Products Co vs CA G.R. No. 116863, February 12, 1998