overland transpo cases

8/13/2019 overland transpo cases

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SUPREME COURT REPORTS ANNOTATED

G.R. No. 166250.July 26, 2010.*

Unsworth Transport International (Phils.), Inc. vs. Court of Appeals

UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC., petitioner, vs. COURT OF APPEALS and PIONEER INSURANCEAND SURETY CORPORATION, respondents.

Remedial Law; Appeals; Factual questions may not be raised in a petition for review on certiorari.Well established is

the rule that factual questions may not be raised in a petition for review on certiorari as clearly stated in Section 1, Rule

45 of the Rules of Court.

Commercial Law; Carriage of Goods by Sea Act; Words and Phrases; Meaning of Freight Forwarder.Petitioner is a

freight forwarder. The term freight forwarder refers to a firm holding itself out to the general p ublic (other than as apipeline, rail, motor, or water carrier) to provide transportation of property for compensation and, in the ordinary

course of its business, (1) to assemble and consolidate, or to provide for assembling and consolidating, shipments, and

to perform or provide for break-bulk and distribution operations of the shipments; (2) to assume responsibility for the

transportation of goods from the place of receipt to the place of destination; and (3) to use for any part of the

transportation a carrier subject to the federal law pertaining to common carriers.

Same; Same; Limitation of a Freight Forwarders Liability.A freight forwarders liability is limited to damages arising

from its own negligence, including negligence in choosing the carrier; however, where the forwarder contracts to deliver

goods to their destination instead of merely arranging for their transportation, it becomes liable as a common carrier for

loss or damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the

transport, even though the forwarder does not carry the merchandise itself.

Same; Same; Bill of Lading; Meaning of a Bill of Lading; A bill of lading operates both as receipts and as a contract.A

bill of lading is a written acknowledgement of the receipt of goods and an agreement to transport and to deliver them at

a specified place to a person named or on his or her order. It operates both as a receipt and as a contract. It is a receipt

for the goods shipped and a contract to transport and deliver the same as therein stipulated. As a receipt, it recites the

date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks, condition,

quality, and value. As a contract, it names the contracting parties, which include the consignee; fixes the route,

destination, and freight rate or charges; and stipulates the rights and obligations assumed by the parties.

Same; Same; Common Carriers; Negligence; Common carriers, as a general rule, are presumed to have been at fault ornegligent if the goods they transported deteriorated or got lost or destroyed; Mere proof of delivery of the goods in

good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of

fault or negligence against the carrier.UTI is liable as a common carrier. Common carriers, as a general rule, are

presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is,

unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility

for any loss or damage, therefore, they have the burden of proving that they observed such diligence. Mere proof of

delivery of the goods in good order to a common carrier and oftheir arrival in bad order at their destination constitutes a


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prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the

deterioration, loss, or destruction of the goods happened, the transporter shall be held responsible.

Same; Same; Same; The Civil Code does not limit the liability of the common carrier to a fixed amount per package;

The Carriage of Goods by Sea Act (COGSA) supplements the Civil Code by establishing aprovision limiting the carriers

liability in the absence of a shippers declaration of a higher value in the bill of lading.It is to be noted that the Civil

Code does not limit the liability of the common carrier to a fixed amount per package. In all matters not regulated by the

Civil Code, the rights and obligations of common carriers are governed by the Code of Commerce and special laws. Thus,

the COGSA supplements the Civil Code by establishing a provision limiting the carriers liability in the absen ce of a

shippers declaration of a higher value in the bill of lading.

Same; Same; Same; Insertion of an invoice number does not in itself sufficiently and convincingly show that petitioner

had knowledge of the value of the cargo.In the present case, the shipper did not declare a higher valuation of the

goods to be shipped. Contrary to the CAs conclusion, the insertion of the words L/C No. LC No. 1 -187-008394/NY

69867 covering shipment of raw materials for pharmaceutical Mfg. x x x cannot be the basis of petitioners liability.

Furthermore, the insertion of an invoice number does not in itself sufficiently and convincingly show that petitioner had

knowledge of the value of the cargo.

DECISION

NACHURA, J.:

For review is the Court of Appeals (CA) Decision[1]dated April 29, 2004 and Resolution[2]dated November 26

2004. The assailed Decision affirmed the Regional Trial Court (RTC) decision [3]dated February 22, 2001; while the

assailed Resolution denied petitioner Unsworth Transport International (Philippines), Inc., American President Lines, Ltd

(APL), and Unsworth Transport International, Inc.s (UTIs) motion for reconsideration.

The facts of the case are:

On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to UTI a shipment of 27 drums of

various raw materials for pharmaceutical manufacturing, consisting of: 1) 3 drums (of) extracts, flavoring liquid

flammable liquid x x x banana flavoring; 2) 2 drums (of) flammable liquids x x x turpentine oil; 2 pallets. STC: 40 bags

dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B Complex Extract. [4] UTI issued Bill of Lading No. C320/C15991

2,[5]covering the aforesaid shipment. The subject shipment was insured with private respondent Pioneer Insurance and

Surety Corporation in favor of Unilab against all risks in the amount of P1,779,664.77 under and by virtue of Marine Risk

Note Number MC RM UL 0627 92[6]and Open Cargo Policy No. HO-022-RIU.[7]
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On the same day that the bill of lading was issued, the shipment was loaded in a sealed 1x40 container van, with

no. APLU-982012, boarded on APLs vesselM/V Pres. Jackson, Voyage 42, and transshipped to APLsM/V Pres

Taft[8]for delivery to petitioner in favor of the consignee United Laboratories, Inc. (Unilab).

On September 30, 1992, the shipment arrived at the port of Manila. On October 6, 1992, petitioner received the

said shipment in its warehouse after it stamped the Permit to Deliver Imported Goods[9]procured by the Champs Customs

Brokerage.[10] Three days thereafter, or on October 9, 1992, Oceanica Cargo Marine Surveyors Corporation (OCMSC)

conducted a stripping survey of the shipment located in petitioners warehouse. The survey results stated:

2-pallets STC 40 bags Dried Yeast, both in good order condition and properly sealed

19- steel drums STC Vitamin B Complex Extract, all in good order condition and properly sealed

1-steel drum STC Vitamin B Complex Extra[ct] with cut/hole on side, with approx. spilling of1%[11]

On October 15, 1992, the arrastre Jardine Davies Transport Services, Inc. (Jardine) issued Gate Pass No

7614[12]which stated that 22 drums[13]Raw Materials for Pharmaceutical Mfg. were loaded on a truck with Plate N o

PCK-434 facilitated by Champs for delivery to Unilabs warehouse. The materials were noted to be complete and in good

order in the gate pass.[14]On the same day, the shipment arrived in Unilabs warehouse and was immediately surveyed by

an independent surveyor, J.G. Bernas Adjusters & Surveyors, Inc. (J.G. Bernas). The Report stated:

1-p/bag torn on side contents partly spilled1-s/drum #7 punctured and retaped on bottom side content lacking5-drums shortship/short delivery[15]

On October 23 and 28, 1992, the same independent surveyor conducted final inspection surveys which yielded the same

results. Consequently, Unilabs quality control representative rejected one paper bag containing dried yeast and one steel

drum containing Vitamin B Complex as unfit for the intended purpose.[16]

On November 7, 1992, Unilab filed a formal claim[17]for the damage against private respondent and UTI. On

November 20, 1992, UTI denied liability on the basis of the gate pass issued by Jardine that the goods were in complete

and good condition; while private respondent paid the claimed amount on March 23, 1993. By virtue of the Loss and

Subrogation Receipt[18] issued by Unilab in favor of private respondent, the latter filed a complaint forDamages agains

APL, UTI and petitioner with the RTC of Makati.[19]The case was docketed as Civil Case No. 93-3473 and was raffled to

Branch 134.

After the termination of the pre-trial conference, trial on the merits ensued. On February 22, 2001, the RTC decided

in favor of private respondent and against APL, UTI and petitioner, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintif PIONEER INSURANCE &SURETY CORPORATION and against the defendants AMERICAN PRESIDENT LINES and
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UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC. (now known as JUGRO TRANSPORTINTL., PHILS.), ordering the latter to pay, jointly and severally, the former the following amounts:

1. The sum of SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE and 27/100(Php76,231.27) with interest at the legal rate of 6% per annum to be computed starting from September30, 1993 until fully paid, for and as actual damages;

2. The amount equivalent to 25% of the total sum as attorneys fees;

3. Cost of this litigation.

SO ORDERED.[20]

On appeal, the CA affirmed the RTC decision on April 29, 2004. The CA rejected UTIs defense that it was merely

a forwarder, declaring instead that it was a common carrier. The appellate court added that by issuing the Bill of Lading

UTI acknowledged receipt of the goods and agreed to transport and deliver them at a specific place to a person named or

his order. The court further concluded that upon the delivery of the subject shipment to petitioners warehouse, its liabilit y

became similar to that of a depositary. As such, it ought to have exercised ordinary diligence in the care of the goods. And

as found by the RTC, the CA agreed that petitioner failed to exercise the required diligence. The CA also rejected

petitioners claim that its liability should be limited to $500 per package pursuant to the Carriage of Goods by Sea Act

(COGSA) considering that the value of the shipment was declared pursuant to the letter of credit and the pro forma

invoice. As to APL, the court considered it as a common carrier notwithstanding the non-issuance of a bill of lading

inasmuch as a bill of lading is not indispensable for the execution of a contract of carriage. [21]

Unsatisfied, petitioner comes to us in this petition for review on certiorari, raising the following issues:

1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVEABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION INUPHOLDING THE DECISION OF THE REGIONAL TRIAL COURT DATED 22 FEBRUARY 2001,AWARDING THE SUM OF SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE AND27/100 PESOS (PHP76,231.27) WITH LEGAL INTEREST AT 6% PER ANNUM AS ACTUALDAMAGES AND 25% AS ATTORNEYS FEES.

2. WHETHER OR NOT PETITIONER UTI IS A COMMON CARRIER.

3. WHETHER OR NOT PETITIONER UTI EXERCISED THE REQUIRED ORDINARYDILIGENCE.

4. WHETHER OR NOT THE PRIVATE RESPONDENT SUFFICIENTLY ESTABLISHED THEALLEGED DAMAGE TO ITS CARGO.[22]

Petitioner admits that it is a forwarder but disagrees with the CAs conclusion that it is a common carrier. It also

questions the appellate courts findings that it failed to establish that it exercised extraordinary or ordinary diligence in the

vigilance over the subject shipment. As to the damages allegedly suffered by private respondent, petitioner counters that

they were not sufficiently proven. Lastly, it insists that its liability, in any event, should be limited to $500 pursuant to the
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package limitation rule. Indeed, petitioner wants us to review the factual findings of the RTC and the CA and to evaluate

anew the evidence presented by the parties.

The petition is partly meritorious.

Well established is the rule that factual questions may not be raised in a petition for review on certiorarias clearly

stated in Section 1, Rule 45 of the Rules of Court, viz.:

Section 1.Filing of petition with Supreme Court.A party desiring to appeal by certiorarifrom ajudgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional TrialCourt or other courts whenever authorized by law, may file with the Supreme Court a verified petition forreview on certiorari. The petition shall raise only questions of law which must be distinctly set forth.

Admittedly, petitioner is a freight forwarder. The term freight forwarder" refers to a firm holding itself outto the

general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for

compensation and, in the ordinary course of its business, (1) toassemble and consolidate, or to provide for assembling and consolidating, shipments, and to perform or provide for break

bulk and distribution operations of the shipments; (2) to assume responsibility for the transportation of goods from the

place of receipt to the place of destination; and (3) to use for any part of the transportation a carrier subject to the federa

law pertaining to common carriers.[23]

A freight forwarders liability is limited to damages arising from its own negligence, including negligence in

choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead of merely

arranging for their transportation, it becomes liable as a common carrier for loss or damage to goods. A freight forwarder

assumes the responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the

merchandise itself.[24]

It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant thereto, petitioner undertook to

transport, ship, and deliver the 27 drums of raw materials for pharmaceutical manufacturing to the consignee.

A bill of lading is a written acknowledgement of the receipt of goods and an agreement to transport and to deliver

them at a specified place to a person named or on his or her order.[25]It operates both as a receipt and as a contract. It is a

receipt for the goods shipped and a contract to transport anddeliver the same as therein stipulated. As a receipt, it recites the date and place of shipment, describes the goods as to

quantity, weight, dimensions, identification marks, condition, quality, and value. As a contract, it names the contracting

parties, which include the consignee; fixes the route, destination, and freight rate or charges; and stipulates the rights and

obligations assumed by the parties.[26]
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Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general rule, are presumed to have been at

fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they

exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage

therefore, they have the burden of proving that they observed such diligence.[27]Mere proof of delivery of the goods in

good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault

or negligence against the carrier. If no adequate explanation is given as to how the deterioration, loss, or destruction of t he

goods happened, the transporter shall be held responsible.[28]

Though it is not our function to evaluate anew the evidence presented, we refer to the records of the case to show

that, as correctly found by the RTC and the CA, petitioner failed to rebut the prima facie presumption of negligence in the

carriage of the subject shipment.

First, as stated in the bill of lading, the subject shipment was received by UTI in apparent good order and

condition in New York, United States of America. Second, theOCMSC Survey Report stated that one steel drum STC

Vitamin B Complex Extract was discovered to be with a cut/hole on the side, with approximate spilling of 1%. Thirdthough Gate Pass No. 7614, issued by Jardine, noted that the subject shipment was in good order and condition, it was

specifically stated that there were 22 (should be 27 drums per Bill of Lading No. C320/C15991-2) drums of raw materials

for pharmaceutical manufacturing.Last, J.G. Bernas Survey Report stated that 1-s/drum was punctured and retaped on

the bottom side and the content was lacking, and there was a short delivery of 5-drums.

All these conclusively prove the fact of shipment in good order and condition, and the consequent damage to one

steel drum of Vitamin B Complex Extract while in the possession of petitioner which failed to explain the reason for the

damage. Further, petitioner failed to prove that it observed the extraordinary diligence and precaution which the law

requires a common carrier to exercise and to follow in order to avoid damage to or destruction of the goods entrusted to it

for safe carriage and delivery.[29]

However, we affirm the applicability of the Package Limitation Rule under the COGSA, contrary to the RTC and

the CAs findings.

It is to be noted that the Civil Code does not limit the liability of the common carrier to a fixed amount per

package. In all matters not regulated by the Civil Code, the rights and obligations of common carriers are governed by the

Code of Commerce and special laws. Thus, the COGSA supplements the Civil Code by establishing a provision limitingthe carriers liability in the absence of a shippers declaration of a higher value in the bill of lading .[30]Section 4(5) of the

COGSA provides:

(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damageto or in connection with the transportation of goods in an amount exceeding $500 per package of lawfulmoney of the United States, or in case of goods not shipped in packages, per customary freight unit, or theequivalent of that sum in other currency, unless the nature and value of such goods have been declared by
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the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill oflading, shall beprima facie evidence, but shall not be conclusive on the carrier.

In the present case, the shipper did not declare a higher valuation of the goods to be shipped. Contrary to the CAs

conclusion, the insertion of the words L/C No. LC No. 1-187-008394/ NY 69867 covering shipment of raw materials for

pharmaceutical Mfg. x x x cannot be the basis of petitioners liability.[31] Furthermore, the insertion of an invoice

number does not in itself sufficiently and convincingly show that petitioner had knowledge of the value of the cargo.[32]

In light of the foregoing, peti tioners liability should be limited to $500 per steel drum. In this case, as there was

only one drum lost, private respondent is entitled to receive only $500 as damages for the loss. In addition to said amount

as aptly held by the trial court, an interest rate of 6% per annumshould also be imposed, plus 25% of the total sum as

attorneys fees.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision

dated April 29, 2004 and Resolution dated November 26, 2004 are AFFIRMEDwith MODIFICATIONby reducing the

principal amount due private respondent Pioneer Insurance and Surety Corporation from P76,231.27 to $500, with interes

of 6%per annumfrom date of demand, and 25% of the amount due as attorneys fees.

The other aspects of the assailed Decision and Resolution STAND.

SO ORDERED.
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Ace Navigation Co., Inc. vs. FGU Insurance Corporation

G.R. No. 171591.

June 25, 2012.*

ACE NAVIGATION CO., INC., petitioner, vs. FGU INSURANCE CORPORATION and PIONEER INSURANCE AND SURETY

CORPORATION, respondents.

Mercantile Law; Bill of Lading; A bill of lading is defined as an instrument in writing, signed by a carrier or his agent,

describing the freight so as to identify it, stating the name of the consignor, the terms of the contract for carriage, and

agreeing or directing that the freight to be delivered to the order or assigns of a specified person at a specified

place.A bill of lading is defined as an instrument in writing, signed by a carrier or his agent, describing the freight so

as to identify it, stating the name of the consignor, the terms of the contract for carriage, and agreeing or directing that

the freight to be delivered to the order or assigns of a specified person at a specified place.It operates both as a receipt

and as a contract. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight,

dimensions, identification marks and condition, quality, and value. As a contract, it names the contracting parties, which

include the consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and obligations

assumed by the parties. As such, it shall only be binding upon the parties who make them, their assigns and heirs.

Civil Law; Agency; An agent is not personally liable to the party with whom he contracts, unless he expressly binds

himself or exceeds the limits of his authority without giving such party sufficient notice of his powers.Article 1868 of

the Civil Code states: ART. 1868. By the contract of agency, a person binds himself to render some service or to do

something in representation or on behalf of another, with the consent or authority of the latter. Corollarily, Article

1897 of the same Code provides that an agent is not personally liable to the party with whom he contracts, unless he

expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers.

[Ace Navigation Co., Inc. vs. FGU Insurance Corporation, 674 SCRA 348(2012)]

D E C I S I O N

PERLAS-BERNABE,J.:

This is an appeal under Rule 45 of the Rules of Court seeking to reverse the June 22, 2004 Decisio n1and February 17,

2006 Resolution2of the Court of Appeals (CA) ordering petitioner Ace Navigation Co., Inc., jointly and severally with

Cardia Limited, to pay respondents FGU Insurance Corp. and Pioneer Insurance and Surety Corp. the sum of P213,518.20plus interest at the rate of six percentum (6%) from the filing of the complaint until paid.

The Facts

On July 19, 1990, Cardia Limited (CARDIA) shipped on board the vessel M/V Pakarti Tiga at Shanghai Port China, 8,260

metric tons or 165,200 bags of Grey Portland Cement to be discharged at the Port of Manila and delivered to its

consignee, Heindrich Trading Corp. (HEINDRICH). The subject shipment was insured with respondents, FGU Insurance
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Corp. (FGU) and Pioneer Insurance and Surety Corp. (PIONEER), against all risks under Marine Open Policy No.

062890275 for the amount of P18,048,421.00.3

The subject vessel is owned by P.T. Pakarti Tata (PAKARTI) which it chartered to Shinwa Kaiun Kaisha Ltd.

(SHINWA).4Representing itself as owner of the vessel, SHINWA entered into a charter party contract with Sky

International, Inc. (SKY), an agent of Kee Yeh Maritime Co. (KEE YEH),5which further chartered it to Regency Express

Lines S.A. (REGENCY). Thus, it was REGENCY that directly dealt with consignee HEINDRICH, and accordingly, issued Clean

Bill of Lading No. SM-1.6

On July 23, 1990, the vessel arrived at the Port of Manila and the shipment was discharged. However, upon inspection of

HEINDRICH and petitioner Ace Navigation Co., Inc. (ACENAV), agent of CARDIA, it was found that out of the 165,200 bags

of cement, 43,905 bags were in bad order and condition. Unable to collect the sustained damages in the amount of

P1,423,454.60 from the shipper, CARDIA, and the charterer, REGENCY, the respondents, as co-insurers of the cargo,

each paid the consignee, HEINDRICH, the amounts of P427,036.40 and P284,690.94, respectively, 7and consequently

became subrogated to all the rights and causes of action accruing to HEINDRICH.

Thus, on August 8, 1991, respondents filed a complaint for damages against the following defendants: "REGENCY

EXPRESS LINES, S.A./ UNKNOWN CHARTERER OF THE VESSEL 'PAKARTI TIGA'/ UNKNOWN OWNER and/or DEMIFE (sic)

CHARTERER OF THE VESSEL 'PAKARTI TIGA', SKY INTERNATIONAL, INC. and/or ACE NAVIGATION COMPANY, INC." 8which

was docketed as Civil Case No. 90-2016.

In their answer with counterclaim and cross-claim, PAKARTI and SHINWA alleged that the suits against them cannot

prosper because they were not named as parties in the bill of lading.9

Similarly, ACENAV claimed that, not being privy to the bill of lading, it was not a real party-in-interest from whom the

respondents can demand compensation. It further denied being the local ship agent of the vessel or REGENCY and

claimed to be the agent of the shipper, CARDIA. 10

For its part, SKY denied having acted as agent of the charterer, KEE YEH, which chartered the vessel from SHINWA, which

originally chartered the vessel from PAKARTI. SKY also averred that it cannot be sued as an agent without impleading its

alleged principal, KEE YEH.11

On September 30, 1991, HEINDRICH filed a similar complaint against the same parties and Commercial Union Assurance

Co. (COMMERCIAL), docketed as Civil Case No. 91-2415, which was later consolidated with Civil Case No. 91-2016.

However, the suit against COMMERCIAL was subsequently dismissed on joint motion by the respondents and

COMMERCIAL.12

Proceedings Before the RTC and the CA

In its November 26, 2001 Decision,13

the RTC dismissed the complaint, thefalloof which reads:

WHEREFORE, premises considered, plaintiffs complaint is DISMISSED. Defendants counter-claim against the plaintiffs

are likewise dismissed, it appearing that plaintiff[s] did not act in evident bad faith in filing the present complaint againstthem.

Defendant Pakarti and Shinwas cross-claims against their co-defendants are likewise dismissed for lack of sufficient

evidence.

No costs.

SO ORDERED.
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Dissatisfied, the respondents appealed to the CA which, in its assailed June 22, 2004 Decision, 14found PAKARTI,

SHINWA, KEE YEH and its agent, SKY, solidarily liable for 70% of the respondents' claim, with the remaining 30% to be

shouldered solidarily by CARDIA and its agent, ACENAV, thus:

WHEREFORE, premises considered, the Decision dated November 26, 2001 is hereby MODIFIED in the sense that:

a) defendant-appellees P.T. Pakarti Tata, Shinwa Kaiun Kaisha, Ltd., Kee Yeh Maritime Co., Ltd. and the latters

agent Sky International, Inc. are hereby declared jointly and severally liable, and are DIRECTED to pay FGU

Insurance Corporation the amount of Two Hundred Ninety Eight Thousand Nine Hundred Twenty Five and45/100 (P298,925.45) Pesos and Pioneer Insurance and Surety Corp. the sum of One Hundred Ninety Nine

Thousand Two Hundred Eighty Three and 66/100 (P199,283.66) Pesos representing Seventy (70%) percentum of

their respective claims as actual damages plus interest at the rate of six (6%) percentum from the date of the

filing of the complaint; and

b) defendant Cardia Ltd. and defendant-appellee Ace Navigation Co., Inc. are DECLARED jointly and severally

liable and are hereby DIRECTED to pay FGU Insurance Corporation One Hundred Twenty Eight Thousand One

Hundred Ten and 92/100 (P128,110.92) Pesos and Pioneer Insurance and Surety Corp. Eighty Five Thousand

Four Hundred Seven and 28/100 (P85,407.28) Pesos representing thirty (30%) percentum of their respective

claims as actual damages, plus interest at the rate of six (6%) percentum from the date of the filing of the

complaint.

SO ORDERED.

Finding that the parties entered into a time charter party, not a demise or bareboat charter where the owner completely

and exclusively relinquishes possession, command and navigation to the charterer, the CA held PAKARTI, SHINWA, KEE

YEH and its agent, SKY, solidarily liable for 70% of the damages sustained by the cargo. This solidarity liability was borne

by their failure to prove that they exercised extraordinary diligence in the vigilance over the bags of cement entrusted to

them for transport. On the other hand, the CA passed on the remaining 30% of the amount claimed to the shipper,

CARDIA, and its agent, ACENAV, upon a finding that the damage was partly due to the cargo's inferior packing.

With respect to REGENCY, the CA affirmed the findings of the RTC that it did not acquire jurisdiction over its person for

defective service of summons.

PAKARTI's, SHINWA's, SKY's and ACENAV's respective motions for reconsideration were subsequently denied in the CA's

assailed February 17, 2006 Resolution.

Issues Before the Court

PAKARTI, SHINWA, SKY and ACENAV filed separate petitions for review on certiorari before the Court, docketed as G.R.

Nos. 171591, 171614, and 171663, which were ordered consolidated in the Courts Resolution dated July 31, 2006. 15

On April 21, 2006, SKY manifested16

that it will no longer pursue its petition in G.R. No. 171614 and has preferred to

await the resolution in G.R. No. 171663 filed by PAKARTI and SHINWA. Accordingly, an entry of judgment 17against itwas made on August 18, 2006. Likewise, on November 29, 2007, PAKARTI and SHINWA moved

18for the withdrawal of

their petitions for lack of interest, which the Court granted in its January 21, 2008 Resolution. 19

The corresponding entry

of judgment20against them was made on March 17, 2008.

Thus, only the petition of ACENAV remained for the Court's resolution, with the lone issue of whether or not it may be

held liable to the respondents for 30% of their claim.
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Maintaining that it was not a party to the bill of lading, ACENAV asserts that it cannot be held liable for the damages

sought to be collected by the respondents. It also alleged that since its principal, CARDIA, was not impleaded as a party-

defendant/respondent in the instant suit, no liability can therefore attach to it as a mere agent. Moreover, there is

dearth of evidence showing that it was responsible for the supposed defective packing of the goods upon which the

award was based.

The Court's Ruling

A bill of lading is defined as "an instrument in writing, signed by a carrier or his agent, describing the freight so as toidentify it, stating the name of the consignor, the terms of the contract for carriage, and agreeing or directing that the

freight to be delivered to the order or assigns of a specified person at a specified place."21

It operates both as a receipt and as a contract. As a receipt, it recites the date and place of shipment, describes the

goods as to quantity, weight, dimensions, identification marks and condition, quality, and value. As a contract, it names

the contracting parties, which include the consignee, fixes the route, destination, and freight rates or charges, and

stipulates the rights and obligations assumed by the parties.22As such, it shall only be binding upon the parties who

make them, their assigns and heirs.23

In this case, the original parties to the bill of lading are: (a) the shipper CARDIA; (b) the carrier PAKARTI; and (c) the

consignee HEINDRICH. However, by virtue of their relationship with PAKARTI under separate charter arrangements,SHINWA, KEE YEH and its agent SKY likewise became parties to the bill of lading. In the same vein, ACENAV, as admitted

agent of CARDIA, also became a party to the said contract of carriage.

The respondents, however, maintain24that ACENAV is a ship agent and not a mere agent of CARDIA, as found by both

the CA25

and the RTC.26

The Court disagrees.

Article 586 of the Code of Commerce provides:

ART. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations

contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed

was invested therein.

By ship agent is understood the person entrusted with the provisioning of a vessel, or who represents her in the port in

which she may be found.(Emphasis supplied)

Records show that the obligation of ACENAV was limited to informing the consignee HEINDRICH of the arrival of the

vessel in order for the latter to immediately take possession of the goods. No evidence was offered to establish that

ACENAV had a hand in the provisioning of the vessel or that it represented the carrier, its charterers, or the vessel at any

time during the unloading of the goods. Clearly, ACENAV's participation was simply to assume responsibility over the

cargo when they were unloaded from the vessel. Hence, no reversible error was committed by the courts a quo in

holding that ACENAV was not a ship agent within the meaning and context of Article 586 of the Code of Commerce, buta mere agent of CARDIA, the shipper.

On this score, Article 1868 of the Civil Code states:

ART. 1868. By the contract of agency, a person binds himself to render some service or to do something in

representation or on behalf of another, with the consent or authority of the latter.
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Corollarily, Article 1897 of the same Code provides that an agent is not personally liable to the party with whom he

contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient

notice of his powers.

Both exceptions do not obtain in this case. Records are bereft of any showing that ACENAV exceeded its authority in the

discharge of its duties as a mere agent of CARDIA. Neither was it alleged, much less proved, that ACENAV's limited

obligation as agent of the shipper, CARDIA, was not known to HEINDRICH.

Furthermore, since CARDIA was not impleaded as a party in the instant suit, the liability attributed upon it by theCA

27on the basis of its finding that the damage sustained by the cargo was due to improper packing cannot be borne by

ACENAV. As mere agent, ACENAV cannot be made responsible or held accountable for the damage supposedly caused

by its principal.28

Accordingly, the Court finds that theCA erred in ordering ACENAV jointly and severally liable with CARDIA to pay 30o/o

of the respondents' claim.

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are hereby REVERSED.1awp++i1The

complaint against petitioner Ace Navigation Co., Inc. is hereby DISMISSED.

SO ORDERED.
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Keng Hua Paper Products Co., Inc. vs. Court of Appeals

G.R. No. 116863.February 12, 1998.*

KENG HUA PAPER PRODUCTS CO., INC., petitioner, vs. COURT OF APPEALS; REGIONAL TRIAL COURT OF MANILA, BR.21; and SEA-LAND SERVICE, INC., respondents.

Commercial Law; Bills of Lading; Nature of a Bill of Lading.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. A bill of lading delivered and accepted constitutes

the contract of carriage even though not signed, because the (a)cceptance 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. In a nutshell, 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.

Same; Same; Same; Both lower courts held that the bill of lading was a valid and perfected contract between the

shipper, the consignee, and the carrier.In the case at bar, both lower courts held that the bill of lading was a valid and

perfected contract between the shipper (Ho Kee), the consignee (Petitioner Keng Hua), and the carrier (Private

Respondent Sea-Land). 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. Applying said stipulation, both lower courts found petitioner liable.

Same; Same; Same; Contrary to petitioners contention, the notice and the letter supportnot beliethe findings of

the two lower courts that the bill of lading was impliedly accepted by petitioner.Petitioners reliance on the Notice oRefused or On Hand Freight, as proof of its nonacceptance of the bill of lading, is of no consequence. Said notice was not

written by petitioner; it was sent by private respondent to petitioner in November 1982, or four months after petitioner

received the bill of lading. If the notice has any legal significance at all, it is to highlight petitioners prolonged failure to

object to the bill of lading. Contrary to petitioners contention, the notice and the letter supportnot beliethe

findings of the two lower courts that the bill of lading was impliedly accepted by petitioner.

Same; Same; Same; Mere apprehension of violating customs, tariff and central bank laws without a clear

demonstration that taking delivery of the shipment has become legally impossible, cannot defeat the petitioners

contractual obligation and liability under the bill of lading.Petitioners attempt to evade its obligation to receive the

shipment on the pretext that this may cause it to violate customs, tariff and central bank laws must likewise fail. Mere

apprehension of violating said laws, without a clear demonstration that taking delivery of the shipment has become

legally impossible, cannot defeat the petitioners contractual obligation and liability under the bill of lading.

Same; Letters of Credit; In a letter of credit, there are three distinct and independent contracts.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


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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.

Remedial Law; Appeals; 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.In any event, the issue

of whether petitioner accepted the bill of lading was raised for the first time only in petitioners memorandum before

this Court. Clearly, we cannot now entertain an issue raised for the very first time on appeal, in deference to the well-

settled doctrine that (a)n issue raised for the first time on appeal and not raised timely in the proceedings in the lower

court is barred by estoppel. 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.

Same; Attorneys Fees; The text of the decision should state the reason for the award of attorneys fees.The Court

notes that the matter of attorneys fees was taken up only in the dispositive portion of the trial courts decision. This

falls short of the settled requirement that the text of the decision should state the reason for the award of attorneys

fees, for without such justification, its award would be a conclusion without a premise, its basis being improperly left to

speculation and conjecture.

D E C I S I O N

PANGANIBAN, J .:

What is the nature of a bill of lading? When does a bill of lading become binding on a consignee? Will an allegedovershipment justify the consignees refusal to receive the goods described in the bill of lading? When may interest becomputed on unpaid demurrage charges?

Statement of the Case

These are the main questions raised in this petition assailing the Decision[1]of the Court of Appeals[2]promulgated onMay 20, 1994 in C.A.-G.R. CV No. 29953 affirming in toto the decision[3]dated September 28, 1990 in Civil Case No. 8533269 of the Regional Trial Court of Manila, Branch 21. The dispositive portion of the said RTC decision reads:

WHEREFORE, the Court finds by preponderance of evidence that Plaintiff has proved its cause of action andright to relief. Accordingly, judgment is hereby rendered in favor of the Plaintiff and against Defendant, orderingthe Defendant to pay plaintiff:

1. The sum of P67,340.00 as demurrage charges, with interest at the legal rate from the date of the extrajudicialdemand until fully paid;

2. A sum equivalent to ten (10%) percent of the total amount due as Attorneys fees and litigation expenses.

Send copy to respective counsel of the parties.

SO ORDERED.[4]

The Facts
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The factual antecedents of this case as found by the Court of Appeals are as follows:

Plaintiff (herein private respondent), a shipping company, is a foreign corporation licensed to do business inthe Philippines. On June 29, 1982, plaintiff received at its Hong Kong terminal a sealed container, ContainerNo. SEAU 67523, containing seventy-six bales of unsorted waste paper for shipment to defendant (hereinpetitioner), Keng Hua Paper Products, Co. in Manila. A bill of lading (Exh. A) to cover the shipment was issuedby the plaintiff.

On July 9, 1982, the shipment was discharged at the Manila International Container Port. Notices of arrivalwere 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 momentthe free time period expired on July 29, 1982 until the time when the shipment was unloaded from the containeron November 22, 1983, or a total of four hundred eighty-one (481) days. During the 481-day period, demurragecharges accrued. Within the same period, letters demanding payment were sent by the plaintiff to thedefendant who, however, refused to settle its obligation which eventually amounted to P67,340.00. Numerousdemands were made on the defendant but the obligation remained unpaid. Plaintiff thereafter commenced thiscivil action for collection and damages.

In its answer, defendant, by way of special and affirmative defense, alleged that it purchased fifty (50) tons ofwaste paper from the shipper in Hong Kong, Ho Kee Waste Paper, as manifested in Letter of Credit No.824858 (Exh. 7. p. 110. Original Record) issued by Equitable Banking Corporation, with partial shipmentpermitted; that under the letter of credit, the remaining balance of the shipment was only ten (10) metric tons asshown in Invoice No. H-15/82 (Exh. 8, p. 111, Original Record); that the shipment plaintiff was asking defendantto 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 customand tariff laws; that plaintiff had no cause of action against the defendant because the latter did not hire theformer to carry the merchandise; that the cause of action should be against the shipper which contracted theplaintiffs services and not against defendant; and that the defendant duly notified the plaintiff about the wrongshipment through a letter dated January 24, 1983 (Exh. D for plaintiff, Exh. 4 for defendant, p. 5. Folder ofExhibits).

As previously mentioned, the RTC found petitioner liable for demurrage, attorneys fees and expenses olitigation. The petitioner appealed to the Court of Appeals, arguing that the lower court erred in (1) awarding the sumof P67,340 in favor of the private respondent, (2) rejecting petitioners contention that there was overshipment, (3ruling that petitioners recourse was against the shipper, and (4) computing legal interest from date of extrajudiciademand.[5]

Respondent Court of Appeals denied the appeal and affirmed the lower courts decisionin toto. In a subsequen

resolution,[6]

it also denied the petitioners motion for reconsideration.

Hence, this petition for review.[7]

The Issues

In its memorandum, petitioner submits the following issues:

I. Whether or not petitioner had accepted the bill of lading;

II. Whether or not the award of the sum of P67,340.00 to private respondent was proper;

III. Whether or not petitioner was correct in not accepting the overshipment;

IV. Whether or not the award of legal interest from the date of private respondents extrajudicial demand was proper;[8]

In the main, the case revolves around the question of whether petitioner was bound by the bi ll of lading. We shallthus, discuss the above four issues as they intertwine with this main question.
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The Courts Ruling

The petition is partly meritorious. We affirm petitioners liability for demurrage, but modify the interest rate thereon.

Main Issue: Liabi l i ty Under the Bil l of Ladin g

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

[9]A bill of lading delivered and accepted constitutes the contract of carriage even though no

signed,[10]

because the (a)cceptance of a paper containing the terms of a proposed contract generally constitutesan acceptance of the contract and of all of its terms and conditions of which the acceptor has actual or constructivenotice.

[11]In a nutshell, 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.[12]

In the case at bar, both lower courts held that the bill of lading was a valid and perfected contract between theshipper (Ho Kee), the consignee (Petitioner Keng Hua), and the carrier (Private Respondent Sea-Land). Section 17 of thebill of lading provided that the shipper and the consignee were liable for the payment of demurrage charges for the failureto discharge the containerized shipment beyond the grace period allowed by tariff rules. Applying said stipulation, bothlower courts found petitioner liable. The aforementioned section of the bill of lading reads:

17. COOPERAGE FINES. The shipper and consignee shall be liable for, indemnify the carrier and ship andhold them harmless 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 or containers, and allexpenses incurred in protecting, caring for or otherwise made for the benefit of the goods, whether the goodsbe damaged or not, and for any payment, expense, penalty fine, dues, duty, tax or impost, loss, damage,detention,demurrage, or liability of whatsoever nature, sustained or incurred by or levied upon the carrier or theship in connection with the goods or by reason of the goods being or having been on board, or because ofshippers failure to procure consular or other proper permits, certificates or any papers that may be required atany port or place or shippers failure to supply information or otherwise to comply with all laws, regulations andrequirements of law in connection with the goods of from any other act or omission of the shipper orconsignee:(Underscoring supplied.)

Petitioner contends, however, that it should not be bound by the bill of lading because it never gave its consentthereto. Although petitioner admits physical acceptance of the bill of lading, it argues that its subsequent actions belie

the finding that it accepted the terms and conditions printed therein.[13]

Petitioner cites as support the Notice of Refusedor On Hand Freight it received on November 2, 1982 from private respondent, which acknowledged that petitionerdeclined to accept the shipment. Petitioner adds that it sent a copy of the said notice to the shipper on December 291982. Petitioner points to its January 24, 1983 letter to the private respondent, stressing that its acceptance of the bill oflading would be tantamount to an act of smuggling as the amount it had imported (with full documentary support) was only(at that time) for 10,000 kilograms and not for 20,313 kilograms as stated in the bill of lading and could lay themvulnerable to legal sanctions for violation of customs and tariff as well as Central Bank laws.

[14]Petitioner further argues

that the demurrage was a consequence of the shippers mistake of shipping more than what was bought. Thediscrepancy in the amount of waste paper it actually purchased, as reflected in the invoice vis--visthe excess amount inthe bill of lading, allegedly justifies its refusal to accept the shipment.

[15]

Petitioner Bound by the Bill of Lading

We are not persuaded. Petitioner admits that it received the bill of lading immediately after the arrival of theshipment

[16]on July 8, 1982.[17]Having been afforded an opportunity to examine the said document, petitioner did noimmediately object to or dissent from any term or stipulation therein. It was only six months later, on January 24, 1983that petitioner sent a letter to private respondent saying that it could not accept the shipment. Petitioners inaction fosuch 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 petitioners inability to use the delivery permit,i.e.to pick up the cargo, due to the shippers failureto comply with the terms and conditions of the letter of credit, for which reason the bill of lading and other shipping
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documents were returned by the banks to the shipper.[18]The letter merely proved petitioners refusal to pick up the

cargo, not its rejection of the bill of lading.

Petitioners reliance on the Notice of Refused or On Hand Freight, as proof of its nonacceptance of the bill of lading,is of no consequence. Said notice was not written by petitioner; it was sent by private respondent to petitioner inNovember 1982, or four months after petitioner received the bill of lading. If the notice has any legal significanceat all, it is to highlight petitioners prolonged failure to object to the bill of lading. Contrary to petitioners contention, thenotice and the letter supportnot beliethe findings of the two lower courts that the bill of lading was impliedly acceptedby petitioner.

As aptly stated by Respondent Court of Appeals:In the instant case, (herein petitioner) cannot and did not allege non -receipt of its copy of the bill of lading fromthe shipper. Hence, the terms and conditions as well as the various entries contained therein were brought toits knowledge. (Herein petitioner) accepted the bill of lading without interposing any objection as to itscontents. This raises the presumption that (herein petitioner) agreed to the entries and stipulations imposedtherein.

Moreover, it is puzzling that (herein petitioner) allowed months to pass, six (6) months to be exact, beforenotifying (herein private respondent) of the wrong shipment. It was only on January 24, 1983 that (hereinpetitioner) sent (herein private respondent) such a letter of notification (Exh D for plaintiff, Exh. 4 for defendant;p. 5, Folder of Exhibits). Thus, for the duration of those six months (herein private respondent never knew thereason for (herein petitioners) refusal to discharge the shipment.

After accepting the bill of lading, receiving notices of arrival of the shipment, failing to object thereto, (herein

petitioner) cannot now deny that it is bound by the terms in the bill of lading. If it did not intend to be bound,(herein petitioner) would not have waited for six months to lapse before finally bringing the matter to (hereinprivate respondents attention. The most logical reaction in such a case would be to immediately verify thematter with the other parties involved. In this case, however, (herein petitioner) unreasonably detained (hereinprivate respondents) vessel to the latters prejudice.

[19]

Petitioners attempt to evade its obligation to receive the shipment on the pretext that this may cause it to violate customs,tariff and central bank laws must likewise fail. Mere apprehension of violating said laws, without a clear demonstrationthat taking delivery of the shipment has become legally impossible,

[20]cannot defeat the petitioners contractual obligation

and liability under the bill of lading.

In any event, the issue of whether petitioner accepted the bill of lading was raised for the first time only in petitionersmemorandum before this Court. Clearly, we cannot now entertain an issue raised for the very first time on appeal, indeference to the well-settled doctrine that (a)n issue raised for the first time on appeal and not raised timely in the

proceedings in the lower court 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 on appeal.[21]

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

In The Apollon,[22]Justice Story made the following relevant comment on the nature of demurrage:

In truth, demurrage is merely an allowance or compensation for the delay or detention of a vessel. It is often amatter of contract, but not necessarily so. The very circumstance that in ordinary commercial voyages, aparticular sum is deemed by the parties a fair compensation for delays, is the very reason why it is, and ought tobe, adopted as a measure of compensation, in cases ex delicto. What fairer rule can be adopted than thatwhich founds itself upon mercantile usage as to indemnity, and fixes a recompense upon the deliberateconsideration of all the circumstances attending the usual earnings and expenditures in common voyages? It

appears to us that an allowance, by way of demurrage, is the true measure of damages in all cases of meredetention, for that allowance has reference to the ships expenses, wear and tear, and commonemployment.

[23]

Amoun t of Demurrage Charges

Petitioner argues that it is not obligated to pay any demurrage charges because, prior to the filing of the complaint,private respondent made no demand for the sum of P67,340. Moreover, private respondents loss and prevention
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manager, Loi Gillera, demanded P50,260, but its counsel, Sofronio Larcia, subsequently asked for a different amounof P37,800.

Petitioners position is puerile. The amount of demurrage charges in the sum of P67,340 is a factual conclusion othe trial court that was affirmed by the Court of Appeals and, thus, binding on this Court. [24]Besides such factual finding issupported by the extant evidence.[25]The apparent discrepancy was a result of the variance of the dates when the twodemands were made. Necessarily, the longer the cargo remained unclaimed, the higher the demurrage. Thus, while inhis letter dated April 24, 1983,

[26]private respondents counsel demanded payment of onlyP37,800, the additiona

demurrage incurred by petitioner due to its continued refusal to receive delivery of the cargo ballooned to P67,340 byNovember 22, 1983. The testimony of Counsel Sofronio Larcia as regards said letter of April 24, 1983 elucidates, viz:

Q Now, after you sent this letter, do you know what happened?

A Defendant continued to refuse to take delivery of the shipment and the shipment stayed at the port for a longerperiod.

Q So, what happened to the shipment?

A The shipment incurred additional demurrage charges which amounted to P67,340.00 as of November 22, 1983 ormore than a year after - almost a year after the shipment arrived at the port.

Q So, what did you do?

A We requested our collection agency to pursue the collection of this amount.[27]

Bil l of Ladin g Separate from

Other Letter of Credit Arrangements

In a letter of credit, there are three distinct and independent contracts: (1) the contract of sale between the buyeand the seller, (2) the contract of the buyer with the issuing bank, and (3) the letter of credit proper in which the bankpromises to pay the seller pursuant to the terms and conditions stated therein. Few things are more clearly settled in lawthan that the three contracts which make up the letter of credit arrangement are to be maintained in a state of perpetualseparation.

[28]A transaction involving the purchase of goods may also require, apart from a letter of credit, a contract o

transportation specially when the seller and the buyer are not in the same locale or country, and the goods purchasedhave to be transported to the latter.

Hence, the contract of carriage, as stipulated in the bill of lading in the present case, must be treated independentlyof the contract of sale between the seller and the buyer, and the contract for the issuance of a letter of credit between thebuyer and the issuing bank. Any discrepancy between the amount of the goods described in the commercial invoice inthe contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the

contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documentspresented to it by the seller pursuant to the letter of credit,

[29]neither can the carrier be expected to go beyond the

representations of the shipper in the bill of lading and to verify their accuracy vis--vis the commercial invoice and theletter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and theamount in the bill of lading cannot negate petitioners obligation to private respondent arising from the contract oftransportation. Furthermore, private respondent, as carrier, had no knowledge of the contents of the container. Thecontract of carriage was under the arrangement known as Shippers Load And Count, and the shipper was solelyresponsible for the loading of the container while the carrier was oblivious to the contents of the shipment. Petitionersremedy in case of overshipment lies against the seller/shipper, not against the carrier.

Payment of Interest

Petitioner posits that it first knew of the demurrage claim ofP67,340 only when it received, by summons, privaterespondents complaint. Hence, interest may not be allowed to run from the date of private respondents extrajudiciademands on March 8, 1983 for P50,260 or on April 24, 1983 for P 37,800, considering that, in both cases, there was nodemand for interest.

[30]We agree.

Jurisprudence teaches us:

2. When an obligation,not constituting a loan or forbearance of money, is breached, an interest on the amount ofdamages awarded may be imposed at the discretionof the court at the rate of 6%per annum. No interest, however, shall
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be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonablecertainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from thetime the claim is made judicially or extrajudicially(Art. 1169, Civil Code) but when such certainty cannot be so reasonablyestablished at the time the demand is made, the interest shall begin to run only from the date the judgment of the court ismade (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actualbase 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

overland transpo cases

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