Transportation Law Cases

Topic:
BILL OF LADING
(a) Functions of Bill of Lading
(b) Article 350 and 706 of the Code of Commerce
(c) Types of Bill of Lading
(d) Parties

Keng Hua Paper Products Co., Inc. vs. CA

G.R. No. 116863 | February 12, 1998
FACTS:
1. Plaintiff Sea-Land Service, Inc. (respondent), a shipping company, is
a foreign corporation licensed to do business in the Philippines
2. June 29, 1982: Plaintiff received at its Hong Kong Terminal a sealed
container, containing 76 bales of unsorted waste paper for
shipment to defendant Keng Hua Paper Products (petitioner), in
Manila
3. A bill of lading to cover the shipment was issued by the plaintiff
4. July 9, 1982: shipment was discharged at the Manila International
Container Port.
5. 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.
6. 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 (481 days)
7. During that period:
- Demurrage charges accrued
- Letters demanding payment were sent by the plaintiff to the
defendant who, however, refused to settle its obligation which
amounted to P67. 340
8. Numerous demands were made on the defendant but the obligation
remained unpaid
9. Plaintiff commenced this civil action for collection and damages
10. Defendant Keng Hua Paper Products:
- It purchased 50 tons of waste paper from the shipper in HK, Ho
Kee Waste Paper, as manifested in Letter of Credit issued by
Equitable Banking Corporation, with partial shipment permitted
- Under the LC, the remaining balance of shipment was only 10
metric tons
- The shipment plaintiff was asking defendant to accept was 20
metric tons which is 10 more than the remaining balance

If defendant were to accept such, it would be violating Central

Bank rules and regulations and custom and tariff laws
Plaintiff had no cause of action against defendant because the
latter did not hire the former to carry merchandise
The COA should be against the shipper which contracted the
plaintiffs services and not against defendant
Defendant duly notified the plaintiff about the wrong shipment
through a letter

11. RTC: found petitioner liable for demurrage, attys fees and expenses
of litigation
12. Petitioner appealed to CA
13. CA denied appeal and affirmed LCs decision in toto; denied MR
14. Hence, this petition for review.
ISSUE: Whether or not the petitioner was bound by the bill of lading
HELD: YES. We affirm petitioners liability for demurrage, but modify
the interest rate thereon
RATIO:
2 FUNCTIONS OF BILL OF LADING:
(a) It is a receipt for the goods shipped
(b) A contract by which 3 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.
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
SeaLand). 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.

17. COOPERAGE FINES. The shipper and consignee shall be liable for,
indemnify the carrier and ship and hold them harmless against, and the
carrier shall have a lien on the goods for, all expenses and charges for
mending cooperage, baling, repairing or reconditioning the goods, or the van,
trailers or containers, and all expenses incurred in protecting, caring for or
otherwise made for the benefit of the goods, whether the goods be 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 the ship in connection
with the goods or by reason of the goods being or having been on board, or
because of shippers failure to procure consular or other proper permits,
certificates or any papers that may be required at any port or place or
shippers failure to supply information or otherwise to comply with all laws,
regulations and requirements of law in connection with the goods of from any
other act or omission of the shipper or consignee.
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
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 petitioners 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.
Petitioners reliance on the Notice of Refused or On Hand Freight, as proof of
its non-acceptance of the bill of lading, is of no consequence. Said notice
was not written by petitioner; it was sent by private respondent to petitioner 4
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.
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.
The prolonged failure of petitioner to receive and discharge the cargo from
the respondents vessel constitutes a violation of the terms of the bill of
lading. It should thus be liable for demurrage to the former.

Demurrage merely an allowance or compensation for the delay or

detention of a vessel

Maersk Line vs. CA

G.R. No. 94761 | May 17, 1993
FACTS:
1. Petitioner Maersk Line is engaged in the transportation of goods by
sea, doing business in the Philippines through its general agent
Compania General de Tabacos de Filipinas.
2. Private respondent Efren Castillo is the proprietor of Ethegal
Laboratories, a firm engaged in the manufacture of pharmaceutical
products
3. November 12, 1976: Private respondent ordered from Eli Lilly, Inc. of
Puerto Rico through its (Eli Lilly, Inc.s) agent in the Philippines,
Elanco Products, 600,000 empty gelatin capsules for the
manufacture of his pharmaceutical products
4. Capsules were placed in 6 drums of 100,000 capsules each valued
at US $1,668.71
5. Through a Memorandum of Shipment, the shipper Eli Lilly, Inc. of
Puerto Rico advised respondent as consignee that the 600,000
empty gelatin capsules in 6 drums of 100,000 capsules each, were
already shipped on board MV Anders Maerskline under Voyage for
shipment to the Philippines via Oakland, CA.
6. In the Memo, shipper Eli Lilly, Inc. specified the date of arrival to be
April 3, 1977.
7. For reasons unknown, said cargo of capsules were mishipped and
diverted to Richmond, Virginia, USA and then transported back to
Oakland, CA.
8. June 10, 1977 (or after 2 months from date specified in the memo):
Goods finally arrived in the Philippines
9. Private respondent as consignee refused to take delivery of the
goods on account of its failure to arrive on time
10. Private respondent filed an action before the court for rescission of
contract with damages against petitioner and Eli Lilly, Inc. as
defendants
11. Petitioner:
- Subject shipment was transported in accordance with the
provisions of the covered bill of lading
- Liability under the law on transportation of goods attaches only in
case of loss, destruction or deterioration of goods
12. Defendant Eli Lilly, Inc.:
- Delay in the arrival of subject merchandise was due solely to the
gross negligence of petitioner Maersk Line
- Moved for dismissal of complaint against Eli Lilly, Inc. on the
ground that the delay in the delivery was attributable solely to
petitioner

13. TC: dismissed complaint against Eli Lilly, Inc.

14. After trial held between respondent and petitioner, the court rendered
judgment in favor of respondent Castillo
15. On appeal, CA affirmed decision with modifications
ISSUE: Whether or not petitioner is liable for the delay in the delivery of
the goods
HELD: YES
RATIO:
6. GENERAL
(1) The Carrier does not undertake that the Goods shall arrive at the port of
discharge or the place of delivery at any particular time or to meet any
particular market or use and save as is provided in clause 4 the Carrier shall
in no circumstances be liable for any direct, indirect or consequential loss or
damage caused by delay. If the Carrier should nevertheless be held legally
liable for any such direct or indirect or consequential loss or damage caused
by delay, such liability shall in no event exceed the freight paid for the
transport covered by this Bill of Lading.
A bill of lading 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 contract, it names the parties, which includes the
consignee, fixes the route, destination, and freight rates or charges, and
stipulates the rights and obligations assumed by the parties. Being a
contract, it is the law between the parties who are bound by its terms and
conditions provided that these are not contrary to law, morals, good customs,
public order and public policy. A bill of lading usually becomes effective upon
its delivery to and acceptance by the shipper. It is presumed that the
stipulations of the bill were, in the absence of fraud, concealment or improper
conduct, known to the shipper, and he is generally bound by his acceptance
whether he reads the bill or not.
However, the aforequoted ruling applies only if such contracts will not create
an absurd situation as in the case at bar. The questioned provision in the
subject 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, and persons are not vested with the right to prompt
delivery, 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.

In the absence of a special contract, a carrier is not an insurer against delay

in transportation of goods. When a common carrier undertakes to convey
goods, the law implies a contract that they shall be delivered at destination
within a reasonable time, in the absence, of any agreement as to the time of
delivery. But where a carrier has made an express contract to transport and
deliver property within a specified time, it is bound to fulfil its contract and is
liable for any delay, no matter from what cause it may have arisen.
An examination of the subject bill of lading shows that the subject shipment
was estimated to arrive in Manila on April 3, 1977. While there was no
special contract entered into by the parties indicating the date of arrival of the
subject shipment, petitioner nevertheless, was very well aware of the specific
date when the goods were expected to arrive as indicated in the bill of lading
itself. In this regard, there arises no need to execute another contract for the
purpose as it would be a mere superfluity.
In the case before us, we find that a delay in the delivery of the goods
spanning a period of two (2) months and seven (7) days falls way beyond the
realm of reasonableness. Described as gelatin capsules for use in
pharmaceutical products, subject shipment was delivered to, and left in, the
possession and custody of petitioner carrier for transport to Manila via
Oakland, California. But through petitioners negligence was mishipped to
Richmond, Virginia. Petitioners insistence that it cannot be held liable for the
delay finds no merit.

Magellan Manufacturing Marketing Corp vs. CA

G.R. No. 95529 | August 22, 1991
FACTS:
1. May 20, 1980: Plaintiff-appellant Magellan Manufacturers Marketing
Corp. (MMMC) entered into a contract with Choju Co. of Yokohama,
Japan to export 136, 000 anahaw fans for and in consideration of
$23,220
2. As payment thereof, a letter of credit was issued to plaintiff MMMC
by the buyer
3. Through its president, James Cu, MMMC then contracted F.E.
Zuellig, a shipping agent, through its solicitor, one Mr. King, to ship
the anahaw fans through the other appellee, Orient Overseas
Container Lines, Inc. (OOCL) specifying that he needed an onboard
bill of lading and that transhipment is not allowed under the letter of
credit
4. June 30, 1980: appellant MMMC paid F.E. Zuellig the freight charges
and secured a copy of the bill of lading which was presented to Allied
Bank.
5. Bank credited the amount of US $23,220 covered by the letter of
credit to appellants account
6. However, when appellants president James Cu, went back to the
bank later, he was informed that the payment was refused by the
buyer allegedly because there was no on-board bill of lading, and
there was a transhipment of goods
7. As a result of refusal, the anahaw fans were shipped back to Manila
by appellees (F.E. Zuellig and Orient Overseas Container Lines, Inc.)
8. Appellees demanded from appellant payment of P246,043.43
9. Appellant MMMC abandoned the whole cargo and asked appellees
for damages
10. Private respondents:
- Bill of lading clearly shows that there will be a transhipment and
that petitioner is well aware that MV (Pacific) Despatcher was
only up to HK where the subject cargo will be transferred to
another vessel for Japan
- Petitioner be ordered to pay freight charges from Japan to
Manila and the demurrages in Japan and Manila
11. LC: in favor of private respondents; dismissed complaint on the
ground that petitioner had given its consent to contents of the bill of
lading where it is clearly indicated that there will be a transhipment;
petitioner is liable to pay to private respondent the freight charges
from Japan to Manila and demurrages since it was the former which
ordered the reshipment of cargo from Japan to Manila
12. On appeal, liability of petitioner modified, which represents the freight
charges and demurrages incurred in Japan but not for the
demurrages incurred in Manila

13. Petitioners MR denied

14. Hence, this petition
ISSUE: Whether or not private respondents were liable for the refusal of
the buyer to take delivery of the goods due to violation of terms and
conditions of letter of credit issued in favor of the former due to the
requirement for an on board bill of lading and prohibition against
transhipment of goods
HELD: NO
RATIO:
Transhipment the act of taking cargo out of one ship and loading it in
another, or the transfer of goods from the vessel stipulated in the contract of
affreightment to another vessel before the place of destination named in the
contract has been reached, or the transfer for further transportation from one
ship or conveyance to another.
Either in its ordinary or its strictly legal acceptation, there is transhipment
whether or not the same person, firm or entity owns the vessels. In other
words, the fact of transhipment is not dependent upon the ownership of the
transporting ships or conveyances or in the change of carriers, as the
petitioner seems to suggest, but rather on the fact of actual physical transfer
of cargo from one vessel to another.
That there was transhipment within this contemplation is the inescapable
conclusion, as there unmistakably appears on the face of the bill of lading the
entry Hong
Kong in the blank space labeled Transhipment,"' which can only mean that
transhipment actually took place. This fact is further bolstered by the
certification13 issued by private respondent F.E. Zuellig, Inc. dated July 19.
1980, although it carefully used the term transfer instead of transhipment.
Nonetheless, no amount of semantic juggling can mask the fact that
transhipment in truth occurred in this case.
A bill of lading 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 contract, it names the parties, which includes the
consignee, fixes the route, destination, and freight rates or charges, and
stipulates the rights and obligations assumed by the parties. Being a
contract, it is the law between the parties who are bound by its terms and
conditions provided that these are not contrary to law, morals, good customs,
public order and public policy. A bill of lading usually becomes effective upon
its delivery to and acceptance by the shipper.

It is presumed that the stipulations of the bill were, in the absence of fraud,
concealment or improper conduct, known to the shipper, and he is generally
bound by his acceptance whether he reads the bill or not.
A shipper who receives a bill of lading without objection after an opportunity
to inspect it, and permits the carrier to act on it by proceeding with the
shipment is presumed to have accepted it as correctly stating the contract
and to have assented to its terms. In other words, 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.
In the light of the series of events that transpired in the case at bar, there can
be no logical conclusion other than that the petitioner 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. As borne out by the records, James Cu
himself, in his capacity as president of MMMC, personally received and
signed the bill of lading. On practical considerations, there is no better way to
signify consent than by voluntarily signing the document which embodies the
agreement
CA: the appellant actually consented to the transhipment when it received
the bill of lading personally at appellees (F.E. Zuelligs) office. There clearly
appears on the face of the bill of lading under column PORT OF
TRANSHIPMENT" an entry HONGKONG" (Exhibits G1'). Despite said
entries he still delivered his voucher (Exh. F) and the corresponding check in
payment of the freight (Exhibit D), implying that he consented to the
transhipment.
It is a well-known commercial usage that transhipment of freight without legal
excuse, however competent and safe the vessel into which the transfer is
made, is a violation of the contract and an infringement of the right of the
shipper, and subjects the carrier to liability if the freight is lost even by a
cause otherwise excepted. It is highly improbable to suppose that private
respondents, having been engaged in the shipping business for so long,
would be unaware of such a custom of the trade as to have undertaken such
transhipment without petitioners consent and unnecessarily expose
themselves to a possible liability.
An on board bill of lading is one in which it is stated that the goods have been
received on board the vessel which is to carry the goods, whereas a received
for shipment bill of lading is one in which it is stated that the goods have
been received for shipment with or without specifying the vessel by which the
goods are to be shipped. Received for shipment bills of lading are issued

whenever conditions are not normal and there is insufficiency of shipping

space. An on board bill of lading is issued when the goods have been
actually placed aboard the ship with every reasonable expectation that the
shipment is as good as on its way. It is, therefore, understandable that a
party to a maritime contract would require an on board bill of lading because
of its apparent guaranty of certainty of shipping as well as the seaworthiness
of the vessel which is to carry the goods.
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. In a broad sense, every improper
detention of a vessel may be considered a demurrage. Liability for
demurrage, using the word in its strictly technical sense, exists only when
expressly stipulated in the contract. Using the term in its broader sense,
damages in the nature of demurrage are recoverable for a breach of the
implied obligation to load or unload the cargo with reasonable dispatch, but
only by the party to whom the duty is owed and only against one who is a
party to the shipping contract. Notice of arrival of vessels or conveyances, or
of their placement for purposes of unloading is often a condition precedent to
the right to collect demurrage charges.

Reyma Brokerage, Inc. vs. Philippine Home Assurance Corp. and CA

G.R. No. 93464 | October 7, 1991
FACTS:
1. October 2, 1979: The vessel MS Malmros Monsoon received
onboard at Fremantle, Brisbane Queensland, Australia from shipper
Craig Mostyn & Co., Pty. Ltd. (of Brisbane, Queensland) a shipment
of 2,680 cartons of hard frozen boneless beef contained in 5
containers complete and in good order and condition for transport to
Manila in favor of eventual consignee RFM Corp. under a Bill of
Lading.
2. October 13, 1979: the MS Malmros Monsoon arrived at Pier 3 of the
Port of Manila and discharged the shipment into the possession and
custody of the defendant, the arrastre operator
3. From Pier 3, the shipment was transferred to the Reefer Van Area of
Pier 13
4. October 22, 1979: the defendant arrastre contractor loaded the
containers in 2 trucks and delivered them to Grech Food Industries
Cold Storage in Pasig, Rizal arriving there at 1am the following
morning, October 23, 1979
- 4 personnel of defendant, a driver and a helper in each truck
made the delivery
5. October 23 at 9am: containers were stripped and the representative
of defendant and consignee counted the contents; After the
inventory, 203 cartons were found short out of the loaded 2,680
cartons of hard frozen boneless beef
6. Consignee:
- totally attributable to the defendant as it occurred while the said
container was in the custody and responsibility of the defendant
- filed claim for the recovery of the missing 203 cartons
7. claim denied
8. consignee filed a claim with the plaintiff under its Marine Cargo
Insurance Policy
9. consignee was paid by plaintiff the amount of P88,658.22
10. the payment of consignees claim by plaintiff had subrogated the
latter to file this instant claim for the recovery of the said amount
11. LC: against petitioner
ISSUE: Whether or not the respondent court committed a reversible
error in declaring the petitioner liable for the short delivery of 203
cartons from the containerized shipments
HELD: YES
RATIO:

The carrier, by signifying in the bill of lading that "it is a receipt x x x for the
number of packages shown above," had explicitly admitted that the
containerized shipments had actually the number of packages declared by
the shipper in the bill of lading. And this conclusion is bolstered by the
stipulation printed in the bill of lading, "unless expressly acknowledged and
agreed to." Therefore, the phrase "said to contain" also appearing in the bill
of lading must give way to this reality.
Hence, this express acknowledgment of the carrier makes the case at bar an
exception to the doctrine enunciated in United States Lines. The rule
enunciated by United States Lines applies to a situation where the carrier of
the containerized cargo simply admits the information furnished by the
shipper with regard to the goods it shipped as reflected in the bill of lading
("said to contain") but not where the carrier of the containerized cargo makes
an explicit admission as to the weight, measurement marks, numbers, quality
contents, and value, and more so, inscribed these admissions as stipulations
in the bill of lading itself, or made them an addendum thereto, to which the
carrier affixed its express acknowledgment as what happened in this case. In
its stead, the dictum that the bill of lading shall be prima facie evidence of the
receipt by the carrier of the goods as therein described governs.
[a] bill of lading 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 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.
The petitioner contradicts itself for contrary to these posturings, it included
allegations in its answer that all the containerized shipments arrived in Manila
with the seals intact, and that the petitioner received the said sealed
containers of the shipments, particularly container No. BROU4306561 which
sustained the loss of 203 cartons from the arrastre operator, also with the
seals intact. It can therefore be concluded that the petitioner received all the
shipments as itemized in the bill of lading. For the rule is well-established that
the facts alleged in a party's pleading are deemed admissions of that party
and binding upon it.
As the petitioner prima facie received all the shipments in the sealed
containers, it has the burden to rebut the conclusion that it received the same
without shortage. We have gone over the records and we find that the
petitioner had not overthrown this presumption by contrary evidence.
Therefore, the respondent court did not commit any reversible error in
agreeing with the trial court that the loss of the 203 cartons is attributable to
the petitioner.