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.

FACTS

Private respondent Sea-Land Service, Inc., a shipping company, received a sealed container with seventy-six bales of “unsorted waste paper” in Hong Kong for shipment to petitioner Keng Hua Paper Products Co. Inc. in Manila. A bill of lading was issued on June 29, 1982. The shipment arrived in Manila on July 9, 1982. Notices of arrival were sent to petitioner, but it failed to discharge the shipment from the container during the allowed “free time” grace period. The shipment remained in the container for 481 days after the free time expired on July 29, 1982, accruing demurrage charges amounting to P67,340.00. Despite demands, petitioner refused to pay. Petitioner defended its refusal by alleging it purchased only 50 tons of waste paper from the shipper, with only a 10-metric ton balance remaining under its Letter of Credit, but the shipment covered by the bill of lading was for 20 metric tons, constituting an overshipment. Petitioner argued accepting it would violate Central Bank and customs laws, and that the cause of action should be against the shipper, not the consignee. The Regional Trial Court ruled in favor of Sea-Land, ordering petitioner to pay demurrage charges with interest and attorney’s fees. The Court of Appeals affirmed the decision in toto.

ISSUE

1. Whether petitioner was bound by the bill of lading.
2. Whether the award of P67,340.00 as demurrage charges was proper.
3. Whether petitioner was justified in refusing to accept the alleged overshipment.
4. Whether the award of legal interest from the date of extrajudicial demand was proper.

RULING

1. Yes, petitioner was bound by the bill of lading. A bill of lading is both a receipt for goods and a contract between shipper, carrier, and consignee. Acceptance of the bill, with knowledge of its contents, gives rise to a perfected and binding contract. Petitioner received the bill of lading upon the shipment’s arrival in July 1982 but only objected six months later in a January 24, 1983 letter. Its prolonged inaction constituted implied acceptance of the bill’s terms, including Section 17, which made the shipper and consignee liable for demurrage charges.
2. Yes, the award of demurrage charges was proper. The demurrage accrued due to petitioner’s failure to discharge the container after the free time period. Petitioner’s liability arose from its acceptance of the bill of lading. The defense of overshipment did not legally justify its refusal to take delivery, as the remedy for any discrepancy lay against the shipper, not the carrier.
3. No, petitioner was not justified in refusing the shipment based on the alleged overshipment. The defense of physical or legal impossibility of performance (Article 1266 of the Civil Code) was not applicable. The alleged overshipment did not make it physically or legally impossible for petitioner to accept the goods; it merely made the performance more burdensome. Petitioner’s recourse was against the shipper for any breach of their sales contract.
4. The award of legal interest was modified. The Supreme Court ruled that interest on unliquidated claims, such as demurrage charges, shall be computed from the date of the trial court’s judgment. Therefore, legal interest on the demurrage charges should be computed from September 28, 1990, the date of the RTC decision, not from the date of extrajudicial demand. The Court affirmed the award of attorney’s fees.
The petition was partly meritorious. The Supreme Court affirmed petitioner’s liability for demurrage charges and attorney’s fees but modified the computation of legal interest to run from the date of the RTC judgment.