G.R. No. 95529 ; August 22, 1991
MAGELLAN MANUFACTURING MARKETING CORPORATION, petitioner, vs. COURT OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and F.E. ZUELLIG, INC., respondents.

FACTS

Petitioner Magellan Manufacturing Marketing Corporation (MMMC) contracted to export anahaw fans to a Japanese buyer, with payment via a letter of credit requiring an “on-board” bill of lading and prohibiting transhipment. MMMC engaged respondent F.E. Zuellig, agent for carrier Orient Overseas Container Lines (OOCL), for shipment, specifically instructing that transhipment was not allowed. A bill of lading was issued, and upon its presentation, MMMC received payment. The buyer, however, refused payment, alleging the bill was not “on-board” and that transhipment occurred, leading to the cargo’s rejection and eventual return to Manila.
Upon MMMC’s request, the goods were reshipped to Manila. Respondents later demanded payment for associated charges. In a letter dated March 20, 1981, respondents gave MMMC the option to either pay the sum of P51,271.02 or abandon the cargo, enabling its sale at auction to cover costs. MMMC opted in writing to abandon the goods. Subsequently, however, respondents demanded a larger sum covering additional charges, prompting MMMC to file a complaint for damages.

ISSUE

The primary issues were whether respondents were liable for damages for the buyer’s refusal to accept the goods, and whether petitioner was liable for the freight and demurrage charges claimed by respondents.

RULING

The Supreme Court affirmed the dismissal of MMMC’s complaint but modified the appellate court’s award on the counterclaim. On the first issue, the Court found no basis to hold respondents liable. The bill of lading, which MMMC accepted, contained notations indicating the possibility of transhipment. Furthermore, the subsequent transfer of cargo between vessels owned by the same carrier did not constitute a prohibited “transhipment” in the commercial sense, which typically involves a change of carriers. Respondents also issued a clarifying certificate, but the buyer still refused. Thus, respondents did not breach their contractual obligations.
On the counterclaim, the Court absolved MMMC of liability for the claimed charges. The legal crux was the effect of MMMC’s exercise of the option to abandon the cargo. The Court ruled that when respondents extended the option to abandon the goods in satisfaction of the charges, and MMMC formally accepted this option, a binding agreement was perfected. This agreement extinguished MMMC’s monetary liability for the reshipment costs and demurrage. Respondents could not later unilaterally revoke this settled agreement and demand a different, higher amount. The doctrine of estoppel precluded them from reneging on the terms they themselves offered and which MMMC relied upon. Consequently, the award of P52,102.45 was set aside.