Petitioner: Telengtan Bros. and Sons., Inc.

Respondent: United States Lines, and the CA

GR 132284
Feb. 28, 2006
Justice Garcia

Nature of the Case

This is an appeal to the SC from the CA, which appealed the RTC decision
The CA and RTC both ruled in favor of US Lines (USL)
This case is about demurrage fees, and a lot of it is centered on factual circumstances.
The Courts relied on these facts to determine whether or not Telengtan was liable to US
Lines.
This case is assigned under Art. 1250, so Ill be focusing on the issues under that article.
Facts
Telengtan is a domestic corporation doing business under the name and Style La Suerte
Cigar and Cigarette Factory.
US Lines is a foreign corporation engaged in the business of overseas shipping.
Important to note in this case (for purposes of the liability issue) is the effectivity of Far
East Conference Tariff No. 12
o This rule makes consignees who fail to take delivery of their containerized cargo
within 10 days liable to pay demurrage charges
USL is suing Telengtan for collection of these charges, plus interest and damages.
o They allege that between 1979 and 1980, Telengtan loaded goods onto USLs
vessels, which arrived in Manila from US Ports
Thus, these goods are subject to the requirements of the Tariff mentioned
above
o Take note of the dates! 1979 and 1980, but this case was decided in 2006. This
will become important because of the discussion on inflation, and I think Atty.
Balane will ask it.
o USL alleges that Telengtan was unable to withdraw its goods from the containers,
making it liable in the amount of P94,000.
Telengtan answers that it never entered into a contract nor signed an agreement to be
bound by any rules of demurrage.
o They also say that there was no proper or legal demand, so they are justified in
refusing to pay.
In any case, the RTC ruled for USL. In the dispositive portion, they found Telengtan
liable for P 99,408.00, bearing interest, plus attorneys fees.
o The RTC further held that all of this would be recomputed as of the date of
payment in accordance with the provisions of Article 1250 of the Civil Code.

In deciding for USL, the RTC held that Telengtan had actually been paying demurrage to
USL, many times in the past. It was thus estopped from claiming that it did not know or
did not agree to any payment of demurrage to USL.
o This is the basic and essential reason why Telengtan was liable. Well now move
on to the discussion on Article 1250.
o There is a discussion on Bills of Lading and factual circumstances
regarding why Telengtan was liable. I really think this isnt important for our
purposes, but Ill past narin the discussion at the end of the digest to
soothe everyones mind.
ISSUE
The main issue relevant to our Oblicon discussion is whether or not the CA erred In
affirming the RTCs order for the recomputation of the judgment award in accordance
with Article 1250 of the Civil Code.
HELD + RATIO
On this issue, the SC found the RTC and CA to be in error when they ordered the
recomputation as of the date of payment.
In asking for the application of 1250, USL urged that judicial notice be taken of the
devaluations of the peso against the dollar since the proceedings begain in 1981.
According to USL, the computation of the amount should factor in the devaluation so
theyre asking for more money, since the peso is a lot weaker than it was 20 years
before (remember, theyre a foreign corporation)
Article 1250 provides that -- In case an extraordinary inflation or deflation of the currency
stipulated should supervene, the value of the currency at the time of the establishment of
the obligation shall be the basis of payment, unless there is an agreement to the
contrary.
Extraordinary inflation or deflation exists when there is an unusual increase or decrease
in the purchasing power of the Philippine Peso which is beyond the common
fluctuation in value of the said currency, and such increase or decrease could not
have been reasonably foreseen or was manifestly beyond the contemplation of the
parties at the time of the establishment of the obligation. Extraordinary inflation must be
PROVEN, and is never assumed.
In this case, the SC ruled that there had been no extraordinary inflation within the
meaning of Article 1250.
o Thus, there is no plausible reason for ordering the payment of an obligation in an
amout different from what has been agreed upon because of the purported
supervention of extraordinary inflation.
o In other words, USL is entitled to the same peso amount it was in 1981, even if
that amount means a lot less by 2006.
USL is unable to prove the occurrence of extraordinary inflation since 1981.
o The record has no evidence to prove inflation, much less extraordinary inflation.
o Even if the price of goods and services may have increased, this alone may not
be considered as extraordinary inflation.
o The erosion of value of the Php in the past 3 to 4 decades is characteristic of
most currencies.

While the Court may take judicial notice of the decline of the purchasing power of
the Philippine Currency, such downward trend cannot be considered as the
extraordinary inflation contemplated by Art. 1250.
Further, absent an official pronouncement or declaration by competent authorities
of the existence of extraordinary inflation during a given period, the effects of
such will not be applied
(labo, so kailangan muna ng declaration? So why did the court look for
evidence on the record on the part of USL? Kung walang declaration,
hindi ba dapat madali nalang un? Why ask for proof pa and say all that
stuff about inflation being proven? Weird)

Lest it be overlooked, Article 1250 of the Code, as couched, clearly provides that the value of
the peso at the time of the establishment of the obligation shall control and be the basis
of payment of the contractual obligation, unless there is "agreement to the contrary."
o

It is only when there is a contrary agreement that extraordinary inflation will

make the value of the currency at the time of payment, not at the time of the
establishment of obligation, the basis for payment.

Take a look at the provision again even if there is extraordinary inflation, General
Rule is still value at establishment. It is only when there is inflation AND AN
AGREEMENT where it becomes value at payment.

In other words, an agreement is needed for the effects of an extraordinary inflation to

be taken into account to alter the value of the currency at the time of the
establishment of the obligation which, as a rule, is always the determinative element.
So aside from the factual circumstances of extraordinary inflation, you also need an
agreement saying that in such cases, the value of the currency would be at paytment, and
not at establishment. There was no such agreement in this case.

Discussion on Liability of Telengtan

It is undisputed that the goods subject of petitioners counterclaim and covered by seven (7) B/Ls with Shippers Reference Nos. S16844, S-16846, S-16848, S-17748, S-17750, S-17749 and S-17751 7 were loaded for shipment to Manila on respondents vessels
in container vans on a "House/House Containers-Shippers Load, Stowage and Count" basis. This shipping arrangement means that
the shipping companys container vans are to be brought to the shipper for loading of its goods; that from the shippers warehouse,
the goods in container vans are brought to the shipping company for shipment; that the shipping company, upon arrival of its ship at
the port of destination, is to deliver the container vans to the consignees compound or warehouse; and that the shipper (consignee)
is supposed to load, stow and count the goods from the container van. 8 Likewise undisputed is the fact that the container vans
containing the goods covered by three (3) of the aforesaid B/Ls, particularly those with Shippers Reference Nos. S-17748, S-17750
and S-17751,9 were delivered to a warehouse, stripped of their contents and the contents deposited thereat.10
On the argument that the respondent, upon the foregoing undisputed facts, violated its contractual obligation to deliver when,
instead of delivering the goods to the petitioner as consignee thereof, it deposited the same in bonded warehouse/s, petitioner
would now score the CA for finding it at fault for non-withdrawal of its cargo from the container vans within the 10-day free
demurrage period. Pressing the point, petitioner argues that, since the CA drew an erroneous conclusion from an undisputed set of
facts, petitioner now asserts that the matter of who is at fault - its first assigned error - could be treated as a legal issue and not a
question of fact.

After careful consideration, the Court sustain the CAs stance faulting the petitioner for not taking delivery of its cargo from the
container vans within the 10-day free period, an inaction which led respondent to deposit the same in warehouse/s.
It may be that, when the relevant facts are undisputed, the question of whether or not the conclusion deduced therefrom by the CA
is correct is a question of law properly cognizable by this Court. 11 However, it has also been held that all doubts as to the
correctness of such conclusions will be resolved in favor of the disposing court.12 So it must be in this case.
At any rate, the Court finds that petitioners first contention raises a question of fact rather than of law. And settled is the
rule that factual findings of the CA, particularly those confirmatory of that of the trial court, as here, are binding on this
Court,13 save for the most compelling of reasons, like when they are reached arbitrarily.14
As it were, however, the conclusion of the CA on who contextually is the erring party was not exactly drawn from a
vacuum, supported as such conclusion is by the records of the case. What the CA wrote with some measure of logic
commends itself for concurrence:
However, ... We find that [petitioner] was the one at fault in not withdrawing its cargo from the containers wherein the goods were
shipped within the ten (10)-day free period. Had it done so, then there would not have been any need of depositing the cargo in a
warehouse.
It is incumbent upon the carrier to immediately advise the consignee of the arrival of the goods for if it does not, it continues to be
liable for the same until the consignee has had reasonable opportunity to remove them.
Sound business practice dictates that the consignee, upon notification of the arrival of the goods, should immediately get the cargo
from the carrier especially since it has need of it. xxx.
Appellant tries to shift the blame on the [respondent] by stating that it was not informed beforehand of the latters intention to deliver
the goods to a warehouse. It likewise alleges that it does not know where to contact [respondent] for it argues that the person
manning the latters office would only hold office for a few hours, if not always out. But had it taken the necessary steps of inquiring
for the address of [respondent] from the proper government offices, then it would have succeeded in finding the latters address.
Judging from the [petitioners] way of conducting business in the past, We come to the conclusion that it is used to paying
demurrage charges. Exhibits "H" and "I" are certainly proofs of appellants practice of not getting its cargo from the carrier
immediately upon notification of the goods arrival. 15 (Words in bracket added.)
It cannot be over-emphasized that the container vans were stripped of their cargo with the prior authorization of the Bureau of
Customs. The trial court said as much, thus:
It is not disputed that [respondent] company did not [sic] in fact remove these goods belonging to [petitioner] from its vans and
deposited them in warehouses. However, this was done by authority of the Bureau of Customs and for that purpose, [respondent]
addressed a letter-request to the Collector of Customs, for permission to remove the goods of [petitioner] from its vans (Exhibit "L").
The corresponding authority was granted by the Bureau of Customs to do so as evidenced by a van permit (Exhibit "M"). In other
words, while [respondent] admits that it removed the goods of [petitioner] from its vans and deposited them in various warehouses,
there is no question that this was done by authority of the Bureau of Customs which is the proper agency of the government
charged with the supervision and regulation of maritime commerce.
Verily, the authority secured from the Bureau of Customs is indicative of the bona fides of respondents intention. And as held below,
the authority thus acquired relieved respondent of its obligations under the B/Ls when it caused the containers to be stripped and
the goods stored in bonded warehouses.
Not lost on this Court is the fact that the B/Ls under which petitioner anchors its counterclaim allow the goods carried to be delivered
to bonded warehouses for the shippers and/or consignees account if it does not take possession or delivery thereof as soon as
they are at its disposal for removal. Section 17 of the Regular Long Form Inward B/L of the respondent 16 which is incorporated by
reference to the Short Form of B/L17 provides:
17. The carrier shall not be required to give any notification whatsoever of arrival, discharge or any disposition of or action taken with
respect to the goods, even though the goods are consigned to order with provision for notice to a named person.
The carrier or master may appoint a stevedore or any other persons to unload and take delivery of the goods and such delivery from
ship's tackle shall be considered complete and all responsibility of the carrier shall then terminate.

It is agreed that when possession of the goods is received or taken by the customs or other authorities or by any operator of any
lighter, craft, or other facilities whether selected by the carrier or master, shipper of consignee, whether public or private, such
authority or person shall be considered as having received possession and delivery of the goods solely as agent of and on behalf of
the shipper and consignee, . Also if the consignee does not take possession or delivery of the goods as soon as the
goods are at the disposal of the consignee for removal, the goods shall be at their own risk and expense, delivery shall be
considered complete and the carrier may, subject to carrier's liens, send the goods to store, warehouse, put them on
lighters or other craft, put them in possession of authorities, dump, permit to lie where landed or otherwise dispose of
them, always at the risk and expense of the goods, and the shipper and consignee shall pay and indemnify the carrier for any
loss, damage, fine, charge or expense whatsoever suffered or incurred in so dealing with or disposing of the goods, or by reason of
the consignee's failure or delay in taking possession and delivery as provided herein. (Emphasis Ours)