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G.R. No.

91636 April 23, 1992


PETER JOHN D. CALDERON, petitioner,
vs.
BARTOLOME CARALE, in his capacity as Chairman of the National Labor Relations
Commission, EDNA BONTO PEREZ, LOURDES C. JAVIER, ERNESTO G. LADRIDO III, MUSIB
M. BUAT, DOMINGO H. ZAPANTA, VICENTE S.E. VELOSO III, IRENEO B. BERNARDO,
IRENEA E. CENIZA, LEON G. GONZAGA, JR., ROMEO B. PUTONG, ROGELIO I. RAYALA,
RUSTICO L. DIOKNO, BERNABE S. BATUHAN and OSCAR N. ABELLA, in their capacity as
Commissioners of the National Labor Relations Commission, and GUILLERMO CARAGUE, in
his capacity as Secretary of Budget and Management, respondents.

PADILLA, J .:
Controversy is focused anew on Sec. 16, Art. VII of the 1987 Constitution which provides:
Sec. 16. The President shall nominate and, with the consent of the Commission on
Appointments, appoint the heads of the executive departments, ambassadors, other
public ministers and consuls, or officers of the armed forces from the rank of colonel
or naval captain, and other officers whose appointments are vested in him in this
Constitution. He shall also appoint all other officers of the Government whose
appointments are not otherwise provided for by law, and those whom he may be
authorized by law to appoint. The Congress may, by law, vest the appointment of
other officers lower in rank in the President alone, in the courts, or in the heads of
departments, agencies, commissions, or boards.
The President shall have the power to make appointments during the recess of the
Congress, whether voluntary or compulsory, but such appointments shall be effective
only until disapproval by the Commission on Appointments or until the next
adjournment of the Congress.
1

The power of the Commission on Appointments (CA for brevity) to confirm appointments, contained
in the aforequoted paragraph 1 of Sec. 16, Art. VII, was first construed in Sarmiento III vs. Mison
2
as
follows:
. . . it is evident that the position of Commissioner of the Bureau of Customs (a
bureau head) is not one of those within the first group of appointments where the
consent of the Commission on Appointments is required. As a matter of fact, as
already pointed out, while the 1935 Constitution includes "heads of bureaus" among
those officers whose appointments need the consent of the Commission on
Appointments, the 1987 Constitution, on the other hand, deliberately excluded the
position of "heads of bureaus" from appointments that need the consent
(confirmation) of the Commission on Appointments.
. . . Consequently, we rule that the President of the Philippines acted within her
constitutional authority and power in appointing respondent Salvador Mison,
Commissioner of the Bureau of Customs, without submitting his nomination to the
Commission on Appointments for confirmation. . . .
. . . In the 1987 Constitution, however, as already pointed out, the clear and
expressed intent of its framers was to exclude presidential appointments from
confirmation by the Commission on Appointments, except appointments to offices
expressly mentioned in the first sentence of Sec. 16, Art. VII. Consequently, there
was no reason to use in the third sentence of Sec. 16, Article VII the word "alone"
after the word "President" in providing that Congress may by law vest the
appointment of lower-ranked officers in the President alone, or in the courts, or in the
heads of departments, because the power to appoint officers whom he (the
president) may be authorized by law to appoint is already vested in the President,
without need of confirmation by the Commission on Appointments, in the second
sentence of the same Sec. 16, Article VII." (emphasis supplied)
Next came Mary Concepcion Bautista v. Salonga,
3
this time involving the appointment of the Chairman
of the Commission on Human Rights. Adhering to the doctrine in Mison, the Court explained:
. . . Since the position of Chairman of the Commission on Human Rights is not
among the positions mentioned in the first sentence of Sec. 16, Art. VII of the 1987
Constitution, appointments to which are to be made with the confirmation of the
Commission on Appointments, it follows that the appointment by the President of the
Chairman of the CHR is to be made without the review or participation of the
Commission on Appointments. To be more precise, the appointment of the Chairman
and Members of the Commission on Human Rights is not specifically provided for in
the Constitution itself, unlike the Chairmen and Members of the Civil Service
Commission, the Commission on Elections and the Commission on Audit, whose
appointments are expressly vested by the Constitution in the president with the
consent of the Commission on Appointments. The president appoints the Chairman
and Members of The Commission on Human Rights pursuant to the second
sentence in Section 16, Art. VII, that is, without the confirmation of the Commission
on Appointments because they are among the officers of government "whom he (the
President) may be authorized by law to appoint." And Section 2(c), Executive Order
No. 163, 5 May 1987, authorizes the President to appoint the Chairman and
Members of the Commission on Human Rights.
Consistent with its rulings in Mison and Bautista, in Teresita Quintos Deles, et al. v. The Commission
on Constitutional Commissions, et al.,
4
the power of confirmation of the Commission on Appointments
over appointments by the President of sectoral representatives in Congress was upheld because:
. . . Since the seats reserved for sectoral representatives in paragraph 2, Section 5,
Art. VI may be filled by appointment by the President by express provision of Section
7, Art. XVIII of the Constitution, it is indubitable that sectoral representatives to the
House of Representatives are among the "other officers whose appointments are
vested in the President in this Constitution," referred to in the first sentence of
Section 16, Art. VII whose appointments are subject to confirmation by the
Commission on Appointments.
From the three (3) cases above-mentioned, these doctrines are deducible:
1. Confirmation by the Commission on Appointments is required only for presidential appointees
mentioned in the first sentence of Section 16, Article VII, including, those officers whose
appointments are expressly vested by the Constitution itself in the president (like sectoral
representatives to Congress and members of the constitutional commissions of Audit, Civil Service
and Election).
2. Confirmation is not required when the President appoints other government officers whose
appointments are not otherwise provided for by law or those officers whom he may be authorized by
law to appoint (like the Chairman and Members of the Commission on Human Rights). Also, as
observed in Mison, when Congress creates inferior offices but omits to provide for appointment
thereto, or provides in an unconstitutional manner for such appointments, the officers are considered
as among those whose appointments are not otherwise provided for by law.
Sometime in March 1989, RA 6715 (Herrera-Veloso Law), amending the Labor Code (PD 442) was
approved. It provides in Section 13 thereof as follows:
xxx xxx xxx
The Chairman, the Division Presiding Commissioners and other Commissioners shall
all be appointed by the President, subject to confirmation by the Commission on
Appointments. Appointments to any vacancy shall come from the nominees of the
sector which nominated the predecessor. The Executive Labor Arbiters and Labor
Arbiters shall also be appointed by the President, upon recommendation of the
Secretary of Labor and Employment, and shall be subject to the Civil Service Law,
rules and regulations.
5

Pursuant to said law (RA 6715), President Aquino appointed the Chairman and Commissioners of
the NLRC representing the public, workers and employers sectors. The appointments stated that the
appointees may qualify and enter upon the performance of the duties of the office. After said
appointments, then Labor Secretary Franklin Drilon issued Administrative Order No. 161, series of
1989, designating the places of assignment of the newly appointed commissioners.
This petition for prohibition questions the constitutionality and legality of the permanent appointments
extended by the President of the Philippines to the respondents Chairman and Members of the
National Labor Relations Commission (NLRC), without submitting the same to the Commission on
Appointments for confirmation pursuant to Art. 215 of the Labor Code as amended by said RA 6715.
Petitioner insists on a mandatory compliance with RA 6715 which has in its favor the presumption of
validity. RA 6715 is not, according to petitioner, an encroachment on the appointing power of the
executive contained in Section 16, Art. VII, of the Constitution, as Congress may, by law, require
confirmation by the Commission on Appointments of other officers appointed by the President
additional to those mentioned in the first sentence of Section 16 of Article VII of the Constitution.
Petitioner claims that the Mison and Bautista rulings are not decisive of the issue in this case for in
the case at bar, the President issued permanent appointments to the respondents without submitting
them to the CA for confirmation despite passage of a law (RA 6715) which requires the confirmation
by the Commission on Appointments of such appointments.
The Solicitor General, on the other hand, contends that RA 6715 which amended the Labor
Code transgressesSection 16, Article VII by expanding the confirmation powers of the Commission
on Appointments without constitutional basis. Mison and Bautista laid the issue to rest, says the
Solicitor General, with the following exposition:
As interpreted by this Honorable Court in the Mison case, confirmation by the
Commission on Appointments is required exclusively for the heads of executive
departments, ambassadors, public ministers, consuls, officers of the armed forces
from the rank of colonel or naval captain, and other officers whose appointments are
vested in the President by the Constitution, such as the members of the various
Constitutional Commissions. With respect to the other officers whose appointments
are not otherwise provided for by the law and to those whom the President may be
authorized by law to appoint, no confirmation by the Commission on Appointments is
required.
Had it been the intention to allow Congress to expand the list of officers whose
appointments must be confirmed by the Commission on Appointments, the
Constitution would have said so by adding the phrase "and other officers required by
law" at the end of the first sentence, or the phrase, "with the consent of the
Commission on Appointments" at the end of the second sentence. Evidently, our
Constitution has significantly omitted to provide for such additions.
The original text of Section 16 of Article VII of the present Constitution as embodied
in Resolution No. 517 of the Constitutional Commission reads as follows:
"The President shall nominate and, with the consent of the
Commission on Appointments, shall appoint the heads of the
executive departments and bureaus, ambassadors, other public
ministers and consuls, or officers of the armed forces from the rank of
captain or commander, and all other officers of the Government
whose appointments are not herein otherwise provided for by law,
and those whom he may be authorized by law to appoint. The
Congress may by law vest the appointment of inferior officers in the
President alone, in the courts or in the heads of the department."
Three points should be noted regarding sub-section 3 of Section 10 of Article VII of
the 1935 Constitution and in the original text of Section 16 of Article VII of the present
Constitution as proposed in Resolution No. 517.
First, in both of them, the appointments of heads of bureaus were required to be
confirmed by the Commission on Appointments.
Second, in both of them, the appointments of other officers, "whose appointments
are not otherwise provided for by law to appoint" are expressly made subject to
confirmation by the Commission on Appointments. However, in the final version of
Resolution No. 517, as embodied in Section 16 of Article VII of the present
Constitution, the appointment of the above mentioned officers (heads of bureaus;
other officers whose appointments are not provided for by law; and those whom he
may be authorized by law to appoint) are excluded from the list of those officers
whose appointments are to be confirmed by the Commission on Appointments. This
amendment, reflected in Section 16 of Article VII of the Constitution, clearly shows
the intent of the framers to exclude such appointments from the requirement of
confirmation by the Commission on Appointments.
Third, under the 1935 Constitution the word "nominate" qualifies the entire
Subsection 3 of Section 10 of Article VII thereof.
Respondent reiterates that if confirmation is required, the three (3) stage process of
nomination, confirmation and appointment operates. This is only true of the first
group enumerated in Section 16, but the word nominate does not any more appear in
the 2nd and 3rd sentences. Therefore, the president's appointment pursuant to the
2nd and 3rd sentences needs no confirmation.
6

The only issue to be resolved by the Court in the present case is whether or not Congress may, by
law, require confirmation by the Commission on Appointments of appointments extended by the
president to government officers additional to those expressly mentioned in the first sentence of Sec.
16, Art. VII of the Constitution whose appointments require confirmation by the Commission on
Appointments.
To resolve the issue, we go back to Mison where the Court stated:
. . . there are four (4) groups of officers whom the President shall appoint. These four
(4) groups, to which we will hereafter refer from time to time, are:
First, the heads of the executive departments, ambassadors, other
public ministers and consuls, officers of the armed forces from the
rank of colonel or naval captain, and other officers whose
appointments are vested in him in this Constitution;
Second, all other officers of the Government whose appointments are
not otherwise provided for by law;
Third, those whom the president may be authorized by law to appoint;
Fourth, officers lower in rank whose appointments the Congress may
by law vest in the President alone.
7

Mison also opined:
In the course of the debates on the text of Section 16, there were two (2) major
changes proposed and approved by the Commission. These were (1) the exclusion
of the appointments of heads of bureaus from the requirement of confirmation by the
Commission on Appointments; and (2) the exclusion of appointments made under
the second sentence of the section from the same requirement. . . .
The second sentence of Sec. 16, Art. VII refers to all other officers of the government whose
appointments are not otherwise provided for by law and those whom the President may be
authorized by law to appoint.
Indubitably, the NLRC Chairman and Commissioners fall within the second sentence of Section 16,
Article VII of the Constitution, more specifically under the "third groups" of appointees referred to
in Mison, i.e. those whom the President may be authorized by law to appoint. Undeniably, the
Chairman and Members of the NLRC are not among the officers mentioned in the first sentence of
Section 16, Article VII whose appointments requires confirmation by the Commission on
Appointments. To the extent that RA 6715 requires confirmation by the Commission on
Appointments of the appointments of respondents Chairman and Members of the National Labor
Relations Commission, it is unconstitutional because:
1) it amends by legislation, the first sentence of Sec. 16, Art. VII of the Constitution by adding thereto
appointments requiring confirmation by the Commission on Appointments; and
2) it amends by legislation the second sentence of Sec. 16, Art. VII of the Constitution, by imposing
the confirmation of the Commission on Appointments on appointments which are otherwise
entrusted only with the President.
Deciding on what laws to pass is a legislative prerogative. Determining their constitutionality is a
judicial function. The Court respects the laudable intention of the legislature. Regretfully, however,
the constitutional infirmity of Sec. 13 of RA 6715 amending Art. 215 of the Labor Code, insofar as it
requires confirmation of the Commission on Appointments over appointments of the Chairman and
Member of the National Labor Relations Commission (NLRC) is, as we see it, beyond redemption if
we are to render fealty to the mandate of the Constitution in Sec. 16, Art. VII thereof.
Supreme Court decisions applying or interpreting the Constitution shall form part of the legal system
of the Philippines.
8
No doctrine or principle of law laid down by the Court in a decision rendered en
banc or in division may be modified or reversed except by the Court sitting en banc.
9

. . . The interpretation upon a law by this Court constitutes, in a way, a part of the law
as of the date that law was originally passed, since this Court's construction merely
establishes the contemporaneous legislative intent that the law thus construed
intends to effectuate. The settled rule supported by numerous authorities is a
restatement of the legal maxim "legis interpretado legis vim obtinent" the
interpretation placed upon the written law by a competent court has the force of law.
10

The rulings in Mison, Bautista and Quintos-Deles have interpreted Art. VII, Sec. 16 consistently in
one manner. Can legislation expand a constitutional provision after the Supreme Court has
interpreted it?
In Endencia and Jugo vs. David,
11
the Court held:
By legislative fiat as enunciated in Section 13, Republic Act No. 590, Congress says
that taxing the salary of a judicial officer is not a decrease of compensation. This is a
clear example of interpretation or ascertainment of the meaning of the phrase "which
shall not be diminished during their continuance in office," found in Section 9, Article
VIII of the Constitution, referring to the salaries of judicial officers.
xxx xxx xxx
The rule is recognized elsewhere that the legislature cannot pass any
declaratory act, or act declaratory of what the law was before its
passage, so as to give it any binding weight with the courts. A
legislative definition of a word as used in a statute is not conclusive of
its meaning as used elsewhere; otherwise, the legislature would be
usurping a judicial function in defining a term. (11 Am. Jur., 914,
emphasis supplied).
The legislature cannot, upon passing law which violates a
constitutional provision, validate it so as to prevent an attack thereon
in the courts, by a declaration that it shall be so construed as not to
violate the constitutional inhibition. (11 Am., Jur., 919, emphasis
supplied).
We have already said that the Legislature under our form of government is assigned
the task and the power to make and enact laws, but not to interpret them. This is
more true with regard to the interpretation of the basic law, the Constitution, which is
not within the sphere of the Legislative department. If the Legislature may declare
what a law means, or what a specific portion of the Constitution means, especially
after the courts have in actual case ascertained its meaning by interpretation and
applied it in a decision, this would surely cause confusion and instability in judicial
processes and court decisions. Under such a system, a final court determination of a
case based on a judicial interpretation of the law or of the Constitution may be
undermined or even annulled by a subsequent and different interpretation of the law
or of the Constitution by the Legislative department that would be neither wise nor
desirable, being clearly violative of the fundamental principles of our constitutional
system of government, particularly those governing the separation of
powers.
14
(Emphasis supplied)
Congress, of course, must interpret the Constitution, must estimate the scope of its constitutional
powers when it sets out to enact legislation and it must take into account the relevant constitutional
prohibitions.
15

. . . The Constitution did not change with public opinion.
It is not only the same words, but the same in meaning . . . and as long as it it speaks
not only in the same words, but with the same meaning and intent with which it spoke
when it came from the hands of its framers, and was voted and adopted by the
people . . .
16

The function of the Court in passing upon an act of Congress is to "lay the article of the Constitution
which is invoked beside the statute which is challenged and to decide whether the latter squares
with the former" and to "announce its considered judgment upon the question."
17

It can not be overlooked that Sec. 16, Art. VII of the 1987 Constitution was deliberately, not
unconsciously, intended by the framers of the 1987 Constitution to be a departure from the system
embodied in the 1935 Constitution where the Commission on Appointments exercised the power of
confirmation over almost all presidential appointments, leading to many cases of abuse of such
power of confirmation. Subsection 3, Section 10, Art. VII of the 1935 Constitution provided:
3. The President shall nominate and with the consent of the Commission on
Appointments, shall appoint the heads of the executive departments and bureaus,
officers of the Army from the rank of colonel, of the Navy and Air Forces from the
rank of captain or commander, and all other officers of the Government whose
appointments are not herein otherwise provided for, and those whom he may be
authorized by law to appoint; . . .
The deliberate limitation on the power of confirmation of the Commission on Appointments over
presidential appointments, embodied in Sec. 16, Art. VII of the 1987 Constitution, has undoubtedly
evoked the displeasure and disapproval of members of Congress. The solution to the apparent
problem, if indeed a problem, is not judicial or legislative but constitutional. A future constitutional
convention or Congress sitting as a constituent (constitutional) assembly may then consider either a
return to the 1935 Constitutional provisions or the adoption of a hybrid system between the 1935 and
1987 constitutional provisions. Until then, it is the duty of the Court to apply the 1987 Constitution in
accordance with what it says and not in accordance with how the legislature or the executive would
want it interpreted.
WHEREFORE, the petition is DISMISSED. Art. 215 of the Labor Code as amended by RA 6715
insofar as it requires the confirmation of the Commission on Appointments of appointments of the
Chairman and Members of the National Labor Relations Commission (NLRC) is hereby declared
unconstitutional and of no legal force and effect.
SO ORDERED.
Narvasa, C.J., Melencio-Herrera, Paras, Feliciano, Bidin, Grio-Aquino, Medialdea, Regalado,
Davide, Jr., Romero and Nocon, JJ., concur.
Bellosillo, J., took no part.



Separate Opinions

GUTIERREZ, J R., concurring:
When the issues in this petition were first raised in Sarmiento III v. Mison (156 SCRA 549 [1987]), I
joined Justice Cruz in a dissent because I felt that the interpretation of Section 16, Article VII by the
majority of the Court results in absurd or irrational consequences. The framers could not have
intended what the majority ruled to be the meaning of the provision. When the question was again
raised in Bautista v. Salonga (172 SCRA 160 [1989]), I reiterated my dissent and urged a re-
examination of the doctrine stated in Sarmiento v. Mison.
The issue is again before us. Even as I continue to believe that the majority was wrong in
the Sarmiento andBautista cases, I think it is time to finally accept the majority opinion as the Court's
ruling on the matter and one which everybody should respect. There will be no end to litigation if,
everytime a high government official is appointed without confirmation by the Commission on
Appointments, another petition is filed with this Court.
I, therefore, VOTE with the majority to DISMISS the PETITION.
CRUZ, J ., dissenting:
I dissent on the basis of my dissent in Sarmiento v. Mison, which I believe should be re-examined
instead of being automatically re-affirmed simply because of its original adoption. I do not believe we
should persist in error on the ground merely of adherence to judicial precedent, however unsound.
Separate Opinion
GUTIERREZ, JR., J ., concurring:
When the issues in this petition were first raised in Sarmiento III v. Mison (156 SCRA 549 [1987]), I
joined Justice Cruz in a dissent because I felt that the interpretation of Section 16, Article VII by the
majority of the Court results in absurd or irrational consequences. The framers could not have
intended what the majority ruled to be the meaning of the provision. When the question was again
raised in Bautista v. Salonga (172 SCRA 160 [1989]), I reiterated my dissent and urged a re-
examination of the doctrine stated in Sarmiento v. Mison.
The issue is again before us. Even as I continue to believe that the majority was wrong in
the Sarmiento andBautista cases, I think it is time to finally accept the majority opinion as the Court's
ruling on the matter and one which everybody should respect. There will be no end to litigation if,
everytime a high government official is appointed without confirmation by the Commission on
Appointments, another petition is filed with this Court.
I, therefore, VOTE with the majority to DISMISS the PETITION.
CRUZ, J ., dissenting:
I dissent on the basis of my dissent in Sarmiento v. Mison, which I believe should be re-examined
instead of being automatically re-affirmed simply because of its original adoption. I do not believe we
should persist in error on the ground merely of adherence to judicial precedent, however unsound.
MAGELLAN MANUFACTURING MARKETING CORPORATION, * petitioner,
vs.
COURT OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and F.E. ZUELLIG,
INC. respondents.

REGALADO, J .:p
Petitioner, via this petition for review on certiorari, seeks the reversal of the judgment of respondent
Court of Appeals in CA-G.R. CV No. 18781,
1
affirming in part the decision of the trial court,
2
the
dispositive portion of which reads:
Premises considered, the decision appealed from is affirmed insofar as it dismisses
the complaint. On the counter-claim, however, appellant is ordered to pay appellees
the amount of P52,102.45 with legal interest from date of extra-judicial demand. The
award of attorney's fees is deleted.
3

The facts as found by respondent appellate court are as follows:
On 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 $23,220.00. As payment thereof, a
letter of credit was issued to plaintiff MMMC by the buyer. 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 on-board bill
of lading and that transhipment is not allowed under the letter of credit (Exh. B-1). On
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. The bank then credited
the amount of US$23,220.00 covered by the letter of credit to appellant's account.
However, when appellant's 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. As a result of the
refusal of the buyer to accept, upon appellant's request, the anahaw fans were
shipped back to Manila by appellees, for which the latter demanded from appellant
payment of P246,043.43. Appellant abandoned the whole cargo and asked appellees
for damages.
In their Partial Stipulation of Facts, the parties admitted that a shipment of 1,047
cartons of 136,000 pieces of Anahaw Fans contained in 1 x 40 and 1 x 20 containers
was loaded at Manila on board the MV 'Pacific Despatcher' freight prepaid, and duly
covered by Bill of Lading No. MNYK201T dated June 27, 1980 issued by OOCL; that
the shipment was delivered at the port of discharge on July 19, 1980, but was
subsequently returned to Manila after the consignee refused to accept/pay the
same.
4

Elaborating on the above findings of fact of respondent court and without being disputed by herein
private respondents, petitioner additionally avers that:
When petitioner informed private respondents about what happened, the latter
issued a certificate stating that its bill of lading it issued is an on board bill of lading
and that there was no actual transhipment of the fans. According to private
respondents when the goods are transferred from one vessel to another which both
belong to the same owner which was what happened to the Anahaw fans, then there
is (no) transhipment. Petitioner sent this certification to Choju Co., Ltd., but the said
company still refused to accept the goods which arrived in Japan on July 19, 1980.
Private respondents billed petitioner in the amount of P16,342.21 for such shipment
and P34,928.71 for demurrage in Japan from July 26 up to August 31, 1980 or a total
of P51,271.02. In a letter dated March 20, 1981, private respondents gave petitioner
the option of paying the sum of P51,271.02 or to abandon the Anahaw fans to enable
private respondents to sell them at public auction to cover the cost of shipment and
demurrages. Petitioner opted to abandon the goods. However, in a letter dated June
22, 1981 private respondents demanded for payment of P298,150.93 from petitioner
which represents the freight charges from Japan to Manila, demurrage incurred in
Japan and Manila from October 22, 1980 up to May 20, 1981; and charges for
stripping the container van of the Anahaw fans on May 20, 1981.
On July 20, 1981 petitioner filed the complaint in this case praying that private
respondents be ordered to pay whatever petitioner was not able to earn from Choju
Co., Ltd., amounting to P174,150.00 and other damages like attorney's fees since
private respondents are to blame for the refusal of Choju Co., Ltd. to accept the
Anahaw fans. In answer thereto the private respondents alleged that the bill of lading
clearly shows that there will be a transhipment and that petitioner was well aware
that MV (Pacific) Despatcher was only up to Hongkong where the subject cargo will
be transferred to another vessel for Japan. Private respondents also filed a
counterclaim praying that petitioner be ordered to pay freight charges from Japan to
Manila and the demurrages in Japan and Manila amounting to P298,150.93.
The lower court decided the case in favor of private respondents. It dismissed the
complaint on the ground that petitioner had given its consent to the contents of the
bill of lading where it is clearly indicated that there will be transhipment. The lower
court also said that 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 the cargo from Japan to Manila.
On appeal to the respondent court, the finding of the lower (court) that petitioner
agreed to a transhipment of the goods was affirmed but the finding that petitioner is
liable for P298,150.93 was modified. It was reduced to P52,102.45 which represents
the freight charges and demurrages incurred in Japan but not for the demurrages
incurred in Marta. According to the respondent (court) the petitioner can not be held
liable for the demurrages incurred in Manila because Private respondents did not
timely inform petitioner that the goods were already in Manila in addition to the fact
that private respondent had given petitioner the option of abandoning the goods in
exchange for the demurrages.
5

Petitioner, being dissatisfied with the decision of respondent court and the motion for reconsideration
thereof having been denied, invokes the Court's review powers for the resolution of the issues as to
whether or not respondent court erred (1) in affirming the decision of the trial court which dismissed
petitioner's complaint; and (2) in holding petitioner liable to private respondents in the amount of
P52,102.45.
6

I. Petitioner obstinately faults private respondents for the refusal of its buyer, Choju Co., Ltd., to take
delivery of the exported anahaw fans resulting in a loss of P174,150.00 representing the purchase
price of the said export items because of violation of the terms and conditions of the letter of credit
issued in favor of the former which specified the requirement for an on board bill of lading and the
prohibition against transhipment of goods, inasmuch as the bill of lading issued by the latter bore the
notation "received for shipment" and contained an entry indicating transhipment in Hongkong.
We find no fault on the part of private respondents. On the matter of transhipment, petitioner
maintains that "... while the goods were transferred in Hongkong from MV Pacific Despatcher, the
feeder vessel, to MV Oriental Researcher, a mother vessel, the same cannot be considered
transhipment because both vessels belong to the same shipping company, the private respondent
Orient Overseas Container Lines, Inc."
7
Petitioner emphatically goes on to say: "To be sure, there was
no actual transhipment of the Anahaw fans. The private respondents have executed a certification to the
effect that while the Anahaw fans were transferred from one vessel to another in Hong Kong, since the
two vessels belong to one and the same company then there was no transhipment.
8

Transhipment, in maritime law, is defined as "the act of taking cargo out of one ship and loading it in
another,"
9
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,"
10
or "the transfer for
further transportation from one ship or conveyance to another."
11
Clearly, 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.
12
This fact is
further bolstered by the certification
13
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.
Petitioner insists that "(c)onsidering that there was no actual transhipment of the Anahaw fans, then
there is no occasion under which the petitioner can agree to the transhipment of the Anahaw fans
because there is nothing like that to agree to" and "(i)f there is no actual transhipment but there
appears to be a transhipment in the bill of lading, then there can be no possible reason for it but a
mistake on the part of the private respondents.
14

Petitioner, in effect, is saying that since there was a mistake in documentation on the part of private
respondents, such a mistake militates against the conclusiveness of the bill of lading insofar as it
reflects the terms of the contract between the parties, as an exception to the parol evidence rule,
and would therefore permit it to explain or present evidence to vary or contradict the terms of the
written agreement, that is, the bill of lading involved herein.
It is a long standing jurisprudential rule that 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.
15
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.
16
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.
17

The holding in most jurisdictions has been that 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.
This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of
its contents and acceptance under such circumstances makes it a binding contract.
18

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 voluntarry signing the document
which embodies the agreement. As found by the Court of Appeals
Contrary to appellant's allegation that it did not agree to the transhipment, it could be
gleaned from the record that the appellant actually consented to the transhipment
when it received the bill of lading personally at appellee's (F.E. Zuellig's) office. There
clearly appears on the face of the bill of lading under column "PORT OF
TRANSHIPMENT" an entry "HONGKONG' (Exhibits'G-l'). 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 (Decision, p. 6, Rollo).
19

Furthermore and particularly on the matter of whether or not there was transhipment, James Cu, in
his testimony on crossexamination, categorically stated that he knew for a fact that the shipment was
to be unloaded in Hong Kong from the MV Pacific Despatcher to be transferred to a mother vessel,
the MV Oriental Researcher in this wise:
Q Mr. Cu, are you not aware of the fact that your shipment is to be
transferred or transhipped at the port of Hongkong?
A I know. It's not transport, they relay, not trans... yes, that is why we
have an agreement if they should not put a transhipment in
Hongkong, that's why they even stated in the certification.
xxx xxx xxx
Q In layman's language, would you agree with me that transhipment
is the transfer of a cargo from one vessel to the other?
A As a layman, yes.
Q So, you know for a fact that your shipment is going to be unloaded
in Hongkong from M. V. Dispatcher (sic) and then transfer (sic) to
another vessel which was the Oriental Dispatcher, (sic) you know that
for a fact?
A Yes, sir. (Emphasis supplied.)
20

Under the parol evidence rule,
21
the terms of a contract are rendered conclusive upon the parties, and
evidence aliundeis not admissible to vary or contradict a complete and enforceable agreement embodied
in a document, subject to well defined exceptions which do not obtain in this case. The parol evidence
rule is based on the consideration that when the parties have reduced their agreement on a particular
matter into writing, all their previous and contemporaneous agreements on the matter are merged therein.
Accordingly, evidence of a prior or contemporaneous verbal agreement is generally not admissible to
vary, contradict or defeat the operation of a valid instrument.
22
The mistake contemplated as an
exception to the parol evidence rule is one which is a mistake of fact mutual to the parties.
23
Furthermore,
the rules on evidence, as amended, require that in order that parol evidence may be admitted, said
mistake must be put in issue by the pleadings, such that if not raised inceptively in the complaint or in the
answer, as the case may be, a party can not later on be permitted to introduce parol evidence
thereon.
24
Needless to say, the mistake adverted to by herein petitioner, and by its own admission, was
supposedly committed by private respondents only and was raised by the former rather belatedly only in
this instant petition. Clearly then, and for failure to comply even only with the procedural requirements
thereon, we cannot admit evidence to prove or explain the alleged mistake in documentation imputed to
private respondents by petitioner.
Petitioner further argues that assuming that there was transhipment, it cannot be deemed to have
agreed thereto even if it signed the bill of lading containing such entry because it had made known to
private respondents from the start that transhipment was prohibited under the letter of credit and
that, therefore, it had no intention to allow transhipment of the subject cargo. In support of its stand,
petitioner relies on the second paragraph of Article 1370 of the Civil Code which states that "(i)f the
words appear to be contrary to the evident intention of the parties, the latter shall prevail over the
former," as wen as the supposed ruling in Caltex Phil., Inc. vs. Intermediate Appellate Court, et
al.
25
that "where the literal interpretation of a contract is contrary to the evident intention of the parties,
the latter shall prevail."
As between such stilted thesis of petitioner and the contents of the bill of lading evidencing the
intention of the parties, it is irremissible that the latter must prevail. Petitioner conveniently overlooks
the first paragraph of the very article that he cites which provides that "(i)f the terms of the contract
are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of the
stipulations shall control." In addition, Article 1371 of the same Code provides that "(i)n order to
judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be
principally considered."
The terms of the contract as embodied in the bill of lading are clear and thus obviates the need for
any interpretation. The intention of the parties which is the carriage of the cargo under the terms
specified thereunder and the wordings of the bill of lading do not contradict each other. The terms of
the contract being conclusive upon the parties and judging from the contemporaneous and
subsequent actuations of petitioner, to wit, personally receiving and signing the bill of lading and
paying the freight charges, there is no doubt that petitioner must necessarily be charged with full
knowledge and unqualified acceptance of the terms of the bill of lading and that it intended to be
bound thereby.
Moreover, 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.
26
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 petitioner's consent and unnecessarily expose
themselves to a possible liability. Verily, they could only have undertaken transhipment with the shipper's
permission, as evidenced by the signature of James Cu.
Another ground for the refusal of acceptance of the cargo of anahaw fans by Choju Co., Ltd. was
that the bill of lading that was issued was not an on board bill of lading, in clear violation of the terms
of the letter of credit issued in favor of petitioner. On cross-examination, it was likewise established
that petitioner, through its aforesaid president, was aware of this fact, thus:
Q If the container van, the loaded container van, was transported
back to South Harbor on June 27, 1980, would you tell us, Mr. Cu,
when the Bill of Lading was received by you?
A I received on June 30, 1980. I received at the same time so then I
gave the check.
xxx xxx xxx
Q So that in exchange of the Bill of Lading you issued your check
also dated June 30, 1980?
A Yes, sir.
Q And June 27, 1980 was the date of the Bill of Lading, did you
notice that the Bill of Lading states: 'Received for shipment'only? .
A Yes, sir.
Q What did you say?
A I requested to issue me on board bill of lading.
Q When?
A In the same date of June 30.
Q What did they say?
A They said, they cannot.
xxx xxx xxx
Q Do you know the difference between a "received for shipment bill
of lading" and "on board bill of lading"?
A Yes, sir.
Q What's the difference?
A Received for shipment, you can receive the cargo even you don't
ship on board, that is placed in the warehouse; while on-board bill of
lading means that is loaded on the vessel, the goods.
xxx xxx xxx
Q In other words, it was not yet on board the vessel?
A During that time, not yet.
xxx xxx xxx
Q Do you know, Mr. Cu, that under the law, if your shipment is
received on board a vessel you can demand an on-board bill of lading
not only a received for shipment bill of lading.?
A Yes sir.
Q And did you demand from F.E. Zuellig the substitution of that
received for shipment bill of lading with an on-board bill of lading?
A Of course, instead they issue me a certification.
Q They give you a ... ?
A ... a certification that it was loaded on board on June 30.
xxx xxx xxx
Q Mr. Cu, are you aware of the conditions of the Letter of Credit to
the effect that there should be no transhipment and that it should also
get an on board bill of lading.?
A Yes sir.
27

Undoubtedly, at the outset, petitioner knew that its buyer, Choju Co., Ltd., particularly required that
there be an on board bill of lading, obviously due to the guaranty afforded by such a bill of lading
over any other kind of bill of lading. The buyer could not have insisted on such a stipulation on a
pure whim or caprice, but rather because of its reliance on the safeguards to the cargo that having
an on board bill of lading ensured. Herein petitioner cannot feign ignorance of the distinction
between an "on board" and a "received for shipment" bill of lading, as manifested by James Cu's
testimony. It is only to be expected that those long engaged in the export industry should be familiar
with business usages and customs.
In its petition, MMMC avers that "when petitioner teamed of what happened, it saw private
respondent F.E. Zuellig which, in turn, issued a certification that as of June 30, 1980, the Anahaw
fans were already on board MV Pacific Despatcher (which means that the bill of lading is an on-
board-bill of lading or 'shipped' bill of lading as distinguished from a 'received for shipment'bill of
lading as governed by Sec. 3, par. 7, Carriage of Goods by Sea Act) ...."
28
What the petitioner would
suggest is that said certification issued by F.E. Zuellig, Inc., dated July 19, 1980, had the effect of
converting the original "received for shipment only" bill of lading into an "on board" bill of lading as
required by the buyer and was, therefore, by substantial compliance, not violative of the contract.
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.
29
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.
30
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.
It cannot plausibly be said that the aforestated certification of F.E. Zuellig, Inc. can qualify the bill of
lading, as originally issued, into an on board bill of lading as required by the terms of the letter of
credit issued in favor of petitioner. For one, the certification was issued only on July 19, 1980, way
beyond the expiry date of June 30, 1980 specified in the letter of credit for the presentation of an on
board bill of lading. Thus, even assuming that by a liberal treatment of the certification it could have
the effect of converting the received for shipment bill of lading into an on board of bill of lading, as
petitioner would have us believe, such an effect may be achieved only as of the date of its issuance,
that is, on July 19, 1980 and onwards.
The fact remains, though, that on the crucial date of June 30, 1980 no on board bill of lading was
presented by petitioner in compliance with the terms of the letter of credit and this default
consequently negates its entitlement to the proceeds thereof. Said certification, if allowed to operate
retroactively, would render illusory the guaranty afforded by an on board bill of lading, that is,
reasonable certainty of shipping the loaded cargo aboard the vessel specified, not to mention that it
would indubitably be stretching the concept of substantial compliance too far.
Neither can petitioner escape hability by adverting to the bill of lading as a contract of adhesion, thus
warranting a more liberal consideration in its favor to the extent of interpreting ambiguities against
private respondents as allegedly being the parties who gave rise thereto. The bill of lading is clear on
its face. There is no occasion to speak of ambiguities or obscurities whatsoever. All of its terms and
conditions are plainly worded and commonly understood by those in the business.
It will be recalled that petitioner entered into the contract with Choju Co., Ltd. way back on May
20,1980 or over a month before the expiry date of the letter of credit on June 30, 1980, thus giving it
more than ample time to find a carrier that could comply with the requirements of shipment under the
letter of credit. It is conceded that bills of lading constitute a class of contracts of adhesion. However,
as ruled in the earlier case of Ong Yiu vs. Court of Appeals, et al.
31
and reiterated in Servando, et al.
vs. Philippine Steam Navigation Co.,
32
plane tickets as well as bills of lading are contracts not entirely
prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he
gives his consent. The respondent court correctly observed in the present case that "when the appellant
received the bill of lading, it was tantamount to appellant's adherence to the terms and conditions as
embodied therein.
33

In sum, petitioner had full knowledge that the bill issued to it contained terms and conditions clearly
violative of the requirements of the letter of credit. Nonetheless, perhaps in its eagerness to
conclude the transaction with its Japanese buyer and in a race to beat the expiry date of the letter of
credit, petitioner took the risk of accepting the bill of lading even if it did not conform with the
indicated specifications, possibly entertaining a glimmer of hope and imbued with a touch of daring
that such violations may be overlooked, if not disregarded, so long as the cargo is delivered on time.
Unfortunately, the risk did not pull through as hoped for. Any violation of the terms and conditions of
the letter of credit as would defeat its right to collect the proceeds thereof was, therefore, entirely of
the petitioner's making for which it must bear the consequences. As finally averred by private
respondents, and with which we agree, "... the questions of whether or not there was a violation of
the terms and conditions of the letter of credit, or whether or not such violation was the cause or
motive for the rejection by petitioner's Japanese buyer should not affect private respondents therein
since they were not privies to the terms and conditions of petitioner's letter of credit and cannot
therefore be held liable for any violation thereof by any of the parties thereto."
34

II. Petitioner contends that respondent court erred in holding it liable to private respondents for
P52,102.45 despite its exercise of its option to abandon the cargo. It will be recalled that the trial
court originally found petitioner liable for P298,150.93, which amount consists of P51,271.02 for
freight, demurrage and other charges during the time that the goods were in Japan and for its
reshipment to Manila, P831.43 for charges paid to the Manila International Port Terminal, and
P246,043.43 for demurrage in Manila from October 22, 1980 to June 18, 1981. On appeal, the Court
of Appeals limited petitioner's liability to P52,102.45 when it ruled:
As regards the amount of P51,271.02, which represents the freight charges for the
return shipment to Manila and the demurrage charges in Japan, the same is
supported by appellant's own letter request (Exh. 2) for the return of the shipment to
Manila at its (appellant's) expense, and hence, it should be held liable therefor. The
amount of P831.43 was paid to the Manila International Port Terminal upon arrival of
the shipment in Manila for appellant's account. It should properly be charged to said
appellant.
35

However, respondent court modified the trial court's decision by excluding the award for
P246,043.43 for demurrage in Manila from October 22, 1980 to June 18, 1981.
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.
36
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.
Private respondents, admittedly, have adopted the common practice of requiring prior notice of
arrival of the goods shipped before the shipper can be held liable for demurrage, as declared by
Wilfredo Hans, head of the accounting department of F.E. Zuellig, Inc., on cross-examination as a
witness for private respondents:
Q ... you will agree with me that before one could be charged with
demurrage the shipper should be notified of the arrival of the
shipment?
A Yes sir.
Q Without such notification, there is no way by which the shipper
would know (of) such arrival?
A Yes.
Q And no charges of demurrage before the arrival of the cargo?
A Yes sir.
37

Accordingly, on this score, respondent court ruled:
However, insofar as the demurrage charges of P246,043.43 from October up to May
1980, arriv(al) in Manila, are concerned, We are of the view that appellant should not
be made to shoulder the same, as it was not at fault nor was it responsible for said
demurrage charges. Appellee's own witness (Mabazza) testified that while the goods
arrived in Manila in October 1980, appellant was notified of said arrival only in March
1981. No explanation was given for the delay in notifying appellant. We agree with
appellant that before it could be charged for demurrage charges it should have been
notified of the arrival of the goods first. Without such notification it could not- be so
charged because there was no way by which it would know that the goods had
already arrived for it to take custody of them. Considering that it was only in March
1981 (Exh. K) that appellant was notified of the arrival of the goods, although the
goods had actually arrived in October 1980 (tsn, Aug. 14, 1986, pp. 10-14), appellant
cannot be charged for demurrage from October 1980 to March 1981. ...
38

While being satisfied with the exclusion of demurrage charges in Manila for the period from October
22,1980 to June 18,1981, petitioner nevertheless assails the Court of Appeals' award of P52,102.43
in favor of private respondents, consisting of P51,271.01 as freight and demurrage charges in Japan
and P831.43 for charges paid at the Manila International Port Termninal.
Petitioner asserts that by virtue of the exercise of its option to abandon the goods so as to allow
private respondents to sell the same at a public auction and to apply the proceeds thereof as
payment for the shipping and demurrage charges, it was released from liability for the sum of
P52,102.43 since such amount represents the shipping and demurrage charges from which it is
considered to have been released due to the abandonment of goods. It further argues that the
shipping and demurrage charges from which it was released by the exercise of the option to
abandon the goods in favor of private respondents could not have referred to the demurrage
charges in Manila because respondent court ruled that the same were not chargeable to petitioner.
Private respondents would rebut this contention by saying in their memorandum that the
abandonment of goods by petitioner was too late and made in bad faith.
39

On this point, we agree with petitioner. Ordinarily, the shipper is liable for freightage due to the fact
that the shipment was made for its benefit or under its direction and, correspondingly, the carrier is
entitled to collect charges for its shipping services. This is particularly true in this case where the
reshipment of the goods was made at the instance of petitioner in its letter of August 29, 1980.
40

However, in a letter dated March 20, 1981,
41
private respondents belatedly informed petitioner of the
arrival of its goods from Japan and that if it wished to take delivery of the cargo it would have to pay
P51,271.02, but with the last paragraph thereof stating as follows:
Please can you advise within 15 days of receipt of this letter whether you intend to
take delivery of this shipment, as alternatively we will have to take legal proceedings
in order to have the cargo auctioned to recover the costs involved, as well as free the
container which are (sic) urgently required for export cargoes.
Clearly, therefore, private respondents unequivocally offered petitioner the option of paying the
shipping and demurrage charges in order to take delivery of the goods or of abandoning the same
so that private respondents could sell them at public auction and thereafter apply the proceeds in
payment of the shipping and other charges.
Responding thereto, in a letter dated April 3, 1981, petitioner seasonably communicated its decision
to abandon to the goods in favor of private respondents with the specific instruction that any excess
of the proceeds over the legal costs and charges be turned over to petitioner. Receipt of said letter
was acknowledged by private respondents, as revealed by the testimony of Edwin Mabazza, a claim
officer of F.E. Zuellig, Inc., on cross-examination.
42

Despite petitioner's exercise of the option to abandon the cargo, however, private respondents sent
a demand letter on June 22, 1981
43
insisting that petitioner should pay the entire amount of
P298,150.93 and, in another letter dated Apiril 30, 1981,
44
they stated that they win not accept the
abandonment of the goods and demanded that the outstanding account be settled. The testimony of said
Edwin Mabazza definitely admits and bears this out.
45

Now, there is no dispute that private respondents expressly and on their own volition granted
petitioner an option with respect to the satisfaction of freightage and demurrage charges. Having
given such option, especially since it was accepted by petitioner, private respondents are estopped
from reneging thereon. Petitioner, on its part, was well within its right to exercise said option. Private
respondents, in giving the option, and petitioner, in exercising that option, are concluded by their
respective actions. To allow either of them to unilaterally back out on the offer and on the exercise of
the option would be to countenance abuse of rights as an order of the day, doing violence to the long
entrenched principle of mutuality of contracts.
It will be remembered that in overland transportation, an unreasonable delay in the delivery of
transported goods is sufficient ground for the abandonment of goods. By analogy, this can also
apply to maritime transportation. Further, with much more reason can petitioner in the instant case
properly abandon the goods, not only because of the unreasonable delay in its delivery but because
of the option which was categorically granted to and exercised by it as a means of settling its liability
for the cost and expenses of reshipment. And, said choice having been duly communicated, the
same is binding upon the parties on legal and equitable considerations of estoppel.
WHEREFORE, the judgment of respondent Court of Appeals is AFFIRMED with the
MODIFICATION that petitioner is likewise absolved of any hability and the award of P52,102.45 with
legal interest granted by respondent court on private respondents' counterclaim is SET ASIDE, said
counterclaim being hereby DISMISSED, without pronouncement as to costs.
SO ORDERED.
Melencio-Herrera (Chairperson), Paras and Padilla, JJ., concur.
Sarmiento, J., is on leave.