G.R. No. 95529 - Magellan Manufacturing Marketing Corp. vs. Court of Appeals

On May 20, 1980, Magellan Manufacturers Marketing Corporation (MMMC) entered into a contract with Choju Co. of Yokohama, Japan to export 136,000 anahaw fans for a consideration of US$23,220.00.
Payment for the export was to be made via a letter of credit issued in MMMC’s favor, which explicitly required an on-board bill of lading and prohibited transhipment of goods.
MMMC, through its president James Cu, engaged F.E. Zuellig, Inc. as its shipping agent and contracted Orient Overseas Container Lines, Inc. (OOCL) to handle the shipment.
Instructions were given that an on-board bill of lading was necessary, reflecting the terms of the letter of credit.

On June 30, 1980, MMMC paid F.E. Zuellig the requisite freight charges and secured a copy of the bill of lading, which was later presented to Allied Bank.
Subsequent events revealed that the bill of lading bore the notation “received for shipment” with an entry indicating transhipment at “Hong Kong,” contrary to the letter of credit’s requirement.
MMMC’s buyer, Choju Co., Ltd., refused payment for the shipment on the grounds that the required on-board bill of lading was not presented and transhipment had occurred.
As a result, the anahaw fans were shipped back to Manila, and the shipping parties demanded payment amounting to P246,043.43; MMMC then abandoned the cargo and sought damages.

The trial court (Regional Trial Court, Branch 38, Manila) rendered a decision that dismissed MMMC’s complaint but ordered it to pay on its counterclaim for freight and demurrage charges, initially amounting to P298,150.93.
The Court of Appeals modified the trial court’s award by reducing the liability solely to P52,102.45, which comprised freight charges and demurrage incurred in Japan, excluding demurrage charges in Manila.
The appellate findings emphasized that MMMC, by having received and signed the bill of lading—containing the transhipment entry—implicitly consented to its terms.
MMMC subsequently petitioned for review on certiorari before the Supreme Court, challenging (a) the dismissal of its complaint and (b) the imposition of liability for P52,102.45 on the ground of its abandonment of the cargo.

MMMC acknowledged that its president James Cu personally received and signed the bill of lading, thereby indicating acceptance of its terms despite the evident transhipment notation.
A certification issued by F.E. Zuellig, Inc. on July 19, 1980, stated that the cargo was on board, yet it did not alter the fact that, on June 30, 1980, an on-board bill of lading compliant with the letter of credit was not provided.
MMMC’s decision to abandon the cargo was communicated in a letter where it opted for private respondents to sell the goods at public auction, with the proceeds meant to cover shipping and demurrage charges.
The subsequent conflicting demand letters from private respondents further complicated the liability issues, particularly regarding whether abandonment released MMMC from the shipping and demurrage obligations.

Whether MMMC, by receiving and signing the bill of lading which contained a transhipment entry, was deemed to have accepted its terms—even if those terms conflicted with the letter of credit stipulations.
Whether the factual certification provided by F.E. Zuellig, Inc. could retroactively convert a “received for shipment” bill into an “on-board” bill of lading.

Whether MMMC should be held liable for freight and demurrage charges amounting to P52,102.45, particularly given its exercise of the option to abandon the cargo.
Whether MMMC’s abandonment of the cargo, made in reliance on private respondents’ offer, legally absolved it from further liability for the shipping charges.

Whether the alleged mistake in documentation (the transhipment notation versus on-board requirement) is admissible to vary or contradict the written terms of the bill of lading under the parol evidence rule.
Whether any alleged mutual mistake, raised belatedly by MMMC, can be considered an exception to the parol evidence rule in this context.

Whether the customary practice in shipping and transhipment — particularly that physical transfer from one vessel to another constitutes transhipment irrespective of vessel ownership — governs the interpretation of the bill of lading.
Whether MMMC’s knowledge and acceptance of these commercial practices precludes the argument that there was a mistake or misunderstanding regarding transhipment.