MOF Company, Inc. vs. Shin Yang Brokerage Corporation

A consignee named in a bill of lading is not automatically bound by its terms, including a “Freight Collect” clause; liability attaches only upon proof of (a) an agency relation between shipper and consignee, (b) the consignee’s acceptance of the bill of lading with knowledge of its contents, or (c) the consignee’s demand for fulfillment of a stipulation pour autrui contained in the bill of lading.

Halla Trading Co., a Korea-based shipper, shipped secondhand cars and other articles to Manila on board a Hanjin vessel. The carrier, Hanjin Shipping Co., issued Bill of Lading No. HJSCPUSI14168303, naming respondent Shin Yang Brokerage Corporation as consignee and indicating “Freight Collect,” meaning the consignee was to pay freight and other charges totaling P57,646.00. Petitioner MOF Company, Inc., Hanjin’s exclusive general agent in the Philippines, repeatedly demanded payment from Shin Yang. Shin Yang refused, contending it was merely a consolidator, had not caused the importation, had not endorsed the original bill of lading, and had given no consent to be named consignee.

• The Shipment and Bill of Lading: On October 25, 2001, Halla Trading Co. shipped secondhand cars and other articles from Korea to Manila on board Hanjin Busan 0238W. The carrier, Hanjin Shipping Co., issued Bill of Lading No. HJSCPUSI14168303 naming Shin Yang Brokerage Corporation as consignee. The bill of lading was marked “Freight Collect,” signifying that the consignee would pay ocean freight, documentation fee, and terminal handling charges totaling P57,646.00.

• Demand and Refusal: MOF Company, Inc., as exclusive general agent of Hanjin in the Philippines, made repeated demands for payment upon Shin Yang after the shipment arrived on October 29, 2001. Shin Yang refused to pay, maintaining it had not caused the importation, was only a consolidator, had not endorsed the original bill of lading in its favor, and did not consent to being named consignee.

• MOF’s Allegations: MOF claimed Shin Yang was a regular client that caused the importation and assured that freight and charges would be paid upon the goods’ arrival. According to MOF, the bill of lading itself evidenced Shin Yang’s participation in the contract of affreightment and its obligation to pay on a “Freight Collect” basis.

• Shin Yang’s Defense: Shin Yang denied any involvement in arranging the shipment or promising to shoulder the freightage. It asserted it never authorized Halla Trading Co. to ship the articles on its behalf, never received or accepted the bill of lading, and never demanded delivery of the cargo. Shin Yang further argued that MOF failed to present any supporting documents proving agency, consent, or other participation beyond the bill of lading.

• MeTC and RTC Rulings: The MeTC ruled for MOF, reasoning that Shin Yang’s prior business dealings with MOF and the inclusion of its name in the bill of lading sufficiently established a contract of affreightment. The RTC affirmed in toto, holding that under Article 653 of the Code of Commerce, the bill of lading governs where no charter party was signed, and that the contract could be oral.

• Court of Appeals Reversal: The CA found MOF’s evidence insufficient. It held that the bill of lading, unilaterally prepared by Hanjin, did not prove Shin Yang’s consent to the contract. Because Shin Yang never accepted the bill of lading and disowned the shipment, the CA concluded no contract of carriage existed between the parties, and MOF’s claim rested on speculation.

• Factual Findings Entitled to Respect: MOF argued that the MeTC and RTC factual findings were well-supported and should have bound the CA, which had no justifiable reason to disturb them.

• Bill of Lading as Best Evidence: MOF maintained that the bill of lading, expressly naming Shin Yang as consignee, was the best evidence of Shin Yang’s participation in the carriage and stood as the law among shipper, carrier, and consignee.

• Consent and Acquiescence: MOF contended that Shin Yang supplied all details in the bill of lading and acquiesced to being named consignee on a “Freight Collect” basis. Even if it never gave prior consent, Shin Yang never objected until after the shipment arrived, suggesting the refusal was due to a botched transaction with Halla Trading Co.

• Awareness and Prior Dealings: MOF pointed to Shin Yang’s letters requesting a refund of container deposits as proof that Shin Yang was aware of the shipment and undertook preparations for its release, evidencing a business relationship that supported the bill of lading as a binding contract.

• Lack of Consent: Shin Yang insisted that MOF presented no evidence of consent to the contract of affreightment; the bill of lading was prepared without its knowledge or authorization, and it never accepted the document.

• Burden of Proof Not Met: Shin Yang argued that MOF, as the party alleging a contract, bore the burden to prove all essential elements, including consent, but failed to do so beyond the bare bill of lading.

• No Agency or Acceptance: Shin Yang stressed it was never an agent of the shipper, never received the original bill of lading, and never demanded delivery; therefore, none of the recognized bases for a consignee’s liability existed.

• No Benefit or Availment: Shin Yang contended that liability under a “Freight Collect” bill of lading arises from either agency or the consignee’s availment of the stipulation pour autrui; because it never claimed or benefited from the goods, it was not liable.

• Consignee’s Liability under Bill of Lading: Whether a consignee who is not a signatory to the bill of lading is bound by its stipulations, particularly a “Freight Collect” clause.

• Liability Absent Agency or Availment: Whether a consignee who was not an agent of the shipper and who did not demand fulfillment of any stipulation in its favor is liable to pay the corresponding freight and handling charges.

• Consignee’s Liability under Bill of Lading: A consignee who is not a signatory to the bill of lading may nevertheless be bound by its stipulations in three circumstances: (a) when a relation of agency exists between the shipper/consignor and the consignee; (b) when the consignee receives and accepts the bill of lading without objection, with actual or constructive notice of its terms; or (c) when the consignee, as a third-party beneficiary, demands from the carrier fulfillment of a stipulation pour autrui in its favor—specifically, delivery of the goods. A bill of lading that merely names a consignee does not, by itself, establish the consignee’s consent or create a contractual obligation to pay freight.

• Liability Absent Agency or Availment: Because Shin Yang consistently denied authorizing the shipment, receiving the bill of lading, or demanding delivery, and because MOF produced no evidence of agency, acceptance, or demand, none of the three circumstances was established. The burden of proof lay on MOF as the party alleging the obligation, yet it offered only the bill of lading itself. The CA correctly dismissed the complaint for insufficiency of evidence, as MOF failed to prove its cause of action by a preponderance of evidence.

• Consignee’s Liability under a Bill of Lading — Although a bill of lading is a contract among shipper, carrier, and consignee, a consignee who is not a signatory remains a stranger to the contract unless one of three conditions is met: (1) the consignee is the shipper’s agent; (2) the consignee accepts the bill of lading without objecting to its terms, thereby impliedly consenting to the contract of carriage; or (3) the consignee demands fulfillment of a stipulation pour autrui contained in the bill of lading, such as delivery of the goods, thereby communicating its acceptance of the benefit and binding itself to the corresponding obligations. The Court applied this rule and found that Shin Yang was not shown to have done any act that would make it a party to the contract; its bare designation as consignee did not suffice.

• Burden of Proof and Preponderance of Evidence in Civil Cases — In civil cases, the party who asserts a claim bears the burden of proving it by a preponderance of evidence—evidence of greater weight or more convincing than that offered in opposition. A denial needs no proof; the party alleging an affirmative fact must produce credible, substantial evidence. The bill of lading alone, which only evidenced receipt of cargo and named a consignee, did not amount to preponderant proof of the consignee’s consent or liability because the consignee’s participation was controverted and no other evidence was adduced.

• “The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the intervention of the consignee. However, the latter can be bound by the stipulations of the bill of lading when a) there is a relation of agency between the shipper or consignor and the consignee or b) when the consignee demands fulfillment of the stipulation of the bill of lading which was drawn up in its favor.” — This passage, quoting Sea-Land Service v. Intermediate Appellate Court, crystallizes the controlling doctrine on a consignee’s accession to the contract of carriage.

• “A bill of lading delivered and accepted constitutes the contract of carriage even though not signed, because the acceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of the contract and of all its terms and conditions of which the acceptor has actual or constructive notice.” — From Keng Hua Paper Products Co., Inc. v. Court of Appeals, this excerpt underpins the requirement of acceptance as a mode of binding a non-signatory consignee.

• Sea-Land Service v. Intermediate Appellate Court, 237 Phil. 531 (1987) — Cited as authority for the rule that a consignee can be bound by a bill of lading’s stipulations when an agency relationship exists or when the consignee demands fulfillment of a stipulation in its favor.

• Keng Hua Paper Products Co., Inc. v. Court of Appeals, 349 Phil. 925 (1998) — Followed for the proposition that delivery and acceptance of a bill of lading without objection constitutes acceptance of its terms, thereby binding the consignee.

• Mendoza v. Philippine Air Lines, Inc., 90 Phil. 836 (1952) — Applied for the twin principles that a consignee becomes a party to the contract by demanding delivery (thus availing of a stipulation pour autrui), and that prior to such demand, the consignee is a stranger to the contract.

• Acabal v. Acabal, 494 Phil. 528 (2005) — Relied upon for the rule that the burden of proof lies upon the party who asserts a fact, not upon the party who denies it.

• New Testament Church of God v. Court of Appeals, 316 Phil. 330 (1995); Condes v. Court of Appeals, G.R. No. 161304, July 27, 2007, 528 SCRA 339 — Cited to define preponderance of evidence as the quantum of proof required in civil cases.

• Article 1311, second paragraph, Civil Code — Provides that if a contract contains a stipulation in favor of a third person, that third person may demand its fulfillment provided he communicated his acceptance to the obligor before revocation. The Court applied this stipulation pour autrui as a ground for binding a consignee who demands delivery.

• Section 1, Rule 131, Rules of Court (Burden of Proof) — Establishes that the burden of proof is on the party who alleges an affirmative fact. The Court relied on this principle in requiring MOF to prove Shin Yang’s consent or other circumstances rendering it liable, rather than on Shin Yang to prove a negative.

Associate Justice Antonio T. Carpio (Chairperson), Associate Justice Teresita J. Leonardo-De Castro, Associate Justice Arturo D. Brion, and Associate Justice Roberto A. Abad.