Northern Cement Corporation vs. Intermediate Appellate Court and Shipside Incorporated

In an unwritten contract, the scope of “integrated services” is interpreted according to the usages of the place and the circumstances attending the agreement; only services that could be predetermined and valued in advance are included in a fixed integrated rate. A party that receives notice of a rate increase and billing, continues availing itself of the services, and makes deposits without seasonable objection is estopped from later contesting the increase. On a counterclaim, an award higher than the amount pleaded may be allowed only if the evidence supporting the higher amount was properly presented with full opportunity for the opposing party to contest it.

Northern Cement Corporation used the port services of Shipside Incorporated in connection with its cement exportation. Shipside was an entity long engaged and experienced in the business of arrastre and stevedoring. Beginning September 14, 1973, the parties had a verbal arrangement for Shipside’s “integrated services,” for which NCC would pay a fixed rate per bag of cement. The agreement was not reduced to writing, and the term “integrated services” was never expressly defined.

In connection with its exportation of cement, Northern Cement Corporation contracted the arrastre, stevedoring, and other related services of Shipside Incorporated beginning September 14, 1973. The parties had only a verbal understanding. For Shipside’s “integrated services,” NCC would pay a fixed rate of P0.41 per bag of cement, later increased by agreement to P0.46 after Shipside had begun rendering services. The term “integrated services” was not defined, and the contract was not in writing.

Subsequently, Shipside advised NCC of another rate increase and billed it accordingly, adding charges for regular and overtime stand-by, lighting, equipment rental, gears, empty bags, and other items. NCC apparently acceded to the new arrangement, but about two years later questioned the billing. NCC contended that the agreed integrated rate of P0.46 covered all services rendered by Shipside and could not be increased unilaterally. Shipside maintained that only arrastre and stevedoring services were included, that all other services were subject to separate billings, and that NCC had not earlier objected. When no agreement could be reached, Shipside filed its complaint to collect the amount allegedly due.

The appellate court treated the integrated rate as covering regular arrastre and stevedoring charges, gear charges, cleaning gang charges, and charges for opening and closing ship hatches. Those charges were predetermined by the weight, volume, or measurement of the shipment, and the manpower needed was directly controlled by Shipside. By contrast, charges for regular overtime work on weekdays, special overtime work on Sundays and holidays, and regular and special stand-by time during breakdowns of NCC’s cement plant in Sison, Pangasinan, or during hauling from the plant to the pier in San Fernando, La Union depended entirely on NCC’s needs and demands and could not be predetermined.

The increase in rates was communicated to NCC on August 12, 1974, and the first billing based on those rates was made on September 13, 1974. NCC indicated no objection to the notice or the billing. It continued availing itself of Shipside’s services and, at Shipside’s request, agreed without objection or reservation to make deposits on its account totaling P690,000.00 from September 17, 1974 to February 7, 1975. Only in reply to Shipside’s letter of April 30, 1975 did NCC finally object, arguing for the first time that it was liable only under the P0.46 rate. NCC claimed it had remained silent because Shipside had a monopoly of such services in the region and because the billing was only a request it could ignore.

On the counterclaim, the trial court allowed a refund of P526,280.53, while the appellate court limited the refund to P31,652.62, the amount stated in the counterclaim. The trial court excluded Shipside’s rebuttal evidence as contrary to the parties’ stipulation and as hearsay and self-serving. The appellate court then admitted all 142 of Shipside’s exhibits without much analysis and without giving NCC an opportunity to refute them.

• Scope of “Integrated Services”: Petitioner argued that the agreed integrated rate of P0.46 per bag covered all services rendered by Shipside and could not be increased unilaterally.
• Absence of Acceptance or Estoppel: Petitioner maintained that it never accepted the unilateral increase or the other charges beyond arrastre and stevedoring services. It continued availing itself of Shipside’s services only because Shipside had a monopoly of such services in the region, and it did not object to the billing because the billing was not a demand for payment but a mere request it could ignore. Its non-payment was itself an overt act of protest.
• Counterclaim Refund: Petitioner argued that the trial court correctly awarded P526,280.53 because that amount had been established by the evidence adduced at trial, and that the appellate court erred in limiting the refund to P31,652.62, the amount claimed in the counterclaim.

• Scope of “Integrated Services”: Respondent maintained that only arrastre and stevedoring services were included in the integrated rate, while all other services were subject to separate billings.
• Implied Acceptance: Respondent argued that NCC did not seasonably question the increased rate and therefore impliedly accepted it. NCC did not object to the notice or billing and continued availing itself of Shipside’s services and making deposits after the new rates took effect.
• Counterclaim Evidence: Respondent contended that the stipulation of facts was limited to allowing NCC to prove additional payments on the accountabilities covered by Shipside’s claims. Respondent further argued that, under the Aldanese ruling, it could present rebuttal evidence on NCC’s counterclaim.
• Excess Payments: Respondent maintained that NCC did not really succeed in proving any excess payment for the period September 14, 1973 to September 12, 1974.

• Interpretation of “Integrated Services”: Whether the phrase “integrated services” in the verbal agreement covered all services rendered by Shipside or only regular arrastre and stevedoring services and other predeterminable services.
• Estoppel by Silence: Whether NCC was estopped from questioning the increased rates and other charges after receiving notice and billings, continuing to avail of Shipside’s services, and making deposits without seasonable objection.
• Counterclaim Award and Evidence: Whether the appellate court erred in limiting NCC’s refund to the amount stated in its counterclaim, and whether the trial and appellate courts properly received and evaluated the evidence on the counterclaim.

• Interpretation of “Integrated Services”: No. The fixed integrated rate did not cover all services. The phrase was properly interpreted according to the usages of the place and the circumstances attending the agreement to include only services that could be predetermined, such as regular arrastre, stevedoring, gear, cleaning gang, and ship hatch services.
• Estoppel by Silence: Yes. NCC was estopped from questioning the increased billing, having received notice and billing, continued to avail of Shipside’s services, and made deposits without seasonable objection.
• Counterclaim Award and Evidence: Remanded. A court may award more than the pleaded amount only if the evidence of the higher amount was properly presented with full opportunity to contest; that condition failed here, and the case was remanded for further reception and evaluation of evidence.

• Interpretation of “Integrated Services”: Because the term was not defined in writing, its meaning was determined in light of the usages of the place where the contract was entered into and the particular circumstances of the case. Shipside, as an experienced arrastre and stevedoring entity, would not have bound itself to a fixed rate sufficient only to defray stevedoring and arrastre expenses while covering all other services whose costs could not be projected in advance. The fixed fee reasonably covered only services whose costs were predetermined by weight, volume, or measurement and whose manpower was directly controlled by Shipside. Overtime and stand-by services depended entirely on NCC’s needs and demands and were therefore not included.

• Estoppel by Silence: The rate increase was communicated on August 12, 1974, and billing followed on September 13, 1974. NCC did not object, continued using Shipside’s services, and made deposits of P690,000.00 from September 17, 1974 to February 7, 1975. It objected only after Shipside’s letter of April 30, 1975. Under Rule 131, Section 3(a) of the Rules of Court, a party who by act or omission intentionally leads another to believe a fact and act upon it cannot later falsify that fact. NCC’s silence and conduct led Shipside to believe the charges were accepted. The argument that the billing was a mere request was rejected; a courteous request for payment does not negate demandability. Non-payment was not an effective protest because it could be due to lack of funds rather than unwillingness to accept liability. The monopoly argument was also insufficient absent a showing that Shipside’s terms were oppressive or opportunistic.

• Counterclaim Award and Evidence: Under Rule 10, Section 5, issues tried by express or implied consent may be treated as raised in the pleadings, but an award higher than the pleaded amount is permissible only if the supporting evidence was properly presented and the opposing party had full opportunity to refute it. The trial court disregarded Shipside’s rebuttal evidence as violating the stipulation of facts and as hearsay and self-serving, contrary to due process and to American Express Co., Inc. vs. Vicente Aldanese, which permits additional evidence after a stipulation of facts when necessary for the better solution of the principal issues. The appellate court then accepted all 142 exhibits without adequate analysis and without giving NCC an opportunity to refute them. The proper remedy was remand to the Court of Appeals for reception and careful evaluation of both parties’ evidence and, if necessary, amendment of the pleadings, with any award bearing legal interest at 6% only.

• Interpretation of Undefined Contract Terms — When a term such as “integrated services” is not defined, it is interpreted according to the usages of the place and the particular circumstances attending the contract. A fixed fee covers only services that could be predetermined and valued in advance; services dependent on one party’s future needs and demands are not included in a fixed integrated rate.

• Estoppel by Silence and Conclusive Presumption — Under Rule 131, Section 3(a), a party who by declaration, act, or omission intentionally and deliberately leads another to believe a thing is true and to act upon that belief cannot later falsify it. Failure to object to a billing while continuing to avail of services and making deposits constitutes implied acceptance and may trigger estoppel. Non-payment alone is not an effective protest because it may be due to lack of funds.

• Amendment to Conform to Evidence and Award Beyond Pleadings — A court may award an amount higher than that claimed in the pleadings notwithstanding the absence of formal amendment, provided the evidence of the higher amount was properly presented and the opposing party had full opportunity to support its contentions and refute the other party’s evidence. When rebuttal evidence is improperly excluded, or when an appellate court admits exhibits without analysis and without opportunity for refutation, the award cannot stand and remand is proper.

• Additional Evidence After Stipulation of Facts — Under American Express Co., Inc. vs. Vicente Aldanese, additional evidence is admissible even after a stipulation of facts when it brings to the court all facts pertinent and necessary for the better solution of the principal questions involved.

• Legal Interest on Awards — Any award to either party should provide for legal interest at the rate of 6% only.

• "Obviously, Shipside offered for the fixed fee only such services as could be predetermined and for which a value could be fixed in advance." — This passage states the core reason why overtime, stand-by, and similar charges were not covered by the fixed “integrated services” rate.

• "Such 'overt act of non-payment' may be due to other causes, usually lack of funds, and does not necessarily signify an unwillingness to accept liability." — This passage rejects the argument that non-payment was a sufficiently clear protest equivalent to an express objection to the billings.

• "It is the view of the Court that pursuant to the abovementioned rule and in light of the decisions cited, the trial court should not be precluded from awarding an amount higher than that claimed in the pleadings notwithstanding the absence of the required amendment. But this is upon the condition that the evidence of such higher amount has been presented properly, with full opportunity on the part of the opposing parties to support their respective contentions and to refute each other's evidence." — This passage supplies the controlling principle for the counterclaim remand and limits the circumstances under which a court may award more than what was pleaded.

• Malayan Insurance Company vs. Manila Port Services, 85 SCRA 320 — Cited for the rule that where the plaintiff failed to amend the prayer of its complaint to conform to the evidence, the amount demanded in the complaint should be awarded.
• J.M. Tuason & Co. vs. Santiago, 99 Phil. 615 — Cited within Malayan for the same rule requiring the amount demanded in the pleadings to control if no amendment to conform to evidence is made.
• Tuazon vs. Bolanos, 95 Phil. 106 — Cited as an instance where relief beyond the pleading could be validly awarded without formal amendment because the facts shown entitled the plaintiff to such relief and the defendant himself raised the point on which recovery was based.
• American Express Co., Inc. vs. Vicente Aldanese, 47 Phil. 325 — Followed for the doctrine that additional evidence is admissible even after a stipulation of facts when necessary to bring all pertinent facts before the court for the better solution of the principal questions.
• National Power Corporation vs. Court of Appeals, 113 SCRA 556 — Cited for treating the pleadings as amended to conform with the evidence where there is a variance between the pleading and the evidence adduced.
• Philippine Rabbit Bus Lines, Inc. vs. Cruz, 143 SCRA 158 — Cited for the directive that awards should bear legal interest at the rate of 6% only.

• Rule 131, Section 3(a), Rules of Court — Establishes the conclusive presumption that a party who by declaration, act, or omission intentionally leads another to believe a thing true and to act upon it cannot falsify it in litigation arising from that declaration, act, or omission. Applied to hold NCC estopped from contesting the increased billings.
• Rule 10, Section 5, Rules of Court — Governs amendment to conform to evidence and provides that issues tried by express or implied consent are treated as raised in the pleadings. Applied to the counterclaim and the question whether an award higher than the pleaded amount could stand.
• Article XII, Section 19, Constitution — Recognizes that monopolies are not objectionable per se and may be regulated or prohibited when the public interest so requires. Applied to reject NCC’s claim that it had no choice but to accept Shipside’s billing due to monopoly, absent proof of oppressive or opportunistic terms.
• Section 9, Batas Pambansa Blg. 129 — Cited as the basis for remanding the case to the Court of Appeals for reception and more careful evaluation of evidence on the counterclaim.

Teehankee, C.J., Narvasa, Gancayco, and Griño-Aquino, JJ., concurred.