TELENGTAN BROTHERS and SONS vs.

UNITED STATES LINES

G.R.No. 132284
February 28,2006

FACTS: Petitioner is a domestic corporation while US Lines is a foreign corporation engaged in

overseas shipping. It was made applicable that consignees who fail to take delivery of their
containerized cargo within the 10-day free period are liable to pay demurrage charges. On June 22,
1981, US Lines filed a suit against petitioner seeking payment of demurrage charges plus interest
and damages. Petitioner incurred P94,000 which the latter refused to pay despite repeated
demands. On the other hand, [petitioner] claims that [respondent] company owes them the far larger
sum of P123,738.04 by way of damages allegedly suffered by their goods when [respondent]
company removed these goods from its cargo vans and deposited them in bonded warehouses
without its consent. Petitioner disclaims liability alleging that it has never entered into a contract nor
signed an agreement to be bound by it. RTC ruled that petitioner is liable to respondent and all be
computed as of the date of payment in accordance with Article 1250 of the Civil Code. CA affirmed
the decision.

WHEREFORE, in view of all the foregoing, the Court finds [petitioner] liable to [respondent] for demurrage incurred
in the amount of P99,408.00 which sum will bear interest at the legal rate from the date of the filing of the
complaint till full payment thereof plus attorneys fees in the amount of 20% of the total sum due, all of which shall
be recomputed as of the date of payment in accordance with the provisions of Article 1250 of the Civil
Code. Exemplary damages in the amount of P80,000.00 are also granted. The counterclaim is dismissed. Costs
against [petitioner].

ISSUE: 1) WON the petitioner company should shoulder the demurrage charges. YES
2) WON the re-computation of the judgment award in accordance with Article 1250 of the Civil Code
proper. NO

RULING: 1) The Supreme Court finds that the petitioner was the one at fault in not withdrawing its
cargo from the containers wherein the goods were shipped within the ten (10)-day free period. Had it
done so, then there would not have been any need of depositing the cargo in a warehouse;
emphasizing the fact that it was done with prior authorization of the Bureau of Customs. Hence
Petitioner should pay the demurrage charges.

2) The Supreme Court found as erroneous the trial courts decision as affirmed by the Court of
Appeals. The Court holds that there has been an extraordinary inflation within the meaning of Article
1250 of the Civil Code. There is no reason for ordering the payment of an obligation in an amount
different from what has been agreed upon because of the purported supervention of an
extraordinary inflation.

The assailed decision is affirmed with modification that the order for re-computation as of the date of
payment in accordance with the provisions of Article 1250 of New Civil Code is deleted.

Demurrage Charges refers to the charges that the ship owner pays to the charterer for its
delayed operations of loading/unloading. Officially, demurrage is a form of liquidated damages
for breaching the lay time as a it is stated in the governing contract (the charter party).
IEQUITABLE PCI BANK vs NG SHEUNG NGOR Case Digest
EQUITABLE PCI BANK, YU and APAS v. NG SHEUNG NGOR
G.R.NO. 171545, December 19, 2007

FACTS: On October 7, 2001, respondents Ngor and Go filed an action for amendment and/or
reformation of documents and contracts against Equitable and its employees. They claimed that they
were induced by the bank to avail of its peso and dollar credit facilities by offering low interests so
they accepted and signed Equitables proposal. They alleged that they were unaware that the
documents contained escalation clauses granting Equitable authority to increase interest without
their consent. These were rebutted by the bank. RTC ordered the use of the 1996 dollar exchange
rate in computing respondents dollar-denominated loans. CA granted the Banks application for
injunction but the properties were sold to public auction.

ISSUE: 1)WON the escalation clause violated the principle of mutuality of contracts. YES
2) Whether or not there was an extraordinary deflation. NO

RULING:
1) Clauses of that nature violate the principle of mutuality of contracts.[66] Article 1308[67] of the
Civil Code holds that a contract must bind both contracting parties; its validity or compliance cannot
be left to the will of one of them.[68]
For this reason, we have consistently held that a valid escalation clause provides:

1. that the rate of interest will only be increased if the applicable maximum rate of interest
is increased by law or by the Monetary Board; and

2. that the stipulated rate of interest will be reduced if the applicable maximum rate of
interest is reduced by law or by the Monetary Board (de-escalation clause).

The RTC found that Equitable's promissory notes only provides and uniformly stated:

If subject promissory note is extended, the interest for subsequent extensions shall be at such rate
as shall be determined by the bank.

Equitable dictated the interest rates if the term (or period for repayment) of the loan was extended.
Respondents had no choice but to accept them. This was a violation of Article 1308 of the Civil
Code. Furthermore, the assailed escalation clause did not contain the necessary provisions for
validity, that is, it neither provided that the rate of interest would be increased only if allowed by law
or the Monetary Board, nor allowed de-escalation. For these reasons, the escalation clause was
void.

2) Extraordinary inflation exists when there is an unusual decrease in the purchasing power of
currency and such decrease could not be reasonably foreseen or was beyond the contemplation of
the parties at the time of the obligation. Deflation is an inverse situation.

Despite the devaluation of the peso, BSP never declared a situation of extraordinary inflation.
Respondents should pay their dollar denominated loans at the exchange rate fixed by the
BSP on the date of maturity.

Decision of lower courts are reversed and set aside.