Overseas Factor (Seller), entered into a contract to supply 5,000 Metric tons of Kangni rice with National Rice and Corn Corp(Purchaser). The two entered into an agreement that the shipment shall be imported from Pakistan aboard a ship owned by South Sea Shipping (Carrier). A cofinancier of Seller entered into a surety bond agreement with an Insurance company owned by the carrier to guarantee the payment by the charterers from HK of the losses that may arise, in favor of the Carrier. Upon arrival of the goods in Manila, the Carrier refused to unload the rice unless the balance of the freight and other charges were paid. The Carrier was paid in rupees, but it wanted to be paid in British sterling or pesos. This resulted to a delay of 8 days, and demurrage. A complaint was filed against the Carrier to accept the payment and to allow unloading of the cargo. The Carrier lost and appealed.

Issue: Whether or not the Carrier had a right to hold the cargo?


Carrier's lien exists if freight was not paid. The fact that the freight was already included in the purchase price of the goods paid by the purchaser to the appellees(Seller), did not free the cargo from the carrier's lien as as provided for in Article 665 of the Code of Commerce, if the freight has not yet been fully paid by the Charter-Seller. Moreover, under clause No. 8 of the charter party, provides: "Owners shall have a lien on the cargo for freight, deadfreight, demurrage, and damages for detention. Charterers shall remain responsible for deadfreight and demurrage(including damages for detention), incurred at the port of loading. Charterers shall also remain responsible for freight and demurrage(including damages for detention) incurred at port of discharge, but to such extent as the Owners have been unable to obtain payment thereof by exercising the lien on the cargo.