G.R. No.

L-12138 February 27, 1962 quality and specifications enumerated in Philippine National Bank Letter of Credit
No. 62655 (Exhibit 6). Badruddin H. Mavani undertook to supply the Overseas
OVERSEAS FACTORS, INC. and GERTRUDES CARLOS, plaintiffs-appellees, Factors, Inc. with the needed Joshi rice.
vs.
SOUTH SEA SHIPPING CO., LTD., A. MAGSAYSAY, INC., On 5 November 1954 the Overseas Factors, Inc. and Gertrudes Carlos, co-
THE CAPTAIN AND THE CREW OF THE S.S. OCEAN TRADER financier of the former in its contract with the National Rice and Corn Corporation
and THE COLLECTOR OF CUSTOMS OF MANILA, defendants-appellants. to supply it with the needed rice, jointly and severally applied to the South Sea
Surety & Insurance Co., Inc. to act as surety upon a bond demanded by the
SOUTH SEA SURETY & INSURANCE CO., cross-claimant, South Sea Shipping Co., Ltd. in the amount of P315,000 to guarantee the
vs. payment by the charterers in Hongkong of the freight, demurrage, dead freight
OVERSEAS FACTORS, INC. and GERTRUDES CARLOS, cross-defendants. and other losses that might arise (Exhibit B-South Sea Surety & Insurance Co.,
Inc.). On the same date, 5 November 1954, the Overseas Factors, Inc., as
principal, and Gertrudes Carlos, as co-principal, and the South Sea Surety &
Paredes, Balcoff and Poblador and Angel S. Alvir for plaintiffs-appellees.
Insurance Co., Inc., as surety, executed a performance bond in the amount of
Ramon T. Oben and Solicitor General for defendants-appellants.
P315,000 in favor of the South Sea Shipping Co., Ltd. to guarantee the full
Romualdo Constantino for cross-claimant.
payment by the Charterers at Hongkong of all freight, demurrage, dead freight
Godofredo L. Guzman for intervenor.
and other losses that might arise, within 14 days from the date of departure of the
vessel from Karachi, Pakistan (Exhibits 14; A-South Sea Factory & Insurance
PADILLA, J.: Co., Inc.).

On 3 and 9 September 1954 the National Rice and Corn Corporation and the From 16 to 23 November 1954, 2,567,6053 metric tons gross of Joshi rice and
Overseas Factors, Inc. entered into two contracts whereby the later undertook to from 20 to 25 November 1954, 5,054.-0662 metric tons gross of Kangni rice or a
supply the former with 5,000 metric tons of Kangni rice at P.51 per ganta and total of 7,621.-6715 metric tons of rice were loaded on board the SS Ocean
5,000 metric tons of Joshi rice at P.49 per ganta (Exhibits A & B). On 10 Trader in Karachi, Pakistan (Exhibits Q-Naric; E-Naric).
September 1954, the National Rice and Corn Corporation established for its
account with the Philippine National Bank in Manila two irrevocable letters of
On 25 and 29 November the bills of lading covering the said shipments of rice
credit (Nos. 62655 & 62656) in the amounts of $529,125 and $508,375, United
duly signed by the shipper's agent were issued in the name of the Philippine
States currency, in favor of the Pakistan Development Corporation, Ltd., Karachi,
National Bank, Manila, as consignee. It appears in the two bills of lading that the
Pakistan (Exhibits a-2 & B-2).
party to be notified upon arrival in Manila was the National Rice and Corn
Corporation (Exhibits D & E).
On 30 October 1954, S.M. Yeung, authorized representative of the South Sea
Shipping Co., Ltd., wrote to Jose W. Diokno, authorized representative of the
On 25 November 1954 the SS Ocean Trader sailed from Karachi, Pakistan
Overseas Factors, Inc., in Karachi, Pakistan, enumerating the terms and
(Exhibits 1 & 17) and arrived in Manila on 18 December 1954 (Exhibit 15). The
conditions of the charter party they have agreed upon for shipment of the rice to
captain and crew members of the SS Ocean Trader refused to unload the cargo
be imported by the Overseas Factors, Inc. from Pakistan aboard the SS Ocean
of rice unless the balance of the freight and other charges due were paid by the
Trader owned by the South Sea Shipping Co., Ltd. At the foot of the letter, Jose
charterers. Hence an action was brought on 29 December 1954 in the Court of
W. Diokno affixed his signature signifying his intention to confirm the terms and
First Instance of Manila praying the Court to direct the defendants to convert the
conditions therein enumerated (Exhibit 10). On the same date, 30 October 1954,
amount in rupees paid by the plaintiff in Karachi, Pakistan, into British sterling
S.M. Yeung, in behalf of the Overseas Factors, Inc., entered into a formal
pounds, computed at the legal rate of exchange as allowed by the Government
contract of charter party in Karachi, Pakistan, incorporating the terms and
of Pakistan; to deliver to the plaintiffs the bills of lading of the cargo of rice; to
conditions enumerated in the letter (Exhibit 11).(See Exhibit C.) On 12 November
permit the unloading by the plaintiffs of the cargo of the rice from the SS Ocean
1954 the terms and conditions of the charter party regarding the rate and
Trader pending trial of the case; to desist or refrain from interfering with such
payment of freight were amended by the parties in Hongkong (Exhibit 12).
unloading upon the filing of an additional surety bond, if necessary, in an amount
that the Court may fix to answer for damages that the defendants may suffer as a
On 4 November 1954 Juan A. Magsino, in behalf of Overseas Factors, Inc. result of such injunction, and to pay the costs; and the Collector of Customs to
entered into an agreement with Abdulaye A. Badat, sole proprietor of Ivlom see to it that the cargo of rice from the SS Ocean Trader be unloaded. Plaintiffs
Corporation, in Karachi, Pakistan, whereby the said corporation undertook to also pray that the demurrage sought to be collected by the defendants be
supply the Overseas Factors, Inc. with 5,000 metric tons of Kangni rice of the computed at the rate L300 and not at L700 a day; and for other just and equitable
relief(civil No. 24972). The defendants answered the complaint and set up a In the letter written by S. M. Yeung, authorized representative of the appellant
counterclaim of P316,364.38 for freightage, demurrage, charges for detention shipping company, to Jose W. Diokno, authorized representative ofthe appellees,
and other expenses of the vessel while on detention. The plaintiffs controverted on 30 October 1954 in Karachi, Pakistan, summing up the principal terms and
the defendant's counterclaim. The National Rice and Corn Corporation filed a conditions of the charter party agreed upon by them, it appears that they have
complaint in intervention to protect its interest and the South Sea Surety & agreed, among others, as follows:.
Insurance Co., Inc. filed a cross-claim against the plaintiffs.

FREIGHT: Sterling one hundred shillings (100) per metric

The other pleadings filed by the parties and others issued by the Court in
ton gross weight, F10 and free stowed;.
connection with the disposition of the cargo of rice in question need not be stated
for the determination of the case.1 PAYMENT OF Charterers to pay full freight to the Owners at
FREIGHT: Hongkong in British Pound Sterling upon signing
After trial, the Court rendered judgment, the dispositive part of which is as of the bills of lading, ship lost or not lost;.
follows:.
PERFORMANCE Charterers to arrange a performance bond in
IN VIEW OF THE FOREGOING, the Court believes and so holds that BOND: Hongkong satisfactory to the Owners at
the preponderance of evidence is in favor of the plaintiffs and against the Hongkong, latest before noon on the 1st
defendant South Sea Shipping Co., Ltd. The total amount of 369,000 November 1954 to guarantee the due
Pakistan rupees received by S.M. Yeung was in full payment of the performance of all freight at Hongkong within
fourteen (14) days from date of vessel's
transportation of the rice in question from Karachi to Manila, and that the
departure from Karachi. Charter Party Form (as
delay in the unloading of such rice in Manila was not due to plaintiffs'
fault. adopted 1922). (Exhibit 10.).

The claim for lien on the shipment of rice has no legal basis for the On the same date, 30 October 1954, the parties executed in Karachi, Pakistan, a
reason that the freight had already been paid in Karachi, Pakistan, formal contract of charter party in a printed form of the uniform general charter
before such shipment arrived in Manila. adopted by the documentary committee of the Chamber of Shipping of the United
Kingdom, as revised in 1922. Chung Kien Tieng signed in behalf of the appellees
The injunction bond filed by plaintiffs as well as the performance bond and Yeung Siu Man in behalf of the appellant shipping company. The pertinent
executed to guaranty the payment of freight are hereby ordered terms of the contract are:.
cancelled.
Rate of Freight:
The complaint with respect to defendants A. Magsaysay, Inc., the Sterling One Hundred (100/-) per metric ton, free in, free out and free
Captain and Crew of the S.S. Ocean Trader, and the Collector of Manila, stowed.
is hereby dismissed, it appearing that they have nothing to do with the
controversy between plaintiff Overseas Factors, Inc. and South Sea Payment of Freight:
Shipping Co., Ltd. The freight to be paid in case without discount on signing bills of lading
in British Pound Sterling transferable to the Owners at Hongkong within
Defendants' counterclaim is hereby dismissed. fourteen (14) days from the date of the vessel's departure from Karachi.
(Exhibit C or 11.).
Defendant South Sea Shipping Co., Ltd. shall pay the costs.
On 12 November 1954 the two clauses were amended by adding the following to
the first clause:
SO ORDERED.

or according to Owners' option of Forty Two Pesos (Pesos 42.-) per

Manila, Philippines, December 28, 1956.
metric tons, free in, free out and free stowed. and the following to the
second clause:.
The defendants South Sea Shipping Co., Ltd. and A. Magsaysay, Inc. have
appealed.
 or according to Owners' option of payment at Manila at the rate stated in ... acknowledges that my Head Office in Hongkong has this day, the
clause No. 1 (Exhibit 12). 29th November 1954, received the sum of Sterling THIRTEEN
THOUSAND EIGHT HUNDRED EIGHTY EIGHT POUNDS
In the performance bond executed and signed by the appellees in favor of the SEVENTEEN SHILLING NINE PENCE ONLY (L-13,888-17-9-d) being
appellants, it was stipulated that — your first partial payment of freight due to us under our charter party
dated the 30th October 1954. This amount has now been credited to
your freight account with us in Hongkong pending the final settlement of
... the condition of this bond is such that if the Principal and co-Principal
the aforementioned charter, without prejudice to the Bond executed by
shall well and duly comply with the conditions and stipulations South Sea Surety Company at Manila in favor of Owner's Agents M/s A.
enumerated in the above mentioned agreement charter and contract of Magsaysay, Inc., Manila for payment of full freight, etc., in Sterling at
charter party as well as pay all freight at Hongkong within fourteen (14) Hongkong within 14 days from 25th November 1954 being the date of
days from the date of vessel's departure from Karachi, then this departure of SS "Ocean Trader" from Karachi. (Exhibit 1.).
obligation shall be null and void; otherwise, it shall remain in full force
and effect. (Exhibits 14; A-South Sea Surety & Insurance Co., Inc.).
However, the appellants deny having received the sum of L12,838-0-6d from the
appellees and claim that the sum of 119,221-5-0 Pakistani rupees that Yeung
According to the appellant shipping company, the amount due from the appellees received from Mavani could not be credited as part payment of the freight.
as freightage of the 7,621.6715 metric tons of rice at 100 shillings per metric ton
was L38, 108-7-1d (Exhibit 16-A) and that the appellees had paid it only L13,888-
17-9d (Exhibit 1). The contract between the parties is that payment shall be made in British Pound
Sterling payable to the appellants in Hongkong within 14 days from date of
departure of the vessel from Karachi, Pakistan, or in Philippine currency.
Juan A. Magsino testifies that he was the agent of the appellees; that he went to
Karachi, Pakistan, at the instance of his principals where he stayed for three
months to take charge of screening the rice being imported by his principals, On 5 November 1954 Magsino wrote to Kazi & Kazi, agents of the South Sea
loading them on board the SS Ocean Trader and paying the freight due for their Shipping Co., Ltd., in Karachi, requesting them to write a letter to the Shipping
shipment to Manila; that he requested Abdulaye A. Badat, proprietor or manager Controller, and furnishing a copy thereof to the Food Ministry, confirming that
or Ivlom Corporation, with whom his principals had an agreement to supply them they have booked a cargo of 2,500 tons of Joshi rice and 5,000 tons of Kangni
with Kangni rice for export to Manila, to pay Yeung, the authorized representative rice to be shipped by Badruddin H. Mavani and Ivlom Corporation, respectively,
of the appellant shipping company, the sum of P250,000 Pakistani rupees as to the National Rice and Corn Corporation at the rate of Sterling One Hundred
payment for the freight due; that on 29 November 1954 he called Yeung to go to Shillings per metric ton gross, so that the approval of the Government for the
the Philippines Legation and receive from him payment of the freight, and to remittance of the freight to the South Sea Shipping Co., Ltd. in Hongkong may be
bring with him the bill of lading but he answered that he could not surrender the obtained (Exhibit 2). In the last paragraph Magsino wrote: .
bill of lading unless the freight was fully paid; that at about 11:00 o'clock in the
morning or 12:00 o'clock noon of the same day, 29 November 1954, Badat paid We do understand quite well that your Principal, South Sea Shipping Co.
to Yeung the sum of P250,000 Pakistani rupees in 100 rupee denomination in Ltd., Hongkong, are not concerned or obliged in any way, under the
the presence of Consul General Tagakotta Sotto, Eustacio Barrera, a gentleman terms of our Charter Party dated 30th October 1954 on the subject
from T.K. Brothers, attorney Emigdio Arcilla, and the witness inside the office of vessel, in respect of the application for the approval of remittance of
the Philippine Legation in Karachi; that Yeung requested the witness to help him freight to Hongkong, therefore we hereby confirm that your acceptance
count the money and it took them two hours to finish counting it; that after the of our present request shall not prejudice the terms and conditions of the
sum of P250,000, Pakistani rupees was received by Yeung, he surrendered to above mentioned Charter Party and shall have no effect on the Charter
Badat the original of the bill of lading for 5,000 metric tons of Kangni rice and Party whatsoever, and we shall assume all responsibilities and
gave the witness a copy thereof (Exhibit D); that between 6 and 8 December consequences in this regard. (Exhibit 2-A.)
1954 the sum of L19,221-5-0 Pakistani rupees in check as payment for the
freight of the Joshi rice was paid to Yeung inside the National Bank of India by On the same date, 5 November 1954, Magsino wrote to T.K. Brothers & Co.,
Badruddin H. Mavani in his (the witness') presence; and that after receiving agents of the South Sea Shipping Co., Ltd. in Hongkong, requesting them to
payment, Yeung delivered to Mavani the bill of lading for the Joshi rice (Exhibit write a similar letter to the same Government officials of Pakistan (Exhibit 3). In
E). the last paragraph, he wrote: .

Appellant shipping company admits that it has received payment of the sum of
L13,888-17-9d. In his letter addressed to Magsino, Yeung —
 This is without prejudice to the terms and conditions of the above FREIGHT PAID IN PAKISTAN Rs. 119,221-5-0 BEING EQUIVALENT
mentioned Charter Party entered into between South Sea Shipping Co. TO L-12,838-0-6d BY BADRUDDIN H. MAVANI ON ACCOUNT OF
Ltd., Hongkong and ourselves and has no effect on the Charter Party MINISTRY OF FOOD, GOVERNMENT OF PAKISTAN, KARACHI,
whatsoever. (Exhibit 3-A). PENDING TRANSFER TO HONGKONG. (Exhibit E-1.).

On 1 January 1955 Magsino wrote to Yeung acknowledging receipt of two signed It is, therefore, clear that the sum of L12,838-0-6d (in British Pound Sterling) due
copies of the bill of lading covering the shipment of 2,567.6053 metric tons of for freight on the Joshi rice shipped on board the SS Ocean Trader has not yet
Joshi rice shipped by Badruddin H. Mavani on board the SS Ocean Trader been paid to the appellant shipping company by the appellees, in accordance
consigned to the Philippine National Bank (Exhibit 4). In the second paragraph of with their contract. Moreover, payment of the sum of 119,221-5-0 Pakistan
the letter, he said:. rupees to Yeung made by Mavani in check was held by Kazi & Kazi merely for
the account of the appellees pending Government approval for transfer to the
I find all particulars in these bills of lading to be all in order and confirm Office of the appellant shipping company in Hongkong (Exhibit 5).
that your issuance of such bills of lading indicating only the charges of
freight in conformity with Messrs. Kazi & Kazi's letter addressed to the Magsino claims that the possession by any individual of British pounds sterling is
Shipping Controller, Karachi, dated 5th November 1954 upon my written outlawed in Pakistan in the same way that the possession by any person of
request of same date, shall not prejudice your interests in respect of our United States dollars is prohibited in the Philippines, and for that reason it was
Charter Party dated 30th October 1954. .1äwphï1.ñët impossible for him to have paid Yeung in British pounds sterling. If that were true,
why was the first payment of 250,000 Pakistani rupees made by Abdulaye A.
At the foot of the said letter, he stated over his signature that:. Badat and received by S.M. Yeung for the 5,000 tons of Kangni rice converted
into L13,838-17-9d and credited by the appellant shipping company to the freight
account with it in Hongkong?.
The necessity to replace the clause "Freight Payable as per C/P on
streamer 'Ocean Trader'" dated 30th Oct. 1954 by the new "Freight
Paid" clause upon the insistence of our shippers in order to facilitate to Under the charter party, the appellant shipping company has the option to
remit the freight officially is hereby acknowledged specifically not to demand payment of the freight in British pounds sterling payable in Hongkong at
prejudice your position in respect of the said charter. (Exhibit 4-A.) . the rate of 100 shillings per metric ton or P42, Philippine currency, per metric ton
(Exhibits C & 12). In the appellants' answer and counterclaim they demand that
the appellees pay them the freight at P42 per metric ton, Philippine currency, The
In reply, on 5 January 1955 Yeung wrote to Magsino as follows:.
amount due as freightage for 7,621,6715 metric tons of rice computed at P42,
Philippine currency, per metric ton, is P320,110.20. Deducting therefrom the sum
With reference of your letter dated 1st January 1955, I beg to confirm of L13,888.17-9d or P116,660.62, computed at P8.40 to L1 or P42 to L5 per
that our agents, Messrs. Kazi & Kazi, Karachi, are now holding, for your metric ton, there is still due the appellant shipping company from the appellees
account, the sum of Rs 119,221-5-0, being freight in Pakistan Rupees the sum of P203,449.57, Philippine currency.
equivalent to L-12,838-0-6d, paid by Messrs. Badruddin H. Mavani on
2,567.6053 metric tons gross of Joshi Rice as per B/L No. 2 of ss Clauses Nos. 5, 7, 11 and 20 of the charter party (Exhibit C) provide:.
"Ocean Trader", pending Government approval for transfer of the same
to my Head Office in Hongkong in accordance with our charter party
dated 30th October 1954. 5. Cargo to be brought alongside in such a manner as to enable vessel
to take the goods with her own tackle and to load the full cargo in nine
(9) running days free of expense to the vessel. Charterers to procure
While we would be glad to request Kazi & Kazi to do all the usual and pay the necessary men on shore or on board the lighters to do the
formalities for applying for the remittance of the total freight on your work there, vessel only leaving the cargo on board.
behalf, we have to inform you that it is necessary for both your shippers
to approach the Government Authorities concerned for explanation of
certain details before such approval for remittance of freight will be Any pieces and/or packages of cargo over two tons weight, shall be
given. Therefore, in your interests, it would be advisable for you to ask loaded, stowed and discharged by Charterers at their risk and expense.
your shippers to follow up the matter immediately until the permit for
transfer of the freight is obtained from the State Bank. (Exhibit 5.). Time shall commence at 1 p.m. on the 30th October 1954.

In the bill of lading Exhibit E, it is written that — Time lost in waiting for berth to count as loading time.
 7. Four running days on demurrage at the rate of L-300. - Sterling per vessel and cargo were fumigated by the health authorities. Notice of its arrival
day or pro rata for any part of a day, payable day by day, at Hongkong to and readiness to unload the cargo was served upon the appellees by the Captain
be allowed Merchants altogether at ports of loading and discharging. L- of the vessel at 10:20 o'clock in the morning of 20 December 1954 (Exhibit 15).
100. - per day for dispatch. Pursuant to clause No. 6 of the charter party (Exhibit C), the unloading was to be
made in seven running days, free of expenses for the account of the vessel,
11. Should the cargo not be brought alongside to load (whether in berth beginning at 1:00 o'clock in the afternoon of 20 December and expiring at 1:00
or not) on or before the 8th Nov. 1954 Owners have the option of o'clock in the afternoon of 27 December 1954. However, because of the refusal
cancelling this contract. of the appellees to pay the balance of the freight and other charges, the captain
and crew of the vessel refused to unload the cargo, and the vessel was placed
under detention from 1:00 o'clock in the afternoon of 27 December 1954 to 6:00
20. Any dispute arising under this charter to be referred to arbitration in o'clock in the morning of 5 January 1955. During that time the cargo was
London, one Arbitrator to be nominated by the Owners and the other by unloaded pursuant to the order of the Court and deposited in the warehouse of
the Charterers, and in case the Arbitrators shall not agree then to the the National Rice and Corn Corporation. The unloading was finished at 6:00
decision of an Umpire to be appointed by them, the Award of the o'clock in the morning of 5 January 1955 resulting in 8 days and 17 hours of
Arbitrators or the Umpire to be final and binding upon both parties.
detention. Under clause No. 7 of the charter party (Exhibit C) the appellant
shipping company is entitled to collect from the appellees four running days on
The period of nine days of loading time free of expenses for the account of the demurrage for detention at the rate of L300 or a total of L1,200. Computed at the
vessel from 10:00 o'clock p.m., 30 October, expired at 1:00 o'clock p.m., 8 rate of exchange prevailing in January 1955, which is P5.60 to L1 (51 Off. Gaz.
November 1954. It was only on 25 November 1954 that the vessel was fully 1271), the appellant shipping company should be paid by the appellees the sum
loaded and able to sail for Manila (Exhibits 1 & 17) after a delay of seventeen of P6,720, Philippine currency. The demurrage for the remaining detention of four
days. Pursuant to clause No. 7 of the charter party (Exhibit C),four running days days and 17 hours and other charges claimed by the appellant shipping company
on demurrage shall be paid to the appellant shipping company at the rate of L300 are subject to arbitration in London pursuant to clause No. 20 of the charter party
or a total of L1,200. Computed at the rate of exchange prevailing in December (Exhibit C).
1954, which is P5.60 to L1 (50 Off. Gaz. 4744), the appellant shipping company
should be paid by the appellees the sum of P6,720, Philippine currency. The As held by this Court in the case of National Rice and Corn Corporation vs.
demurrage for the remaining delay of thirteen days is subject to arbitration in Macadaeg, supra, the fact that the freight was already included in the purchase
London pursuant to the clause No. 20 of the charter party (Exhibit C).
price paid by it to the appellees did not free the cargo of rice from the carrier's
lien provided for in article 665 of the Code of Commerce, if the freight has not yet
The appellees cannot be charged with L-700 a day for demurrage on the been fully paid by the charterer. Moreover, clause No. 8 of the charter party
remaining thirteen days of delay because they are only answerable for that much (Exhibit C) provides:
"for all detention charges" "if the ship is so detained after loading the cargo."
(Exhibit 13) The departure of the vessel was not delayed after the cargo was Owners shall have a lien on the cargo for freight, dead freight,
finally loaded. As a matter of fact it sailed for Manila on 25 November 1954 after demurrage and damages for detention. Charterers shall remain
it was loaded.
responsible for dead-freight and demurrage (including damages for
detention), incurred at port of loading. Charterers shall also remain
Clause No. 6 of the Charter Party (Exhibit C) provides:. responsible for freight and demurrage (including damages for detention)
incurred at the port of discharge, but only to such extent as the Owners
Cargo to be received by Merchants at their risk and expense alongside have been unable to obtain payment thereof by exercising the lien on
the vessel not beyond the reach of her tackle and to be discharged in the cargo.
seven (7) running days, free of expenses to the vessel. Time to
commence at 1 p.m. if notice of readiness to discharge is given before The contention that the omission of this clause in the letter dated 30 October
noon, and at 6 a.m. next working day if notice given during office hours 1954 where the principal terms and conditions of the charter party were
after noon. enumerated by Yeung, the shipowners' representative, and confirmed by Diokno,
the charterer's representative, and that in lieu thereof a clause requiring the
Time lost in waiting for berth to count as discharging time. charter to file a performance bond in favor of the shipowners, amounted to a
waiver of the shipowners, or carrier's lien on the cargo is untenable. The last part
The SS Ocean Trader arrived in Manila at 4:45 o'clock in the morning (1655 of the letter (Exhibit 10), which says:.
hours) of 18 December 1954 (Exhibit 15). The day following, 19 December, the
 This agreement is subject to the arrangement of the performance bond Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera,
being completed before the time as specified above. The two copies of Paredes, Dizon and De Leon, JJ., concur.
the formal Charter Party shall be signed immediately upon confirmation
of the performance bond being established at the stipulated bank,. Footnotes

shows that the letter Exhibit 10 was written before the formal contract of charter 1
See National Rice and Corn Corporation vs. Macadaeg, G.R. No. L-
party (Exhibit C) was executed by the parties. Hence it cannot be said that the 9025, 27 September 1957.
shipowners waived their lien provided for in the formal contract of charter party
(Exhibit C).

The addendum to the charter party contract (Exhibit C) executed by the parties
on 12 November 1954 in Hongkong varying the clauses on the rate and payment
of freight without the consent of the surety (Exhibit 12) was a novation of the
contract. For that reason the surety's obligation in the performance of bond was
extinguished (Exhibits 14; A-South Sea Surety & Insurance Co., Inc.).

The foregoing notwithstanding, the Court is of the opinion that the sum of Rs-
119,221-5-0 equivalent to L-12-838-6-6d paid by the Badruddin H. Mavani for the
account of the appellees to pay the freight of 2,567.6053 metric tons gross of
Joshi rice received by S. M. Yeung as agent or representative of the appellant
shipping company should be set off against the sum due the said appellant
shipping company for freight and demurrages, at the official rate of exchange in
Karachi, Pakistan, on the day of receipt thereof by the agent of the appellant
shipping company, for aside from the fact that the latter should not be allowed to
enrich itself at the expense of the appellees, the forfeiture of the amount to be
deposited with Chartered Bank of India, Australia and China in Karachi to the
credit of the appellant shipping company, offered by Magsino, the agent of the
appellees, to pay the freight of the cargo of rice (Exhibits 7 and 7-A) was not
accepted by S. M. Yeung, the agent of the shipowners. (See p. 29, appellants'
brief.) And the difference after the set off in favor of any party shall bear the legal
rate of interest, to wit: if in favor of the appellees, from the date of the receipt of
the amount in Karachi, Pakistan, by the agent of the appellant shipping company;
or, if in favor of the appellant shipping company, from the date of filing of its
counterclaim for the amount of freight and demurrages.

The judgment appealed from is modified by ordering the appellees to pay the
appellant shipping company the sums of P203,449.57, the balance of the
freightage still unpaid, P6,720 as demurrage in loading the cargo and P6,720 as
demurrage for detention of the vessel, without prejudice to any amount sought to
be collected for demurrage which is to be submitted to arbitration in London,
against which the equivalent amount in Philippine currency of the sum of
L12,838-0-6d or Rs119,221-5-0 as above stated is set of; and holding that the
appellant shipping company did not lose its lien on the cargo of rice, without
pronouncement as to costs. The complaint and the complaint in intervention are
dismissed as to the other defendants-appellants and the counterclaim against the
appellee South Sea Surety & Insurance Co. and the latter's cross-claim are
likewise dismissed.