Private respondent K-Line is a foreign shipping company doing biz in PH, its shipping agent is respondent Smith, Bell & Co., Inc. It is a member of the Far East Conference, the body which fixes rates by agreement of its member-shipowners. The conference is registered with the U.S. Federal Maritime Commission.

Van Reekum Paper, Inc. entered into a contract of affreightment with the K-Line for the shipment of 468 rolls of container board liners from Georgia to Manila, consigned to herein petitioner La Suerte Cigar. The contract of affreightment was embodied in Bill of Lading issued by the carrier to the shipper. The expenses of loading and unloading were for the account of the consignee (La Suerte). The shipment was packed in 12 container vans. At Tokyo, the cargo was transhipped on two vessels of the K-Line. Ten (10) container vans were loaded on the 1st vessel, while two (2) were loaded on another vessel.

On June 11, the first vessel arrived at the port of Manila. La Suerte was notified in writing of the ship's arrival, together with information that container demurrage would be charged unless the consignee took delivery of the cargo within ten (10) days.

On June 21, the other vessel arrived and was discharged of its contents the next day. On the same day the shipping agent Smith, Bell & Co. released the Delivery Permit for twelve (12) containers to the broker upon payment of freight charges on the bill of lading. On June 22, La Suerte’s broker presented the shipping documents to the Bureau of Customs. But the latter refused to act on them because the manifest of the 1st vessel covered only 10 containers, whereas the bill of lading covered 12 containers.

The broker therefore sent back the manifest to Smith, Bell & Co with the request that the manifest be amended. Smith, Bell & Co. refused on the ground that an amendment would violate the Tariff and Customs Code relating to unmanifested cargo.

Later however, it agreed to add a footnote reading "Two container vans carried by other vessel to complete the shipment of twelve containers under the bill of lading."

The manifest was approved for release only on July 3. On July 11, when the broker tried to secure the release of the cargo, it was informed by Smith, Belle, & Co. that the free time for removing the containers from the container yard had expired on June 26 for the first vessel, and on July 9, in the case of the 2nd vessel, and that demurrage charges had begun to run a day after the free time, respectively.

On July 13, La Suerte paid P47,680 representing the total demurrage charges on all the containers, but it was not able to obtain its goods. It was able to obtain only a partial release of the cargo because of the breakdown of the arrastre's equipment at the container yard. On July 16, La Suerte sent a letter to Smith, Bell & Co. requesting reconsideration of the demurrage charges, but was refused. Subsequently, La Suerte refused to pay any more demurrage charges on the ground that the delay in the release of the cargo was not due to its fault but to the breakdown of the equipment at the container yard.

La Suerte filed this suit in the RTC for specific performance to compel respondents to release 7 container vans consigned to it free of charge.

In their answer, private respondents claimed that they were not free to waive these charges because under the United States Shipping Act of 1916 it was unlawful for any common carrier engaged in transportation involving the foreign commerce to charge or collect a greater or lesser compensation that the rates and charges specified in its tariffs on file with the Federal Maritime Commission.

RTC dismissed petitioner's complaint. It cited the bill of lading which provided:

23. The ocean carrier shall have a lien on the goods, which shall survive delivery, for all freight, dead freight, demurrage, damages, loss, charges, expenses and any other sums whatsoever payable or chargeable to or for the account of the Merchant under this bill of lading . . . . RTC likewise invoked clause 29 of the bill of lading which provided:

29. . . .The terms of the ocean carrier's applicable tariff, including tariffs covering intermodal transportation on file with the Federal Maritime Commission and the Interstate Commission or any other regulatory body which governs a portion of the carriage of goods, are incorporated herein.

18. The RTC held that the bill of lading was the contract between the parties and, therefore, petitioner was liable for demurrage charges. It rejected petitioner's claim of force majeure in such a way that the delay in the delivery of the containers was caused by the breaking down of the equipment of the arrastre operator. The Court reasoned that still plaintiff has to pay the corresponding demurrage charges. The possibility that the equipment would break down was not only foreseeable, but actually, foreseen, and was not caso fortuito. CA affirmed.

ISSUE: Whether or not La Suerte is liable for demurrage for delay in removing its cargo from the containers - YES but only for the period July 3 - 13, 1979 with respect to ten containers and from July 10 - July 13, 1979, in respect of two other containers


Payment of demurrage
La Suerte's contention is that the bill of lading does not provide for the payment of container demurrage, as Clause 23 of the bill of lading only says "demurrage," i.e., damages for the detention of vessels. Here there is no detention of vessels. It invokes a case where SC defined "demurrage" as follows:

Demurrage, in its strict sense, is the compensation provided for in the contract of affreightment for the detention of the vessel beyond the time agreed on for loading and unloading. Essentially, demurrage is the claim for damages for failure to accept delivery… Whatever may be the merit of petitioner's contention, the fact is that clause 29(a) also of the bill of lading, in relation to Rule 21 of the Far East Conference Tariff , specifically provides for the payment by the consignee of demurrage for the detention of containers and other equipment after the so-called "free time."

A bill of lading is both a receipt and a contract. As a contract, its terms and conditions are conclusive on the parties, including the consignee. The enforcement of the rules of the Far East Conference and the Federal Maritime Commission is in accordance with R.A. 1407 which declares that the Philippines, in common with other maritime nations, recognizes the international character of shipping in foreign trade and existing international practices in maritime transportation and that it is
part of the national policy to cooperate with other friendly nations in the maintenance and improvement of such practices. Period of Demurrage With respect to the period of La Suerte’s liability, La Suerte cannot be held liable for demurrage starting June 27 on the 10 containers because the delay in obtaining release of the goods was not due to its fault.

The evidence shows that the Bureau of Customs refused to give an entry permit to petitioner because the manifest issued by K-Line stated only 10 containers whereas the bill of lading also issued by the K-Line showed there were 12 containers. For this reason, petitioner's broker had to see Smith, Bell & Co. on June 22, but the latter did not immediately do something to correct the manifest. Smith, Bell & Co. was asked to "amend" the manifest, but it refused to do so on the ground that this would violate the law. It was only on June 29 that it thought of adding instead a footnote, by which time the "free time" had already expired. Now June 29 was a Friday. Again it is probable the correct manifest was presented to the Bureau of Customs only on Monday, July 2, and therefore it was only on July 3 that it was approved.

It was therefore only from July 3 that La Suerte could have claimed its cargo and charged for any delay With respect to the other two containers, demurrage was properly considered to have accrued on July 10 since the "free time" expired on July 9. The period of delay, however, for all the 12 containers must be deemed to have stopped on July 13, because on this date petitioner paid P47,680.00. If it was not able to get its cargo from the container vans, it was because of the breakdown of the shifter or cranes of the arrastre service operation. It would be unjust to charge demurrage after July 13, since the delay in emptying the containers was not due to the fault of La suerte In sum, we hold that petitioner can be held liable for demurrage only for the period July 3-13, 1979 and that in accordance with the stipulation in its bill of lading.