MINDANAO TERMINAL AND BROKERAGE SERVICE, INC.

Petitioner, versus
PHOENIX ASSURANCE COMPANY OF NEW YORK/ MCGEE & CO., INC.,
Respondent.
2009-05-08 | G.R. No. 162467
DECISION

Tinga, J.:
Before us is a petition for review on certiorari[1] under Rule 45 of the 1997 Rules of Civil Procedure of
the 29 October 2003[2] Decision of the Court of Appeals and the 26 February 2004 Resolution[3] of the
same court denying petitioner's motion for reconsideration.
The facts of the case are not disputed.
Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao Terminal and Brokerage Service,
Inc. (Mindanao Terminal), a stevedoring company, to load and stow a shipment of 146,288 cartons of
fresh green Philippine bananas and 15,202 cartons of fresh pineapples belonging to Del Monte Fresh
Produce International, Inc. (Del Monte Produce) into the cargo hold of the vessel M/V Mistrau. The
vessel was docked at the port of Davao City and the goods were to be transported by it to the port of
Inchon, Korea in favor of consignee Taegu Industries, Inc. Del Monte Produce insured the shipment
under an "open cargo policy" with private respondent Phoenix Assurance Company of New York
(Phoenix), a non-life insurance company, and private respondent McGee & Co. Inc. (McGee), the
underwriting manager/agent of Phoenix.[4]
Mindanao Terminal loaded and stowed the cargoes aboard the M/V Mistrau. The vessel set sail from the
port of Davao City and arrived at the port of Inchon, Korea. It was then discovered upon discharge that
some of the cargo was in bad condition. The Marine Cargo Damage Surveyor of Incok Loss and
Average Adjuster of Korea, through its representative Byeong Yong Ahn (Byeong), surveyed the extent
of the damage of the shipment. In a survey report, it was stated that 16,069 cartons of the banana
shipment and 2,185 cartons of the pineapple shipment were so damaged that they no longer had
commercial value.[5]
Del Monte Produce filed a claim under the open cargo policy for the damages to its shipment. McGee's
Marine Claims Insurance Adjuster evaluated the claim and recommended that payment in the amount of
$210,266.43 be made. A check for the recommended amount was sent to Del Monte Produce; the latter
then issued a subrogation receipt[6] to Phoenix and McGee.
Phoenix and McGee instituted an action for damages[7] against Mindanao Terminal in the Regional Trial
Court (RTC) of Davao City, Branch 12. After trial, the RTC,[8] in a decision dated 20 October 1999, held
that the only participation of Mindanao Terminal was to load the cargoes on board the M/V Mistrau under
the direction and supervision of the ship's officers, who would not have accepted the cargoes on board
the vessel and signed the foreman's report unless they were properly arranged and tightly secured to
withstand voyage across the open seas. Accordingly, Mindanao Terminal cannot be held liable for
whatever happened to the cargoes after it had loaded and stowed them. Moreover, citing the survey
report, it was found by the RTC that the cargoes were damaged on account of a typhoon which M/V
Mistrau had encountered during the voyage. It was further held that Phoenix and McGee had no cause
of action against Mindanao Terminal because the latter, whose services were contracted by Del Monte,
a distinct corporation from Del Monte Produce, had no contract with the assured Del Monte Produce.

The RTC dismissed the complaint and awarded the counterclaim of Mindanao Terminal in the amount of
P83,945.80 as actual damages and P100,000.00 as attorney's fees.[9] The actual damages were
awarded as reimbursement for the expenses incurred by Mindanao Terminal's lawyer in attending the
hearings in the case wherein he had to travel all the way from Metro Manila to Davao City.
Phoenix and McGee appealed to the Court of Appeals. The appellate court reversed and set aside[10]
the decision of the RTC in its 29 October 2003 decision. The same court ordered Mindanao Terminal to
pay Phoenix and McGee "the total amount of $210,265.45 plus legal interest from the filing of the
complaint until fully paid and attorney's fees of 20% of the claim."[11] It sustained Phoenix's and
McGee's argument that the damage in the cargoes was the result of improper stowage by Mindanao
Terminal. It imposed on Mindanao Terminal, as the stevedore of the cargo, the duty to exercise
extraordinary diligence in loading and stowing the cargoes. It further held that even with the absence of a
contractual relationship between Mindanao Terminal and Del Monte Produce, the cause of action of
Phoenix and McGee could be based on quasi-delict under Article 2176 of the Civil Code.[12]
Mindanao Terminal filed a motion for reconsideration,[13] which the Court of Appeals denied in its 26
February 2004[14] resolution. Hence, the present petition for review.
Mindanao Terminal raises two issues in the case at bar, namely: whether it was careless and negligent
in the loading and stowage of the cargoes onboard M/V Mistrau making it liable for damages; and,
whether Phoenix and McGee has a cause of action against Mindanao Terminal under Article 2176 of the
Civil Code on quasi-delict. To resolve the petition, three questions have to be answered: first, whether
Phoenix and McGee have a cause of action against Mindanao Terminal; second, whether Mindanao
Terminal, as a stevedoring company, is under obligation to observe the same extraordinary degree of
diligence in the conduct of its business as required by law for common carriers[15] and
warehousemen;[16] and third, whether Mindanao Terminal observed the degree of diligence required by
law of a stevedoring company.
We agree with the Court of Appeals that the complaint filed by Phoenix and McGee against Mindanao
Terminal, from which the present case has arisen, states a cause of action. The present action is based
on quasi-delict, arising from the negligent and careless loading and stowing of the cargoes belonging to
Del Monte Produce. Even assuming that both Phoenix and McGee have only been subrogated in the
rights of Del Monte Produce, who is not a party to the contract of service between Mindanao Terminal
and Del Monte, still the insurance carriers may have a cause of action in light of the Court's consistent
ruling that the act that breaks the contract may be also a tort.[17] In fine, a liability for tort may arise even
under a contract, where tort is that which breaches the contract[18]. In the present case, Phoenix and
McGee are not suing for damages for injuries arising from the breach of the contract of service but from
the alleged negligent manner by which Mindanao Terminal handled the cargoes belonging to Del Monte
Produce. Despite the absence of contractual relationship between Del Monte Produce and Mindanao
Terminal, the allegation of negligence on the part of the defendant should be sufficient to establish a
cause of action arising from quasi-delict.[19]
The resolution of the two remaining issues is determinative of the ultimate result of this case.
Article 1173 of the Civil Code is very clear that if the law or contract does not state the degree of
diligence which is to be observed in the performance of an obligation then that which is expected of a
good father of a family or ordinary diligence shall be required. Mindanao Terminal, a stevedoring
company which was charged with the loading and stowing the cargoes of Del Monte Produce aboard
M/V Mistrau, had acted merely as a labor provider in the case at bar. There is no specific provision of
law that imposes a higher degree of diligence than ordinary diligence for a stevedoring company or one
who is charged only with the loading and stowing of cargoes. It was neither alleged nor proven by

Phoenix and McGee that Mindanao Terminal was bound by contractual stipulation to observe a higher
degree of diligence than that required of a good father of a family. We therefore conclude that following
Article 1173, Mindanao Terminal was required to observe ordinary diligence only in loading and stowing
the cargoes of Del Monte Produce aboard M/V Mistrau.
The Court of Appeals erred when it cited the case of Summa Insurance Corporation v. CA and Port
Service Inc.[20] in imposing a higher degree of diligence,[21] on Mindanao Terminal in loading and
stowing the cargoes. The case of Summa Insurance Corporation v. CA, which involved the issue of
whether an arrastre operator is legally liable for the loss of a shipment in its custody and the extent of its
liability, is inapplicable to the factual circumstances of the case at bar. Therein, a vessel owned by the
National Galleon Shipping Corporation (NGSC) arrived at Pier 3, South Harbor, Manila, carrying a
shipment consigned to the order of Caterpillar Far East Ltd. with Semirara Coal Corporation (Semirara)
as "notify party." The shipment, including a bundle of PC 8 U blades, was discharged from the vessel to
the custody of the private respondent, the exclusive arrastre operator at the South Harbor. Accordingly,
three good-order cargo receipts were issued by NGSC, duly signed by the ship's checker and a
representative of private respondent. When Semirara inspected the shipment at house, it discovered that
the bundle of PC8U blades was missing. From those facts, the Court observed:
x x x The relationship therefore between the consignee and the arrastre operator must be examined.
This relationship is much akin to that existing between the consignee or owner of shipped goods and the
common carrier, or that between a depositor and a warehouseman[[22]]. In the performance of its
obligations, an arrastre operator should observe the same degree of diligence as that required of a
common carrier and a warehouseman as enunciated under Article 1733 of the Civil Code and Section
3(b) of the Warehouse Receipts Law, respectively. Being the custodian of the goods discharged from a
vessel, an arrastre operator's duty is to take good care of the goods and to turn them over to the party
entitled to their possession. (Emphasis supplied)[23]
There is a distinction between an arrastre and a stevedore.[24] Arrastre, a Spanish word which refers to
hauling of cargo, comprehends the handling of cargo on the wharf or between the establishment of the
consignee or shipper and the ship's tackle. The responsibility of the arrastre operator lasts until the
delivery of the cargo to the consignee. The service is usually performed by longshoremen. On the other
hand, stevedoring refers to the handling of the cargo in the holds of the vessel or between the ship's
tackle and the holds of the vessel. The responsibility of the stevedore ends upon the loading and stowing
of the cargo in the vessel.
It is not disputed that Mindanao Terminal was performing purely stevedoring function while the private
respondent in the Summa case was performing arrastre function. In the present case, Mindanao
Terminal, as a stevedore, was only charged with the loading and stowing of the cargoes from the pier to
the ship's cargo hold; it was never the custodian of the shipment of Del Monte Produce. A stevedore is
not a common carrier for it does not transport goods or passengers; it is not akin to a warehouseman for
it does not store goods for profit. The loading and stowing of cargoes would not have a far reaching
public ramification as that of a common carrier and a warehouseman; the public is adequately protected
by our laws on contract and on quasi-delict. The public policy considerations in legally imposing upon a
common carrier or a warehouseman a higher degree of diligence is not present in a stevedoring outfit
which mainly provides labor in loading and stowing of cargoes for its clients.
In the third issue, Phoenix and McGee failed to prove by preponderance of evidence[25] that Mindanao
Terminal had acted negligently. Where the evidence on an issue of fact is in equipoise or there is any
doubt on which side the evidence preponderates the party having the burden of proof fails upon that
issue. That is to say, if the evidence touching a disputed fact is equally balanced, or if it does not
produce a just, rational belief of its existence, or if it leaves the mind in a state of perplexity, the party

holding the affirmative as to such fact must fail.[26]

We adopt the findings[27] of the RTC,[28] which are not disputed by Phoenix and McGee. The Court of
Appeals did not make any new findings of fact when it reversed the decision of the trial court. The only
participation of Mindanao Terminal was to load the cargoes on board M/V Mistrau.[29] It was not
disputed by Phoenix and McGee that the materials, such as ropes, pallets, and cardboards, used in
lashing and rigging the cargoes were all provided by M/V Mistrau and these materials meets industry
standard.[30]
It was further established that Mindanao Terminal loaded and stowed the cargoes of Del Monte Produce
aboard the M/V Mistrau in accordance with the stowage plan, a guide for the area assignments of the
goods in the vessel's hold, prepared by Del Monte Produce and the officers of M/V Mistrau.[31] The
loading and stowing was done under the direction and supervision of the ship officers. The vessel's
officer would order the closing of the hatches only if the loading was done correctly after a final
inspection.[32] The said ship officers would not have accepted the cargoes on board the vessel if they
were not properly arranged and tightly secured to withstand the voyage in open seas. They would order
the stevedore to rectify any error in its loading and stowing. A foreman's report, as proof of work done on
board the vessel, was prepared by the checkers of Mindanao Terminal and concurred in by the Chief
Officer of M/V Mistrau after they were satisfied that the cargoes were properly loaded.[33]
Phoenix and McGee relied heavily on the deposition of Byeong Yong Ahn[34] and on the survey
report[35] of the damage to the cargoes. Byeong, whose testimony was refreshed by the survey
report,[36] found that the cause of the damage was improper stowage[37] due to the manner the
cargoes were arranged such that there were no spaces between cartons, the use of cardboards as
support system, and the use of small rope to tie the cartons together but not by the negligent conduct of
Mindanao Terminal in loading and stowing the cargoes. As admitted by Phoenix and McGee in their
Comment[38] before us, the latter is merely a stevedoring company which was tasked by Del Monte to
load and stow the shipments of fresh banana and pineapple of Del Monte Produce aboard the M/V
Mistrau. How and where it should load and stow a shipment in a vessel is wholly dependent on the
shipper and the officers of the vessel. In other words, the work of the stevedore was under the
supervision of the shipper and officers of the vessel. Even the materials used for stowage, such as ropes,
pallets, and cardboards, are provided for by the vessel. Even the survey report found that it was because
of the boisterous stormy weather due to the typhoon Seth, as encountered by M/V Mistrau during its
voyage, which caused the shipments in the cargo hold to collapse, shift and bruise in extensive
extent.[39] Even the deposition of Byeong was not supported by the conclusion in the survey report that:

CAUSE OF DAMAGE

xxx

From the above facts and our survey results, we are of the opinion that damage occurred aboard the

carrying vessel during sea transit, being caused by ship's heavy rolling and pitching under boisterous
weather while proceeding from 1600 hrs on 7th October to 0700 hrs on 12th October, 1994 as described
in the sea protest.[40]

As it is clear that Mindanao Terminal had duly exercised the required degree of diligence in loading and
stowing the cargoes, which is the ordinary diligence of a good father of a family, the grant of the petition
is in order.
However, the Court finds no basis for the award of attorney's fees in favor of petitioner. None of the
circumstances enumerated in Article 2208 of the Civil Code exists. The present case is clearly not an
unfounded civil action against the plaintiff as there is no showing that it was instituted for the mere
purpose of vexation or injury. It is not sound public policy to set a premium to the right to litigate where
such right is exercised in good faith, even if erroneously.[41] Likewise, the RTC erred in awarding
P83,945.80 actual damages to Mindanao Terminal. Although actual expenses were incurred by
Mindanao Terminal in relation to the trial of this case in Davao City, the lawyer of Mindanao Terminal
incurred expenses for plane fare, hotel accommodations and food, as well as other miscellaneous
expenses, as he attended the trials coming all the way from Manila. But there is no showing that Phoenix
and McGee made a false claim against Mindanao Terminal resulting in the protracted trial of the case
necessitating the incurrence of expenditures.[42]
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No.
66121 is SET ASIDE and the decision of the Regional Trial Court of Davao City, Branch 12 in Civil Case
No. 25,311.97 is hereby REINSTATED MINUS the awards of P100,000.00 as attorney's fees and
P83,945.80 as actual damages.
SO ORDERED.

DANTE O. TINGA
Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice
Acting Chairperson

PRESBITERO J. VELASCO, JR. TERESITA LEONARDO DE CASTRO

Associate Justice Associate Justice

ARTURO D. BRION
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was

assigned to the writer of the opinion of the Court's Division.

CONCHITA CARPIO MORALES

Associate Justice
Acting Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Acting Chairperson's Attestation,
it is hereby certified that the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Court's Division.

REYNATO S. PUNO
Chief Justice

[1]Rollo, pp. 3-25.

*Acting Chairperson as replacement of Associate Justice Leonardo Quisumbing who is on official leave
per Special Order No. 618.

**Additional member of the Special Second Division per Special Order No. 619.

[2]Id. at 29-34. Penned by Associate Justice Danilo B. Pine and concurred by Associate Justices Cancio
C. Garcia and Renato C. Dacudao. The dispositive portion reads as follows:

WHEREFORE, premises considered, the judgment appealed from is hereby REVERSED and SET
ASIDE. Mindanao Terminal Brokerage Services, Inc. is ordered to pay the plaintiff-appellants the total
amount of $210,265.45 plus legal interest from the filing of the complaint until fully paid and attorney's
fees of 20% of the claim.

Costs against defendant-appellee.

SO ORDERED.

[3]Id. at 36.

[4]Records, pp. 234-310.

[5]Rollo, p. 30.

[6]Records, p. 350.

[7]Id. at 1-6.

[8]Rollo, pp. 38-44. Penned by Judge Paul T. Arcangel.

[9]Id. at 44.

[10]Id. at 33-34.

[11]Id. at 36.

[12]Id. at 31-33.

[13]CA rollo, pp. 94-104.

[14]Rollo, p. 36.

[15]Civil Code, Art. 1733.

[16]Sec. 3(b), Act 2137, Warehouse Receipt Law.

[17]Air France v. Carrascoso, 18 SCRA 155, 168 (1966). Singson v. Bank of the Philippine Islands, 132
Phil. 597, 600 (1968); Mr. & Mrs. Fabre, Jr . v. Court of Appeals, 328 Phil. 775, 785 (1996).

[18]PSBA v. Court of Appeals, G.R. No. 84698, 4 February 1992, 205 SCRA 729, 734.

[19]CIVIL CODE. Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this
Chapter. (Emphasis supplied)

[20]323 Phil. 214 (1996).

[21]Rollo, p. 32.

[22]Malayan Insurance Co. Inc. v. Manila Port Service, 138 Phil. 69 (1969).

[23]Supra note at 222-223.

[24]See Compania Maritima v. Allied Free Workers Union, 167 Phil. 381, 385 (1977).

[25]See Republic of the Philippines v. Orfinada Sr., G.R. No. 141145, November 12, 2004, 442 SCRA
342, 352 citing Go v. Court of Appeals, G.R. No. 112550, February 5, 2001 citing Reyes v. Court of
Appeals, 258 SCRA 651 (1996).

[26]Francisco, Ricardo, Evidence, 3rd (1996), p. 555. Citing Howes v. Brown, 75 Ala. 385; Evans v.
Winston, 74 Ala. 349; Marlowe v. Benagh, 52 Ala. 112; Brandon v. Cabiness, 10 Ala. 155; Delaware
Coach v. Savage, 81 Supp. 293.

[27]This Court is not a trier of facts. Furthermore, well settled is the doctrine that "the findings of fact by
the trial court are accorded great respect by appellate courts and should not be disturbed on appeal
unless the trial court has overlooked, ignored, or disregarded some fact or circumstances of sufficient
weight or significance which, if considered, would alter the situation." The facts of the case, as stated by
the trial court, were adopted by the Court of Appeals. And a conscientious sifting of the records fails to
bring to light any fact or circumstance militative against the correctness of the said findings of the trial
court and the Court of Appeals. See Home Development Mutual Fund v. CA, 351 Phil. 858, 859-860
(1998).

[28]Rollo, pp. 38-44.

[29]Id. at 42.

[30]Id. at 16.

[31]TSN, 6 July 1999, p. 5.

[32]Id. at 9-10.

[33]Id. at 5-6.

[34]Records, pp. 89-96.

[35]Id. at 99-113.

[36]Id. at 93.

[37]Id. at 96.

[38]Rollo, pp. 47-49.

[39]Records, pp. 105.

[40]Id. at 112.

[41]See Ramos v. Ramos, 158 Phil. 935, 960 (1974); Barreto v. Arevalo, 99 Phil. 771, 779 (1956);
Mirasol v. Judge De la Cruz, 173 Phil. 518 (1978).

[42]See Uy v. Court of Appeals, 420 Phil. 408 (2001).