6/10/2021 G.R. No.

162467, May 08, 2009

605 Phil. 507

SECOND DIVISION
G.R. No. 162467, May 08, 2009

MINDANAO TERMINAL AND BROKERAGE SERVICE, INC.

PETITIONER, VS. PHOENIX ASSURANCE COMPANY OF NEW YORK/
MCGEE & CO., INC., RESPONDENT.
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.

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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
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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
[22]
depositor and a warehouseman[ ]. 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
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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
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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

x xx

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]
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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.

Carpio-Morales,* (Acting Chairperson), Velasco, Jr., Leonardo De Castro,** and Brion, JJ.,
concur.

* 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.

[1] Rollo, pp. 3-25.

[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.

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[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 Compaňia 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.

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[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).

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