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SECOND DIVISION

[G.R. No. 162467. May 8, 2009.]

MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. , petitioner,


vs . PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE & CO.,
INC. , respondent.

DECISION

TINGA , J : p

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 led 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. TCaAHI

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 of cers, who would not have accepted the cargoes on board
the vessel and signed the foreman's report unless they were properly arranged and
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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 1 0 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 ling of the complaint until fully paid and
attorney's fees of 20% of the claim". 1 1 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. 1 2
Mindanao Terminal led a motion for reconsideration, 1 3 which the Court of
Appeals denied in its 26 February 2004 1 4 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: rst, 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 1 5 and warehousemen; 1 6 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 led 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.
1 7 In ne, a liability for tort may arise even under a contract, where tort is that which
breaches the contract. 1 8 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
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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 suf cient 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. TCcIaA

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 speci c 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. 2 0 in imposing a higher degree of diligence, 2 1
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 PC 8 U blades was missing. From those facts,
the Court observed:
. . . 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. [ 2 2 ] 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) 2 3

There is a distinction between an arrastre and a stevedore. 2 4 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
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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 pro t. The loading and stowing of
cargoes would not have a far reaching public rami cation 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 2 5 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. 2 6ACaTIc

We adopt the ndings 2 7 of the RTC, 2 8 which are not disputed by Phoenix and
McGee. The Court of Appeals did not make any new ndings 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. 2 9 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. 3 0
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 of cers of M/V Mistrau. 3 1 The loading and stowing was done
under the direction and supervision of the ship of cers. The vessel's of cer would
order the closing of the hatches only if the loading was done correctly after a nal
inspection. 3 2 The said ship of cers 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 Of cer of M/V
Mistrau after they were satisfied that the cargoes were properly loaded. 3 3
Phoenix and McGee relied heavily on the deposition of Byeong Yong Ahn 3 4 and
on the survey report 3 5 of the damage to the cargoes. Byeong, whose testimony was
refreshed by the survey report, 3 6 found that the cause of the damage was improper
stowage 3 7 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
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their Comment 3 8 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 of cers of the vessel.
In other words, the work of the stevedore was under the supervision of the shipper and
of cers 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. 3 9 Even the deposition of Byeong was not
supported by the conclusion in the survey report that:
CAUSE OF DAMAGE

xxx xxx 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. 4 0

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 nds 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. 4 1 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. 4 2 ISaCTE

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 .
Carpio Morales, * Velasco, Jr., Leonardo-de Castro ** and Brion, JJ., concur.

Footnotes

* Acting Chairperson as replacement of Associate Justice Leonardo Quisumbing who is on


official leave per Special Order No. 618.
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** 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 ling 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. ACcDEa

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). SHaATC

21. Rollo, p. 32.


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

23. Supra note at 222-223.


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

25. See Republic of the Philippines v. Or nada 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 suf cient weight or signi cance 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 ndings 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. cDCSTA

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, p. 105.
40. Id. at 112. TEHDIA

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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