SECOND DIVISION

MINDANAO TERMINAL AND G.R. No. 162467

BROKERAGE SERVICE, INC.
Petitioner, Present:

- versus - CARPIO MORALES ,* JJ.,

Acting Chairperson,
TINGA,
PHOENIX ASSURANCE VELASCO, JR.,
COMPANY OF NEW YORK/ LEONARDO DE CASTRO,** and
MCGEE & CO., INC., BRION, JJ.
Respondent.
Promulgated:
May 8, 2009
x------------------------------------------------------------------------------------x

DECISION

TINGA, J.:
[1]
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
[2]
Procedure of the 29 October 2003 Decision of the Court of Appeals and the 26 February
[3]
2004 Resolution of the same court denying petitioners 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

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 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
[4]
of Phoenix.

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
[5]
shipment were so damaged that they no longer had commercial value.

Del Monte Produce filed a claim under the open cargo policy for the damages to its shipment.
McGees 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
[6]
sent to Del Monte Produce; the latter then issued a subrogation receipt to Phoenix and
McGee.

[7]
Phoenix and McGee instituted an action for damages against Mindanao Terminal in the
[8]
Regional Trial Court (RTC) of Davao City, Branch 12. After trial, the RTC, 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 ships officers,
who would not have accepted the cargoes on board the vessel and signed the foremans 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

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 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
[9]
Terminal in the amount of P83,945.80 as actual damages and P100,000.00 as attorneys fees.
The actual damages were awarded as reimbursement for the expenses incurred by Mindanao
Terminals 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
[10]
set aside 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 attorneys fees of 20% of the claim.
[11]
It sustained Phoenixs and McGees 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
[12]
be based on quasi-delict under Article 2176 of the Civil Code.

[13]
Mindanao Terminal filed a motion for reconsideration, which the Court of Appeals
[14]
denied in its 26 February 2004 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,

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 is under obligation to observe the same extraordinary degree of diligence in the conduct of its
[15] [16]
business as required by law for common carriers and warehousemen; 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 Courts consistent ruling that the act that breaks the
[17]
contract may be also a tort. In fine, a liability for tort may arise even under a contract,
[18]
where tort is that which breaches the contract . 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
[19]
should be sufficient to establish a cause of action arising from quasi-delict.

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

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 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.
[20] [21]
CA and Port Service Inc. in imposing a higher degree of diligence, 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
[22]
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 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
[23]
over to the party entitled to their possession. (Emphasis supplied)

[24]
There is a distinction between an arrastre and a stevedore. Arrastre, a Spanish word which

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 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 ships 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.

[25]
In the third issue, Phoenix and McGee failed to prove by preponderance of evidence 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
[26]
the mind in a state of perplexity, the party holding the affirmative as to such fact must fail.
[27] [28]
We adopt the findings of the RTC, 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
[29]
cargoes on board M/V Mistrau. 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

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 [30]
all provided by M/V Mistrau and these materials meets industry standard.
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 vessels hold, prepared by Del Monte Produce and the
[31]
officers of M/V Mistrau. The loading and stowing was done under the direction and
supervision of the ship officers. The vessels officer would order the closing of the hatches only
[32]
if the loading was done correctly after a final inspection. 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 foremans 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
[33]
M/V Mistrau after they were satisfied that the cargoes were properly loaded.

[34]
Phoenix and McGee relied heavily on the deposition of Byeong Yong Ahn and on the
[35]
survey report of the damage to the cargoes. Byeong, whose testimony was refreshed by the
[36] [37]
survey report, found that the cause of the damage was improper stowage 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
[38]
by Phoenix and McGee in their Comment 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.

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 [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 ships heavy rolling and pitching
under boisterous weather while proceeding from 1600 hrs on 7th October to 0700 hrs on 12th
[40]
October, 1994 as described in the sea protest.

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 attorneys 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
[42]
the incurrence of expenditures.

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

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 P100,000.00 as attorneys 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

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 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 Courts Division.

CONCHITA CARPIO MORALES

Associate Justice
Acting Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Acting
Chairpersons 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
Courts 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

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 $210,265.45 plus legal interest from the filing of the complaint until fully paid and attorneys 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

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 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 Compaia 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.

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 [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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