11 Mindanao Terminal vs. Phoenix Assurance

2/15/2016 SUPREME COURT REPORTS ANNOTATED VOLUME 587

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CarpioMorales (Acting Chairperson), Velasco, Jr.,LeonardoDe Castro and Brion, JJ., concur.

Petition partially granted, judgment reversed and setaside. That of RTC of Cebu City, Br. 9 reinstated withmodification.

Note.—Express trusts, sometimes referred to as directtrusts, are intentionally created by the direct and positiveacts of the settler or the trustor—by some writing, deed, orwill or oral declaration. It is created not necessarily bysome written words, but by the direct and positive acts ofthe parties. No particular words are required, it beingsufficient that a trust was clearly intended. (Ringor vs.Ringor, 436 SCRA 484 [2004])

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G.R. No. 162467. May 8, 2009.*

MINDANAO TERMINAL AND BROKERAGE SERVICE,INC., petitioner, vs. PHOENIX ASSURANCE COMPANYOF NEW YORK/MCGEE & CO., INC., respondent.

Common Carriers; Contracts; Damages.—As it is clear thatMindanao Terminal had duly exercised the required degree ofdiligence in loading and stowing the cargoes, which is theordinary diligence of a good father of a family, the grant of thepetition is in order.

Attorney’s Fees; The Court finds no basis for the award ofattorney’s fees in favor of petitioner—none of the circumstancesenumerated in Article 2208 of the Civil Code exists.—The Courtfinds no basis for the award of attorney’s fees in favor ofpetitioner. None of the circumstances enumerated in Article 2208of the Civil Code exists. The present case is clearly not anunfounded civil action



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* SECOND DIVISION.

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against the plaintiff as there is no showing that it was institutedfor the mere purpose of vexation or injury. It is not sound publicpolicy to set a premium to the right to litigate where such right isexercised in good faith, even if erroneously. Likewise, the RTCerred in awarding P83,945.80 actual damages to MindanaoTerminal. Although actual expenses were incurred by MindanaoTerminal in relation to the trial of this case in Davao City, thelawyer of Mindanao Terminal incurred expenses for plane fare,hotel accommodations and food, as well as other miscellaneousexpenses, as he attended the trials coming all the way fromManila. But there is no showing that Phoenix and McGee made afalse claim against Mindanao Terminal resulting in theprotracted trial of the case necessitating the incurrence ofexpenditures.

PETITION for review on certiorari of the decision andresolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Froilan Bacungan & Associates for petitioner. Fajardo Law Offices for respondents.

TINGA, J.:Before us is a petition for review on certiorari1 under Rule45 of the 1997 Rules of Civil Procedure of the 29 October20032 Decision of the Court of Appeals and the 26 February

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1 Rollo, pp. 325.2 Id., at pp. 2934. 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 appealedfrom is hereby REVERSED and SET ASIDE. Mindanao TerminalBrokerage Services, Inc. is ordered to pay the plaintiffappellants the totalamount of $210,265.45 plus legal interest from the filing of the complaintuntil fully paid and attorney’s fees of 20% of the claim.

Costs against defendantappellee.

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2004 Resolution3 of the same court denying petitioner’smotion 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 andstow a shipment of 146,288 cartons of fresh greenPhilippine bananas and 15,202 cartons of fresh pineapplesbelonging to Del Monte Fresh Produce International, Inc.(Del Monte Produce) into the cargo hold of the vessel M/VMistrau. The vessel was docked at the port of Davao Cityand the goods were to be transported by it to the port ofInchon, Korea in favor of consignee Taegu Industries, Inc.Del Monte Produce insured the shipment under an “opencargo policy” with private respondent Phoenix AssuranceCompany of New York (Phoenix), a nonlife insurancecompany, and private respondent McGee & Co. Inc.(McGee), the underwriting manager/agent of Phoenix.4

Mindanao Terminal loaded and stowed the cargoesaboard the M/V Mistrau. The vessel set sail from the port ofDavao City and arrived at the port of Inchon, Korea. It wasthen discovered upon discharge that some of the cargo wasin bad condition. The Marine Cargo Damage Surveyor ofIncok Loss and Average Adjuster of Korea, through itsrepresentative Byeong Yong Ahn (Byeong), surveyed theextent of the damage of the shipment. In a survey report, itwas stated that 16,069 cartons of the banana shipment and2,185 cartons of the pineapple shipment were so damagedthat they no longer had commercial value.5Del Monte Produce filed a claim under the open cargopolicy for the damages to its shipment. McGee’s MarineClaims

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SO ORDERED.3 Id., at p. 36.4 Records, pp. 234310.5 Rollo, p. 30.

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Insurance Adjuster evaluated the claim and recommended






that payment in the amount of $210,266.43 be made. Acheck for the recommended amount was sent to Del MonteProduce; the latter then issued a subrogation receipt6 toPhoenix and McGee.

Phoenix and McGee instituted an action for damages7

against Mindanao Terminal in the Regional Trial Court(RTC) of Davao City, Branch 12. After trial, the RTC,8 in adecision dated 20 October 1999, held that the onlyparticipation of Mindanao Terminal was to load the cargoeson board the M/V Mistrau under the direction andsupervision of the ship’s officers, who would not haveaccepted the cargoes on board the vessel and signed theforeman’s report unless they were properly arranged andtightly secured to withstand voyage across the open seas.Accordingly, Mindanao Terminal cannot be held liable forwhatever happened to the cargoes after it had loaded andstowed them. Moreover, citing the survey report, it wasfound by the RTC that the cargoes were damaged onaccount of a typhoon which M/V Mistrau had encounteredduring the voyage. It was further held that Phoenix andMcGee had no cause of action against Mindanao Terminalbecause the latter, whose services were contracted by DelMonte, a distinct corporation from Del Monte Produce, hadno contract with the assured Del Monte Produce. The RTCdismissed the complaint and awarded the counterclaim ofMindanao Terminal in the amount of P83,945.80 as actualdamages and P100,000.00 as attorney’s fees.9 The actualdamages were awarded as reimbursement for the expensesincurred by Mindanao Terminal’s lawyer in attending thehearings in the case wherein he had to travel all the wayfrom Metro Manila to Davao City.

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6 Records, p. 350.7 Id., at pp. 16.8 Rollo, pp. 3844. Penned by Judge Paul T. Arcangel.9 Id., at p. 44.

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Phoenix and McGee appealed to the Court of Appeals.The appellate court reversed and set aside10 the decision ofthe RTC in its 29 October 2003 decision. The same courtordered Mindanao Terminal to pay Phoenix and McGee







“the total amount of $210,265.45 plus legal interest fromthe filing of the complaint until fully paid and attorney’sfees of 20% of the claim.”11 It sustained Phoenix’s andMcGee’s argument that the damage in the cargoes was theresult of improper stowage by Mindanao Terminal. Itimposed on Mindanao Terminal, as the stevedore of thecargo, the duty to exercise extraordinary diligence inloading and stowing the cargoes. It further held that evenwith the absence of a contractual relationship betweenMindanao Terminal and Del Monte Produce, the cause ofaction of Phoenix and McGee could be based on quasidelictunder Article 2176 of the Civil Code.12

Mindanao Terminal filed a motion for reconsideration,13

which the Court of Appeals denied in its 26 February200414 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 theloading and stowage of the cargoes onboard M/V Mistraumaking it liable for damages; and, whether Phoenix andMcGee has a cause of action against Mindanao Terminalunder Article 2176 of the Civil Code on quasidelict. Toresolve the petition, three questions have to be answered:first, whether Phoenix and McGee have a cause of actionagainst Mindanao Terminal; second, whether MindanaoTerminal, as a stevedoring company, is under obligation toobserve the same extraordinary degree of diligence in theconduct of its businessas required by law for common carriers15 and warehouse

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10 Id., at pp. 3334.11 Id., at p. 36.12 Id., at pp. 3133.13 CA Rollo, pp. 94104.14 Rollo, p. 36.15 Civil Code, Art. 1733.

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men;16 and third, whether Mindanao Terminal observedthe degree of diligence required by law of a stevedoringcompany.

We agree with the Court of Appeals that the complaintfiled by Phoenix and McGee against Mindanao Terminal,









from which the present case has arisen, states a cause ofaction. The present action is based on quasidelict, arisingfrom the negligent and careless loading and stowing of thecargoes belonging to Del Monte Produce. Even assumingthat both Phoenix and McGee have only been subrogated inthe rights of Del Monte Produce, who is not a party to thecontract of service between Mindanao Terminal and DelMonte, still the insurance carriers may have a cause ofaction in light of the Court’s consistent ruling that the actthat breaks the contract may be also a tort.17 In fine, aliability for tort may arise even under a contract, wheretort is that which breaches the contract18. In the presentcase, Phoenix and McGee are not suing for damages forinjuries arising from the breach of the contract of servicebut from the alleged negligent manner by which MindanaoTerminal handled the cargoes belonging to Del MonteProduce. Despite the absence of contractual relationshipbetween Del Monte Produce and Mindanao Terminal, theallegation of negligence on the part of the defendant shouldbe sufficient to establish a cause of action arising fromquasidelict.19

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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; 23 SCRA 1117, 1120 (1968);Mr. & Mrs. Fabre, Jr. v. Court of Appeals, 328 Phil. 775, 785; 259 SCRA426, 433 (1996).

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

19 Civil Code. Art. 2176. Whoever by act or omission causes damageto another, there being fault or negligence, is obliged to pay for thedamage done. Such fault or negligence, if there is no preexistingcontractual relation between the parties, is called a quasidelict and isgoverned by the provisions of this Chapter. (Emphasis supplied)

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The resolution of the two remaining issues isdeterminative of the ultimate result of this case.

Article 1173 of the Civil Code is very clear that if the lawor contract does not state the degree of diligence which is tobe observed in the performance of an obligation then that







which is expected of a good father of a family or ordinarydiligence shall be required. Mindanao Terminal, astevedoring company which was charged with the loadingand stowing the cargoes of Del Monte Produce aboard M/VMistrau, had acted merely as a labor provider in the case atbar. There is no specific provision of law that imposes ahigher degree of diligence than ordinary diligence for astevedoring company or one who is charged only with theloading and stowing of cargoes. It was neither alleged norproven by Phoenix and McGee that Mindanao Terminalwas bound by contractual stipulation to observe a higherdegree of diligence than that required of a good father of afamily. We therefore conclude that following Article 1173,Mindanao Terminal was required to observe ordinarydiligence only in loading and stowing the cargoes of DelMonte Produce aboard M/V Mistrau.The Court of Appeals erred when it cited the case ofSumma Insurance Corporation v. CA and Port ServiceInc.20 in imposing a higher degree of diligence,21 onMindanao Terminal in loading and stowing the cargoes.The case of Summa Insurance Corporation v. CA, whichinvolved the issue of whether an arrastre operator islegally liable for the loss of a shipment in its custody andthe extent of its liability, is inapplicable to the factualcircumstances of the case at bar. Therein, a vessel ownedby the National Galleon Shipping Corporation (NGSC)arrived at Pier 3, South Harbor, Manila, carrying ashipment consigned to the order of Caterpillar Far EastLtd. with Semirara Coal Corporation (Semirara) as “notifyparty.” The shipment, including a bundle of PC 8 U

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20 323 Phil. 214; 253 SCRA 175 (1996).21 Rollo, p. 32.

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blades, was discharged from the vessel to the custody of theprivate respondent, the exclusive arrastre operator at theSouth Harbor. Accordingly, three goodorder cargo receiptswere issued by NGSC, duly signed by the ship's checkerand a representative of private respondent. When Semirarainspected the shipment at house, it discovered that thebundle of PC8U blades was missing. From those facts, the





Court observed:

“x x x The relationship therefore between the consignee and thearrastre operator must be examined. This relationship is muchakin to that existing between the consignee or owner of shippedgoods and the common carrier, or that between a depositor and awarehouseman.22 In the performance of its obligations, anarrastre operator should observe the same degree ofdiligence as that required of a common carrier and awarehouseman as enunciated under Article 1733 of the CivilCode and Section 3(b) of the Warehouse Receipts Law,respectively. Being the custodian of the goods dischargedfrom a vessel, an arrastre operator’s duty is to take goodcare of the goods and to turn them over to the partyentitled to their possession.” (Emphasis supplied)23

There is a distinction between an arrastre and astevedore.24 Arrastre, a Spanish word which refers tohauling of cargo, comprehends the handling of cargo on thewharf or between the establishment of the consignee orshipper and the ship’s tackle. The responsibility of thearrastre operator lasts until the delivery of the cargo to theconsignee. The service is usually performed bylongshoremen. On the other hand, stevedoring refers to thehandling of the cargo in the holds of the vessel or betweenthe ship’s tackle and the holds

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22 Malayan Insurance Co., Inc. v. Manila Port Service, 138 Phil. 69; 27SCRA 760 (1969).

23 Supra note at pp. 222223.24 See Compañia Maritima v. Allied Free Workers Union, 167 Phil.

381, 385; 77 SCRA 24, 27 (1977).

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of the vessel. The responsibility of the stevedore ends uponthe loading and stowing of the cargo in the vessel.

It is not disputed that Mindanao Terminal wasperforming purely stevedoring function while the privaterespondent in the Summa case was performing arrastrefunction. In the present case, Mindanao Terminal, as astevedore, was only charged with the loading and stowingof the cargoes from the pier to the ship’s cargo hold; it wasnever the custodian of the shipment of Del Monte Produce.






A stevedore is not a common carrier for it does nottransport goods or passengers; it is not akin to awarehouseman for it does not store goods for profit. Theloading and stowing of cargoes would not have a farreaching public ramification as that of a common carrierand a warehouseman; the public is adequately protected byour laws on contract and on quasidelict. The public policyconsiderations in legally imposing upon a common carrieror a warehouseman a higher degree of diligence is notpresent in a stevedoring outfit which mainly provides laborin loading and stowing of cargoes for its clients.

In the third issue, Phoenix and McGee failed to prove bypreponderance of evidence25 that Mindanao Terminal hadacted negligently. Where the evidence on an issue of fact isin equipoise or there is any doubt on which side theevidence preponderates the party having the burden ofproof fails upon that issue. That is to say, if the evidencetouching a disputed fact is equally balanced, or if it doesnot produce a just, rational belief of its existence, or if itleaves the mind in a state of perplexity, the party holdingthe affirmative as to such fact must fail.26

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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, 351 SCRA 145 citing Reyes v. Court ofAppeals, 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.

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We adopt the findings27 of the RTC,28 which are notdisputed by Phoenix and McGee. The Court of Appeals didnot make any new findings of fact when it reversed thedecision of the trial court. The only participation ofMindanao Terminal was to load the cargoes on board M/VMistrau.29 It was not disputed by Phoenix and McGee thatthe materials, such as ropes, pallets, and cardboards, usedin lashing and rigging the cargoes were all provided by M/VMistrau and these materials meets industry standard.30

It was further established that Mindanao Terminal loadedand stowed the cargoes of Del Monte Produce aboard theM/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/VMistrau.31 The loading and stowing was done under thedirection and supervision of the ship officers. The vessel’sofficer would order the closing of the hatches only if theloading was done correctly after a final inspection.32 Thesaid ship officers would not have

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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 thedoctrine that “the findings of fact by the trial court are accorded greatrespect by appellate courts and should not be disturbed on appeal unlessthe trial court has overlooked, ignored, or disregarded some fact orcircumstances of sufficient weight or significance which, if considered,would alter the situation.” The facts of the case, as stated by the trialcourt, were adopted by the Court of Appeals. And a conscientious siftingof the records fails to bring to light any fact or circumstance militativeagainst the correctness of the said findings of the trial court and the Courtof Appeals. See Home Development Mutual Fund v. Court of Appeals, 351Phil. 858, 859860; 288 SCRA 617, 625 (1998).

28 Rollo, pp. 3844.29 Id., at p. 42.30 Id., at p. 16.31 TSN, 6 July 1999, p. 5.32 Id., at pp. 910.

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accepted the cargoes on board the vessel if they were notproperly arranged and tightly secured to withstand thevoyage in open seas. They would order the stevedore torectify any error in its loading and stowing. A foreman’sreport, as proof of work done on board the vessel, wasprepared by the checkers of Mindanao Terminal andconcurred in by the Chief Officer of M/V Mistrau after theywere satisfied that the cargoes were properly loaded.33

Phoenix and McGee relied heavily on the deposition ofByeong Yong Ahn34 and on the survey report35 of thedamage to the cargoes. Byeong, whose testimony wasrefreshed by the survey report,36 found that the cause ofthe damage was improper stowage37 due to the manner the









cargoes were arranged such that there were no spacesbetween cartons, the use of cardboards as support system,and the use of small rope to tie the cartons together but notby the negligent conduct of Mindanao Terminal in loadingand stowing the cargoes. As admitted by Phoenix andMcGee in their Comment38 before us, the latter is merely astevedoring company which was tasked by Del Monte toload and stow the shipments of fresh banana and pineappleof Del Monte Produce aboard the M/V Mistrau. How andwhere it should load and stow a shipment in a vessel iswholly dependent on the shipper and the officers of thevessel. In other words, the work of the stevedore was underthe 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 thesurvey report found that it was because of the boisterousstormy weather due to the typhoon Seth, as encountered byM/V Mistrau during its voyage, which caused the

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33 Id., at pp. 56.34 Records, pp. 8996.35 Id., at pp. 99113.36 Id., at p. 93.37 Id., at p. 96.38 Rollo, pp. 4749.

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shipments in the cargo hold to collapse, shift and bruise inextensive extent.39 Even the deposition of Byeong was notsupported by the conclusion in the survey report that:

CAUSE OF DAMAGEx x x

From the above facts and our survey results, we are of theopinion that damage occurred aboard the carrying vessel duringsea transit, being caused by ship’s heavy rolling and pitchingunder boisterous weather while proceeding from 1600 hrs on 7thOctober to 0700 hrs on 12th October, 1994 as described in the seaprotest.”40

As it is clear that Mindanao Terminal had dulyexercised the required degree of diligence in loading andstowing 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 ofattorney’s fees in favor of petitioner. None of thecircumstances enumerated in Article 2208 of the Civil Codeexists. The present case is clearly not an unfounded civilaction against the plaintiff as there is no showing that itwas instituted for the mere purpose of vexation or injury. Itis not sound public policy to set a premium to the right tolitigate where such right is exercised in good faith, even iferroneously.41 Likewise, the RTC erred in awardingP83,945.80 actual damages to Mindanao Terminal.Although actual expenses were incurred by MindanaoTerminal in relation to the trial of this case in Davao City,the lawyer of Mindanao Terminal incurred expenses forplane fare, hotel accommodations and food, as well as othermiscellaneous expenses, as he attended the trials comingall the way from Manila. But there is no

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39 Records, pp. 105.40 Id., at p. 112.41 See Ramos v. Ramos, 158 Phil. 935, 960; 61 SCRA 284, 306 (1974);

Barreto v. Arevalo, 99 Phil. 771, 779 (1956); Mirasol v. Judge De la Cruz,173 Phil. 518; 84 SCRA 337 (1978).

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showing that Phoenix and McGee made a false claimagainst Mindanao Terminal resulting in the protractedtrial of the case necessitating the incurrence ofexpenditures.42

WHEREFORE, the petition is GRANTED. The decisionof the Court of Appeals in CAG.R. CV No. 66121 is SETASIDE and the decision of the Regional Trial Court ofDavao City, Branch 12 in Civil Case No. 25,311.97 ishereby REINSTATED MINUS the awards of P100,000.00as attorney’s fees and P83,945.80 as actual damages.

SO ORDERED.

CarpioMorales,** Velasco, Jr., LeonardoDe Castro***and Brion, JJ., concur.

Petition granted, judgment set aside.

Note.—Common carriers are bound to observe






extraordinary diligence over the goods they transport,according to all the circumstances of each case. In all othercases not specified under Article 1734 of the Civil Code,common carriers are presumed to have been at fault or tohave acted negligently, unless they prove that theyobserved extraordinary diligence. (Central ShippingCompany, Inc. vs. Insurance Company of North America,438 SCRA 511 [2004])

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42 See Uy v. Court of Appeals, 420 Phil. 408; 368 SCRA 347 (2001).** 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.

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11 Mindanao Terminal vs. Phoenix Assurance