Case Summary (G.R. No. 162467)
Factual Background
Mindanao Terminal and Brokerage Service, Inc. was engaged by Del Monte Philippines, Inc. to load and stow 146,288 cartons of bananas and 15,202 cartons of pineapples owned by Del Monte Fresh Produce International, Inc. onto the vessel M/V Mistrau at the port of Davao City for carriage to Inchon, Korea. The cargo was insured under an open cargo policy issued by Phoenix Assurance Company of New York, with McGee & Co., Inc. acting as underwriting manager and agent. After the voyage, a marine survey by Incok Loss and Average Adjuster, through Byeong Yong Ahn, reported that 16,069 banana cartons and 2,185 pineapple cartons were damaged beyond commercial value. A claim was adjusted at $210,266.43, paid by Phoenix and McGee to Del Monte Produce, and the insurers received a subrogation receipt.
Procedural History in the RTC
Phoenix and McGee instituted an action against Mindanao Terminal in the Regional Trial Court, Davao City, Branch 12. The RTC, by decision dated 20 October 1999, dismissed the complaint and found that Mindanao Terminal had acted only as a labor provider in loading and stowing the cargo under the direction and supervision of the ship’s officers, who had accepted the cargo after inspection. The RTC found that the damage resulted from a typhoon encountered during the voyage and ruled that Phoenix and McGee lacked cause of action against Mindanao Terminal because Mindanao Terminal had no contract with the assured Del Monte Produce. The RTC awarded Mindanao Terminal P83,945.80 as actual damages and P100,000.00 as attorney’s fees on its counterclaim.
Court of Appeals' Ruling
The Court of Appeals reversed and set aside the RTC decision in its 29 October 2003 judgment and ordered Mindanao Terminal to pay Phoenix and McGee the adjusted amount of $210,265.45 with legal interest and attorney’s fees equivalent to twenty percent of the claim. The appellate court held that the cargo damage resulted from improper stowage and imposed on Mindanao Terminal, as stevedore, the duty to exercise an extraordinary degree of diligence akin to that required of common carriers and warehousemen. It also sustained a cause of action based on quasi-delict under Art. 2176 despite the absence of privity of contract between the stevedore and the assured.
Issues Presented
The Supreme Court identified the controlling questions as: (1) whether Phoenix and McGee have a cause of action against Mindanao Terminal; (2) whether a stevedore is required to observe the same extraordinary degree of diligence as common carriers and warehousemen; and (3) whether Mindanao Terminal observed the degree of diligence required by law in loading and stowing the cargo.
Petitioner's Contentions
Mindanao Terminal contended that it acted merely as a labor provider charged with loading and stowing under the direction and supervision of the ship’s officers and the shipper, that it was not the custodian of the goods, and that no contractual relationship existed between it and Del Monte Produce. It argued that only ordinary diligence was required of a stevedore and that the evidence established compliance with that standard. Mindanao Terminal further challenged the award of attorney’s fees and actual damages granted by the RTC.
Respondents' Contentions
Phoenix and McGee argued that the cargo damage resulted from improper stowage and that a stevedore, by virtue of its role in the handling of cargo, must observe an extraordinary degree of diligence similar to that of common carriers and warehousemen. They relied on the deposition of the Korean surveyor, Byeong Yong Ahn, and the survey report to attribute the loss to negligent stowage and invoked quasi-delict liability under Art. 2176 despite lack of direct contractual privity with Del Monte Produce.
The Supreme Court's Disposition
The Supreme Court granted the petition for review, set aside the Court of Appeals decision, and reinstated the RTC decision dismissing the complaint against Mindanao Terminal. The Court eliminated the RTC awards of P100,000.00 attorney’s fees and P83,945.80 actual damages, finding no basis in law or evidence for those items.
Legal Basis and Reasoning — Cause of Action and Quasi-delict
The Court held that Phoenix and McGee stated a cause of action because the action was grounded in quasi-delict under Art. 2176, as the insurers had been subrogated to the assured’s rights and sought recovery for damages allegedly caused by negligent handling. The Court recalled the principle that an act that breaks a contract may also constitute a tort and that liability in tort may arise even under a contract where the tort constitutes the breach.
Legal Basis and Reasoning — Degree of Diligence Applicable to Stevedores
The Court applied Art. 1173 of the Civil Code and concluded that, in the absence of a law or contract specifying a higher standard, a party must exercise the ordinary diligence expected of a good father of a family. The Court distinguished arrastre operators from stevedores and held that the heightened diligence imposed in Summa Insurance Corporation v. CA and Port Service, Inc. — where the arrastre operator was treated akin to a common carrier or warehouseman — did not apply to a stevedore whose responsibility ends upon loading and stowing and who does not act as custodian of goods. The Court observed that public policy rationales for imposing greater diligence on common carriers and warehousemen were not present in the case of a stevedore providing labor for stowage.
Legal Basis and Reasoning — Application of Facts to Diligence Standard
Applying the ordinary diligence standard, the Court found that Mindanao Terminal had met its burden. The record showed that stowage materials were provided by M/V Mistrau; the stowage conformed to a stowage plan prepared by Del Monte Produce and the ship’s officers; loading and stowage occurred under the supervision and final inspection of the ship’s officers; and a foreman’s report was concurred in by the chief officer. The marine survey itself attributed damage to heavy rolling and pitching caused by a typhoon during the voyage. Where evidence was in equipoise, the Court applied the rule that the party with the burden of proof fails; accordi
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Case Syllabus (G.R. No. 162467)
Parties and Procedural Posture
- MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. was the stevedoring company that loaded and stowed the cargo aboard M/V Mistrau and is the Petitioner in the present Rule 45 petition.
- PHOENIX ASSURANCE COMPANY OF NEW YORK and MCGEE & CO., INC. were the insurers and underwriting manager who prosecuted the action against Petitioner after payment and subrogation.
- The insurers instituted an action for damages in the Regional Trial Court (RTC) of Davao City, Branch 12, which rendered a decision dated 20 October 1999.
- The RTC dismissed the complaint and awarded Petitioner its counterclaim for actual damages and attorney’s fees.
- The insurers appealed to the Court of Appeals, which reversed by decision dated 29 October 2003 and awarded the insurers $210,265.45 plus legal interest and attorney’s fees of twenty percent.
- Petitioner filed a motion for reconsideration which the Court of Appeals denied in its 26 February 2004 resolution.
- Petitioner sought review under Rule 45, Rules of Civil Procedure, resulting in the present petition before this Court.
Key Factual Allegations
- Del Monte Philippines, Inc. contracted MINDANAO TERMINAL to load and stow 146,288 cartons of bananas and 15,202 cartons of pineapples belonging to Del Monte Fresh Produce International, Inc. aboard M/V Mistrau for shipment to Inchon, Korea.
- Del Monte Produce insured the shipment under an open cargo policy with PHOENIX and MCGEE, who paid the claim and received a subrogation receipt.
- Upon discharge at Inchon, significant portions of the cargo were found to be damaged and worthless.
- A marine cargo surveyor engaged in Korea, represented by Byeong Yong Ahn, reported 16,069 cartons of bananas and 2,185 cartons of pineapples as totally damaged.
- MCGEE’s adjuster recommended payment of $210,266.43 to the assured, and a corresponding check was issued to Del Monte Produce.
Survey and Adjuster Findings
- The survey report by Incok Loss and Average Adjuster attributed the damage to heavy rolling and pitching of the ship during boisterous weather and the typhoon encountered on voyage.
- The surveyor’s report described collapse, shifting and bruising of the cargo aboard the vessel during sea transit from 7 October to 12 October 1994.
- The surveyor, Byeong Yong Ahn, testified that improper stowage characteristics were present but the formal survey conclusion emphasized damage by sea conditions.
Trial Court Findings
- The RTC found that MINDANAO TERMINAL acted merely as a labor provider tasked to load and stow the cargo under the direction and supervision of the ship’s officers and the shipper.
- The RTC found that the ship’s officers inspected and accepted the stowage and that stowage materials such as ropes, pallets and cardboards were supplied by the vessel and met industry standards.
- The RTC concluded that the damage resulted from a typhoon and that PHOENIX and MCGEE had no cause of action against MINDANAO TERMINAL because no direct contractual relationship existed between the stevedore and the assured.
- The RTC dismissed the complaint and granted Petitioner actual damages of P83,945.80 and attorney’s fees of P100,000.00 on its counterclaim.
Court of Appeals Ruling
- The Court of Appeals reversed the RTC and imposed liability on MINDANAO TERMINAL for negligence in stowage, ordering payment of $210,265.45 plus legal interest and attorne