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9/9/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 587

Carpio-Morales (Acting Chairperson), Velasco, Jr.,


Leonardo-De Castro and Brion, JJ., concur.

Petition partially granted, judgment reversed and set


aside. That of RTC of Cebu City, Br. 9 reinstated with
modification.

Note.Express trusts, sometimes referred to as direct


trusts, are intentionally created by the direct and positive
acts of the settler or the trustorby some writing, deed, or
will or oral declaration. It is created not necessarily by
some written words, but by the direct and positive acts of
the parties. No particular words are required, it being
sufficient that a trust was clearly intended. (Ringor vs.
Ringor, 436 SCRA 484 [2004])
o0o

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.

Common Carriers; Contracts; Damages.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.
Attorneys Fees; The Court finds no basis for the award of
attorneys fees in favor of petitionernone of the circumstances
enumerated in Article 2208 of the Civil Code exists.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

_______________

*SECOND DIVISION.

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430

430 SUPREME COURT REPORTS ANNOTATED

Mindanao Terminal and Brokerage Service, Inc. vs. Phoenix


Assurance Company of New York/McGee & Co., Inc.

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. 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.

PETITION for review on certiorari of the decision and


resolution 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 Rule
45 of the 1997 Rules of Civil Procedure of the 29 October
20032 Decision of the Court of Appeals and the 26 February

_______________

1Rollo, pp. 3-25.


2 Id., at pp. 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 attorneys fees of 20% of the claim.
Costs against defendant-appellee.

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VOL. 587, MAY 8, 2009 431


Mindanao Terminal and Brokerage Service, Inc. vs.
Phoenix Assurance Company of New York/McGee & Co.,
Inc.

2004 Resolution3 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 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. McGees Marine
Claims

_______________

SO ORDERED.
3 Id., at p. 36.
4Records, pp. 234-310.
5Rollo, p. 30.

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Mindanao Terminal and Brokerage Service, Inc. vs.


Phoenix Assurance Company of New York/McGee & Co.,
Inc.

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 receipt6 to
Phoenix 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 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 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 attorneys fees.9 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.

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6Records, p. 350.
7 Id., at pp. 1-6.
8Rollo, pp. 38-44. Penned by Judge Paul T. Arcangel.
9Id., at p. 44.

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VOL. 587, MAY 8, 2009 433


Mindanao Terminal and Brokerage Service, Inc. vs.
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Phoenix Assurance Company of New York/McGee & Co.,


Inc.

Phoenix and McGee appealed to the Court of Appeals.


The appellate court reversed and set aside10 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 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
200414 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 extra-ordinary degree of diligence in the
conduct of its business
as required by law for common carriers15 and warehouse-

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10Id., at pp. 33-34.


11 Id., at p. 36.
12Id., at pp. 31-33.
13CA Rollo, pp. 94-104.
14 Rollo, p. 36.
15 Civil Code, Art. 1733.

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9/9/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 587

Mindanao Terminal and Brokerage Service, Inc. vs.


Phoenix Assurance Company of New York/McGee & Co.,
Inc.

men;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 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 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 contract18. 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

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16Sec. 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 SCRA
426, 433 (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)

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VOL. 587, MAY 8, 2009 435


Mindanao Terminal and Brokerage Service, Inc. vs.
Phoenix Assurance Company of New York/McGee & Co.,
Inc.

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

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20323 Phil. 214; 253 SCRA 175 (1996).


21Rollo, p. 32.

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436 SUPREME COURT REPORTS ANNOTATED


Mindanao Terminal and Brokerage Service, Inc. vs.
Phoenix Assurance Company of New York/McGee & Co.,
Inc.

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
warehouseman.22 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 operators 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 ships 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 ships tackle and the holds

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22 Malayan Insurance Co., Inc. v. Manila Port Service, 138 Phil. 69; 27
SCRA 760 (1969).
23Supra note at pp. 222-223.
24 See Compaia Maritima v. Allied Free Workers Union, 167 Phil.
381, 385; 77 SCRA 24, 27 (1977).

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VOL. 587, MAY 8, 2009 437


Mindanao Terminal and Brokerage Service, Inc. vs.
Phoenix Assurance Company of New York/McGee & Co.,
Inc.

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.
In the third issue, Phoenix and McGee failed to prove by
preponderance of evidence25 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

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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 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.

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Mindanao Terminal and Brokerage Service, Inc. vs.


Phoenix Assurance Company of New York/McGee & Co.,
Inc.

We adopt the findings27 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 vessels 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 vessels
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

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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 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. Court of Appeals, 351
Phil. 858, 859-860; 288 SCRA 617, 625 (1998).
28 Rollo, pp. 38-44.
29Id., at p. 42.
30Id., at p. 16.
31TSN, 6 July 1999, p. 5.
32 Id., at pp. 9-10.

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Mindanao Terminal and Brokerage Service, Inc. vs.
Phoenix Assurance Company of New York/McGee & Co.,
Inc.

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 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 Ahn34 and on the survey report35 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 stowage37 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 Comment38 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

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33Id., at pp. 5-6.


34 Records, pp. 89-96.
35 Id., at pp. 99-113.
36 Id., at p. 93.
37Id., at p. 96.
38Rollo, pp. 47-49.

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Mindanao Terminal and Brokerage Service, Inc. vs.
Phoenix Assurance Company of New York/McGee & Co.,
Inc.

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
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 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
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

_______________

39 Records, pp. 105.


40Id., at p. 112.
41See 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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Mindanao Terminal and Brokerage Service, Inc. vs.
Phoenix Assurance Company of New York/McGee & Co.,
Inc.

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
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 attorneys fees and P83,945.80 as actual damages.
SO ORDERED.

Carpio-Morales,** Velasco, Jr., Leonardo-De 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 other
cases not specified under Article 1734 of the Civil Code,
common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they
observed extraordinary diligence. (Central Shipping
Company, Inc. vs. Insurance Company of North America,
438 SCRA 511 [2004])
o0o

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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.

Copyright 2017 Central Book Supply, Inc. All rights reserved.

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9/9/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 587

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