The Supreme Court held that a stevedoring company, responsible for loading and stowing cargo, is only required to exercise ordinary diligence, equivalent to that of a good father of a family, unless a higher degree of diligence is stipulated by law or contract. This ruling clarifies that stevedores are not automatically held to the same high standards as common carriers or warehousemen. The Court emphasized that proving negligence rests on establishing a failure to exercise this ordinary diligence.

Cargo Calamity: When Does Improper Stowage Trigger Liability?

This case originated from a shipment of bananas and pineapples damaged during transport from Davao City to Inchon, Korea. Del Monte Produce contracted Mindanao Terminal and Brokerage Service, Inc. (Mindanao Terminal), a stevedoring company, to load and stow the cargo aboard the M/V Mistrau. The shipment was insured by Phoenix Assurance Company of New York (Phoenix). Upon arrival in Korea, a portion of the cargo was found to be damaged. Phoenix, after paying Del Monte Produce for the damages, sought to recover from Mindanao Terminal, alleging improper stowage. This legal battle reached the Supreme Court, which was tasked to determine the extent of a stevedore’s responsibility and the applicable standard of care.

The central question before the Court was whether Mindanao Terminal was liable for the damaged cargo due to negligence. The lawsuit was premised on the concept of quasi-delict, arising from alleged negligence in the loading and stowing of the goods. Even though there was no direct contractual relationship between Mindanao Terminal and Del Monte Produce (the owner of the cargo), the Court acknowledged that a cause of action could still exist if negligence was proven. This is rooted in the principle that the act that breaches a contract may also be a tort, creating a basis for liability outside of the contractual agreement.

However, the crucial issue hinged on the degree of diligence required of Mindanao Terminal. The Court examined whether stevedores should be held to the same high standard as common carriers or warehousemen, who are legally bound to exercise extraordinary diligence. The Court referenced Article 1173 of the Civil Code, which states that if neither the law nor contract specifies the diligence required, the standard is that of a good father of a family, meaning ordinary diligence.

Article 1173 of the Civil Code: 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.

The Court distinguished the role of a stevedore from that of an arrastre operator, citing the case of Summa Insurance Corporation v. CA and Port Service Inc. An arrastre operator handles cargo on the wharf and is responsible until delivery to the consignee, similar to a common carrier or warehouseman. In contrast, a stevedore handles cargo between the ship’s tackle and the holds of the vessel, with responsibility ending upon loading and stowing. The Court noted that Mindanao Terminal performed a purely stevedoring function and was not the custodian of the shipment, differentiating its responsibilities from those of an arrastre operator. Because the law does not specifically impose a higher degree of care on stevedores and there was no contractual agreement to do so, the Court concluded that Mindanao Terminal was only obligated to exercise ordinary diligence.

Ultimately, the Court found that Phoenix and McGee failed to prove that Mindanao Terminal had acted negligently, meaning a lack of ordinary diligence, in the loading and stowing of the cargo. The Court reiterated the principle that the party bearing the burden of proof must prevail; evidence must preponderate on the issue of fact. The Regional Trial Court (RTC) found, and the Supreme Court agreed, that the materials used were industry standard and the stowage was done under the supervision of the ship officers who approved the work before closing the hatches.

Even the testimony of Byeong Yong Ahn, the Marine Cargo Damage Surveyor, noted the cause of damage was improper stowage by the shipper and ship officers due to the lack of space between cartons and inadequate support and tying. He also pointed out that the damage happened on board due to boisterous weather while on the sea transit as described in the sea protest. Accordingly, Mindanao Terminal could not be held liable for damages.

FAQs

What is a stevedoring company?	A stevedoring company is hired to load and stow cargo on ships. They essentially provide labor for handling goods in the vessel’s holds, facilitating the loading process.
What is the standard of care required for stevedores under Philippine law?	The standard of care for stevedores is ordinary diligence, akin to that of a good father of a family, unless a higher standard is specified by law or contract. This standard is more lenient than the extraordinary diligence required of common carriers.
What is a quasi-delict, and how does it relate to this case?	A quasi-delict is an act or omission causing damage to another, where fault or negligence exists without a pre-existing contractual relation. In this case, it was the basis for the claim against Mindanao Terminal, alleging negligence in loading the cargo.
What is the difference between an arrastre operator and a stevedore?	An arrastre operator handles cargo on the wharf and is responsible for delivery to the consignee, while a stevedore handles cargo between the ship’s tackle and the holds of the vessel. Their responsibilities and the degree of diligence they are bound to exercise differ accordingly.
Who bears the burden of proving negligence in this case?	The plaintiff, in this case, Phoenix Assurance Company, bears the burden of proving that Mindanao Terminal acted negligently in its loading and stowing operations. Failure to provide preponderant evidence results in a dismissal of the case.
Why was the surveyor’s report considered important?	The surveyor’s report provided evidence regarding the cause of the cargo damage, helping to determine whether improper stowage contributed to the loss. However, its conclusions were carefully scrutinized to establish a direct link between the actions of the stevedoring company and the resulting damage.
Does the ship officer’s supervision affect the liability of the stevedore?	Yes, the Court considered the fact that the loading and stowing were done under the direction and supervision of the ship officers. Their approval of the work influenced the decision, suggesting that any deficiencies should have been addressed by the officers before the vessel departed.
What happens if a typhoon is encountered during the voyage?	The fact that a typhoon was encountered affects the outcome, especially since damage was connected to that fact as the cargoes collapse and are bruised during the storm; it exonerates the stevedore from liability as long as proper diligence has been observed.

This case highlights the importance of clearly defining responsibilities and standards of care in contracts. It underscores that without specific legal or contractual requirements, service providers are held to a reasonable standard of diligence, taking into account the nature of their work and the circumstances involved.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Mindanao Terminal and Brokerage Service, Inc. vs. Phoenix Assurance Company of New York, G.R. No. 162467, May 08, 2009