Asia Lighterage and Shipping, Inc. vs. Court of Appeals

A lighterage operator offering its barges to the public for the transport of goods by water for compensation is a common carrier under Article 1732 of the Civil Code, regardless of whether it operates on a scheduled or irregular basis, maintains fixed routes or terminals, or serves only a limited clientele; and it is presumed negligent for loss of cargo unless it proves extraordinary diligence, with a typhoon constituting force majeure only if it was the proximate and only cause of the loss and the carrier exercised due diligence before, during, and after its occurrence.

Petitioner Asia Lighterage and Shipping, Inc. is a corporation engaged in the business of shipping and lighterage, offering its barges to the public for the carrying or transporting of goods by water for compensation. Private respondent Prudential Guarantee and Assurance, Inc. is an insurance company that insured a shipment of wheat consigned to General Milling Corporation and, after indemnifying the consignee for the loss of the cargo, stood as subrogee to the consignee's rights against the petitioner. The dispute arose from the total loss of 900 metric tons of wheat being transported by petitioner's barge from the carrying vessel's discharge point to the consignee's warehouse, which loss the insurer sought to recover from the carrier in a subrogation action.

On June 13, 1990, Marubeni American Corporation of Portland, Oregon shipped 3,150 metric tons of Better Western White Wheat in bulk, valued at US$423,192.35, on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to consignee General Milling Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4. The shipment was insured by private respondent Prudential Guarantee and Assurance, Inc. against loss or damage for ₱14,621,771.75 under Marine Cargo Risk Note RN 11859/90.

On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody of petitioner Asia Lighterage and Shipping, Inc., which had been contracted by the consignee as carrier to deliver the cargo to the consignee's warehouse at Bo. Ugong, Pasig City. On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by Lighterage Receipt No. 0364, for delivery to the consignee. The cargo did not reach its destination.

On August 17, 1990, the transport was suspended due to a warning of an incoming typhoon. On August 22, 1990, petitioner pulled the barge to Engineering Island off Baseco to seek shelter. PSTSI III was tied down to other barges that had arrived ahead of it while weathering the storm. A few days later, the barge developed a list because of a hole it sustained after hitting an unseen protuberance underneath the water. Petitioner filed a Marine Protest on August 28, 1990, and secured the services of Gaspar Salvaging Corporation, which refloated the barge. The hole was patched with clay and cement.

The barge was towed to ISLOFF terminal before finally heading toward the consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge ran aground due to strong current. To avoid complete sinking, a portion of the goods was transferred to three other barges. The next day, September 6, 1990, the towing bits of the barge broke; it sank completely, resulting in the total loss of the remaining cargo. A second Marine Protest was filed on September 7, 1990. On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and loaded on the three other barges, yielding total proceeds of ₱201,379.75.

On the same date, the consignee sent a claim letter to petitioner and another letter dated September 18, 1990 to the private respondent for the value of the lost cargo. On January 30, 1991, the private respondent indemnified the consignee in the amount of ₱4,104,654.22. Thereafter, as subrogee, it sought recovery of said amount from the petitioner, but to no avail. On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the amount of indemnity, attorney's fees, and cost of suit. Petitioner filed its answer with counterclaim. The trial court found petitioner liable, and the Court of Appeals affirmed with modification, deducting the salvage value from the award. Petitioner then elevated the case to the Supreme Court.

• Not a Common Carrier: Petitioner contended that it is not a common carrier but a private carrier, alleging that it has no fixed and publicly known route, maintains no terminals, and issues no tickets. It argued that it is not obliged to carry indiscriminately for any person and is not bound to carry goods unless it consents; in short, it does not hold out its services to the general public.
• Erroneous Application of Common Carrier Liability: Petitioner argued that the Court of Appeals erred in affirming the lower court's ruling that, under the Civil Code provisions applicable to common carriers, the loss of the cargo is borne by the carrier in all cases except the five enumerated exceptions.
• Exercise of Due Diligence: Petitioner claimed that it exercised due diligence in its care and custody of the consignee's cargo and that the loss was caused by a typhoon, which should exempt it from liability as a natural disaster under Article 1734 of the Civil Code.

• Common Carrier Status: Whether the petitioner is a common carrier.
• Extraordinary Diligence: Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in its care and custody of the consignee's cargo.

• Common Carrier Status: Yes. Petitioner is a common carrier under Article 1732 of the Civil Code, its principal business being lighterage and drayage, offering its barges to the public for carrying or transporting goods by water for compensation.
• Extraordinary Diligence: No. Petitioner failed to overcome the presumption of negligence, having failed to prove that the typhoon was the proximate and only cause of the loss and that it exercised due diligence before, during, and after the occurrence of the typhoon.

• Common Carrier Status: Article 1732 of the Civil Code defines common carriers as persons, corporations, firms, or associations engaged in the business of carrying or transporting passengers or goods by land, water, or air, for compensation, offering their services to the public. The definition makes no distinction between one whose principal business activity is the carrying of goods and one who does so only as an ancillary activity; nor between a carrier offering service on a regular or scheduled basis and one offering it on an occasional, episodic, or unscheduled basis; nor between a carrier offering services to the general public and one soliciting business only from a narrow segment of the population. Applying the test laid down in Bascos vs. Court of Appeals, the determining factor is whether the undertaking is part of the business held out to the general public as the carrier's occupation, rather than the quantity or extent of the business transacted. Petitioner admitted it is engaged in the business of shipping and lighterage, offering its barges to the public for carrying goods by water for compensation. A common carrier need not have fixed and publicly known routes, maintain terminals, or issue tickets. Petitioner is therefore a common carrier whether its carrying of goods is done on an irregular rather than scheduled manner and with only a limited clientele.

• Extraordinary Diligence: Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported and are presumed to have been at fault or negligent if the goods are lost, destroyed, or deteriorated. To overcome this presumption, the carrier must prove it exercised extraordinary diligence. While Article 1734 exempts the carrier for loss due to flood, storm, or other natural disaster, Article 1739 requires that the natural disaster be the proximate and only cause of the loss and that the carrier exercise due diligence before, during, and after the occurrence to prevent or minimize the loss. Petitioner failed on both counts. Even before the towing bits broke, the barge had already sustained a hole when it hit a sunken object while docked at Engineering Island — damage not solely attributable to the typhoon. The hole was patched with only clay and cement, a provisional remedy insufficient for safe sailing; when petitioner persisted in the voyage, it recklessly exposed the cargo to further damage. Moreover, petitioner proceeded toward the consignee's wharf on September 5, 1990 despite knowledge that typhoon "Loleng" had already entered the Philippine area of responsibility. Petitioner's own employees admitted that when the towing bits broke and the barge sank, it was no longer affected by the typhoon. The typhoon was thus not the proximate cause of the loss; a human factor — negligence — had intervened.

• Definition of Common Carrier (Article 1732) — A common carrier is any person, corporation, firm, or association engaged in the business of carrying or transporting passengers or goods, or both, by land, water, or air, for compensation, offering their services to the public. The definition makes no distinction between principal and ancillary business activity, between scheduled and unscheduled service, or between service offered to the general public and service offered to a narrow segment. The Court applied this provision to hold that a lighterage operator offering barges to the public for transporting goods by water for compensation is a common carrier regardless of irregular operation or limited clientele.

• Bascos Test for Common Carriers — The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." The Court applied this test and found that petitioner, having admitted engagement in shipping and lighterage and offering its barges to the public, satisfied the test notwithstanding limited clientele.

• Presumption of Negligence (Article 1735) — In all cases other than those enumerated in Article 1734, if goods are lost, destroyed, or deteriorated, common carriers are presumed to have been at fault or to have acted negligently unless they prove extraordinary diligence. The Court applied this presumption against petitioner, which failed to rebut it.

• Force Majeure Exemption for Natural Disasters (Article 1739) — For a common carrier to be exempted from responsibility on the ground of natural disaster, the natural disaster must have been the proximate and only cause of the loss, and the carrier must exercise due diligence to prevent or minimize the loss before, during, and after the occurrence. The Court found that the typhoon was neither the proximate nor the only cause of the loss, as prior damage from a submerged object and negligent continuation of the voyage constituted intervening human negligence.

• "We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets." — This passage articulates the Court's holding that the indicia of a common carrier do not require fixed routes, terminals, tickets, or indiscriminate service to the general public, extending common-carrier status to irregular operators with limited clientele.

• "The test to determine a common carrier is 'whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted.'" — This is the canonical formulation of the Bascos test, frequently cited in subsequent jurisprudence to distinguish common from private carriers.

• "The typhoon then is not the proximate cause of the loss of the cargo; a human factor, i.e., negligence had intervened." — This passage crystallizes the ratio decidendi on the force majeure issue: where human negligence intervenes between a natural disaster and the loss, the carrier cannot invoke the Article 1734 exemption.

• De Guzman vs. Court of Appeals, G.R. No. L-47822, December 22, 1988 — Followed. The Court relied on De Guzman for the proposition that Article 1732 makes no distinction between principal and ancillary business activity, between scheduled and unscheduled service, or between service to the general public and service to a narrow segment. The Court also invoked the factual parallel in De Guzman, where a person whose principal occupation was buying and selling used bottles and scrap metal was held to be a common carrier.

• Bascos vs. Court of Appeals, G.R. No. 101089, April 7, 1993, 221 SCRA 318 — Followed. The Court applied the Bascos test for determining common-carrier status, which looks to whether the undertaking is part of the business held out to the public as the carrier's occupation rather than the quantity or extent of the business transacted.

• Article 1732, Civil Code — Defines common carriers as persons, corporations, firms, or associations engaged in the business of carrying or transporting passengers or goods, or both, by land, water, or air, for compensation, offering their services to the public. Applied to classify petitioner as a common carrier.
• Article 1733, Civil Code — Requires common carriers to observe extraordinary diligence in the vigilance over the goods transported, according to all the circumstances of each case. Applied as the standard of care petitioner was bound to meet.
• Article 1734, Civil Code — Enumerates the causes that exempt a common carrier from responsibility for loss, destruction, or deterioration of goods, including flood, storm, earthquake, or other natural disaster. Petitioner invoked paragraph (1) (natural disaster) but failed to qualify for the exemption.
• Article 1735, Civil Code — Establishes the presumption of fault or negligence on the part of the common carrier in all cases other than those enumerated in Article 1734, unless the carrier proves extraordinary diligence. Applied to presume petitioner negligent upon the loss of the cargo.
• Article 1739, Civil Code — Requires that, for a natural disaster to exempt the carrier, it must be the proximate and only cause of the loss, and the carrier must exercise due diligence before, during, and after the occurrence. Applied to reject petitioner's force majeure defense, as the typhoon was not the proximate and only cause and petitioner had not exercised due diligence.

Panganiban, J., and Sandoval-Gutierrez, J., concurred.