Calvo vs. UCPB General Insurance Co., Inc.

A customs broker or warehouseman who transports goods as an integral part of its business is a common carrier regardless of whether its services are offered to a narrow segment of the population, and is thus bound by the presumption of negligence for damage to goods if it accepts them without exception and fails to prove extraordinary diligence.

Virgines Calvo, owner of Transorient Container Terminal Services, Inc. (TCTSI), contracted with San Miguel Corporation (SMC) to transfer reels of paper from the Port Area in Manila to SMC's warehouse. The cargo was insured by UCPB General Insurance Co., Inc. Upon delivery, the cargo was found wet, stained, and torn.

• Contract for Transport: Petitioner Virgines Calvo, doing business as TCTSI, entered into a contract with SMC to transfer 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse at the Tabacalera Compound. The shipment was insured by respondent UCPB.
• Arrival and Discharge: On July 14, 1990, the shipment arrived in Manila on board "M/V Hayakawa Maru" and was unloaded to the custody of arrastre operator Manila Port Services, Inc. The cargo was discharged with clean Equipment Interchange Reports (EIRs), indicating the containers were received in good condition.
• Withdrawal and Delivery: From July 23 to 25, 1990, petitioner withdrew the cargo from the arrastre operator without exception or protest regarding the condition of the container vans or their contents, and delivered it to SMC's warehouse.
• Damage Discovered: On July 25, 1990, Marine Cargo Surveyors inspected the goods and found 15 reels of semi-chemical fluting paper "wet/stained/torn" and 3 reels of kraft liner board torn. The damage was valued at P93,112.00. The surveyor opined that the damage was attributable to improper handling in transit while in the broker's custody.
• Subrogation: SMC collected the value of the damage from respondent UCPB under its insurance contract. Respondent, as subrogee, brought suit against petitioner.

• Classification as Private Carrier: Petitioner maintained that she is a private or special carrier, not a common carrier, because as a customs broker and warehouseman, she does not indiscriminately hold her services out to the public but only offers them to select parties.
• Lack of Fault or Negligence: Petitioner argued that the damage occurred while the goods were in the custody of either the carrying vessel or the arrastre operator, noting the containers were kept in open air for nine days and had apparent defects. She contended that her driver immediately delivered the cargo, a mere thirty-minute drive, making it impossible for the damage to have occurred in her custody.
• Judicial Reliance on Surmise: Petitioner asserted that the Court of Appeals committed reversible error by deciding the case on pure surmises, speculations, and manifestly mistaken inferences rather than the evidence presented.

• Classification as Common Carrier: Respondent countered that petitioner is a common carrier because the transportation of goods is an integral part of her business, thus subjecting her to the extraordinary diligence requirement.
• Presumption of Negligence: Respondent argued that the presumption of negligence applies because the cargo was discharged with clean EIRs and withdrawn by petitioner without exception, establishing that the damage occurred while in her custody.

• Classification as Common Carrier: Whether a customs broker or warehouseman who transports goods as an integral part of its business is a common carrier or a private carrier.
• Presumption of Negligence: Whether the presumption of negligence under Article 1735 applies when a carrier accepts goods without exception and delivers them damaged.
• Exempting Circumstances: Whether a carrier is exempt from liability under Article 1734(4) for defects in containers when it accepted the goods without protest.

• Classification as Common Carrier: Petitioner was correctly classified as a common carrier. Article 1732 of the Civil Code makes no distinction between one whose principal business activity is carrying goods and one who does so only as an ancillary activity, nor between a carrier offering services to the general public and one offering services only to a narrow segment. The concept coincides with "public service" under the Public Service Act, which includes services with limited clientele. Because the transportation of goods is an integral part of petitioner's business, she is bound to observe extraordinary diligence.
• Presumption of Negligence: The presumption of negligence was properly applied. The cargo was discharged from the vessel to the arrastre with clean EIRs and was withdrawn by petitioner without exception. Because the goods were received in good order and delivered damaged, the damage is presumed to have occurred while in petitioner's possession. Petitioner failed to prove extraordinary diligence; merely showing the possibility that another party could be responsible is insufficient to rebut the presumption.
• Exempting Circumstances: The exemption under Article 1734(4) for defects in packing or containers is unavailing. If the defect in the container is known to the carrier or apparent upon ordinary observation, but the carrier accepts the goods without protest or exception, the carrier is not relieved of liability for damage resulting therefrom. Petitioner accepted the cargo without exception despite the alleged defects, thus forfeiting the exemption.

• Presumption of Negligence in Common Carriers — Under Article 1735, if goods are lost, destroyed, or deteriorated, common carriers are presumed at fault or negligent unless they prove extraordinary diligence. Proof of delivery of goods in good order to a carrier and their arrival in bad condition creates a prima facie case against the carrier, shifting the burden to prove extraordinary diligence or an exempting circumstance.
• Definition of Common Carrier — Under Article 1732, common carriers are persons, corporations, firms, or associations engaged in the business of carrying or transporting goods for compensation, offering their services to the public. The definition does not distinguish between principal or ancillary business activities, regular or unscheduled service, or general or limited clientele.
• Extraordinary Diligence in Vigilance over Goods — Under Article 1733, common carriers are bound to observe extraordinary diligence, which requires them to render service with the greatest skill and foresight, use all reasonable means to ascertain the nature and characteristics of goods, and exercise due care in handling and stowage.
• Loss of Exemption for Defects in Containers — Under Article 1734(4), a common carrier is not relieved of liability for damage resulting from defects in packing or containers if it accepts the goods without protest or exception despite the defects being known or apparent upon ordinary observation.

• "Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the 'general public,' i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population." — Defines the scope of Article 1732 and rejects the argument that serving a narrow clientele excludes an entity from common carrier classification.
• "[I]f the improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for damage resulting therefrom." — Articulates the condition for losing the Article 1734(4) exemption.

• De Guzman v. Court of Appeals, 168 SCRA 612 (1988) — Followed. Established that Article 1732 deliberately refrains from distinguishing between principal or ancillary business activities, regular or unscheduled service, and general or limited clientele in defining common carriers.
• Compania Maritima v. Court of Appeals, 164 SCRA 685 (1988) — Followed. Defined "extraordinary diligence in the vigilance over goods" as requiring the carrier to use all reasonable means to ascertain the nature of goods and exercise due care in handling and stowage.
• Planters Products, Inc. v. Court of Appeals, 226 SCRA 476 (1993) — Cited. Noted that if a carrier is not a common carrier, it is liable only for ordinary diligence, underscoring the importance of proper classification.
• Southern Lines, Inc. v. Court of Appeals and City of Iloilo, 114 Phil. 198 (1962) — Cited. Established the rule that acceptance of goods without protest forfeits the carrier's exemption under Article 1734(4) for defects in packing or containers.

• Article 1732, Civil Code — Defines common carriers. Applied to classify petitioner as a common carrier despite serving a narrow segment of the population, because the transportation of goods was an integral part of her business.
• Article 1733, Civil Code — Requires common carriers to observe extraordinary diligence in the vigilance over goods. Applied to establish the standard of care required of petitioner.
• Article 1734(4), Civil Code — Enumerates exempting circumstances for common carriers, including defects in packing or containers. Applied to deny exemption because petitioner accepted the containers without protest.
• Article 1735, Civil Code — Presumes common carriers at fault or negligent for loss or deterioration of goods unless they prove extraordinary diligence. Applied to hold petitioner liable due to failure to rebut the presumption.
• Section 13(b), Public Service Act (Commonwealth Act No. 1416) — Defines "public service" to include common carriers with general or limited clientele. Applied to supplement the interpretation of "common carrier" under Article 1732.

Bellosillo, Quisumbing, Buena, and De Leon, Jr.