FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation

A private carrier is liable for breach of contract of carriage upon proof of the contract and failure of its compliance, which gives rise to a presumption of lack of care and shifts the burden to the obligor to prove due diligence or fortuitous event.

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver 30 refrigerators for Concepcion Industries, Inc. from Alabang to Dagupan City aboard an Isuzu truck driven by Lambert Eroles. While traversing the north diversion road in Bamban, Tarlac, the truck collided with an unidentified truck and fell into a deep canal, resulting in damage to the cargoes. FGU Insurance Corporation, the shipment's insurer, paid Concepcion Industries the value of the covered cargoes and, as subrogee, sought reimbursement from GPS.

• The Contract of Carriage: GPS agreed to transport 30 units of Condura refrigerators from Concepcion Industries' plant in Alabang to Central Luzon Appliances in Dagupan City on June 18, 1994.
• The Incident: The GPS truck, driven by Lambert Eroles, collided with an unidentified truck along McArthur highway in Bamban, Tarlac, causing it to fall into a deep canal and damaging the cargo.
• Insurance Payment and Subrogation: FGU Insurance paid Concepcion Industries P204,450.00 for the damaged shipment and was subrogated to the latter's rights and interests.
• Lower Court Findings: FGU presented evidence on the damages and payment. GPS filed a demurrer to evidence, arguing FGU failed to prove GPS was a common carrier. The trial court granted the demurrer, holding GPS was a private carrier and the presumption of negligence under Article 1735 was unavailing; FGU likewise failed to prove the driver violated traffic regulations. The Court of Appeals affirmed, noting GPS was an exclusive hauler and FGU bore the burden of proving its status as a common carrier, which it failed to discharge.

• Common Carrier Status: Petitioner argued that GPS should be considered a common carrier under the law and existing jurisprudence despite serving a limited clientele.
• Presumption of Negligence: Petitioner maintained that GPS, whether as a common or private carrier, should be presumed negligent when goods it undertook to transport were damaged while in its custody.
• Res Ipsa Loquitur: Petitioner invoked the doctrine of res ipsa loquitur to establish negligence.

• Private Carrier Status: Respondent countered that GPS was the exclusive hauler of Concepcion Industries since 1988 and was not engaged in business as a common carrier.
• Accidental Cause: Respondent asserted that the damage to the cargo was purely accidental.
• Burden of Proof: Respondent argued that petitioner had the burden of proving GPS was a common carrier to invoke the presumption of negligence, which it failed to do.

• Common Carrier Status: Whether respondent GPS may be considered a common carrier as defined under the law and existing jurisprudence.
• Presumption of Negligence: Whether respondent GPS, either as a common or private carrier, may be presumed to have been negligent when the goods it undertook to transport safely were subsequently damaged while in its protective custody and possession.
• Res Ipsa Loquitur: Whether the doctrine of res ipsa loquitur is applicable in the instant case.

• Common Carrier Status: GPS is a private carrier. An exclusive contractor rendering services to no other individual or entity does not offer its services to the public, which is the true test of a common carrier. Common carriers may offer services to a limited clientele, but never on an exclusive basis.
• Presumption of Negligence / Breach of Contract: GPS is liable for breach of contract under culpa contractual. Mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. A default on the obligation gives rise to a presumption of lack of care and corresponding liability on the contractual obligor, shifting the burden to the obligor to establish due diligence or fortuitous event. GPS failed to do so. Furthermore, because the demurrer to evidence was granted but is now reversed on appeal, GPS is deemed to have waived the right to present evidence, precluding a remand.
• Liability of the Driver: The driver is not liable. Not being a party to the contract of carriage, he cannot be held liable under culpa contractual. His liability can only be based on culpa aquiliana, which requires the claimant to prove negligence or fault. The presumption of negligence in culpa contractual does not extend to him.
• Res Ipsa Loquitur: The doctrine is inapplicable against the driver. While he had management of the vehicle, it was not shown the accident could have been exclusively due to his negligence, given the collision with an unidentified truck. The requirement that other responsible causes be eliminated confines the doctrine's application to pure tort cases, not culpa contractual where the presumption of negligence immediately attaches by failure of the covenant.

• Culpa Contractual — In an action based on breach of contract, the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. A default on the obligation gives rise to a presumption of lack of care and corresponding liability on the contractual obligor, the burden being on the obligor to establish due diligence or fortuitous event.
• Common Carrier vs. Private Carrier — The true test of a common carrier is the carriage of passengers or goods, providing space for those who opt to avail themselves of its transportation service for a fee, offering services to the public. A carrier serving a limited clientele may be a common carrier, but one rendering services on an exclusive basis is a private carrier.
• Res Ipsa Loquitur — A mode of proof or procedural convenience that furnishes a substitute for specific proof of negligence, placing on the defendant the burden of going forward with the proof. It applies when: (a) the event is of a kind which does not ordinarily occur in the absence of negligence; (b) other responsible causes are sufficiently eliminated by the evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the plaintiff. It is not applicable when an unexplained accident may be attributable to one of several causes, for some of which the defendant could not be responsible.
• Privity of Contract — A contract can only bind the parties who have entered into it or their successors. A third person not a party to the contract cannot be held liable under it; their liability must be based on culpa aquiliana, which requires proof of negligence.
• Effect of Reversal of Demurrer — If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to have waived the right to present evidence.

• "Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering their services to the public, whether to the public in general or to a limited clientele in particular, but never on an exclusive basis."
• "In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief."
• "A contract can only bind the parties who have entered into it or their successors who have assumed their personality or their juridical position. Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third person."

• Guzman vs. Court of Appeals — Followed regarding the principle that a common carrier may offer services to a limited clientele, but never on an exclusive basis.
• National Steel Corporation vs. Court of Appeals — Followed regarding the true test of a common carrier being the carriage of goods providing space for those who opt to avail of the service for a fee.
• Calalas vs. Court of Appeals — Followed regarding the principle that in culpa contractual, proof of the contract and its failure justify relief, and that a driver not a party to the contract can only be sued under culpa aquiliana.

• Article 1732, Civil Code — Defines common carriers as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods for hire, offering services to the public. Applied to distinguish respondent as a private carrier because it did not offer services to the public.
• Article 1735, Civil Code — Provides the presumption of fault or negligence on the part of a common carrier in case of loss, damage, or deterioration of goods. Held inapplicable because respondent is a private carrier.
• Article 1311, Civil Code — Provides that contracts take effect only between the parties, their assigns, and heirs. Applied to absolve the driver who was not a party to the contract of carriage.
• Article 2176, Civil Code — Governs quasi-delicts or culpa aquiliana. Applied as the proper basis for an action against the driver, requiring proof of negligence.
• Section 1, Rule 33, 1997 Rules of Civil Procedure — Provides that if a demurrer to evidence is granted but reversed on appeal, the movant waives the right to present evidence. Applied to preclude remand and hold the corporation liable.

Davide, Jr., C.J., Kapunan, Ynares-Santiago, and Austria-Martinez, JJ.