G.R. No.

149038 April 9, 2003

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner,

VITUG, J.:

The petition before the Court seeks a review of the decision of the Court of Appeals in C.A. G.R. CV
No. 56470, promulgated on 25 June 2001, which has affirmed in toto the judgment of the Regional
Trial Court (RTC), Branch 65, of Makati, dismissing the complaint for damages filed by petitioner
insurance corporation against respondent shipping company.

Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping
Company (PKS Shipping) for the shipment to Tacloban City of seventy-five thousand (75,000) bags
of cement worth Three Million Three Hundred Seventy-Five Thousand Pesos (P3,375,000.00).
DUMC insured the goods for its full value with petitioner Philippine American General Insurance
Company (Philamgen). The goods were loaded aboard the dumb barge Limar I belonging to PKS
Shipping. On the evening of 22 December 1988, about nine o’clock, while Limar Iwas being towed
by respondent’s tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast of Dumagasa
Point, in Zamboanga del Sur, bringing down with it the entire cargo of 75,000 bags of cement.

DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly
made payment; it then sought reimbursement from PKS Shipping of the sum paid to DUMC but the
shipping company refused to pay, prompting Philamgen to file suit against PKS Shipping with the
Makati RTC.

The RTC dismissed the complaint after finding that the total loss of the cargo could have been
caused either by a fortuitous event, in which case the ship owner was not liable, or through the
negligence of the captain and crew of the vessel and that, under Article 587 of the Code of
Commerce adopting the "Limited Liability Rule," the ship owner could free itself of liability by
abandoning, as it apparently so did, the vessel with all her equipment and earned freightage.

Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the decision of the
trial court. The appellate court ruled that evidence to establish that PKS Shipping was a common
carrier at the time it undertook to transport the bags of cement was wanting because the peculiar
method of the shipping company’s carrying goods for others was not generally held out as a
business but as a casual occupation. It then concluded that PKS Shipping, not being a common
carrier, was not expected to observe the stringent extraordinary diligence required of common
carriers in the care of goods. The appellate court, moreover, found that the loss of the goods was
sufficiently established as having been due to fortuitous event, negating any liability on the part of
PKS Shipping to the shipper.

In the instant appeal, Philamgen contends that the appellate court has committed a patent error in
ruling that PKS Shipping is not a common carrier and that it is not liable for the loss of the subject
cargo. The fact that respondent has a limited clientele, petitioner argues, does not militate against
respondent’s being a common carrier and that the only way by which such carrier can be held
exempt for the loss of the cargo would be if the loss were caused by natural disaster or calamity.
Petitioner avers that typhoon "APIANG" has not entered the Philippine area of responsibility and
that, even if it did, respondent would not be exempt from liability because its employees, particularly
the tugmaster, have failed to exercise due diligence to prevent or minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied because what Philamgen
seeks is not a review on points or errors of law but a review of the undisputed factual findings of the
RTC and the appellate court. In any event, PKS Shipping points out, the findings and conclusions of
both courts find support from the evidence and applicable jurisprudence.

The determination of possible liability on the part of PKS Shipping boils down to the question of
whether it is a private carrier or a common carrier and, in either case, to the other question of
whether or not it has observed the proper diligence (ordinary, if a private carrier, or extraordinary, if a
common carrier) required of it given the circumstances.

The findings of fact made by the Court of Appeals, particularly when such findings are consistent
with those of the trial court, may not at liberty be reviewed by this Court in a petition for review under
Rule 45 of the Rules of Court.1The conclusions derived from those factual findings, however, are not
necessarily just matters of fact as when they are so linked to, or inextricably intertwined with, a
requisite appreciation of the applicable law. In such instances, the conclusions made could well be
raised as being appropriate issues in a petition for review before this Court. Thus, an issue whether
a carrier is private or common on the basis of the facts found by a trial court or the appellate court
can be a valid and reviewable question of law.

The Civil Code defines "common carriers" in the following terms:

"Article 1732. 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 compensation, offering their services to the public."

Complementary to the codal definition is Section 13, paragraph (b), of the Public Service Act; it
defines "public service" to be –

"x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, subway motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship, or steamship line, pontines, ferries and
water craft, engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power petroleum, sewerage system, wire or
wireless communication systems, wire or wireless broadcasting stations and other similar
public services. x x x. (Underscoring supplied)."

The prevailing doctrine on the question is that enunciated in the leading case of De Guzman vs.
Court of Appeals.2Applying Article 1732 of the Code, in conjunction with Section 13(b) of the Public
Service Act, this Court has held:

"The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as `a sideline’). 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. We think that Article
1732 deliberately refrained from making such distinctions.

"So understood, the concept of `common carrier’ under Article 1732 may be seen to coincide
neatly with the notion of `public service,’ under the Public Service Act (Commonwealth Act
No. 1416, as amended) which at least partially supplements the law on common carriers set
forth in the Civil Code."

Much of the distinction between a "common or public carrier" and a "private or special carrier" lies in
the character of the business, such that if the undertaking is an isolated transaction, not a part of the
business or occupation, and the carrier does not hold itself out to carry the goods for the general
public or to a limited clientele, although involving the carriage of goods for a fee,3 the person or
corporation providing such service could very well be just a private carrier. A typical case is that of a
charter party which includes both the vessel and its crew, such as in a bareboat or demise, where
the charterer obtains the use and service of all or some part of a ship for a period of time or a
voyage or voyages4 and gets the control of the vessel and its crew.5 Contrary to the conclusion made
by the appellate court, its factual findings indicate that PKS Shipping has engaged itself in the
business of carrying goods for others, although for a limited clientele, undertaking to carry such
goods for a fee. The regularity of its activities in this area indicates more than just a casual activity
on its part.6 Neither can the concept of a common carrier change merely because individual
contracts are executed or entered into with patrons of the carrier. Such restrictive interpretation
would make it easy for a common carrier to escape liability by the simple expedient of entering into
those distinct agreements with clients.

Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence
demanded of common carriers, Article 1733 of the Civil Code requires common carriers to observe
extraordinary diligence in the vigilance over the goods they carry. In case of loss, destruction or
deterioration of goods, common carriers are presumed to have been at fault or to have acted
negligently, and the burden of proving otherwise rests on them.7 The provisions of Article 1733,
notwithstanding, common carriers are exempt from liability for loss, destruction, or deterioration of
the goods due to any of the following causes:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers; and

(5) Order or act of competent public authority.8

The appellate court ruled, gathered from the testimonies and sworn marine protests of the respective
vessel masters of Limar I and MT Iron Eagle, that there was no way by which the barge’s or the
tugboat’s crew could have prevented the sinking of Limar I. The vessel was suddenly tossed by
waves of extraordinary height of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots
resulting in the entry of water into the barge’s hatches. The official Certificate of Inspection of the
barge issued by the Philippine Coastguard and the Coastwise Load Line Certificate would attest to
the seaworthiness of Limar I and should strengthen the factual findings of the appellate court.

Findings of fact of the Court of Appeals generally conclude this Court; none of the recognized
exceptions from the rule - (1) when the factual findings of the Court of Appeals and the trial court are
contradictory; (2) when the conclusion is a finding grounded entirely on speculation, surmises, or
conjectures; (3) when the inference made by the Court of Appeals from its findings of fact is
manifestly mistaken, absurd, or impossible; (4) when there is a grave abuse of discretion in the
appreciation of facts; (5) when the appellate court, in making its findings, went beyond the issues of
the case and such findings are contrary to the admissions of both appellant and appellee; (6) when
the judgment of the Court of Appeals is premised on a misapprehension of facts; (7) when the Court
of Appeals failed to notice certain relevant facts which, if properly considered, would justify a
different conclusion; (8) when the findings of fact are themselves conflicting; (9) when the findings of
fact are conclusions without citation of the specific evidence on which they are based; and (10) when
the findings of fact of the Court of Appeals are premised on the absence of evidence but such
findings are contradicted by the evidence on record – would appear to be clearly extant in this
instance.

All given then, the appellate court did not err in its judgment absolving PKS Shipping from liability for
the loss of the DUMC cargo.