The Supreme Court held that a brokerage firm that also undertakes the delivery of goods for its customers can be considered a common carrier, even if it subcontracts the actual transport. This means the brokerage firm is responsible for the goods’ safety during transit. If the goods are lost or damaged, the firm is presumed to be at fault unless it can prove it exercised extraordinary diligence. The decision clarifies the scope of common carrier liability and underscores the importance of diligence in ensuring the safe delivery of goods.

From Broker to Carrier: Who Bears the Risk When Cargo Goes Missing?

This case revolves around a shipment of electronic goods that went missing en route from the Port of Manila to Sony Philippines’ warehouse in Laguna. Sony had contracted Torres-Madrid Brokerage, Inc. (TMBI) to handle the shipment’s release from customs and its delivery. TMBI, in turn, subcontracted the trucking to BMT Trucking Services. When one of the trucks disappeared with its cargo, the legal battle began to determine who was responsible for the significant loss. This prompts the question: Can a brokerage firm that subcontracts delivery be held liable as a common carrier for lost goods?

The heart of the matter lies in determining whether TMBI, primarily a customs brokerage, also functioned as a common carrier. Article 1732 of the Civil Code defines common carriers as entities engaged in transporting passengers or goods for compensation, offering their services to the public. The Supreme Court has previously established that even if the primary business is not transportation, undertaking to deliver goods for customers can qualify a business as a common carrier, citing A.F. Sanchez Brokerage Inc. v. Court of Appeals. The crucial factor is whether the entity holds itself out to the public for the transport of goods as a business, regardless of whether it owns the vehicles used. TMBI argued it was merely a broker, but the Court scrutinized its activities.

The Court emphasized that TMBI’s services included the delivery of goods, making it a common carrier. TMBI’s General Manager even testified that their business involved acquiring release documents from customs and delivering the cargoes to the consignee’s warehouse. The fact that TMBI subcontracted the trucking was irrelevant. According to the Court, this is because “as long as an entity holds itself to the public for the transport of goods as a business, it is considered a common carrier regardless of whether it owns the vehicle used or has to actually hire one.” As a common carrier, TMBI was bound to exercise extraordinary diligence in ensuring the safety of the goods.

This duty of extraordinary diligence is outlined in Article 1733 of the Civil Code, requiring common carriers to be exceptionally vigilant over the goods they transport. When goods are lost, Article 1735 creates a presumption of fault or negligence against the common carrier. To escape liability, the carrier must prove it observed extraordinary diligence or that the loss was due to specific causes like natural disasters, acts of war, or the shipper’s fault, as listed in Article 1734. In this case, TMBI claimed the loss was due to hijacking, a fortuitous event. However, the Court clarified that theft or robbery, including hijacking, does not automatically qualify as a fortuitous event that exempts the carrier from liability.

For a hijacking to be considered a fortuitous event, it must involve grave or irresistible threat, violence, or force, as established in De Guzman v. Court of Appeals. The burden of proving such force lies with the carrier. TMBI failed to provide sufficient evidence of this, and the Court noted that TMBI’s initial actions pointed to the truck driver being the perpetrator of the theft. Therefore, the hijacking could not be considered a force majeure. Since TMBI could not prove extraordinary diligence or a qualifying fortuitous event, it remained liable for the loss.

While TMBI was liable to Sony (through Mitsui, as the subrogee), the Court disagreed with the lower courts’ ruling that TMBI and BMT were solidarily liable as joint tortfeasors. Article 2194 of the Civil Code establishes solidary liability for those liable for quasi-delict. The Court clarified that TMBI’s liability arose from breach of contract (culpa contractual) with Sony, not from quasi-delict (culpa aquiliana). There was no direct contractual relationship between Sony/Mitsui and BMT; any action against BMT would have to be based on quasi-delict, requiring proof of BMT’s negligence. Mitsui did not sue BMT or prove any negligence on its part. However, TMBI could seek recourse from BMT, as they had a contract of carriage, and BMT failed to prove extraordinary diligence, making them liable to TMBI for the loss.

FAQs

What was the key issue in this case?	The key issue was whether Torres-Madrid Brokerage, Inc. (TMBI), a brokerage firm, could be held liable as a common carrier for the loss of goods during transport, even though it subcontracted the actual trucking.
What is a common carrier under Philippine law?	A common carrier is a person, corporation, firm, or association engaged in the business of transporting passengers or goods for compensation, offering their services to the public. They are required to exercise extraordinary diligence in their operations.
Can a brokerage firm be considered a common carrier?	Yes, a brokerage firm can be considered a common carrier if it undertakes to deliver the goods for its customers, even if its primary business is customs brokerage.
What standard of care is required of a common carrier?	Common carriers are required to exercise extraordinary diligence in the vigilance over the goods and in the safety of their passengers, as per Article 1733 of the Civil Code.
What happens when goods are lost while in the custody of a common carrier?	Article 1735 of the Civil Code presumes that the common carrier was at fault or acted negligently when goods are lost, destroyed, or deteriorated.
What is a fortuitous event, and how does it affect a common carrier’s liability?	A fortuitous event is an event that could not be foreseen or, though foreseen, was inevitable. If a loss is due to a fortuitous event as defined under Article 1734 of the Civil Code, the common carrier may be exempt from liability. However, theft or robbery is not automatically considered a fortuitous event.
When is a hijacking considered a fortuitous event?	A hijacking is considered a fortuitous event only if it is attended by grave or irresistible threat, violence, or force. The burden of proving such force lies with the carrier.
What is the difference between culpa contractual and culpa aquiliana in this context?	Culpa contractual is liability arising from breach of contract, while culpa aquiliana is liability arising from quasi-delict or negligence. In this case, TMBI’s liability to Mitsui was based on culpa contractual, while any potential liability of BMT to Mitsui would have to be based on culpa aquiliana.

This case clarifies that brokerage firms offering delivery services assume the responsibilities of common carriers, highlighting the need for diligence and risk management in subcontracting transport. This ruling emphasizes that the obligation to ensure safe delivery extends beyond merely processing paperwork. Companies must now take proactive measures to secure transported goods, or risk bearing the financial burden of loss.

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: Torres-Madrid Brokerage, Inc. vs. FEB Mitsui Marine Insurance Co., Inc., G.R. No. 194121, July 11, 2016