The Supreme Court’s decision in Philippine American General Insurance Company v. PKS Shipping Company clarifies the definition of a common carrier under Philippine law. The Court ruled that a shipping company which engages in the business of carrying goods for others, even with a limited clientele, can still be considered a common carrier, therefore, it is subject to the higher standards of diligence required by law. This means businesses offering transportation services cannot easily avoid liability by claiming to serve only a select group of customers.

Barge Disaster: Was the Shipping Company a Common Carrier or a Private One?

This case arose from the sinking of a barge, Limar I, owned by PKS Shipping Company (PKS Shipping), which was transporting 75,000 bags of cement insured by Philippine American General Insurance Company (Philamgen). The cement belonged to Davao Union Marketing Corporation (DUMC), which had contracted PKS Shipping for the shipment. The barge sank off the coast of Zamboanga del Sur, resulting in a total loss of the cargo. After Philamgen paid DUMC’s insurance claim, it sought reimbursement from PKS Shipping, leading to a legal battle over whether PKS Shipping was liable for the loss.

The central legal question was whether PKS Shipping operated as a common carrier or a private carrier. This distinction is critical because common carriers are held to a higher standard of care, known as extraordinary diligence, in ensuring the safety of goods they transport. If PKS Shipping were deemed a common carrier, it would be presumed negligent for the loss of the cargo unless it could prove the loss was due to a cause that exempts them from liability. The Regional Trial Court (RTC) and the Court of Appeals initially sided with PKS Shipping, finding that it was not a common carrier and that the loss was due to a fortuitous event.

However, the Supreme Court disagreed with the lower courts’ assessment of PKS Shipping’s status. The Court emphasized the definition of “common carriers” as outlined in Article 1732 of the Civil Code:

“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.”

The Court further cited Section 13, paragraph (b), of the Public Service Act, which defines “public service” in relation to common carriers as:

“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. (Italics supplied).”

The Court highlighted that Article 1732 makes no distinction between those whose primary business is transportation and those for whom it’s an ancillary activity. It also avoids differentiating between services offered regularly or occasionally, and those offered to the general public versus a narrow segment. Building on this, the Court cited the case of De Guzman vs. Court of Appeals, emphasizing that the concept of a common carrier aligns with that of “public service” under the Public Service Act.

The Supreme Court contrasted common carriers with private carriers, explaining that a private carrier’s undertaking is typically an isolated transaction, not part of a regular business. Unlike common carriers, private carriers do not hold themselves out to serve the general public. A key example is a charter party, where the charterer gains control of the vessel and its crew for a specific period or voyage. The court noted that the appellate court’s findings indicated that PKS Shipping was involved in the business of carrying goods for others for a fee, even if its clientele was limited. This regularity suggested more than a casual business activity.

The Court rejected the argument that entering into individual contracts with clients could shield a common carrier from liability. Such an interpretation would allow common carriers to easily evade their responsibilities by simply formalizing agreements with each customer. Given that PKS Shipping was classified as a common carrier, the Court addressed the standard of diligence it was required to meet. Article 1733 of the Civil Code states that common carriers must observe extraordinary diligence in the vigilance over the goods they transport. This means that in the event of loss, destruction, or deterioration of goods, common carriers are presumed to be at fault or to have acted negligently.

Despite the high standard of care, Article 1734 of the Civil Code provides exceptions where common carriers are not liable for loss, destruction, or deterioration of goods. These exceptions include:

(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.

The Court of Appeals had relied on the testimonies and marine protests of the vessel masters to conclude that the sinking of Limar I was unavoidable due to extraordinary waves and strong winds. The appellate court also considered the Certificate of Inspection and Coastwise Load Line Certificate as evidence of the barge’s seaworthiness. The Supreme Court acknowledged that it generally defers to the factual findings of the Court of Appeals, and that none of the recognized exceptions to this rule were evident in this case. The High Court therefore affirmed the appellate court’s ruling that PKS Shipping was not liable for the loss of the cargo. This decision hinged on the acceptance of the appellate court’s finding that the sinking was indeed due to a fortuitous event despite PKS Shipping being a common carrier.

FAQs

What was the key issue in this case?	The main issue was whether PKS Shipping Company should be considered a common carrier or a private carrier under Philippine law, which would determine the standard of diligence required of them in the transport of goods.
What is the difference between a common carrier and a private carrier?	A common carrier offers transportation services to the public for compensation, while a private carrier’s services are typically limited to specific clients and are not offered to the general public. Common carriers are held to a higher standard of care.
What does “extraordinary diligence” mean for common carriers?	Extraordinary diligence requires common carriers to take exceptional precautions to ensure the safety of the goods they transport, and they are presumed negligent if goods are lost or damaged unless they can prove otherwise.
What are some exceptions to a common carrier’s liability for lost goods?	Common carriers are not liable for losses due to natural disasters, acts of war, actions of the shipper, the nature of the goods themselves, or orders from public authorities.
How did the Court define a common carrier in this case?	The Court defined a common carrier as an entity engaged in the business of transporting goods for compensation, offering services to the public, whether with a general or limited clientele.
Why was the seaworthiness of the barge important in this case?	The seaworthiness of the barge was relevant to determining whether the loss of cargo was due to negligence on the part of PKS Shipping, or due to an unforeseen event.
What was the final ruling of the Supreme Court?	The Supreme Court upheld the Court of Appeals’ decision, absolving PKS Shipping from liability for the loss of the cargo, accepting the finding that the sinking was due to a fortuitous event.
What is the practical takeaway from this case for businesses?	The case underscores that businesses engaged in transporting goods cannot easily evade the responsibilities of a common carrier simply by limiting their clientele or entering into individual contracts.

This case serves as an important reminder that entities involved in the transportation of goods must understand their obligations as either common or private carriers. The Supreme Court’s interpretation of “common carrier” is broad, encompassing businesses that offer transport services even to a limited clientele. Businesses should ensure they understand their responsibilities to avoid potential liabilities.

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: Philippine American General Insurance Company vs. PKS Shipping Company, G.R. No. 149038, April 09, 2003