Case Summary (G.R. No. 98243)
Factual Background
Alejandro Arada, doing business under the name and style "South Negros Enterprises" operated a small shipping business with five vessels and contracted on March 24, 1982 to carry San Miguel Corporation's cargo from San Carlos City, Negros Occidental to Mandaue City on board the M/L Maya. The cargo comprised 9,824 cases of beer empties itemized and valued at P176,824.80. The Philippine Coast Guard denied clearance to depart on March 24, 1982 because of an approaching typhoon but issued clearance on March 25, 1982 when the sea appeared calm. While en route a typhoon developed, the vessel lost its rudder, drifted for sixteen hours, and sank on March 27, 1982; the crew survived and filed a marine protest.
Procedural History
A Board of Marine Inquiry conducted hearings and on November 7, 1983 recommended exoneration of the owner/operator, officers and crew of M/L Maya from administrative liability. The Commandant of the Philippine Coast Guard rendered a decision on December 21, 1984 exonerating them administratively. San Miguel Corporation filed a civil complaint on March 25, 1983 in the Regional Trial Court for the value of the lost cargo and other claims. The RTC rendered judgment on July 18, 1988 dismissing the first cause of action for breach of contract of carriage and rendering assorted monetary awards and offsets in favor of the parties. San Miguel Corporation appealed to the Court of Appeals. The Court of Appeals reversed on April 8, 1991 and ordered Alejandro Arada, doing business under the name and style "South Negros Enterprises" to pay P176,824.80 with legal interest from March 25, 1983 and costs. The petitioner sought review by certiorari to the Supreme Court.
The Parties' Contentions
The petitioner argued that it was not acting as a common carrier but as a private carrier and therefore was not bound to the standard of extraordinary diligence; petitioner further contended that the factual findings of the Board of Marine Inquiry and the Special Board of Marine Inquiry, which administratively exonerated the owner/operator and crew, were binding and conclusive. The private respondent contended that the M/L Maya was operating as a common carrier, that the carrier failed to exercise extraordinary diligence over the cargo, and that such failure rendered the carrier civilly liable for the value of the lost cargo.
Trial Court Proceedings and Findings
The Regional Trial Court, after hearing, dismissed the first cause of action for breach of contract of carriage. The RTC awarded P2,000.00 under the second cause and P2,849.20 under the third cause, ordered an offset against an amount withheld by the plaintiff, and dismissed the defendant's counterclaim for lack of proof. The RTC thus denied recovery for the value of the cargo.
Ruling of the Court of Appeals
The Court of Appeals reversed the RTC. It found that the carrier failed to observe extraordinary diligence and that the master, Vivencio Babao, was negligent prior to the sinking by failing to verify the storm's position before departing. The Court of Appeals ordered the petitioner to pay P176,824.80, representing the value of the lost cargo, with interest at the legal rate from the date of filing of the complaint, March 25, 1983, until fully paid, plus costs.
Supreme Court Ruling
The Supreme Court affirmed the judgment of the Court of Appeals. The Court held that the petitioner was indisputably exercising the function of a common carrier when it undertook to transport the goods of San Miguel Corporation. The Court found substantial evidence supporting the appellate court's conclusion that the carrier and the master failed to exercise the required extraordinary diligence and were negligent prior to the sinking. The Court affirmed the award of P176,824.80 with legal interest and costs.
Legal Basis and Reasoning
The Court explained that a common carrier is engaged in the business of transporting goods for compensation and, by nature of the business and public policy, is subject to the duty of exercising extraordinary diligence to ensure the safety of passengers and goods (citing Article 1732, Article 1739, and Article 1756, New Civil Code). The loss of goods in the carrier's custody raises a presumption of fault on the part of the carrier, except where loss is caused solely and proximately by an act of God or natural disaster. Even then, the carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence (textual application of Article 1739). The Court relied on trial testimony that the master was aware of an approaching typhoon on March 24 when the Coast Guard initially denied clearance, yet he did not check the storm's direction by barometer or radio and did not keep the weather records required by Art. 612, Code of Commerce while navigating for thirty-one hours. Meteorological records from PAG-ASA showed sea conditions deteriorating from slight to rough on March 25, 1982. The crew lacked the qualifications required by P.D. No. 97, and any special permits to man the vessel were issued at the owner's risk. Th
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Case Syllabus (G.R. No. 98243)
Parties and Procedural Posture
- Alejandro Arada, doing business under the name and style "South Negros Enterprises" filed a petition for review on certiorari seeking to annul the decision of the Court of Appeals dated April 8, 1991 in CA-G.R. CV No. 20597.
- San Miguel Corporation was the private respondent and appellee below who sued for recovery of the value of cargo lost aboard M/L Maya.
- The Regional Trial Court rendered judgment on July 18, 1988 dismissing the first cause of action and awarding limited sums on other claims.
- The Court of Appeals reversed the RTC on April 8, 1991 and ordered Alejandro Arada to pay P176,824.80 with legal interest from the filing of the complaint on March 25, 1983 and costs.
- The Supreme Court, upon due course on November 20, 1991, entertained the petition and the present decision affirms the appealed judgment.
Key Factual Allegations
- South Negros Enterprises operated five vessels and entered into a contract on March 24, 1982 to carry 9,824 cases of beer empties valued at P176,824.80 from San Carlos City, Negros Occidental to Mandaue City aboard M/L Maya.
- The Philippine Coast Guard denied clearance to sail on March 24, 1982 because of a typhoon and later granted clearance on March 25, 1982 when the sea appeared calm.
- While en route a typhoon developed, the vessel lost its rudder, drifted for sixteen hours despite the engine running, and sank on March 27, 1982 with whatever cargo remained.
- The master, Vivencio Babao, filed a marine protest after rescue, and a Board of Marine Inquiry and a Special Board of Marine Inquiry recommended exoneration of the owner/operator, officers, and crew on November 7, 1983.
- The Commandant of the Philippine Coast Guard issued a decision on December 21, 1984 exonerating the owner/operator, officers, and crew from administrative liability.
Issues Presented
- Whether Alejandro Arada was liable for the value of the cargo lost aboard M/L Maya.
- Whether the carrier acted as a common carrier or as a private carrier for purposes of the duty of extraordinary diligence.
- Whether the administrative exoneration by the Board of Marine Inquiry and the Commandant of the Philippine Coast Guard was binding on the courts as to civil liability.
Contentions of the Parties
- Petitioner contended that he acted as a private carrier not bound by the duty of extraordinary diligence and that the Board's factual findings and exoneration were binding and conclusive on the courts.
- Private respondent countered that M/L Maya operated as a common carrier and that the failure to exercise extraordinary diligence made the petitioner liable for the value of the lost cargo.