G.R. No.

149038

April 9, 2003

PHILAMGEN v. PKS Shipping Company

Facts: Davao Union Marketing Corporation (DUMC) contracted the services of PKS Shipping Company (PKS
Shipping) for the shipment of 75,000 bags of cement worth Php3, 375, 000.00 to Tacloban City. DUMC
insured the goods for its full value with Philippine American General Insurance Company (Philamgen).
The goods were loaded aboard dumb barge Limar I which belonged to PKS Shipping. On the evening
of December 22, 1988, while Limar I was being towed by MT Iron Eagle (PKS tugboat), the barge sank a
couple of miles off the coast of Dumagas Point, in Zamboanga del Sur, bringing down with it the entire
cargo of cement.
DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly
made payment. However, PKS Shipping refused to reimburse Philamgen which prompted the latter to file
suit against the former before the Makati RTC.
PKS Shipping contends it is not a common carrier and therefore not liable for the loss of the cement
due to a fortuitous event (Typhoon APIANG).
Issue: 1. Whether PKS Shipping is a common carrier or private carrier.
2. In either case, WON it has observed the proper diligence (ordinary-private, extraordinarycommon) required in the circumstances to be exempt from liability.
Held: 1. PKS Shipping is a Common Carrier (CC). Article 1732 of the Civil Code: CCs 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: public service is 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 CC, x x x
In applying Article 1732, in conjunction with Sec.13 (b) of the Public Service Act, the Court ruled in
the leading case of De Guzman vs. CA that there is no distinction between:
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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 (sideline);
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; and
a carrier offering its services to the general public and one who offers services or solicits
business only from the narrow segment of the general population.

Much of the distinction between a CC and a private carrier lies in the character of the business. If it
undertakes an isolated transaction (not part of the business), and the carrier does not hold itself out to
carry goods for the general public or to a limited clientele, although involving the carriage of goods for a
fee, the carrier could very well be a private one.
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 casual activity on its part. Even if individual contracts are entered into, the concept of a CC
would not change, otherwise, it will be easy for one to evade liability by simply entering into those distinct
agreements with clients.
2. YES, PKS observed extraordinary diligence, hence, not liable for the loss. Article 1733
of the Civil Code requires CC to observe extraordinary diligence in the vigilance over the goods they carry.
In case of loss, destruction or deterioration of goods, CC are presumed to have been at fault or to have
acted negligently, and the burden of proving otherwise rests on them. However, CC are exempt from
liability for the loss, destruction, etc. due to Flood, storm, earthquake, lightning, or natural disaster or
calamity; act of the public enemy in war, whether intl or civil; act or omission of the shipper or owner of
the goods; the character of the goods or defects in the packing or in the containers; and order or act of
competent public authority.
The Court upheld the finding of the CA that based on 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 crew of
both the barge and tugboat could have prevented the sinking of Limar I. The vessel was suddenly tossed

by 6-8 foot tall waves (extraordinary height) buffeted by strong winds which resulted to the entry of water
into the barges hatches. The official certificate of inspection done by the Philippine Coastguard and the
Coastwise Load Line certificate would attest to the seaworthiness of Limar I.