GREAT HARVEST ENTERPRISES, INC., PLAINTIFF-APPELLEE, VS. ANNIE TAN, DOING BUSINESS UNDER THE TRADE NAME AND STYLE A J & T TRADING, DEFENDANT-APPELLANT.

Great Harvest Enterprises versus Tan

The Case

This is a case about a common carrier who lost the goods she was hired to haul, and who tried to escape liability by blaming the shipper. Great Harvest Enterprises, Incorporated sued Annie Tan, who does business under the trade name and style A J and T Trading, for a sum of money, claiming that the loss of four hundred thirty bags of soya beans was caused by her negligence. The case matters because it gathers in one decision the whole architecture of the common carrier's liability: the presumption of fault, the extraordinary diligence required, the duration of that responsibility, and the narrow exemptions. For a Bar candidate, it is a compact review of Articles 1732, 1734, and 1736 of the Civil Code applied to a purely verbal hauling contract.

Procedural History

The complaint for collection of sum of money was filed before the Regional Trial Court of Quezon City, Branch 217. During the presentation of the plaintiff's evidence, the defendant moved to dismiss the complaint; the trial court denied the motion, and the defendant elevated that denial to the Court of Appeals by petition for certiorari. The Court of Appeals denied the petition, and the defendant then offered her own evidence. In its Decision dated January 3, 2012, the trial court ruled in favor of Great Harvest, ordering Annie Tan to pay 230,000 pesos with interest at twelve percent per annum from June 2, 1994 until fully paid, plus 50,000 pesos in attorney's fees, and the costs of suit. Not content, Annie Tan appealed. The appeal reached the Supreme Court, which decided it in 2015 and affirmed the trial court in full.

Facts

On February 3, 1994, Great Harvest engaged the services of Annie Tan to transport four hundred thirty bags of United States soya beans valued at 230,000 pesos from the Tacoma Integrated Port Services in Port Area, Manila to Selecta Feeds in Camarin, Novaliches, Quezon City. The goods were loaded onto Tan's hauling truck, driven by her employee Rannie Sultan Cabugatan, as shown by two waybills, one issued by Tacoma and one by Great Harvest.

When the truck reached Selecta Feeds, the goods were rejected. Great Harvest then instructed the driver to bring the rejected goods to its Malabon warehouse. Despite Tan's assurances, the goods did not arrive that day. On the evening of February 4, Great Harvest's checker reported that the truck was parked at the Tacoma terminal; the driver was told to stay there, but the truck later could not be found. On February 7, Great Harvest discovered the goods had never been delivered, and Tan promised to verify. The next day she admitted that both the truck and the goods were missing. On February 19, the National Bureau of Investigation informed Great Harvest that the truck had been found abandoned in Cavite, but the driver and the cargo were gone.

Great Harvest demanded payment through letters dated March 2 and April 26, 1994. Tan refused to pay and made no arrangement to settle. In her Answer, Tan claimed there was no hauling contract at all, that the arrangement was a mere accommodation, and that she never consented to the diversion of the goods to Malabon. She blamed the hijacking as beyond her control, insisted the driver had been acting under Great Harvest's authority at the time, and argued that Great Harvest's own acts caused the loss.

Issues

• Whether or not a valid verbal contract of hauling existed between Great Harvest and Annie Tan, including an agreement to deliver rejected goods to the shipper's nearest warehouse upon payment of additional fees.
• Whether or not Annie Tan, as a common carrier, is liable for the loss of the goods notwithstanding the diversion of the cargo to the Malabon warehouse.
• Whether or not Annie Tan observed the extraordinary diligence required of a common carrier over the goods in her custody.

Applicable Provisions

Article 1732 of the Civil Code defines who is a common carrier, and it fixes Tan's status in this case:

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.

Article 1734 of the Civil Code governs the carrier's responsibility for the goods, and it is the provision Tan invoked and the Court applied:

Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: 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; 5. Order or act of competent public authority.

Article 1736 of the Civil Code fixes the duration of that responsibility, which the Court described in this case:

The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them.

Ruling

On the first issue, the Court held that a valid verbal contract of hauling was perfected. The testimony of Great Harvest's account officer, Cynthia Chua, was positive, consistent, and corroborated by the Tacoma waybill and the Great Harvest waybill. The Court found that Tan had agreed that rejected goods would be delivered to the company's nearest warehouse, as had been the practice between the parties since 1988, and that previous receipts showed additional charges had been paid for such diversions. Against this, Tan offered mere denials and self-serving allegations. Her own testimony contradicted her Answer, for she admitted the transaction was her second with the company, and the receipts showed she had contracted with Great Harvest several times as early as October 1993.

On the second issue, the Court held that the diversion did not transfer responsibility to the shipper. The delivery to the Malabon warehouse was part of the terms and conditions of the contract, so responsibility over the cargo remained with Tan. The Court quoted the governing rule:

Common carriers are responsible for the loss, destruction, or deterioration of the goods.

The Court added that a contract is the law between the parties, and obligations arising from contracts have the force of law between them and must be complied with in good faith. Tan's invocation of the act of the shipper as an exempting cause therefore failed, because the act complained of was itself contractual.

On the third issue, the Court held that Tan did not observe extraordinary diligence. She failed to provide security while the goods were in transit, and she did not pay for insurance coverage, either of which could have prevented the hijacking or ensured payment of the damages. Her efforts after the loss did not erase her liability. The Court also rejected her belated attack on the amount claimed, since she had admitted it in her responsive pleading, and the mere rejection of the goods by Selecta Feeds did not by itself depreciate their value. Finally, the Court reiterated that factual findings of the lower courts, when supported by substantial evidence, are entitled to great weight and respect, even finality, on appeal.

Doctrine

First, a common carrier is a person, corporation, firm, or association engaged in carrying or transporting passengers or goods, by land, water, or air, for compensation, offering its services to the public; the status attaches from the nature of the business, not from the label the parties give their agreement. Second, a verbal contract of carriage is valid and enforceable once perfected, and a contract is the law between the parties; its stipulations bind them and must be performed in good faith unless contrary to law, morals, good customs, public order, or public policy. Third, the common carrier is responsible for the loss, destruction, or deterioration of the goods, and this responsibility lasts from the time the goods are unconditionally placed in its possession and received for transportation until they are delivered, actually or constructively, to the consignee or to the person with a right to receive them. Fourth, the carrier is exempt only upon proof of the causes enumerated in Article 1734, among them the act or omission of the shipper or owner of the goods; where the very act complained of is a term of the contract, it is no exemption at all. Fifth, the carrier must observe extraordinary diligence in the vigilance over the goods, which includes taking reasonable measures such as security and insurance; efforts exerted after the loss do not cure the failure.

Disposition

The Supreme Court dismissed the appeal and affirmed in full the trial court's decision holding Annie Tan liable to Great Harvest Enterprises for 230,000 pesos with twelve percent interest per annum from June 2, 1994 until paid, plus 50,000 pesos in attorney's fees and the costs of suit.

Remember This

Memorize this line: the common carrier's extraordinary responsibility runs from receipt of the goods until actual or constructive delivery to the consignee, and only the causes in Article 1734 will excuse it. Examiners use this case to test the definition of a common carrier under Article 1732, the duration rule under Article 1736, and the rule that the shipper's act is no exemption when that act is itself part of the hauling contract.