ALEJANDRO ARADA, DOING BUSINESS UNDER THE NAME AND STYLE “SOUTH NEGROS ENTERPRISES”, PETITIONER, VS. HONORABLE COURT OF APPEALS, SAN MIGUEL CORPORATION, RESPONDENTS.

This is a petition for review on certiorari which seeks to
annul and set aside the decision* of the
Court of Appeals dated April 8, 1991 in CA-G.R. CV No. 20597 entitled “San
Miguel Corporation v. Alejandro Arada, doing business under the name and style
“South Negros Enterprises”, reversing the decision of the RTC,
Seventh Judicial Region, Branch XII, Cebu City, ordering petitioner to pay the
private respondent the amount of P172,284.80 representing the value of the
cargo lost on board the ill-fated, M/L Maya with interest thereon at the legal
rate from the date of the filing of the complaint on March 25, 1983 until fully
paid, and the costs.

The undisputed facts of the case are as follows:

Alejandro Arada, herein petitioner, is the proprietor and
operator of the firm South Negros Enterprises which has been organized and
established for more than ten (10) years. It is engaged in the business of small scale shipping as a common
carrier, servicing the hauling of cargoes of different corporations and
companies with the five (5) vessels it was operating (Rollo, p. 121).

On March 24, 1982, petitioner entered into a contract with
private respondent to safely transport as a common carrier, cargoes of the
latter from San Carlos City, Negros Occidental to Mandaue City using one of
petitioner’s vessels, M/L Maya. The
cargoes of private respondent consisted of 9,824 cases of beer empties valued
at P176,824.80, were itemized as follows:

On March 24, 1982, petitioner thru its crew master, Mr. Vivencio
Babao, applied for a clearance with the Philippine Coast Guard for M/L Maya to
leave the port of San Carlos City, but due to a typhoon, it was denied
clearance by SNI Antonio Prestado PN who was then assigned at San Carlos City
Coast Guard Detachment (Rollo, p. 122).

On March 25, 1982 M/L Maya was given clearance as there was no
storm and the sea was calm. Hence, said
vessel left for Mandaue City. While it was navigating towards Cebu, a typhoon
developed and said vessel was buffeted on all its sides by big waves. Its rudder was destroyed and it drifted for
sixteen (16) hours although its engine was running.

On March 27, 1982 at about 4:00 a.m., the vessel sank with
whatever was left of its cargoes. The
crew was rescued by a passing pump boat and was brought to Calanggaman
Island. Later in the afternoon, they
were brought to Palompon, Leyte, where Vivencio Babao filed a marine protest
(Rollo, p. 10).

On the basis of such marine protest, the Board of Marine Inquiry
conducted a hearing of the sinking of M/L Maya wherein private respondent was
duly represented. Said Board made its
findings and recommendation dated November 7, 1983, the dispositive portion of
which reads as:

“WHEREFORE, premises considered, this Board recommends as it
is hereby recommended that the owner/operator, officers and crew of M/L Maya be
exonerated or absolved from any administrative liability on account of this
incident” (Exh. 1).

The Board’s report containing its findings and recommendation was
then forwarded to the headquarters of the Philippine Coast Guard for
appropriate action. On the basis of
such report, the Commandant of the Philippine Coast Guard rendered a decision
dated December 21, 1984 in SBMI Adm. Case No. 88-82 exonerating the
owner/operator officers and crew of the ill-fated M/L Maya from any
administrative liability on account of said incident (Exh. 2).

On March 25, 1983, private respondent filed a complaint in the
Regional Trial Court its first cause of action being for the recovery of the
value of the cargoes anchored on breach of contract of carriage. After due hearing, said court rendered a
decision dated July 18, 1988, the dispositive portion of which reads –

“WHEREFORE, judgment is hereby rendered as follows:

(1) With respect to the
first cause of action, claim of plaintiff is hereby dismissed;

(2) Under the second cause
of action, defendant must pay plaintiff the sum of P2,000.00;

(3) In the third cause of
action, the defendant must pay plaintiff the sum of P2,849.20;

(4) Since the plaintiff has
withheld the payment of P12,997.47 due the defendant, the plaintiff should
deduct the amount of P4,849.20 from the P12,997.47 and the balance of P8,148.27
must be paid to the defendant; and

(5) Defendant’s
counterclaim not having been substantiated by evidence is likewise
dismissed. NO COSTS.” (Orig. Record, pp. 193-195).

Thereafter, private respondent appealed said decision to the
Court of Appeals claiming that the trial court erred in -?

(1) Holding that nothing
was shown that the defendant, or any of his employees who manned the M/L Maya
was negligent in any way nor did they fail to observe extraordinary diligence
over the cargoes of the plaintiff; and

(2) Holding that the
sinking of said vessel was caused by the storm, consequently, dismissing the
claim of plaintiff in its first cause of action for breach of contract of
carriage of goods (Rollo, pp. 33-34; Decision, pp. 3-4).

In its decision promulgated on April 8, 1991, the Court of
Appeals reversed the decision of the court a quo, the dispositive
portion and the dispositive part of its decision reads as:

“WHEREFORE, that part of the judgment appealed from is
REVERSED and the appellee Alejandro Arada, doing business by the name and
style, “South Negros Enterprises”, ordered (sic) to pay unto the
appellant San Miguel Corporation the amount of P176,824.80 representing the
value of the cargo lost on board the ill-fated vessel, M/L Maya, with interest
thereon at the legal rate from date of the filing of the complaint on March
25, 1983, until fully paid, and the
costs.” (Rollo, p. 37)

The Court of Appeals ruled that “in view of his failure to
observe extraordinary diligence over the cargo in question and his negligence
previous to the sinking of the carrying vessel, as above shown, the appellee is
liable to the appellant for the value of the lost cargo.

Hence, the present recourse.

On November 20, 1991, this Court gave due course to the petition.

The pivotal issue to be resolved is whether or not petitioner is
liable for the value of the lost cargoes.

Petitioner contends that it was not in the exercise of its
function as a common carrier when it entered into a contract with private
respondent, but was then acting as a private carrier not bound by the
requirement of extraordinary diligence (Rollo, p. 15) and that the factual
findings of the Board of Marine Inquiry and the Special Board of Marine Inquiry
are binding and conclusive on the Court (Rollo, pp. 16-17).

Private respondent counters that M/L Maya was in the exercise of
its function as a common carrier and its failure to observe the extraordinary
diligence required of it in the vigilance over their cargoes makes petitioner
liable for the value of said cargoes.

The petition is devoid of merit.

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 (Art. 1732 of the New Civil Code).

In the case at bar, there is no doubt that petitioner was
exercising its function as a common carrier when it entered into a contract
with private respondent to carry and transport the latter’s cargoes. This fact is best supported by the admission
of petitioner’s son, Mr. Eric Arada, who testified as the officer-in-charge for
operations of South Negros Enterprises in Cebu City. In substance his testimony on January 14, 1985 is as follows:

Q.   How
many vessels are you operating?

A.    There
were all in all around five (5).

Q.   And
you were entering to service hauling of cargoes to different companies, is that
correct?

A.    Yes,
sir.

Q.   In
one word,  the South Negros Enterprises is
engaged in the business of common carriers, is that correct?

A.    Yes,
sir.

Q.   And
in fact, at the time of the hauling of the San Miguel Beer, it was also in the
same category as a common carrier?

A.    Yes,
sir.

(TSN, pp. 3-4, Jan. 29, 1985)

A common carrier, both from the nature of its business and for
insistent reasons of public policy is burdened by law with the duty of
exercising extraordinary diligence not only in ensuring the
safety of passengers, but in caring for the goods transported by it. The loss or destruction or deterioration of
goods turned over to the common carrier for the conveyance to a designated
destination raises instantly a presumption of fault or negligence on the part
of the carrier, save only where such loss, destruction or damage arises from
extreme circumstances such as a natural disaster or calamity x x x (Benedicto
v. IAC, G.R. No. 70876, July 19, 1990, 187 SCRA 547) (Underscoring supplied).

In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the proximate and only
cause of the loss. However, the common carrier must exercise due diligence to prevent or
minimize the loss before, during and after the occurrence of flood, storm or
other natural disaster in order that the common carrier may be exempted from
liability for the destruction or deterioration of the goods (Article 1739, New
Civil Code).

In the instant case, the appellate court was correct in finding
that petitioner failed to observe the extraordinary diligence over the cargo in
question and he or the master in his employ was negligent previous to the
sinking of the carrying vessel. In
substance, the decision reads:

“x x x VIVENCIO BABAO, the master of the carrying vessel, knew
that there was a typhoon coming before his departure but did not check where it
was.

x x x

“If only for the fact that he was
first denied clearance to depart on March 24, 1982, obviously because of a
typhoon coming, Babao, as master of the vessel, should have verified first
where the typhoon was before departing on March 25, 1982. True, the sea was calm at departure
time. But that might be the calm before
the storm. Prudence dictates that he
should have ascertained first where the storm was before departing as it might
be on his path.”

(Rollo, pp. 35-36)

Respondent court’s conclusion as to the negligence of petitioner
is supported by evidence. It will be
noted that Vivencio Babao knew of the impending typhoon on March 24, 1982 when
the Philippine Coast Guard denied M/L Maya the issuance of a clearance to
sail. Less than 24 hours elapsed since
the time of the denial of said clearance and the time a clearance to sail was
finally issued on March 25, 1982. Records
will show that Babao did not ascertain where the typhoon was headed by the use
of his vessel’s barometer and radio (Rollo, p. 142). Neither did the captain of the vessel monitor and record the
weather conditions everyday as required by Art. 612 of the Code of Commerce
(Rollo, pp. 142-143). Had he done so
while navigating for 31 hours he could have anticipated the strong winds and
big waves and taken shelter (Rollo, pp. 36; 145). His testimony on May 4, 1982 is as follows:

Q.   Did
you not check on your own where the typhoon was?

A.    No,
sir. (TSN, May 4, 1982, pp. 58-59)

Noteworthy is the fact that as per official records of the
Climatological Division of the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAG-ASA for brevity) issued by its Chief
of Climatological Division, Primitivo G. Ballan, Jr. as to the weather and sea
conditions that prevailed in the vicinity of Catmon, Cebu during the period
March 25-27, 1982, the sea conditions on March 25, 1982 were slight to rough
and the weather conditions then prevailing during those times were cloudy skies
with rainshowers and the small waves grew larger and larger, to wit:

(Exh. 3)

A common carrier is obliged to observe extraordinary diligence and
the failure of Babao to ascertain the direction of the storm and the weather
condition of the path they would be traversing, constitute lack of foresight
and minimum vigilance over its cargoes taking into account the surrounding
circumstances of the case.

While the goods are in the possession of the carrier, it is but
fair that it exercises extraordinary diligence in protecting them from loss or
damage, and if loss occurs, the law presumes that it was due to the carrier’s
fault or negligence; that is necessary to protect the interest of the shipper
which is at the mercy of the carrier (Art. 1756, Civil Code, Aboitiz Shipping
Corporation v. Court of Appeals, G.R. No. 89757, Aug. 6, 1990, 188 SCRA 387).

Furthermore, the records show that the crew of M/L Maya did not
have the required qualifications provided for in P.D. No. 97 or the Philippine
Merchant Marine Officers Law, all of whom were unlicensed. While it is true that they were given
special permit to man the vessel, such permit was issued at the risk and
responsibility of the owner (Rollo, p. 36).

Finally, petitioner claims that the factual findings of the
Special Board of Marine Inquiry exonerating the owner/operator, crew officers
of the ill-fated vessel M/L Maya from any administrative liability is binding
on the court.

In rejecting petitioner’s claim, respondent court was correct in
ruling that “such exoneration was but with respect to the administrative
liability of the “owner/operator, officers and crew of the ill-fated”
vessel. It could not have meant
exoneration of appellee from liability as a common carrier for his failure to
observe extraordinary diligence in the vigilance over the goods it was
transporting and for the negligent acts or omissions of his employees. Such is the function of the Court, not the
Special Board of Marine Inquiry.” (Rollo, p. 37, Annex A, p. 7)

The Philippine Merchant Marine Rules and Regulations particularly
Chapter XVI thereof entitled “Marine Investigation and Suspension and
Revocation Proceedings” prescribes the Rules governing maritime casualties
or accidents, the rules and procedures in administrative investigation of all
maritime cases within the jurisdiction or cognizance of the Philippine Coast
Guard and the grounds for suspension and revocation of licenses/certificates of
marine officers and seamen (1601 – SCOPE); clearly, limiting the jurisdiction
of the Board of Marine Inquiry and Special Board of Marine Inquiry to the
administrative aspect of marine casualties in so far as it involves the
shipowners and officers.

PREMISES CONSIDERED, the appealed decision is AFFIRMED.

SO ORDERED.

Narvasa, C.J., (Chairman), Regalado, and Nocon, JJ., concur.

Padilla, J., no part.

* Penned by Associate Justice
Pedro A. Ramirez and concurred in by Associate Justices Fernando A. Santiago
and Fermin A. Martin, Jr.