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Court of Appeals

Before this Court is an ^**appeal from the decision^[1] dated January 15, 1999 of the Regional Trial Court, National Capital Judicial Region, Branch 257, Parañaque City in Civil Case Mo. 96-0330, entitled "California Manufacturing Corp., Plaintiff, versus Capemco Trade, Corp., Respondent", the dispositive portion of which reads:

WHEREFORE, in the light of the foregoing, the instant case is hereby dismissed.

SO ORDERED."

The facts are:

In its Complaint^[2] for Sum of Money against defendant-appellee V. Capemco Trade Corporation (V. Capemco for brevity), plaintiff-appellant California Manufacturing Co., Inc. (CMCI for brevity) alleged that: on May 11, 1993, it entered into a Contract of Carriage^[3] for defendant-appellee V. Capemco to supply it with means for transporting its goods; item No. 4 of the Contract of Carriage provides that:

"4) Liabilities-That Capemco shall be liable to, and pay CMCI for any toss or damage to the Merchandise or goods transported while in transit occasioned by employees (sic) dishonesty, negligence, non-delivery, pilferage *** or any other cause not covered by Insurance set forth in the next paragraph."

on March 11, 1996, a ten-wheeler truck with plate number TBP-995, owned by defendant-appellee V. Capemco and driven by Romeo S. Odallo, went to plaintiff-appellant CMCI's Las Piñas plant to load Seven Hundred Seventy (770) cases of Royal Spaghetti worth Six Hundred Eighty Six Thousand Seventy Pesos (P686,070.00) to be delivered to plaintiff-appellant CMCI's Parañaque Plant;^[4] at around 9:30 p.m. on said date, while the truck was running north bound along the West Service Road in Sucat, Muntinlupa City, Odallo suddenly stopped the vehicle and told another co-employee Amero Galleto, who was riding in the truck, to get a flashlight and some tools, claiming that the truck broke down; before Gaileto left the scene, he saw two (2) other employees of defendant-appellee V. Capemco, namely: Simeon Nombrado and Benjamin Mapanao, board the truck; when Galleto returned to the scene, the truck was nowhere to be found; on March 28, 1996, Homer B. Nugui sent a letter^[5] to Vicente Alejaga, Manager of defendant-appellee V. Capemco, demanding that defendant-appellee V. Capemco pay the amount of the stolen spaghetti; on May 15, 1996, Nugui sent another demand letter^[6] to defendant-appellee V. Capemco; on July 8, 1996, counsel for plaintiff-appllant CMCI sent a final demand letter^[7] to defendant-appellee V. Capemco demanding for the settlement of the value of the stolen spaghetti, however, the latter ignored the same; due to defendant-appellee V. Capemco's failure to pay the amount demanded, plaintiff-appellant CMCI was constrained to hire the services of a counsel to protect its interests, thereby incurring legal and attorney's fees.

In its Answer^[8] defendant-appellee V. Capemco denied all the material allegations in the complaint and alleged by way of special and affirmative-defenses that: plaintiff-appellant CMCI has no cause of action against it; assuming without admitting that its employees did commit some acts of dishonesty, it had exercised the diligence required by law in the selection and supervision of its employees and therefore should not be held liable thereto; as carrier, it is not the insurer of all risks; and in all transactions emanating from the contract of carriage, the same are covered by marine insurance which both parties have mutually contributed for the payment of its premium.

By way of compulsory counterclaim, defendant-appellee V. Capemco prayed for exemplary damages, attorney's fees and other litigation expenses.

On December 3, 1996, plaintiff-appellant CMCI filed a Motion for Summary Judgment^[9] which was denied by the lower court in its Order^[10] dated February 5, 1997.

Pre-trial conference was held and the parties stipulated on the following issues: "1) whether or not defendant is liable to plaintiff for the loss of 770 cases of Royal Spaghetti valued at P686,700.00; and 2) whether or not it is a condition precedent that plaintiff must seek recovery first from the insurance before it can go after the defendant in this case."^[11]

Trial on the merits ensued. Plaintiff-appellant CMCI presented as witnesses Reynaldo B. Castillo, Luisito Cailing and Felipe Lumbog.

Reynaldo B. Castillo testified that: he is the Sales Accounting Service Manager of Plaintiff-appellant CMCI, which entered into a Contract of Carriage with defendant-appellee V. Capemco for the latter to deliver the former's finished products from its Las Piñas warehouse to its Parañaque Warehouse; he identified plaintiff-appellant CMCI's Retail Price List^[12] showing that the price of one (1) box of Royal Spaghetti containing 40 packages of 450 grams was P891.00 or a total of P686.070.00 for 770 boxes.^[13]

Luisito Cailing testified that: he is a factory worker of plaintiff-appellant CMCI; he was present when the 770 cases of spaghetti were loaded in defendant-appellee V. Capemco's truck with Plate No. TBP-995 for delivery to the Parañaque warehouse; and he was the one who prepared and issued the Product Transfer Receipt (PTR) No. 61134^[14] covering the 770 cases of spaghetti.^[15]

Felipe Lumbog testified that: he is a Checker at plaintiff-appellant CMCI's Parañaque Warehouse for 16 years; as checker, he receives finished products from the Las Piñas warehouse; he was sure that he did not receive the 770 cases of spaghetti from Las Piñas on March 11,1997 as there was no V. Capemco truck that arrived on that date; and he later learned that a V. Capemco truck was held up.^[16]

On the other hand, defendant-appellee V. Capemco presented as witness Vicente Alejada, its President and General Manager, who testified that: he paid the insurance premium covering the insurance of the goods of plaintiff-appellant CMCI which was deducted from the trucking charges as evidenced by the Interplant Trucking Charges^[17]; the value of the merchandise loaded in the truck with Plate No. TBP-995 was P265,249.60 as shown in the Interplant Trucking Charges and not P686.070.00 as alleged by plaintiff-appellant CMCI; and that his company is not liable for the loss of the merchandise.^[18]

On rebuttal, Reynaldo Castillo stated that the correct amount of the 770 cases of spaghetti was P686,070.00 as appearing in the Product Transfer Receipt^[19] and not P265.249.60 as shown in the Interplant Trucking Charges.^[20]

After the parties have submitted their respective memorandum^[21], the lower court rendered the assailed decision. Hence, this appeal with the following assignment of errors.

"I.	THE LOWER COURT ERRED IN NOT HOLDING THE DEFENDANT-APPELLEE LIABLE TO THE PLAINTIFF-APPELLANT FOR THE LOSS OF THE CARGO VALUED AT SIX HUNDRED EIGHTY SIX THOUSAND SEVENTY PESOS (P686.070.00) DESPITE ITS FINDING OF FACT THAT IT GOT LOST WHILE LOADED ON DEFENDANT-APPELLEE'S TRUCK.
II.	THE LOWER COURT ERRED IN HOLDING THAT THE LIABILITY OF THE CARRIER FOR LOSS OF GOODS IS LIMITED TO CAUSES NOT COVERED BY INSURANCE.
III.	THE LOWER COURT ERRED IN NOT AWARDING ATTORNEY'S FEES TO THE PLAINTIFF-APPELLANT."[22]

The appeal is meritorious.

Undoubtedly, plaintiff-appellant CMCI's merchandise was loaded in defendant-appellee V. Capemco's truck from the former's Las Piñas warehouse to be delivered to its Paranaque warehouse, unfortunately, the merchandise never reached its destination. Somewhere along the way, it got lost. Allegedly, it was stolen by defendant-appellee V. Capemco's employees. Nevertheless, how it got lost is not an issue here. The real issue is whether or not defendant-appellee V. Capemco is liable for the loss of plaintiff-appellant CMCI's merchandise.

At the outset, there is no gainsaying that defendant-appellee V. Capemco is a common carrier. Article 1732 of the Civil Code states that:

"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." (Underscoring supplied)

Indeed, by the nature of its business, which is trucking, defendant-appellee V. Capemco is a common carrier. Plaintiff-appellant CMCI hired the services of its trucks for a fee to transport the former's goods from Las Piñas to Parañaque. As common carrier, defendant-appellee V. Capemco is bound to observe extraordinary diligence in the vigilance over the goods transported by it.^[23]

Pertinent provision of the Contract of Carriage^[24] entered into between the parties provides that:

"4. Liabilities:—That the carrier shall be liable to, and pay the company for any loss or damage to the merchandise or goods transported while in transit occasioned by employees (sic) dishonesty, negligence, non-delivery, pilferage, breakage, strikes, civil commotion, riots and public disturbance or any other cause not covered by insurance as set forth in the next paragraph."

Under the aforequoted provision, defendant-appellee V. Capemco shall be liable for the loss or damage to the merchandise or goods while in transit occasioned by defendant-appellee V. Capemco's employees' dishonesty, negligence, non-delivery, pilferage, breakage, strikes, civil commotion, riots and public disturbance or any other cause not covered by insurance. Evidently, plaintiff-appellant CMCI's merchandise loaded in defendant-appellee V. Capemco's truck with Plate No. TBP 995 were lost while in transit to its Parañaque warehouse. Based on the said provision and as common carrier, defendant-appellee V. Capemco is liable to plaintiff-appellant CMCI for the value of the merchandise.

In an attempt to evade liability for the loss of the goods, defendant-appellee V. Campeco denied that it is a common carrier. It opined that it does not offer its services to the public and has not held itself out to carry all freight for all persons, but only to a limited clientele covered by special contracts.^[25] The argument deserved scant consideration.

The test to determine a common carrier is whether the given undertaking is a part of the business engaged in by the carrier which it has held out to the general public as his occupation rather that the quantity or extent of the business transacted.^[26]

The definition of common carrier in Article 1732 of the Civil Code makes no distinction between a carrier offering its services to the general public and one who offers services or solicits business only from a narrow segment of the general population or as an ancillary activity.

While the concept of common carrier continues to vary in every case that reached the Higher Court, its determination and interpretation should generally rely on the facts of the case, the nature of the service being offered by the carrier, and mostly on common sense, since law is also common sense.

The concept of a common carrier does not change merely because individual contracts are executed or entered into with patrons of the carrier.^[27] Otherwise, such restrictive interpretation would make it easy for a common carrier to escape liability by the simple expedient of entering into these contracts.

As common carrier, defendant-appellee V. Capemco's only grounds to be exempted from liability for the loss of the goods it transported are those found in Article 1734 of the Civil Code which stated that:

"Article 1734. Common carrier 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."

The foregoing causes are the only means by which a common carrier may be exempted from liability for the loss of the goods it transports. This fact was affirmed by the Supreme Court in the landmark case of De Guzman vs. CA,^[28] wherein it was held that:

"It is important to point out that above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majure, fall within the scope of Article 1735."

Plaintiff-appellant CMCI's merchandise was stolen by defendant-appellee V. Capemco's employees while in transit to the former's Parañaque warehouse. Theft is not one of the grounds mentioned in Article 1734 for the carrier to be exempted from liability. Hence, defendant-appellee V. Capemco cannot escape from its liability for the loss of plaintiff-appellant CMCI's goods and must therefore pay its value. Granting arguendo that it was not stolen, nevertheless, non-delivery of the merchandise to plaintiff-appellant CMCI's warehouse in Paranaque still makes defendant-appellee V. Capemco liable to plaintiff-appellant CMCI.

Defendant-appellee V. Capemco's defense that the contract of carriage was covered by a marine insurance but plaintiff-appellant CMCI did secure the same is unavailing. The Contract of Carriage provides that:

"5. Marine Insurance: - That the carrier to ensure performance of its obligation herein stipulated, shall cover with Marine Insurance, in the name of the company merchandise or goods being transported. As financial assistance to the carrier, the company will share in the payment of Insurance Premium but shall in no case be more than 50% of the total premium cost."

From the foregoing provision, it is clear that defendant-appellee V. Capemco shall cover with Marine Insurance the merchandise or goods being transported by it. Thus, it is defendant-appellee y. Capemco's primary duty to secure an insurance to ensure the performance of its obligation. In this case, it should have been plaintiff-appellant CMCI which should have given financial assistance to defendant-appellee V. Capemco as its share in the payment of insurance premium and not the other way around. Defendant-appellee V. Capemco should have inquired from plaintiff-appellant CMCI if the latter had indeed secured an insurance, but it seems from the records that it never did. This slip tantamounts to negligence on the part of defendant-appellee V. Capemco and thus damaging to its cause.

Defendant-appellee V. Capemco's claim that its liability for the loss of the merchandise is limited to causes not covered by insurance is misplaced. It anchored its claim on the provisions of paragraph 4 of the Contract of Carriage. However, the enumeration in paragraph 4 is separated by the word or; to wit: "*** for any loss or damage to the merchandise, or goods transported while in-transit occasioned by employees dishonesty, negligence, non-delivery, pilferage, breakage, strikes, civil commotion, riots and public disturbance or any other cause not covered by insurance ***".

The word "or" is a disjunctive term signifying disassociation and independence of one thing from each of the other thing enumerated.^[29] Thus, plaintiff-appellant CMCI correctly asserts that it has two separate grounds to recover from defendant-appelle V. Capemco for the loss of its cargo or merchandise. One, when the loss or damage is brought about by employees' dishonesty, negligence, non-delivery, pilferage, breakage, strikes, civil commotion, riots and public disturbance, and the other, on any other cause not covered by insurance. This being the case, defendant-appellee V. Capemco's liability cannot be limited to a cause not covered by insurance.

With these findings of fact, the only issue left for determination is the value of the merchandise. Record shows that loaded in defendant-appellee V. Capemco's truck with Plate No. TBP 995 on March 11, 1997 were 770 cases of Royal Spaghetti containing 40 packages per case. Each package weighs 450 grams and each case was valued at P891.00 as shown in the Retail Price List^[30]. Therefore, for the 770 cases of Royal Spaghetti, the total value is P686,070.00.^[31]

Under paragraph 4 of the Contract of Carriage, defendant-appellee V. Capemco shall be liable to, and pay plaintiff-appellant CMCI for any loss or damage to the merchandise or goods transported while in transit occasioned by employees' dishonesty, negligence, non-delivery, pilferage, breakage, strikes, civil commotion, riots and public disturbance, and the other, on any other cause not covered by insurance.

Likewise, paragraph 8 of the same contract provides that:

"8) Damages: - That in case of breach of any term and condition of this Agreement by the CARRIER, it shall be liable to the COMPANY for liquidated damage of Five Thousand Pesos (P5.000.00) Philippine Currency, exclusive of other consequential damages which may be suffered by the COMPANY ***"

The contract is the law between the parties.^[32] Plaintiff-appellant CMCI is therefore entitled to the payment by defendant-appellee V. Capemco of the amount of P686.070.00 representing the value of the merchandise plus liquidated damages in the amount of  P5,000.00.

Anent the award of attorney's fees, the same is not awarded everytime a party prevails in a suit because of the policy that no premium should be placed on the right to litigate.^[33] Defendant-appellee V. Capemco's stand is not so untenable which amounts to gross and evident bad faith that warrants the award of attorney's fees. In the absence of stipulation, the same cannot be awarded.

WHEREFORE, premises considered, the assailed decision dated January 15, 1999 of the RTC, Branch 257, Paranaque City in Civil Case No. 96-0330 is hereby reversed and set aside. Defendant-appellee V. Capemco is hereby ordered to pay plaintiff-appellant CMCI the sum of Six Hundred Eighty Six Thousand Seventy Pesos (P686.070.00) representing the value of the 770 cases of Royal Spaghetti, and liquidated damages in the amount of Five Thousand Pesos (P5,000.00) as stipulated in the Contract of Carriage.

SO ORDERED.

Librea-Leagogo and Elbinias, JJ., concur.

---

^* As ordered in the October 8, 2001 resolution (p. 163, Rollo).

^** NOTE: This case was submitted for decision and ordered re-rafflejd to another Justice for study and report on October 30, 2000 (p. 142, Rollo) and later on March 8, 2001 (p. 163, Rollo). Pursuant to this Court's Zero Backlog Project, the case was raffled to this ponente and received on April 27, 2010.

^[1] Records, pp. 549-552

^[2] Records, pp. 1-6

^[3] Records, pp. 7-16

^[4] Records, p. 17

^[5] Records, p. 40

^[6] Records, p. 41

^[7] Records, p. 42

^[8] Records, pp. 51-54

^[9] Records, pp. 61-63

^[10] Records, p. 86

^[11] Pre-Trial Order, pp. 97-100

^[12] Records, p. 132

^[13] TSN, April 16, 1997, pp. 4-20

^[14] Records, p. 133

^[15] TSN, April 30, 1997, pp. 3-11

^[16] TSN, May 14, 1997, pp. 3-12

^[17] Records, p. 172

^[18] TSN, June 18, 1997, pp. 3-18

^[19] Records, p. 38

^[20] TSN. November 12, 1997. pp. 12-19

^[21] Plaintiff-Appellant CMCI's Memorandum, pp. 229-250; Defendant-Appellee V. Capemco's Memorandum, pp. 284-289

^[22] Rollo, p. 40

^[23] Article 1733, Civil Code

^[24] Records, pp. 28-33

^[25] Paragraph 4.01 - Memorandum, pp 278-289

^[26] Asis Lighterage and Shipping, Inc. vs. CA, 409 SCRA 340

^[27] Philippine American General Insurance Company vs. PKS Shipping Company, 401 SCRA 222

^[28] 168 SCRA 612

^[29] Statutory Construction by Ruben E. Agpalo, Fifth Ed., 2003, p. 204

^[30] Records, p. 153

^[31] PTR, p. 38

^[32]Heirs of the  Late  Spouses Aurelio and Esperanza Balite vs. Lim, 446 SCRA 56

^[33] Pajuyo vs. CA, 430 SCRA 492