TL;DR
The Supreme Court affirmed that a forwarding company, Keihin-Everett, is liable for cargo lost to hijacking even though the transport was subcontracted to Sunfreight Forwarders. Keihin-Everett, as the primary common carrier contracted by Honda Trading, has a responsibility to ensure extraordinary diligence in the transport of goods from the moment they are received until delivery. While Keihin-Everett is liable to Tokio Marine (subrogated insurer of Honda Trading), it has a right to seek reimbursement from Sunfreight Forwarders due to the latter’s failure to prove extraordinary diligence during the transport when the hijacking occurred.
Hijacked and Held Liable: When Subcontracting Shipping Doesn’t Shield the Primary Carrier
Imagine entrusting your valuable goods to a forwarding company for delivery, only for them to be hijacked en route. Who bears the loss when the forwarding company subcontracts the actual transportation? This was the central question in Keihin-Everett Forwarding Co., Inc. v. Tokio Marine Malayan Insurance Co., Inc., where the Supreme Court tackled the extent of a common carrier’s liability, particularly when services are delegated to a third party. The case arose from the hijacking of a truck carrying aluminum alloy ingots, insured by Tokio Marine, while being transported by Sunfreight Forwarders, subcontracted by Keihin-Everett, the company initially hired by the consignee, Honda Trading.
Honda Trading, after importing aluminum alloy ingots, engaged Keihin-Everett to handle clearance and delivery to their Laguna warehouse. Keihin-Everett, in turn, subcontracted the land transport to Sunfreight Forwarders. Tragically, one of the container vans was hijacked while in Sunfreight’s custody. Tokio Marine, having insured the shipment, paid Honda Trading’s claim and subsequently sued Keihin-Everett to recover the insured amount, stepping into Honda Trading’s shoes through subrogation. Keihin-Everett argued they shouldn’t be liable because the hijacking occurred while the goods were with Sunfreight. The Regional Trial Court (RTC) and the Court of Appeals (CA) both found Keihin-Everett liable, albeit with modifications on the extent of liability.
The Supreme Court upheld the CA’s decision, emphasizing the unwavering duty of extraordinary diligence required of common carriers under Philippine law. Article 1733 of the Civil Code mandates common carriers to observe extraordinary diligence in the vigilance over goods they transport. This responsibility, according to Article 1736, extends from the moment the goods are unconditionally placed in their possession until they are delivered to the consignee. The Court reiterated that hijacking is not considered a fortuitous event that automatically exempts a carrier from liability. To be absolved, the carrier must prove that the hijacking was accompanied by grave or irresistible threat, violence, or force, which Keihin-Everett failed to demonstrate.
Keihin-Everett’s defense hinged on the argument that Sunfreight Forwarders was in possession of the goods during the hijacking. However, the Court clarified that subcontracting does not release Keihin-Everett from its obligations to Honda Trading. As the primary carrier directly contracted by Honda Trading, Keihin-Everett remained responsible for the safe delivery of the goods. The Court cited the case of Torres-Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc., which presented a similar scenario. In Torres-Madrid, the Court established a principle of recourse: the primary carrier, liable to the shipper, has a right to seek reimbursement from the subcontractor due to the latter’s breach of their subcontracted carriage agreement.
The Court explained the concept of subrogation, stating that it is a legal mechanism rooted in equity. Article 2207 of the Civil Code explicitly provides for subrogation in insurance cases:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract.
Upon paying Honda Trading’s claim, Tokio Marine legally stepped into Honda Trading’s position, acquiring the right to sue Keihin-Everett for breach of contract. The Court dismissed Keihin-Everett’s procedural arguments concerning the non-attachment of the insurance policy to the complaint, clarifying that while ideal, it is not a fatal error if the document is presented as evidence, as was done in this case. The Court also addressed Keihin-Everett’s argument about Tokio Marine’s standing to sue, confirming that Tokio Marine, through an agency agreement and subsequent name change from TMNFIC, was indeed the proper party and had sufficiently proven its right to subrogation through presented documents like the Insurance Policy and Subrogation Receipt.
Ultimately, the Supreme Court’s decision underscores the significant responsibility placed upon common carriers in the Philippines. It clarifies that subcontracting transport services does not diminish the primary carrier’s liability to the shipper. While Keihin-Everett is held accountable to Tokio Marine, the ruling also acknowledges their right to seek reimbursement from Sunfreight Forwarders, effectively distributing the liability based on the contractual relationships and the principle of extraordinary diligence. This case reinforces the importance of due diligence in all stages of cargo transport and the protective role of insurance and subrogation in mitigating losses.
FAQs
| What was the central issue in this case? | The main issue was whether Keihin-Everett, as the primary common carrier, was liable for the loss of goods due to hijacking, even though the actual transport was subcontracted to Sunfreight Forwarders. |
| What is ‘extraordinary diligence’ in the context of common carriers? | Extraordinary diligence is a high standard of care that common carriers must exercise in protecting transported goods from loss, destruction, or deterioration, as mandated by Philippine law. |
| What is subrogation and how does it apply here? | Subrogation is the legal right of an insurer to step into the shoes of the insured after paying a claim, allowing the insurer to recover the paid amount from the party responsible for the loss. In this case, Tokio Marine, after paying Honda Trading, was subrogated to Honda Trading’s rights against Keihin-Everett. |
| Is hijacking considered a fortuitous event that exempts common carriers from liability? | No, hijacking is generally not considered a fortuitous event that automatically exempts common carriers. Carriers must prove that the hijacking involved grave or irresistible force to be absolved of liability. |
| Can Keihin-Everett recover from Sunfreight Forwarders? | Yes, the Supreme Court recognized Keihin-Everett’s right to seek reimbursement from Sunfreight Forwarders based on their Accreditation Agreement and Sunfreight’s failure to prove extraordinary diligence. |
| What is the practical implication of this ruling for businesses? | Businesses hiring forwarding companies should understand that primary carriers remain liable for the safe transport of goods, even when subcontracting. Carriers must ensure extraordinary diligence throughout the entire transport process, regardless of subcontracting arrangements. |
For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.
Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Keihin-Everett Forwarding Co., Inc. v. Tokio Marine Malayan Insurance Co., Inc., G.R. No. 212107, January 28, 2019
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