Common Carriers and Stolen Goods: The Extraordinary Diligence Standard

A common carrier that loses goods to theft may still be held liable, even when the cargo was stolen rather than merely misplaced. In a 2019 ruling, the Supreme Court reaffirmed that carriers must exercise extraordinary diligence over goods in their custody—a standard far higher than ordinary care. This ruling matters to any business that ships goods or operates a transport service in the Philippines.

The Case: A Hijacked Truckload of Soya Beans

Great Harvest Enterprises, Inc. hired Annie Tan, a common carrier, to transport 430 bags of soya beans from Manila to Quezon City. The intended recipient rejected the shipment, and the driver was instructed to deliver the goods to Great Harvest's warehouse instead. The truck and cargo never arrived. Tan argued that the hijacking was a fortuitous event that absolved her of liability. The Supreme Court disagreed.

The Legal Standard: Extraordinary Diligence Under Article 1733

Article 1733 of the Civil Code sets the baseline: common carriers must observe extraordinary diligence in the vigilance over goods, "according to all the circumstances of each case." This standard exists because carriers operate for the public and hold near-complete control over goods during transit. The shipper has little ability to protect its property once it leaves the dock.

Article 1734 enumerates the only exceptions to carrier liability: natural disasters, acts of public enemies, acts or omissions of the shipper, the inherent character of the goods, and orders from competent public authority. Theft—absent grave threat or irresistible force—is not among them.

Why Theft Is Not Always a Fortuitous Event

Tan argued that the hijacking was a fortuitous event. The Court rejected this. While some prior rulings treated armed robbery with grave threats as a fortuitous event, the circumstances here were different. The theft was not attended by grave or irresistible threat, violence, or force. Under Article 1745(6) of the Civil Code, stipulations that relieve carriers of liability for acts of thieves or robbers acting without grave threat are void as contrary to public policy.

The Court also emphasized that the carrier failed to take basic precautions—such as providing security for the cargo or obtaining insurance. That failure, not the theft itself, was the proximate cause of the loss.

The Court's Reasoning: Policy and Economics

Two policy considerations underpin the ruling:

• Public trust. Carriers are not mere movers; they are custodians. The public relies on them to safeguard goods, and the law holds them to that trust.
• Allocative efficiency. Requiring carriers to internalize the cost of losses encourages them to invest in precautions. If shippers bore the risk, trade would be discouraged and markets destabilized.

The Court also gave weight to the trial court's factual finding that Tan had agreed to deliver rejected goods to Great Harvest's warehouse. Findings of fact by trial courts, when supported by substantial evidence, are generally binding on appeal.

Practical Takeaways

• Carriers must secure cargo. Background checks on employees, security escorts for high-value shipments, and insurance coverage are not optional extras—they are part of extraordinary diligence.
• Theft is not a free pass. A carrier cannot escape liability simply by showing the goods were stolen. The theft must be attended by grave or irresistible threat, violence, or force.
• Contract terms are limited. Stipulations that waive liability for ordinary theft are void under Article 1745(6).
• Document the agreement. The Court relied on evidence that Tan had agreed to deliver rejected goods to the warehouse. Carriers should clearly document delivery instructions and any deviations.
• Shippers should verify coverage. Before engaging a carrier, confirm that it has adequate insurance and security measures in place.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.