DIVISION

[ GR No. 162267, Jul 04, 2008 ]

PCI LEASING v. UCPB GENERAL INSURANCE CO. +

DECISION

579 Phil. 418

AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, seeking a reversal of the Decision[1] of the Court of Appeals
(CA) dated December 12, 2003 affirming with modification the Decision of
the Regional Trial Court (RTC) of Makati City which ordered petitioner and
Renato Gonzaga (Gonzaga) to pay, jointly and severally, respondent the
amount of P244,500.00 plus interest; and the CA Resolution [2] dated
February 18, 2004 denying petitioner's Motion for Reconsideration.

The facts, as found by the CA, are undisputed:

On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with
Plate Number PHD-206 owned by United Coconut Planters Bank was
traversing the Laurel Highway, Barangay Balintawak, Lipa City. The car
was insured with plantiff-appellee [UCPB General Insurance Inc.], then
driven by Flaviano Isaac with Conrado Geronimo, the Asst. Manager of said
bank, was hit and bumped by an 18-wheeler Fuso Tanker Truck with Plate
No. PJE-737 and Trailer Plate No. NVM-133, owned by defendants-
appellants PCI Leasing Finance, Inc. allegedly leased to and operated by
defendant-appellant Superior Gas Equitable Co., Inc. (SUGECO) and
driven by its employee, defendant appellant Renato Gonzaga.

The impact caused heavy damage to the Mitsubishi Lancer car resulting in
an explosion of the rear part of the car. The driver and passenger suffered
physical injuries. However, the driver defendant-appellant Gonzaga
continued on its [sic] way to its [sic] destination and did not bother to bring
his victims to the hospital.

Plaintiff-appellee paid the assured UCPB the amount of P244,500.00

representing the insurance coverage of the damaged car.

As the 18-wheeler truck is registered under the name of PCI Leasing,

repeated demands were made by plaintiff-appellee for the payment of the
aforesaid amounts. However, no payment was made. Thus, plaintiff-
appellee filed the instant case on March 13, 1991. [3]
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it
could not be held liable for the collision, since the driver of the truck,
Gonzaga, was not its employee, but that of its co-defendant Superior Gas
Equitable Co., Inc. (SUGECO).[4] In fact, it was SUGECO, and not
petitioner, that was the actual operator of the truck, pursuant to a Contract
of Lease signed by petitioner and SUGECO.[5] Petitioner, however, admitted
that it was the owner of the truck in question.[6]

After trial, the RTC rendered its Decision dated April 15, 1999, [7] the
dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor

of plaintiff UCPB General Insurance [respondent], ordering the defendants
PCI Leasing and Finance, Inc., [petitioner] and Renato Gonzaga, to pay
jointly and severally the former the following amounts: the principal
amount of P244,500.00 with 12% interest as of the filing of this complaint
until the same is paid; P50,000.00 as attorney's fees; and P20,000.00 as
costs of suit.

SO ORDERED.[8]
Aggrieved by the decision of the trial court, petitioner appealed to the CA.

In its Decision dated December 12, 2003, the CA affirmed the RTC's
decision, with certain modifications, as follows:

WHEREFORE, the appealed decision dated April 15, 1999 is hereby

AFFIRMED with modification that the award of attorney's fees is hereby
deleted and the rate of interest shall be six percent (6%) per annum
computed from the time of the filing of the complaint in the trial court until
the finality of the judgment. If the adjudged principal and the interest
remain unpaid thereafter, the interest rate shall be twelve percent (12%) per
annum computed from the time the judgment becomes final and executory
until it is fully satisfied.

SO ORDERED.[9]
Petitioner filed a Motion for Reconsideration which the CA denied in its
Resolution dated February 18, 2004.

Hence, herein Petition for Review.

The issues raised by petitioner are purely legal:

Whether petitioner, as registered owner of a motor vehicle that figured in

a quasi-delict may be held liable, jointly and severally, with the driver
thereof, for the damages caused to third parties.

Whether petitioner, as a financing company, is absolved from liability by

the enactment of Republic Act (R.A.) No. 8556, or the Financing Company
Act of 1998.
Anent the first issue, the CA found petitioner liable for the damage caused
by the collision since under the Public Service Act, if the property covered
by a franchise is transferred or leased to another without obtaining the
requisite approval, the transfer is not binding on the Public Service
Commission and, in contemplation of law, the grantee continues to be
responsible under the franchise in relation to the operation of the vehicle,
such as damage or injury to third parties due to collisions. [10]

Petitioner claims that the CA's reliance on the Public Service Act is
misplaced, since the said law applies only to cases involving common
carriers, or those which have franchises to operate as public utilities. In
contrast, the case before this Court involves a private commercial vehicle
for business use, which is not offered for service to the general public. [11]

Petitioner's contention has partial merit, as indeed, the vehicles involved in

the case at bar are not common carriers, which makes the Public Service
Act inapplicable.

However, the registered owner of the vehicle driven by a negligent driver

may still be held liable under applicable jurisprudence involving laws on
compulsory motor vehicle registration and the liabilities of employers
for quasi-delicts under the Civil Code.

The principle of holding the registered owner of a vehicle liable for quasi-

delicts resulting from its use is well-established in jurisprudence. Erezo v.
Jepte,[12] with Justice Labrador as ponente, wisely explained the reason
behind this principle, thus:

Registration is required not to make said registration the operative act by

which ownership in vehicles is transferred, as in land registration cases,
because the administrative proceeding of registration does not bear any
essential relation to the contract of sale between the parties (Chinchilla vs.
Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of
the vehicle upon any public highway (section 5 [a], Act No. 3992, as
amended.) The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or injury is
caused by the vehicle on the public highways, responsibility therefor can be
fixed on a definite individual, the registered owner. Instances are numerous
where vehicles running on public highways caused accidents or injuries to
pedestrians or other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor
vehicle registration is primarily ordained, in the interest of the
determination of persons responsible for damages or injuries caused on
public highways.

"`One of the principal purposes of motor vehicles legislation is

identification of the vehicle and of the operator, in case of accident; and
another is that the knowledge that means of detection are always available
may act as a deterrent from lax observance of the law and of the rules of
conservative and safe operation. Whatever purpose there may be in these
statutes, it is subordinate at the last to the primary purpose of rendering it
certain that the violator of the law or of the rules of safety shall not escape
because of lack of means to discover him.' The purpose of the statute is
thwarted, and the displayed number becomes a `snare and delusion,' if
courts would entertain such defenses as that put forward by appellee in this
case. No responsible person or corporation could be held liable for the most
outrageous acts of negligence, if they should be allowed to place a
`middleman' between them and the public, and escape liability by the
manner in which they recompense their servants." (King vs. Brenham
Automobile Co., 145 S.W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses
is: should not the registered owner be allowed at the trial to prove who the
actual and real owner is, and in accordance with such proof escape or evade
responsibility and lay the same on the person actually owning the vehicle?
We hold with the trial court that the law does not allow him to do so; the
law, with its aim and policy in mind, does not relieve him directly of the
responsibility that the law fixes and places upon him as an incident or
consequence of registration. Were a registered owner allowed to evade
responsibility by proving who the supposed transferee or owner is, it would
be easy for him, by collusion with others or otherwise, to escape said
responsibility and transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for the damage or
injury done. A victim of recklessness on the public highways is usually
without means to discover or identify the person actually causing the injury
or damage. He has no means other than by a recourse to the registration in
the Motor Vehicles Office to determine who is the owner. The protection
that the law aims to extend to him would become illusory were the
registered owner given the opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and carried out, the
registered owner should not be allowed to prove the contrary to the
prejudice of the person injured, that is, to prove that a third person or
another has become the owner, so that he may thereby be relieved of the
responsibility to the injured person.

The above policy and application of the law may appear quite harsh and
would seem to conflict with truth and justice. We do not think it is so. A
registered owner who has already sold or transferred a vehicle has the
recourse to a third-party complaint, in the same action brought against him
to recover for the damage or injury done, against the vendee or transferee
of the vehicle. The inconvenience of the suit is no justification for relieving
him of liability; said inconvenience is the price he pays for failure to comply
with the registration that the law demands and requires.

In synthesis, we hold that the registered owner, the defendant-appellant

herein, is primarily responsible for the damage caused to the vehicle of the
plaintiff-appellee, but he (defendant-appellant) has a right to be
indemnified by the real or actual owner of the amount that he may be
required to pay as damage for the injury caused to the plaintiff-appellant. [13]
The case is still good law and has been consistently cited in subsequent
cases.[14] Thus, there is no good reason to depart from its tenets.
For damage or injuries arising out of negligence in the operation of a motor
vehicle, the registered owner may be held civilly liable with the negligent
driver either 1) subsidiarily, if the aggrieved party seeks relief based on
a delict or crime under Articles 100 and 103 of the Revised Penal Code; or
2) solidarily, if the complainant seeks relief based on a quasi-delict under
Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff
whether to waive completely the filing of the civil action, or institute it with
the criminal action, or file it separately or independently of a criminal
action;[15] his only limitation is that he cannot recover damages twice for the
same act or omission of the defendant.[16]

In case a separate civil action is filed, the long-standing principle is that the
registered owner of a motor vehicle is primarily and directly responsible for
the consequences of its operation, including the negligence of the driver,
with respect to the public and all third persons.[17] In contemplation of law,
the registered owner of a motor vehicle is the employer of its driver, with
the actual operator and employer, such as a lessee, being considered as
merely the owner's agent.[18] This being the case, even if a sale has been
executed before a tortious incident, the sale, if unregistered, has no effect as
to the right of the public and third persons to recover from the registered
owner.[19] The public has the right to conclusively presume that the
registered owner is the real owner, and may sue accordingly. [20]

In the case now before the Court, there is not even a sale of the vehicle
involved, but a mere lease, which remained unregistered up to the time of
the occurrence of the quasi-delict that gave rise to the case. Since a lease,
unlike a sale, does not even involve a transfer of title or ownership, but the
mere use or enjoyment of property, there is more reason, therefore, in this
instance to uphold the policy behind the law, which is to protect the
unwitting public and provide it with a definite person to make accountable
for losses or injuries suffered in vehicular accidents. [21] This is and has
always been the rationale behind compulsory motor vehicle registration
under the Land Transportation and Traffic Code and similar laws, which, as
early as Erezo, has been guiding the courts in their disposition of cases
involving motor vehicular incidents. It is also important to emphasize that
such principles apply to all vehicles in general, not just those offered for
public service or utility.[22]

The Court recognizes that the business of financing companies has a

legitimate and commendable purpose.[23] In earlier cases, it considered a
financial lease or financing lease a legal contract, [24] though subject to the
restrictions of the so-called Recto Law or Articles 1484 and 1485 of the
Civil Code.[25] In previous cases, the Court adopted the statutory definition
of a financial lease or financing lease, as:

[A] mode of extending credit through a non-cancelable lease contract under

which the lessor purchases or acquires, at the instance of the lessee,
machinery, equipment, motor vehicles, appliances, business and office
machines, and other movable or immovable property in consideration of
the periodic payment by the lessee of a fixed amount of money sufficient to
amortize at least seventy (70%) of the purchase price or acquisition cost,
including any incidental expenses and a margin of profit over an obligatory
period of not less than two (2) years during which the lessee has the right to
hold and use the leased property, x x x but with no obligation or option on
his part to purchase the leased property from the owner-lessor at the end of
the lease contract. [26]
Petitioner presented a lengthy discussion of the purported trend in other
jurisdictions, which apparently tends to favor absolving financing
companies from liability for the consequences of quasi-delictual acts or
omissions involving financially leased property.[27] The petition adds that
these developments have been legislated in our jurisdiction in Republic Act
(R.A.) No. 8556,[28] which provides:

Section 12. Liability of lessors. -- Financing companies shall not be liable

for loss, damage or injury caused by a motor vehicle, aircraft, vessel,
equipment, machinery or other property leased to a third person or entity
except when the motor vehicle, aircraft, vessel, equipment or other
property is operated by the financing company, its employees or agents at
the time of the loss, damage or injury.
Petitioner's argument that the enactment of R.A. No. 8556, especially its
addition of the new Sec. 12 to the old law, is deemed to have absolved
petitioner from liability, fails to convince the Court.

These developments, indeed, point to a seeming emancipation of financing

companies from the obligation to compensate claimants for losses suffered
from the operation of vehicles covered by their lease. Such, however, are
not applicable to petitioner and do not exonerate it from liability in the
present case.

The new law, R.A. No. 8556, notwithstanding developments in foreign

jurisdictions, do not supersede or repeal the law on compulsory motor
vehicle registration. No part of the law expressly repeals Section 5(a) and
(e) of R.A. No. 4136, as amended, otherwise known as the Land
Transportation and Traffic Code, to wit:

Sec. 5. Compulsory registration of motor vehicles. - (a) All motor

vehicles and trailer of any type used or operated on or upon any highway of
the Philippines must be registered with the Bureau of Land Transportation
(now the Land Transportation Office, per Executive Order No. 125, January
30, 1987, and Executive Order No. 125-A, April 13, 1987) for the current
year in accordance with the provisions of this Act.

xxxx

(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other

encumbrances of motor vehicles, in order to be valid against third
parties must be recorded in the Bureau (now the Land Transportation
Office). Voluntary transactions or voluntary encumbrances shall likewise be
properly recorded on the face of all outstanding copies of the certificates of
registration of the vehicle concerned.

Cancellation or foreclosure of such mortgages, attachments, and other

encumbrances shall likewise be recorded, and in the absence of such
cancellation, no certificate of registration shall be issued without the
corresponding notation of mortgage, attachment and/or other
encumbrances.

x x x x (Emphasis supplied)
Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by
implication is frowned upon, unless there is clear showing that the later
statute is so irreconcilably inconsistent and repugnant to the existing law
that they cannot be reconciled and made to stand together. [29] There is
nothing in R.A. No. 4136 that is inconsistent and incapable of
reconciliation.

Thus, the rule remains the same: a sale, lease, or financial lease, for that
matter, that is not registered with the Land Transportation Office, still does
not bind third persons who are aggrieved in tortious incidents, for the latter
need only to rely on the public registration of a motor vehicle as conclusive
evidence of ownership.[30] A lease such as the one involved in the instant
case is an encumbrance in contemplation of law, which needs to be
registered in order for it to bind third parties.[31] Under this policy, the evil
sought to be avoided is the exacerbation of the suffering of victims of tragic
vehicular accidents in not being able to identify a guilty party. A contrary
ruling will not serve the ends of justice. The failure to register a lease, sale,
transfer or encumbrance, should not benefit the parties responsible, to the
prejudice of innocent victims.

The non-registration of the lease contract between petitioner and its lessee
precludes the former from enjoying the benefits under Section 12 of R.A.
No. 8556.

This ruling may appear too severe and unpalatable to leasing and financing
companies, but the Court believes that petitioner and other companies so
situated are not entirely left without recourse. They may resort to third-
party complaints against their lessees or whoever are the actual operators
of their vehicles. In the case at bar, there is, in fact, a provision in the lease
contract between petitioner and SUGECO to the effect that the latter shall
indemnify and hold the former free and harmless from any "liabilities,
damages, suits, claims or judgments" arising from the latter's use of the
motor vehicle.[32] Whether petitioner would act against SUGECO based on
this provision is its own option.

The burden of registration of the lease contract is minuscule compared to

the chaos that may result if registered owners or operators of vehicles are
freed from such responsibility. Petitioner pays the price for its failure to
obey the law on compulsory registration of motor vehicles for registration is
a pre-requisite for any person to even enjoy the privilege of putting a
vehicle on public roads.

WHEREFORE, the petition is DENIED. The Decision dated December

12, 2003 and Resolution dated February 18, 2004 of the Court of Appeals
are AFFIRMED.

Costs against petitioner.

SO ORDERED.

Ynares-Santiago, (Chairperson), Chico-Nazario, Nachura, and Reyes,

JJ., concur.
 DIVISION

[ GR No. 181398, Jun 29, 2011 ]

FEB LEASING v. SPS. SERGIO P. BAYLON AND MARITESS VILLENA-

BAYLON +

DECISION

668 Phil. 184

CARPIO, J.:
The Case

This is a petition for review on certiorari[1] of the 9 October 2007

Decision[2] and the 18 January 2008 Resolution[3] of the Court of Appeals in
CA-G.R. CV No. 81446. The 9 October 2007 Decision affirmed the 30
October 2003 Decision[4] of the Regional Trial Court (Branch 35) of Gapan
City in Civil Case No. 2334 ordering petitioner to pay respondents damages.
The 18 January 2008 Resolution denied petitioner's motion for
reconsideration.

The Facts

On 2 September 2000, an Isuzu oil tanker running along Del Monte Avenue
in Quezon City and bearing plate number TDY 712 hit Loretta V. Baylon
(Loretta), daughter of respondent spouses Sergio P. Baylon and Maritess
Villena-Baylon (spouses Baylon). At the time of the accident, the oil tanker
was registered[5] in the name of petitioner FEB Leasing and Finance
Corporation[6] (petitioner). The oil tanker was leased[7] to BG Hauler, Inc.
(BG Hauler) and was being driven by the latter's driver, Manuel Y.
Estilloso. The oil tanker was insured[8] by FGU Insurance Corp. (FGU
Insurance).

The accident took place at around 2:00 p.m. as the oil tanker was coming
from Balintawak and heading towards Manila. Upon reaching the
intersection of Bonifacio Street and Del Monte Avenue, the oil tanker
turned left. While the driver of the oil tanker was executing a left turn side
by side with another vehicle towards Del Monte Avenue, the oil tanker hit
Loretta who was then crossing Del Monte Avenue coming from Mayon
Street. Due to the strong impact, Loretta was violently thrown away about
three to five meters from the point of impact. She fell to the ground
unconscious. She was brought for treatment to the Chinese General
Hospital where she remained in a coma until her death two days after. [9]

The spouses Baylon filed with the RTC (Branch 35) of Gapan City a
Complaint[10] for damages against petitioner, BG Hauler, the driver, and
FGU Insurance. Petitioner filed its answer with compulsory counterclaim
while FGU Insurance filed its answer with counterclaim. On the other hand,
BG Hauler filed its answer with compulsory counterclaim and cross-claim
against FGU Insurance.

Petitioner claimed that the spouses Baylon had no cause of action against it
because under its lease contract with BG Hauler, petitioner was not liable
for any loss, damage, or injury that the leased oil tanker might cause.
Petitioner claimed that no employer-employee relationship existed between
petitioner and the driver.

BG Hauler alleged that neither do the spouses Baylon have a cause of action
against it since the oil tanker was not registered in its name. BG Hauler
contended that the victim was guilty of contributory negligence in crossing
the street. BG Hauler claimed that even if its driver was at fault, BG Hauler
exercised the diligence of a good father of a family in the selection and
supervision of its driver. BG Hauler also contended that FGU Insurance is
obliged to assume all liabilities arising from the use of the insured oil
tanker.

For its part, FGU Insurance averred that the victim was guilty of
contributory negligence. FGU Insurance concluded that the spouses Baylon
could not expect to be paid the full amount of their claims. FGU Insurance
pointed out that the insurance policy covering the oil tanker limited any
claim to a maximum of P400,000.00.

During trial, FGU Insurance moved that (1) it be allowed to deposit in court
the amount of P450,000.00 in the joint names of the spouses Baylon,
petitioner, and BG Hauler and (2) it be released from further participating
in the proceedings. After the RTC granted the motion, FGU Insurance
deposited in the Branch Clerk of Court a check in the names of the spouses
Baylon, petitioner, and BG Hauler. The RTC then released FGU Insurance
from its contractual obligations under the insurance policy.

The Ruling of the RTC

After weighing the evidence submitted by the parties, the RTC found that
the death of Loretta was due to the negligent act of the driver. The RTC held
that BG Hauler, as the employer, was solidarily liable with the driver. The
RTC further held that petitioner, as the registered owner of the oil tanker,
was also solidarily liable.

The RTC found that since FGU Insurance already paid the amount of
P450,000.00 to the spouses Baylon, BG Hauler, and petitioner, the
insurer's obligation has been satisfactorily fulfilled. The RTC thus
dismissed the cross-claim of BG Hauler against FGU Insurance. The
decretal part of the RTC's decision reads:
Wherefore, premises considered, judgment is hereby rendered in favor of
the plaintiffs and against defendants FEB Leasing (now BPI Leasing), BG
Hauler, and Manuel Estilloso, to wit:

1. Ordering the defendants, jointly and severally, to pay plaintiffs the

following:

a. the amount of P62,000.00 representing actual expenses incurred by the

plaintiffs;
b. the amount of P50,000.00 as moral damages;
c. the amount of P2,400,000.00 for loss of earning capacity of the deceased
victim, Loretta V. Baylon;
d. the sum of P50,000.00 for death indemnity;
e. the sum of P50,000.00 for and as attorney's fees; and
f. with costs against the defendants.
2. Ordering the dismissal of defendants' counter-claim for lack of merit and
the cross claim of defendant BG Hauler against defendant FGU Insurance.
SO ORDERED.[11]

Petitioner, BG Hauler, and the driver appealed the RTC Decision to the
Court of Appeals. Petitioner claimed that as financial lessor, it is exempt
from liability resulting from any loss, damage, or injury the oil tanker may
cause while being operated by BG Hauler as financial lessee.

On the other hand, BG Hauler and the driver alleged that no sufficient
evidence existed proving the driver to be at fault. They claimed that the
RTC erred in finding BG Hauler negligent despite the fact that it had
exercised the diligence of a good father of a family in the selection and
supervision of its driver and in the maintenance of its vehicles. They
contended that petitioner, as the registered owner of the oil tanker, should
be solely liable for Loretta's death.

The Ruling of the Court of Appeals

The Court of Appeals held that petitioner, BG Hauler, and the driver are
solidarily liable for damages arising from Loretta's death. Petitioner's
liability arose from the fact that it was the registered owner of the oil tanker
while BG Hauler's liability emanated from a provision in the lease contract
providing that the lessee shall be liable in case of any loss, damage, or
injury the leased oil tanker may cause.

Thus, the Court of Appeals affirmed the RTC Decision but with the
modification that the award of attorney's fees be deleted for being
speculative. The dispositive part of the appellate court's Decision reads:
WHEREFORE, in the light of the foregoing, the instant appeal is DENIED.
Consequently, the assailed Decision of the lower court is AFFIRMED with
the MODIFICATION that the award of attorney's fees is DELETED.

IT IS SO ORDERED.[12]

Dissatisfied, petitioner and BG Hauler, joined by the driver, filed two

separate motions for reconsideration. In its 18 January 2008 Resolution,
the Court of Appeals denied both motions for lack of merit.

Unconvinced, petitioner alone filed with this Court the present petition for
review on certiorari impleading the spouses Baylon, BG Hauler, and the
driver as respondents.[13]

The Issue

The sole issue submitted for resolution is whether the registered owner of a
financially leased vehicle remains liable for loss, damage, or injury caused
by the vehicle notwithstanding an exemption provision in the financial
lease contract.

The Court's Ruling

Petitioner contends that the lease contract between BG Hauler and

petitioner specifically provides that BG Hauler shall be liable for any loss,
damage, or injury the leased oil tanker may cause even if petitioner is the
registered owner of the said oil tanker. Petitioner claims that the Court of
Appeals erred in holding petitioner solidarily liable with BG Hauler despite
having found the latter liable under the lease contract.

For their part, the spouses Baylon counter that the lease contract between
petitioner and BG Hauler cannot bind third parties like them. The spouses
Baylon maintain that the existence of the lease contract does not relieve
petitioner of direct responsibility as the registered owner of the oil tanker
that caused the death of their daughter.

On the other hand, BG Hauler and the driver argue that at the time
petitioner and BG Hauler entered into the lease contract, Republic Act No.
5980[14] was still in effect. They point out that the amendatory law, Republic
Act No. 8556,[15] which exempts from liability in case of any loss, damage, or
injury to third persons the registered owners of vehicles financially leased
to another, was not yet enacted at that time.

In point is the 2008 case of PCI Leasing and Finance, Inc. v. UCPB
General Insurance Co., Inc.[16] There, we held liable PCI Leasing and
Finance, Inc., the registered owner of an 18-wheeler Fuso Tanker Truck
leased to Superior Gas & Equitable Co., Inc. (SUGECO) and being driven by
the latter's driver, for damages arising from a collision. This despite an
express provision in the lease contract to the effect that the lessee,
SUGECO, shall indemnify and hold the registered owner free from any
liabilities, damages, suits, claims, or judgments arising from SUGECO's use
of the leased motor vehicle.

In the instant case, Section 5.1 of the lease contract between petitioner and
BG Hauler provides:

Sec. 5.1. It is the principle of this Lease that while the title or ownership of
the EQUIPMENT, with all the rights consequent thereof, are retained by
the LESSOR, the risk of loss or damage of the EQUIPMENT from whatever
source arising, as well as any liability resulting from the ownership,
operation and/or possession thereof, over and above those
actually compensated by insurance, are hereby transferred to
and assumed by the LESSEE hereunder which shall continue in full
force and effect.[17] (Emphasis supplied)

If it so wishes, petitioner may proceed against BG Hauler to seek

enforcement of the latter's contractual obligation under Section 5.1 of the
lease contract. In the present case, petitioner did not file a cross-claim
against BG Hauler. Hence, this Court cannot require BG Hauler to
reimburse petitioner for the latter's liability to the spouses Baylon.
However, as the registered owner of the oil tanker, petitioner may not
escape its liability to third persons.

Under Section 5 of Republic Act No. 4136,[18] as amended, all motor vehicles
used or operated on or upon any highway of the Philippines must be
registered with the Bureau of Land Transportation (now Land
Transportation Office) for the current year.[19] Furthermore, any
encumbrances of motor vehicles must be recorded with the Land
Transportation Office in order to be valid against third parties. [20]

In accordance with the law on compulsory motor vehicle registration, this

Court has consistently ruled that, with respect to the public and third
persons, the registered owner of a motor vehicle is directly and primarily
responsible for the consequences of its operation regardless of who the
actual vehicle owner might be.[21] Well-settled is the rule that the registered
owner of the vehicle is liable for quasi-delicts resulting from its use. Thus,
even if the vehicle has already been sold, leased, or transferred to another
person at the time the vehicle figured in an accident, the registered vehicle
owner would still be liable for damages caused by the accident. The sale,
transfer or lease of the vehicle, which is not registered with the Land
Transportation Office, will not bind third persons aggrieved in an accident
involving the vehicle. The compulsory motor vehicle registration
underscores the importance of registering the vehicle in the name of the
actual owner.

The policy behind the rule is to enable the victim to find redress by the
expedient recourse of identifying the registered vehicle owner in the
records of the Land Transportation Office. The registered owner can be
reimbursed by the actual owner, lessee or transferee who is known to him.
Unlike the registered owner, the innocent victim is not privy to the lease,
sale, transfer or encumbrance of the vehicle. Hence, the victim should not
be prejudiced by the failure to register such transaction or encumbrance. As
the Court held in PCI Leasing:

The burden of registration of the lease contract is minuscule compared to

the chaos that may result if registered owners or operators of vehicles are
freed from such responsibility. Petitioner pays the price for its failure to
obey the law on compulsory registration of motor vehicles for registration is
a pre-requisite for any person to even enjoy the privilege of putting a
vehicle on public roads.[22]

In the landmark case of Erezo v. Jepte,[23] the Court succinctly laid down

the public policy behind the rule, thus:

The main aim of motor vehicle registration is to identify the owner so that if
any accident happens, or that any damage or injury is caused by the vehicle
on the public highways, responsibility therefor can be fixed on a definite
individual, the registered owner. Instances are numerous where vehicles
running on public highways caused accidents or injuries to pedestrians or
other vehicles without positive identification of the owner or drivers, or
with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor
vehicle registration is primarily ordained, in the interest of the
determination of persons responsible for damages or injuries caused on
public highways.

xxx

Were a registered owner allowed to evade responsibility by proving who the

supposed transferee or owner is, it would be easy for him, by collusion with
others or, or otherwise, to escape said responsibility and transfer the same
to an indefinite person, or to one who possesses no property with which to
respond financially for the damage or injury done. A victim of recklessness
on the public highways is usually without means to discover or identify the
person actually causing the injury or damage. He has no means other than
by a recourse to the registration in the Motor Vehicles Office to determine
who is the owner. The protection that the law aims to extend to him would
become illusory were the registered owner given the opportunity to escape
liability by disproving his ownership. If the policy of the law is to be
enforced and carried out, the registered owner should not be allowed to
prove the contrary to the prejudice of the person injured, that is to prove
that a third person or another has become the owner, so that he may be
thereby be relieved of the responsibility to the injured person. [24]
In this case, petitioner admits that it is the registered owner of the oil
tanker that figured in an accident causing the death of Loretta. As the
registered owner, it cannot escape liability for the loss arising out of
negligence in the operation of the oil tanker. Its liability remains even if at
the time of the accident, the oil tanker was leased to BG Hauler and was
being driven by the latter's driver, and despite a provision in the lease
contract exonerating the registered owner from liability.

As a final point, we agree with the Court of Appeals that the award of
attorney's fees by the RTC must be deleted for lack of basis. The RTC failed
to justify the award of P50,000 attorney's fees to respondent spouses
Baylon. The award of attorney's fees must have some factual, legal and
equitable bases and cannot be left to speculations and conjectures.
[25]
 Consistent with prevailing jurisprudence,[26] attorney's fees as part of
damages are awarded only in the instances enumerated in Article 2208 of
the Civil Code.[27] Thus, the award of attorney's fees is the exception rather
than the rule. Attorney's fees are not awarded every time a party prevails in
a suit because of the policy that no premium should be placed on the right
to litigate.[28]

WHEREFORE, we DENY the petition. We AFFIRM the 9 October 2007

Decision and the 18 January 2008 Resolution of the Court of Appeals in
CA-G.R. CV No. 81446 affirming with modification the 30 October 2003
Decision of the Regional Trial Court (Branch 35) of Gapan City in Civil Case
No. 2334 ordering petitioner FEB Leasing and Finance Corporation, BG
Hauler, Inc., and driver Manuel Y. Estilloso to solidarily pay respondent
spouses Sergio P. Baylon and Maritess Villena-Baylon the following
amounts:

a. P62,000.00 representing actual expenses incurred by the plaintiffs;

b. P50,000.00 as moral damages;
c. P2,400,000.00 for loss of earning capacity of the deceased victim,
Loretta V. Baylon; and
d. P50,000.00 for death indemnity.

Costs against petitioner.

SO ORDERED.

Leonardo-De Castro,* Brion, Perez, and Sereno, JJ., concur.