I. REGISTERED OWNER RULE AND KABIT SYSTEM
(Section 68 [a], Rule 123, and
- Gaudioso Erezo, et.al. vs. Aguedo Jepte [G.R. No. L-
9605, Sept. 30, 1957]
G.R. No. L-9605             September 30, 1957
GAUDIOSO EREZO, ET AL., plaintiff-appellee,
vs.
AGUEDO JEPTE, defendant-appellant.
Gesolgon, Matti and Custodio for appellees.
Aguedo Y. Jepte in his own behalf.
LABRADOR, J.:
Appeal from a judgment of the Court of First Instance of
Manila ordering defendant to pay plaintiff Gaudioso Erezo
P3,000 on the death of Ernesto Erezo, son of plaintiff
Gaudioso Erezo.
Defendant-appellant is the registered owner of a six by six
truck bearing plate No. TC-1253. On August, 9, 1949, while
the same was being driven by Rodolfo Espino y Garcia, it
collided with a taxicab at the intersection of San Andres and
Dakota Streets, Manila. As the truck went off the street, it hit
Ernesto Erezo and another, and the former suffered injuries, as
a result of which he died. The driver was prosecuted for
homicide through reckless negligence in criminal case No.
10663 of the Court of First Instance of Manila. The accused
pleaded guilty and was sentenced to suffer imprisonment and
to pay the heirs of Ernesto Erezo the sum of P3,000. As the
amount of the judgment could not be enforced against him,
plaintiff brought this action against the registered owner of the
truck, the defendant-appellant. The circumstances material to
the case are stated by the court in its decision.
The defendant does not deny at the time of the fatal
accident the cargo truck driven by Rodolfo Espino y
Garcia was registered in his name. He, however,
claims that the vehicle belonged to the Port
Brokerage, of which he was the broker at the time of
the accident. He explained, and his explanation was
corroborated by Policarpio Franco, the manager of
the corporation, that the trucks of the corporation
were registered in his name as a convenient
arrangement so as to enable the corporation to pay
the registration fee with his backpay as a pre-war
government employee. Franco, however, admitted
that the arrangement was not known to the Motor
Vehicle Office.
The trial court held that as the defendant-appellant represented
himself to be the owner of the truck and the Motor Vehicle
Office, relying on his representation, registered the vehicles in
his name, the Government and all persons affected by the
representation had the right to rely on his declaration of
ownership and registration. It, therefore, held that the
defendant-appellant is liable because he cannot be permitted to
repudiate his own declaration.
Art. 1431, New Civil Code.).
Against the judgment, the defendant has prosecuted this
appeal claiming that at the time of the accident the relation of
employer and employee between the driver and defendant-
appellant was not established, it having been proved at the trial
that the owner of the truck was the Port Brokerage, of which
defendant-appellant was merely a broker. We find no merit or
justice in the above contention. In previous decisions, We
already have held that the registered owner of a certificate of
public convenience is liable to the public for the injuries or
damages suffered by passengers or third persons caused by the
operation of said vehicle, even though the same had been
transferred to a third person. (Montoya vs. Ignacio, 94 Phil.,
182, 50 Off. Gaz., 108; Roque vs. Malibay Transit Inc.,1 G. R.
No. L- 8561, November 18,1955; Vda. de Medina vs.
Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.)The
principle upon which this doctrine is based is that in dealing
with vehicles registered under the Public Service Law, the
public has the right to assume or presume that the registered
owner is the actual owner thereof, for it would be difficult for
the public to enforce the actions that they may have for
injuries caused to them by the vehicles being negligently
operated if the public should be required to prove who the
actual owner is. How would the public or third persons know
against whom to enforce their rights in case of subsequent
transfers of the vehicles? We do not imply by this doctrine,
however, that the registered owner may not recover whatever
amount he had paid by virtue of his liability to third persons
from the person to whom he had actually sold, assigned or
conveyed the vehicle.
Under the same principle the registered owner of any vehicle,
even if not used for a public service, should primarily be
responsible to the public or to third persons for injuries caused
the latter while the vehicle is being driven on the highways or
streets. The members of the Court are in agreement that the
defendant-appellant should be held liable to plaintiff-appellee
for the injuries occasioned to the latter because of the
negligence of the driver even if the defendant-appellant was
no longer the owner of the vehicle at the time of the damage
because he had previously sold it to another. What is the legal
basis for his (defendant-appellant's) liability?.
There is a presumption that the owner of the guilty vehicle is
the defendant-appellant as he is the registered owner in the
Motor Vehicle Office. Should he not be allowed to prove the
truth, that he had sold it to another and thus shift the
responsibility for the injury to the real and actual owner? The
defendant holds the affirmative of this proposition; the trial
court held the negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended)
provides that no vehicle may be used or operated upon any
public highway unless the same is properly registered. It has
been stated that the system of licensing and the requirement
that each machine must carry a registration number,
conspicuously displayed, is one of the precautions taken to
reduce the danger of injury to pedestrians and other travelers
from the careless management of automobiles, and to furnish a
means of ascertaining the identity of persons violating the
laws and ordinances, regulating the speed and operation of
machines upon the highways (2 R. C. L. 1176). Not only are
vehicles to be registered and that no motor vehicles are to be
used or operated without being properly registered for the
current year, but that dealers in motor vehicles shall furnish
the Motor Vehicles Office a report showing the name and
address of each purchaser of motor vehicle during the previous
month and the manufacturer's serial number and motor
number. (Section 5 [c], Act. No. 3992, as amended.).
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 vehicles on the public highways, responsibility therefore
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 those 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 will
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 be 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 laws 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 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.1âwphïl.nêt
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.1âwphïl.nêt

- Equitable Leasing Corporation vs. Lucita Suyon, et.al.
[G.R. No. 143360, Sept. 5, 2002]
THIRD DIVISION
[G.R. No. 143360. September 5, 2002.]
EQUITABLE LEASING CORPORATION, Petitioner, v.
LUCITA SUYOM, MARISSA ENANO, MYRNA
TAMAYO and FELIX OLEDAN, Respondents.
DECISION
PANGANIBAN, J.:
In an action based on quasi delict, the registered owner of a
motor vehicle is solidarily liable for the injuries and damages
caused by the negligence of the driver, in spite of the fact that
the vehicle may have already been the subject of an
unregistered Deed of Sale in favor of another person. Unless
registered with the Land Transportation Office, the sale —
while valid and binding between the parties — does not affect
third parties, especially the victims of accidents involving the
said transport equipment. Thus, in the present case, Petitioner,
which is the registered owner, is liable for the acts of the
driver employed by its former lessee who has become the
owner of that vehicle by virtue of an unregistered Deed of
Sale.chanrob1es virtua1 1aw 1ibrary
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules
of Court, assailing the May 12, 2000 Decision 1 of the Court
of Appeals 2 (CA) in CA-G.R. CV No. 55474. The decretal
portion of the Decision reads as
follows:jgc:chanrobles.com.ph
"WHEREFORE, premises considered, the instant appeal is
hereby DISMISSED for lack of merit. The assailed decision,
dated May 5, 1997, of the Regional Trial Court of Manila,
Branch 14, in Civil Case No. 95-73522, is hereby AFFIRMED
with MODIFICATION that the award of attorney’s fees is
DELETED." 3
On the other hand, in Civil Case No. 95-73522, the Regional
Trial Court (RTC) of Manila (Branch 14) had earlier disposed
in this wise:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendant Equitable Leasing
Corporation ordering said defendant to pay to the plaintiffs the
following:chanrob1es virtual 1aw library
A. TO MYRNA TAMAYO
1. the sum of P50,000.00 for the death of Reniel Tamayo;
2. P50,000.00 as moral damages; and
3. P56,000.00 for the damage to the store and its contents, and
funeral expenses.
B. TO FELIX OLEDAN
1. the sum of P50,000.00 for the death of Felmarie Oledan;
2. P50,000.00 as moral damages; and
3. P30,000.00 for medical expenses, and funeral expenses.
C. TO MARISSA ENANO
1. P7,000.00 as actual damages
D. TO LUCITA SUYOM
1. The sum of P5,000.00 for the medical treatment of her two
sons.
The sum of P120,000.00 as and for attorney’s fees." 4
The Facts
On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor
rammed into the house cum store of Myrna Tamayo located at
Pier 18, Vitas, Tondo, Manila. A portion of the house was
destroyed. Pinned to death under the engine of the tractor were
Respondent Myrna Tamayo’s son, Reniel Tamayo, and
Respondent Felix Oledan’s daughter, Felmarie Oledan.
Injured were Respondent Oledan himself, Respondent Marissa
Enano, and two sons of Respondent Lucita Suyom.chanrob1es
virtua1 1aw 1ibrary
Tutor was charged with and later convicted of reckless
imprudence resulting in multiple homicide and multiple
physical injuries in Criminal Case No. 296094-SA,
Metropolitan Trial Court of Manila, Branch 12. 5
Upon verification with the Land Transportation Office,
respondents were furnished a copy of Official Receipt No.
62204139 6 and Certificate of Registration No. 08262797, 7
showing that the registered owner of the tractor was
"Equitable Leasing Corporation/leased to Edwin Lim." On
April 15, 1995, respondents filed against Raul Tutor, Ecatine
Corporation ("Ecatine") and Equitable Leasing Corporation
("Equitable") a Complaint 8 for damages docketed as Civil
Case No. 95-73522 in the RTC of Manila, Branch 14.
The trial court, upon motion of plaintiffs’ counsel, issued an
Order dropping Raul Tutor, Ecatine and Edwin Lim from the
Complaint, because they could not be located and served with
summonses. 9 On the other hand, in its Answer with
Counterclaim, 10 petitioner alleged that the vehicle had
already been sold to Ecatine and that the former was no longer
in possession and control thereof at the time of the incident. It
also claimed that Tutor was an employee, not of Equitable, but
of Ecatine. damages sustained by respondents and that arose from the
negligence of the driver of the Fuso Road Tractor, which it
After trial on the merits, the RTC rendered its Decision had already sold to Ecatine at the time of the accident. Not
ordering petitioner to pay actual and moral damages and having employed Raul Tutor, the driver of the vehicle, it could
attorney’s fees to respondents. It held that since the Deed of not have controlled or supervised him. 18
Sale between petitioner and Ecatine had not been registered
with the Land Transportation Office, (LTO), the legal owner We are not persuaded. In negligence cases, the aggrieved party
was still Equitable. 11 Thus, petitioner was liable to may sue the negligent party under (1) Article 100 19 of the
respondents. 12 Revised Penal Code, for civil liability ex delicto; or (2) under
Article 2176 20 of the Civil Code, for civil liability ex quasi
Ruling of the Court of Appeals delicto. 21chanrob1es virtua1 1aw 1ibrary

Furthermore, under Article 103 of the Revised Penal Code,

Sustaining the RTC, the CA held that petitioner was still to be
legally deemed the owner/operator of the tractor, even if that
vehicle had been the subject of a Deed of Sale in favor of
Ecatine on December 9, 1992. The reason cited by the CA was
that the Certificate of Registration on file with the LTO still
remained in petitioner’s name. 13 In order that a transfer of
ownership of a motor vehicle can bind third persons, it must
be duly recorded in the LTO. 14
The CA likewise upheld respondents’ claim for moral
damages against petitioner because the appellate court
considered Tutor, the driver of the tractor, to be an agent of
the registered owner/operator. 15
Hence, this Petition. 16chanrob1es virtua1 1aw 1ibrary
Issues
In its Memorandum, petitioner raises the following issues for
the Court’s consideration:chanrob1es virtual 1aw library
I
"Whether or not the Court of Appeals and the trial court
gravely erred when they decided and held that petitioner [was]
liable for damages suffered by private respondents in an action
based on quasi delict for the negligent acts of a driver who
[was] not the employee of the petitioner.
employers may be held subsidiarily liable for felonies
committed by their employees in the discharge of the latter’s
duties. 22 This liability attaches when the employees who are
convicted of crimes committed in the performance of their
work are found to be insolvent and are thus unable to satisfy
the civil liability adjudged. 23
On the other hand, under Article 2176 in relation to Article
2180 24 of the Civil Code, an action predicated on quasi delict
may be instituted against the employer for an employee’s act
or omission. The liability for the negligent conduct of the
subordinate is direct and primary, but is subject to the defense
of due diligence in the selection and supervision of the
employee. 25 The enforcement of the judgment against the
employer for an action based on Article 2176 does not require
the employee to be insolvent, since the liability of the former
is solidary — the latter being statutorily considered a joint
tortfeasor. 26 To sustain a claim based on quasi delict, the
following requisites must be proven: (a) damage suffered by
the plaintiff, (b) fault or negligence of the defendant, and (c)
connection of cause and effect between the fault or negligence
of the defendant and the damage incurred by the plaintiff. 27
These two causes of action (ex delicto or ex quasi delicto) may
be availed of, subject to the caveat 28 that the offended party
cannot "recover damages twice for the same act or omission"
or under both causes. 29 Since these two civil liabilities are
distinct and independent of each other, the failure to recover in
one will not necessarily preclude recovery in the other.
30chanrob1es virtua1 1aw 1ibrary

II In the instant case, respondents — having failed to recover

anything in the criminal case — elected to file a separate civil
action for damages, based on quasi delict under Article 2176
"Whether or not the Court of Appeals and the trial court of the Civil Code. 31 The evidence is clear that the deaths and
gravely erred when they awarded moral damages to private the injuries suffered by respondents and their kins were due to
respondents despite their failure to prove that the injuries they the fault of the driver of the Fuso tractor.
suffered were brought by petitioner’s wrongful act." 17
Dated June 4, 1991, the Lease Agreement 32 between
This Court’s Ruling petitioner and Edwin Lim stipulated that "it is the intention of
the parties to enter into a FINANCE LEASE AGREEMENT."
33 Under such scheme, ownership of the subject tractor was to
The Petition has no merit. be registered in the name of petitioner, until the value of the
vehicle has been fully paid by Edwin Lim. 34 Further, in the
First Issue:chanrob1es virtual 1aw library "Lease Schedule," 35 the monthly rental for the tractor was
stipulated, and the term of the Lease was scheduled to expire
Liability for Wrongful Acts on December 4, 1992. After a few months, Lim completed the
payments to cover the full price of the tractor. 36 Thus, on
Petitioner contends that it should not be held liable for the December 9, 1992, a Deed of Sale 37 over the tractor was
executed by petitioner in favor of Ecatine represented by
Edwin Lim. However, the Deed was not registered with the
LTO.cralaw : red
We hold petitioner liable for the deaths and the injuries
complained of, because it was the registered owner of the
tractor at the time of the accident on July 17, 1994. 38 The
Court has consistently ruled that, regardless of sales made of a
motor vehicle, the registered owner is the lawful operator
insofar as the public and third persons are concerned;
consequently, it is directly and primarily responsible for the
consequences of its operation 39 In contemplation of law, the
owner/operator of record is the employer of the driver, the
actual operator and employer being considered as merely its
agent. 40 The same principle applies even if the registered
owner of any vehicle does not use it for public service 41
Since Equitable remained the registered owner of the tractor, it
could not escape primary liability for the deaths and the
injuries arising from the negligence of the driver. 42
The finance-lease agreement between Equitable on the one
hand and Lim or Ecatine on the other has already been
superseded by the sale. In any event, it does not bind third
persons. The rationale for this rule has been aptly explained in
Erezo v. Jepte, 43 which we quote
hereunder:jgc:chanrobles.com.ph
". . . .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." 44chanrobles virtuallawlibrary
Further, petitioner’s insistence on FGU Insurance Corp. v.
Court of Appeals 45 is misplaced. First, in FGU Insurance, the
registered vehicle owner, which was engaged in a rent-a-car
business, rented out the car. In this case, the registered owner
of the truck, which is engaged in the business of financing
motor vehicle acquisitions, has actually sold the truck to
Ecatine, which in turn employed Tutor. Second, in FGU
Insurance, the registered owner of the vehicle was not held
responsible for the negligent acts of the person who rented one
of its cars, because Article 2180 of the Civil Code was not
applicable. We held that no vinculum juris as employer and
employee existed between the owner and the driver. 46 In this
case, the registered owner of the tractor is considered under
the law to be the employer of the driver, while the actual
operator is deemed to be its agent. 47 Thus, Equitable, the
registered owner of the tractor, is — for purposes of the law
on quasi delict — the employer of Raul Tutor, the driver of the
tractor. Ecatine, Tutor’s actual employer, is deemed as merely
an agent of Equitable. 48
True, the LTO Certificate of Registration, dated "5/31/91,"
qualifies the name of the registered owner as "EQUITABLE
LEASING CORPORATION/Leased to Edwin Lim." But the
lease agreement between Equitable and Lim has been
overtaken by the Deed of Sale on December 9, 1992, between
petitioner and Ecatine. While this Deed does not affect
respondents in this quasi delict suit, it definitely binds
petitioner because, unlike them, it is a party to it.chanrob1es
virtua1 1aw 1ibrary
We must stress that the failure of Equitable and/or Ecatine to
register the sale with the LTO should not prejudice
respondents, who have the legal right to rely on the legal
principle that the registered vehicle owner is liable for the
damages caused by the negligence of the driver. Petitioner
cannot hide behind its allegation that Tutor was the employee
of Ecatine. This will effectively prevent respondents from
recovering their losses on the basis of the inaction or fault of
petitioner in failing to register the sale. The non-registration is
the fault of petitioner, which should thus face the legal
consequences thereof.
Second Issue:chanrob1es virtual 1aw library
Moral Damages
Petitioner further claims that it is not liable for moral damages,
because respondents failed to establish or show the causal
connection or relation between the factual basis of their claim
and their wrongful act or omission, if any. 49
Moral damages are not punitive in nature, but are designed to
compensate 50 and alleviate in some way the physical
suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation,
and similar injury unjustly caused a person. 51 Although
incapable of pecuniary computation, moral damages must
nevertheless be somehow proportional to and in
approximation of the suffering inflicted. 52 This is so because
moral damages are in the category of an award designed to
compensate the claimant for actual injury suffered, not to
impose a penalty on the wrongdoer. 53chanrob1es virtua1 1aw
1ibrary
Viewed as an action for quasi delict, the present case falls
squarely within the purview of Article 2219 (2), 54 which
provides for the payment of moral damages in cases of quasi
delict. 55 Having established the liability of petitioner as the
registered owner of the vehicle, 56 respondents have
satisfactorily shown the existence of the factual basis for the
award 57 and its causal connection to the acts of Raul Tutor,
who is deemed as petitioner’s employee. 58 Indeed, the
damages and injuries suffered by respondents were the
proximate result of petitioner’s tortious act or omission. 59
Further, no proof of pecuniary loss is necessary in order that
moral damages may be awarded, the amount of indemnity
being left to the discretion of the court. 60 The evidence gives
no ground for doubt that such discretion was properly and
judiciously exercised by the trial court. 61 The award is in fact
consistent with the rule that moral damages are not intended to
enrich the injured party, but to alleviate the moral suffering
undergone by that party by reason of the defendant’s culpable
action. 62chanrob1es virtua1 1aw 1ibrary
WHEREFORE, the Petition is DENIED and the assailed
Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
- BA Finance Corporation vs. CA [G.R. No. 98275]  reasonable doubt of reckless imprudence resulting in triple
G.R. No. 98275 November 13, 1992
BA FINANCE CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, REGIONAL TRIAL
COURT OF ANGELES CITY, BRANCH LVI, CARLOS
OCAMPO, INOCENCIO TURLA, SPOUSES MOISES
AGAPITO and SOCORRO M. AGAPITO and NICOLAS
CRUZ, respondents.
MELO, J.:
The question of petitioner's responsibility for damages when
on March 6, 1983, an accident occurred involving petitioner's
Isuzu ten-wheeler truck then driven by an employee of Lino
Castro is the thrust of the petition for review on certiorari now
before Us considering that neither the driver nor Lino Castro
appears to be connected with petitioner.
On October 13, 1988, the disputed decision in the suit below
was rendered by the court of origin in this manner:
1. Ordering Rock B.A. and Rogelio Villar y Amare
jointly and severally to pay the plaintiffs as follows:
a) To the plaintiff Carlos Ocampo — P121,650.00;
b) To the plaintiff Moises Ocampo — P298,500.00
c) To the plaintiff Nicolas Cruz — P154,740.00
d) To the plaintiff Inocencio Turla, Sr. — 48,000.00
2. Dismissing the case against Lino Castro
3. Dismissing the third-party complaint against
STRONGHOLD
4. Dismissing all the counterclaim of the defendants and
third-party defendants.
5. Ordering ROCK to reimburse B.A. the total amount of
P622,890.00 which the latter is adjudged to pay to the
plaintiffs. (p. 46, Rollo)
Respondent Court of Appeals affirmed the appealed
disposition in toto through Justice Rasul, with Justices De
Pano, Jr. and Imperial concurring, on practically the same
grounds arrived at by the court a quo (p. 28, Rollo). Efforts
exerted towards re-evaluation of the adverse were futile (p.
37, Rollo). Hence, the instant petition.
The lower court ascertained after due trial that Rogelio Villar
y Amare, the driver of the Isuzu truck, was at fault when the
mishap occurred in as much as he was found guilty beyond
homicide with multiple physical injuries with damage to
property in a decision rendered on February 16, 1984 by the
Presiding Judge of Branch 6 of the Regional Trial Court
stationed at Malolos, Bulacan. Petitioner was adjudged liable
for damages in as much as the truck was registered in its name
during the incident in question, following the doctrine laid
down by this Court in Perez vs. Gutierrez (53 SCRA 149
[1973]) and Erezo, et al. vs. Jepte (102 Phil. 103 [1957]). In
the same breadth, Rock Component Philippines, Inc. was
ordered to reimburse petitioner for any amount that the latter
may be adjudged liable to pay herein private respondents as
expressly stipulated in the contract of lease between petitioner
and Rock Component Philippines, Inc. Moreover, the trial
court applied Article 2194 of the new Civil Code on solidary
accountability of join tortfeasors insofar as the liability of the
driver, herein petitioner and Rock Component Philippines was
concerned (pp. 6-7, Decision; pp. 44-45, Rollo).
To the question of whether petitioner can be held responsible
to the victim albeit the truck was leased to Rock Component
Philippines when the incident occurred, the appellate court
answered in the affirmative on the basis of the jurisprudential
dogmas which, as aforesaid, were relied upon by the trial court
although respondent court was quick to add
the caveat embodied in the lease covenant between petitioner
and Rock Component Philippines relative to the latter's duty to
reimburse any amount which may be adjudged against
petitioner (pp. 32-33, Rollo).
Petitioner asseverates that it should not have been haled to
court and ordered to respond for the damage in the manner
arrived at by both the trial and appellate courts since
paragraph 5 of the complaint lodged by the plaintiffs below
would indicate that petitioner was not the employer of the
negligent driver who was under the control an supervision of
Lino Castro at the time of the accident, apart from the fact that
the Isuzu truck was in the physical possession of Rock
Component Philippines by virtue of the lease agreement.
Aside from casting clouds of doubt on the propriety of
invoking the Perez and Erezo doctrines, petitioner continue to
persist with the idea that the pronouncements of this Court
in Duavit vs. Court of Appeals (173 SCRA 490 [1989])
and Duquillo vs. Bayot (67 Phil 131 [1939]) dovetail with the
factual and legal scenario of the case at hand. Furthermore,
petitioner assumes, given the so-called hiatus on the basis for
the award of damages as decreed by the lower and appellate
courts, that Article 2180 of the new Civil Code on vicarious
liability will divest petitioner of any responsibility absent as
there is any employer-employee relationship between
petitioner and the driver.
Contrary to petitioner's expectations, the recourse instituted
from the rebuffs it encountered may not constitute a sufficient
foundation for reversal of the impugned judgment of
respondent court. Petitioner is of the impression that
the Perez and Erezo cases are inapplicable due to the variance
of the generative facts in said cases as against those obtaining
in the controversy at bar. A contrario, the lesson imparted by
Justice Labrador in Erezo is still good law, thus:
. . . In previous decisions, We already have held that
the registered owner of a certificate of public
convenience is liable to the public for the injuries or
damages suffered by passengers or third persons
caused by the operation of said vehicle, even though
the same had been transferred to a third person.
(Montoya vs. Ignacio, 94 Phil., 182 50 Off. Gaz.,
108; Roque vs. Malibay Transit, Inc., G.R. No. L-
8561, November 18, 1955; Vda. de Medina vs.
Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.)
The principle upon which this doctrine is based is
that in dealing with vehicles registered under the
Public Service Law, the public has the right to
assume or presumed that the registered owner is the
actual owner thereof, for it would be difficult with
the public to enforce the actions that they may have
for injuries caused to them by the vehicles being
negligently operated if the public should be required
to prove who actual the owner is. How would the
public or third persons know against whom to
enforce their rights in case of subsequent transfer of
the vehicles? We do not imply by this doctrine,
however, that the registered owner may not recover
whatever amount he had paid by virtue of his liability
to third persons from the person to whom he had
actually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any
vehicle, even if not used for a public service, should
primarily responsible to the public or to the third
persons for injuries caused the latter while the
vehicle is being driven on the highways or streets.
The members of the Court are in agreement that the
defendant-appellant should be held liable to plaintiff-
appellee for the injuries occasioned to the latter
because of the negligence of the driver, even if the
defendant-appellant was no longer an owner of the
vehicle at the time of the damage because he had
previously sold it to another. What is the legal basis
for his (defendants-appellant's) liability?
There is a presumption that the owner of the guilty
vehicle is the defendant-appellant as he is the
registered owner in the Motor Vehicle Office. Should
he not be allowed to prove the truth, that he had sold
it to another and thus shift the responsibility for the
injury to the real and the actual owner? The
defendants hold the affirmative of this proposition;
the trial court hold the negative.
The Revised Motor Vehicle Law (Act No. 3992, as
amended) provides that the vehicle may be used or
operated upon any public highway unless the same is
properly registered. It has been stated that the system
of licensing and the requirement that each machine
must carry a registration number, conspicuously
displayed, is one of the precautions taken to reduce
the danger of injury of pedestrians and other travelers
from the careless management of automobiles, and to
furnish a means of ascertaining the identity of
persons violating the laws and ordinances, regulating
the speed and operation of machines upon the
highways (2 R. C. L. 1176). Not only are vehicles to
be registered and that no motor vehicles are to be
used or operated without being properly registered
from the current year, furnish the Motor Vehicle
Office a report showing the name and address of each
purchaser of motor vehicle during the previous month
and the manufacturer's serial number and motor
number. (Section 5[c], Act No. 3992, as amended.)
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
obtained, in the interest of the determinations of
persons responsible for damages or injuries caused on
public highways.
One of the principle 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 my 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 "share 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 pace a "middleman" between them and the
public, and escape liability by the manner in which
they recompense their servants. (King vs. Breham
Automobile Co., Inc. 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 then 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.
If the foregoing words of wisdom were applied in solving the
circumstance whereof the vehicle had been alienated or sold to
another, there certainly can be no serious exception against
utilizing the same rationale to the antecedents of this case
where the subject vehicle was merely leased by petitioner to
Rock Component Philippines, Inc., with petitioner retaining
ownership over the vehicle.
Petitioner's reliance on the ruling of this Court in Duavit vs.
Court of Appeals and in Duquillo vs. Bayot (supra) is legally
unpalatable for the purpose of the present discourse. The
vehicles adverted to in the two cases shared a common thread,
so to speak, in that the jeep and the truck were driven in
reckless fashion without the consent or knowledge of the
respective owners. Cognizant of the inculpatory testimony
spewed by defendant Sabiniano when he admitted that he took
the jeep from the garage of defendant Dauvit without the
consent or authority of the latter, Justice Gutierrez, Jr.
in Duavit remarked;
. . . Herein petitioner does not deny
ownership of the vehicle involved in the
mishap but completely denies having
employed the driver Sabiniano or even
having authorized the latter to drive his jeep.
The jeep was virtually stolen from the
petitioner's garage. To hold, therefore, the
petitioner liable for the accident caused by
the negligence of Sabiniano who was neither
his driver nor employee would be absurd as
it would be like holding liable the owner of
a stolen vehicle for an accident caused by
the person who stole such vehicle. In this
regard, we cannot ignore the many cases of
vehicles forcibly taken from their owners at
gunpoint or stolen from garages and parking
areas and the instances of service station
attendants or mechanics of auto repair shops
using, without the owner's consent, vehicles
entrusted to them for servicing or repair.(at
p. 496.)
In the Duquillo case, the defendant therein cannot, according
to Justice Diaz, be held liable for anything because of
circumstances which indicated that the truck was driven
without the consent or knowledge of the owner thereof.
Consequently, there is no need for Us to discuss the matter of
imputed negligence because petitioner merely presumed,
erroneously, however, that judgment was rendered against it
on the basis of such doctrine embodied under Article 2180 of
the new Civil Code.
WHEREFORE, the petition is hereby DISMISSED and
decision under review AFFIRMED without special
pronouncement as to costs.
SO ORDERED.

Duavit vs. CA [173 SCRA 490]
G.R. No. 82318 May 18, 1989
GILBERTO M. DUAVIT, petitioner,
vs.
THE HON. COURT OF APPEALS, Acting through the
Third Division, as Public Respondent, and ANTONIO
SARMIENTO, SR. & VIRGILIO CATUAR respondents.
Rodolfo d. Dela Cruz for petitioner.
Bito, Lozada, Ortega & Castillo for respondents.
GUTIERREZ, JR., J.:
This petition raises the sole issue of whether or not the owner
of a private vehicle which figured in an accident can be held
liable under Article 2180 of the Civil Code when the said
vehicle was neither driven by an employee of the owner nor
taken with the consent of the latter.
The facts are summarized in the contested decision, as
follows:
From the evidence adduced by the plaintiffs,
consisting of the testimonies of witnesses Virgilio
Catuar, Antonio Sarmiento, Jr., Ruperto Catuar, Jr.
and Norberto Bernarte it appears that on July 28,
1971 plaintiffs Antonio Sarmiento, Sr. and Virgilio
Catuar were aboard a jeep with plate number 77-99-
F-I Manila, 1971, owned by plaintiff, Ruperto Catuar
was driving the said jeep on Ortigas Avenue, San
Juan, Rizal; that plaintiff's jeep, at the time, was
running moderately at 20 to 35 kilometers per hour
and while approaching Roosevelt Avenue, Virgilio
Catuar slowed down; that suddenly, another jeep with
plate number 99-97-F-J Manila 1971 driven by
defendant Oscar Sabiniano hit and bumped plaintiff's
jeep on the portion near the left rear wheel, and as a
result of the impact plaintiff's jeep fell on its right and
skidded by about 30 yards; that as a result plaintiffs
jeep was damaged, particularly the windshield, the
differential, the part near the left rear wheel and the
top cover of the jeep; that plaintiff Virgilio Catuar
was thrown to the middle of the road; his wrist was
broken and he sustained contusions on the head; that
likewise plaintiff Antonio Sarmiento, Sr. was trapped
inside the fallen jeep, and one of his legs was
fractured.
Evidence also shows that the plaintiff Virgilio Catuar
spent a total of P2,464.00 for repairs of the jeep, as
shown by the receipts of payment of labor and spare
parts (Exhs. H to H-7 Plaintiffs likewise tried to
prove that plaintiff Virgilio Catuar, immediately after
the accident was taken to Immaculate Concepcion
Hospital, and then was transferred to the National
Orthopedic Hospital; that while plaintiff Catuar was
not confined in the hospital, his wrist was in a plaster
cast for a period of one month, and the contusions on
his head were under treatment for about two (2)
weeks; that for hospitalization, medicine and allied
expenses, plaintiff Catuar spent P5,000.00.
Evidence also shows that as a result of the incident,
plaintiff Antonio Sarmiento, Sr. sustained injuries on
his leg; that at first, he was taken to the National
Orthopedic Hospital (Exh. K but later he was
confined at the Makati Medical Center from July 29,
to August 29, 1971 and then from September 15 to
25, 1971; that his leg was in a plaster cast for a period
of eight (8) months; and that for hospitalization and
medical attendance, plaintiff Antonio Sarmiento, Sr.
spent no less than P13,785.25 as evidenced by
receipts in his possession. (Exhs. N to N-1).
Proofs were adduced also to show that plaintiff
Antonio sarmiento Sr. is employed as Assistant
Accountant of the Canlubang Sugar Estate with a
salary of P1,200.00 a month; that as sideline he also
works as accountant of United Haulers Inc. with a
salary of P500.00 a month; and that as a result of this
incident, plaintiff Sarmiento was unable to perform
his normal work for a period of at least 8 months. On
the other hand, evidence shows that the other plaintiff
Virgilio Catuar is a Chief Clerk in Canlubang Sugar
Estate with a salary of P500.00 a month, and as a
result of the incident, he was incapacitated to work
for a period of one (1) month.
The plaintiffs have filed this case both against Oscar
Sabiniano as driver, and against Gualberto Duavit as
owner of the jeep.
Defendant Gualberto Duavit, while admitting
ownership of the other jeep (Plate No. 99-07-F-J
Manila, 1971), denied that the other defendant (Oscar
Sabiniano) was his employee. Duavit claimed that he
has not been an employer of defendant Oscar
Sabiniano at any time up to the present.
On the other hand documentary and testimonial
evidence show that defendant Oscar Sabiniano was
an employee of the Board of Liquidators from
 November 14, 1966 up to January 4, 1973 (Annex A
of Answer).
Defendant Sabiniano, in his testimony, categorically
admitted that he took the jeep from the garage of
defendant Duavit without the consent or authority of
the latter (TSN, September 7, 1978, p. 8). He testified
further, that Duavit even filed charges against him for
theft of the jeep, but which Duavit did not push
through as his (Sabiniano's) parents apologized to
Duavit on his behalf.
Defendant Oscar Sabiniano, on the other hand in an
attempt to exculpate himself from liability, makes it
appear that he was taking all necessary precaution
while driving and the accident occurred due to the
negligence of Virgilio Catuar. Sabiniano claims that
it was plaintiffs vehicle which hit and bumped their
jeep. (Reno, pp. 21-23)
The trial court found Oscar Sabiniano negligent in driving the
vehicle but found no employer-employee relationship between
him and the petitioner because the latter was then a
government employee and he took the vehicle without the
authority and consent of the owner. The petitioner was, thus,
absolved from liability under Article 2180 of the Civil Code.
The private respondents appealed the case.
On January 7, 1988, the Court of Appeals rendered the
questioned decision holding the petitioner jointly and severally
liable with Sabiniano. The appellate court in part ruled:
We cannot go along with appellee's argument. It will
be seen that in Vargas v. Langcay, supra, it was held
that it is immaterial whether or not the driver was
actually employed by the operator of record or
registered owner, and it is even not necessary to
prove who the actual owner of the vehicle and who
the employer of the driver is. When the Supreme
Court ruled, thus: 'We must hold and consider such
owner-operator of record (registered owner) as the
employer in contemplation of law, of the driver,' it
cannot be construed other than that the registered
owner is the employer of the driver in contemplation
of law. It is a conclusive presumption of fact and
law, and is not subject to rebuttal of proof to the
contrary. Otherwise, as stated in the decision, we
quote:
The purpose of the principles evolved by the
decisions in these matters will be defeated and
thwarted if we entertain the argument of petitioner
that she is not liable because the actual owner and
employer was established by the evidence. . . .
Along the same vein, the defendant-appellee Gualberto Duavit
cannot be allowed to prove that the driver Sabiniano was not
his employee at the time of the vehicular accident.
The ruling laid down in Amar V. Soberano (1966),
63 O.G. 6850, by this Court to the effect that the
burden of proving the non-existence of an employer-
employee relationship is upon the defendant and this
he must do by a satisfactory preponderance of
evidence, has to defer to the doctrines evolved by
the Supreme Court in cases of damages arising from
vehicular mishaps involving registered motor
vehicle. (See Tugade v. Court of Appeals, 85 SCRA
226, 230). (Rollo, pp. 26-27)
The appellate court also denied the petitioner's motion for
reconsideration. Hence, this petition.
The petitioner contends that the respondent appellate court
committed grave abuse of discretion in holding him jointly
and severally liable with Sabiniano in spite of the absence of
an employer-employee relationship between them and despite
the fact that the petitioner's jeep was taken out of his garage
and was driven by Sabiniano without his consent.
As early as in 1939, we have ruled that an owner of a vehicle
cannot be held liable for an accident involving the said vehicle
if the same was driven without his consent or knowledge and
by a person not employed by him. Thus, in Duquillo v.
Bayot (67 Phil. 131-133-134) [1939] we said:
Under the facts established, the defendant cannot be
held liable for anything. At the time of the accident,
James McGurk was driving the truck, and he was not an
employee of the defendant, nor did he have anything to
do with the latter's business; neither the defendant nor
Father Ayson, who was in charge of her business,
consented to have any of her trucks driven on the day of
the accident, as it was a holy day, and much less by a
chauffeur who was not in charge of driving it; the use
of the defendant's truck in the circumstances indicated
was done without her consent or knowledge; it may,
therefore, be said, that there was not the remotest
contractual relation between the deceased Pio Duquillo
and the defendant. It necessarily follows from all this
that articles 1101 and following of the Civil Code, cited
by the appellant, have no application in this case, and,
therefore, the errors attributed to the inferior court are
without basis.
The Court upholds the above ruling as still relevant and better
applicable to present day circumstances.
The respondent court's misplaced reliance on the cases
of Erezo v. Jepte (102 Phil. 103 [1957] and Vargas v.
Langcay (6 SCRA 174 [1962]) cannot be sustained. In the
Erezo case, Jepte, the registered owner of the truck which
collided with a taxicab, and which resulted in the killing of
Erezo, claimed that at the time of the accident, the truck
belonged to the Port Brokerage in an arrangement with the
corporation but the same was not known to the Motor
Vehicles Office. This Court sustained the trial court's ruling
that since Jepte represented himself to be the owner of the
truck and the Motor Vehicles Office, relying on his
representation, registered the vehicle in his name, the
Government and all persons affected by the representation had
the right to rely on his declaration of ownership and
registration. Thus, even if Jepte were not the owner of the
truck at the time of the accident, he was still held liable for the
death of Erezo significantly, the driver of the truck was fully
authorized to drive it.

Likewise, in the Vargas case, just before the accident occurred

Vargas had sold her jeepney to a third person, so that at the
time of the accident she was no longer the owner of the
jeepney. This court, nevertheless, affirmed Vargas' liability
since she failed to surrender to the Motor Vehicles Office the
corresponding AC plates in violation of the Revised Motor
Vehicle Law and Commonwealth Act No. 146. We further
ruled that the operator of record continues to be the operator of
the vehicle in contemplation of law, as regards the public and
third persons, and as such is responsible for the consequences
incident to its operator. The vehicle involved was a public
utility jeepney for hire. In such cases, the law does not only
require the surrender of the AC plates but orders the vendor
operator to stop the operation of the jeepney as a form of
public transportation until the matter is reported to the
authorities.

As can be seen, the circumstances of the above cases are

entirely different from those in the present case. Herein
petitioner does not deny ownership of the vehicle involved in
tire mishap but completely denies having employed the driver
Sabiniano or even having authorized the latter to drive his
jeep. The jeep was virtually stolen from the petitioner's
garage. To hold, therefore, the petitioner liable for the accident
caused by the negligence of Sabiniano who was neither his
driver nor employee would be absurd as it would be like
holding liable the owner of a stolen vehicle for an accident
caused by the person who stole such vehicle. In this regard, we
cannot ignore the many cases of vehicles forcibly taken from
their owners at gunpoint or stolen from garages and parking
areas and the instances of service station attendants or
mechanics of auto repair shops using, without the owner's
consent, vehicles entrusted to them for servicing or repair.

We cannot blindly apply absolute rules based on precedents

whose facts do not jibe four square with pending cases. Every
case must be determined on its own peculiar factual
circumstances. Where, as in this case, the records of the
petition fail to indicate the slightest indicia of an employer-
employee relationship between the owner and the erring driver
or any consent given by the owner for the vehicle's use, we
cannot hold the owner liable.

We, therefore, find that the respondent appellate court

committed reversible error in holding the petitioner jointly and
severally liable with Sabiniano to the private respondent.

WHEREFORE, the petition is GRANTED and the decision

and resolution appealed from are hereby ANNULLED and
SET ASIDE. The decision of the then Court of First Instance
(now Regional Trial Court) of Laguna, 8th Judicial District,
Branch 6, dated July 30, 1981 is REINSTATED.

SO ORDERED.

- Abelardo Lim, et.al. vs. CA [G.R. No. 125817, Jan.
16, 2002]
G.R. No. 125817            January 16, 2002
ABELARDO LIM and ESMADITO
GUNNABAN, petitioners,
vs.
COURT OF APPEALS and DONATO H.
GONZALES, respondents.
BELLOSILLO, J.:
When a passenger jeepney covered by a certificate of public
convenience is sold to another who continues to operate it
under the same certificate of public convenience under the so-
called kabit system, and in the course thereof the vehicle
meets an accident through the fault of another vehicle, may the
new owner sue for damages against the erring vehicle?
Otherwise stated, does the new owner have any legal
personality to bring the action, or is he the real party in interest
in the suit, despite the fact that he is not the registered owner
under the certificate of public convenience?
Sometime in 1982 private respondent Donato Gonzales
purchased an Isuzu passenger jeepney from Gomercino
Vallarta, holder of a certificate of public convenience for the
operation of public utility vehicles plying the Monumento-
Bulacan route. While private respondent Gonzales continued
offering the jeepney for public transport services he did not
have the registration of the vehicle transferred in his name nor
did he secure for himself a certificate of public convenience
for its operation. Thus Vallarta remained on record as its
registered owner and operator.1âwphi1.nêt
On 22 July 1990, while the jeepney was running northbound
along the North Diversion Road somewhere in Meycauayan,
Bulacan, it collided with a ten-wheeler-truck owned by
petitioner Abelardo Lim and driven by his co-petitioner
Esmadito Gunnaban. Gunnaban owned responsibility for the
accident, explaining that while he was traveling towards
Manila the truck suddenly lost its brakes. To avoid colliding
with another vehicle, he swerved to the left until he reached
the center island. However, as the center island eventually
came to an end, he veered farther to the left until he smashed
into a Ferroza automobile, and later, into private respondent's
passenger jeepney driven by one Virgilio Gonzales. The
impact caused severe damage to both the Ferroza and the
passenger jeepney and left one (1) passenger dead and many
others wounded.
Petitioner Lim shouldered the costs for hospitalization of the
wounded, compensated the heirs of the deceased passenger,
and had the Ferroza restored to good condition. He also
negotiated with private respondent and offered to have the
passenger jeepney repaired at his shop. Private respondent
however did not accept the offer so Lim offered him
₱20,000.00, the assessment of the damage as estimated by his
chief mechanic. Again, petitioner Lim's proposition was
rejected; instead, private respondent demanded a brand-new
jeep or the amount of ₱236,000.00. Lim increased his bid to
₱40,000.00 but private respondent was unyielding. Under the
circumstances, negotiations had to be abandoned; hence, the
filing of the complaint for damages by private respondent
against petitioners.
In his answer Lim denied liability by contending that he
exercised due diligence in the selection and supervision of his
employees. He further asserted that as the jeepney was
registered in Vallarta’s name, it was Vallarta and not private
respondent who was the real party in interest. 1 For his part,
petitioner Gunnaban averred that the accident was a fortuitous
event which was beyond his control.2
Meanwhile, the damaged passenger jeepney was left by the
roadside to corrode and decay. Private respondent explained
that although he wanted to take his jeepney home he had no
capability, financial or otherwise, to tow the damaged vehicle.3
The main point of contention between the parties related to the
amount of damages due private respondent. Private respondent
Gonzales averred that per estimate made by an automobile
repair shop he would have to spend ₱236,000.00 to restore his
jeepney to its original condition.4 On the other hand,
petitioners insisted that they could have the vehicle repaired
for ₱20,000.00.5
On 1 October 1993 the trial court upheld private respondent's
claim and awarded him ₱236,000.00 with legal interest from
22 July 1990 as compensatory damages and ₱30,000.00 as
attorney's fees. In support of its decision, the trial court
ratiocinated that as vendee and current owner of the passenger
jeepney private respondent stood for all intents and purposes
as the real party in interest. Even Vallarta himself supported
private respondent's assertion of interest over the jeepney for,
when he was called to testify, he dispossessed himself of any
claim or pretension on the property. Gunnaban was found by
the trial court to have caused the accident since he panicked in
the face of an emergency which was rather palpable from his
act of directing his vehicle to a perilous streak down the fast
lane of the superhighway then across the island and ultimately
to the opposite lane where it collided with the jeepney.
On the other hand, petitioner Lim's liability for Gunnaban's
negligence was premised on his want of diligence in
supervising his employees. It was admitted during trial that
Gunnaban doubled as mechanic of the ill-fated truck despite
the fact that he was neither tutored nor trained to handle such
task.6
Forthwith, petitioners appealed to the Court of Appeals which,
on 17 July 1996, affirmed the decision of the trial court. In
upholding the decision of the court a quo the appeals court
concluded that while an operator under the kabit system could
not sue without joining the registered owner of the vehicle as
his principal, equity demanded that the present case be made
an exception.7 Hence this petition.
It is petitioners' contention that the Court of Appeals erred in
sustaining the decision of the trial court despite their
opposition to the well-established doctrine that an operator of
a vehicle continues to be its operator as long as he remains the
operator of record. According to petitioners, to recognize an
operator under the kabit system as the real party in interest and
to countenance his claim for damages is utterly subversive of
public policy. Petitioners further contend that inasmuch as the
passenger jeepney was purchased by private respondent for
only ₱30,000.00, an award of ₱236,000.00 is inconceivably
large and would amount to unjust enrichment.8
Petitioners' attempt to illustrate that an affirmance of the
appealed decision could be supportive of the
pernicious kabit system does not persuade. Their labored
efforts to demonstrate how the questioned rulings of the
courts a quo are diametrically opposed to the policy of the law
requiring operators of public utility vehicles to secure a
certificate of public convenience for their operation is quite
unavailing.
The kabit system is an arrangement whereby a person who has
been granted a certificate of public convenience allows other
persons who own motor vehicles to operate them under his
license, sometimes for a fee or percentage of the
earnings.9 Although the parties to such an agreement are not
outrightly penalized by law, the kabit system is invariably
recognized as being contrary to public policy and therefore
void and inexistent under Art. 1409 of the Civil Code.
In the early case of Dizon v. Octavio10 the Court explained that
one of the primary factors considered in the granting of a
certificate of public convenience for the business of public
transportation is the financial capacity of the holder of the
license, so that liabilities arising from accidents may be duly
compensated. The kabit system renders illusory such purpose
and, worse, may still be availed of by the grantee to escape
civil liability caused by a negligent use of a vehicle owned by
another and operated under his license. If a registered owner is
allowed to escape liability by proving who the supposed
owner of the vehicle is, it would be easy for him to transfer the
subject vehicle to another who possesses no property with
which to respond financially for the damage done. Thus, for
the safety of passengers and the public who may have been
wronged and deceived through the baneful kabit system, the
registered owner of the vehicle is not allowed to prove that
another person has become the owner so that he may be
thereby relieved of responsibility. Subsequent cases affirm
such basic doctrine.11
It would seem then that the thrust of the law in enjoining
the kabit system is not so much as to penalize the parties but
to identify the person upon whom responsibility may be fixed
in case of an accident with the end view of protecting the
riding public. The policy therefore loses its force if the public
at large is not deceived, much less involved.
In the present case it is at once apparent that the evil sought to
be prevented in enjoining the kabit system does not
exist. First, neither of the parties to the
pernicious kabit system is being held liable for
damages. Second, the case arose from the negligence of
another vehicle in using the public road to whom no
representation, or misrepresentation, as regards the ownership
and operation of the passenger jeepney was made and to
whom no such representation, or misrepresentation, was
necessary. Thus it cannot be said that private respondent
Gonzales and the registered owner of the jeepney were in
estoppel for leading the public to believe that the jeepney
belonged to the registered owner. Third, the riding public was
not bothered nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private respondent
himself who had been wronged and was seeking compensation
for the damage done to him. Certainly, it would be the height
of inequity to deny him his right.
In light of the foregoing, it is evident that private respondent
has the right to proceed against petitioners for the damage
caused on his passenger jeepney as well as on his business.
Any effort then to frustrate his claim of damages by the
ingenuity with which petitioners framed the issue should be
discouraged, if not repelled.
In awarding damages for tortuous injury, it becomes the sole
design of the courts to provide for adequate compensation by
putting the plaintiff in the same financial position he was in
prior to the tort. It is a fundamental principle in the law on
damages that a defendant cannot be held liable in damages for
more than the actual loss which he has inflicted and that a
plaintiff is entitled to no more than the just and adequate
compensation for the injury suffered. His recovery is, in the
absence of circumstances giving rise to an allowance of
punitive damages, limited to a fair compensation for the harm
done. The law will not put him in a position better than where
he should be in had not the wrong happened.12
In the present case, petitioners insist that as the passenger
jeepney was purchased in 1982 for only ₱30,000.00 to award
damages considerably greater than this amount would be
improper and unjustified. Petitioners are at best reminded that
indemnification for damages comprehends not only the value
of the loss suffered but also that of the profits which the
obligee failed to obtain. In other words, indemnification for
damages is not limited to damnum emergens or actual loss but
extends to lucrum cessans or the amount of profit lost.13
Had private respondent's jeepney not met an accident it could
reasonably be expected that it would have continued earning
from the business in which it was engaged. Private respondent
avers that he derives an average income of ₱300.00 per day
from his passenger jeepney and this earning was included in
the award of damages made by the trial court and upheld by
the appeals court. The award therefore of ₱236,000.00 as
compensatory damages is not beyond reason nor speculative
as it is based on a reasonable estimate of the total damage
suffered by private respondent, i.e. damage wrought upon his
jeepney and the income lost from his transportation business.
Petitioners for their part did not offer any substantive evidence
to refute the estimate made by the courts a quo.
percent (6%) per annum shall be computed from the time the
judgment of the lower court is made until the finality of this
Decision. If the adjudged principal and interest remain unpaid
thereafter, the interest shall be twelve percent (12%) per
annum computed from the time judgment becomes final and
executory until it is fully satisfied.1âwphi1.nêt
Costs against petitioners.
SO ORDERED.

However, we are constrained to depart from the conclusion of

the lower courts that upon the award of compensatory
damages legal interest should be imposed beginning 22 July
1990, i.e. the date of the accident. Upon the provisions of Art.
2213 of the Civil Code, interest "cannot be recovered upon
unliquidated claims or damages, except when the demand can
be established with reasonable certainty." It is axiomatic that if
the suit were for damages, unliquidated and not known until
definitely ascertained, assessed and determined by the courts
after proof, interest at the rate of six percent (6%) per annum
should be from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to
be reasonably ascertained).14

In this case, the matter was not a liquidated obligation as the

assessment of the damage on the vehicle was heavily debated
upon by the parties with private respondent's demand for
₱236,000.00 being refuted by petitioners who argue that they
could have the vehicle repaired easily for ₱20,000.00. In fine,
the amount due private respondent was not a liquidated
account that was already demandable and payable.

One last word. We have observed that private respondent left

his passenger jeepney by the roadside at the mercy of the
elements. Article 2203 of the Civil Code exhorts parties
suffering from loss or injury to exercise the diligence of a
good father of a family to minimize the damages resulting
from the act or omission in question. One who is injured then
by the wrongful or negligent act of another should exercise
reasonable care and diligence to minimize the resulting
damage. Anyway, he can recover from the wrongdoer money
lost in reasonable efforts to preserve the property injured and
for injuries incurred in attempting to prevent damage to it.15

However we sadly note that in the present case petitioners

failed to offer in evidence the estimated amount of the damage
caused by private respondent's unconcern towards the
damaged vehicle. It is the burden of petitioners to show
satisfactorily not only that the injured party could have
mitigated his damages but also the amount thereof; failing in
this regard, the amount of damages awarded cannot be
proportionately reduced.

WHEREFORE, the questioned Decision awarding private

respondent Donato Gonzales ₱236,000.00 with legal interest
from 22 July 1990 as compensatory damages and ₱30,000.00
as attorney's fees is MODIFIED. Interest at the rate of six

- Baliwag Transit Inc. vs. CA [G.R. No. 57493, Jan. 7,
1989]
G.R. No. L-57493 January 7, 1987
BALIWAG TRANSIT, INC., petitioner,
vs.
THE HON. COURT OF APPEALS AND ROMAN
MARTINEZ, respondents.
Sta. Maria & Associates for petitioner.
Felimon A. Imazan for respondent Roman Martinez.
PARAS, J.:
This is a petition for review on certiorari, seeking the reversal
of the decision of the Court of Appeals dated June 4, 1981, the
dispositive portion of which reads:
WHEREFORE, the resolution (decision) of the Social
Security Commission in SSC Case No. 3272 is hereby
set aside and another one entered: ordering respondent
Baliwag Transit, Inc. to remit to the Social Security
Commission the premium contributions for the petitioner
for the years 1958 to May 1963 and from 1967 to March
1971, inclusive, plus penalties thereon at the rate of 3%
per month of delinquency.
Two passenger bus lines with similar buses and similar routes
were being operated by firm names "Baliwag Transit' and
"Baliwag Transit, Inc." (BTI) the herein petitioner. The former
was owned by the late Pascual Tuazon who continued to
operate it until his death on January 26, 1972, while the latter
was owned by petitioner corporation, incorporated in the year
1968 and existing until the present time. Both bus lines
operate under different grants of franchises by the Public
Service Commission (Brief for Petitioner, p.11), but were
issued only one ID Number 03-22151 by the Social Security
System (Rollo, p. 66).
Private respondent claiming to be an employee of both bus
lines with one ID Number, filed a petition with the Social
Security Commision on August 14, 1975 which was docketed
as SSC Case No. 3272 to compel BTI to remit to the Social
Security private respondent's SSS Premium contributions for
the years 1958 to March, 1963 and from 1967 to March 1971.
He alleged that he was employed by petitioner from 1947 to
1971 as conductor and later as inspector with corresponding
salary increases and that petitioner deducted from his salaries,
premium contributions, but what was remitted to the SSS was
only for a period covering June, 1963 to 1966, at a much
lesser amount.
In its answer, BTI denied having employed private respondent
Ramon Martinez, the truth being that he was employed by
Pascual Tuazon who since 1948 owned and operated buses
under the trade name Baliwag Transit which were separate and
distinct from the buses operated by petitioner company owned
by Mrs. Victoria Vda. de Tengco. Both bus lines had different
offices, different maintenance and repair shops, garages,
books of account, and managers. The employment of private
respondent lasted until 1971 when his employer Pascual
Tuazon became bankrupt. It was the latter which deducted
from private respondent the amount corresponding to his SSS
contributions for the years in question but allegedly did not
remit the same. Finally, herein petitioner BTI claims that
private respondent allowed 17 years to elapse and at a time
when Pascual Tuazon was already dead before filing the
subject petition with the Social Security Commission. (Rollo,
p. 18).lwphl@itç
After trial on the merits, the Social Security Commission on
September 12, 1979, entered a resolution in SSC Case No.
3272, the dispositive portion of which reads:
PREMISES CONSIDERED, this Commission finds and so
holds that there existed no employer-employee relationship
between the petitioner and respondent as would warrant
further remittance of SSS contributions for and in behalf of
petitioner Roman Martinez.
Consequently, this petition is hereby dismissed for lack of
merit,
SO ORDERED.
On appeal ,the Court of Appeals finding that the late Pascual
Tuazon operated his buses under the "Kabit" System reversed
and set aside the foregoing resolution as follows:
WHEREFORE, the resolution (decision) of the Social
Security Commission in SSC Case No. 3272 is hereby
 set aside and another one entered ordering respondent
Baliwag Transit, Inc. to remit to the Social Security
Commission the premium contributions for the petitioner
for the years 1958 to May 1963 and from 1967 to March
1971, inclusive, plus penalties thereon at the rate of 3%
per month of delinquency.
SO ORDERED.
Herein petitioner filed a Motion for Reconsideration with
respondent Court of Appeals, which Motion was later denied.
Hence, this petition.
In the resolution of August 26, 1981 of the Second Division of
this Court, respondents were required to comment (Rollo, p.
64) which was complied with on September 21, 1981 (Rollo,
pp. 65-71). On October 5, 198 1, petitioner filed its Reply
(Rollo, pp. 73-75) in compliance with the resolution of
September 30, 1981 (Rollo, p. 71). In the resolution of
December 7, 1981, the petition was given due course (Rollo,
p. 81). The brief for petitioner-appellant was filed on March
27, 1982 (Rollo, p. 89) while private respondent filed a
manifestation and motion to be excused for not filing private
respondent's brief and to be allowed to adopt as his arguments
the comments he filed on September 19, 1981 and his brief
with the Court of Appeals (Rollo, p. 92). Said manifestation
and motion was noted in the resolution of June 23, 1982
(Rollo, p. 93) and this case was submitted for deliberation in
the resolution of February 3, 1984 (Rllo, p. 94).
Petitioners raised the following assignment of errors:
I. THAT THE FINDINGS OF THE RESPONDENT
HONORABLE COURT OF APPEALS TO THE EFFECT
THAT THE VEHICLES OF THE LATE PASCUAL
TUAZON WERE "ATTACHED" OR "KABIT" WITH
PETITIONER, BALIWAG TRANSIT, INC. MAY NOT
HAVE BEEN SUPPORTED BY SUBSTANTIAL
EVIDENCE.
II. GRANTING THAT THE VEHICLES OF THE LATE
PASCUAL TUAZON WERE INDEED "ATTACHED" OR
"KABIT" WITH PETITIONER BALIWAG TRANSIT, INC.
EMPLOYER- EMPLOYEE RELATIONS MAY NOT
EXTENT TC COVER OR INCLUDE THE EMPLOYEES OF
THE ACTUAL OWNER OF THE VEHICLES AS
EMPLOYEES ALSO OF THE HOLDER OF THE
CERTIFICATE OF PUBLIC CONVENIENCE WHICH IS IN
THIS CASE, PETITIONER BALIWAG TRANSIT, INC.
However, the main issue in this case is whether or not the
issuance by the Social Security System of one SSS-ID-
Number to two bus lines necessarily indicates that one of
them, operates his buses under the "Kabit System."
The answer is in the negative.
The "Kabit System" has been defined by the Supreme Court as
an arrangement "whereby a person who has been granted a
certificate of convenience allows another person who owns
motor vehicles to operate under such franchise for a fee." (Lita
Enterprises, Inc. v. Second Civil Cases Division, IAC, et al.,
G.R. No. 64693, April 27, 1984).lwphl@itç
The determining factor, therefore, is the possession of a
franchise to operate which negates the existence of the "Kabit
System" and not the issuance of one SSS ID Number for both
bus lines from which the existence of said system was
inferred.
In the instant case, the findings of the Court of Appeals are as
follows:
... It is very obvious from the foregoing narration of
facts that the late Pascual Tuazon, during the time
material to this case, operated his buses under the
"kabit" Syetem; that is, while actually he was the
owner and operator of public utility buses, maintaining
his own drivers, conductors, inspectors and other
employees, his buses were not registered with the
Public Service Commission (now the Bureau of Land
Transportation) in his own name. Instead, his buses
were absorbed and registered as owned and operated
by the "Baliwag Transit," which was the firm name
owned and used by his niece, Victoria Vda. de
Tengco.
It is well settled that the findings of facts of the Court
of Appeals ... are conclusive on the parties and on this
Court, unless ... (2) the inference made is manifestly
mistaken; ... (4) the judgment is based on
misapprehension of facts; ... (6) the Court of Appeals
went beyond the issues of the case and its findings are
contrary to the admissions of both appellant appellant
and appellees; (7) the findings of facts of the Court of
Appeals are contrary to those of the trial court; ...
(Sacay v. Sandiganbayan, G.R. No. 66497-98, July 10,
1986).
In the case at bar, it is undisputed that as testified to, lot only
by seven (7) witnesses presented by the petitioner but also by
the Social Security System witness Mangowan Macalaba,
Clerk I ,of the R & A Division of the Board of Transportation,
who had access to the records of said office with respect to
applications and grant of franchises of public utility vehicles,
that Victoria Vda. de Tengco and Pascual Tuazon were
granted separate franchises to operate public utility buses,
under Cases Nos. 15904, 114913, 11564, 103366, 64157 and
65894 for the former and Case No. 69-4592 and Case No.
697775 for the latter, both operating between Manila and
Baliuag routes. However, the franchises of Pascual Tuazon
were cancelled on December 16, 1971 and may 14, 1972
respectively (Rollo, p. 22), when the latter terminated his
operation.
It is thus evident that both bus lines operated under their own
franchises but opted to retain the firm name "Baliwag Transit"
with slight modification, by the inclusion of the word "Inc." in
the case of herein petitioner, obviously to take advantage of
the goodwill such firm name enjoys with the riding public.
Conversely, the conclusion of the Court of Appeals that the
late Pascual Tuazon, during the time material to this case
operated his buses under the "Kabit System" on the ground
that while he was actually the owner and operator, his buses
were not registered with the Public Service Commission (now
the Bureau of Land Transportation) in his own name, is not
supported by the records. Much less can it be said that there is
an analogy between the case at bar and the cited case of
Doligosa, et al. v. Decolongon, et al. (3 CA Nos. 1135, 1142-
43) to the extent that Baliwag Transit, Inc. being the ostensible
operator of the buses actually owned by Pascual Tuazon,
should be held liable for the contributions collected or ought
to be collected from private respondent (Rollo, pp. 53-54),
presumably to discourage the proliferating "Kabit System" in
public utility vehicles.
While it is admitted that petitioner was the one who remitted
the SSS premiums of private respondent, it has also been
established by testimonies of witnesses that such arrangement
was done purposely to accommodate the request of the late
Pascual Tuazon, the uncle of Victoria Vda. de Tengco and the
money came from him. On the other hand, there is no reason
why such testimonies should not be given credence as the
records fail to show that said witnesses have any motive or
reason to falsify or perjure their testimonies (Rollo, pp. 23-
24).
Moreover, the Social Security Commission after several
hearings had been conducted, arrived at the following
conclusion:
It was established during the hearings that petitioner
Roman Martinez was employed by, worked for and took
orders from Pascual Tuazon and was authorized to get
"vales" from the conductors of the trucks of Mr. Tuazon.
This was admitted got "vales" from the buses of Pascual
Tuazon (TSN. pp. 24-25, May 7, 1976 and Exhibits "3" to
"49").
On the other hand, there is no evidence introducted to
show that petitioner ever received salaries from
respondent or from Mrs. Victoria Vda. de Tengco and
neither had he been under the orders of the latter. The
only basis upon which petitioner anchors his claim despite
his actual employment by Pascual Tuazon was the use by
the latter of the trade name, Baliwag Transit, in the
operation of his (Mr. Tuazon's) own buses which the latter
had every reason to do since he laboriously helped and
organized said firm until it gained cognizance by the
public.
It is, therefore, clear that even long before the
incorporation of the Baliwag Transit in 1968 petitioner
was already an employee of the late Pascual Tuazon who
despite having separate office, employees and buses
which were operated under the line of the Baliwag Transit
did not report him for coverage to the SSS. Sadly enough
petitioner who claims to be an employee of the
respondent did not refute, by way of submitting rebuttal
evidence, the testimonies given by respondent's witnesses
that he was an employee of the late Pascual Tuazon and
not of said respondent or of Mrs. Victoria Tuazon and not
of said respondent or of Mr. Victoria Vda. de Tengco.
Indeed, there is a reasonable basis to believe that he
would not attempt to do so if only to be consistent with
his stand when he filed a case before the National Labor
Relations Commission, a claim against both the late
Pascual Tuazon and the respondent, He is now
concentrating his action against the respondent in view of
the death of Pascual Tuazon who during his lifetime sold
his trucks and became bankrupt Exhibit "2") —
Resolution, September 14, 1979, pp. 29-31). (Rollo, pp.
28-30)
It has been uniformly held by this Court that it is sufficient
that administrative findings of fact are supported by evidence
on the record, or stated negatively, it is sufficient that findings
of fact are not shown to be unsupported by evidence.
The Court has also held further that "in reviewing
administrative decisions, the reviewin/g court cannot re-
examine the sufficiency of the evidence as if originally
instituted therein, and receive additional evidence that was not
submitted to the administrative agency concerned. The
findings of fact must be respected, so long as they are
supported by substantial evidence, even if not overwhelming
or preponderant." (Police Commission v. Lood, 127 SCRA
758 [1984]).lwphl@itç
Thus, the employer-employee relationship between the late
Pascual Tuazon and herein private respondent, having been
established, the remittance of SSS contributions of the latter, is
the responsibility of his employer Tuazon, regardless of the
existence or non-existence of the "Kabit System."
Moreover, private respondent having allowed seventeen (17)
years to elapse before filing his petition with the Social
Security System, has undoubtedly slept on his rights and his
cause of action has already prescribed under Article 1144(2)
of the Civil Code (Central Azucarrera del Davao v. Court of
Appeals, 137 SCRA 296 [1985]; applied by analogy).
PREMISES CONCERNED, the decision of respondent Court
of Appeals dated June 4, 1981 is hereby REVERSED and SET
ASIDE, and the Resolution of the Social Security Commission
dated September 12, 1979 is hereby REINSTATED.
SO ORDERED.
 also appeared as counsel for the plaintiffs (herein private
respondents). 3 The private respondents alleged that the
petitioners were guilty of gross negligence, recklessness,
violation of traffic rules and regulations, abandonment of
victim, and attempt to escape from a crime.

To support their allegations, the private respondents presented

eight witnesses. On 10 February 1992, after the cross-
examination of the last witness, the private respondents'
counsel made a reservation to present a ninth witness. The
case was then set for continuation of the trial on 30 and 31
March 1992. Because of the non-appearance of the petitioners'
counsel, the 30 March 1992 hearing was cancelled. The next
day, private respondents' counsel manifested that he would no
longer present the ninth witness. He thereafter made an oral
offer of evidence and rested the case. The trial court
summarized private respondents' evidence in this wise:

[I]n the early morning of March 24, 1990, about 6:00

- Philtranco Service Enterprises vs. CA [273 SCRA
562]
G.R. No. 120553 June 17, 1997
PHILTRANCO SERVICE ENTERPRISES, INC. and
ROGACIONES MANILHIG, petitioner,
vs.
COURT OF APPEALS and HEIRS OF THE LATE
RAMON ACUESTA, respondents
DAVIDE, JR., J.:
The petitioners interposed this appeal by way of a petition for
review under Rule 45 of the Rules of Court from the 31
January 1995 Decision of the Court of Appeals in CA-G.R.
CV No. 41140 1 affirming the 22 January 1993 2 Decision of
Branch 31 of the Regional Trial Court, Calbayog City, in Civil
Case No. 373, which ordered the petitioners to pay the private
respondents damages as a result of a vehicular accident.
Civil Case No. 373 was an action against herein petitioners for
damages instituted by the heirs of Ramon A. Acuesta, namely,
Gregorio O. Acuesta; Julio O. Acuesta; Ramon O. Acuesta,
Jr.; Baltazar O. Acuesta; Rufino O. Acuesta; Maximo O.
Acuesta; Neri O. Acuesta; Iluminada O. Acuesta; Rosario
Acuesta-Sanz; and Pamfilo O. Acuesta. Atty. Julio O. Acuesta
o'clock, the victim Ramon A. Acuesta was riding in his
easy rider bicycle (Exhibit "O"), along the Gomez Street
of Calbayog City. The Gomez Street is along the side of
Nijaga Park. On the Magsaysay Blvd., also in Calbayog
City, defendant Philtranco Service Enterprises, Inc.
(Philtranco for brevity) Bus No. 4025 with plate No.
EVA-725 driven by defendant Rogasiones Manilhig y
Dolira was being pushed by some persons in order to
start its engine. The Magsaysay Blvd. runs perpendicular
to Gomez St. and the said Philtranco bus 4025 was
heading in the general direction of the said Gomez
Street. Some of the persons who were pushing the bus
were on its back, while the others were on the sides. As
the bus was pushed, its engine started thereby the bus
continued on its running motion and it occurred at the
time when Ramon A. Acuesta who was still riding on his
bicycle was directly in front of the said bus. As the
engine of the Philtranco bus started abruptly and
suddenly, its running motion was also enhanced by the
said functioning engine, thereby the subject bus bumped
on the victim Ramon A. Acuesta who, as a result thereof
fell and, thereafter, was run over by the said bus. The bus
did not stop although it had already bumped and ran [sic]
over the victim; instead, it proceeded running towards
the direction of the Rosales Bridge which is located at
one side of the Nijaga Park and towards one end of the
Gomez St., to which direction the victim was then
heading when he was riding on his bicycle. P/Sgt. Yabao
who was then jogging thru the Gomez Street and was
heading and meeting the victim Ramon A. Acuesta as
the latter was riding on his bicycle, saw when the
Philtranco bus was being pushed by some passengers,
when its engine abruptly started and when the said bus
bumped and ran over the victim. He approached the bus
driver defendant Manilhig herein and signalled to him to
stop, but the latter did not listen. So the police officer
jumped into the bus and introducing himself to the driver
defendant as policeman, ordered the latter to stop. The
said defendant driver stopped the Philtranco bus near the
Nijaga Park and Sgt. Yabao thereafter, told the driver to
proceed to the Police Headquarter which was only 100
meters away from Nijaga Park because he was
 apprehensive that the said driver might be harmed by the
relatives of the victim who might come to the scene of
the accident. Then Sgt. Yabao cordoned the scene where
the vehicular accident occurred and had P/Cpl.
Bartolome Bagot, the Traffic Investigator, conduct an
investigation and make a sketch of the crime scene. Sgt.
Yambao Yabao was only about 20 meters away when he
saw the bus of defendant Philtranco bumped [sic] and
[sic] ran over the victim. From the place where the
victim was actually bumped by the bus, the said vehicle
still had run to a distance of about 15 meters away. 4
For their part, the petitioners filed an Answer 5 wherein they
alleged that petitioner Philtranco exercised the diligence of a
good father of a family in the selection and supervision of its
employees, including petitioner Manilhig who had excellent
record as a driver and had undergone months of rigid training
before he was hired. Petitioner Manilhig had always been a
prudent professional driver, religiously observing traffic rules
and regulations. In driving Philtranco's buses, he exercised the
diligence of a very cautious person.
As might be expected, the petitioners had a different version
of the incident. They alleged that in the morning of 24 March
1990, Manilhig, in preparation for his trip back to Pasay City,
warmed up the engine of the bus and made a few rounds
within the city proper of Calbayog. While the bus was slowly
and moderately cruising along Gomez Street, the victim, who
was biking towards the same direction as the bus, suddenly
overtook two tricycles and swerved left to the center of the
road. The swerving was abrupt and so sudden that even as
Manilhig applied the brakes and blew the bus horn, the victim
was bumped from behind and run over by the bus. It was
neither willful nor deliberate on Manilhig's part to proceed
with the trip after his bus bumped the victim, the truth being
that when he looked at his rear-view window, he saw people
crowding around the victim, with others running after his bus.
Fearing that he might be mobbed, he moved away from the
scene of the accident and intended to report the incident to the
police. After a man boarded his bus and introduced himself as
a policeman, Manilhig gave himself up to the custody of the
police and reported the accident in question.
The petitioners further claimed that it was the negligence of
the victim in overtaking two tricycles, without taking
precautions such as seeing first that the road was clear, which
caused the death of the victim. The latter did not even give any
signal of his intention to overtake. The petitioners then
counterclaimed for P50,000 as and for attorney's fees; P1
million as moral damages; and P50,000 for litigation
expenses.
However, the petitioners were not able to present their
evidence, as they were deemed to have waived that right by
the failure of their counsel to appear at the scheduled hearings
on 30 and 31 March 1992. The trial court then issued an
Order 6 declaring the case submitted for decision. Motions for
the reconsideration of the said Order were both denied.
On 22 January 1992, the trial court handed down a decision
ordering the petitioners to jointly and severally pay the private
respondents the following amounts:
1) P55, 615.72 as actual damages;
2) P200,000 as death indemnity for the death of the victim
Ramon A. Acuesta;
3) P1 million as moral damages;
4) P500,000 by way of exemplary damages;
5) P50,000 as attorney's fees; and
6) the costs of suit. 7
Unsatisfied with the judgment, the petitioners appealed to the
Court of Appeals imputing upon the trial court the following
errors:
(1) in preventing or barring them from presenting their
evidence;
(2) in finding that petitioner Manilhig was at fault;
(3) in not finding that Ramon was the one at fault and his own
fault caused, or at least contributed to, his unfortunate
accident;
(4) in awarding damages to the private respondents; and
(5) in finding that petitioner Philtranco was solidarily liable
with Manilhig for damages. 8
In its decision of 31 January 1995, the Court of Appeals
affirmed the decision of the trial court. It held that the
petitioners were not denied due process, as they were given an
opportunity to present their defense. The records show that
they were notified of the assignment of the case for 30 and 31
March 1992. Yet, their counsel did not appear on the said
dates. Neither did he file a motion for postponement of the
hearings, nor did he appeal from the denial of the motions for
reconsideration of the 31 March 1992 Order of the trial court.
The petitioners have thereby waived their right to present
evidence. Their expectation that they would have to object yet
to a formal offer of evidence by the private respondents was
"misplaced," for it was within the sound discretion of the court
to allow oral offer of evidence.
As to the second and third assigned errors, the respondent
court disposed as follows:
. . . We cannot help but accord with the lower court's finding
on appellant Manilhig's fault. First, it is not disputed that the
bus driven by appellant Manilhig was being pushed at the time
of the unfortunate happening. It is of common knowledge and
experience that when a vehicle is pushed to a jump-start, its
initial movement is far from slow. Rather, its movement is
abrupt and jerky and it takes a while before the vehicle attains
normal speed. The lower court had thus enough basis to
conclude, as it did, that the bumping of the victim was due to
appellant Manilhig's actionable negligence and inattention.
Prudence should have dictated against jump-starting the bus in
a busy section of the city. Militating further against appellants'
posture was the fact that the precarious pushing of subject bus
 to a jumpstart was done where the bus had to take a left turn,
thereby making the move too risky to take. The possibility that
pedestrians on Gomez Street, where the bus turned left and the
victim was biking, would be unaware of a vehicle being pushed
to a jumpstart, was too obvious to be overlooked. Verily,
contrary to their bare arguments, there was gross negligence on
the part of appellants.
The doctrine of last clear chance theorized upon by appellants,
is inapplicable under the premises because the victim, who was
bumped from behind, obviously, did not of course anticipate a
Philtranco bus being pushed from a perpendicular street.
The respondent court sustained the awards of moral and
exemplary damages and of attorney's fees, for they are
warranted under Articles 2206, 2231, and 2208(1),
respectively, of the Civil Code. Anent the solidary liability of
petitioner Philtranco, the same finds support in Articles 2180
and 2194 of the said Code. The defense that Philtranco
exercised the diligence of a good father of a family in the
selection and supervision of its employees crumbles in the
face of the gross negligence of its driver, which caused the
untimely death of the victim.
Their motion for reconsideration having been denied, the
petitioners came to us claiming that the Court of Appeals
gravely erred
I . . . IN HOLDING THAT PETITIONERS WAIVED
THEIR RIGHT TO PRESENT THEIR EVIDENCE,
AND THAT PETITIONERS WERE NOT DENIED
DUE PROCESS.
II. . . IN APPLYING ART. 2194, INSTEAD OF ART.
2180, OF THE CIVIL CODE, AND IN HOLDING
THAT PETITIONER PHILTRANCO CAN NOT
INVOKE THE DEFENSE OF DILIGENCE OF A
GOOD FATHER OF A FAMILY.
III. . . IN AWARDING DAMAGES TO
RESPONDENTS AND/OR IN NOT FINDING THE
TRIAL COURT'S AWARD OF DAMAGES
EXCESSIVE.
We resolved to give due course to the petition and required the
parties to submit their respective memoranda after due
consideration of the allegations, issues, and arguments
adduced in the petition, the comment thereon by the private
respondents, and the reply to the comment filed by the
petitioners. The petitioners filed their memorandum in due
time; while the private respondents filed theirs only on 3
January 1997, after their counsel was fined in the amount of
P1,000 for failure to submit the required memorandum.
The first imputed error is without merit. The petitioners and
their counsel, Atty. Jose Buban, were duly notified in open
court of the order of the trial court of 10 February 1992 setting
the case for hearing on 30 and 31 March 1992. 9 On both dates
neither the petitioners nor their counsel appeared. In his
motion for reconsideration, 10 Atty. Buban gave the following
reasons for his failure to appear on the said hearings:
1. That when this case was called on March 27, 1992, counsel
was very much indisposed due to the rigors of a very hectic
campaign as he is a candidate for City Councilor of Tacloban;
he wanted to leave for Calbayog City, but he was seized with
slight fever on the morning of said date; but then, during the
last hearing, counsel was made to understand that plaintiffs
would formally offer their exhibits in writing, for which
reason, counsel for defendants waited for a copy of said
formal offer, but counsel did not receive any copy as counsel
for plaintiffs opted to formally offer their exhibits orally in
open court;
2. That counsel for defendants, in good faith believed that he
would be given reasonable time within which to comment on
the formal offer in writing, only to know that counsel for
plaintiffs orally offered their exhibits in open court and that
the same were admitted by the Honorable Court; and that
when this case was called on March 30 and 31, 1992, the
undersigned counsel honestly believed that said schedule
would be cancelled, pending on the submission of the
comments made by the defendants on the formal offer; but it
was not so, as the exhibits were admitted in open court. 11
In its order of 26 May 1992, the trial court denied the motion,
finding it to be "devoid of meritorious basis," as Atty. Buban
could have filed a motion for postponement. 12 Atty. Buban
then filed a motion to reconsider 13 the order of denial, which
was likewise denied by the trial court in its order of 12 August
1992. 14 Nothing more was done by the petitioners after receipt
of the order of 12 August 1992. A perusal of the first and
second motions for reconsideration discloses absence of any
claim that the petitioners have meritorious defenses. Clearly,
therefore, the trial court committed no error in declaring the
case submitted for decision on the basis of private
respondent's evidence.
The second imputed error is without merit either.
Civil Case No. 373 is an action for damages based on quasi-
delict 15 under Article 2176 and 2180 of the Civil Code against
petitioner Manilhig and his employer, petitioner Philtranco,
respectively. These articles pertinently provide:
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is
no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of
this Chapter.
Art. 2180. The obligation imposed by Article 2176 is
demandable not only for one's own acts or omissions, but
also for those of persons for whom one is responsible.
xxx xxx xxx
The owners and managers of an establishment or
enterprise are likewise responsible for damages caused by
their employees in the service of the branches in which
the latter are employed or on the occasion of their
functions.
 Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope
of their assigned tasks even though the former are not
engaged in any business or industry.
xxx xxx xxx
The responsibility treated of in this article shall cease
when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to
prevent damage.
We have consistently held that the liability of the registered
owner of a public service vehicle, like petitioner
Philtranco, 16 for damages arising from the tortious acts of the
driver is primary, direct, and joint and several or solidary with
the driver. 17 As to solidarity, Article 2194 expressly provides:
Art. 2194. The responsibility of two or more persons
who are liable for a quasi-delict is solidary.
Since the employer's liability is primary, direct and
solidary, its only recourse if the judgment for damages is
satisfied by it is to recover what it has paid from its
employee who committed the fault or negligence which
gave rise to the action based on quasi-delict. Article 2181
of the Civil Code provides:
Art. 2181. Whoever pays for the damage caused by his
dependents or employees may recover from the latter
what he has paid or delivered in satisfaction of the
claim.
There is, however, merit in the third imputed error.
The trial court erroneously fixed the "death indemnity" at
P200,000. The private respondents defended the award in their
Opposition to the Motion for Reconsideration by saying that
"[i]n the case of Philippine Airlines, Inc. vs. Court of Appeals,
185 SCRA 110, our Supreme Court held that the award of
damages for death is computed on the basis of the life
expectancy of the deceased." In that case, the "death
indemnity" was computed by multiplying the victim's gross
annual income by his life expectancy, less his yearly living
expenses. Clearly then, the "death indemnity" referred to was
the additional indemnity for the loss of earning capacity
mentioned in Article 2206(1) of the Civil Code, and not the
basic indemnity for death mentioned in the first paragraph
thereof. This article provides as follows:
Art. 2206. The amount of damages for death caused by a
crime or quasi-delict shall be at least three thousand pesos,
even though there may have been mitigating
circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning
capacity of the deceased, and the indemnity shall be paid to
the heirs of the latter; such indemnity shall in every case be
assessed and awarded by the court, unless the deceased on
account of permanent physical disability not caused by the
defendant, had no earning capacity at the time of his death;
(2) If the deceased was obliged to give support according
to the provisions of article 291, the recipient who is not an
heir called to the decedent's inheritance by the law of
testate or intestate succession, may demand support from
the person causing the death, for a period of not exceeding
five years, the exact duration to be fixed by the court;
(3) The spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages
for mental anguish by reason of the death of the deceased.
We concur with petitioners' view that the trial court intended
the award of "P200,000.00 as death indemnity" not as
compensation for loss of earning capacity. Even if the trial
court intended the award as indemnity for loss of earning
capacity, the same must be struck out for lack of basis. There
is no evidence on the victim's earning capacity and life
expectancy.
Only indemnity for death under the opening paragraph of
Article 2206 is due, the amount of which has been fixed by
current jurisprudence at P50,000. 18
The award of P1 million for moral damages to the heirs of
Ramon Acuesta has no sufficient basis and is excessive and
unreasonable. This was based solely on the testimony of one
of the heirs, Atty. Julio Acuesta, contained in his "Direct
Testimony . . . As Plaintiff, conducted by Himself," 19 to wit:
Q. What was your feeling or reaction as a result of the
death of your father Ramon A. Acuesta?
A. We, the family members, have suffered much from
wounded feelings, moral shock, mental anguish,
sleepless nights, to which we are entitled to moral
damages at the reasonable amount of ONE MILLION
(P1,000,000.00) PESOS or at the sound discretion of
this Hon. Court.
Since the other heirs of the deceased did not take the witness
stand, the trial court had no basis for its award of moral
damages to those who did not testify thereon.
Moral damages are emphatically not intended to enrich a
plaintiff at the expense of the defendant. They are awarded
only to allow the former to obtain means, diversion, or
amusements that will serve to alleviate the moral suffering he
has undergone due to the defendant's culpable action and
must, perforce, be proportional to the suffering inflicted. 20 In
light of the circumstances in this case, an award of P50,000 for
moral damages is in order.
The award of P500,000 for exemplary damages is also
excessive. In quasi-delicts, exemplary damages may be
awarded if the party at fault acted with gross
negligence. 21 The Court of Appeals found that there was gross
negligence on the part of petitioner Manilhig. 22 Under Article
2229 of the Civil Code, exemplary damages are imposed by
way of example or correction for the public good, in addition
to the moral, temperate, liquidated, or compensatory damages.
Considering its purpose, it must be fair and reasonable in
every case and should not be awarded to unjustly enrich a
prevailing party. In the instant case, an award of P50,000 for
the purpose would be adequate, fair, and reasonable.
Finally, the award of P50,000 for attorney's fees must be
reduced. The general rule is that attorney's fees cannot be
recovered as part of damages because of the policy that no
premium should be placed on the right to
litigate. 23 Stated otherwise, the grant of attorney's fees as part
of damages is the exception rather than the rule, as counsel's
fees are not awarded every time a party prevails in a
suit. 24 Such attorney's fees can be awarded in the cases
enumerated in Article 2208 of the Civil Code, and in all cases
it must be reasonable. In the instant case, the counsel for the
plaintiffs is himself a co-plaintiff; it is then unlikely that he
demanded from his brothers and sisters P100,000 as attorney's
fees as alleged in the complaint and testified to by
him. 25 He did not present any written contract for his fees. He
is, however, entitled to a reasonable amount for attorney's
fees, considering that exemplary damages are awarded.
Among the instances mentioned in Article 2208 of the Civil
Code when attorney's fees may be recovered is "(1) when
exemplary damages are awarded." Under the circumstances in
this case, an award of P25,000 for attorney's fees is
reasonable.
The petitioners did not contest the award for actual damages
fixed by the trial court. Hence, such award shall stand.
IN VIEW OF THE FOREGOING, the petition is hereby partly
granted and the challenged decision of CA-G.R. CV No.
41140 is AFFIRMED, subject to modifications as to the
damages awarded, which are reduced as follows:
(a) Death indemnity, from P200,000 to P50,000;
(b) Moral damages, from P1 million to P50,000;
(c) Exemplary damages, from P500,000 to P50,000; and
(d) Attorney's fees, from P50,000 to P25,000.
No pronouncements as to costs in this instance.
SO ORDERED.
Tamayo vs. Aquino [105 Phil 949]
G.R. Nos. L-12634 and L-12720             May 29, 1959
JOSE G. TAMAYO, petitioner,
vs.
INOCENCIO AQUINO, ET AL., and SILVESTRE
RAYOS, respondents.
SILVESTRE RAYOS, petitioner,
vs.
JOSE G. TAMAYO and INOCENCIO AQUINO ET
AL., respondents.
LABRADOR, J.:
Inocencio Aquino and his children brought this action against
Jose G. Tamayo, holder of a certificate of public convenience
to operate two trucks for damages for the death of Inocencio's
wife, Epifania Gonzales, while riding aboard Tamayo's trucks.
It is alleged that while his (Inocencio Aquino) wife was
making a trip aboard truck with Plate No. TPU-735, it bumped
against a culvert on the side of the road in Bugallon,
Pangasinan; that as a consequence of this accident Epifania
Gonzales was thrown away from the vehicle and two pieces of
wood embedded in her skull, as a result of which she died; that
the impact of the truck against the culvert was so violent that
the roof of the vehicle was ripped off from its body, one
fender was smashed and the engine damaged beyond repair.
Complaint was filed for the recovery of P10,000 as actual
damages, P10,000 as moral damages, and costs.
Upon being summoned, defendant Tamayo answered alleging
a that the truck is owned by Silvestre Rayos, so he filed a
third-party complaint against the latter, alleging that he no
longer had any interest whatsoever in the said truck, as he had
sold the same before the accident to the third-party defendant
Silvestre Rayos. Answering the third-party complaint, Rayos
alleged that if any indemnity is due, it should come from Jose
G. Tamayo, because he did not have any transaction with him
regarding such sale.
The Court of First Instance found that the truck with plate No.
TPU-735 was one of the trucks of Tamayo under a certificate
of public convenience issued to him; that he had sold it to
Rayos in March, 1953, but did not inform the Public Service
Commission of the sale until June 30, 1953, one month after
the accident. On the basis of the above facts, the Court of First
Instance ordered the defendant Tamayo and the third-party
defendant Rayos to pay plaintiffs jointly and severally the sum
of P6,000 as compensatory damages, and another sum of
P5,000 as moral damages, with interest, and authorized the
defendant or third-party defendant, whoever should pay the
entire amount, to recover from the other any sum in excess of
one-half of the amount ordered to be paid, with interest. The
Court also dismissed the third-party complaint.
Appeals against the above decision was made to the Court of
Appeals. This court affirmed the judgment of the Court of
First Instance in all respects, and against this
judgment certiorari was issued by us on separate petitions of
Tamayo and Rayos.
Tamayo claims exemption from liability, arguing that the
owner and operator of the truck at the time the accident was
not he but Rayos. In answer we state that we have already held
in the cases of Medina vs. Cresencia, 99 Phil., 506; 52 Off.
Gaz., (11) 4606; Timbol vs. Osias, 98 Phil., 432; 52 Off. Gaz.
(3) 1392; Montoya vs. Ignacio, 94 Phil., 182; 50 Off. Gaz.,
108, and Roque vs. Malibay, L-8561, Nov. 18, 1955, that the
registered owner of a public service vehicle is responsible for
damages that may be caused to any of the passengers therein,
even if the said vehicle had already been sold, leased or
transferred to another person who was, at the time of the
accident, actually operating the vehicle. This principle was
also reaffirmed in the case of Erezo vs. Jepte, 102 Phil., 103.
The reason given by us for the above liability imposed upon
the registered owner of the vehicle under a certificate of public
convenience is as follows:
. . . 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 alleged 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.
(Erezo vs. Jepte, supra).
The decision of the Court of Appeals is also attacked insofar
as it holds that inasmuch as the third-party defendant had used
the truck on a route not covered by the registered owner's
franchise, both the registered owner and the actual owner and
operator should be considered as joint tortfeasors and should
be made liable in accordance with Article 2194 of the Civil
Code. This Article is as follows:
Art. 2194. The responsibility of two or more persons
who are liable for a quasi-delict is solidary.
But the action instituted in the case at bar is one for breach of
contract, for failure of the defendant to carry safety the
deceased for her destination. The liability for which he is
made responsible, i.e., for the death of the passenger, may not
be considered as arising from a quasi-delict. As the registered
owner Tamayo and his transferee Rayos may not be held
guilty of tort or a quasi-delict; their responsibility is not
solidary as held by the Court of Appeals.
The question that poses, therefore, is how should the holder of
the certificate of public convenience Tamayo participate with
his transferee, operator Rayos, in the damages recoverable by
the heirs of the deceased passenger, if their liability is not that
of Joint tortfeasors in accordance with Article 2194 of the
Civil Code. The following considerations must be borne in
mind in determining this question. As Tamayo is the
registered owner of the truck, his responsibility to the public
or to any passenger riding in the vehicle or truck must be
direct, for the reasons given in our decision in the case
of Erezo vs. Jepte, supra, as quoted above. But as the
transferee, who operated the vehicle when the passenger died,
is the one directly responsible for the accident and death he
should in turn be made responsible to the registered owner for
what the latter may have been adjudged to pay. In operating
the truck without transfer thereof having been approved by the
Public Service Commission, the transferee acted merely as
agent of the registered owner and should be responsible to him
(the registered owner), for any damages that he may cause the
latter by his negligence.
In the case at bar, the court found, furthermore, that inspite of
the fact that the agreement between Tamayo and Rayos was
for Rayos to use the truck in carrying of gasoline, the latter
used the same in transporting passengers outside the route
covered by the franchise of Tamayo. For this additional
reason, the agent or Rayos must be held responsible to the
registered owner, to the extent that the latter may suffer
damage by reason of the death caused during the accident. The
responsibility of the transferee was already adverted to by us
in the case of Erezo vs. Jepte, supra, when we held expressly:
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. (Erezo vs.
Jepte, supra.)
We hereby affirm that the responsibility of the transferee of
the public vehicle be as above denied.
The procedural means by which the liability of the transferee
to the holder of the certificate should be enforced is that
indicated by us in the above-quoted portion of the case
of Erezo vs. Jepte. This procedure was adopted by Tamayo,
the defendant herein, when he presented a third party
complaint against Rayos. The courts below should not have
dismissed this third-party complaint, and should have
adjudged the responsibility to make indemnity in accordance
therewith. The transferee is liable to indemnify the registered
owner for the damages that the latter may be required to pay
for the accident, hence the remedy is by third-party complaint
(See Rule 12, Rules of the Court).
We now come to the question of the damages that the Court of
Appeals and the Court of First Instance awarded to the
plaintiffs. The actual or compensatory damage of P6,000 is not
seriously questioned by any of the defendants, but the award
of P5,000 as moral damages is questioned by them in this
appeal. We agree with the appellants that as the responsibility
of Tamayo and his agent Rayos is culpa-contractual, no award
of moral damages can be given. The law on this matter is
expressed in Article 2220 of the Civil Code, which provides:
Willful injury to property may be a legal ground for
awarding moral damages if the court should find that,
 under the circumstances, such damages are justly
due. The same rule applies to breaches of contract
where the defendant acted fraudulently or in bad
faith.

Both the Court of First Instance and the Court of Appeals

considered the violation of the rules of the Public Service
Commission prohibiting transfer of public vehicles without
approval by the Commission as justifying the award of moral
damages. We believe that both courts erred. The law expressly
provides that award of moral damages can be made in a suit
for breach of contact only when the defendants acted
fraudulently or in bad faith. We do not believe that the holder
of the certificate, defendant Tamayo, was guilty of fraud or
bad faith. There appears to be no fraud at all in the transfer.
Transfers are prohibited only if made without approval by the
Public Service Commission. There may have been a violation
of the regulations because Tamayo did not secure a previous
authority to transfer from said Commission, but he actually
applied for and obtained said permission or approval about a
month after the accident. Besides, the truck was transferred to
Rayos with the understanding that the same was not to be used
as a public convenience, so that insofar as Tamayo is
concerned, there could have been no shade or tint of bad faith
at all. Consequently, the ground upon which moral damages
may be demanded from him by the plaintiffs does not exist.

Neither can we find that there was fraud or bad faith

committed on the part of the transferee or agent. There may
have been a breach of the agreement between Tamayo and
Rayos, but this was not the immediate cause of the accident. It
was the negligence of the driver. What the law would seem to
consider as bad faith which may furnish a ground for the
award of moral damages in the case at bar would be bad faith
in the securing and in the execution of the contract and in the
enforcement of its terms (Article 1338, Civil Code), or any
other kind of deceit which may have been used by both
defendants. None can be said to have been present in the case
at bar. There was no bad faith on the part of the agent Rayos;
there was negligence of the driver employed by him, but this
certainly not bad faith defendants' part contemplated by law.

For the foregoing considerations, the judgment appealed from

is hereby modified, in that the defendant-appellant Tamayo is
hereby ordered to pay to the plaintiff-appellees the sum of
P6,000 as compensatory damages for the death of the
deceased, but that he (Tamayo) has the right to be indemnified
by third-party defendant-appellant Rayos of the amount he is
hereby ordered to pay. With costs against appellants.