Republic of the Philippines
SUPREME COURT 2. That on or about June 10, 1912, the
Manila
EN BANC
G.R. No. L-8095 March 31, 1915
F.C. FISHER, plaintiff,
vs.
YANGCO STEAMSHIP COMPANY, J.S. STANLEY, as
Acting Collector of Customs of the Philippine
Islands, IGNACIO VILLAMOR, as Attorney-General of
the Philippine Islands, and W.H. BISHOP, as
prosecuting attorney of the city of
Manila, respondents.
Haussermann, Cohn and Fisher for plaintiff.
Office of the Solicitor-General Harvey for
respondents.
CARSON, J.:
ISSUE: whether the refusal of the owners and officers
of a steam vessel, duly licensed to engage in the
coastwise trade of the Philippine Islands and
engaged in that trade as a common carrier, to accept
for carriage "dynamite, powder or other explosives"
from any and all shippers who may offer such
explosives for carriage can be held to be a lawful act
without regard to any question as to the conditions
under which such explosives are offered to carriage,
or as to the suitableness of the vessel for the
transportation of such explosives, or as to the
possibility that the refusal to accept such articles of
commerce in a particular case may have the effect of
subjecting any person or locality or the traffic in such
explosives to an undue, unreasonable or
unnecessary prejudice or discrimination.
Summarized briefly, the complaint alleges that
FACTS:
1. Plaintiff is a stockholder in the Yangco
Steamship Company, the owner of a large
number of steam vessels, duly licensed to
engage in the coastwise trade of the
Philippine Islands;
directors of the company adopted a
resolution which was thereafter ratified and
affirmed by the shareholders of the
company, "expressly declaring and providing
that the classes of merchandise to be
carried by the company in its business as a
common carrier do not include dynamite,
powder or other explosives, and expressly
prohibiting the officers, agents and servants
of the company from offering to carry,
accepting for carriage said dynamite,
powder or other explosives;"
3. that thereafter the respondent Acting
Collector of Customs demanded and
required of the company the acceptance
and carriage of such explosives; that he has
refused and suspended the issuance of the
necessary clearance documents of the
vessels of the company unless and until the
company consents to accept such explosives
for carriage;
4. that plaintiff is advised and believes that
should the company decline to accept such
explosives for carriage, the respondent
Attorney-General of the Philippine Islands
and the respondent prosecuting attorney of
the city of Manila intend to institute
proceedings in violation of Act No. 98 of the
Philippine Commission against the
company, its managers, agents and
servants, to enforce the requirements of the
Acting Collector of Customs as to the
acceptance of such explosives for carriage;
5. that notwithstanding the demands of the
plaintiff stockholder, - the manager, agents
and servants of the company decline and
refuse to cease the carriage of such
explosives, on the ground that by reason of
the severity of the penalties with which
they are threatened upon failure to carry
such explosives, they cannot subject
themselves to "the ruinous consequences
which would inevitably result" from failure
on their part to obey the demands and
requirements of the Acting Collector of
Customs as to the acceptance for carriage of
explosives;
 6. that plaintiff believes that the Acting
Collector of Customs erroneously construes
the provisions of Act No. 98 in holding that
they require the company to accept such
explosives for carriage notwithstanding the
above mentioned resolution of the directors
and stockholders of the company, and that
if the Act does in fact require the company
to carry such explosives it is to that extent
unconstitutional and void; that
notwithstanding this belief of complainant
as to the true meaning of the Act, the
questions involved cannot be raised by the
refusal of the company or its agents to
comply with the demands of the Acting
Collector of Customs, without the risk of
irreparable loss and damage resulting from
his refusal to facilitate the documentation of
the company's vessels, and without
assuming the company to test the questions
involved by refusing to accept such
explosives for carriage.
There are no allegations in the complaint that for
some special and sufficient reasons all or indeed any
of the company's vessels are unsuitable for the
business of transporting explosives; or that shippers
have declined or will in future decline to comply with
such reasonable regulations and to take such
reasonable precautions as may be necessary and
proper to secure the safety of the vessels of the
company in transporting such explosives
The duties and liabilities of common carriers in this
jurisdiction are defined and fully set forth in Act No.
98 of the Philippine Commission, and until and
unless that statute be declared invalid or
unconstitutional, we are bound by its provisions.
Sections 2, 3 and 4 of the Act are as follows:
SEC. 2. It shall be unlawful for any common
carrier engaged in the transportation of
passengers or property as above set forth to
make or give any unnecessary or
unreasonable preference or advantage to
any particular person, company, firm,
corporation or locality, or any particular
kind of traffic in any respect whatsoever, or
to subject any particular person, company,
firm, corporation or locality, or any
particular kind of traffic, to undue or
unreasonable prejudice or discrimination
whatsoever, and such unjust preference or
discrimination is also hereby prohibited and
declared to be unlawful.
SEC. 3. No common carrier engaged in the
carriage of passengers or property as
aforesaid shall, under any pretense
whatsoever, fail or refuse to receive for
carriage, and as promptly as it is able to do
so without discrimination, to carry any
person or property offering for carriage, and
in the order in which such persons or
property are offered for carriage, nor shall
any such common carrier enter into any
arrangement, contract or agreement with
any other person or corporation whereby
the latter is given an exclusive or
preferential or monopolize the carriage any
class or kind of property to the exclusion or
partial exclusion of any other person or
persons, and the entering into any such
arrangement, contract or agreement, under
any form or pretense whatsoever, is hereby
prohibited and declared to be unlawful.
SEC. 4. Any willful violation of the provisions
of this Act by any common carrier engaged
in the transportation of passengers or
property as hereinbefore set forth is hereby
declared to be punishable by a fine not
exceeding five thousand dollars money of
the United States, or by imprisonment not
exceeding two years, or both, within the
discretion of the court.
The validity of this Act has been questioned on
various grounds, and it is vigorously contended that
in so far as it imposes any obligation on a common
carrier to accept for carriage merchandise of a class
which he makes no public profession to carry, or
which he has expressly or impliedly announced his
intention to decline to accept for carriage from all
shippers alike, it is ultra vires, unconstitutional and
void.
The question, then, of construing and applying the
statute, in cases of alleged violations of its
provisions, always involves a consideration as to
whether the acts complained of had the effect of
making or giving an "unreasonable or unnecessary
preference or advantage" to any person, locality or
particular kind of traffic, or of subjecting any person, corporations, so large a proportion
locality, or particular kind of traffic to any undue or of whose investment is in the soil
unreasonable prejudice or discrimination. It is very and fixtures appertaining thereto,
clear therefore that the language of the statute itself which cannot be removed. For a
refutes any contention as to its invalidity based on government, whether that
the alleged unreasonableness of its mandatory or government be a single sovereign
prohibitory or one of the majority, to say to an
individual who has invested his
It may therefore be said that when the means in so laudable an enterprise
penalties for disobedience are by fines so as the construction of a railroad,
enormous and imprisonment so severe as one which tends so much to the
to intimidate the company and its officers wealth and prosperity of the
from resorting to the courts to test the community, that, if he finds that
validity of the legislation, the result is the the rates imposed will cause him to
same as if the law in terms prohibited the do business at a loss, he may quit
company from seeking judicial construction business, and abandon that road, is
of laws which the very irony of despotism. Apples
of Sodom were fruit of joy in
Counsel for petitioner contends also that the statute, comparison. Reading, as I do, in
if construed so as to deny the right of the steamship the preamble of the Federal
company to elect at will whether or not it will engage Constitution, that it was ordained
in a particular business, such as that of carrying to "establish justice," I can never
explosives, is unconstitutional "because it is a believe that it is within the
confiscation of property, a taking of the carrier's property of an individual invested
property without due process of law," and because it in and used for a purpose in which
deprives him of his liberty by compelling him to even the Argus eyes of the police
engage in business against his will. The argument power can see nothing injurious to
continues as follows: public morals, public health, or the
general welfare. I read also in the
first section of the bill of rights of
To require of a carrier, as a condition to his
this state that "all men are by
continuing in said business, that he must
nature free and equal, and have
carry anything and every thing is to render
certain inalienable rights, among
useless the facilities he may have for the
which are those of enjoying and
carriage of certain lines of freight. It would
defending life and liberty,
be almost as complete a confiscation of
acquiring, possessing, and
such facilities as if the same were
protecting property, and pursuing
destroyed. Their value as a means of
and obtaining safety and
livelihood would be utterly taken away. The
happiness;" and I know that, while
law is a prohibition to him to continue in
that remains as the supreme law of
business; the alternative is to get out or to
the state, no legislature can
go into some other business — the same
directly or indirectly lay its
alternative as was offered in the case of the
withering or destroying hand on a
Chicago & N.W. Ry. vs. Dey (35 Fed. Rep.,
single dollar invested in the
866, 880), and which was there commented
legitimate business of
on as follows:
transportation." (Chicago & N.W.
Ry. vs. Dey, 35 Fed. Rep., 866, 880.)
"Whatever of force there may be in
such arguments, as applied to
It is manifest, however, that this contention is
mere personal property capable of
directed against a construction of the statute, which,
removal and use elsewhere, or in
as we have said, is not warranted by its terms. As we
other business, it is wholly without
have already indicated, the statute does not "require
force as against railroad
of a carrier, as a condition to his continuing in said
business, that he must carry anything and
everything," and thereby "render useless the
facilities he may have for the carriage of certain lines
of freight." It merely forbids failures or refusals to
receive persons or property for carriage which have
the effect of giving an "unreasonable or unnecessary
preference or advantage" to any person, locality or
particular kind of traffic, or of subjecting any person,
locality or particular kind of traffic to any undue or
unreasonable prejudice or discrimination.
Common carriers exercise a sort of public office, and
have duties to perform in which the public is
interested. Their business is, therefore, affected with
a public interest, and is subject of public regulation.
(New Jersey Steam Nav. Co. vs. Merchants Bank, 6
How., 344, 382; Munn vs. Illinois, 94 U.S., 113, 130.)
Indeed, this right of regulation is so far beyond
question that it is well settled that the power of the
state to exercise legislative control over railroad
companies and other carriers "in all respects
necessary to protect the public against danger,
injustice and oppression" may be exercised through
boards of commissioners. (New York etc. R.
Co. vs. Bristol, 151 U.S., 556, 571; Connecticut etc. R.
Co. vs. Woodruff, 153 U.S., 689.)
This of course is, in each case, a question of fact, and
we are of the opinion that the facts alleged in the
complaint are not sufficient to sustain a finding in
favor of the contentions of the petitioner. It is not
alleged in the complaint that "dynamite, gunpowder
and other explosives" can in no event be transported
with reasonable safety on board steam vessels
engaged in the business of common carriers. It is not
alleged that all, or indeed any of the defendant
steamship company's vessels are unsuited for the
carriage of such explosives. It is not alleged that the
nature of the business in which the steamship
company is engaged is such as to preclude a finding
that a refusal to accept such explosives on any of its
vessels would subject the traffic in such explosives to
an undue and unreasonable prejudice and
discrimination.
We think however that the answer to the question
whether such a refusal to carry explosives involves
an unnecessary or unreasonable preference or
advantage to any person, locality or particular kind of
traffic or subjects any person, locality or particular to
traffic to an undue or unreasonable prejudice and
discrimination is by no means "self-evident," and
that it is a question of fact to be determined by the
particular circumstances of each case.
The words "dynamite, powder or other explosives"
are broad enough to include matches, and other
articles of like nature, and may fairly be held to
include also kerosene oil, gasoline and similar
products of a highly inflammable and explosive
character. Many of these articles of merchandise are
in the nature of necessities in any country open to
modern progress and advancement. We are not fully
advised as to the methods of transportation by
which they are made commercially available
throughout the world, but certain it is that dynamite,
gunpowder, matches, kerosene oil and gasoline are
transported on many vessels sailing the high seas.
Indeed it is a matter of common knowledge that
common carriers throughout the world transport
enormous quantities of these explosives, on both
land and sea, and there can be little doubt that a
general refusal of the common carriers in any
country to accept such explosives for carriage would
involve many persons, firms and enterprises in utter
ruin, and would disastrously affect the interests of
the public and the general welfare of the community.
It would be going to far to say that a refusal by a
steam vessel engaged in the business of transporting
general merchandise as a common carrier to accept
for carriage a shipment of matches, solely on the
ground of the dangers incident to the explosive
quality of this class of merchandise, would not
subject the traffic in matches to an unnecessary,
undue or unreasonable prejudice and discrimination
without proof that for some special reason the
particular vessel is not fitted to carry articles of that
nature. There may be and doubtless are some
vessels engaged in business as common carriers of
merchandise, which for lack of suitable deck space or
storage rooms might be justified in declining to carry
kerosene oil, gasoline, and similar products, even
when offered for carriage securely packed in cases;
and few vessels are equipped to transport those
products in bulk. But in any case of a refusal to carry
such products which would subject any person,
locality or the traffic in such products would be
necessary to hear evidence before making an
affirmative finding that such prejudice or
discrimination was or was not unnecessary, undue or
unreasonable. The making of such a finding would
involve a consideration of the suitability of the vessel
for the transportation of such products ; the
reasonable possibility of danger or disaster resulting
from their transportation in the form and under the
conditions in which they are offered for carriage; the
general nature of the business done by the carrier
and, in a word, all the attendant circumstances which
might affect the question of the reasonable necessity
for the refusal by the carrier to undertake the
transportation of this class of merchandise.
But it is contended that whatever the rule may be as
to other explosives, the exceptional power and
violence of dynamite and gunpowder in explosion
will always furnish the owner of a vessel with a
reasonable excuse for his failure or refusal to accept
them for carriage or to carry them on board his boat.
We think however that even as to dynamite and
gunpowder we would not be justified in making such
a holding unaided by evidence sustaining the
proposition that these articles can never be carried
with reasonable safety on any vessel engaged in the
business of a common carrier. It is said that dynamite
is so erratic an uncontrollable in its action that it is
impossible to assert that it can be handled with
safety in any given case. On the other hand it is
contended that while this may be true of some kinds
of dynamite, it is a fact that dynamite can be and is
manufactured so as to eliminate any real danger
from explosion during transportation. These are of
course questions of fact upon which we are not
qualified to pass judgment without the assistance of
expert witnesses who have made special studies as
to the chemical composition and reactions of the
different kinds of dynamite, or attained a thorough
knowledge of its properties as a result of wide
experience in its manufacture and transportation.
As we construe the Philippine statute, the mere fact
that violent and destructive explosions can be
obtained by the use of dynamite under certain
conditions would not be sufficient in itself to justify
the refusal of a vessel, duly licensed as a common
carrier of merchandise, to accept it for carriage, if it
can be proven that in the condition in which it is
offered for carriage there is no real danger to the
carrier, nor reasonable ground to fear that his vessel
or those on board his vessel will be exposed to
unnecessary and unreasonable risk in transporting it,
having in mind the nature of his business as a
common carrier engaged in the coastwise trade in
the Philippine Islands, and his duty as a servant of
the public engaged in a public employment. So also,
if by the exercise of due diligence and the taking of
unreasonable precautions the danger of explosions
can be practically eliminated, the carrier would not
be justified in subjecting the traffic in this commodity
to prejudice or discrimination by proof that there
would be a possibility of danger from explosion
when no such precautions are taken.
The traffic in dynamite, gunpowder and other
explosives is vitally essential to the material and
general welfare of the people of these Islands. If
dynamite, gunpowder and other explosives are to
continue in general use throughout the Philippines,
they must be transported by water from port to port
in the various islands which make up the
Archipelago. We are satisfied therefore that the
refusal by a particular vessel, engaged as a common
carrier of merchandise in the coastwise trade of the
Philippine Islands, to accept any or all of these
explosives for carriage would constitute a violation of
the prohibitions against discriminations penalized
under the statute, unless it can be shown by
affirmative evidence that there is so real and
substantial a danger of disaster necessarily involved
in the carriage of any or all of these articles of
merchandise as to render such refusal a due or a
necessary or a reasonable exercise of prudence and
discretion on the part of the shipowner.
The complaint in the case at bar lacking the
necessary allegations under this ruling, the demurrer
must be sustained on the
ground that the facts alleged do not constitute a
cause of action.
A number of interesting questions of procedure are
raised and discussed in the briefs of counsel. As to all
of these questions we expressly reserve our opinion,
believing as we do that in sustaining the demurrer on
the grounds indicated in this opinion we are able to
dispose of the real issue involved in the proceedings
without entering upon the discussion of the nice
questions which it might have been necessary to
pass upon had it appeared that the facts alleged in
the complaint constitute a cause of action.
We think, however, that we should not finally
dispose of the case without indicating that since the
institution of these proceedings the enactment of
Acts No. 2307 and No. 2362 (creating a Board of
Public Utility Commissioners and for other purposes)
may have materially modified the right to institute
and maintain such proceedings in this jurisdiction.
But the demurrer having been formallly submitted
for judgment before the enactment of these
statutes, counsel have not been heard in this
connection. We therefore refrain from any comment
upon any questions which might be raised as to
whether or not there may be another adequate and
appropriate remedy for the alleged wrong set forth
in the complaint. Our disposition of the question
raised by the demurrer renders that unnecessary at
this time, though it may not be improper to observe
that a careful examination of those acts confirms us
in the holding upon which we base our ruling on this
demurrer, that is to say "That whatever may have
been the rule at the common law, common carriers
in this jurisdiction cannot lawfully decline to accept a
particular class of goods for carriage, to the prejudice
of the traffic in those goods, unless it appears that
for some sufficient reason the discrimination against
the traffic in such goods is reasonable and necessary.
Mere prejudice or whim will not suffice. The grounds
of the discrimination must be substantial ones, such
as will justify the courts in holding the discrimination
to have been reasonable and necessary under all the
circumstances of the case."
Unless an amended complaint be filed in the
meantime, let judgment be entered ten days
hereafter sustaining the demurrer and dismissing the
complaint with costs against the complainant, and
twenty days thereafter let the record be filed in the
archives of original actions in this court. So ordered.
Arellano, C.J., and Trent, J., concur.
Torres and Johnson, JJ., concur in the result.
Fisher vs. Yangco Steamship Case Digest
Fisher vs. Yangco Steamship
(31 Phil 1)
Facts: The complained alleges that plaintiff is a
stockholder in Yangco Steamship
Company, the owner of the large steam vessels, duly
licensed to engage in the coastwise trade of the
Philippine Island; that on or about June 10, 1912, the
directors of the company, adopted a resolution
which was thereafter ratified and affirmed by the
stockholders of the company “expressly declaring
and providing that the classes of merchandise to be
carried by the company in its business as common
carrier do not include dynamite, powder or other
explosives, and expressly prohibiting the officers,
agents an d servants of the company from offering to
carry, accepting for carriage or carrying said
dynamite, powder or other explosives.”
Issue: Whether the refusal of the owner and officer
of a steam vessel, to accept for carriage dynamite,
powder or other explosives for carriage can be held
to be a lawful act?
Held: The traffic in dynamite gun powder and other
explosive is vitally essential to the material and
general welfare of the inhabitants of this islands and
it these products are to continue in general use
throughout the Philippines they must be transported
from water to port to port in various island which
make up the Archipelago.
It follows that a refusal by a particular vessel engage
as a common carrier of merchandise in coastwise
trade in the Philippine Island to accept such
explosives for carriage constitutes a violation.
The prohibition against discrimination penalized
under the statute, unless it can be shown that there
is so Real and substantial danger of disaster
necessarily involved in the courage of any or all of
this article of merchandise as to render such refusal
a due or unnecessary or a reasonable exercise or
prudence and discreation on the part of the ship
owner.
Equitable Leasing Corporation vs. Lucita
Suyom
Facts:
A Fuso Road tractor driven by Tutor
rammed into the house cum of Tamayo
which resulted in the death of Tamayo’s
son and Oledan’s daughter. Failure to
claim from a criminal case finding Tutor
guilty of reckless imprudence,
respondents filed a civil case based on
quasi delict against Equitable Leasing
Corp, the registered owner of the tractor,
among others. Equitable contends that it
should not be held liable for such damages
which arose from the negligence of the
driver Fuso Road. That such tractor was
already sold to the owner of Fuso Road at
the time of the accident. Thus, not having
employed driver Tutor, it could not have
controlled or supervised him.
Issue: WON Equitable should be held liable
for damages in an action based on quasi
delict for the negligent acts of a driver
who was not its employee.
Held: Yes, Equitable should be held liable
because it was the registered owner at the
time of the accident.
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. 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. The same
principle applies even if the registered
owner of any vehicle does not use it for
public service.
-----------------
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.
Duavit vs. CA, Sarmiento & Catuar G.R. No. 82318
May 18, 1989
Facts:
Private respondents were on board a jeep when they
met an accident with another jeep driven by
Sabiniano. This accident caused injuries to private
respondents, thus they filed a case for damages
against driver Salbiniano and owner of the jeep
Duavit. Duavit admits ownership of the jeep but
contends that he should not be held liable since
Salbiniano is not his employee and that the jeep was
taken by Salbiniano without his (Duavit) consent.
Issue: Whether or not the owner of a private vehicle
which figured in an accident can be held liable as an
employer when the said vehicle was neither driven
by an employee of the owner nor taken with his
consent.
Held: No, 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.
To hold 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.
BA Finance Corp vs. CA G.R. No.
98275 November 13, 1992
Facts:
Amare, the driver of an Isuzu truck was
involved in an accident which caused the
death of three persons. Amare was found
guilty beyond reasonable doubt of reckless
imprudence. BA Finance was found liable
for damages since the truck was
registered in its name. BA Finance
contends that it should not be held liable
since it was not Amare’s employer at the
time of the accident. It also contends that
the Isuzu truck was in the possession of
Rock Component Phil, by virtue of a lease
agreement. Hence, BA Finance wants to
prove who the actual/real owner is at the
time of the accident, and in accordance
with such proof, evade liability and lay the
same on the person actually owning the
vehicle.
Issues:
1 WON BA Finance should be held liable.
2 WON BA Finance can escape liability by
proving the actual/real owner of the truck.
Held:
1 Yes, BA Finance is liable.
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. 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
the third persons for injuries caused the
latter while the vehicle is being driven on
the highways or streets.
2 No, the law does not allow him. 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.
This may appear harsh but nevertheless, 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.
While the registered owner is primarily
responsible for the damage caused, he
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.
G.R. No. 162267 July 4, 2008
PCI LEASING AND FINANCE, INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC., respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review
on Certiorari under Rule 45 of the Rules of Court,
seeking a reversal of the Decision1 of the Court of
Appeals (CA) dated December 12, 2003 affirming
with modification the Decision of the Regional Trial
Court (RTC) of Makati City which ordered petitioner
and Renato Gonzaga (Gonzaga) to pay, jointly and
severally, respondent the amount of P244,500.00
plus interest; and the CA Resolution2 dated February
18, 2004 denying petitioner's Motion for
Reconsideration.
The facts, as found by the CA, are undisputed:
On October 19, 1990 at about 10:30 p.m., a
Mitsubishi Lancer car owned by United
Coconut Planters Bank was traversing the
Laurel Highway, Barangay Balintawak, Lipa
City.
The car was insured with plantiff-appellee
[UCPB General Insurance Inc.], then driven
by Flaviano Isaac with Conrado Geronimo,
the Asst. Manager of said bank, was hit and
bumped by an 18-wheeler Fuso Tanker
Truck, owned by PCI Leasing & Finance, Inc.
allegedly leased to and operated by
Superior Gas & Equitable Co., Inc. (SUGECO)
and driven by its employee, defendant
appellant Renato Gonzaga.
 The impact caused heavy damage to the
Mitsubishi Lancer car resulting in an
explosion of the rear part of the car. The
driver and passenger suffered physical
injuries. However, the driver defendant-
appellant Gonzaga continued on its [sic]
way to its [sic] destination and did not
bother to bring his victims to the hospital.
Plaintiff-appellee UCPB Gen. Insurance Inc.
paid the assured UCPB the amount
of P244,500.00 representing the insurance
coverage of the damaged car.
As the 18-wheeler truck is registered under
the name of PCI Leasing, repeated demands
were made by plaintiff-appellee UCPPB for
the payment of the aforesaid amounts.
However, no payment was made. Thus,
plaintiff-appellee filed the instant case on
March 13, 1991.3
PCI Leasing and Finance, Inc., (petitioner) interposed
the defense that it could not be held liable for the
collision, since the driver of the truck, Gonzaga, was
not its employee, but that of its co-defendant
Superior Gas & Equitable Co., Inc. (SUGECO). 4 In fact,
it was SUGECO, and not petitioner, that was the
actual operator of the truck, pursuant to a Contract
of Lease signed by petitioner and
SUGECO.5 Petitioner, however, admitted that it was
the owner of the truck in question.6
RTC – in favor of plaintiff
Aggrieved by the decision of the trial court,
petitioner appealed to the CA.
In its Decision dated December 12, 2003, the CA
affirmed the RTC's decision
The issues raised by petitioner are purely legal:
Whether petitioner, as registered owner of
a motor vehicle that figured in a quasi-
delict may be held liable, jointly and
severally, with the driver thereof, for the
damages caused to third parties. (YES)
Whether petitioner, as a financing company,
is absolved from liability by the enactment
of Republic Act (R.A.) No. 8556, or the
Financing Company Act of 1998. (NO) (hindi
naman yata related ito sa transpo)
HELD:
1. CA found petitioner liable for the damage
caused by the collision since under the
Public Service Act, if the property covered
by a franchise is transferred or leased to
another without obtaining the requisite
approval, the transfer is not binding on the
Public Service Commission and, in
contemplation of law, the grantee continues
to be responsible under the franchise in
relation to the operation of the vehicle,
such as damage or injury to third parties
due to collisions.10
The principle of holding the registered owner of a
vehicle liable for quasi-delicts resulting from its use is
well-established in jurisprudence. Erezo v.
Jepte,12 with Justice Labrador as ponente, wisely
explained the reason behind this principle, thus:
Registration is required not to make said
registration the operative act by which
ownership in vehicles is transferred, as in
land registration cases, because the
administrative proceeding of registration
does not bear any essential relation to the
contract of sale between the parties
(Chinchilla vs. Rafael and Verdaguer, 39 Phil.
888), but to permit the use and operation of
the vehicle upon any public highway
(section 5 [a], Act No. 3992, as amended.)
The main aim of motor vehicle registration
is to identify the owner so that if any
accident happens, or that any damage or
injury is caused by the vehicle on the public
highways, responsibility therefor can be
fixed on a definite individual, the registered
owner. Instances are numerous where
vehicles running on public highways caused
accidents or injuries to pedestrians or other
vehicles without positive identification of
the owner or drivers, or with very scant
means of identification. It is to forestall
these circumstances, so inconvenient or
prejudicial to the public, that the motor
 vehicle registration is primarily ordained, in
the interest of the determination of persons
responsible for damages or injuries caused
on public highways.
"'One of the principal purposes of
motor vehicles legislation is
identification of the vehicle and of
the operator, in case of accident;
and another is that the knowledge
that means of detection are always
available may act as a deterrent
from lax observance of the law and
of the rules of conservative and
safe operation. Whatever purpose
there may be in these statutes, it is
subordinate at the last to the
primary purpose of rendering it
certain that the violator of the law
or of the rules of safety shall not
escape because of lack of means to
discover him.' The purpose of the
statute is thwarted, and the
displayed number becomes a
'snare and delusion,' if courts
would entertain such defenses as
that put forward by appellee in this
case. No responsible person or
corporation could be held liable for
the most outrageous acts of
negligence, if they should be
allowed to place a 'middleman'
between them and the public, and
escape liability by the manner in
which they recompense their
servants." (King vs. Brenham
Automobile Co., 145 S.W. 278,
279.)
In synthesis, we hold that the registered
owner, the defendant-appellant herein, is
primarily responsible for the damage
caused to the vehicle of the plaintiff-
appellee, but he (defendant-appellant) has
a right to be indemnified by the real or
actual owner of the amount that he may be
required to pay as damage for the injury
caused to the plaintiff-appellant.13
The case is still good law and has been consistently
cited in subsequent cases.14 Thus, there is no good
reason to depart from its tenets.
For damage or injuries arising out of negligence in
the operation of a motor vehicle, the registered
owner may be held civilly liable with the negligent
driver either 1) subsidiarily, if the aggrieved party
seeks relief based on a delict or crime under Articles
100 and 103 of the Revised Penal Code; or
2) solidarily, if the complainant seeks relief based on
a quasi-delict under Articles 2176 and 2180 of the
Civil Code. It is the option of the plaintiff whether to
waive completely the filing of the civil action, or
institute it with the criminal action, or file it
separately or independently of a criminal
action;15 his only limitation is that he cannot recover
damages twice for the same act or omission of the
defendant.16
*In case a separate civil action is filed, the long-
standing principle is that the registered owner of a
motor vehicle is primarily and directly responsible for
the consequences of its operation, including the
negligence of the driver, with respect to the public
and all third persons.17 In contemplation of law, the
registered owner of a motor vehicle is the employer
of its driver, with the actual operator and employer,
such as a lessee, being considered as merely the
owner's agent.18 This being the case, even if a sale
has been executed before a tortious incident, the
sale, if unregistered, has no effect as to the right of
the public and third persons to recover from the
registered owner.19The public has the right to
conclusively presume that the registered owner is
the real owner, and may sue accordingly.20
*In the case now before the Court, there is not even
a sale of the vehicle involved, but a mere lease,
which remained unregistered up to the time of the
occurrence of the quasi-delict that gave rise to the
case. Since a lease, unlike a sale, does not even
involve a transfer of title or ownership, but the mere
use or enjoyment of property, there is more reason,
therefore, in this instance to uphold the policy
behind the law, which is to protect the unwitting
public and provide it with a definite person to make
accountable for losses or injuries suffered in
vehicular accidents.21 This is and has always been the
rationale behind compulsory motor vehicle
registration under the Land Transportation and
Traffic Code and similar laws, which, as early
as Erezo, has been guiding the courts in their
disposition of cases involving motor vehicular
incidents. It is also important to emphasize that such
principles apply to all vehicles in general, not just
those offered for public service or utility. 22
2. HELD: p.37
The Court recognizes that the business of financing
companies has a legitimate and commendable
purpose.23 In earlier cases, it considered a financial
lease or financing lease a legal contract,24 though
subject to the restrictions of the so-called Recto
Law or Articles 1484 and 1485 of the Civil Code. 25 In
previous cases, the Court adopted the statutory
definition of a financial lease or financing lease, as:
[A] mode of extending credit through a non-
cancelable lease contract under which the
lessor purchases or acquires, at the instance
of the lessee, machinery, equipment, motor
vehicles, appliances, business and office
machines, and other movable or immovable
property in consideration of the periodic
payment by the lessee of a fixed amount of
money sufficient to amortize at least
seventy (70%) of the purchase price or
acquisition cost, including any incidental
expenses and a margin of profit over an
obligatory period of not less than two (2)
years during which the lessee has the right
to hold and use the leased property, x x x
but with no obligation or option on his part
to purchase the leased property from the
owner-lessor at the end of the lease
contract. 26
Petitioner presented a lengthy discussion of the
purported trend in other jurisdictions, which
apparently tends to favor absolving financing
companies from liability for the consequences
of quasi-delictual acts or omissions involving
financially leased property.27 The petition adds that
these developments have been legislated in our
jurisdiction in Republic Act (R.A.) No. 8556,28 which
provides:
Section 12. Liability of lessors. - Financing
companies shall not be liable for loss,
damage or injury caused by a motor vehicle,
aircraft, vessel, equipment, machinery or
other property leased to a third person or
entity except when the motor vehicle,
aircraft, vessel, equipment or other
property is operated by the financing
company, its employees or agents at the
time of the loss, damage or injury.1avvphi1
Petitioner's argument that the enactment of R.A. No.
8556, especially its addition of the new Sec. 12 to the
old law, is deemed to have absolved petitioner from
liability, fails to convince the Court.
These developments, indeed, point to a seeming
emancipation of financing companies from the
obligation to compensate claimants for losses
suffered from the operation of vehicles covered by
their lease. Such, however, are not applicable to
petitioner and do not exonerate it from liability in
the present case.
The new law, R.A. No. 8556, notwithstanding
developments in foreign jurisdictions, do not
supersede or repeal the law on compulsory motor
vehicle registration. No part of the law expressly
repeals Section 5(a) and (e) of R.A. No. 4136, as
amended, otherwise known as the Land
Transportation and Traffic Code, to wit:
Sec. 5. Compulsory registration of motor
vehicles. - (a) All motor vehicles and trailer
of any type used or operated on or upon
any highway of the Philippines must be
registered with the Bureau of Land
Transportation (now the Land
Transportation Office, per Executive Order
No. 125, January 30, 1987, and Executive
Order No. 125-A, April 13, 1987) for the
current year in accordance with the
provisions of this Act.
xxxx
(e) Encumbrances of motor vehicles. -
Mortgages, attachments, and other
encumbrances of motor vehicles,in order to
be valid against third parties must be
recorded in the Bureau (now the Land
Transportation Office). Voluntary
transactions or voluntary encumbrances
shall likewise be properly recorded on the
face of all outstanding copies of the
certificates of registration of the vehicle
concerned.
Cancellation or foreclosure of such
mortgages, attachments, and other
 encumbrances shall likewise be recorded,
and in the absence of such cancellation, no
certificate of registration shall be issued
without the corresponding notation of
mortgage, attachment and/or other
encumbrances.
x x x x (Emphasis supplied)
Neither is there an implied repeal of R.A. No. 4136.
As a rule, repeal by implication is frowned upon,
unless there is clear showing that the later statute is
so irreconcilably inconsistent and repugnant to the
existing law that they cannot be reconciled and
made to stand together.29 There is nothing in R.A. No.
4136 that is inconsistent and incapable of
reconciliation.
Thus, the rule remains the same: a sale, lease, or
financial lease, for that matter, that is not registered
with the Land Transportation Office, still does not
bind third persons who are aggrieved in tortious
incidents, for the latter need only to rely on the
public registration of a motor vehicle as conclusive
evidence of ownership.30 A lease such as the one
involved in the instant case is an encumbrance in
contemplation of law, which needs to be registered
in order for it to bind third parties.31 Under this
policy, the evil sought to be avoided is the
exacerbation of the suffering of victims of tragic
vehicular accidents in not being able to identify a
guilty party. A contrary ruling will not serve the ends
of justice. The failure to register a lease, sale,
transfer or encumbrance, should not benefit the
parties responsible, to the prejudice of innocent
victims.
The non-registration of the lease contract between
petitioner and its lessee precludes the former from
enjoying the benefits under Section 12 of R.A. No.
8556.
This ruling may appear too severe and unpalatable to
leasing and financing companies, but the Court
believes that petitioner and other companies so
situated are not entirely left without recourse. They
may resort to third-party complaints against their
lessees or whoever are the actual operators of their
vehicles. In the case at bar, there is, in fact, a
provision in the lease contract between petitioner
and SUGECO to the effect that the latter shall
indemnify and hold the former free and harmless
from any "liabilities, damages, suits, claims or
judgments" arising from the latter's use of the motor
vehicle.32 Whether petitioner would act against
SUGECO based on this provision is its own option.
The burden of registration of the lease contract is
minuscule compared to the chaos that may result if
registered owners or operators of vehicles are freed
from such responsibility. Petitioner pays the price for
its failure to obey the law on compulsory registration
of motor vehicles for registration is a pre-requisite
for any person to even enjoy the privilege of putting
a vehicle on public roads.
Lim & Gunnaban vs. CA & Gonzales
Facts:
Gonzales purchased an Isuzu passenger
jeepney from Vallarta. Vallarta remained
as the holder of a certificate of public
convenience and the registered owner of
the jeepney. Subsequently, the jeepney
collided with a ten-wheeler truck owned
by Lim, driven by Gunnaban which
resulted in the death of 1 passenger and
injuries to all others. Failure to arrive to a
settlement with Lim for the repair of the
jeepney, Gonzales brought an action for
damages against Lim & Gunnaban. Lim
denied liability asserting that Vallarte, and
not Gonzales, is the real party in interest
being the registered owner of the jeepney.
He further asserts that an operator of the
vehicle continues to be its operator as he
remains the operator of record; and that 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.
Issue: WON Gonzales, an operator under
the kabit system (considering that he is
not the registered owner of the jeepney),
may sue for damages against Lim. Or,
WON Gonzales is a real party in interest.
Held: Yes, Gonzales may sue.
The evil sought to be prevented in
enjoining the kabit system* does not exist.
1 Neither of the parties to the
pernicious kabit system is being held
liable for damages.
2 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
Gonzales and the registered owner of the
jeepney were in stoppels for leading the
public to believe that the jeepney
belonged to the registered owner.
3 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.
Thus, 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.
-----------------
N.B.
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. Although the parties to such an
agreement are not outrightly penalized by
law, thekabit system is invariably
recognized as being contrary to public
policy and therefore void and inexistent
under Art. 1409 of the Civil Code.
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.
G.R. No. L-65510 March 9, 1987
TEJA MARKETING AND/OR ANGEL
JAUCIAN, petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE
COURT * AND PEDRO N. NALE, respondents.
Cirilo A. Diaz, Jr. for petitioner.
Henry V. Briguera for private respondent.
PARAS, J.: p 40
"'Ex pacto illicito' non oritur actio" (No action arises
out of illicit bargain) is the time-honored maxim that
must be applied to the parties in the case at bar.
Having entered into an illegal contract, neither can
seek relief from the courts, and each must bear the
consequences of his acts." (Lita Enterprises vs. IAC,
129 SCRA 81.)
The factual background of this case is undisputed.
The same is narrated by the respondent court in its
now assailed decision, as follows:
On May 9, 1975, the defendant
bought from the plaintiff a
motorcycle with complete
accessories and a sidecar in the
total consideration of P8,000.00 as
shown by Invoice No. 144 (Exh.
"A").
Out of the total purchase price the
defendant gave a downpayment of
P1,700.00 with a promise that he
would pay plaintiff the balance
within sixty days. The defendant,
however, failed to comply with his
promise and so upon his own
request, the period of paying the
balance was extended to one year
in monthly installments until
January 1976 when he stopped
paying anymore. The plaintiff made
demands but just the same the
defendant failed to comply with
the same thus forcing the plaintiff
to consult a lawyer and file this
action for his damage in the
amount of P546.21 for attorney's
fees and P100.00 for expenses of
litigation. The plaintiff also claims
that as of February 20, 1978, the
total account of the defendant was
already P2,731.06 as shown in a
statement of account (Exhibit. "B").
This amount includes not only the
balance of P1,700.00 but an
additional 12% interest per annum
on the said balance from January
26, 1976 to February 27, 1978; a
2% service charge; and P 546.21
representing attorney's fees.
In this particular transaction a
chattel mortgage (Exhibit 1) was
constituted as a security for the
payment of the balance of the
purchase price. It has been the
practice of financing firms that
whenever there is a balance of the
purchase price the registration
papers of the motor vehicle subject
of the sale are not given to the
buyer. The records of the LTC show
that the motorcycle sold to the
defendant was first mortgaged to
the Teja Marketing by Angel
Jaucian though the Teja Marketing
and Angel Jaucian are one and the
same, because it was made to
appear that way only as the
defendant had no franchise of his
own and he attached the unit to
the plaintiff's MCH Line. The
agreement also of the parties here
was for the plaintiff to undertake
the yearly registration of the
motorcycle with the Land
Transportation Commission.
Pursuant to this agreement the
defendant on February 22, 1976
gave the plaintiff P90.00, the P8.00
would be for the mortgage fee and
the P82.00 for the registration fee
of the motorcycle. The plaintiff,
however failed to register the
motorcycle on that year on the
ground that the defendant failed to
comply with some requirements
such as the payment of the
insurance premiums and the
bringing of the motorcycle to the
LTC for stenciling, the plaintiff
saying that the defendant was
hiding the motorcycle from him.
Lastly, the plaintiff explained also
that though the ownership of the
motorcycle was already transferred
to the defendant the vehicle was
still mortgaged with the consent of
the defendant to the Rural Bank of
Camaligan for the reason that all
motorcycle purchased from the
plaintiff on credit was rediscounted
with the bank.
On his part the defendant did not
dispute the sale and the
outstanding balance of P1,700. 00
still payable to the plaintiff. The
defendant was persuaded to buy
from the plaintiff the motorcycle
with the side car because of the
condition that the plaintiff would
be the one to register every year
the motorcycle with the Land
Transportation Commission. In
1976, however, the plaintfff failed
to register both the chattel
mortgage and the motorcycle with
the LTC notwithstanding the fact
that the defendant gave him
P90.00 for mortgage fee and
registration fee and had the
motorcycle insured with La Perla
Compana de Seguros (Exhibit "6")
as shown also by the Certificate of
cover (Exhibit "3"). Because of this
failure of the plaintiff to comply
with his obligation to register the
motorcycle the defendant suffered
damages when he failed to claim
any insurance indemnity which
would amount to no less than
P15,000.00 for the more than two
times that the motorcycle figured
in accidents aside from the loss of
the daily income of P15.00 as
boundary fee beginning October
1976 when the motorcycle was
impounded by the LTC for not
being registered.
The defendant disputed the claim
of the plaintiff that he was hiding
from the plaintiff the motorcycle
resulting in its not being registered.
The truth being that the
motorcycle was being used for
transporting passengers and it kept
on travelling from one place to
another. The motor vehicle sold to
him was mortgaged by the plaintiff
with the Rural Bank of Camaligan
without his consent and
knowledge and the defendant was
not even given a copy of the
mortgage deed. The defendant
claims that it is not true that the
motorcycle was mortgaged
because of re-discounting for
rediscounting is only true with
Rural Banks and the Central Bank.
The defendant puts the blame on
the plaintiff for not registering the
motorcycle with the LTC and for
not giving him the registration
papers inspite of demands made.
Finally, the evidence of the
defendant shows that because of
the filing of this case he was forced
to retain the services of a lawyer
for a fee on not less than
P1,000.00.
xxx xxx xxx
... it also appears and the Court so
finds that defendant purchased the
motorcycle in question, particularly
for the purpose of engaging and
using the same in the
transportation business and for
this purpose said trimobile unit
was attached to the plaintiffs
transportation line who had the
franchise, so much so that in the
registration certificate, the plaintiff
appears to be the owner of the
unit. Furthermore, it appears to
have been agreed, further between
the plaintiff and the defendant,
that plaintiff would undertake the
yearly registration of the unit in
question with the LTC. Thus, for the
registration of the unit for the year
1976, per agreement, the
defendant gave to the plaintiff the
amount of P82.00 for its
registration, as well as the
insurance coverage of the unit.
Eventually, petitioner Teja Marketing and/or Angel
Jaucian filed an action for "Sum of Money with
Damages" against private respondent Pedro N. Nale
in the City Court of Naga City. The City Court
rendered judgment in favor of petitioner, the
dispositive portion of which reads:
WHEREFORE, decision is hereby
rendered dismissing the
counterclaim and ordering the
defendant to pay plaintiff the sum
of P1,700.00 representing the
unpaid balance of the purchase
price with legal rate of interest
from the date of the filing of the
complaint until the same is fully
paid; to pay plaintiff the sum of
P546.21 as attorney's fees; to pay
plaintiff the sum of P200.00 as
 expenses of litigation; and to pay
the costs.
SO ORDERED.
On appeal to the Court of First Instance of Camarines
Sur, the decision was affirmed in toto. Private
respondent filed a petition for review with the
Intermediate Appellate Court and on July 18, 1983
the said Court promulgated its decision, the
pertinent portion of which reads —
However, as the purchase of the
motorcycle for operation as a
trimobile under the franchise of
the private respondent Jaucian,
pursuant to what is commonly
known as the "kabit system",
without the prior approval of the
Board of Transportation (formerly
the Public Service Commission)
was an illegal transaction involving
the fictitious registration of the
motor vehicle in the name of the
private respondent so that he may
traffic with the privileges of his
franchise, or certificate of public
convenience, to operate a tricycle
service, the parties being in pari
delicto, neither of them may bring
an action against the other to
enforce their illegal contract [Art.
1412 (a), Civil Code].
xxx xxx xxx
WHEREFORE, the decision under
review is hereby set aside. The
complaint of respondent Teja
Marketing and/or Angel Jaucian, as
well as the counterclaim of
petitioner Pedro Nale in Civil Case
No. 1153 of the Court of First
Instance of Camarines Sur
(formerly Civil Case No. 5856 of the
City Court of Naga City) are
dismissed. No pronouncement as
to costs.
SO ORDERED.
The decision is now before Us on a petition for
review, petitioner Teja Marketing and/or Angel
Jaucian presenting a lone assignment of error —
whether or not respondent court erred in applying
the doctrine of "pari delicto."
We find the petition devoid of merit.
Unquestionably, the parties herein operated under
an arrangement, commonly known as the "kabit
system" whereby a person who has been granted a
certificate of public convenience allows another
person who owns motor vehicles to operate under
such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the
government. Abuse of this privilege by the grantees
thereof cannot be countenanced. The "kabit system"
has been Identified as one of the root causes of the
prevalence of graft and corruption in the
government transportation offices.
Although not outrightly penalized as a criminal
offense, the kabit system is invariably recognized as
being contrary to public policy and, therefore, void
and in existent under Article 1409 of the Civil Code.
It is a fundamental principle that the court will not
aid either party to enforce an illegal contract, but will
leave both where it finds then. Upon this premise it
would be error to accord the parties relief from their
predicament. Article 1412 of the Civil Code denies
them such aid. It provides:
Art. 1412. If the act in which the
unlawful or forbidden cause
consists does not constitute a
criminal offense, the following
rules shall be observed:
1. When the fault is on the part of
both contracting parties, neither
may recover that he has given by
virtue of the contract, or demand,
the performance of the other's
undertaking.
The defect of in exi
stence of a contract is permanent and cannot be
cured by ratification or by prescription. The mere
lapse of time cannot give efficacy to contracts that
are null and void.
WHEREFORE, the petition is hereby dismissed for
lack of merit. The assailed decision of the
Intermediate Appellate Court (now the Court of
Appeals) is AFFIRMED. No costs.
SO ORDERED.
Lita Enterprises vs. IAC Case Digest
Lita Enterprises vs.
Intermediate Appellate Court
(129 SCRA 464)
Facts: Spouses Nicasio Ocampo and Francisca
Garcia (private respondents) purchased in
installment from the Delta Motor Sales
Corporation five (5) Toyota Corona Standard
cars to be used as taxi. Since they had no
franchise to operate taxicabs, they contracted
with petitioner Lita Enterprise, Inc., through its
representative Manuel Concordia, for the use of
the latter’s certificate of public convenience for a
consideration of P1, 000.00 and a monthly rental
of P200.00/taxicab unit. For the agreement to
take effect, the cars were registered in the name
of Lita Enterprises, Inc. The possession,
however, remains with spouses Ocampo and
Garcia who operated and maintained the same
under Acme Taxi, petitioner’s trade name.
A year later, one of the taxicabs, driven by their
employee, Emeterio Martin, collided with a
motorcycle. Unfortunately the driver of the
motorcycle, Florante Galvez died from the
injuries it sustained.
Criminal case was filed against Emeterio Martin,
while a civil case was filed by the heir of the
victim against Lita Enterprises. In the decision of
the lower court Lita Enterprises was held liable
for damages for the amount of P25, 000.00 and
P7, 000.00 for attorney’s fees.
A writ of execution for the decision followed, 2 of
the cars of the respondent’s spouses were
levied and were sold to a public auction.
On March 1973, respondent Ocampo decided to
register his taxicabs in his own name. The
manager of petitioner refused to give him the
registration papers. Thus, making spouses file a
complaint against petitioner. In the decision, Lita
Enterprise was ordered to return the three
certificate of registration not levied in the prior
case.
Petitioner now prays that private respondent be
held liable to pay the amount they have given to
the heir of Galvez.
Issue: Whether or not petitioner can recover
from private respondent, knowing they are in an
arrangement known as “kabit system”.
Held: “Kabit system” is defined as, when a
person who has been granted a certificate of
convenience allows another person who owns a
motor vehicle to operate under such franchise
for a fee. This system is not penalized as a
criminal offense but is recognized as one that is
against public policy; therefore it is void and
inexistent.
It is fundamental that the court will not aid either
of the party to enforce an illegal contract, but will
leave them both where it finds them. Upon this
premise, it was flagrant error on the part of both
trial and appellate courts to have accorded the
parties relief from their predicament. Specifically
Article 1412 states that:
“If the act in which the unlawful or forbidden
cause consists does not constitute a criminal
offense, the following rules shall be observed:
“when the fault, is on the part of both contracting
parties, neither may recover what he has given
by virtue of the contract, or demand the
performance of the other’s undertaking.”
The principle of in pari delicto is evident in this
case. “the proposition is universal that no action
arises, in equity or at law, from an illegal
contract; no suit can be maintained for its
specific performance, or to recover the property
agreed to sold or delivered, or damages for its
property agreed to be sold or delivered, or
damages for its violation.” The parties in this
case are in pari delicto, therefore no affirmative
relief can be granted to them.
Teja Marketing v. IAC Case Digest
Teja Marketing v. Intermediate Appellate Court
(148 SCRA 347)
Facts: Pedro Nale bought from Teja Marketing a
motorcycle with complete accessories and a sidecar.
A chattel mortgage was constituted as a security for
the payment of the balance of the purchase price.
The records of the Land Transportation Commission
show that the motorcycle sold to the defendant was
first mortgaged to the Teja Marketing by Angel
Jaucian though the Teja Marketing and Angel Jaucian
are one and the same, because it was made to
appear that way only as the defendant had no
franchise of his own and he attached the unit to the
plaintiff's MCH Line. The agreement also of the
parties here was for the plaintiff to undertake the
yearly registration of the motorcycle with the Land
Transportation Commission. The plaintiff, however
failed to register the motorcycle on that year on the
ground that the defendant failed to comply with
some requirements such as the payment of the
insurance premiums and the bringing of the
motorcycle to the LTC for stenciling, the plaintiff said
that the defendant was hiding the motorcycle from
him. Lastly, the plaintiff also explained that though
the ownership of the motorcycle was already
transferred to the defendant, the vehicle was still
mortgaged with the consent of the defendant to the
Rural Bank of Camaligan for the reason that all
motorcycle purchased from the plaintiff on credit
was rediscounted with the bank.
Teja Marketing made demands for the payment of
the motorcycle but just the same Nale failed to
comply, thus forcing Teja Marketing to consult a
lawyer and file an action for damage before the City
Court of Naga in the amount of P546.21 for
attorney's fees and P100.00 for expenses of
litigation. Teja Marketing also claimed that as of 20
February 1978, the total account of Nale was already
P2, 731, 05 as shown in a statement of account;
includes not only the balance of P1, 700.00 but an
additional 12% interest per annum on the said
balance from 26 January 1976 to 27 February 1978; a
2% service charge; and P546.21 representing
attorney's fees. On his part, Nale did not dispute the
sale and the outstanding balance of P1,700.00 still
payable to Teja Marketing; but contends that
because of this failure of Teja Marketing to comply
with his obligation to register the motorcycle, Nale
suffered damages when he failed to claim any
insurance indemnity which would amount to no less
than P15,000.00 for the more than 2 times that the
motorcycle figured in accidents aside from the loss of
the daily income of P15.00 as boundary fee
beginning October 1976 when the motorcycle was
impounded by the LTC for not being registered. The
City Court rendered judgment in favor of Teja
Marketing, dismissing the counterclaim, and ordered
Nale to pay Teja Marketing On appeal to the Court of
First Instance of Camarines Sur, the decision was
affirmed in toto. Nale filed a petition for review with
the Intermediate Appellate Court. On 18 July 1983,
the appellate court set aside the decision under
review on the basis of doctrine of "pari delicto," and
accordingly, dismissed the complaint of Teja
Marketing, as well as the counterclaim of Nale;
without pronouncements as to costs. Hence, the
petition for review was filed by Teja Marketing
and/or Angel Jaucian.
Issue: Whether the defendant can recover damages
against the plaintiff?
Held: Unquestionably, the parties herein operated
under an arrangement, commonly known as the
"kabit system" whereby a person who has been
granted a certificate of public convenience allows
another person who owns motor vehicles to operate
under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the
government. Abuse of this privilege by the grantees
thereof cannot be countenanced.
The "kabit system" has been identified as one of the
root causes of the prevalence of graft and corruption
in the government transportation offices. Although
not out rightly penalized as a criminal offense, the
kabit system is invariably recognized as being
contrary to public policy and, therefore, void and in
existent under Article 1409 of the Civil Code. It is a
fundamental principle that the court will not aid
either party to enforce an illegal contract, but will
leave both where it finds then. Upon this premise it
would be error to accord the parties relief from their
predicament.
Maersk Line vs. Court of Appeals
Facts:
Petitioner Maersk Line is engaged in the
transportation of goods by sea, doing business in the
Philippines through its general agent Compania
General de Tabacos de Filipinas. Private respondent
Efren Castillo, on the other hand, is the proprietor of
Ethegal Laboratories, a firm engaged in the
manufacture of pharamaceutical products. Private
respondent ordered from Eli Lilly Inc. of Puerto Rico
through its (Eli Lilly, Inc.’s) agent in the Philippines,
Elanco Products, 600,000 empty gelatin capsules for
the manufacture of his pharmaceutical products. The
capsules each valued at US $1,668.71. through a
Memorandmun of Shipment, the shipper Eli Lilly, Inc.
advised private respondent as consignee that the
items were already shipped on board MV “Anders
Maerskline” to the Philippines via Oakland,
California. In said Memorandum, shipper Eli Lilly, Inc.
specified the date of arrival to be april 3, 1977. For
reasons unkown, said cargo of capsules were
mishipped and diverted to Richmond, Virginia, USA
and then transported back Oakland, California. The
goods finally arrived in the Philippines on June 10,
1977 or after two (2) months from the date specified
in the memorandum. As a consequence, private
respondent as consignee refused to take delivery of
the goods on account of its failure to arrive on time.
Private respondent alleging gross negligence and
undue delay in the delivery of the goods, filed an
action before the court a quo for rescission of
contract with damages against petitioner and Eli Lilly,
Inc. as defendants.
ISSUE:
Whether or not respondent Castillo is entitled to
damages resulting from delay in the delivery of the
shipment in the absence in the bill of lading of a
stipulation on the period of delivery.
RULING:
Yes. While it is true that common carriers are not
obligated by law to carry and to deliver merchandise,
and persons are not vested with the right to prompt
delivery, unless such common carriers previously
assume the obligation to deliver at a given date or
time, delivery of shipment or cargo should at least be
made within a reasonable time. An examination of
the subject bill of lading shows that the subject
shipment was estimated to arrive in Manila on april
3, 1977.
While there was no special contract entered into by
the parties indicating the date of arrival of the
subject shipment, petitioner nevertheless, was very
well aware of the specific date when the goods were
expected to arrive as indicated in the bill of lading
itself. In this regard, there arises no need to execute
another contract for the purpose as it would be a
mere superfluity.
In the case before us, we find delay in the delivery of
the goods spanning a period of two (2) months and
seven days falls was beyond the realm of
reasonableness.
Saludo Jr vs. CA

Shipper - Pomierski and Son Funeral Home
 were two bodies at the terminal, and somehow they
Consignee
– *The following day October 28, 1976, the shipment
Maria Saludo
 Francisco from Mexico on board American Airlines.
Carrier - Transworld Airlines (TWA) Chicago
– at1945H or 7:45 p.m. This casket bearing the
San Francisco, and Philippine Airlines (PAL)-
SanFrancisco
– resealed by Crispin F. Patagas for shipment to the
Manila

*After the death of petitioner's mother, Crispina
Galdo Saludo, in Chicago Illinois, Pomierski and
SonFuneral Home of Chicago, made the necessary
preparations and arrangements for the shipment, of
the remains from Chicago to the Philippines.
*Philippine Vice Consul in Chicago, Illinois,
Bienvenido M.Llaneta, at the Pomierski & Son
Funeral Home, sealed the shipping case containing a
hermetically sealed casket that is airtight and
waterproof wherein was contained the remains of
Crispina SaludoGaldo).
*On the same date, October 26, 1976, Pomierski
brought the remains to C.M.A.S.
(ContinentalMortuary Air Services) at the airport
(Chicago) which made the necessary arrangements
such as flights,transfers, etc.;
*C.M.A.S. (is a national service used by undertakers
to throughout the nation (U.S.A.).C.M.A.S.) booked
the shipment with PAL thru the carrier's agent Air
Care International, with PomierskiF.H. as the shipper
and Mario (Maria) Saludo as the consignee.
*The requested routing was from Chicago to San
Francisco on board TWA Flight 131 of October 27,
1976 and from San Francisco to Manila on board PAL
Flight No. 107 of the same date, and from Manila to
Cebu on board PAL Flight149 of October 29, 1976.
* Maria Saludo upon arriving at San Francisco
Airport, she then called Pomierski that her mother's
remains were not at the West Coast terminal,
and Pomierski immediately called C.M.A.S., which in
a matter of 10 minutes informed him that the
remains were on a plane toMexico City, that there
were switched.
or remains of Crispina Saludo arrived (in) San
*This shipment was transferred to or received by PAL
remains of Crispina Saludo,which was mistakenly
sent to Mexico and was opened (there), was
Philippines.
*The shipment was immediately loaded on PAL flight
forManila that same evening and arrived (in) Manila
on October 30, 1976, a day after its expected
arrivalon October 29, 1976.
*Aggrieved by the incident, the petitioners instituted
an action against respondents and were asked to pay
for damages.

Petitioner allege that private respondents received
the casketed remains of petitioners' mother on
October 26, 1976 and from said date, private
respondents were charged with the responsibility to
exercise extraordinary diligence so much so that for
the alleged switching of the caskets on October 27,
1976, or one day after private respondents received
the cargo, the latter must necessarily be liable.

RTC - absolved the two respondent airlines
companies of liability.

CA - affirmed the decision of the lower court
in toto, and in a subsequent resolution, denied
hereinpetitioners' motion for reconsideration for lack
of merit.
ISSUE
W/N the delay in the delivery of the casketed
remains of petitioners' mother was due to the fault
of
respondent airline companies,
HELD:
NO. A bill of lading is a written
acknowledgment of the receipt of the goods and
an agreement to transport and deliver them at a
specified place to a person named or on his order.
According to foreign and local jurisprudence, "the
issuance of a bill of lading carries the presumption
that the goods were delivered to the carrier issuing
the bill, for immediate shipment, and it is nowhere
questioned that a bill of lading is prima facie
evidence of the receipt of the goods by the carrier. . .
. In the absence of convincing testimony establishing
mistake, recitals in the bill of lading showing that the
carrier received the goods for shipment on as
pecified date controls. However, except as may be
prohibited by law, there is nothing to prevent an
inverse order of events, that is, the execution of the
bill of lading even prior to actual possession and
control by the carrier of the cargo to be transported.
There is no law which requires that the delivery of
the goods for carriage and the issuance of the
covering bill of lading must coincide in point of time
or, for that matter, that the former should precede
the latter.
As between the shipper and the carrier, when no
goods have been delivered for shipment no recitals in the bill
can estop the carrier from showing the true facts . . . Between
the consignor of goods and receiving carrier, recitals in a
bill of lading as to the goods shipped raise only a
rebuttable presumption that such goods were
delivered for shipment. As between the consignor and a
receiving carrier, the fact must outweigh the recital."
In the case at bar, it was on October 26, 1976 the
cargo containing the casketed remains of
CrispinaSaludo was booked for PAL Flight Number
PR-107 leaving San Francisco for Manila on October
27, 1976, PALAirway Bill No. 079-01180454 was
issued, not as evidence of receipt of delivery of the
cargo on October 26,1976, but merely as a
confirmation of the booking thus made for the San
Francisco-Manila flight scheduled on October 27,
1976. Actually, it was not until October 28, 1976 that
PAL received physical delivery of the body at San
Francisco. Explicit is the rule under Article 1736 of
the Civil Code that the extraordinary responsibility of
the common carrier begins from the time the goods
are delivered to the carrier. This responsibility
remains in full force and effect even when they are
temporarily unloaded or stored in transit, unless the
shipper or owner exercises the right of stoppage
in transit and terminates only after the lapse of a
reasonable time for the acceptance, of the goods by
the consignee or such other person entitled to
receive them. And, there is delivery to the carrier
when the goods are ready for and have been placed
in the exclusive possession, custody and control of
the carrier for the purpose of their immediate
transportation and the carrier has accepted them.
Where such a delivery has thus been accepted by the
carrier, the liability of the common carrier
commences
eo instanti.
As already demonstrated, the facts in the case at bar
belie the averment that there was delivery of the
cargo to the carrier on October 26, 1976. Rather, as
earlier explained, the body intended to be shipped as
agreed upon was really placed in the possession and
control of PAL on October 28, 1976 and it was from
that date that private respondents became
responsible for the agreed cargo under their
undertakings in PAL Airway Bill No. 079-01180454.
Consequently, for the switching of caskets prior
thereto which was not caused by them, and
subsequent events caused thereby, private
respondents cannot be held liable.
12. Trans-Asia Shipping Lines vs. CA
(GR 118126, 4 March 1996)
FACTS:
Respondent Atty. Renato Arroyo, a public attorney,
bought a ticket from herein petitioner for thevoyage
of M/V Asia Thailand vessel to Cagayan de Oro City
from Cebu City on November 12, 1991. At
around5:30 in the evening of November 12, 1991,
respondent boarded the M/V Asia Thailand vessel
during which henoticed that some repairs were
being undertaken on the engine of the vessel. The
vessel departed at around11:00 in the evening with
only one (1) engine running. After an hour of slow
voyage, the vessel stopped nearKawit Island and
dropped its anchor thereat. After half an hour of
stillness, some passengers demanded thatthey
should be allowed to return to Cebu City for they
were no longer willing to continue their voyage
toCagayan de Oro City. The captain acceded to their
request and thus the vessel headed back to Cebu
City. InCebu City, plaintiff together with the other
passengers who requested to be brought back to
Cebu City, wereallowed to disembark. Thereafter, the
vessel proceeded to Cagayan de Oro City. Petitioner,
the next day,boarded the M/V Asia Japan for its
voyage to Cagayan de Oro City, likewise a vessel of
defendant. On accountof this failure of defendant to
transport him to the place of destination on
November 12, 1991, respondentArroyo filed before
the trial c
ourt “an action for damage arising from bad faith,
breach of contract and fromtort,” against petitioner.
The trial court ruled only for breach of contract. The
CA reversed and set aside said
decision on appeal.

ISSUE: Whether or not the petitioner Trans-Asia was

negligent?

HELD: Yes. Before commencing the contracted

voyage, the petitioner undertook some repairs on
the cylinder
head of one of the vessel’s engines. But even before
it could finish these repairs, it allowed the vessel to
leave
the port of origin on only one functioning engine,
instead of two. Moreover, even the lone functioning
enginewas not in perfect condition as sometime
after it had run its course, it conked out. This caused
the vessel tostop and remain adrift at sea, thus in
order to prevent the ship from capsizing, it had to
drop anchor. Plainly,the vessel was unseaworthy
even before the voyage began. For a vessel to be
seaworthy, it must beadequately equipped for the
voyage and manned with a sufficient number
of competent officers and crew.[21]The failure of
a common carrier to maintain in seaworthy condition
its vessel involved in a contract of carriageis a clear
breach of is duty prescribed in Article 1755 of the
Civil Code