G.R. No. 186312 June 29, 2010 SPOUSES DANTE CRUZ and Issue:Whether or not respondent is a common carrier.

LEONORA CRUZ, Petitioners, vs. SUN HOLIDAYS, INC.,

Held:The Civil Code defines "common carriers" in the following terms:
Respondent.
Article 1732. Common carriers are persons, corporations, firms or
Facts: Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint associations engaged in the business of carrying or transporting passengers
on January 25, 2001 against Sun Holidays, Inc. (respondent) with the or goods or both, by land, water, or air for compensation, offering their
Regional Trial Court (RTC) of Pasig City for damages arising from the services to the public. The above article makes no distinction between one
death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on whose principal business activity is the carrying of persons or goods or
September 11, 2000 on board the boat M/B Coco Beach III that capsized both, and one who does such carrying only as an ancillary activity (in local
en route to Batangas from Puerto Galera, Oriental Mindoro where the idiom, as "a sideline"). Article 1732 also carefully avoids making any
couple had stayed at Coco Beach Island Resort (Resort) owned and distinction between a person or enterprise offering transportation service
operated by respondent. on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732
On September 11, 2000, as it was still windy, Matute and 25 other Resort
distinguish between a carrier offering its services to the "general public,"
guests including petitioners son and his wife trekked to the other side of
i.e., the general community or population, and one who offers services or
the Coco Beach mountain that was sheltered from the wind where they
solicits business only from a narrow segment of the general population.
boarded M/B Coco Beach III, which was to ferry them to Batangas.
We think that Article 1733 deliberately refrained from making such
Shortly after the boat sailed, it started to rain. As it moved farther away
distinctions. Indeed, respondent is a common carrier. Its ferry services are
from Puerto Galera and into the open seas, the rain and wind got stronger,
so intertwined with its main business as to be properly considered ancillary
causing the boat to tilt from side to side and the captain to step forward to
thereto. The constancy of respondents ferry services in its resort
the front, leaving the wheel to one of the crew members. The waves got
operations is underscored by its having its own Coco Beach boats. And the
more unwieldy. After getting hit by two big waves which came one after
tour packages it offers, which include the ferry services, may be availed of
the other, M/B Coco Beach III capsized putting all passengers underwater.
by anyone who can afford to pay the same. These services are thus
The passengers, who had put on their life jackets, struggled to get out of
available to the public. That respondent does not charge a separate fee or
the boat. Upon seeing the captain, Matute and the other passengers who
fare for its ferry services is of no moment. It would be imprudent to
reached the surface asked him what they could do to save the people who
suppose that it provides said services at a loss. The Court is aware of the
were still trapped under the boat. The captain replied "Iligtas niyo na lang
practice of beach resort operators offering tour packages to factor the
ang sarili niyo" (Just save yourselves). Help came after about 45 minutes
transportation fee in arriving at the tour package price. That guests who
when two boats owned by Asia Divers in Sabang, Puerto Galera passed by
opt not to avail of respondents ferry services pay the same amount is
the capsized M/B Coco Beach III. Boarded on those two boats were 22
likewise inconsequential. These guests may only be deemed to have
persons, consisting of 18 passengers and four crew members, who were
overpaid
brought to Pisa Island. Eight passengers, including petitioners son and his
wife, died during the incident.

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CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
AF Sanchez Brokerage vs CA and FGU Insurance (Dec 21, 2004) improperly packed, since AF Sanchez knew of the condition and yet it
accepted the shipment without protest or reservation, the defense is
Facts:
deemed waived.
AF Sanchez is engaged in a broker business wherein its main job is to
Foul Bill of Lading reservation or protest on a shipment or goods
calculate customs duty, fees and charges as well as storage fees for the
improperly packed.
cargoes. Part also of the services being given by AF Sanchez is the
delivery of the shipment to the consignee upon the instruction of the
shipper.
Wyett engaged the services of AF Sanchez where the latter delivered the
shipment to Hizon Laboratories upon instruction of Wyett. Upon
inspection, it was found out that at least 44 cartons containing
contraceptives were in bad condition. Wyett claimed insurance from FGU.
FGU exercising its right of subrogation claims damages against AF
Sanchez who delivered the damaged goods. AF Sanchez contended that it
is not a common carrier but a brokerage firm.
Issue:
Is AF Sanchez a common carrier?
Held:
SC held that Art 1732 of the Civil Code in defining common carrier does
not distinguish whether the activity is undertaken as a principal activity or
merely as an ancillary activity. In this case, while it is true that AF Sanchez
is principally engaged as a broker, it cannot be denied from the evidence
presented that part of the services it offers to its customers is the delivery
of the goods to their respective consignees.
Addendum:
AF Sanchez claimed that the proximate cause of the damage is improper
packing. Under the CC, improper packing of the goods is an exonerating
circumstance. But in this case, the SC held that though the goods were

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Topic: Registered Owner Rule and Kabit System
Crisostomo v. CA, 409 SCRA 528 (2003)
Problem:
Estela L. Crisostomo contracted the services of Caravan Travel and Tours
International, Inc. to arrange and facilitate her booking, ticketing and
accommodation in a tour dubbed "Jewels of Europe". The package tour
cost her P74, 322.70. She was given a 5% discount on the amount, which
included airfare, and the booking fee was also waived because petitioners
niece, Meriam Menor, was formers companys ticketing manager.
Menor went to her aunts residence on a Wednesday to deliver petitioners
travel documents and plane tickets. Estela, in turn, gave Menor the full
payment for the package tour. Menor then told her to be at the Ninoy
Aquino International Airport (NAIA) on Saturday, two hours before her
flight on board British Airways.
Without checking her travel documents, Estela went to NAIA on Saturday,
to take the flight for the first leg of her journey from Manila to Hongkong.
She discovered that the flight she was supposed to take had already
departed the previous day. She learned that her plane ticket was for the
flight scheduled on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon Estela to take another tour the
"British Pageant, which cost P20, 881.00. She gave caravan travel and
tours P7, 980.00 as partial payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61, 421.70, representing the difference between the
sum she paid for "Jewels of Europe" and the amount she owed respondent
for the "British Pageant" tour. Despite several demands, respondent
company refused to reimburse the amount, contending that the same was
non-refundable.
Estela filed a complaint against Caravan travel and Tours for breach of
contract of carriage and damages.
CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
A) Will the action prosper?
B) Will she be entitled to damages?
Answer:
No, for there was no contract of carriage.
By definition, a contract of carriage or transportation is one whereby a
certain person or association of persons obligate themselves to transport
persons, things, or news from one place to another for a fixed price.
From the above definition, Caravan Travel and Tours is not an entity
engaged in the business of transporting either passengers or goods and is
therefore, neither a private nor a common carrier. Caravan Travel and
Tours did not undertake to transport Estela from one place to another since
its covenant with its customers is simply to make travel arrangements in
their behalf. Caravan travel and tours services as a travel agency include
procuring tickets and facilitating travel permits or visas as well as booking
customers for tours.
While Estela concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a
common carrier. At most, Caravan Travel and Tours acted merely as an
agent of the airline, with whom the former ultimately contracted for her
carriage to Europe.
B) No.
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The negligence of the obligor in the performance of the obligation renders
him liable for damages for the resulting loss suffered by the obligee. Fault
or negligence of the obligor consists in his failure to exercise due care and
prudence in the performance of the obligation as the nature of the
obligation so demands.
In the case at bar, Caravan Travel and Tours exercised due diligence in
performing its obligations under the contract and followed standard
procedure in rendering its services to Estela. The plane ticket issued to
petitioner clearly reflected the departure date and time, contrary to Estelas
contention. The travel documents, consisting of the tour itinerary, vouchers
and instructions, were likewise delivered to her two days prior to the trip.
The Caravan Travel and Tours also properly booked Estela for the tour,
prepared the necessary documents and procured the plane tickets. It
arranged Estelas hotel accommodation as well as food, land transfers and
sightseeing excursions, in accordance with its avowed undertaking.
From the foregoing, it is clear that the Caravan Travel and Tours
performed its prestation under the contract as well as everything else that
was essential to book Estela for the tour.
Hence, Estela cannot recover and must bear her own damage.

De Guzman v. CA
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CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
Facts: Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who
Respondent Ernesto Cendana was a junk dealer. He buys scrap materials
offers services or solicits business only from a narrow segment of the
and brings those that he gathered to Manila for resale using 2 six-wheeler
general population. It appears to the Court that private respondent is
trucks. On the return trip to Pangasinan, respondent would load his vehicle
properly characterized as a common carrier even though he merely "back-
with cargo which various merchants wanted delivered, charging fee lower
hauled" goods for other merchants from Manila to Pangasinan, although
than the commercial rates. Sometime in November 1970, petitioner Pedro
such backhauling was done on a periodic or occasional rather than regular
de Guzman contracted with respondent for the delivery of 750 cartons of
or scheduled manner, and even though private respondent's principal
Liberty Milk. On December 1, 1970, respondent loaded the cargo. Only
occupation was not the carriage of goods for others. There is no dispute
150 boxes were delivered to petitioner because the truck carrying the
that private respondent charged his customers a fee for hauling their
boxes was hijacked along the way. Petitioner commenced an action
goods; that fee frequently fell below commercial freight rates is not
claiming the value of the lost merchandise. Petitioner argues that
relevant here. A certificate of public convenience is not a requisite for the
respondent, being a common carrier, is bound to exercise extraordinary
incurring of liability under the Civil Code provisions governing common
diligence, which it failed to do. Private respondent denied that he was a
carriers.
common carrier, and so he could not be held liable for force majeure. The
trial court ruled against the respondent, but such was reversed by the Court (2) Article 1734 establishes the general rule that common carriers are
of Appeals. responsible for the loss, destruction or deterioration of the goods which
they carry, "unless the same is due to any of the following causes only:
a. Flood, storm, earthquake, lightning, or other natural disaster or calamity;
Issues:
b. Act of the public enemy in war, whether international or civil;
(1) Whether or not private respondent is a common carrier
c. Act or omission of the shipper or owner of the goods;
(2) Whether private respondent is liable for the loss of the goods
d. The character of the goods or defects in the packing or in the containers;
and
Held:
e. Order or act of competent public authority."
(1) Article 1732 makes no distinction between one whose principal
The hijacking of the carrier's truck - does not fall within any of the five (5)
business activity is the carrying of persons or goods or both, and one who
categories of exempting causes listed in Article 1734. Private respondent
does such carrying only as an ancillary activity. Article 1732 also carefully
as common carrier is presumed to have been at fault or to have acted
avoids making any distinction between a person or enterprise offering
negligently. This presumption, however, may be overthrown by proof of
transportation service on a regular or scheduled basis and one offering
extraordinary diligence on the part of private respondent. We believe and
such service on an occasional, episodic or unscheduled basis. Neither does
so hold that the limits of the duty of extraordinary diligence in the
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CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat,
violence or force." we hold that the occurrence of the loss must reasonably
be regarded as quite beyond the control of the common carrier and
properly regarded as a fortuitous event. It is necessary to recall that even
common carriers are not made absolute insurers against all risks of travel
and of transport of goods, and are not held liable for acts or events which
cannot be foreseen or are inevitable, provided that they shall have
complied with the rigorous standard of extraordinary diligence.

First Philippine Industrial Corp. vs. CA

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CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
Facts:
Petitioner is a grantee of a pipeline concession under Republic Act No.
387. Sometime in January 1995, petitioner applied for mayors permit in
Batangas. However, the Treasurer required petitioner to pay a local tax
based on gross receipts amounting to P956,076.04. In order not to hamper
its operations, petitioner paid the taxes for the first quarter of 1993
amounting to P239,019.01 under protest. On January 20, 1994, petitioner
filed a letter-protest to the City Treasurer, claiming that it is exempt from
local tax since it is engaged in transportation business. The respondent
City Treasurer denied the protest, thus, petitioner filed a complaint before
the Regional Trial Court of Batangas for tax refund. Respondents assert
that pipelines are not included in the term common carrier which refers
solely to ordinary carriers or motor vehicles. The trial court dismissed the
complaint, and such was affirmed by the Court of Appeals.
Issue:
Whether a pipeline business is included in the term common carrier so
as to entitle the petitioner to the exemption
(1) He must be engaged in the business of carrying goods for others as a
public employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a
casual occupation;
(2) He must undertake to carry goods of the kind to which his business is
confined;
(3) He must undertake to carry by the method by which his business is
conducted and over his established roads; and
(4) The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt that
petitioner is a common carrier. It is engaged in the business of transporting
or carrying goods, i.e. petroleum products, for hire as a public
employment. It undertakes to carry for all persons indifferently, that is, to
all persons who choose to employ its services, and transports the goods by
land and for compensation. The fact that petitioner has a limited clientele
does not exclude it from the definition of a common carrier.

Held:
Article 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
Erezo v. Jepte Facts:

The test for determining whether a party is a common carrier of goods is:
CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
Defendant-appellant is the registered owner of a six by six truck bearing.
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
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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. 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 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. Issue: WoN Jepte should be liable to Erezo for the
injuries occasioned to the latter because of the negligence of the driver
even if he was no longer the owner of the vehicle at the time of the
damage (because he had previously sold it to another) Held: YES.
The registered owner, the defendant-appellant herein, is primarily
responsible for the damage caused to the vehicle of the plaintiff-appellee,
CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
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
The Revised Motor Vehicle Law provides that no vehicle may be used or
operated upon any public highway unless the same is properly registered.
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.
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, but to permit
the use and operation of the vehicle upon any public
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.
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.
Lim v. Court of Appeals
Facts:
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Private respondent herein purchased an Isuzu passenger jeepney from Second, the case arose from the negligence of another vehicle in using the
Gomercino Vallarta, a holder of a certificate of public convenience for the public road to whom no representation, or misrepresentation, as regards
operation of a public utility vehicle. He continued to operate the public the ownership and operation of the passenger jeepney was made and to
transport business without transferring the registration of the vehicle to his whom no such representation, or misrepresentation, was necessary. Thus it
name. Thus, the original owner remained to be the registered owner and cannot be said that private respondent Gonzales and the registered owner
operator of the vehicle. Unfortunately, the vehicle got involved in a road of the jeepney were in estoppel for leading the public to believe that the
mishap which caused it severe damage. The ten-wheeler-truck which jeepney belonged to the registered owner.
caused the accident was owned by petitioner Lim and was driven by co-
Third, the riding public was not bothered nor inconvenienced at the very
petitioner Gunnaban. Gunnaban admitted responsibility for the accident,
least by the illegal arrangement. On the contrary, it was private respondent
so that petitioner Lim shouldered the costs of hospitalization of those
himself who had been wronged and was seeking compensation for the
wounded, compensation for the heirs of the deceased passenger and the
damage done to him. Certainly, it would be the height of inequity to deny
restoration of the other vehicle involved. He also negotiated for the repair
him his right. Hence, the private respondent has the right to proceed
of the private respondent's jeepney but the latter refused and demanded for
against petitioners for the damage caused on his passenger jeepney as well
its replacement. Hence, private respondent filed a complaint for damages
as on his business.
against petitioners. Meanwhile, the jeepney was left by the roadside to
corrode and decay. The trial court decided in favor of private respondent
and awarded him his claim. On appeal, the Court of Appeals affirmed the
decision of the trial court. Hence, petitioner filed this petition.
Issue: WoN the new owner of a passenger jeepney who continued to
operate the same under the so-called kabit system and in the course thereof
met an accident has the legal personality to bring the action for damages
against the erring vehicle.
Held: YES. According to the Court, the thrust of the law in enjoining the
kabit system is not 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. In the present case, it is 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 CASE DIGEST (Transportation Law): Lita Enterprises vs. Intermediate
liable for damages. Appellate Court

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CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
LITA ENTERPRISES, INC., vs.INTERMEDIATE APPELLATE
COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA.
[G.R. No. L-64693 April 27, 1984]
FACTS:
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia,
herein private respondents, purchased in installment from the Delta Motor
Sales Corporation five (5) Toyota Corona Standard cars to be used as
taxicabs. Since they had no franchise to operate taxicabs, they contracted
with petitioner Lita Enterprises, Inc., through its representative, Manuel
Concordia, for the use of the latter's certificate of public convenience in
consideration of an initial payment of P1,000.00 and a monthly rental of
P200.00 per taxicab unit. To effectuate Id agreement, the aforesaid cars
were registered in the name of petitioner Lita Enterprises, Inc, Possession,
however, remained with tile spouses Ocampo who operated and
maintained the same under the name Acme Taxi, petitioner's trade name.
About a year later one of said taxicabs driven by their employee, Emeterio
Martin, collided with a motorcycle whose driver, one Florante Galvez,
died from the head injuries sustained therefrom. A criminal case was
eventually filed against the driver Emeterio Martin, while a civil case for
damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the
victim, against Lita Enterprises, Inc., as registered owner of the taxicab in
the latter case. Petitioner Lita Enterprises, Inc. was adjudged liable for
damages by the CFI.
This decision having become final, a writ of execution was issued. Two of
the vehicles of respondent spouses were levied upon and sold at public
auction.
Thereafter, Nicasio Ocampo decided to register his taxicabs in his name.
He requested the manager of petitioner Lita Enterprises, Inc. to turn over
the registration papers to him, but the latter allegedly refused. Hence, he
and his wife filed a complaint against Lita Enterprises, Inc., Mrs. de
Galvez and the Sheriff of Manila for reconveyance of motor vehicles with
CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
damages.
ISSUE: Whether or not petitioner has a cause of action against defendants.
HELD:
No.
Unquestionably, the parties herein operated under an arrangement,
commonly known as the "kabit system", whereby a person who has been
granted a certificate of convenience allows another person who owns
motors 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. In the words of Chief Justice Makalintal, "this is a pernicious
system that cannot be too severely condemned. It constitutes an imposition
upon the goo faith of the government.
Although not outrightly penalized as a criminal offense, the "kabit system"
is invariably recognized as being contrary to public policy and, therefore,
void and inexistent 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 them both where it finds them. Upon this
premise, it was flagrant error on the part of both the trial and appellate
courts to have accorded 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 what he has given by virtue of the contract, or demand the
performance of the other's undertaking.
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Having entered into an illegal contract, neither can seek relief from the
courts, and each must bear the consequences of his acts.

The defect of inexistence of a contract is permanent and incurable, and

cannot be cured by ratification or by prescription. As this Court said in
Eugenio v. Perdido, "the mere lapse of time cannot give efficacy to
contracts that are null void."

The principle of in pari delicto is well known not only in this jurisdiction
but also in the United States where common law prevails. Under American
jurisdiction, the doctrine is stated thus: "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 be sold or delivered, or damages for its property agreed to be sold or
delivered, or damages for its violation. The rule has sometimes been laid
down as though it was equally universal, that where the parties are in pari
delicto, no affirmative relief of any kind will be given to one against the
other." Although certain exceptions to the rule are provided by law, We see
no cogent reason why the full force of the rule should not be applied in the
instant case.

Teja Marketing v. IAC Case Digest

Teja Marketing v. Intermediate Appellate Court
(148 SCRA 347)

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CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System

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
CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
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.
VILLANUEVA vs. DOMINGO
12 | P a g e
FACTS
On 22 October 1991 at about 9:45 in the evening, following a green traffic
light, Priscilla Domingos silver Lancer car with Plate No. NDW 781 91
then driven by Leandro Luis R. Domingo was cruising along the middle
lane of South Superhighway at moderate speed from north to south.
Suddenly, a green Mitsubishi Lancer with plate No. PHK 201 91 driven
by Renato Dela Cruz Ocfemia darted from Vito Cruz Street towards the
South Superhighway directly into the path of NDW 781 91 thereby hitting
and bumping its left front portion. As a result of the impact, NDW 781 91
hit two (2) parked vehicles at the roadside, the second hitting another
parked car in front of it.
Per Traffic Accident Report prepared by Traffic Investigator Pfc.
Patrocinio N. Acido, Ocfemia was driving with expired license and
positive for alcoholic breath. Hence, Manila Assistant City Prosecutor
Oscar A. Pascua recommended the filing of information for reckless
imprudence resulting to damage to property and physical injuries.
The original complaint was amended twice: first, impleading Auto Palace
Car Exchange as commercial agent and/or buyer-seller and second,
impleading Albert Jaucian as principal defendant doing business under the
name and style of Auto Palace Car Exchange.
Except for Ocfemia, all the defendants filed separate answers to the
complaint. Nostradamus Villanueva claimed that he was no longer the
owner of the car at the time of the mishap because it was swapped with a
Pajero owned by Albert Jaucian/Auto Palace Car Exchange. For her part,
Linda Gonzales declared that her presence at the scene of the accident was
upon the request of the actual owner of the Mitsubishi Lancer (PHK 201
91) for whom she had been working as agent/seller. On the other hand,
Auto Palace Car Exchange represented by Albert Jaucian claimed that he
was not the registered owner of the car. Moreover, it could not be held
subsidiary liable as employer of Ocfemia because the latter was off-duty as
utility employee at the time of the incident. Neither was Ocfemia
performing a duty related to his employment.
CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
After trial, the trial court found petitioner liable and ordered him to pay
respondent actual, moral and exemplary damages plus appearance and
attorneys fees.
ISSUE
May the registered owner of a motor vehicle be held liable for damages
arising from a vehicular accident involving his motor vehicle while being
operated by the employee of its buyer without the latters consent and
knowledge? YES
RULING
We have consistently ruled that the registered owner of any vehicle is
directly and primarily responsible to the public and third persons while it
is being operated. The rationale behind such doctrine was explained way
back in 1957 in Erezo vs. Jepte.
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
his 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
13 | P a g e
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.
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 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 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.
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.
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.
Whether the driver is authorized or not by the actual owner is
irrelevant to determining the liability of the registered owner who the
law holds primarily and directly responsible for any accident, injury or
death caused by the operation of the vehicle in the streets and highways.
To require the driver of the vehicle to be authorized by the actual owner
before the registered owner can be held accountable is to defeat the very
purpose why motor vehicle legislations are enacted in the first place.

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 FEB Leasing and Finance Corporation (now BPI Leasing Corp.) vs.
registration in the Motor Vehicles Office to determine who is the owner. Spouses Sergio P. Baylon and Maritess Villena Baylon, et.al. [GR No.
The protection that the law aims to extend to him would become illusory 181398, June 29, 2011]
were the registered owner given the opportunity to escape liability by
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CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
Post under case digests, Commercial Law at Tuesday, January 26,
not registered with the Land Transportation Office, will not bindthird
2016 Posted by Schizophrenic Mind
persons aggrieved in an accident involving the vehicle.
FACTS: An Isuzu oil tanker, registered in the name of petitioner FEB
Leasing and Finance Corporation and leased to BG Hauler, Inc., was
running along Del Monte Avenue in Quezon City. While executing a left
turn upon reaching an intersection, the oil tanker hit Loretta Baylon,
daughter of respondent spouses Sergio and Maritess Baylon, who was then
crossing the Del Monte Avenue. Due to the strong impact, Loretta was
violently thrown away resulting to her death.

ISSUE: Whether or not FEB Leasing and Finance Corp. (now BPI
Leasing Corp.) should be held liable

RULING: Yes. In accordance with the law on compulsory motor vehicle

registration, with respect to the public and third persons,
the registered owner of a motor vehicle is directly and primarily
responsible for the consequence of its operation regardless of who the
actual vehicle owner might be. Well-settled is the rule that
the registered owner of the vehicle is liable for quasi-delicts resulting from
its use. Thus, even if the vehicle has already been sold, leased or
transferred to another person at the time the vehicle figured in an accident,
the registeredvehicle owner would still be liable for damages caused by SPS PERENA V SPS ZARATE
the accident. The sale, transfer or lease of the vehicle, which is

15 | P a g e
CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
In June 1996, Nicolas and Teresita Zarate contracted Teodoro and Nanette
Perea to transport their (Zarates) son, Aaron Zarate, to and from school.
The Pereas were owners of a van being used for private school transport.
At about 6:45am of August 22, 1996, the driver of the said private van,
Clemente Alfaro, while the children were on board including Aaron,
decided to take a short cut in order to avoid traffic. The usual short cut
was a railroad crossing of the Philippine National Railway (PNR).
Alfaro saw that the barandilla (the pole used to block vehicles crossing the
railway) was up which means it was okay to cross. He then tried to
overtake a bus. However, there was in fact an oncoming train but Alfaro
no longer saw the train as his view was already blocked by the bus he was
trying to overtake. The bus was able to cross unscathed but the vans rear
end was hit. During the collision, Aaron, was thrown off the van. His body
hit the railroad tracks and his head was severed. He was only 15 years old.
It turns out that Alfaro was not able to hear the train honking from 50
meters away before the collision because the vans stereo was playing
loudly.
The Zarates sued PNR and the Pereas (Alfaro became at-large). Their
cause of action against PNR was based on quasi-delict. Their cause of
action against the Pereas was based on breach of contract of common
carriage.
In their defense, the Pereas invoked that as private carriers they were not
negligent in selecting Alfaro as their driver as they made sure that he had a
drivers license and that he was not involved in any accident prior to his
being hired. In short, they observed the diligence of a good father in
selecting their employee.
CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
PNR also disclaimed liability as they insist that the railroad crossing they
placed there was not meant for railroad crossing (really, thats their
defense!).
The RTC ruled in favor of the Zarates. The Court of Appeals affirmed the
RTC. In the decision of the RTC and the CA, they awarded damages in
favor of the Zarates for the loss of earning capacity of their dead son.
The Pereas appealed. They argued that the award was improper as Aaron
was merely a high school student, hence, the award of such damages was
merely speculative. They cited the case of People vs Teehankee where the
Supreme Court did not award damages for the loss of earning capacity
despite the fact that the victim there was enrolled in a pilot school.
ISSUES: Whether or not the defense of due diligence of a good father by
the Pereas is untenable. Whether or not the award of damages for loss of
income is proper.
HELD: Yes, in both issues.
Defense of Due Diligence of a Good Father
This defense is not tenable in this case. The Pereas are common carriers.
They are not merely private carriers. (Prior to this case, the status of
private transport for school services or school buses is not well settled as
to whether or not they are private or common carriers but they were
generally regarded as private carriers). Private transport for schools are
common carriers. The Pereas, as the operators of a school bus service
were: (a) engaged in transporting passengers generally as a business, not
just as a casual occupation; (b) undertaking to carry passengers over
established roads by the method by which the business was conducted; and
(c) transporting students for a fee. Despite catering to a limited clientle,
16 | P a g e
the Pereas operated as a common carrier because they held themselves
out as a ready transportation indiscriminately to the students of a particular
school living within or near where they operated the service and for a fee.
Being a common carrier, what is required of the Pereas is not mere
diligence of a good father. What is specifically required from them by law
is extraordinary diligence a fact which they failed to prove in court.
Verily, their obligation as common carriers did not cease upon their
exercise of diligently choosing Alfaro as their employee.
(It is recommended that you read the full text, the Supreme Court made an
elaborate and extensive definition of common and private carriers as well
as their distinctions.)
Award of Damages for Aarons loss of earning capacity despite he being a
high school student at the time of his death
CASES IN TRANSPORTATION LAW (Atty. Janice Regoso)
Topic: Registered Owner Rule and Kabit System
The award is proper. Aaron was enrolled in a reputable school (Don
Bosco). He was of normal health and was an able-bodied person. Further,
the basis of the computation of his earning capacity was not on what he
would have become. It was based on the current minimum wage. The
minimum wage was validly used because with his circumstances at the
time of his death, it is most certain that had he lived, he would at least be a
minimum wage earner by the time he starts working. This is not being
speculative at all.
The Teehankee case was different because in that case, the reason why no
damages were awarded for loss of earning capacity was that the
defendants there were already assuming that the victim would indeed
become a pilot hence, that made the assumption speculative. But in the
case of Aaron, there was no speculation as to what he might be but
whatever hell become, it is certain that he will at the least be earning
minimum wage.
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