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[G.R. NO. 162267 : July 4, 2008]




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

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

Plaintiff-appellee paid the assured UCPB the amount of P244,500.00 representing the insurance coverage of the damaged car.

As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands were made by plaintiff-appellee for the payment of the aforesaid amounts. However, no payment was made. Thus, plaintiff-appellee filed the instant case on March 13, 1991.3

PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held liable for the collision, since the driver of the truck, Gonzaga, was not its employee, but that of its co-defendant Superior Gas & Equitable Co., Inc. (SUGECO).4 In fact, it was SUGECO, and not petitioner, that was the actual operator of the truck, pursuant to a Contract of Lease signed by petitioner and SUGECO.5 Petitioner, however, admitted that it was the owner of the truck in question.6

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

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


Aggrieved by the decision of the trial court, petitioner appealed to the CA.

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

WHEREFORE, the appealed decision dated April 15, 1999 is hereby AFFIRMED with modification that the award of attorney's fees is hereby deleted and the rate of interest shall be six percent (6%) per annum computed from the time of the filing of the complaint in the trial court until the finality of the judgment. If the adjudged principal and the interest remain unpaid thereafter, the interest rate shall be twelve percent (12%) per annum computed from the time the judgment becomes final and executory until it is fully satisfied.


Petitioner filed a Motion for Reconsideration which the CA denied in its Resolution dated February 18, 2004.

Hence, herein Petition for Review.

The issues raised by petitioner are purely legal:

Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict may be held liable, jointly and severally, with the driver thereof, for the damages caused to third parties.

Whether petitioner, as a financing company, is absolved from liability by the enactment of Republic Act (R.A.) No. 8556, or the Financing Company Act of 1998.

Anent the first issue, the CA found petitioner liable for the damage caused by the collision since under the Public Service Act, if the property covered by a franchise is transferred or leased to another without obtaining the requisite approval, the transfer is not binding on the Public Service Commission and, in contemplation of law, the grantee continues to be responsible under the franchise in relation to the operation of the vehicle, such as damage or injury to third parties due to collisions.10

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

Petitioner's contention has partial merit, as indeed, the vehicles involved in the case at bar are not common carriers, which makes the Public Service Act inapplicable.

However, the registered owner of the vehicle driven by a negligent driver may still be held liable under applicable jurisprudence involving laws on compulsory motor vehicle registration and the liabilities of employers for quasi - delicts under the Civil Code.

The principle of holding the registered owner of a vehicle liable for quasi - delicts resulting from its use is well-established in jurisprudence. Erezo v. Jepte,12 with Justice Labrador as ponente, wisely explained the reason behind this principle, thus:

Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale between the parties (Chinchilla v. 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 v. Brenham Automobile Co., 145 S.W. 278, 279.)

With the above policy in mind, the question that defendant-appellant poses is: should not the registered owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility and lay the same on the person actually owning the vehicle? We hold with the trial court that the law does not allow him to do so; the law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or consequence of registration. Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. A victim of recklessness on the public highways is usually without means to discover or identify the person actually causing the injury or damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility to the injured person.

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

In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.13

The case is still good law and has been consistently cited in subsequent cases.14 Thus, there is no good reason to depart from its tenets.

For damage or injuries arising out of negligence in the operation of a motor vehicle, the registered owner may be held civilly liable with the negligent driver either 1) subsidiarily, if the aggrieved party seeks relief based on a delict or crime under Articles 100 and 103 of the Revised Penal Code; or 2) solidarily, if the complainant seeks relief based on a quasi-delict under Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff whether to waive completely the filing of the civil action, or institute it with the criminal action, or file it separately or independently of a criminal action;15 his only limitation is that he cannot recover damages twice for the same act or omission of the defendant.16

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

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

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

[A] mode of extending credit through a non-cancelable lease contract under which the lessor purchases or acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business and office machines, and other movable or immovable property in consideration of the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of not less than two (2) years during which the lessee has the right to hold and use the leased property, x x x but with no obligation or option on his part to purchase the leased property from the owner-lessor at the end of the lease contract.26

Petitioner presented a lengthy discussion of the purported trend in other jurisdictions, which apparently tends to favor absolving financing companies from liability for the consequences of quasi-delictual acts or omissions involving financially leased property.27 The petition adds that these developments have been legislated in our jurisdiction in Republic Act (R.A.) No. 8556,28 which provides:

Section 12. Liability of lessors. - Financing companies shall not be liable for loss, damage or injury caused by a motor vehicle, aircraft, vessel, equipment, machinery or other property leased to a third person or entity except when the motor vehicle, aircraft, vessel, equipment or other property is operated by the financing company, its employees or agents at the time of the loss, damage or injury.chanrobles virtual law library

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.

x x x

(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)cralawlibrary

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

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

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

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

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

WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003 and Resolution dated February 18, 2004 of the Court of Appeals are AFFIRMED.

Costs against petitioner.


Ynares-Santiago, J., Chairperson, Chico-Nazario, Nachura, Reyes, JJ., concur.


1 Penned by Associate Justice Eugenio S. Labitoria with the concurrence of Associate Justices Mercedes Gozo-Dadole and Rosmari D. Carandang, rollo, pp. 41-47.

2 Id. at 49.

3 Rollo, p. 42.

4 Id. at 72.

5 Id. at 72-73.

6 Id. at 72.

7 Id. at 52-56.

8 Id. at 56.

9 Id. at 47.

10 Id. at 44-45.

11 Id. at 21-22.

12 102 Phil. 103 (1957).

13 Id. at 108-110.

14 Equitable Leasing Corp. v. Suyom, 437 Phil. 244, 256 (2002); Aguilar v. Commercial Savings Bank, 412 Phil. 834, 841 (2001); Spouses Hernandez v. Spouses Dolor, 479 Phil. 593, 603 (2004).

15 Rules of Court, Rule 111, Sec. 1, par. (a), sub-par. 1.

16 Civil Code, Art. 2177.

17 Equitable Leasing Corp. v. Suyom, supra note 14, at 255; First Malayan Leasing and Finance Corp. v. Court of Appeals, G.R. No. 91378, June 9, 1992, 209 SCRA 660, 663.

18 Equitable Leasing Corp. v. Suyom, supra 14, at 255, citing First Malayan Leasing and Finance Corp. v. Court of Appeals, supra note 17; MYC-Agro-Industrial Corp. v. Camerino, 217 Phil. 11, 17 (1984); and Vargas v. Langcay, 116 Phil. 478, 481-482 (1962).

The only known exception to the rule is that enunciated in FGU Insurance Corp. v. Court of Appeals, 351 Phil. 219, 225 (1998), where it was held that a rent-a-car company is not liable for the damages caused by the negligence of its lessee, who drove the subject vehicle. Here, it was established that between a rent-a-car company and a client who drove a leased vehicle, there was a clear absence of vinculum juris as employer and employee.

19 Equitable Leasing Corp. v. Suyom, supra; note 14, at 255; First Malayan Leasing and Finance Corp. v. Court of Appeals, supra note 17, at 664.

20 First Malayan Leasing and Finance Corp. v. Court of Appeals, supra note 17, at 664.

21 Erezo v. Jepte, supra note 12, at 108.

22 Erezo v. Jepte, supra note 12, at 107; Equitable Leasing Corp. v. Suyom, supra note 14, at 256; BA Finance Corp. v. Court of Appeals, G.R. No. 98275, November 13, 1992, 215 SCRA 715, 720.

23 PCI Leasing and Finance Inc. v. Giraffe-X Creative Imaging Inc., G.R. No. 142618, July 12, 2007, 527 SCRA 405, 420-421.

24 Cebu Contractors Consortium Co. v. Court of Appeals, 454 Phil. 650, 656 (2003).

25 Elisco Tools Manufacturing Corp. v. Court of Appeals, 367 Phil. 242, 255 (1999); PCI Leasing and Finance Inc. v. Giraffe-X Creative Imaging Inc., supra note 23, at 424-426.

26 Republic Act No. 5980 (1969), as amended by Republic Act No. 8556 (1998), Sec. 3 (d), quoted in Cebu Contractors Consortium Co. v. Court of Appeals, supra note 24, at 657; PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging Inc., supra note 23, at 416.

27 Rollo, pp. 29-30.

28 Amending R.A. No. 5980, or the old Financing Company Act.

29 Agujetas v. Court of Appeals, 329 Phil. 721, 745 (1996).

30 First Malayan Leasing and Finance Corp. v. Court of Appeals, supra note 17, at 664.

31 Roxas v. Court of Appeals, G.R. No. 92245, June 26, 1991, 198 SCRA 541, 546; also Black's Law Dictionary (abridged 5th edition) defines an encumbrance as "any right to, or interest in, land which may subsist in another to diminution of its value, but consistent with the passing of the fee. A claim, lien, charge, or liability attached to and binding real property; e.g. a mortgage; judgment lien; mechanics' lien; lease; security interest; easement of right of way; accrued and unpaid taxes". (Emphasis supplied.)

32 Exhibit "1-A", records, p. 359.

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