ABELARDO LIM vs.COURT OF APPEALS and DONATO H. GONZALES, respondents.

FACTS

Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger jeepney, from
Gomercino Vallarta, holder of a certificate of public convenience for the operation of PUVs. Gonzales
continued offering the jeepney for public transport services but he did not have the registration of the
vehicle transferred in his name nor did he secure for himself a certificate of public convenience for its
operation. Thus, Vallarta remained on record as its registered owner and operator. On 22 July 1990,
while the jeepney was running northbound along, Meycauayan, Bulacan, it collided with a ten-wheeler-
truck owned by petitioner Abelardo Lim and driven by his co-petitioner Esmadito Gunnaban. Gunnaban
owned responsibility for the accident, explaining that while he was traveling towards Manila the truck
suddenly lost its brakes and smashed into a Ferroza automobile, and later, into private respondent’s
passenger jeepney driven by Virgilio Gonzales. The impact caused severe damage to both the Ferroza
and the passenger jeepney and left one (1) passenger dead and many others wounded. Lim shouldered
the costs for hospitalization of the wounded, compensated the heirs of the deceased passenger, and
had the Ferroza restored to good condition. He also offered to have the passenger jeepney repaired at
his shop which Gonzales did not accept. Lim then offered him P20,000.00 which was again rejected.
Instead, Gonzales demanded a brand-new jeep or the amount of P236,000.00. Lim increased his bid
toP40,000.00 but Gonzales also rejected it. Hence, Gonzales filed a complaint against the petitioners.
Meanwhile, the damaged passenger jeepney was left by the roadside to corrodeand decay. Gonzales
explained that he had no capability, financial or otherwise, to tow the damaged vehicle. The trial court
upheld Gonzales’ claim and awarded him P236,000.00 as compensatory damages. The trial court held
that as vendee and current owner of the passenger jeepney, Gonzales stood as the real party in interest.
Gunnaban was found by the trial court to have caused the accident since he panicked in the face of an
emergency. On the other hand, Lim was held liable for want of diligence in supervising his employees
because Gunnaban doubled as a mechanic of the truck although he was not trained to do so. The
petitioners appealed to the CA which affirmed the decision of the trial court. The CA concluded that
while an operator under the kabit system could not sue without joining the registered owner of the
vehicle as his principal, equity demanded that the present case be made an exception. Hence, this
petition.

ISSUE:

Whether or not Donato Gonzales was the real party in interest in the suit, despite the fact that he is not
the registered owner under the certificate of public convenience.

HELD:

YES. The kabit system is an arrangement whereby a person who has been granted 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
out rightly penalized by law, the kabit system is invariably recognized as being contrary to public policy
and therefore void and inexistent under Art. 1409 of the Civil Code. In the early case of

Dizon v. Octavio, the Court explained that one of the primary factors considered in the granting of a
certificate of public convenience for the business of public transportation is the financial capacity of the
holder of the license, so that liabilities arising from accidents may be duly compensated. The kabit
system renders illusory such purpose and, worse, may still be availed of by the grantee to escape civil
liability caused by a negligent use of a vehicle owned by another and operated under his license. If a
registered owner is allowed to escape liability by proving who the supposed owner of the vehicle is, it
would be easy for him to transfer the subject vehicle to another who possesses no property with which
to respond financially for the damage done. In the present case it is at once apparent that the evil
sought to be prevented in enjoining the kabit system does not exist. First, neither of the parties to the
pernicious kabit system is being held liable for damages. Second, the case arose from the negligence of
another vehicle in using the public road to whom no representation, or misrepresentation, as regards
the ownership and operation of the passenger jeepney was made and to whom no such representation,
or misrepresentation, was necessary. Thus it cannot be said that private respondent Gonzales and the
registered owner of the jeepney were in estoppel for leading the public to believe that the jeepney
belonged to the registered owner. Third, the riding public was not bothered nor inconvenienced at the
very least by the illegal arrangement. On the contrary, it was private respondent himself who had been
wronged and was seeking compensation for the damage done to him. Certainly, it would be the height
of inequity to deny him his right. In light of the foregoing, it is evident that private respondent has the
right to proceed against petitioners for the damage caused on his passenger jeepney as well as on his
business. Any effort then to frustrate his claim of damages by the ingenuity with which petitioners
framed the issue should be discouraged, if not repelled. The Court also upheld that it is but just to award
Gonzales 236,000.00 as compensatory damages for indemnification for damages comprehends not only
the value of the loss (damnum emergens) suffered but also that of the profits which the obligee failed to
obtain(lucrum cessans).
Baliwag Transit vs. CA

FACTS:

On 31 July 1980, Leticia Garcia, and her 5-year old son, Allan Garcia, boarded Baliwag Transit Bus 2036
bound for Cabanatuan City driven by Jaime Santiago. They took the seat behind the driver.

At about 7:30 p.m., in Malimba, Gapan, Nueva Ecija, the bus passengers saw a cargo truck, owned by A
& J Trading, parked at the shoulder of the national highway. Its left rear portion jutted to the outer lane,
as the shoulder of the road was too narrow to accommodate the whole truck. A kerosene lamp
appeared at the edge of the road obviously to serve as a warning device. The truck driver, and his helper
were then replacing a flat tire.

Bus driver Santiago was driving at an inordinately fast speed and failed to notice the truck and the
kerosene lamp at the edge of the road. Santiago’s passengers urged him to slow down but he paid them
no heed. Santiago even carried animated conversations with his co-employees while driving. When the
danger of collision became imminent, the bus passengers shouted “Babangga tayo!”. Santiago stepped
on the brake, but it was too late. His bus rammed into the stalled cargo truck killing him instantly and
the truck’s helper, and injury to several others among them herein respondents.

Thus, a suit was filed against Baliwag Transit, Inc., A & J Trading and Julio Recontique for damages in the
RTC of Bulacan. After trial, it found Baliwag Transit, Inc. liable for having failed to deliver Garcia and her
son to their point of destination safely in violation of Garcia’s and Baliwag Transit’s contractual relation;
and likewise found A & J and its truck driver liable for failure to provide its cargo truck with an early
warning device in violation of the Motor Vehicle Law. All were ordered to pay solidarily the Garcia
spouses.

On appeal, the CA modified the trial court’s Decision by absolving A & J Trading from liability.

ISSUE:

Whether or not Baliwag should be held solely liable for the injuries.

HELD:

Yes.

As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its passengers,
Leticia and Allan Garcia to their destination safe and sound. A common carrier is bound to carry its
passengers safely as far as human care and foresight can provide, using the utmost diligence of a very
cautious person, with due regard for all the circumstances. In a contract of carriage, it is presumed that
the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the
presumption is rebutted, the court need not even make an express finding of fault or negligence on the
part of the common carrier. This statutory presumption may only be overcome by evidence that the
carrier exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code.
Article 1759 of the Civil Code provides that “Common carriers are liable for the death of or injuries to
passengers through the negligence or willfull acts of the former’s employees, although such employees
may have acted beyond the scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers do not cease upon proof that they exercised all the diligence of a
good father of a family in the selection or supervision of their employees.”

Section 34 (g) of the Land Transportation and Traffic Code provides “Lights and reflector when parked or
disabled. — Appropriate parking lights or flares visible one hundred meters away shall be displayed at
the corner of the vehicle whenever such vehicle is parked on highways or in places that are not well-
lighted or, is placed in such manner as to endanger passing traffic. Furthermore, every motor vehicle
shall be provided at all times with built-in reflectors or other similar warning devices either pasted,
painted or attached at its front and back which shall likewise be visible at night at least one hundred
meters away. No vehicle not provided with any of the requirements mentioned in this subsection shall
be registered. ”

x x x However, the evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the
edge of the road, near the rear portion of the truck to serve as an early warning device. This
substantially complies with Section 34 (g) of the Land Transportation and Traffic Code. The law clearly
allows the use not only of an early warning device of the triangular reflectorized plates variety but also
parking lights or flares visible 100 meters away. Indeed, Col. dela Cruz himself admitted that a kerosene
lamp is an acceptable substitute for the reflectorized plates. No negligence, therefore, may be imputed
to A & J Trading and its driver, Recontique.

The Supreme Court affirmed the Decision of the Court of Appeals (CA-GR CV-31246) with the
modification reducing the actual damages for hospitalization and medical fees to P5,017.74; without
costs.