What do we understand about the registered owner rule? What is its significance?

Because we said, that in this

jurisdiction, the law provides that common carriers, by the nature of their business, since it is imbued with public
interest, the nature is that of public employment and that they cannot refuse to accept any passenger or cargo without
any justification, so the registered owner rule is very significant, in so far as damage to goods is concerned, and for
injuries sustained by any person in the public highways so that the public can easily identify the owner of the vehicle
through what office? LTO (Land Transportation Office).

So the rule is the registered owner is primarily responsible for any damage caused by the vehicle registered in his
name, even if said vehicle had already been sold, transferred or leased to another person, and which at the time of
accident, was actually operating said vehicle.

The registered owner can run of course after the transferee pursuant to a deed of conveyance for example a bill of
sale. Example, a vehicle that has already been leased. So the owner is the lessor and the one using the vehicle is the
lessee. How will the lessor be protected in the event of any accident? So the registered owner may annotate the
Contract of Lease in the Certificate of Registration of that vehicle. Dapat naka-annotate sya with the LTO. And that
will exempt him from liability. If that lease is not annotated, he will be liable primarily in the event of an accident.
But he has a right of action against the transferee. But syempre, maha-hassle na sya, need nya pa magfile ng third-
party complaint.

In the case of Duavit vs CA 173 s 490, the issue with respect to the annotation as held also in the case of BA Finance
vs CA, the ruling of the SC is that in order that the registered owner be free from liability, the Contract of Lease be
annotated in the Certificate of Registration which will serve as notice to third parties that the lessee and not the
registered owner who is in possession and operating the vehicle. If there is no annotation, third parties will not be
affected and it will only be between lessor and lessee.

The registered owner was not held liable because he was able to prove that the vehicle was stolen from his garage. It
was stolen and an accident occurred.

What do we understand about the Kabit system?

It is an arrangement wherein a person who has been granted a certificate of public convenience, allows other persons
who own motor vehicles to operate them under his license or franchise for a fee or percentage of the earnings. Kabit
is the term. Although the parties to this agreement are not outrightly penalized by the law but the contract is illicit
and is against public policy under Article 1409 of the Civil Code and therefore considered as void and inexistent.
The parties, having entered into this illicit agreement, are considered as in pari delicto so they could not run after
each other. The court will leave them as they are. No action arises out of an illicit transaction or contract. Again, in a
kabit system, why is it penalized? It is for the protection of the third party. Since the passengers or the third parties,
are infract defrauded by the misrepresentation of the operator who uses the vehicle of another. The pasahero would
think na legal itong sinasakyan ko, na kung hindi ako ihatid sa puntahan ko, I can run after it under the law, pero ang
nangyari, hindi pala sya ang may-ari ng franchise, so hahabulin ko pa ang franchisee.

So what is now the relevance of the case of Abelardo Lim vs Gonzalez? Anyone who has read it?

Abelardo Lim vs Gonzales

Facts: Private respondent herein purchased an Isuzu passenger jeepney from Gomercino Vallarta, a holder of a
certificate of public convenience for the operation of a public utility vehicle. He continued to operate the public
transport business without transferring the registration of the vehicle to his name. Thus, the original owner remained
to be the registered owner and operator of the vehicle. Unfortunately, the vehicle got involved in a road mishap
which caused it severe damage. The ten-wheeler-truck which caused the accident was owned by petitioner Lim and
was driven by co-petitioner Gunnaban. Gunnaban admitted responsibility for the accident, so that petitioner Lim
shouldered the costs of hospitalization of those wounded, compensation for the heirs of the deceased passenger and
the restoration of the other vehicle involved. He also negotiated for the repair of the private respondent's jeepney but
the latter refused and demanded for its replacement. Hence, private respondent filed a complaint for damages 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: Whether or not an operation under the Kabit System could not sue without the registered owner of the vehicle
as his principal.

Held: 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.
Hence, the private respondent has the right to proceed against petitioners for the damage caused on his
passenger jeepney as well as on his business.

Q: Is this a case of culpa contractual or culpa aquilana?

A: Culpa aquilana kasi wala naman silang pre-existing contract. So available yung defense na exercised diligence in
the selection of employees.

Actually in short, the implication in this case is WON Kabit System is applicable in this case. The answer is NO.
The case is between Lim and Gonzales, about sa damage dun sa vehicle, sino magshoulder sa cost. Hindi naman
party si Lim sa transaction between Vallarta and Gonzales. Wala namang misrepresentation as to the owner of the
vehicle, walang problema sa pagbayad sa third parties na na-injure at sa heirs nung deceased. Binayaran na ni Lim,
walang third party na involved.

Lita Enterprises vs IAC

Facts: Spouses Nicasio Ocampo and Francisca Garcia 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
latters certificate of public convenience for a consideration of P1, 000.00 and a monthly rental of P200.00/taxicab
unit. For the agreement to takeeffect, 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, petitioners 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.

A 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 attorneys fees. A writ of execution for the decision followed, 2 of the cars of the
respondents 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 Article1412 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 others
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.

So as we have previously discussed, we said that common carriers by the nature of their business are mandated by
the law to exercise extraordinary diligence. When should this duty commence?

As provided in 1736, it commences and lasts: From the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same are delivered, actually or constructively,
by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions
of Article 1738.

Where is there actual delivery? If you say door-to-door delivery, that is actual. Pano pag constructive delivery? Yan
yung notice sa consignee that cargo has arrived, na example Andito na yung kotse, pwede mo na makuha yung
kotse That would be constructive delivery, that you inform the consignee that the goods are available for release.
Once you notify the consignee of the arrival of the cargo in the place of destination, that would terminate the duty of
the carrier to exercise extraordinary diligence without prejudice to Article 1738 which provides that:

Art. 1738. The extraordinary liability of the common carrier continues to be operative even during the time the
goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of
the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of
them.

What do we understand by stoppage in transit? Who are the parties? Consignor Shipper Consignee The shipper
shipped a partciular kind of good, tapos wala pa naabot kay consignee, nahibaw-an niya na wala na diay kwarta si
consignee, so he can stop the transit of the goods. So when the shipper exercises this right, the transaction between
the shipper and carrier is now one of bailor-bailee. He holds the goods in trust for the consignor/shipper. Hindi na
extraordinary diligence ang required.

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have
been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent
or minimize loss before, during and after the occurrence of flood, storm or other natural disaster in order that the
common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods. The same
duty is incumbent upon the common carrier in case of an act of the public enemy referred to in Article 1734, No. 2.

Art. 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not
free such carrier from responsibility.
Art 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it appears that the designation of the time
when the thing is to be delivered or the service is to be rendered was a controlling motive for the
establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.
So delay. Once there is already a demand, dapat ideliver today, di mo nadeliver and theres a demand for you to
deliver, henceforth you are considered in delay. For example, nagpadeliver ka ng cake kasi birthday, tapos hindi
dumating yung cake, bukas pa dineliver, eh di mo na birthday.

Delay should be determined kung excusable or inexcusable, Kung excusable, suspended lang, na-hold lang yung
cargo, so di sya maconsider na delay. After the reason for the delay ceases, he may proceed with the voyage and
with the delivery. The vessel continues to be liable as common carrier and remains duty-bound to exercise
extraordinary diligence.

But if inexcusable, it will have the following effects (1) liable ang common carrier even if the natural disaster was
the proximate cause of the damage kasi may delay na. (2) Stipulation limiting liability of carrier is inoperative as
provided in 1744. (3) Consignee may exercise the right to abandon, pwede mo na hindi tanggapin yung goods.

What happens if shipper contributed to the loss? But the proximate cause is still the negligence of the common
carrier? The common carrier is still liable for damages, but considering shipper is contributory, damages will be
equitably reduced. Considered sya na mitigating circumstance.

We will continue next meeting.