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Case Digest

Gelisan vs. Alday

(154 SCRA 388)

Facts: Bienvenido Gelisan and Roberto Espiritu entered into a contract where the former
hired the truck of Gelisan for the purpose of transporting goods at the price of P18.00. It is
also agreed that Espiritu shall bear and pay all losses and damages attending the carriage of
the goods to be hauled by him. Benito Alday, a trucking operator, had a contract to haul the
fertilizers of the Atlas Fertilizer Corporation from Pier 4, North Harbor, to its Warehouse in
Mandaluyong. Alday met Espiritu at the gate of Pier 4 and the latter offered the use of his
truck with the driver and helper at 9 centavos per bag of fertilizer. The offer was accepted by
plaintiff Alday and he instructed his checker Celso Henson to let Roberto Espiritu haul the
fertilizer. Espiritu made two hauls of 200 bags of fertilizer per trip. The fertilizer was delivered
to the driver and helper of Espiritu with the necessary way bill receipts, Exhibits A and B.
Espiritu, however, did not deliver the fertilizer to the Atlas Fertilizer bodega at Mandaluyong.

Subsequently, plaintiff Alday saw the truck in question on Sto. Cristo St. and he notified the
Manila Police Department, and it was impounded by the police. It was claimed by Bienvenido
Gelisan. As a result of the impounding of the truck according to Gelisan and that for the
release of the truck he paid the premium of P300 to the surety company.

Benito Alday was compelled to pay the value of the 400 bags of fertilizer, in the amount of
P5,397.33, to Atlas Fertilizer Corporation so that, on 12 February 1962, he (Alday) filed a
complaint against Roberto Espiritu and Bienvenido Gelisan with the CFI Manila

Bienvenido Gelisan, upon the other hand, claimed that he had no contractual relations with
the plaintiff Benito Alday.

Issue: Whether Gelisan being a registered owner is responsible for damages?

Held: The Court has invariably held in several decisions that the registered owner of a public
service vehicle is responsible for damages that may arise from consequences incident to its
operation or that may be caused to any of the passengers therein. The claim of the petitioner
that he is not able in view of the lease contract executed by and between him and Roberto
Espiritu which exempts him from liability to third persons, cannot be sustained because it
appears that the lease contract, adverted to, had not been approved by the Public Service
Commission. It is settled in our jurisprudence that if the property covered by a franchise is
transferred or leased to another without obtaining the requisite approval, the transfer is not
binding upon the public and third persons.

Bienvenido Gelisan, the registered owner, is not however without recourse. He has a right to
be indemnified by Roberto Espiritu for the amount that he may be required to pay as
damages for the injury caused to Benito Alday, since the lease contract in question, although
not effective against the public for not having been approved by the Public Service
Commission, is valid and binding between the contracting parties.
Benedicto v. Intermediate Appellate Court (G.R. No. 70876 July 19, 1990)


 Greenhills Wood Industries - bound itself to sell and deliver to Blue Star
Mahogany, Inc. 100,000 board feet of sawn lumber with the understanding that
an initial delivery would be made.
 Greenhills resident manager in Maddela, Dominador Cruz, contracted Virgilio
Licuden, the driver of a cargo truck, to transport its sawn lumber to the consignee
Blue Star in Valenzuela, Bulacan; this cargo truck was registered in the name of
Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a business enterprise
engaged in hauling freight the Manager of Blue Star called up Greenhills’
president informing him that the sawn lumber on board the subject cargo truck
had not yet arrived in Valenzuela, Bulacan; because of the delay in delivery Blue
Star was constrained to look for other suppliers
 Greenhill’s filed criminal case against driver Licuden for estafa; and a civil case
for recovery of the value of the lost sawn lumber plus damages against Benedicto
 Benedicto denied liability as she was a complete stranger to the contract of
carriage, the subject truck having been earlier sold by her to Benjamin Tee; but
the truck had remained registered in her name because Tee have not yet fully
paid the amount of the truck; be that as it may, Tee had been operating the said
truck in Central Luzon from that and Licuden was Tee’s employee and not hers


WoN Benedicto, being the registered owner of the carrier, should be held liable for the
value of the undelivered or lost sawn lumber


YES. The registered owner liable for consequences flowing from the operations of the
carrier, even though the specific vehicle involved may already have been transferred to
another person. This doctrine rests upon the principle that in dealing with vehicles
registered under the Public Service Law, the public has the right to assume that the
registered owner is the actual or lawful owner thereof It would be very difficult and often
impossible as a practical matter, for members of the general public to enforce the rights
of action that they may have for injuries inflicted by the vehicles being negligently
operated if they should be required to prove who the actual owner is. Greenhills is not
required to go beyond the vehicle’s certificate of registration to ascertain the owner of
the carrier.

Santos v. Sibug


Petitioner Adolfo Santos was the owner of a passenger jeep, but hehad no certificate of
public conveyance for the operation of the vehicle as apublic passenger jeep. Santos
then transferred his jeep to the name of Vidadso that it could be operated under the
latter’s certificate of publicconvenience. In other words, Santos became what is known
as kabitoperator. Vidad executed a re-transfer document presumably to be registeredit
and when it was decided that the passenger jeep of Santos was to bewithdrawn from
kabit arrangement. On the accident date, Abraham Sibug was bumped by the
saidpassenger jeep.


Whether the Vidad is liable being the registered owner of the jeepney?


As the jeep in question was registered in the name of Vidad, thegovernment or any
person affected by the representation that said vehicle isregistered under the name of
the particular person had the right to rely on hisdeclaration of his ownership and
registration. And the registered owner or anyother person for that matter cannot be
permitted to repudiate said declarationwith the objective of proving that the said
registered vehicle is owned byanother person and not by the registered owner. Santos,
as the kabit, should not be allowed to defeat the levy in hisvehicle and to avoid his
responsibility as a kabit owner for he had led thepublic to believe that the vehicle
belongs to Vidad. This is one way of curbingthe pernicious kabit system that facilitates
the commissions of fraud againstthe traveling public.
Lita Enterprises Inc. v. Intermediate Appellate Court


Spouses Nicasio Ocampo and Francisca Garcia (privaterespondents) purchased in

installment from the Delta Motor SalesCorporation five (5) Toyota Corona Standard cars
to be used as taxi. Sincethey had no franchise to operate taxicabs, they contracted with
petitioner LitaEnterprise, Inc., through its representative Manuel Concordia, for the use
ofthe latter’s certificate of public convenience for a consideration of P1, 000.00and a
monthly rental of P200.00/taxicab unit. For the agreement to takeeffect, the cars were
registered in the name of Lita Enterprises, Inc. Thepossession, however, remains with
spouses Ocampo and Garcia whooperated and maintained the same under Acme Taxi,
petitioner’s trade name. A year later, one of the taxicabs, driven by their employee,
EmeterioMartin, collided with a motorcycle. Unfortunately the driver of the
motorcycle,Florante Galvez died from the injuries it sustained. Criminal case was filed
against Emeterio Martin, while a civil case wasfiled by the heir of the victim against Lita
Enterprises. In the decision of thelower court Lita Enterprises was held liable for
damages for the amount ofP25, 000.00 and P7, 000.00 for attorney’s fees. A writ of
execution for the decision followed, 2 of the cars of therespondent’s spouses were levied
and were sold to a public auction. On March 1973, respondent Ocampo decided to
register his taxicabsin his own name. The manager of petitioner refused to give him
theregistration papers. Thus, making spouses file a complaint against petitioner.In the
decision, Lita Enterprise was ordered to return the three certificate ofregistration not
levied in the prior case. Petitioner now prays that private respondent be held liable to
pay theamount they have given to the heir of Galvez.


Whether or not petitioner can recover from private respondent,knowing they are in an
arrangement known as “kabit system”.

“Kabit system” is defined as, when a person who has been granted acertificate of
convenience allows another person who owns a motor vehicle tooperate 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 enforcean illegal contract, but will leave
them both where it finds them. Upon thispremise, it was flagrant error on the part of both
trial and appellate courts tohave accorded the parties relief from their predicament.
Specifically Article1412 states that: “If the act in which the unlawful or forbidden cause
consists does notconstitute a criminal offense, the following rules shall be observed:
“when thefault, is on the part of both contracting parties, neither may recover what hehas
given by virtue of the contract, or demand the performance of the other’sundertaking.”
The principle of in pari delicto is evident in this case. “the proposition isuniversal that no
action arises, in equity or at law, from an illegal contract; nosuit can be maintained for its
specific performance, or to recover the propertyagreed to sold or delivered, or damages
for its property agreed to be sold ordelivered, or damages for its violation.” The parties in
this case are in paridelicto, therefore no affirmative relief can be granted to them

Magboo v. Bernardo


Urbano and Emilia Magboo are the parents of Cesar Magboo, a childof 8 years old, who
lived with them and was under their custody until hisdeath on 24 October 1956 when he
was killed in a motor vehicle accident, thefatal vehicle being a passenger jeepney owned
by Delfin Bernardo. At thetime of the accident, said passenger jeepney was driven by
Conrado Roque.The contract between Roque and Bernardo was that Roque was to pay
toBernardo the sum of P8.00, which he paid to Bernardo, for privilege of drivingthe
jeepney, it being their agreement that whatever earnings Roque couldmake out of the
use of the jeepney in transporting passengers from one pointto another in the City of
Manila would belong entirely to Roque. As aconsequence of the accident and as a result
of the death of Cesar Magboo insaid accident, Roque was prosecuted for homicide thru
reckless imprudencebefore the CFI Manila. Roque was sentenced to 6 months of arresto
mayor,with the accessory penalties of the law; to indemnify the heirs of thedeceased in,
with subsidiary imprisonment in case of insolvency, and to paythe costs. Pursuant to
said judgment Roque served his sentence but he wasnot able to pay the indemnity
because he was insolvent. An action was filedby the spouses Magboo against Bernardo
is for enforcement of his subsidiaryliability. The trial court ordered Bernardo to pay the.
Bernardo appealed to the Court of Appeals, which certified the case to the Supreme
Court on theground that only questions of law are involved.

Whether or not an employer-employee relationship between thejeepney operator and

the driver?


An employer-employee relationship exists between a jeepney owner and a driver under

a boundary system arrangement. The features which characterize the boundary system -
namely the fact that the driver does not receive a fixed wage but gets only the excess of
the amount of fares collected by him over the amount he pays to the jeep-owner, and the
gasoline consumed by the jeep is for the amount of the driver - are not sufficient to
withdraw the relationship between them from that of employee and employer.
Consequently, the jeepney owner is subsidiary liable as employer inaccordance with
Art.103, Revised Penal Code.II

Eastern Shipping Lines v. Intermediate Appellate Court


On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama,
Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern
Shipping Lines under a bill of lading. The shipment was insured under plaintiffs Marine
Insurance Policy. Upon arrival of the shipmentin Manila on December 12, 1981, it was
discharged unto the custody of defendant Metro Port Service, Inc. The latter excepted
to one drum, said to be in bad order, which damage was unknown to plaintiff. On
January 7, 1982 defendant Allied Brokerage Corporation received the shipment from
defendant Metro Port Service, Inc., one drum opened and without seal. On January 8
and 14, 1982, defendant Allied Brokerage Corporation made deliveries of the shipment
to the consignees warehouse.The latter excepted to one drum which contained
spillages, while the rest of the contents was adulterated/fake. Plaintiff contended that
due to the losses/damage sustained by said drum, the consignee suffered losses
totaling P19, 032.95, due to the fault and negligence of defendants. Claims were
presented against defendants who failed and refused to pay the same. As a
consequence of the lossessustained, plaintiff was compelled to pay the consignee P19,
032.95 under the aforestated marine insurance policy, so that it became subrogated to
all the rights of action of said consignee against defendants.


Whether or not a claim for damage sustained on a shipment of goods can be a solidary
or joint and several, liability of the common carrier, thearrastre operator and the customs


The common carriers duty to observe the requisite diligence in the shipment of goods
lasts from the time the articles are surrendered to or unconditionally placed in the
possession of, and received by, the carrier for transportation until delivered to, or until
the lapse of a reasonable time for their acceptance by, the person entitled to receive
them (Arts. 1736-1738,Civil Code). When the goods shipped either are lost or arrive in
damaged condition, a presumption arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of negligence to hold it liable (Art.
1735, Civil Code). There are, of course, exceptional cases when such presumption of
fault is not observed but these cases, enumerated in Article 1734 of the Civil Code, are
exclusive, not one of which can be applied to this case. As to The question of charging
both the carrier and the arrastre operator with the obligation of properly delivering the
goods to the consignee, the legal relationship between the consignee and the arrastre
operator is a kinto that of a depositor and warehouseman while the relationship between
the consignee and the common carrier is similar to that of the consignee and the arrastre
operator. Since it is the duty of the arrastre to take good care of the goods that are in its
custody and to deliver them in good condition to the consignee, such responsibility also
devolves upon the carrier. Both the arrastre and the carrier are therefore charged with
the obligation to deliver the goods in good condition to the consignee. A factual finding of
both the Supreme Court and the appellate court was that there was sufficient evidence
that the shipment sustained damage while in the successive possession of appellants.
Teja Marketing v. Intermediate Appellate Court


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 theLand Transportation Commission show that the
motorcycle sold to thedefendant was first mortgaged to the Teja Marketing by Angel
Jaucian thoughthe Teja Marketing and Angel Jaucian are one and the same, because it
wasmade to appear that way only as the defendant had no franchise of his ownand he
attached the unit to the plaintiffs MCH Line. The agreement also of the parties here was
for the plaintiff to undertake the yearly registration of themotorcycle 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 fromhim.
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 attorneys 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 attorneys fees. On his part, Nale did not dispute the sale and the
outstanding balance of P1,700.00 still payable toTeja Marketing; but contends that
because of this failure of Teja Marketing to comply with his obligation to register the
motorcycle, Nale suffered damages when he failed to claim any insurance indemnity
which would amount to no less than P15,000.00 for the more than 2 times that the
motorcycle figured in accidents aside from the loss of the daily income of P15.00 as
boundary fee beginning October 1976 when the motorcycle was impounded by the LTC
fornot being registered. The City Court rendered judgment in favor of TejaMarketing,
dismissing the counterclaim, and ordered Nale to pay TejaMarketing 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, thepetition for review was filed by
Teja Marketing and/or Angel Jaucian.


Whether the defendant can recover damages against the plaintiff?


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.