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Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 181398               June 29, 2011

FEB LEASING AND FINANCE CORPORATION (now BPI LEASING CORPORATION), Petitioner,
vs.
SPOUSES SERGIO P. BAYLON and MARITESS VILLENA-BAYLON, BG HAULER, INC., and MANUEL Y. ESTILLOSO, Respondents.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for review on certiorari¹ of the 9 October 2007 Decision² and the 18 January 2008 Resolution³ of the Court of Appeals in CA-G.R. CV No. 81446. The 9 October 2007 Decision affirmed the 30 October 2003 Decision⁴ of the Regional Trial Court (Branch 35) of Gapan City in Civil Case No. 2334 ordering petitioner to pay respondents damages. The 18 January 2008 Resolution denied petitioner’s motion for reconsideration.

The Facts

On 2 September 2000, an Isuzu oil tanker running along Del Monte Avenue in Quezon City and bearing plate number TDY 712 hit Loretta V. Baylon (Loretta), daughter of respondent spouses Sergio P. Baylon and Maritess Villena-Baylon (spouses Baylon). At the time of the accident, the oil tanker was registered⁵ in the name of petitioner FEB Leasing and Finance Corporation⁶ (petitioner). The oil tanker was leased⁷ to BG Hauler, Inc. (BG Hauler) and was being driven by the latter’s driver, Manuel Y. Estilloso. The oil tanker was insured⁸ by FGU Insurance Corp. (FGU Insurance).

The accident took place at around 2:00 p.m. as the oil tanker was coming from Balintawak and heading towards Manila. Upon reaching the intersection of Bonifacio Street and Del Monte Avenue, the oil tanker turned left. While the driver of the oil tanker was executing a left turn side by side with another vehicle towards Del Monte Avenue, the oil tanker hit Loretta who was then crossing Del Monte Avenue coming from Mayon Street. Due to the strong impact, Loretta was violently thrown away about three to five meters from the point of impact. She fell to the ground unconscious. She was brought for treatment to the Chinese General Hospital where she remained in a coma until her death two days after.⁹

The spouses Baylon filed with the RTC (Branch 35) of Gapan City a Complaint¹⁰ for damages against petitioner, BG Hauler, the driver, and FGU Insurance. Petitioner filed its answer with compulsory counterclaim while FGU Insurance filed its answer with counterclaim. On the other hand, BG Hauler filed its answer with compulsory counterclaim and cross-claim against FGU Insurance.

Petitioner claimed that the spouses Baylon had no cause of action against it because under its lease contract with BG Hauler, petitioner was not liable for any loss, damage, or injury that the leased oil tanker might cause. Petitioner claimed that no employer-employee relationship existed between petitioner and the driver.

BG Hauler alleged that neither do the spouses Baylon have a cause of action against it since the oil tanker was not registered in its name. BG Hauler contended that the victim was guilty of contributory negligence in crossing the street. BG Hauler claimed that even if its driver was at fault, BG Hauler exercised the diligence of a good father of a family in the selection and supervision of its driver. BG Hauler also contended that FGU Insurance is obliged to assume all liabilities arising from the use of the insured oil tanker.

For its part, FGU Insurance averred that the victim was guilty of contributory negligence. FGU Insurance concluded that the spouses Baylon could not expect to be paid the full amount of their claims. FGU Insurance pointed out that the insurance policy covering the oil tanker limited any claim to a maximum of ₱400,000.00.

During trial, FGU Insurance moved that (1) it be allowed to deposit in court the amount of ₱450,000.00 in the joint names of the spouses Baylon, petitioner, and BG Hauler and (2) it be released from further participating in the proceedings. After the RTC granted the motion, FGU Insurance deposited in the Branch Clerk of Court a check in the names of the spouses Baylon, petitioner, and BG Hauler. The RTC then released FGU Insurance from its contractual obligations under the insurance policy.

The Ruling of the RTC

After weighing the evidence submitted by the parties, the RTC found that the death of Loretta was due to the negligent act of the driver. The RTC held that BG Hauler, as the employer, was solidarily liable with the driver. The RTC further held that petitioner, as the registered owner of the oil tanker, was also solidarily liable.

The RTC found that since FGU Insurance already paid the amount of ₱450,000.00 to the spouses Baylon, BG Hauler, and petitioner, the insurer’s obligation has been satisfactorily fulfilled. The RTC thus dismissed the cross-claim of BG Hauler against FGU Insurance. The decretal part of the RTC’s decision reads:

Wherefore, premises considered, judgment is hereby rendered in favor of the plaintiffs and against defendants FEB Leasing (now BPI Leasing), BG Hauler, and Manuel Estilloso, to wit:

1. Ordering the defendants, jointly and severally, to pay plaintiffs the following:

a. the amount of ₱62,000.00 representing actual expenses incurred by the plaintiffs;

b. the amount of ₱50,000.00 as moral damages;

c. the amount of ₱2,400,000.00 for loss of earning capacity of the deceased victim, Loretta V. Baylon;

d. the sum of ₱50,000.00 for death indemnity;

e. the sum of ₱50,000.00 for and as attorney’s fees; and

f. with costs against the defendants.

2. Ordering the dismissal of defendants’ counter-claim for lack of merit and the cross claim of defendant BG Hauler against defendant FGU Insurance.

SO ORDERED.¹¹

Petitioner, BG Hauler, and the driver appealed the RTC Decision to the Court of Appeals. Petitioner claimed that as financial lessor, it is exempt from liability resulting from any loss, damage, or injury the oil tanker may cause while being operated by BG Hauler as financial lessee.

On the other hand, BG Hauler and the driver alleged that no sufficient evidence existed proving the driver to be at fault. They claimed that the RTC erred in finding BG Hauler negligent despite the fact that it had exercised the diligence of a good father of a family in the selection and supervision of its driver and in the maintenance of its vehicles. They contended that petitioner, as the registered owner of the oil tanker, should be solely liable for Loretta’s death.

The Ruling of the Court of Appeals

The Court of Appeals held that petitioner, BG Hauler, and the driver are solidarily liable for damages arising from Loretta’s death. Petitioner’s liability arose from the fact that it was the registered owner of the oil tanker while BG Hauler’s liability emanated from a provision in the lease contract providing that the lessee shall be liable in case of any loss, damage, or injury the leased oil tanker may cause.

Thus, the Court of Appeals affirmed the RTC Decision but with the modification that the award of attorney’s fees be deleted for being speculative. The dispositive part of the appellate court’s Decision reads:

WHEREFORE, in the light of the foregoing, the instant appeal is DENIED. Consequently, the assailed Decision of the lower court is AFFIRMED with the MODIFICATION that the award of attorney’s fees is DELETED.

IT IS SO ORDERED.¹²

Dissatisfied, petitioner and BG Hauler, joined by the driver, filed two separate motions for reconsideration. In its 18 January 2008 Resolution, the Court of Appeals denied both motions for lack of merit.

Unconvinced, petitioner alone filed with this Court the present petition for review on certiorari impleading the spouses Baylon, BG Hauler, and the driver as respondents.¹³

The Issue

The sole issue submitted for resolution is whether the registered owner of a financially leased vehicle remains liable for loss, damage, or injury caused by the vehicle notwithstanding an exemption provision in the financial lease contract.

The Court’s Ruling

Petitioner contends that the lease contract between BG Hauler and petitioner specifically provides that BG Hauler shall be liable for any loss, damage, or injury the leased oil tanker may cause even if petitioner is the registered owner of the said oil tanker. Petitioner claims that the Court of Appeals erred in holding petitioner solidarily liable with BG Hauler despite having found the latter liable under the lease contract.

For their part, the spouses Baylon counter that the lease contract between petitioner and BG Hauler cannot bind third parties like them. The spouses Baylon maintain that the existence of the lease contract does not relieve petitioner of direct responsibility as the registered owner of the oil tanker that caused the death of their daughter.

On the other hand, BG Hauler and the driver argue that at the time petitioner and BG Hauler entered into the lease contract, Republic Act No. 5980¹⁴ was still in effect. They point out that the amendatory law, Republic Act No. 8556,¹⁵ which exempts from liability in case of any loss, damage, or injury to third persons the registered owners of vehicles financially leased to another, was not yet enacted at that time.

In point is the 2008 case of PCI Leasing and Finance, Inc. v. UCPB General Insurance Co., Inc.¹⁶ There, we held liable PCI Leasing and Finance, Inc., the registered owner of an 18-wheeler Fuso Tanker Truck leased to Superior Gas & Equitable Co., Inc. (SUGECO) and being driven by the latter’s driver, for damages arising from a collision. This despite an express provision in the lease contract to the effect that the lessee, SUGECO, shall indemnify and hold the registered owner free from any liabilities, damages, suits, claims, or judgments arising from SUGECO’s use of the leased motor vehicle.

In the instant case, Section 5.1 of the lease contract between petitioner and BG Hauler provides:

Sec. 5.1. It is the principle of this Lease that while the title or ownership of the EQUIPMENT, with all the rights consequent thereof, are retained by the LESSOR, the risk of loss or damage of the EQUIPMENT from whatever source arising, as well as any liability resulting from the ownership, operation and/or possession thereof, over and above those actually compensated by insurance, are hereby transferred to and assumed by the LESSEE hereunder which shall continue in full force and effect.¹⁷ (Emphasis supplied)

If it so wishes, petitioner may proceed against BG Hauler to seek enforcement of the latter’s contractual obligation under Section 5.1 of the lease contract. In the present case, petitioner did not file a cross-claim against BG Hauler. Hence, this Court cannot require BG Hauler to reimburse petitioner for the latter’s liability to the spouses Baylon. However, as the registered owner of the oil tanker, petitioner may not escape its liability to third persons.

Under Section 5 of Republic Act No. 4136,¹⁸ as amended, all motor vehicles used or operated on or upon any highway of the Philippines must be registered with the Bureau of Land Transportation (now Land Transportation Office) for the current year.¹⁹ Furthermore, any encumbrances of motor vehicles must be recorded with the Land Transportation Office in order to be valid against third parties.²⁰

In accordance with the law on compulsory motor vehicle registration, this Court has consistently ruled that, with respect to the public and third persons, the registered owner of a motor vehicle is directly and primarily responsible for the consequences of its operation regardless of who the actual vehicle owner might be.²¹ 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 registered vehicle owner would still be liable for damages caused by the accident. The sale, transfer or lease of the vehicle, which is not registered with the Land Transportation Office, will not bind third persons aggrieved in an accident involving the vehicle. The compulsory motor vehicle registration underscores the importance of registering the vehicle in the name of the actual owner.1avvphi1

The policy behind the rule is to enable the victim to find redress by the expedient recourse of identifying the registered vehicle owner in the records of the Land Transportation Office. The registered owner can be reimbursed by the actual owner, lessee or transferee who is known to him. Unlike the registered owner, the innocent victim is not privy to the lease, sale, transfer or encumbrance of the vehicle. Hence, the victim should not be prejudiced by the failure to register such transaction or encumbrance. As the Court held in PCI Leasing:

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.²²

In the landmark case of Erezo v. Jepte,²³ the Court succinctly laid down the public policy behind the rule, thus:

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.

x x x

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, 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 be thereby be relieved of the responsibility to the injured person.²⁴

In this case, petitioner admits that it is the registered owner of the oil tanker that figured in an accident causing the death of Loretta. As the registered owner, it cannot escape liability for the loss arising out of negligence in the operation of the oil tanker. Its liability remains even if at the time of the accident, the oil tanker was leased to BG Hauler and was being driven by the latter’s driver, and despite a provision in the lease contract exonerating the registered owner from liability.

As a final point, we agree with the Court of Appeals that the award of attorney’s fees by the RTC must be deleted for lack of basis. The RTC failed to justify the award of ₱50,000 attorney’s fees to respondent spouses Baylon. The award of attorney’s fees must have some factual, legal and equitable bases and cannot be left to speculations and conjectures.²⁵ Consistent with prevailing jurisprudence,²⁶ attorney’s fees as part of damages are awarded only in the instances enumerated in Article 2208 of the Civil Code.²⁷ Thus, the award of attorney’s fees is the exception rather than the rule. Attorney’s fees are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate.²⁸

WHEREFORE, we DENY the petition. We AFFIRM the 9 October 2007 Decision and the 18 January 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 81446 affirming with modification the 30 October 2003 Decision of the Regional Trial Court (Branch 35) of Gapan City in Civil Case No. 2334 ordering petitioner FEB Leasing and Finance Corporation, BG Hauler, Inc., and driver Manuel Y. Estilloso to solidarily pay respondent spouses Sergio P. Baylon and Maritess Villena-Baylon the following amounts:

a. ₱62,000.00 representing actual expenses incurred by the plaintiffs;

b. ₱50,000.00 as moral damages;

c. ₱2,400,000.00 for loss of earning capacity of the deceased victim, Loretta V. Baylon; and

d. ₱50,000.00 for death indemnity.

Costs against petitioner.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

TERESITA J. LEONARDO-DE CASTRO*
Associate Justice

ARTURO D. BRION Associate Justice

JOSE PORTUGAL PEREZ Associate Justice

MARIA LOURDES P.A. SERENO
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

Footnotes

* Designated acting member per Special Order No. 1006 dated 10 June 2011.

¹ Under Rule 45 of the Rules of Court.

²Rollo, pp. 31-48. Penned by Associate Justice Apolinario D. Bruselas, Jr., with Associate Justices Bienvenido L. Reyes and Aurora Santiago-Lagman, concurring.

³Id. at 50-52. Penned by Associate Justice Apolinario D. Bruselas, Jr., with Associate Justices Bienvenido L. Reyes and Monina Arevalo Zenarosa, concurring.

⁴ Id. at 53-65. Penned by Judge Dorentino Z. Floresta.

⁵ Records (Vol. I), p. 8.

⁶Now BPI Leasing Corporation; records (Vol. II), pp. 14-24.

⁷ Rollo, pp. 86-89.

⁸ Records (Vol. I), p. 33.

⁹ Id. at 10.

¹⁰ Id. at 1-7.

¹¹ Rollo, pp. 64-65.

¹² Id. at 47.

¹³Rollo, p. 99. BG Hauler and the driver filed in this Court (Third Division) a separate petition for review, which the Court denied in its Resolution dated 9 April 2008. The subsequent motion for reconsideration was likewise denied with finality.

¹⁴AN ACT REGULATING THE ORGANIZATION AND OPERATION OF FINANCING COMPANIES. Approved on 4 August 1969.

¹⁵AN ACT AMENDING REPUBLIC ACT NO. 5980, AS AMENDED, OTHERWISE KNOWN AS THE FINANCING COMPANY ACT. Approved on 26 February 1998. Section 10 of Republic Act No. 8556 states:

SEC. 10. There is hereby inserted after Section 8 as renumbered, new Sections 9, 10, 11, 12 and 13 to read as follows:

x x x

"SEC. 12. Liability of Lessors. ‒ Financing companies shall not be liable for loss, damage or injury caused by a motor vehicle, aircraft, vessel, equipment or other property leased to a third person or entity except where 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.

x x x

¹⁶ G.R. No. 162267, 4 July 2008, 557 SCRA 141.

¹⁷ Rollo, p. 86 (back page); records (Vol. I), p. 123 (back page).

¹⁸Otherwise known as the "Land Transportation and Traffic Code."

¹⁹Section 5 of RA 4136 reads:

SEC. 5. Compulsory registration of motor vehicles. ‒ (a) All motor vehicles and trailers of any type used or operated on or upon any highway of the Philippines must be registered with the bureau of Land Transportation 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. 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

²⁰Id.

²¹PCI Leasing and Finance, Inc. v. UCPB General Insurance Co., Inc., G.R. No. 162267, 4 July 2008, 557 SCRA 141; Equitable Leasing Corporation v. Suyom, 437 Phil. 244 (2002); First Malayan Leasing and Finance Corporation v. Court of Appeals, G.R. No. 91378, 9 June 1992, 209 SCRA 660.

²²PCI Leasing and Finance, Inc. v. UCPB General Insurance Co., Inc., G.R. No. 162267, 4 July 2008, 557 SCRA 141, 154.

²³ 102 Phil. 103 (1957).

²⁴Id. at 108-109.

²⁵V.V. Soliven Realty Corp. v. Ong, 490 Phil. 229 (2005).

²⁶Delos Santos v. Papa, G.R. No. 154427, 8 May 2009, 587 SCRA 385; Filipinas Broadcasting Network, Inc. v. Ago Medical & Educational Center – Bicol Christian College of Medicine, 489 Phil. 380 (2005); Pajuyo v. Court of Appeals, G.R. No. 146364, 3 June 2004, 430 SCRA 492.

²⁷ Art. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.

In all cases, the attorney’s fees and expenses of litigation must be reasonable.

²⁸Lapanday Agricultural and Development Corporation (LADECO) v. Angala, G.R. No. 153076, 21 June 2007, 525 SCRA 229.

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