[60] Abelardo LIM and Esmadito Gunnaban v.

CA and Donato Gonzales ● July 22, 1990 - while the jeep was running northbound somewhere in
G.R. No. 125817 | January 16, 2002 | Bellosillo, J. Meycauayan, Bulacan, it collided with a 10-wheeler truck owned by
Lim and driven by Gunnaban
SUMMARY Gonzales purchased a jeep from Vallarta who owned a CPC for ○ Gunnaban owned responsibility for the accident, explaining
the operation of PUVs. Gonzales, however, did not secure a CPC of his own that the truck suddenly lost its brakes. To avoid colliding with
and continued to use the jeep for public transport services. The jeep collided another vehicle, he swerved to the left until he reached the
with a truck owned by Lim. Lim offered to pay for the repairs but Gonzales center island. However, as the center island eventually came
refused. Gonzales filed a complaint for damages against Lim. The trial court to an end, he veered farther to the left until he smashed into
and the CA ruled in favor of Gonzales and awarded damages amounting to respondent’s jeep and another vehicle
P236,000. Lim appealed before the Court arguing that since Gonzales did ○ The impact caused severe damage to both vehicles and left
not own a CPC then he should not be considered as the real party in interest. 1 passenger dead and many others wounded.
The Court held that, although the kabit system is contrary to public policy, the ○ Lim shouldered the costs for the hospitalization of the
evil sought to be prevented by enjoining such a system is not present in this wounded and compensated the heirs of the deceased
case. The public not being affected by the illegal arrangement in this case, passenger and had the other private vehicle restored to
Gonzales may properly hold Lim liable for the damages. good condition
● He negotiated with private respondent and offered to have the jeep
DOCTRINE repaired at his shop. Gonzales refused.
Kabit system - an arrangement whereby a person who has been granted a ○ Lim instead offered to pay P20,000. Gonzales also refused.
certificate of public convenience allows other persons who own motor ● Gonzales demanded a brand-new jeep worth P236,000
vehicles to operate them under his license, sometimes for a fee or ○ Lim increased his offer to P40,000
percentage of the earnings. ○ Gonzales still refused
● Failing to negotiate, Gonzales filed a complaint for damages
● Such a system is void for being contrary to public policy ● Lim: denies liability, he exercised due diligence in the selection and
● CPC ensures that the holder of the license may be properly held supervision of his employees.
liable for accidents. Kabit system renders this purpose illusory as it ○ Also, jeep was registered in Vallarta’s name so Gonzales
allows the grantee to escape civil liability in case of negligent use of was not the real party in interest
a vehicle owned by another and operated under his license. ● RTC ruled in favor of Gonzales and awarded P236,000 as damages
● Thrust of this law is not to penalize parties but to identify the and P30,000 as atty’s fees
person upon whom liability may be fixed in case of an accident ○ “As vendee and current owner of the jeep, Gonzales stood
in order to protect the riding policy for all intents and purposes as the real party in interest”
○ The policy therefore loses its force if the public at large is not ● CA affirmed the trial court decision
deceived, much less involved. ○ “while an operator under the kabit system could not sue
without joining the registered owner of the vehicle as his
FACTS principal, equity demanded that the present case be made
an exception.
● 1982 - Gonzales purchased an Isuzu passenger jeep from ● Lim: CA erred. Doctrine is well established that an operator of a
Goemercino Vallarta vehicle continues to be its operator as long as he remains the
○ Vallarta was a holder of a CPC for the operation of PUVs operator of record. To recognize an operator under the kabit system
plying the Monumento-Bulacan route as the real party in interest and to countenance his claim for
● Gonzales continued offering the jeepney for public transport services damages is utterly subversive of public policy.
although he did not have the registration of the vehicle transferred in ○ Also, P236,000 award for damages is inconceivable large
his name, nor did he secure his own CPC since it was only bought for P30,000
○ Vallarta remained on record as the registered owner and
operator ISSUE: W/N Lim should be liable to Gonzales despite the latter’s lack of a
CPC - YES
● Court: Affirming the trial court decision is not supportive of the ■ Thus it cannot be said that private respondent
pernicious kabit system Gonzales and the registered owner of the jeepney
● The kabit system is an arrangement whereby a person who has were in estoppel for leading the public to believe that
been granted a certificate of public convenience allows other the jeepney belonged to the registered owner.
persons who own motor vehicles to operate them under his ○ The riding public was not bothered nor inconvenienced at
license, sometimes for a fee or percentage of the earnings. the very least by the illegal arrangement.
○ Although the parties to such an agreement are not outrightly ■ On the contrary, it was the private respondent
penalized by law, the kabit system is invariably recognized himself who had been wronged and was seeking
as being contrary to public policy and therefore void and compensation for the damage done to him.
inexistent under Art. 1409 of the Civil Code. Certainly, it would be the height of inequity to deny
● Dizon v. Octavio: one of the primary factors considered in the him his right.
granting of a certificate of public convenience for the business of ● In light of the foregoing, it is evident that the private respondent
public transportation is the financial capacity of the holder of the has the right to proceed against petitioners for the damage
license, so that liabilities arising from accidents may be duly caused on his passenger jeepney as well as on his business.
compensated. ○ Any effort then to frustrate his claim of damages by the
○ The kabit system renders illusory such purpose and, worse, ingenuity with which petitioners framed the issue should be
may still be availed of by the grantee to escape civil liability discouraged, if not repelled.
caused by a negligent use of a vehicle owned by another ● As to damages: loss of income must also be indemnified. Thus, the
and operated under his license. award of P236,000 was not unreasonable
■ If a registered owner is allowed to escape liability by ○ However, Court modified computation of interest
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.
○ Thus, for the safety of passengers and the public who may
have been wronged and deceived through the baneful kabit
system, the registered owner of the vehicle is not allowed to
prove that another person has become the owner so that he
may be thereby relieved of responsibility.
● It would seem then that the thrust of the law in enjoining the
kabit system is not so much as to penalize the parties but to
identify the person upon whom responsibility may be fixed in
case of an accident with the end view of protecting the riding
public.
○ The policy therefore loses its force if the public at large is not
deceived, much less involved.
● In the present case it is at once apparent that the evil sought to
be prevented in enjoining the kabit system does not exist.
○ Neither of the parties to the pernicious kabit system is being
held liable for damages.
○ 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.