SECOND DIVISION

G.R. No. 125817            January 16, 2002

ABELARDO LIM and ESMADITO GUNNABAN, petitioners, 

BELLOSILLO, J.:

When a passenger jeepney covered by a certificate of public convenience is sold to another who continues to operate
the same certificate of public convenience under the so-called kabit system, and in the course thereof the vehicle me
accident through the fault of another vehicle, may the new owner sue for damages against the erring vehicle? Otherw
does the new owner have any legal personality to bring the action, or is he the real party in interest in the suit, despite
that he is not the registered owner under the certificate of public convenience?

Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger jeepney from Gomercino Val
of a certificate of public convenience for the operation of public utility vehicles plying the Monumento-Bulacan route. W
respondent Gonzales continued offering the jeepney for public transport services he did not have the registration of th
transferred in his name nor did he secure for himself a certificate of public convenience for its operation. Thus Vallart
on record as its registered owner and operator. 1âwphi1.nêt

On 22 July 1990, while the jeepney was running northbound along the North Diversion Road somewhere in Meycaua
Bulacan, it collided with a ten-wheeler-truck owned by petitioner Abelardo Lim and driven by his co-petitioner Esmadi
Gunnaban. Gunnaban owned responsibility for the accident, explaining that while he was traveling towards Manila th
suddenly lost its brakes. To avoid colliding with another vehicle, he swerved to the left until he reached the center isla
However, as the center island eventually came to an end, he veered farther to the left until he smashed into a Ferroza
automobile, and later, into private respondent's passenger jeepney driven by one Virgilio Gonzales. The impact cause
damage to both the Ferroza and the passenger jeepney and left one (1) passenger dead and many others wounded.

Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the heirs of the deceased passe
had the Ferroza restored to good condition. He also negotiated with private respondent and offered to have the passe
jeepney repaired at his shop. Private respondent however did not accept the offer so Lim offered him ₱20,000.00, the
assessment of the damage as estimated by his chief mechanic. Again, petitioner Lim's proposition was rejected; inste
respondent demanded a brand-new jeep or the amount of ₱236,000.00. Lim increased his bid to ₱40,000.00 but priv
respondent was unyielding. Under the circumstances, negotiations had to be abandoned; hence, the filing of the com
damages by private respondent against petitioners.

In his answer Lim denied liability by contending that he exercised due diligence in the selection and supervision of his
employees. He further asserted that as the jeepney was registered in Vallarta’s name, it was Vallarta and not private
who was the real party in interest. For his part, petitioner Gunnaban averred that the accident was a fortuitous event
1 

beyond his control. 2

Meanwhile, the damaged passenger jeepney was left by the roadside to corrode and decay. Private respondent expla
although he wanted to take his jeepney home he had no capability, financial or otherwise, to tow the damaged vehicle

The main point of contention between the parties related to the amount of damages due private respondent. Private r
Gonzales averred that per estimate made by an automobile repair shop he would have to spend ₱236,000.00 to resto
jeepney to its original condition. On the other hand, petitioners insisted that they could have the vehicle repaired for ₱
4 

On 1 October 1993 the trial court upheld private respondent's claim and awarded him ₱236,000.00 with legal interest
July 1990 as compensatory damages and ₱30,000.00 as attorney's fees. In support of its decision, the trial court ratio
as vendee and current owner of the passenger jeepney private respondent stood for all intents and purposes as the r
interest. Even Vallarta himself supported private respondent's assertion of interest over the jeepney for, when he was
testify, he dispossessed himself of any claim or pretension on the property. Gunnaban was found by the trial court to
caused the accident since he panicked in the face of an emergency which was rather palpable from his act of directin
vehicle to a perilous streak down the fast lane of the superhighway then across the island and ultimately to the oppos
where it collided with the jeepney.

On the other hand, petitioner Lim's liability for Gunnaban's negligence was premised on his want of diligence in super
employees. It was admitted during trial that Gunnaban doubled as mechanic of the ill-fated truck despite the fact that
neither tutored nor trained to handle such task. 6

Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996, affirmed the decision of the trial court
upholding the decision of the court a quo the appeals court concluded that while an operator under the kabit system c
sue without joining the registered owner of the vehicle as his principal, equity demanded that the present case be ma
exception. Hence this petition.
7 

It is petitioners' contention that the Court of Appeals erred in sustaining the decision of the trial court despite their opp
the well-established doctrine that an operator of a vehicle continues to be its operator as long as he remains the oper
record. According to petitioners, to recognize an operator under the kabit system as the real party in interest and to c
his claim for damages is utterly subversive of public policy. Petitioners further contend that inasmuch as the passeng
was purchased by private respondent for only ₱30,000.00, an award of ₱236,000.00 is inconceivably large and would
unjust enrichment. 8

Petitioners' attempt to illustrate that an affirmance of the appealed decision could be supportive of the pernicious kab
does not persuade. Their labored efforts to demonstrate how the questioned rulings of the courts a quo are diametric
opposed to the policy of the law requiring operators of public utility vehicles to secure a certificate of public convenien
operation is quite unavailing.

The kabit system is an arrangement whereby a person who has been granted a certificate of public convenience allow
persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the earning
the parties to such an agreement are not outrightly penalized by law, the kabitsystem is invariably recognized as bein
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
10 

of public convenience for the business of public transportation is the financial capacity of the holder of the license, so
liabilities arising from accidents may be duly compensated. The kabit system renders illusory such purpose and, wors
be availed of by the grantee to escape civil liability caused by a negligent use of a vehicle owned by another and ope
his license. If a registered owner is allowed to escape liability by proving who the supposed owner of the vehicle is, it
easy for him to transfer the subject vehicle to another who possesses no property with which to respond financially fo
damage done. Thus, for the safety of passengers and the public who may have been wronged and deceived through
baneful kabitsystem, the registered owner of the vehicle is not allowed to prove that another person has become the
that he may be thereby relieved of responsibility. Subsequent cases affirm such basic doctrine. 11

It would seem then that the thrust of the law in enjoining the kabit system is not so much as to penalize the parties bu
the person upon whom responsibility may be fixed in case of an accident with the end view of protecting the riding pu
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 e
neither of the parties to the pernicious kabit system is being held liable for damages. Second, the case arose from th
of another vehicle in using the public road to whom no representation, or misrepresentation, as regards the ownershi
operation of the passenger jeepney was made and to whom no such representation, or misrepresentation, was neces
it cannot be said that private respondent Gonzales and the registered owner of the jeepney were in estoppel for leadi
public to believe that the jeepney belonged to the registered owner. Third, the riding public was not bothered nor inco
at the very least by the illegal arrangement. On the contrary, it was private respondent himself who had been wronge
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 damag
on his passenger jeepney as well as on his business. Any effort then to frustrate his claim of damages by the ingenui
which petitioners framed the issue should be discouraged, if not repelled.

In awarding damages for tortuous injury, it becomes the sole design of the courts to provide for adequate compensat
putting the plaintiff in the same financial position he was in prior to the tort. It is a fundamental principle in the law on d
that a defendant cannot be held liable in damages for more than the actual loss which he has inflicted and that a plain
entitled to no more than the just and adequate compensation for the injury suffered. His recovery is, in the absence o
circumstances giving rise to an allowance of punitive damages, limited to a fair compensation for the harm done. The
put him in a position better than where he should be in had not the wrong happened. 12

In the present case, petitioners insist that as the passenger jeepney was purchased in 1982 for only ₱30,000.00 to aw
damages considerably greater than this amount would be improper and unjustified. Petitioners are at best reminded t
indemnification for damages comprehends not only the value of the loss suffered but also that of the profits which the
failed to obtain. In other words, indemnification for damages is not limited to damnum emergens or actual loss but ex
to lucrum cessans or the amount of profit lost. 13

Had private respondent's jeepney not met an accident it could reasonably be expected that it would have continued e
the business in which it was engaged. Private respondent avers that he derives an average income of ₱300.00 per d
passenger jeepney and this earning was included in the award of damages made by the trial court and upheld by the
court. The award therefore of ₱236,000.00 as compensatory damages is not beyond reason nor speculative as it is b
reasonable estimate of the total damage suffered by private respondent, i.e. damage wrought upon his jeepney and t
lost from his transportation business. Petitioners for their part did not offer any substantive evidence to refute the esti
by the courts a quo.

However, we are constrained to depart from the conclusion of the lower courts that upon the award of compensatory
legal interest should be imposed beginning 22 July 1990, i.e. the date of the accident. Upon the provisions of Art. 221
Civil Code, interest "cannot be recovered upon unliquidated claims or damages, except when the demand can be est
with reasonable certainty." It is axiomatic that if the suit were for damages, unliquidated and not known until definitely
ascertained, assessed and determined by the courts after proof, interest at the rate of six percent (6%) per annum sh
from the date the judgment of the court is made (at which time the quantification of damages may be deemed to be re
ascertained). 14

In this case, the matter was not a liquidated obligation as the assessment of the damage on the vehicle was heavily d
upon by the parties with private respondent's demand for ₱236,000.00 being refuted by petitioners who argue that the
have the vehicle repaired easily for ₱20,000.00. In fine, the amount due private respondent was not a liquidated acco
already demandable and payable.

One last word. We have observed that private respondent left his passenger jeepney by the roadside at the mercy of
elements. Article 2203 of the Civil Code exhorts parties suffering from loss or injury to exercise the diligence of a goo
family to minimize the damages resulting from the act or omission in question. One who is injured then by the wrongf
negligent act of another should exercise reasonable care and diligence to minimize the resulting damage. Anyway, he
recover from the wrongdoer money lost in reasonable efforts to preserve the property injured and for injuries incurred
attempting to prevent damage to it. 15

However we sadly note that in the present case petitioners failed to offer in evidence the estimated amount of the dam
caused by private respondent's unconcern towards the damaged vehicle. It is the burden of petitioners to show satisf
only that the injured party could have mitigated his damages but also the amount thereof; failing in this regard, the am
damages awarded cannot be proportionately reduced.

WHEREFORE, the questioned Decision awarding private respondent Donato Gonzales ₱236,000.00 with legal intere
July 1990 as compensatory damages and ₱30,000.00 as attorney's fees is MODIFIED. Interest at the rate of six perc
per annum shall be computed from the time the judgment of the lower court is made until the finality of this Decision.
adjudged principal and interest remain unpaid thereafter, the interest shall be twelve percent (12%) per annum comp
the time judgment becomes final and executory until it is fully satisfied.
1âwphi1.nêt

Costs against petitioners.

SO ORDERED.

Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

Footnote

Original Records, pp. 23-26.

Id., pp. 15-18.

TSN, 6 February 1992, pp. 1-14.

Ibid.
4 
 See Note 1, p. 109.
5 

Decision penned by Judge Basilio R. Gabo, RTC-Br. 11, Malolos, Bulacan; CA Rollo, pp. 41-44.
6 

Decision penned by Associate Justice Maximiano C. Asuncion, concurred in by Associate Justices Salome A
7 

and Godardo A. Jacinto; Rollo, pp 25-33.

Id., pp. 12-23.

Baliwag Transit Inc. v. Court of Appeals, G.R. No. 57493, 7 January 1987, 147 SCRA 82; Teja Marketing v. I
9 

No. 65510, 9 March 1987, 148 SCRA 347; Lita Enterprises, Inc. v. Second Civil Cases Division, IAC, G.R. No
April 1984, 129 SCRA 79.

10 
51 O.G. 4059 (1955).

Santos v. Sibug, No. L-26815, 26 May 1981, 104 SCRA 520; Vargas v. Langcay, 116 Phil 478 (1962); Tama
11 

Aquino 105 Phil. 949 (1959); Erezo v. Jepte, 102 Phil. 103 (1957) .

Ong v. Court of Appeals, G.R. No. 117103, 21 January 1999, 301 SCRA 387; Congregation of the Religious
12 

Virgin Mary v. Court of Appeals, 353 Phil 591 (1998); Llorente v. Sandiganbayan, G.R. No. 122166, 11 March
SCRA 382.

Magat, Jr. v. CA, G.R. No. 124221, 4 August 2000, 337 SCRA 298; Integrated Packaging Corp. v. CA, G.R.
13 

115117, 8 June 2000, 333 SCRA 171; Coca-Cola Bottlers Packaging Inc., v. Henson, 367 Phil 493 (1999); As
Realty Development Co., Inc. v. CA, No. L-18056, 30 January 1956, 13 SCRA 52.

Eastern Assurance and Surety Corporation, G.R. No. 127135, 18 January 2000, 322 SCRA 73; Eastern Shi
14 

Inc. v. Court of Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78; Rivera v. Matute, 98 Phil 516 (1956).

15 
Puentebella v. Negros Coal, 50 Phil 69 (1927); De Castelvi v. Compania de Tabaccos, 49 Phil 998 (1926).

The Lawphil Project - Arellano Law Foundation