Santos vs.

Sibug
(104 SCRA 520)
Facts: Petitioner Adolfo Santos was the owner of a passenger jeep, but he had no certificate of
public conveyance for the operation of the vehicle as a public passenger jeep. Santos then
transferred his jeep to the name of Vidad so that it could be operated under the latters certificate
of public convenience. In other words, Santos became what is known as kabit operator. Vidad
executed a re-transfer document presumably to be registered it and when it was decided that the
passenger jeep of Santos was to be withdrawn from kabit arrangement.
On the accident date, Abraham Sibug was bumped by the said passenger jeep.
Issue: Whether the Vidad is liable being the registered owner of the jeepney?
Held: As the jeep in question was registered in the name of Vidad, the government or any person
affected by the representation that said vehicle is registered under the name of the particular
person had the right to rely on his declaration of his ownership and registration. And the
registered owner or any other person for that matter cannot be permitted to repudiate said
declaration with the objective of proving that the said registered vehicle is owned by another
person and not by the registered owner.
Santos, as the kabit, should not be allowed to defeat the levy in his vehicle and to avoid his
responsibility as a kabit owner for he had led the public to believe that the vehicle belongs to
Vidad. This is one way of curbing the pernicious kabit system that facilitates the commissions of
fraud against the traveling public.
Lita Enterprises vs. Intermediate Appellate Court
(129 SCRA 464)
Facts: Spouses Nicasio Ocampo and Francisca Garcia (private respondents) 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 take effect, 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. 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.
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
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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 Article 1412 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.
Teja Marketing v. Intermediate Appellate Court
(148 SCRA 347)
Facts: 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 the Land Transportation Commission show that the motorcycle
sold to the defendant was first mortgaged to the Teja Marketing by Angel Jaucian though the Teja
Marketing and Angel Jaucian are one and the same, because it was made to appear that way only
as the defendant had no franchise of his own and he attached the unit to the plaintiff's MCH Line.
The agreement also of the parties here was for the plaintiff to undertake the yearly registration of
the motorcycle 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 from
him. 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.
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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 attorney's 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 attorney's fees. On his part, Nale
did not dispute the sale and the outstanding balance of P1,700.00 still payable to Teja 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 for not being registered. The
City Court rendered judgment in favor of Teja Marketing, dismissing the counterclaim, and
ordered Nale to pay Teja Marketing 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, the petition for review was
filed by Teja Marketing and/or Angel Jaucian.
Issue: Whether the defendant can recover damages against the plaintiff?
Held: 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.