FEB Leasing and Finance Corporation v. Spouses Baylon
REITERATIONFacts
The Antecedents: On September 2, 2000, an Isuzu oil tanker registered in the name of petitioner FEB Leasing and Finance Corporation (petitioner), leased to BG Hauler, Inc. (BG Hauler) and driven by its employee Manuel Y. Estilloso, hit Loretta V. Baylon while she was crossing Del Monte Avenue in Quezon City. Loretta died two days later. The spouses Sergio P. Baylon and Maritess Villena-Baylon (spouses Baylon), Loretta's parents, filed a complaint for damages against petitioner, BG Hauler, Estilloso, and FGU Insurance Corp. (FGU Insurance). Procedural History: The Regional Trial Court (RTC) found BG Hauler and Estilloso solidarily liable with petitioner as the registered owner. The RTC ordered them to pay the spouses Baylon actual damages, moral damages, loss of earning capacity, death indemnity, and attorney's fees. FGU Insurance was released from further proceedings after depositing ₱450,000.00. The Court of Appeals (CA) affirmed the RTC decision with modification, deleting the award for attorney's fees. The CA held petitioner, BG Hauler, and Estilloso solidarily liable, with petitioner's liability stemming from being the registered owner and BG Hauler's from a lease contract provision. The Petition: Petitioner filed a petition for review on certiorari with the Supreme Court, questioning its solidary liability despite a lease contract provision exempting it from liability. The sole issue presented was whether the registered owner of a financially leased vehicle remains liable for damages caused by the vehicle despite an exemption provision in the lease contract.
Issue(s)
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; and whether the petitioner can be absolved of liability to third parties due to recourse against the lessee. Whether the Court of Appeals erred in holding petitioner solidarily liable with BG Hauler despite the lease contract provision; and whether the deletion of attorney's fees by the Court of Appeals was proper.
Ruling
The Supreme Court denied the petition, affirming the Court of Appeals' decision. It held that petitioner, as the registered owner of the oil tanker, cannot escape liability to third persons for damages arising from the vehicle's operation, even with a financial lease agreement and an exemption clause therein. The Court affirmed the solidary liability of petitioner, BG Hauler, Inc., and Manuel Y. Estilloso to pay the spouses Baylon actual expenses, moral damages, loss of earning capacity, and death indemnity. The award of attorney's fees was deleted.
Ratio Decidendi
On the issue of the registered owner's liability despite a financial lease agreement, and recourse against the lessee: The Court reiterated the established principle that the registered owner of a motor vehicle is directly and primarily responsible for the consequences of its operation to third persons, regardless of who the actual owner or operator is. This liability stems from compulsory motor vehicle registration under Republic Act No. 4136, as amended, which aims to fix responsibility on a definite individual for accidents on public highways. The Court emphasized that a lease contract, such as the one between petitioner and BG Hauler, cannot bind innocent third parties who are not privy to such agreements. The protection afforded to victims of accidents requires that they can easily identify the responsible party through the vehicle's registration records. Therefore, petitioner, as the registered owner, cannot escape liability even with a provision in the lease contract attempting to transfer all risks and liabilities to the lessee, BG Hauler. The Court cited PCI Leasing and Finance, Inc. v. UCPB General Insurance Co., Inc. and Erezo v. Jepte to support this ruling. While petitioner may have a recourse against BG Hauler for contractual reimbursement under Section 5.1 of the lease contract, this does not absolve petitioner of its primary liability to the spouses Baylon as the registered owner. The Court noted that petitioner did not file a cross-claim against BG Hauler, thus it could not compel BG Hauler to reimburse it in the present proceedings. However, the fundamental principle of registered owner liability to third persons remains. On the petitioner's contention that the Court of Appeals erred in holding it solidarily liable, and the deletion of attorney's fees: The Court found no error in the Court of Appeals' decision regarding solidary liability. The Court also pointed out that the amendatory law exempting registered owners from liability in financial leases was not yet in effect at the time of the lease agreement and the accident, further solidifying petitioner's liability under the prevailing law at the time. The Court agreed with the Court of Appeals that the award of attorney's fees by the RTC was improper. The RTC failed to provide a sufficient factual, legal, and equitable basis for the award. The Court reiterated that attorney's fees are exceptions and not awarded automatically, requiring justification under Article 2208 of the Civil Code. Since no such justification was presented, the award was deleted.
Main Doctrine
The registered owner of a motor vehicle remains directly and primarily liable for the consequences of its operation to third persons, notwithstanding a financial lease agreement that shifts liability to the lessee, as such agreement does not bind innocent third parties who rely on the records of the Land Transportation Office.