SECOND DIVISION prevented in enjoining the kabit system does not exist.
Hence, the private respondent
[G.R. No. 125817. January 16, 2002.]
ABELARDO LIM and ESMADITO
GUNNABAN, petitioners, vs. COURT OF APPEALS and DONATO
H. GONZALES,respondents.
Tranquilino F. Meris for petitioners.
Narciso E. Ramirez for private respondent.
SYNOPSIS
Private respondent herein purchased an Isuzu passenger jeepney from
Gomercino Vallarta, a holder of a certificate of public convenience for the operation of a
public utility vehicle. He continued to operate the public transport business without
transferring the registration of the vehicle to his name. Thus, the original owner
remained to be the registered owner and operator of the vehicle. Unfortunately, the
vehicle got involved in a road mishap which caused it severe damage. The ten-wheeler-
truck which caused the accident was owned by petitioner Lim and was driven by co-
petitioner Gunnaban. Gunnaban admitted responsibility for the accident, so that
petitioner Lim shouldered the costs of hospitalization of those wounded, compensation
for the heirs of the deceased passenger and the restoration of the other vehicle involved.
He also negotiated for the repair of the private respondent's jeepney but the latter
refused and demanded for its replacement. Hence, private respondent filed a complaint
for damages against petitioners. Meanwhile, the jeepney was left by the roadside to
corrode and decay. The trial court decided in favor of private respondent and awarded
him his claim. On appeal, the Court of Appeals affirmed the decision of the trial court.
Hence, petitioner filed this petition. The issue herein is whether or not the new owner of a
passenger jeepney who continued to operate the same under the so-called kabit system
and in the course thereof met an accident has the legal personality to bring the action for
damages against the erring vehicle.
The Supreme Court affirmed the subject decision with modification as to the
computation of interest. According to the Court, the thrust of the law in enjoining
the kabit system is not 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. In the present case, it is once apparent that the evil sought to be
has the right to proceed against petitioners for the damage caused on his passenger
jeepney as well as on his business.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; CERTIFICATE OF PUBLIC
CONVENIENCE; KABIT SYSTEM; DEFINED AND CONSTRUED AS BEING CONTRARY
TO PUBLIC POLICY; RATIONALE. — The kabit system is an arrangement whereby a
person who has been granted a certificate of public convenience allows other persons
who own motor vehicles to operate them under his license, sometimes for a fee or
percentage of the earnings. Although the parties to such an agreement are not outrightly
penalized by law, the kabit system is invariably recognized as being contrary 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 a certificate of public convenience for the business of public
transportation is the financial capacity of the holder of the license, so that liabilities
arising from accidents may be duly compensated. The kabit system renders illusory such
purpose and, worse, may still be availed of by the grantee to escape civil liability caused
by a negligent use of a vehicle owned by another and operated under his license. If a
registered owner is allowed to escape liability by 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 ofpassengers 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. Subsequent cases affirm such basic doctrine. 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.
2. ID.; TORTS; DAMAGES AWARDED AS A RESULT THEREOF; NOT LIMITED
TO ACTUAL LOSS BUT EXTENDS TO AMOUNT OFPROFIT LOST; APPLICATION IN
CASE AT BAR. — In awarding damages for tortuous injury, it becomes the sole
design of the courts to provide for adequate compensation by putting the plaintiff in the
same financial position he was in prior to the tort. It is a fundamental principle in the law
on damages that a defendant cannot be held liable in damages for more than the actual
loss which he has inflicted and that a plaintiff is entitled to no more than the just and
adequate compensation for the injury suffered. His recovery is, in the
absence of circumstances giving rise to an allowance of punitive damages, limited to a
fair compensation for the harm done. The law will not put him in a position better than
where he should be in had not the wrong happened. In the present case, petitioners insist
that as the passenger jeepney was purchased in 1982 for only P30,000.00 to award
damages considerably greater than this amount would be improper and unjustified.
Petitioners are at best reminded that indemnification for damages comprehends not
only the value of the loss suffered but also that of the profits which the obligee failed to
obtain. In other words, indemnification for damages is not limited to damnum
emergens or actual loss but extends to lucrum cessans or the amount of profit
lost. SDcITH
3. ID.; DAMAGES; UNLIQUIDATED CLAIMS; INTEREST RATE OF SIX
PERCENT (6%) PER ANNUM SHOULD BE COMPUTED FROM DATE
JUDGMENT OF COURT IS MADE; APPLICATION IN CASE AT BAR. — Upon the
provisions of Art. 2213 of the Civil Code, interest "cannot be recovered upon unliquidated
claims or damages, except when the demand can be established 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 should be from the date the
judgment of the court is made (at which time the quantification of damages may be
deemed to be reasonably ascertained). In this case, the matter was not a liquidated
obligation as the assessment of the damage on the vehicle was heavily debated upon by
the parties with private respondent's demand for P236,000.00 being refuted by
petitioners who argue that they could have the vehicle repaired easily for P20,000.00. In
fine, the amount due private respondent was not a liquidated account that was already
demandable and payable.
4. ID.; ID.; PARTY INJURED REQUIRED TO EXERCISE DILIGENCE OF GOOD
FATHER OF FAMILY TO MINIMIZE RESULTING DAMAGE. — Article 2203 of the Civil
Code exhorts parties suffering from loss or injury to exercise the diligence of a good
father of a family to minimize the damages resulting from the act or omission in
question. One who is injured then by the wrongful or negligent act of another should
exercise reasonable care and diligence to minimize the resulting damage. Anyway, he
can recover from the wrongdoer money lost in reasonable efforts to preserve the
property injured and for injuries incurred in attempting to prevent damage to it. However
we sadly note that in the present case petitioners failed to offer in evidence the estimated
amount of the damage caused by private respondent's unconcern towards the damaged
vehicle. It is the burden of petitioners to show satisfactorily not only that the injured
party could have mitigated his damages but also the amount thereof; failing in this
regard, the amount ofdamages awarded cannot be proportionately reduced.
DECISION
BELLOSILLO, J p:
When a passenger jeepney covered by a certificate of public convenience is
sold to another who continues to operate it under the same certificate of public
convenience under the so-called kabit system, and in the course thereof the vehicle
meets an accident through the fault of another vehicle, may the new owner sue for
damages against the erring vehicle? Otherwise stated, does the new owner have any
legal personality to bring the action, or is he the real party in interest in the suit, despite
the fact 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 Vallarta, holder of a certificate of public
convenience for the operation of public utility vehicle plying the Monumento-Bulacan
route. While private respondent Gonzales continued offering the jeepney for public
transport services he did not have the registration of the vehicle transferred in his name
nor did he source for himself a certificate of public convenience for its operation. Thus
Vallarta remained on record as its registered owner and operator.
On 22 July 1990, while the jeepney was running northbound along the North
diversion road somewhere in Meycauayan, Bulacan, it collided with a ten-wheeler-truck
owned by petitioner Abelardo Lim and driven by his co-petitioner Esmadito Gunnaban.
Gunnaban owned responsibility for the accident, explaining that while he was traveling
towards Manila the truck suddenly lost its brakes. To avoid colliding with another vehicle,
he swerved to the left until he reached the center island. 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 caused severe 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 passenger, and had the Ferroza restored to good
condition. He also negotiated with private respondent and offered to have the passenger
jeepney repaired at his shop. Private respondent however did not accept the offer
so Lim offered him P20,000.00, the assessment of the damage as estimated by his chief
mechanic. Again, petitioner Lim's proposition was rejected; instead, private respondent
demanded a brand-new jeep or the amount of P236,000.00. Lim increased his bid to
P40,000.00 but private respondent was unyielding. Under the circumstances,
negotiations had to be abandoned; hence, the filing of the complaint for 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 respondent who was the
real party in interest. 1 For his part, petitioner Gunnaban averred that the accident was a
fortuitous event which was beyond his control. 2
Meanwhile, the damaged passenger jeepney was left by the roadside to
corrode and decay. Private respondent explained that although he wanted to take his
jeepney home he had no capability, financial or otherwise, to tow the damaged
vehicle. 3 ACSaHc
The main point of contention between the parties related to the
amount of damages due private respondent. Private respondent Gonzales averred that
per estimate made by an automobile repair shop he would have to spend P236,000.00 to
restore his jeepney to its original condition. 4 On the other hand, petitioners insisted that
they could have the vehicle repaired for P20,000.00. 5
On 1 October 1993 the trial court upheld private respondent's claim and
awarded him P236,000.00 with legal interest from 22 July 1990 as compensatory
damages and P30,000.00 as attorney's fees. In support of its decision, the
trial court ratiocinated that as vendee and current owner of the passenger jeepney
private respondent stood for all intents and purposes as the real party in interest. Even
Vallarta himself supported private respondent's assertion of interest over the jeepney
for, when he was called to testify, he dispossessed himself of any claim or pretension on
the property. Gunnaban was found by the trial court to have caused the accident since
he panicked in the face of an emergency which was rather palpable from
his act of directing his vehicle to a perilous streak down the fast lane of the superhighway
then across the island and ultimately to the opposite lane 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 supervising his employees. It was admitted during
trial that Gunnaban doubled as mechanic of the ill-fated truck despite the fact that he
was 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. In upholding the decision of the court a
quo the appeals court concluded that while an operator under the kabit system could not
sue without joining the registered owner of the vehicle as his principal, equity demanded
that the present case be made an exception. 7Hence this petition.
It is petitioner's contention that the Court of Appeals erred in sustaining the
decision of the trial court despite their opposition to the well-established doctrine that
an operator of a vehicle continues to be its operator as long as he remains the
operator ofrecord. According to petitioners, to recognize an operator under
the kabit system as the real party in interest and to countenance his claim for damages is
utterly subversive of public policy. Petitioners further contend that inasmuch as the
passenger jeepney was purchased by private respondent for only P30,000.00, an
award of P236,000.00 is inconceivably large and would amount to unjust enrichment. 8
Petitioner's attempt to illustrate that an affirmance of the appealed decision
could be supportive of the pernicious kabit system does not persuade. Their labored
efforts to demonstrate how the questioned rulings of the courts a quo are diametrically
opposed to the policy of the law requiring operators of public utility vehicles to secure a
certificate of public convenience for their operation is quite unavailing.
The kabit system is an arrangement whereby a person who has been granted a
certificate of public convenience allows other persons who own motor vehicles to
operate them under his license, sometimes for a fee or percentage of the
earnings. 9 Although the parties to such an agreement are not outrightly penalized by
law, the kabit system is invariably recognized as being contrary to public policy and
therefore void and inexistent under Art. 1409 of the Civil Code.
In the early case of Dizon v. Octavio 10 the Court explained that one of the
primary factors considered in the granting of a certificate of public convenience for the
business of public transportation is the financial capacity of the holder of the license, so
that liabilities arising from accidents may be duly compensated. The kabit system
renders illusory such purpose and, worse, may still be availed of by the grantee to escape
civil liability caused by a negligent use of a vehicle owned by another and operated under
his license. If a registered owner is allowed to escape liability by 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 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. 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 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. DcTaEH
In the present case it is at once apparent that the evil sought to be prevented
in enjoining the kabit system does not exist. First, neither of the parties to the
pernicious kabit system is being held liable for damages. Second, the case arose from the
negligence ofanother vehicle in using the public road to whom no representation, or
misrepresentation, as regards the ownership and operation ofthe passenger jeepney was
made and to whom no such representation, or misrepresentation, was necessary. Thus
it cannot be said that private respondent Gonzales and the registered owner of the
jeepney were in estoppel for leading the public to believe that the jeepney belonged to
the registered owner. Third, the riding public was not bothered nor inconvenienced at the
very least by the illegal arrangement. On the contrary, it was private respondent himself
who had been wronged and was 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 damage caused on his passenger jeepney as well as
on his business. Any effort then to frustrate his claim of damages by the ingenuity with
which petitioners framed the issue should be discouraged, if not repelled.
In awarding damages for the tortuous injury, it becomes the sole design of the
courts to provide for adequate compensation by putting the plaintiff in the same financial
position he was in prior to the tort. It is fundamental principle in the law on damages that
a defendant cannot be held liable in damages for more than actual loss which he has
inflicted and that a plaintiff is entitled to no more than the just and adequate
compensation for the injury suffered. His recovery is, in the absence of circumstances
giving rise to an allowance of punitive damages, limited to a fair compensation for the
harm done. The law will not 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 P30,000.00 to award damages considerably greater than this
amount would be improper and unjustified. Petitioners are at best reminded that
indemnification for damages comprehends not only the value of the loss suffered but
also that of the profits which the obligee failed to obtain. In other words, indemnification
for damages is not limited to damnum emergens or actual loss but extends 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 earning from the business in which it was
engaged. Private respondent avers that he derives an average income of P300.00 per day
from his passenger jeepney and this earning was included in the award of damages made
by the trial court and upheld by the appeals court. The award therefore of P236,000.00
as compensatory damages is not beyond reason nor speculative as it is based on a
reasonable estimate of the total damage suffered by private respondent, i.e. damage
wrought upon his jeepney and the income lost from his transportation business.
Petitioners for their part did not offer any substantive evidence to refute the estimate
made by the courts a quo. aCSEcA
However, we are constrained to depart from the conclusion of the lower courts
that upon the award of compensatory damages legal interest should be imposed
beginning 22 July 1990, i.e. the date of the accident. Upon the provisions of Art.
2213 of the Civil Code, interest "cannot be recovered upon unliquidated claims or
damages, except when the demand can be established 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 should be from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to be reasonably
ascertained). 14
In this case, the matter was not a liquidated obligation as the assessment of the
damage on the vehicle was heavily debated upon by the parties with private respondent's
demand for P236,000.00 being refuted by petitioners who argue that they could have the
vehicle repaired easily for P20,000.00. In fine, the amount due private respondent was
not a liquidated account that was already demandable and payable. TAcSCH
One last word. We have observed that private respondent left his passenger
jeepney by the roadside at the mercy of the elements. Article 2203 of the Civil Code
exhorts parties suffering from loss or injury to exercise the diligence of a good father of a
family to minimize the damages resulting from the act or omission in question. One who
is injured then by the wrongful or negligent act of another should exercise reasonable
care and diligence to minimize the resulting damage. Anyway, he can recover from the
wrongdoer money lost in reasonable efforts to preserve the property injured and for
injuries incurred in 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 damage caused by private respondent's
unconcern towards the damaged vehicle. It is the burden of petitioners to show
satisfactorily not only that the injured party could have mitigated his damages but also
the amount thereof; failing in this regard, the amount of damages awarded cannot be
proportionately reduced.
WHEREFORE, the questioned Decision awarding private respondent Donato
Gonzales P236,000.00 with legal interest from 22 July 1990 as compensatory damages
and P30,000.00 as attorney's fees is MODIFIED. Interest at the rate of six percent (6%)
per annum shall be computed from the time the judgment of the lower court is made
until the finality of this Decision. If the adjudged principal and interest remain unpaid
thereafter, the interest shall be twelve percent (12%) per annum computed from the time
judgment becomes final and executory until it is fully satisfied.
Costs against petitioners.
SO ORDERED.
Mendoza, Quisumbing, Buena and De Leon Jr., JJ., concur.
||| (Lim v. Court of Appeals, G.R. No. 125817, [January 16, 2002], 424 PHIL 457-468)
 EN BANC
[G.R. No. 64693. April 27, 1984.]
LITA ENTERPRISES, INC., petitioner, vs. SECOND CIVIL CASES
DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M.
OCAMPO and FRANCISCA P. GARCIA, respondents.
SYLLABUS
1. MERCANTILE LAW; TRANSPORTATION; CERTIFICATE OF PUBLIC CONVENIENCE;
USE OF SAME UNDER "KABIT SYSTEM p" CONDEMNED. — The parties herein
operated under an arrangement, commonly known as the "kabit system," whereby a
person who has been granted a certificate of 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. In the words of Chief Justice Makalintal, (Dizon vs.
Octavio, 51 O.G. 4059) "this is a pernicious system that cannot be too severely
condemned. It constitutes an imposition upon the good faith of the government."
2. ID.; ID.; ID.; ID.; AGREEMENT UNDER THE SYSTEM, VOID FOR BEING CONTRARY
TO PUBLIC POLICY. — Although not outrightly penalized as a criminal offense, the
"kabit system" is invariably recognized as being contrary to public policy and, therefore,
void and inexistent 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 them
both where it finds them. Upon this premise, it was flagrant error on the part of both
the trial and appellate courts to have accorded the parties relief from their
predicament. Article 1412 of the Civil Code denies them such aid.
3. CIVIL LAW; OBLIGATIONS AND CONTRACTS; VOID CONTRACTS, CANNOT BE
CURED BY RATIFICATION OR PRESCRIPTION. — The defect of inexistence of a
contract is permanent and incurable, and cannot be cured by ratification or by
prescription. As this Courtsaid in Eugenio vs. Perdido, 97 Phil. 41, "the mere lapse of time
cannot give efficacy to contracts that are null and void."
4. ID.; PRINCIPLES OF IN PARI DELICTO, DEFINED; APPLIED IN CASE AT BAR. — The
principle of in pari delicto is well known not only in this jurisdiction but also in the United
States where common law prevails. Under American jurisdiction, the doctrine is stated
thus: "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 be sold or delivered, or damages for its violation. The rule has
sometimes been laid down as though it was equally universal, that where the parties
are in pari delicto, no affirmative relief of any kind will be given to one against the
other." (Pomeroy's Equity Jurisprudence, Vol. 3, 5th ed. p. 728) Although certain
exceptions to the rule are provided by law, We see no cogent reason why the full force
of the rule should not be applied in the instant case.
DECISION
ESCOLIN, J p:
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the time-
honored maxim that must be applied to the parties in the case at bar. Having entered
into an illegal contract, neither can seek relief from the courts, and each must bear the
consequences of his acts. LLpr
The factual background of this case is undisputed.
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private
respondents, purchased in installment from the Delta Motor Sales Corporation five (5)
Toyota Corona Standard cars to be used as taxicabs. Since they had no franchise to
operate taxicabs, they contracted with petitioner Lita Enterprises, Inc., through its
representative, Manuel Concordia, for the use of the latter's certificate of public
convenience in consideration of an initial payment of P1,000.00 and a monthly rental of
P200.00 per taxicab unit. To effectuate said agreement, the aforesaid cars were
registered in the name of petitioner Lita Enterprises, Inc. Possession, however,
remained with the spouses Ocampo who operated and maintained the same under the
name Acme Taxi, petitioner's trade name.
About a year later, on March 18, 1967, one of said taxicabs driven by their employee,
Emeterio Martin, collided with a motorcycle whose driver, one Florante Galvez, died
from the head injuries sustained therefrom. A criminal case was eventually filed against
the driver Emeterio Martin, while a civil case for damages was instituted by Rosita
Sebastian Vda. de Galvez, heir of the victim, against LitaEnterprises, Inc., as registered
owner of the taxicab. In the latter case, Civil Case No. 72067 of the Court of First
Instance of Manila, petitioner Lita Enterprises, Inc. was adjudged liable for damages in
the amount of P25,000.00 and P7,000.00 for attorney's fees.
This decision having become final, a writ of execution was issued. One of the vehicles of
respondent spouses with Engine No. 2R- 914472 was levied upon and sold at public
auction for P2,150.00 to one Sonnie Cortez, the highest bidder. Another car with Engine
No. 2R-915036 was likewise levied upon and sold at public auction for P8,000.00 to a
certain Mr. Lopez. LibLex
Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs
in his name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over
the registration papers to him, but the latter allegedly refused. Hence, he and his wife
filed a complaint against Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez, Visayan
Surety & Insurance Co. and the Sheriff of Manila for reconveyance of motor vehicles
with damages, docketed as Civil Case No. 90988 of the Court of First Instance of
Manila. Trial on the merits ensued and on July 22, 1975, the said court rendered a
decision, the dispositive portion of which reads:
"WHEREFORE, the complaint is hereby dismissed as far as
defendants Rosita Sebastian Vda. de Galvez, Visayan Surety &
Insurance Company and the Sheriff of Manila are concerned.
"Defendant Lita Enterprises, Inc., is ordered to transfer the
registration certificate of the three Toyota cars not levied upon
with Engine Nos. 2R-230026, 2R-688740 and 2R-585884 [Exhs. A,
B, C and D] by executing a deed of conveyance in favor of the
plaintiff.
"Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the
rentals in arrears for the certificate of convenience from March
1973 up to May 1973 at the rate of P200 a month per unit for the
three cars." (Annex A, Record on Appeal, p. 102-103, Rollo).
Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same
was denied by the court a quo on October 27, 1975. (p. 121, Ibid.)
On appeal by petitioner, docketed as CA-G.R. No. 59157-R,
the Intermediate Appellate Court modified the decision by including as part of its
dispositive portion another paragraph, to wit:
"In the event the condition of the three Toyota cars will no longer
serve the purpose of the deed of conveyance because of their
deterioration, or because they are no longer serviceable, or
because they are no longer available, the Lita Enterprises, Inc. is
ordered to pay the plaintiffs their fair market value as of July 22,
1975." (Annex "D", p. 167, Rollo.).
Its first and second motions for reconsideration having been denied, petitioner came to
Us, praying that:
"1. . . .
"2. . . . after legal proceedings, decision be rendered or resolution
be issued, reversing, annulling or amending the decision of public
respondent so that:
"(a) the additional paragraph added by the public respondent to
the DECISION of the lower court (CFI) be deleted;
"(b) that private respondents be declared liable to petitioner for
whatever amount the latter has paid or was declared liable (in
Civil Case No. 72067) of the Court of First Instance of Manila to
Rosita Sebastian Vda. de Galvez, as heir of the victim Florante
Galvez, who died as a result of the gross negligence of private
respondents' driver while driving one private respondents'
taxicabs." (p. 39, Rollo.)
Unquestionably, the parties herein operated under an arrangement, commonly known
as the "kabit system", whereby a person who has been granted a certificate of
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 this
prevalence of graft and corruption in the government transportation offices. In the
words of Chief Justice Makalintal, 1 "this is a pernicious system that cannot be too
severely condemned. It constitutes an imposition upon the good faith of the
government." Cdpr
Although not outrightly penalized as a criminal offense, the "kabit system" is invariably
recognized as being contrary to public policy and, therefore, void and inexistent under
Artic1e 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 them both where it finds them.
Upon this premise, it was flagrant error on the part of both the trial and appellate courts
to have accorded the parties relief from their predicament. Article 1412 of the Civil Code
denies them such aid. It provides:
"ART. 1412. If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following rules
shall be observed:
 "(1) 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 other's undertaking."

The defect of inexistence of a contract is permanent and incurable, and cannot be cured
by ratification or by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere
lapse of time cannot give efficacy to contracts that are null and void."

The principle of in pari delicto is well known not only in this jurisdiction but also in the
United States where common law prevails. Under American jurisdiction, the doctrina is
stated thus: "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 be sold or delivered, or damages for its violation. The rule has
sometimes been laid down as though it was equally universal, that where the parties
are in pari delicto, no affirmative relief of any kind will be given to one against the
other." 3 Although certain exceptions to the rule are provided by law, We see no cogent
reason why the full force of the rule should not be applied in the instant case. LLphil

WHEREFORE, all proceedings had in Civil Case No. 90988 entitle "Nicasio Ocampo and
Francisca P. Garcia, Plaintiffs, versus LitaEnterprises, Inc., et al., Defendants" of
the Court of First Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo
and Francisca P. Garcia, Plaintiffs-Appellees, versus Lita Enterprises, Inc., Defendant-
Appellant," of the Intermediate Appellate Court, as well as the decisions rendered
therein are hereby annulled and set aside. No costs.

SO ORDERED.

Fernando, C .J ., Teehankee, Makasiar, Concepcion, Jr., Guerrero, Abad Santos, De Castro,

Melencio-Herrera Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ ., concur.

Aquino, J ., took no part.

||| (Lita Enterprises, Inc. v. Intermediate Appellate Court, G.R. No. 64693, [April 27, 1984],
214 PHIL 63-68)
 SECOND DIVISION
[G.R. No. L-65510. March 9, 1987.]
TEJA MARKETING AND/OR ANGEL
JAUCIAN, petitioner, vs. HONORABLE INTERMEDIATE APPELLATE C
OURT ** AND PEDRO N. NALE, respondents.
Cirilo A. Diaz, Jr. for petitioner.
Henry V. Briguera for private respondent.
DECISION
PARAS, J p:
"'Ex pacto illicito' non oritur actio' (No action arises out of illicit bargain) is
the time-honored maxim that must be applied to the parties in the case at bar.
Having entered into an illegal contract, neither can seek relief from the courts, and
each must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129 SCRA
81.)
The factual background of this case is undisputed. The same is narrated by the
respondent court in its now assailed decision, as follows:
"On May 9, 1975, the defendant bought from the plaintiff a
motorcycle with complete accessories and a sidecar in the total
consideration of P8,000.00 as shown by Invoice No. 144 (Exh.
"A"). Out of the total purchase price the defendant gave a
downpayment of P1,700.00 with a promise that he would pay
plaintiff the balance within sixty days. The defendant, however,
failed to comply with his promise and so upon his own request,
the period of paying the balance was extended to one year in
monthly installments until January 1976 when he stopped paying
anymore. The plaintiff made demands but just the same the
defendant failed to comply with the same thus forcing the
plaintiff to consult a lawyer and file this action for his damage in
the amount of P546.21 for attorney's fees and P100.00 for
expenses of litigation. The plaintiff also claims that as of February
20, 1978, the total account of the defendant was already
P2,731,05 as shown in a statement of account (Exhibit "B"). This
amount includes not only the balance of P1,700.00 but an
additional 12% interest per annum on the said balance from
January 26, 1976 to February 27, 1978; a 2% service charge; and
P546.21 representing attorney's fees.
"In this particular transaction a chattel mortgage (Exhibit 1) was
constituted as a security for the payment of the balance of the
purchase price. It has been the practice of financing firms that
whenever there is a balance of the purchase price the registration
papers of the motor vehicle subject of the sale are not given to
the buyer. The records of the LTC 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.
Pursuant to this agreement the defendant on February 22, 1976
gave the plaintiff P90.00, the P8.00 would be for the mortgage
fee and the P82.00 for the registration fee of the motorcycle. 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 saying that the defendant was hiding the motorcycle
from him. Lastly, the plaintiff explained also 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.
"On his part the defendant did not dispute the sale and the
outstanding balance of P1,700.00 still payable to the plaintiff. The
defendant was persuaded to buy from the plaintiff the
motorcycle with the side car because of the condition that the
plaintiff would be the one to register every year the motorcycle
with the Land Transportation Commission. In 1976, however, the
plaintiff failed to register both the chattel mortgage and the
motorcycle with the LTC notwithstanding the fact that the
defendant gave him P90.00 for mortgage fee and registration fee
and had the motorcycle insured with La Perla Compaña de
Seguros (Exhibit "6") as shown also by the Certificate of cover
(Exhibit "3"). Because of this failure of the plaintiff to comply with
his obligation to register the motorcycle the defendant suffered
damages when he failed to claim any insurance indemnity which
would amount to no less than P15,000.00 for the more than two
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 defendant disputed the claim of the plaintiff that he was
biding from the plaintiff the motorcycle resulting in its not being
registered. The truth being that the motorcycle was being used
for transporting passengers and it kept on travelling from one
place to another. The motor vehicle sold to him was mortgaged
by the plaintiff with the Rural Bank of Camaligan without his
consent and knowledge and the defendant was not even given a
copy of the mortgage deed. The defendant claims that it is not
true that the motorcycle was mortgaged because of re-
discounting for re-discounting is only true with Rural Banks and
the Central Bank. The defendant puts the blame on the plaintiff
for not registering the motorcycle with the LTC and for not giving
him the registration papers inspite of demands made. Finally, the
evidence of the defendant shows that because of the filing of this
case he was forced to retain the services of a lawyer for a fee on
not less than P1,000.00.
xxx xxx xxx
". . . it also appears and the Court so finds that
defendant purchased the motorcycle in question,
particularly for the purpose of engaging and using the
same in the transportation business and for this
purpose said trimobile unit was attached to the plaintiff's
transportation line who had the franchise, so much so that
in the registration certificate, the plaintiff appears to be the
owner of the unit. Furthermore, it appears to have been
agreed, further between the plaintiff and the defendant,
that plaintiff would undertake the yearly registration of
the unit in question with the LTC. Thus, for the
registration of the unit for the year 1976, per agreement,
the defendant gave to the plaintiff the amount of P82.00
for its registration, as well as the insurance coverage of
the unit."
Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of
Money with Damages" against private respondent Pedro N. Nale in the City Court of
Naga City. The City Court rendered judgment in favor of petitioner, the dispositive
portion of which reads: LLjur
"WHEREFORE, decision is hereby rendered dismissing the
counterclaim and ordering the defendant to pay plaintiff the sum
of P1,700.00 representing the unpaid balance of the purchase
price with legal rate of interest from the date of the filing of the
complaint until the same is fully paid; to pay plaintiff the sum of
P546.21 as attorney's fees; to pay plaintiff the sum of P200.00 as
expenses of litigation; and to pay the costs.
"SO ORDERED."
On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in
toto. Private respondent filed a petition for review with
the Intermediate Appellate Court and on July 18, 1983. The said Court promulgated its
decision, the pertinent portion of which reads —
"However, as the purchase of the motorcycle for operation as a
trimobile under the franchise of the private respondent Jaucian,
pursuant to what is commonly known as the 'kabit system,'
without the prior approval of the Board of Transportation
(formerly the Public Service Commission) was an illegal
transaction involving the fictitious registration of the motor
vehicle in the name of the private respondent so that he may
traffic with the privileges of his franchise, or certificate of public
convenience, to operate a tricycle service, the parties being in pari
delicto, neither of them may bring an action against the other to
enforce their illegal contract [Art. 1412 (a), Civil Code]."
xxx xxx xxx
"WHEREFORE, the decision under review is hereby set aside. The
complaint of respondent Teja Marketing and/or Angel Jaucian, as
well as the counterclaim of petitioner Pedro Nale in Civil Case No.
1153 of the Court of First Instance of Camarines Sur (formerly Civil
 Case No. 5856 of the City Court of Naga City) are dismissed. No Alampay, J., no part.
pronouncement as to costs.
||| (Teja Marketing v. Intermediate Appellate Court, G.R. No. L-65510, [March 9, 1987], 232
"SO ORDERED." PHIL 321-327)

The decision is now before Us on a petition for review, petitioner Teja Marketing and/or
Angel Jaucian presenting a lone assignment of error — whether or not
respondent court erred in applying the doctrine of "pari delicto."

We find the petition devoid of merit. cdrep

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 outrightly penalized as a criminal offense, the kabit system is invariably
recognized as being contrary to public policy and, therefore, void and inexistent 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 them. Upon
this premise it would be error to accord the parties relief from their predicament. Article
1412 of the Civil Code denies them such aid. It provides:

"Art. 1412. If the act in which the unlawful or forbidden cause

consists does not constitute a criminal offense, the following rules
shall be observed:

"1. When the fault is on the part of both contracting parties,

neither may recover that he has given by virtue of the contract, or
demand, the performance of the other's undertaking."

The defect of inexistence of a contract is permanent and cannot be cured by ratification

or by prescription. The mere lapse of time cannot give efficacy to contracts that are null
and void. llcd

WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of
the Intermediate Appellate Court (now the Court of Appeals) is AFFIRMED. No costs.

SO ORDERED.

Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin and Cortez, JJ., concur.
 FIRST DIVISION
[G.R. No. 160286. July 30, 2004.]
SPOUSES FRANCISCO M. HERNANDEZ and ANICETA ABEL-
HERNANDEZ and JUAN GONZALES, petitioners, vs. SPOUSES
LORENZO DOLOR and MARGARITA DOLOR, FRED PANOPIO,
JOSEPH SANDOVAL, RENE CASTILLO, SPOUSES
FRANCISCO VALMOCINA and VIRGINIA VALMOCINA,
SPOUSES VICTOR PANOPIO and MARTINA PANOPIO, and
HON. COURT OF APPEALS, respondents.
DECISION
YNARES-SANTIAGO, J p:
This is a petition for review under Rule 45 of the Rules of Court seeking the
reversal of the decision 1 of the Court of Appeals, dated April 29, 2003, in CA-G.R. CV No.
60357, which affirmed with modification the amount of damages awarded in the
November 24, 1997 decision 2 of the Regional Trial Court of Batangas City, Branch IV.
The undisputed facts are as follows:
At about 3:00 p.m. of December 19, 1986, Lorenzo Menard "Boyet" Dolor, Jr.
was driving an owner-type jeepney with plate no. DEB 804 owned by her mother,
Margarita, towards Anilao, Batangas. As he was traversing the road at Barangay Anilao
East, Mabini, Batangas, his vehicle collided with a passenger jeepney bearing plate no.
DEG 648, driven by petitioner Juan Gonzales and owned by his co-petitioner Francisco
Hernandez, which was travelling towards Batangas City.
Boyet Dolor and his passenger, Oscar Valmocina, died as a result of the
collision. Fred Panopio, Rene Castillo and Joseph Sandoval, who were also on board the
owner-type jeep, which was totally wrecked, suffered physical injuries. The collision also
damaged the passenger jeepney of Francisco Hernandez and caused physical injuries to
its passengers, namely, Virgie Cadavida, Fiscal Artemio Reyes and Francisca Corona. 3
Consequently, respondents commenced an action 4 for damages against
petitioners before the Regional Trial Court of Batangas City, alleging that driver Juan
Gonzales was guilty of negligence and lack of care and that the Hernandez spouses were
guilty of negligence in the selection and supervision of their employees. 5
Petitioners countered that the proximate cause of the death and injuries
sustained by the passengers of both vehicles was the recklessness of Boyet Dolor, the
driver of the owner-type jeepney, who was driving in a zigzagging manner under the
influence of alcohol. Petitioners also alleged that Gonzales was not the driver-employee
of the Hernandez spouses as the former only leased the passenger jeepney on a daily
basis. The Hernandez spouses further claimed that even if an employer-employee
relationship is found to exist between them, they cannot be held liable because as
employers they exercised due care in the selection and supervision of their employee.
During the trial of the case, it was established that the drivers of the two
vehicles were duly licensed to drive and that the road where the collision occurred was
asphalted and in fairly good condition. 6 The owner-type jeep was travelling uphill while
the passenger jeepney was going downhill. It was further established that the owner-
type jeep was moderately moving and had just passed a road bend when its passengers,
private respondents Joseph Sandoval and Rene Castillo, saw the passenger jeepney at a
distance of three meters away. The passenger jeepney was traveling fast when it bumped
the owner type jeep. 7 Moreover, the evidence presented by respondents before the trial
court showed that petitioner Juan Gonzales obtained his professional driver's license only
on September 24, 1986, or three months before the accident. Prior to this, he was holder
of a student driver's permit issued on April 10, 1986. 8
On November 24, 1997, the trial court rendered a decision in favor of
respondents, the dispositive portion of which states:
Premises duly considered and the plaintiffs having
satisfactorily convincingly and credibly presented evidence clearly
satisfying the requirements of preponderance of evidence to
sustain the complaint, this Court hereby declares judgment in
favor of the plaintiffs and against the defendants. Defendants-
spouses Francisco Hernandez and Aniceta Abel Hernandez and
Juan Gonzales are therefore directed to pay jointly and severally,
the following:
1) To spouses Lorenzo Dolor and Margarita Dolor:
a) P50,000.00 — for the death of their son, Lorenzo
Menard "Boyet" Dolor, Jr.;
b) P142,000.00 — as actual and necessary funeral
expenses;
 c) P50,000.00 — reasonable value of the totally wrecked
owner-type jeep with plate no. DEB 804 Phil
'85;
d) P20,000.00 — as moral damages;
e) P20,000.00 as reasonable litigation expenses and
attorney's fees.
2) To spouses Francisco Valmocina and Virginia Valmocina:
a) P50,000.00 — for the death of their son, Oscar
Balmocina (sic);
b) P20,000.00 — as moral damages;
c) P18,400.00 — for funeral expenses;
d) P10,000.00 — for litigation expenses and attorney's
fees.
3) To spouses Victor Panopio and Martina Panopio:
a) P10,450.00 — for the cost of the artificial leg and
crutches being used by their son Fred
Panopio;
b) P25,000.00 — for hospitalization and medical
expenses they incurred for the treatment of
their son, Fred Panopio.
4) To Fred Panopio:
a) P25,000.00 — for the loss of his right leg;
b) P10,000.00 — as moral damages.
5) To Joseph Sandoval:
a) P4,000.00 for medical treatment.
The defendants are further directed to pay the costs of
this proceedings.
SO ORDERED. 9
Petitioners appealed 1 0 the decision to the Court of Appeals, which affirmed
the same with modifications as to the amount of damages, actual expenses and
attorney's fees awarded to the private respondents. The decretal portion of the decision
of the Court of Appeals reads:
WHEREFORE, the foregoing premises considered, the
appealed decision is AFFIRMED. However, the award for damages,
actual expenses and attorney's fees shall be MODIFIED as follows:
1) To spouses Lorenzo Dolor and Margarita Dolor:
a) P50,000.00 — civil indemnity for their son Lorenzo
Menard Dolor, Jr.;
b) P58,703.00 — as actual and necessary funeral
expenses;
c) P25,000.00 — as temperate damages;
d) P100,000.00 — as moral damages;
e) P20,000.00 — as reasonable litigation expenses and
attorney's fees.
2) To Spouses Francisco Valmocina and Virginia Valmocina:
a) P50,000.00 — civil indemnity for the death of their
son, Oscar Valmocina;
b) P100,000.00 — as moral damages;
c) P10,000.00 — as temperate damages;
d) P10,000.00 — as reasonable litigation expenses and
attorney's fees.
3) To Spouses Victor Panopio and Martina Panopio:
a) P10,352.59 — as actual hospitalization and medical
expenses;
b) P5,000.00 — as temperate damages.
4) To Fred Panopio:
a) P50,000.00 — as moral damages.
5) To Joseph Sandoval:
a) P3,000.00 as temperate damages.
 SO ORDERED. 11
Hence the present petition raising the following issues:
1. Whether the Court of Appeals was correct when it
pronounced the Hernandez spouses as solidarily liable with Juan
Gonzales, although it is of record that they were not in the
passenger jeepney driven by latter when the accident occurred;
2. Whether the Court of Appeals was correct in awarding
temperate damages to private respondents namely the Spouses
Dolor, Spouses Valmocina and Spouses Panopio and to Joseph
Sandoval, although the grant of temperate damages is not
provided for in decision of the court a quo;
3. Whether the Court of Appeals was correct in
increasing the award of moral damages to respondents, Spouses
Dolor, Spouses Valmocina and Fred Panopio;
4. Whether the Court of Appeals was correct in affirming
the grant of attorney's fees to Spouses Dolor and to Spouses
Valmocina although the lower court did not specify the fact and
the law on which it is based.
Petitioners contend that the absence of the Hernandez spouses inside the
passenger jeepney at the time of the collision militates against holding them solidarily
liable with their co-petitioner, Juan Gonzales, invoking Article 2184 of the Civil Code,
which provides:
ARTICLE 2184. In motor vehicle mishaps, the owner is
solidarily liable with his driver, if the former, who was in the
vehicle, could have, by the use of the due diligence, prevented the
misfortune. It is disputably presumed that a driver was negligent,
if he had been found guilty of reckless driving or violating traffic
regulations at least twice within the next preceding two months.
If the owner was not in the motor vehicle, the provisions
of article 2180 are applicable.
On the other hand, Article 2176 provides —
The Hernandez spouses argues that since they were not inside the jeepney at
the time of the collision, the provisions of Article 2180 of the Civil Code, which does not
provide for solidary liability between employers and employees, should be applied.
We are not persuaded.
Article 2180 provides:
ARTICLE 2180. The obligation imposed by article 2176 is
demandable not only for one's own acts or omissions, but also for
those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the
mother, are responsible for the damages caused by the minor
children who live in their company.
Guardians are liable for damages caused by the minors
or incapacitated persons who are under their authority and live in
their company.
The owners and managers of an establishment or
enterprise are likewise responsible for damages caused by their
employees in the service of the branches in which the latter are
employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business or industry.
The State is responsible in like manner when it acts
through a special agent; but not when the damage has been
caused by the official to whom the task done properly pertains, in
which case what is provided in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and
trades shall be liable for damages caused by their pupils and
students or apprentices, so long as they remain in their custody.
The responsibility treated of in this article shall cease
when the persons herein mentioned prove that they observed all
the diligence of a good father of a family to prevent damage.
(Emphasis supplied)
Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-
delict and is governed by the provisions of this Chapter. ICTcDA
 While the above provisions of law do not expressly provide for solidary liability,
the same can be inferred from the wordings of the first paragraph of Article 2180 which
states that the obligation imposed by article 2176 is demandable not only for one's own acts
or omissions, but also for those of persons for whom one is responsible.
Moreover, Article 2180 should be read with Article 2194 of the same Code,
which categorically states that the responsibility of two or more persons who are liable for
quasi-delict is solidary. In other words, the liability of joint tortfeasors is
solidary. 12 Verily, under Article 2180 of the Civil Code, an employer may be held
solidarily liable for the negligent act of his employee. 13
The solidary liability of employers with their employees for quasi-delicts having
been established, the next question is whether Julian Gonzales is an employee of the
Hernandez spouses. An affirmative answer will put to rest any issue on the solidary
liability of the Hernandez spouses for the acts of Julian Gonzales. The Hernandez spouses
maintained that Julian Gonzales is not their employee since their relationship relative to
the use of the jeepney is that of a lessor and a lessee. They argue that Julian Gonzales
pays them a daily rental of P150.00 for the use of the jeepney. 14 In essence, petitioners
are practicing the "boundary system" of jeepney operation albeit disguised as a lease
agreement between them for the use of the jeepney.
We hold that an employer-employee relationship exists between the
Hernandez spouses and Julian Gonzales.
Indeed to exempt from liability the owner of a public vehicle who operates it
under the "boundary system" on the ground that he is a mere lessor would be not only to
abet flagrant violations of the Public Service Law, but also to place the riding public at
the mercy of reckless and irresponsible drivers — reckless because the measure of their
earnings depends largely upon the number of trips they make and, hence, the speed at
which they drive; and irresponsible because most if not all of them are in no position to
pay the damages they might cause. 15
Anent the award of temperate damages to the private respondents, we hold
that the appellate court committed no reversible error in awarding the same to the
respondents.
Temperate or moderate damages are damages which are more than nominal
but less than compensatory which may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case, be
proved with certainty. 16 Temperate damages are awarded for those cases where, from
the nature of the case, definite proof of pecuniary loss cannot be offered, although the
court is convinced that there has been such loss. A judge should be empowered to
calculate moderate damages in such cases, rather than the plaintiff should suffer,
without redress, from the defendant's wrongful act. 17 The assessment of temperate
damages is left to the sound discretion of the court provided that such an award is
reasonable under the circumstances. 18
We have gone through the records of this case and we find that, indeed,
respondents suffered losses which cannot be quantified in monetary terms. These losses
came in the form of the damage sustained by the owner type jeep of the Dolor spouses;
the internment and burial of Oscar Valmocina; the hospitalization of Joseph Sandoval on
account of the injuries he sustained from the collision and the artificial leg and crutches
that respondent Fred Panopio had to use because of the amputation of his right leg.
Further, we find that the amount of temperate damages awarded to the respondents
were reasonable under the circumstances.
As to the amount of moral damages which was awarded to respondents, a
review of the records of this case shows that there exists no cogent reason to overturn
the action of the appellate court on this aspect.
Under Article 2206, the "spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental anguish for the
death of the deceased." The reason for the grant of moral damages has been explained,
thus:
. . . the award of moral damages is aimed at a restoration,
within the limits possible, of the spiritual status quo ante; and
therefore, it must be proportionate to the suffering inflicted. The
intensity of the pain experienced by the relatives of the victim is
proportionate to the intensity of affection for him and bears no
relation whatsoever with the wealth or means of the offender. 19
Moral damages are emphatically not intended to enrich a plaintiff at the
expense of the defendant. They are awarded to allow the former to obtain means,
diversion or amusements that will serve to alleviate the moral suffering he has undergone
due to the defendant's culpable action and must, perforce, be proportional to the
suffering inflicted. 20
Truly, the pain of the sudden loss of one's offspring, especially of a son who was
in the prime of his youth, and who holds so much promise waiting to be fulfilled is indeed
a wellspring of intense pain which no parent should be made to suffer. While it is true that
there can be no exact or uniform rule for measuring the value of a human life and the
measure of damages cannot be arrived at by a precise mathematical calculation, 21 we
hold that the Court of Appeals' award of moral damages of P100,000.00 each to the
Spouses Dolor and Spouses Valmocina for the death of their respective sons, Boyet Dolor
and Oscar Valmocina, is in full accord with prevailing jurisprudence. 22
 With respect to the award of attorney's fees to respondents, no sufficient basis
was established for the grant thereof.

It is well settled that attorney's fees should not be awarded in the absence of
stipulation except under the instances enumerated in Article 2208 of the Civil Code. As
we have held in Rizal Surety and Insurance Company v. Court of Appeals: 23

Article 2208 of the Civil Code allows attorney's fees to be

awarded by a court when its claimant is compelled to litigate with
third persons or to incur expenses to protect his interest by reason
of an unjustified act or omission of the party from whom it is
sought. While judicial discretion is here extant, an award thereof
demands, nevertheless, a factual, legal or equitable justification.
The matter cannot and should not be left to speculation and
conjecture (Mirasol vs. De la Cruz, 84 SCRA 337; Stronghold
Insurance Company, Inc. vs. Court of Appeals, 173 SCRA 619).

In the case at bench, the records do not show enough

basis for sustaining the award for attorney's fees and to adjudge its
payment by petitioner. . . .

Likewise, this Court held in Stronghold Insurance

Company, Inc. vs. Court of Appeals that:

"In Abrogar v. Intermediate Appellate

Court [G.R. No. 67970, January 15, 1988, 157 SCRA 57],
the Court had occasion to state that '[t]he reason for the
award of attorney's fees must be stated in the text of the
court's decision, otherwise, if it is stated only in the
dispositive portion of the decision, the same must be
disallowed on appeal.' . . ." 24

WHEREFORE, the petition is DENIED. The assailed decision of the Court of

Appeals is AFFIRMED with the MODIFICATION that the grant of attorney's fees is
DELETED for lack of basis.

Costs against petitioners.

SO ORDERED.

Davide, Jr., C .J ., Quisumbing, Carpio and Azcuna, JJ ., concur.

||| (Spouses Hernandez v. Spouses Dolor, G.R. No. 160286, [July 30, 2004], 479 PHIL 593-
606)