G.R. No.

167797               June 15, 2015

METRO MANILA TRANSIT CORPORATION, Petitioner,

DECISION

BERSAMIN, J.:

The registered owner of a motor vehicle whose operation causes injury to another is legally liable to the latter. But it is error not to
allow the registered owner to recover reimbursement from the actual and present owner by way of its cross-claim.

Antecedents

Metro Manila Transit Corporation (MMTC) and Mina's Transit Corporation (Mina's Transit) entered into an agreement to sell dated
August 31, 1990,  whereby the latter bought several bus units from the former at a stipulated price. They agreed that MMTC would
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retain the ownership of the buses until certain conditions were met, but in the meantime Mina's Transit could operate the buses within
Metro Manila.

On October 14, 1994, one of the buses subject of the agreement to sell, bearing plate number NXM-449-TB-pil 94, hit and damaged a
Honda Motorcycle owned by Reynaldo and driven by Junnel. Reynaldo and Junnel sued MMTC and Mina’s Transit for damages in the
Regional Trial Court (RTC) in Cavite, docketed as Civil Case No. N-6127, pertinently alleging and praying as follows:

5. Defendants Metro Manila Transit Corporation and Mina’s Transit are registered joint-owners or operators of an MMTC/Minas
Transit passenger bus with Plate No. NXM-449-TB-pil 94, and is the employers (sic) of the driver Jessie Rillera y Gaceta.

6. On October 14, 1994, at around 7:45 P.M., while Plaintiff was riding on a Honda Motocycle, with a companion at the back, along
South Superhighway, in front of Magallanes Supermarket in Makati, Metro Manila, a few meters away from the approaches of
Magallanes Overpass complex, coming from the South and heading toward the North, the defendants’ driver Jessie Rillera Y Gaceta,
driving the MMTC/Mina’s Transit Passenger bus with Plate No. NXM-449-TB-pil 94, heading in the same direction and following Plain
tiff’s motorcycle, recklessly and carelessly attempted to overtake Plaintiff’s Motorcycle on the right side of the lane, in the course of
which the said Jessie Rillera side swiped the Plaintiff as the said Jessie Rillera accelerated speed;

7. As a result, plaintiff Junnel Cuevas and his companion were thrown to the road and Plaintiff’s right leg was severely fractured, and
the Honda Motorcycle owned by plaintiff Reynaldo Cuevas was extensively damaged;

8. Plaintiff Junnel Cuevas and his companion were then brought to the Philippine General Hospital along Taft Avenue in Manila,
where the said Plaintiff had to undergo several operations on his right leg; but in spite of the several operations which he had
undergone, Plaintiff Junnel Cuevas, even up to now, is unable to walk on his own without the aid of crutches and is still scheduled for
more operations; a xerox copy of his medical certificate is hereto attached as Annex A hereof; 2

WHEREFORE, it is most respectfully prayed that after notice and hearing a judgment be rendered ordering the defendants jointly and
severally to pay Plaintiffs the following sums of money:

1) ₱200,000.00 more or less, representing actual medical expenses;

2) ₱18,940.00 representing the cost of repair of the damaged motorcycle

3) ₱300,000.00 as moral damage(s)

4) ₱100,000.00 as exemplary damage(s)

5) ₱50,000.00 as nominal damage(s)

6) ₱15,000.00 as litigation expenses

7) ₱30,000.00 as attorney’s fees

8) to pay the cost of the suit. 3

In its answer with compulsory counterclaim and cross-claim,  MMTC denied liability, and averred that although it retained the
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ownership of the bus, the actual operator and employer of the bus driver was Mina’s Transit; and that, in support of its cross-claim
against Mina’s Transit, a provision in the agreement to sell mandated Mina ’s Transport to hold it free from liability arising from the use
and operation of the bus units. 5

On its part, Mina’s Transit contended that it was not liable because: (a) it exercised due diligence in the selection and supervision of
its employees; (b) its bus driver exercised due diligence; and (c) Junnel’s negligence was the cause of the accident.
Meanwhile, Mina’s Transit filed a third-party complaint against its insurer, Perla Compania de Seguros, Inc. (Perla), seeking
reimbursement should it be adjudged liable, pursuant to its insurance policy issued by Perla with the following coverage: (a) third-party
liability of ₱50,000.00 as the maximum amount; and (b) third-party damage to property of ₱20,000.00 as the maximum amount. 6

In its answer to the third-party complaint, Perla denied liability as insurer because Mina’s Transit had waived its recourse by failing to
notify Perla of the incident within one year from its occurrence, as required by Section 384 of the Insurance Code.  It submitted that
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even assuming that the claim had not yet prescribed, its liability should be limited to the maximum of ₱50,000.00 for third-party liability
and ₱20,000.00 for third-party damage. 8

After trial, the RTC rendered judgment in favor of the respondents on September 17, 1999  ordering petitioner Metro Manila Transit
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Corporation (MMTC) and its co-defendant Mina’s Transit Corporation (Mina’s Transit) to pay damages in favor of respondents
Reynaldo Cuevas and Junnel Cuevas to wit:

WHEREFORE, premises considered, defendants Metro Manila Transit Corporation and Mina’s Transit Corporation are hereby held
solidarily liable for the payment to the plaintiffs of the following:

a. ₱115,436.50 as actual damages;

b. ₱100,000.00 as moral damages

c. ₱50,000.00 as exemplary damages; and

d. ₱20,000.00 as attorney’s fees.

Costs are also adjudged against defendants.

SO ORDERED. 10

The RTC concluded that the proximate cause of the mishap was the negligence of the bus driver; that following Article 2180 of the
Civil Code, his employers should be solidarily liable; that MMTC and Mina’s Transit, being the joint owners of the bus, were liable; and
that the third-party complaint was dismissed because no evidence was presented to prove it. The RTC, however, did not rule on the
propriety of the cross-claim.

On appeal, the CA affirmed the RTC’s decision. 11

Issue

Hence, this appeal, in which MMTC posits the sole issue of whether or not it was liable for the injuries sustained by the respondents
despite the provision in the agreement to se ll that shielded it from liability.

Ruling of the Court

The appeal is partly meritorious.

MMTC urges the revisit of the register ed-owner rule in order to gain absolution from liability. It contends that although it retained
ownership of the bus at the time of the vehicular accident, the actual operation was transferred to Mina’s Transit; that for it to be held
liable for the acts of the bus driver, the existence of an employer-employee relationship between them must be established; and that
because the bus driver was not its employee, it was not liable for his negligent act.

The contentions of MMTC cannot persuade.

In view of MMTC’s admission in its pleadings that it had remained the registered owner of the bus at the time of the incident, it could
not escape liability for the personal injuries and property damage suffered by the Cuevases. This is because of the registered-owner
rule, whereby the registered owner of the motor vehicle involved in a vehicular accident could be held liable for the consequences.
The registered-owner rule has remained good law in this jurisdiction considering its impeccable and timeless rationale, as enunciated
in the 1957 ruling in Erezo, et al. v. Jepte,  where the Court pronounced:
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Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land
registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale
between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any
public highway (section 5 [a], Act No. 3992, as amended.) The main aim of motor vehicle registration is to identify the owner so that if
any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility therefore can be
fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant means of
identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is
primarily ordained, in the interest of the determination of persons responsible for damages or injuries caused on public highways.

"‘One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident; and
another is that the knowledge that means of detection are always available may act as a deterrent from lax observance of the law and
of the rules of conservative and safe operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the
primary purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because of lack of means to
discover him.’ The purpose of the statute is thwarted, and the displayed number becomes a ‘snare and delusion,’ if courts would
entertain such defenses as that put forward by appellee in this case. No responsible person or corporation could be held liable for the
most outrageous acts of negligence, if they should be allowed to place a ‘middleman’ between them and the public, and escape
liability by the manner in which they recompense their servants." (King vs. Brenham Automobile Co., 145 S.W. 278, 279.)

The Court has reiterated the registered-owner rule in other rulings, like in Filcar Transport Services v. Espinas ,  to wit:
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It is well settled that in case of motor vehicle mishaps, the registered owner of the motor vehicle is considered as the employer of the
tortfeasor-driver , and is made primarily liable for the tort committed by the latter under Article 2176, in relation with Article 2180, of the
Civil Code.

In Equitable Leasing Corporation v. Suyom, we ruled that in so far as third persons are concerned, the registered owner of the motor
vehicle is the employer of the negligent driver, and the actual employer is considered merely as an agent of such owner .

In that case, a tractor registered in the name of Equitable Leasing Corporation ( Equitable ) figured in an accident, killing and seriously
injuring several persons. As part of its defense, Equitable claimed that the tractor was initially leased to Mr. Edwin Lim under a Lease
Agreement, which agreement has been overtaken by a Deed of Sale entered into by Equitable and Ecatine Corporation (Ecatine).
Equitable argued that it cannot be held liable for damages because the tractor had already been sold to Ecatine at the time of the
accident and the negligent driver was not its employee but of Ecatine.

In upholding the liability of Equitable, as registered owner of the tractor, this Court said that "regardless of sales made of a motor
vehicle, the registered owner is the lawful operator insofar as the public and third persons are concerned; consequently, it is directly
and primarily responsible for the consequences of its operation." The Court further stated that " [i]n contemplation of law, the
owner/operator of record is the employer of the driver, the actual operator and employer being considered as merely its agent. " Thus,
Equitable, as the registered owner of the tractor, was considered under the law on quasi delict to be the employer of the driver, Raul
Tutor; Ecatine, Tutor’s actual employer, was deemed merely as an agent of Equitable.

Thus, it is clear that for the purpose of holding the registered owner of the motor vehicle primarily and directly liable for damages
under Article 2176, in relation with Article 2180, of the Civil Code, the existence of an employer-employee relationship, as it is
understood in labor relations law, is not required. It is sufficient to establish that Filcar is the registered owner of the motor vehicle
causing damage in order that it may be held vicariously liable under Article 2180 of the Civil Code.

Indeed, MMTC could not evade liability by passing the buck to Mina’s Transit. The stipulation in the agreement to sell did not bind
third parties like the Cuevases, who were expected to simply rely on the data contained in the registration certificate of the erring bus.

Although the registered-owner rule might seem to be unjust towards MMTC, the law did not leave it without any remedy or
recourse.  According to Filcar Transport Services v. Espinas ,  MMTC could recover from Mina’s Transit, the actual employer of the
1âwphi1
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negligent driver, under the principle of unjust enrichment, by means of a cross-claim seeking reimbursement of all the amounts that it
could be required to pay as damages arising from the driver’s negligence. A cross-claim is a claim by one party against a co-party
arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein, and may
include a claim that the party against whom it is asserted is or may be liable to the cross-claimant for all or part of a claim asserted in
the action against the cross-claimant. 15

MMTC set up its cross-claim against Mina's Transit precisely to ensure that Mina's Transit would reimburse whatever liability would be
adjudged against MMTC. Yet, it is a cause of concern for the Court that the RTC ignored to rule on the propriety of MMTC's cross-
claim. Such omission was unwarranted, inasmuch as Mina's Transit did not dispute the cross-claim, or did not specifically deny the
agreement to sell with MMTC, the actionable document on which the cross-claim was based. Even more telling was the fact that
Mina's Transit did not present controverting evidence to disprove the cross-claim as a matter of course if it was warranted for it to do
so. Under the circumstances, the RTC should have granted the cross-claim to prevent the possibility of a multiplicity of suits, and to
spare not only the MMTC but also the other parties in the case from further expense and bother. Compounding the RTC's
uncharacteristic omission was the CA's oversight in similarly ignoring the cross-claim. The trial and the appellate courts should not
forget that a cross-claim is like the complaint and the counterclaim that the court must rule upon.

WHEREFORE, the Court AFFIRMS the decision promulgated on June 28, 2004 subject to the MODIFICATION that the cross-claim of
Metro Manila Transit Corporation against Mina's Transit Corporation is GRANTED, and, ACCORDINGLY, Mina's Transit Corporation
is

ORDERED to reimburse to Metro Manila Transit Corporation whatever amounts the latter shall pay to the respondents pursuant to the
judgment of the Regional Trial Court in Civil Case No. N-6127.

No pronouncement on costs of suit.

SO ORDERED.