TL;DR

In a vehicular accident case, the Supreme Court affirmed that UCPB Leasing and Finance Corporation, as the registered owner of a trailer truck, is liable for damages despite having leased the vehicle to Subic Bay Movers, Inc. (SBMI). The Court reiterated the ‘registered owner rule,’ holding that for public safety and victim compensation, the registered owner is primarily responsible for damages caused by the vehicle. Even though UCPB Leasing argued they were exempt under the Financing Company Act due to the lease, the exemption was not applicable because the lease agreement was not registered with the Land Transportation Office. The Court also clarified rules on voluntary appearance and adjusted the computation of damages, ultimately ordering UCPB Leasing to compensate the heirs of the deceased victim.

Wheels of Accountability: When Leasing Doesn’t Shield Liability for a Fatal Road Mishap

This case revolves around a tragic vehicular accident that claimed the life of Florencio Leporgo, Sr. in Calamba, Laguna. Leporgo was fatally injured when a trailer truck, owned by UCPB Leasing and Finance Corporation (ULFC) but leased to Subic Bay Movers, Inc. (SBMI), recklessly collided with his car. The driver of the truck, Miguelito Almazan, was found to be negligent. The legal battle that ensued raised critical questions about liability: Could ULFC, as the registered owner, be held responsible for the actions of the lessee’s driver? And did ULFC successfully challenge the court’s jurisdiction? This Supreme Court decision clarifies the extent of a registered vehicle owner’s liability, even when a lease agreement is in place, and underscores the importance of proper legal procedure in challenging court jurisdiction.

ULFC initially contested the Regional Trial Court’s (RTC) jurisdiction, arguing improper service of summons. However, after their initial motion to dismiss was addressed by the court ordering alias summons, ULFC filed an Answer Ad Cautelam. The Supreme Court emphasized that by filing this answer and raising defenses beyond mere jurisdiction, ULFC effectively made a voluntary appearance. This principle, enshrined in Section 20, Rule 14 of the Rules of Court, dictates that a defendant’s voluntary appearance is equivalent to valid service of summons. Even though ULFC attempted to reserve their jurisdictional challenge, their active participation in the case, without pursuing a petition for certiorari against the summons ruling, constituted submission to the court’s authority. The Court underscored that procedural remedies must be pursued diligently; a mere reservation in pleadings is insufficient to negate the effect of voluntary submission.

The core of the case rested on the liability of ULFC as the registered owner of the trailer truck. ULFC invoked Section 12 of Republic Act No. 8556, the Financing Company Act of 1998, which seemingly exempts financing companies from liability for damages caused by leased vehicles, unless operated by the financing company itself. However, the Supreme Court decisively rejected this argument, reaffirming the long-standing registered owner rule in Philippine jurisprudence. This rule, rooted in public policy and the Land Transportation and Traffic Code (R.A. 4136), dictates that the registered owner of a vehicle is liable for injuries and damages resulting from its operation, regardless of who the actual driver or lessee may be. The rationale is to ensure readily identifiable responsible parties for victims of vehicular accidents and to deter negligence in vehicle operation.

The Court cited its precedent in PCI Leasing and Finance, Inc. v. UCPB General Insurance Co. Inc., clarifying that R.A. 8556 does not supersede the compulsory motor vehicle registration law. Crucially, the lease agreement between ULFC and SBMI was not registered with the Land Transportation Office. According to the Court, such registration is essential for the lease to be binding against third parties and for ULFC to avail itself of the exemption under R.A. 8556. The Court stated unequivocally:

The non-registration of the lease contract between petitioner and its lessee precludes the former from enjoying the benefits under Section 12 of R.A. No. 8556.

Therefore, ULFC’s attempt to evade liability based on the unregistered lease agreement was unsuccessful. The Court emphasized that the registered owner rule serves to protect innocent third parties who may be victims of vehicular accidents. While ULFC pointed to an indemnity clause in their lease agreement with SBMI, obligating SBMI to shoulder liabilities, the Court clarified that such private agreements cannot override public policy and statutory obligations imposed by R.A. 4136. ULFC, however, retains the right to pursue a third-party complaint against SBMI to enforce the indemnity agreement, a recourse they unfortunately did not fully utilize in this case.

Regarding damages, the Supreme Court adjusted the lower courts’ computation of Leporgo’s net earning capacity. While upholding the use of the 80-year life expectancy for Filipinos, the Court applied the standard formula: Net Earning Capacity = Life Expectancy x [Gross Annual Income – Living Expenses (50% of GAI)]. This resulted in a reduced award for loss of earning capacity compared to the lower courts’ calculation. The Court, however, affirmed the awards for actual damages, civil indemnity, and attorney’s fees, while reducing the amount of moral and exemplary damages to more reasonable sums. Exemplary damages were specifically justified due to ULFC’s and SBMI’s failure to register the lease agreement and ULFC’s admission that the vehicle lacked insurance coverage, violating the Insurance Code and demonstrating a concerning lack of oversight.

Finally, the Court clarified the application of legal interest based on Nacar v. Gallery Frames, imposing a 6% per annum interest on the monetary awards from the RTC decision date until finality, and then on the total judgment amount until full payment. The Court also extended the benefit of the reduced damages to Miguel Almazan, ULFC’s co-defendant, even though Almazan did not appeal. This was based on the principle that their liabilities were interwoven, and adjusting ULFC’s liability necessitates a corresponding adjustment for Almazan to maintain consistency and fairness within the judgment.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: UCPB Leasing and Finance Corporation v. Heirs of Leporgo, G.R. No. 210976, January 12, 2021