Case Summary (G.R. No. 64693)
Contractual Agreement and Operation of the Taxicabs
In 1966, the spouses, lacking a franchise, entered into an agreement with Lita Enterprises, acting through Manuel Concordia, whereby they used Lita's CPC in exchange for an initial payment and monthly rental fees per vehicle. The taxicabs were formally registered in the name of Lita Enterprises, but possession and operation remained with the spouses.
Incident Resulting in Civil and Criminal Cases
On March 18, 1967, one of the taxicabs, driven by the spouses' employee, was involved in a fatal collision causing the death of a motorcyclist. A criminal case was filed against the driver while a civil suit for damages was instituted against Lita Enterprises, as the registered owner of the taxicab. Lita Enterprises was found liable for damages totaling P25,000 plus attorney’s fees. Enforcement led to the levy and auction of some of the taxicabs.
Subsequent Legal Proceedings
In 1973, the respondent spouses attempted to register the taxicabs in their own names and requested Lita Enterprises to turn over the registration papers. Upon refusal, they filed a complaint against Lita Enterprises and other parties for the reconveyance of the vehicles. The trial court partially granted relief, ordering Lita Enterprises to transfer registration of the remaining vehicles to the respondents, subject to payment of rental arrears. The Intermediate Appellate Court modified the decision, allowing Lita Enterprises to recover the fair market value of the vehicles should they no longer be serviceable.
The "Kabit System" and Legal Policy on Illegal Contracts
The Court characterized the parties' arrangement as the “kabit system,” whereby a franchise holder allows another party to operate under the franchise for a fee. It emphasized that the Certificate of Public Convenience is a public privilege that cannot be abused or transferred illicitly. The “kabit system” is recognized as contrary to public policy, void, and inexistent under Article 1409 of the Civil Code. It has also been condemned as a source of corruption.
Legal Principle Applied – No Relief on Illegal Contracts
The Court applied the maxim "ex pacto illicito non oritur actio" (no action arises out of an illicit bargain) and cited Article 1412 of the Civil Code, which denies relief when the contracts involve unlawful or forbidden causes by both parties. Both the trial and appe
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Case Syllabus (G.R. No. 64693)
Facts of the Case
- In 1966, spouses Nicasio M. Ocampo and Francisca P. Garcia purchased five Toyota Corona Standard cars on installment from Delta Motor Sales Corporation, intended for use as taxicabs.
- They lacked a franchise to operate taxicabs, so they entered into a contract with petitioner Lita Enterprises, Inc. through its representative Manuel Concordia, allowing use of Lita Enterprises’ certificate of public convenience.
- The contract involved an initial payment of ₱1,000.00 and monthly rentals of ₱200.00 per taxicab.
- To implement the agreement, the cars were registered in the name of Lita Enterprises, Inc., but physical possession remained with the spouses Ocampo, who operated and maintained the vehicles under petitioner’s trade name "Acme Taxi."
- On March 18, 1967, one of the taxicabs collided with a motorcycle driven by Florante Galvez, who died from the injuries.
- A criminal case was filed against the driver, Emeterio Martin, and a civil suit for damages was instituted by the victim’s heir, Rosita Sebastian Vda. de Galvez, against Lita Enterprises as the registered owner.
- The Court of First Instance of Manila adjudged Lita Enterprises liable for ₱25,000.00 in damages plus ₱7,000.00 attorney’s fees; this decision became final and executory.
- Execution sale levied on two of the respondent spouses’ vehicles resulted in sales to third parties.
- In 1973, Nicasio Ocampo sought to register the taxicabs in his name; after refusal by petitioner’s manager to release registration papers, the Ocampos filed a reconveyance complaint against Lita Enterprises and others.
- The Court of First Instance dismissed complaints against other defendants but ordered Lita Enterprises to transfer registration of the three unlevied cars to the Ocampos upon payment of rental arrears.
- On appeal, the Intermediate Appellate Court modified the decision, requiring Lita Enterprises to pay fair market value for deteriorated or unavailable vehicles.
- Petitioner Lita Enterprises filed motions for reconsideration, all denied, promptin