G.R. No. L-30115 September 28, 1973
FE PEREZ, plaintiff-appellant, vs. JOSEFINA GUTIERREZ, defendant third-party plaintiff-appellee, PANFILO ALAJAR, third-party defendant-appellee.

FACTS

Plaintiff-appellant Fe Perez filed a complaint for breach of contract of carriage against defendant-appellee Josefina Gutierrez, the registered owner of an AC jeepney. The complaint alleged that on September 6, 1959, while Perez was a passenger, the vehicle met with an accident due to the reckless negligence of its driver, Leopoldo Cordero, causing her injuries. In her answer, Gutierrez filed a third-party complaint against Panfilo Alajar, alleging he was the actual owner of the jeepney by virtue of a deed of sale executed prior to the accident. The deed stipulated that title would remain with Gutierrez pending approval of the sale by the Public Service Commission and that Alajar would assume all responsibility for claims arising from the vehicle’s operation.
Alajar, the third-party defendant, disclaimed liability. He argued the deed of sale was void for lack of PSC approval, that Gutierrez retained control and collected rentals, and that title remained with her per their agreement. The trial court found the driver Cordero guilty of reckless imprudence and determined Alajar was the actual owner and operator. It held Alajar solely liable to Perez for damages and also liable to Gutierrez for moral damages and attorney’s fees. Perez appealed, contesting the failure to hold the registered owner, Gutierrez, directly liable to her.

ISSUE

Whether the registered owner of a public utility vehicle, rather than the unapproved transferee, is directly liable to a passenger for damages arising from a breach of contract of carriage.

RULING

Yes. The Supreme Court modified the trial court’s decision, ruling that the registered owner, Josefina Gutierrez, is directly and primarily liable to the injured passenger, Fe Perez. The legal logic is anchored on public policy and statutory interpretation under the Public Service Act. The law requires Commission approval for any transfer of a public service franchise to protect the public interest. Without such approval, the transfer is not binding on the Commission, and the registered grantee remains responsible to the public for the vehicle’s operation.
The Court, citing precedents like Erezo v. Jepte and Peralta v. Mangusang, emphasized the doctrine of holding the registered owner liable. This is based on the principle that the public has the right to presume the registered owner is the actual owner. It would be unduly burdensome and impractical to require injured parties to investigate and prove the actual ownership of a public utility vehicle after every unrecorded transfer to enforce their claims. The registered owner’s liability to the public is direct and primary.
Consequently, the trial court erred in absolving Gutierrez and holding only Alajar directly liable to Perez. The Court clarified that while Gutierrez is directly liable to Perez, she may, in turn, recover from Alajar based on their contractual stipulation where he assumed responsibility. Furthermore, the driver Cordero, found negligent, should be held jointly and solidarily liable with the registered owner per the Civil Code. The judgment was thus modified to hold Gutierrez and Cordero jointly and solidarily liable to Perez, with Alajar answerable to Gutierrez for any amounts she pays.