Republic of the Philippines
Supreme Court
Manila
 
 
THIRD DIVISION
 
 
PCI LEASING AND FINANCE, G.R. No. 162267
INC.,
Petitioner, Present:
   
  YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
  CHICO-NAZARIO,
  NACHURA, and
  REYES, JJ.
UCPB GENERAL INSURANCE  
CO., INC., Promulgated:
Respondent. July 4, 2008
 
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
DECISION
 
AUSTRIA-MARTINEZ, J.:
 
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, seeking a reversal of the Decision[1] of the Court of Appeals (CA) dated December
12, 2003 affirming with modification the Decision of the Regional Trial Court (RTC)
of Makati City which ordered petitioner and Renato Gonzaga (Gonzaga) to pay, jointly
and severally, respondent the amount of P244,500.00 plus interest; and the CA
Resolution[2] dated February 18, 2004 denying petitioner's Motion for Reconsideration.
 
The facts, as found by the CA, are undisputed:
 
On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate Number
PHD-206 owned by United Coconut Planters Bank was traversing the Laurel
Highway, Barangay Balintawak, Lipa City. The car was insured with plantiff-
appellee [UCPB General Insurance Inc.], then driven by Flaviano Isaac
with Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped by an 18-
wheeler Fuso Tanker Truck with Plate No. PJE-737 and Trailer Plate No. NVM-133,
owned by defendants-appellants PCI Leasing & Finance, Inc. allegedly leased to and
operated by defendant-appellant Superior Gas & Equitable Co., Inc. (SUGECO) and
driven by its employee, defendant appellant Renato Gonzaga.
  
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an explosion of
the rear part of the car. The driver and passenger suffered physical injuries. However, the
driver defendant-appellant Gonzaga continued on its [sic] way to its [sic] destination and
did not bother to bring his victims to the hospital.
 
Plaintiff-appellee paid the assured UCPB the amount of P244,500.00 representing the
insurance coverage of the damaged car.
 
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands
were made by plaintiff-appellee for the payment of the aforesaid amounts. However, no
payment was made. Thus, plaintiff-appellee filed the instant case on March 13, 1991.[3]
 
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held
liable for the collision, since the driver of the truck, Gonzaga, was not its employee, but
that of its co-defendant Superior Gas & Equitable Co., Inc. (SUGECO).[4] In fact, it was
SUGECO, and not petitioner, that was the actual operator of the truck, pursuant to a
Contract of Lease signed by petitioner and SUGECO.[5] Petitioner, however, admitted that
it was the owner of the truck in question.[6]
 
After trial, the RTC rendered its Decision dated April 15, 1999,[7] the dispositive portion of
which reads:
 
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff
UCPB General Insurance [respondent], ordering the defendants PCI Leasing and Finance,
Inc., [petitioner] and RenatoGonzaga, to pay jointly and severally the former the following
amounts: the principal amount of P244,500.00 with 12% interest as of the filing of this
complaint until the same is paid; P50,000.00 as attorney's fees; and P20,000.00 as costs of
suit.
 
SO ORDERED.[8]
 
Aggrieved by the decision of the trial court, petitioner appealed to the CA.
 
In its Decision dated December 12, 2003, the CA affirmed the RTC's decision, with
certain modifications, as follows:
 
WHEREFORE, the appealed decision dated April 15, 1999 is hereby AFFIRMED with
modification that the award of attorney's fees is hereby deleted and the rate of interest shall
be six percent (6%) per annum computed from the time of the filing of the complaint in the
trial court until the finality of the judgment. If the adjudged principal and the interest
remain unpaid thereafter, the interest rate shall be twelve percent (12%) per annum
computed from the time the judgment becomes final and executory until it is fully
satisfied.
 
SO ORDERED.[9]
 
Petitioner filed a Motion for Reconsideration which the CA denied in its Resolution
dated February 18, 2004.
 
Hence, herein Petition for Review.
 
The issues raised by petitioner are purely legal:
 
Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-
delict may be held liable, jointly and severally, with the driver thereof, for the damages
caused to third parties.
 
Whether petitioner, as a financing company, is absolved from liability by the
enactment of Republic Act (R.A.) No. 8556, or the Financing Company Act of 1998.
 
Anent the first issue, the CA found petitioner liable for the damage caused by the collision
since under the Public Service Act, if the property covered by a franchise is transferred or
leased to another without obtaining the requisite approval, the transfer is not binding on the
Public Service Commission and, in contemplation of law, the grantee continues to be
responsible under the franchise in relation to the operation of the vehicle, such as damage
or injury to third parties due to collisions.[10]
 
Petitioner claims that the CA's reliance on the Public Service Act is misplaced, since the
said law applies only to cases involving common carriers, or those which have franchises
to operate as public utilities. In contrast, the case before this Court involves a private
commercial vehicle for business use, which is not offered for service to the general public.
[11]

 
Petitioner's contention has partial merit, as indeed, the vehicles involved in the case at bar
are not common carriers, which makes the Public Service Act inapplicable.
 
However, the registered owner of the vehicle driven by a negligent driver may still
be held liable under applicable jurisprudence involving laws on compulsory motor vehicle
registration and the liabilities of employers for quasi-delicts under the Civil Code.
 
The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting
from its use is well-established in jurisprudence. Erezo v. Jepte,[12] with Justice Labrador
as ponente, wisely explained the reason behind this principle, thus:
 
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 therefor 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.)
 
With the above policy in mind, the question that defendant-appellant poses is:
should not the registered owner be allowed at the trial to prove who the actual and real
owner is, and in accordance with such proof escape or evade responsibility and lay the
same on the person actually owning the vehicle?  We hold with the trial court that the law
does not allow him to do so; the law, with its aim and policy in mind, does not relieve him
directly of the responsibility that the law fixes and places upon him as an incident or
consequence of registration.  Were a registered owner allowed to evade responsibility by
proving who the supposed transferee or owner is, it would be easy for him, by collusion
with others or otherwise, to escape said responsibility and transfer the same to an indefinite
person, or to one who possesses no property with which to respond financially for the
damage or injury done.  A victim of recklessness on the public highways is usually without
means to discover or identify the person actually causing the injury or damage.  He has no
means other than by a recourse to the registration in the Motor Vehicles Office to
determine who is the owner.  The protection that the law aims to extend to him would
become illusory were the registered owner given the opportunity to escape liability by
disproving his ownership.  If the policy of the law is to be enforced and carried out, the
registered owner should not be allowed to prove the contrary to the prejudice of the person
injured, that is, to prove that a third person or another has become the owner, so that he may
thereby be relieved of the responsibility to the injured person.
 
The above policy and application of the law may appear quite harsh and would
seem to conflict with truth and justice.  We do not think it is so.  A registered owner who
has already sold or transferred a vehicle has the recourse to a third-party complaint, in the
same action brought against him to recover for the damage or injury done, against the
vendee or transferee of the vehicle.  The inconvenience of the suit is no justification for
relieving him of liability; said inconvenience is the price he pays for failure to comply with
the registration that the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is
primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he
(defendant-appellant) has a right to be indemnified by the real or actual owner of the
amount that he may be required to pay as damage for the injury caused to the plaintiff-
appellant.[13]
 
The case is still good law and has been consistently cited in subsequent cases. [14] Thus,
there is no good reason to depart from its tenets.
 
For damage or injuries arising out of negligence in the operation of a motor vehicle, the
registered owner may be held civilly liable with the negligent driver either 1) subsidiarily,
if the aggrieved party seeks relief based on a delict or crime under Articles 100 and 103 of
the Revised Penal Code; or 2) solidarily, if the complainant seeks relief based on a quasi-
delict under Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff
whether to waive completely the filing of the civil action, or institute it with the criminal
action, or file it separately or independently of a criminal action;[15] his only limitation is
that he cannot recover damages twice for the same act or omission of the defendant.[16]
 
In case a separate civil action is filed, the long-standing principle is that the registered
owner of a motor vehicle is primarily and directly responsible for the consequences of its
operation, including the negligence of the driver, with respect to the public and all third
persons.[17] In contemplation of law, the registered owner of a motor vehicle is the
employer of its driver, with the actual operator and employer, such as a lessee, being
considered as merely the owner's agent.[18] This being the case, even if a sale has been
executed before a tortious incident, the sale, if unregistered, has no effect as to the right of
the public and third persons to recover from the registered owner.[19] The public has the
right to conclusively presume that the registered owner is the real owner, and may sue
accordingly.[20]
 
In the case now before the Court, there is not even a sale of the vehicle involved, but a
mere lease, which remained unregistered up to the time of the occurrence of the quasi-
delict that gave rise to the case. Since a lease, unlike a sale, does not even involve a transfer
of title or ownership, but the mere use or enjoyment of property, there is more reason,
therefore, in this instance to uphold the policy behind the law, which is to protect the
unwitting public and provide it with a definite person to make accountable for losses or
injuries suffered in vehicular accidents.[21] This is and has always been the rationale behind
compulsory motor vehicle registration under the Land Transportation and Traffic Code and
similar laws, which, as early as Erezo, has been guiding the courts in their disposition of
cases involving motor vehicular incidents. It is also important to emphasize that such
principles apply to all vehicles in general, not just those offered for public service or utility.
[22]

 
The Court recognizes that the business of financing companies has a legitimate and
commendable purpose.[23] In earlier cases, it considered a financial lease or financing lease
a legal contract,[24] though subject to the restrictions of the so-called Recto Law or Articles
1484 and 1485 of the Civil Code.[25] In previous cases, the Court adopted the statutory
definition of a financial lease or financing lease, as:
 
[A]  mode of extending credit through a non-cancelable lease contract under which
the lessor purchases or acquires, at the instance of the lessee, machinery, equipment, motor
vehicles, appliances, business and office machines, and other movable or immovable
property in consideration of the periodic payment by the lessee of a fixed amount of money
sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost,
including any incidental expenses and a margin of profit over an obligatory period of not
less than two (2) years during which the lessee has the right to hold and use the leased
property, x x x but with no obligation or option on his part to purchase the leased property
from the owner-lessor at the end of the lease contract. [26] 
 
Petitioner presented a lengthy discussion of the purported trend in other jurisdictions,
which apparently tends to favor absolving financing companies from liability for the
consequences of quasi-delictual acts or omissions involving financially leased property.
[27]
 The petition adds that these developments have been legislated in our jurisdiction in
Republic Act (R.A.) No. 8556,[28] which provides:
 
Section 12. Liability of lessors. Financing companies shall not be liable for loss, damage
or injury caused by a motor vehicle, aircraft, vessel, equipment, machinery or other
property leased to a third person or entity except when the motor vehicle, aircraft, vessel,
equipment or other property is operated by the financing company, its employees or agents
at the time of the loss, damage or injury.
 
Petitioners argument that the enactment of R.A. No. 8556, especially its addition of the
new Sec. 12 to the old law, is deemed to have absolved petitioner from liability, fails to
convince the Court.
 
These developments, indeed, point to a seeming emancipation of financing
companies from the obligation to compensate claimants for losses suffered from the
operation of vehicles covered by their lease. Such, however, are not applicable to petitioner
and do not exonerate it from liability in the present case.
 
The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do
not supersede or repeal the law on compulsory motor vehicle registration. No part of the
law expressly repeals Section 5(a) and (e) of R.A. No. 4136, as amended, otherwise known
as the Land Transportation and Traffic Code, to wit:
 
Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles and
trailer of any type used or operated on or upon any highway of the Philippines must be
registered with the Bureau of Land Transportation (now the Land Transportation Office,
per Executive Order No. 125, January 30, 1987, and Executive Order No. 125-A, April 13,
1987) for the current year in accordance with the provisions of this Act.
 
x x x x
 
(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other
encumbrances of motor vehicles, in order to be valid against third parties must be
recorded in the Bureau (now the Land Transportation Office). Voluntary transactions or
voluntary encumbrances shall likewise be properly recorded on the face of all outstanding
copies of the certificates of registration of the vehicle concerned.
 
Cancellation or foreclosure of such mortgages, attachments, and other
encumbrances shall likewise be recorded, and in the absence of such cancellation, no
certificate of registration shall be issued without the corresponding notation of mortgage,
attachment and/or other encumbrances.
 
x x x x (Emphasis supplied)
 
Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by implication is
frowned upon, unless there is clear showing that the later statute is so irreconcilably
inconsistent and repugnant to the existing law that they cannot be reconciled and made to
stand together.[29] There is nothing in R.A. No. 4136 that is inconsistent and incapable of
reconciliation.
 
Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not
registered with the Land Transportation Office, still does not bind third persons who are
aggrieved in tortious incidents, for the latter need only to rely on the public registration of a
motor vehicle as conclusive evidence of ownership.[30] A lease such as the one involved in
the instant case is an encumbrance in contemplation of law, which needs to be registered in
order for it to bind third parties.[31] Under this policy, the evil sought to be avoided is the
exacerbation of the suffering of victims of tragic vehicular accidents in not being able to
identify a guilty party. A contrary ruling will not serve the ends of justice. The failure to
register a lease, sale, transfer or encumbrance, should not benefit the parties responsible, to
the prejudice of innocent victims.
 
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.
 
This ruling may appear too severe and unpalatable to leasing and financing companies, but
the Court believes that petitioner and other companies so situated are not entirely left
without recourse. They may resort to third-party complaints against their lessees or
whoever are the actual operators of their vehicles. In the case at bar, there is, in fact, a
provision in the lease contract between petitioner and SUGECO to the effect that the latter
shall indemnify and hold the former free and harmless from any liabilities, damages, suits,
claims or judgments arising from the latter's use of the motor vehicle. [32] Whether petitioner
would act against SUGECO based on this provision is its own option.
 
The burden of registration of the lease contract is minuscule compared to the chaos that
may result if registered owners or operators of vehicles are freed from such
responsibility. Petitioner pays the price for its failure to obey the law on compulsory
registration of motor vehicles for registration is a pre-requisite for any person to even enjoy
the privilege of putting a vehicle on public roads.
 
WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003 and
Resolution dated February 18, 2004 of the Court of Appeals are AFFIRMED.
 
Costs against petitioner.
 
SO ORDERED.
 
 
 
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
 
 
WE CONCUR:
 
 
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
 
 
 
 
MINITA V. CHICO- ANTONIO EDUARDO B. NACHURA
NAZARIO Associate Justice
Associate Justice
 
 
 
RUBEN T. REYES
Associate Justice
 
 
 
ATTESTATION
 
 
I attest that the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.
 
 
 
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
 
 
Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

 
 
REYNATO S. PUNO

Chief Justice
 
[1]
 Penned by Associate Justice Eugenio S. Labitoria with the concurrence of Associate Justices Mercedes Gozo-
Dadole and Rosmari D. Carandang, rollo, pp. 41-47.
[2]
 Id. at 49.
[3]
 Rollo, p. 42.
[4]
 Id. at 72.
[5]
 Id. at 72-73.
[6]
 Id. at 72.
[7]
 Id. at 52-56.
[8]
 Id. at 56.
[9]
 Id. at 47.
[10] 
Id. at 44-45.
[11]
 Id. at 21-22.
[12]
 102 Phil. 103 (1957).
[13]
 Id. at 108-110.
[14]
 Equitable Leasing Corp. v. Suyom, 437 Phil. 244, 256 (2002); Aguilar v. Commercial Savings Bank, 412 Phil. 834, 841
(2001); Spouses Hernandez v. Spouses Dolor, 479 Phil. 593, 603 (2004).
[15]
 RULES OF COURT, Rule 111, Sec. 1, par. (a), sub-par. 1.
[16]
 CIVIL CODE, Art. 2177.
[17]
 Equitable Leasing Corp. v. Suyom, supra note 14, at 255; First Malayan Leasing and Finance Corp. v. Court of Appeals, G.R.
No. 91378, June 9, 1992, 209 SCRA 660, 663.
[18]
 Equitable Leasing Corp. v. Suyom, supra 14, at 255, citing First Malayan Leasing and Finance Corp. v. Court of Appeals,
supra note 17; MYC-Agro-Industrial Corp. v. Camerino, 217 Phil. 11, 17 (1984); and Vargas v. Langcay, 116 Phil. 478,
481-482 (1962).
The only known exception to the rule is that enunciated in FGU Insurance Corp. v. Court of Appeals, 351 Phil. 219, 225 (1998),
where it was held that a rent-a-car company is not liable for the damages caused by the negligence of its lessee, who drove
the subject vehicle. Here, it was established that between a rent-a-car company and a client who drove a leased vehicle,
there was a clear absence of vinculum juris as employer and employee.
[19]
 Equitable Leasing Corp. v. Suyom, supra; note 14, at 255; First Malayan Leasing and Finance Corp. v. Court of Appeals, supra
note 17, at 664.
[20]
 First Malayan Leasing and Finance Corp. v. Court of Appeals, supra note 17, at 664.
[21]
 Erezo v. Jepte, supra note 12, at 108.
[22]
 Erezo v. Jepte, supra note 12, at 107; Equitable Leasing Corp. v. Suyom, supra note 14, at 256; BA Finance Corp. v. Court of
Appeals, G.R. No. 98275, November 13, 1992, 215 SCRA 715, 720.
[23]
 PCI Leasing and Finance Inc. v. Giraffe-X Creative Imaging Inc., G.R. No. 142618, July 12, 2007, 527 SCRA 405, 420-421.
[24]
 Cebu Contractors Consortium Co. v. Court of Appeals, 454 Phil. 650, 656 (2003).
[25]
 Elisco Tools Manufacturing Corp. v. Court of Appeals, 367 Phil. 242, 255 (1999); PCI Leasing and Finance Inc. v. Giraffe-X
Creative Imaging Inc., supra note 23, at 424-426.
[26]
 Republic Act No. 5980 (1969), as amended by Republic Act No. 8556 (1998), Sec. 3 (d), quoted in Cebu Contractors
Consortium Co. v. Court of Appeals, supra note 24, at 657; PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging
Inc., supra note 23, at 416.
[27]
 Rollo, pp. 29-30.
[28]
 Amending R.A. No. 5980, or the old Financing Company Act.
[29]
 Agujetas v. Court of Appeals, 329 Phil. 721, 745 (1996).
[30]
 First Malayan Leasing and Finance Corp. v. Court of Appeals, supra note 17, at 664.
[31]
 Roxas v. Court of Appeals, G.R. No. 92245, June 26, 1991, 198 SCRA 541, 546; also Black's Law Dictionary (abridged
5th edition) defines an encumbrance as any right to, or interest in, land which may subsist in another to diminution of its
value, but consistent with the passing of the fee. A claim, lien, charge, or liability attached to and binding real property; e.g.
a mortgage; judgment lien; mechanics' lien; lease; security interest; easement of right of way; accrued and unpaid
taxes. (Emphasis supplied.)
[32]
 Exhibit 1-A, records, p. 359.

CHAPTER VI — COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE

SECTION 373.       For purposes of this chapter:

(a)            “Motor Vehicle” is any vehicle as defined in section three, paragraph (a) of Republic
Act Numbered Four Thousand One Hundred Thirty-Six, Otherwise known as the “Land
Transportation & Traffic Code.”

(b)           “Passenger” is any fare paying person being transported & conveyed in & by a motor
vehicle for transportation of passengers for compensation, including persons expressly authorized
by law or by the vehicle’s operator or his agents to ride without fare.
(c)            “Third-Party” is any person other than a passenger as defined in this section & shall
also exclude a member of the household, or a member of the family within the second degree of
consanguinity or affinity, of a motor vehicle owner or land transportation operator, as likewise
defined herein, or his employee in respect of death, bodily injury, or damage to property arising
out of & in the course of employment. (As amended by Presidential Decree No. 1814 & 1981)

(d)           “Owner” or “Motor vehicle owner” means the actual legal owner of a motor vehicle, in
whose name such vehicle is duly registered w/ the Land Transportation Commission;

(e)            “Land transportation operator” means the owner or owners of motor vehicles for
transportation of passengers for compensation, including school buses;

(f)            “Insurance policy” or “Policy” refers to a contract of insurance against passenger &
thirty-party liability for death or bodily injuries & damaged to property arising fr. motor vehicle
accidents. (As amended by Presidential Decree No. 1455 & 1814)

SECTION 374.       It shall be unlawful for any land transportation operator or owner of a motor
vehicle to operate the same in the public highways unless there is in force in relation thereto a
policy of insurance or guaranty in cash or surety bond issued in accordance w/ the provisions of
this chapter to indemnify the death, bodily injury, &/or damage to property of a third-party or
passenger, as the case may be, arising fr. the use thereof. (As amended by Presidential Decree
No. 1455 & 1814)
SECTION 375.       The Commissioner shall furnish the Land Transportation Commissioner w/ a list
of insurance companies authorized to issue the policy of insurance or surety bond required by this
chapter. (As amended by Presidential Decree No. 1814)
SECTION 376.       The Land Transportation Commission shall not allow the registration or renewal
of registration of any motor vehicle without first requiring fr. the land transportation operator or
motor vehicle owner concerned the presentation & filing of a substantiating documentation in a
form approved by the Commissioner evidencing that the policy of insurance or guaranty in cash or
surety bond required by this chapter is in effect. (As amended by Presidential Decree No. 1455)
SECTION 377.       Every land transportation operator & every owner of a motor vehicle shall,
before applying for the registration or renewal of registration of any motor vehicle, at his option,
either secure an insurance policy or surety bond issued by any insurance company authorized by
the Commissioner or make a cash deposit in such amount as herein required as limit of liability for
purposes specified in section three hundred seventy-four.

(1)            In the case of a land transportation operator the insurance guaranty in cash or surety
bond shall cover liability for death or bodily injuries of third-parties &/or passengers arising out of
the use of such vehicle in the amount not less than twelve thousand pesos per passenger or third
party & an amount, for each of such categories, in any one accident of not less than that set forth
in the following scale —

(a)            Motor vehicles w/ an authorized capacity of twenty-six or more passengers: Fifty

thousand pesos;

(b)           Motor vehicles w/ an authorized capacity of fr. twelve to twenty-five passengers: Forty
thousand pesos;

(c)            Motor vehicles w/ an authorized capacity of fr. six to eleven passengers: Thirty
thousand pesos;
(d)           Motor vehicles w/ an authorized capacity of five or less passengers: Five thousand pesos
multiplied by the authorized capacity.

Provided, however, That such cash deposit made to, or surety bond posted w/, the Commissioner
shall be resorted to by him in cases of accidents the indemnities for w/c to third-parties &/or
passengers are not settled accordingly by the land transportation operator &, in that event, the
said cash deposit shall be replenished or such surety bond shall be restored w/ sixty days after
impairment or expiry, as the case may be, by such land transportation operator, otherwise, he
shall secure the insurance policy required by this chapter. The aforesaid cash deposit may be
invested by the Commissioner in readily marketable government bonds &/or securities.

(2)            In the case of an owner of a motor vehicle, the insurance or guaranty in cash or surety
bond shall cover liability for death or injury to third parties in an amount not less than that set
forth in the following scale in any one accident:

I.              Private Cars

(a)           Bantam   :               Twenty thousand pesos;

(b)           Light       :               Twenty thousand pesos;

(c)            Heavy     :               Thirty thousand pesos;

II.            Other Private Vehicles

(a)            Tricycles, motorcycles, & scooters  :  Twelve thousand pesos;

(b)           Vehicles w/ an unladen weight of 2,600 kilos or less : Twenty thousand pesos;

(c)            Vehicles w/ an unladen weight of between 2,601 kilos & 3,930 kilos : Thirty thousand
pesos;

(d)           Vehicles w/ an unladen weight over 3,930 kilos : Fifty thousand pesos.

The Commissioner may, if warranted, set forth schedule of indemnities for the payment of claims
for death or bodily injuries w/ the coverages set forth herein. (As amended by Presidential Decree
No. 1455 & 1814)

SECTION 378.       Any claim for death or injury to any passenger or third party pursuant to the
provisions of this chapter shall be paid without the necessity of proving fault or negligence of any
kind; Provided, That for purposes of this section —

(a)            The total indemnity in respect of any person shall not exceed five thousand pesos;

(ii)            The following proofs of loss, when submitted under oath, shall be sufficient evidence to
substantiate the claim:

(a)            Police report of accident; &

(b)           Death certificate & evidence sufficient to establish the proper payee; or

(c)            Medical report & evidence of medical or hospital disbursement in respect of w/c refund
is claimed.
(iii)           Claim may be made against one motor vehicle only. In the case of an occupant of a
vehicle, claim shall lie against the insurer of the vehicle in w/c the occupant is riding, mounting
or dismounting fr.. In any other case, claim shall lie against the insurer of the directly offending
vehicle. In all cases, the right of the party paying the claim to recover against the owner of the
vehicle responsible for the accident shall be maintained.

SECTION 379.       No land transportation operator or owner of motor vehicle shall be

unreasonably denied the policy of insurance or surety bond required by this chapter by the
insurance companies authorized to issue the same, otherwise, the Land Transportation
Commission shall require fr. said land transportation operator or owner of the vehicle, in lieu of a
policy of insurance or surety bond, a certificate that a cash deposit has been made w/ the
Commissioner in such amount required as limits of indemnity in section three hundred
seventy-seven to answer for the passenger &/or third-party liability of such land transportation
operator or owner of the vehicle.

No insurance company may issue the policy of insurance or surety bond required under this
chapter unless so authorized under existing laws.

The authority to engage in the casualty &/or surety lines of business of an insurance company that
refuses to issue or renew, without just cause, the insurance policy or surety bond therein required
shall be withdrawn immediately. (As amended by Presidential Decree No. 1455 & 1814)

SECTION 380.       No cancellation of the policy shall be valid unless written notice thereof is given
to the land transportation operator or owner of the vehicle & to the Land Transportation
Commission at least fifteen days prior to the intended effective date thereof.

Upon receipt of such notice, the Land Transportation Commission, unless it receives evidence of a
new valid insurance or guaranty in cash or surety bond as prescribed in this chapter, or an
endorsement of revival of the cancelled one, shall order the immediate confiscation of the plates
of the motor vehicle covered by such cancelled policy. The same may be re-issued only upon
presentation of a new insurance policy or that a guaranty in cash or surety band has been made or
posted w/ the Commissioner & w/c meets the requirements of this chapter, or an endorsement or
revival of the cancelled one. (As amended by Presidential Decree No. 1455)

SECTION 381.       If the cancellation of the policy or surety bond is contemplated by the land
transportation operator or owner of the vehicle, he shall, before the policy or surety bond ceases
to be effective, secure a similar policy of insurance or surety bond to replace the policy or surety
bond to be cancelled or make a cash deposit in sufficient amount w/ the Commissioner & without
any gap, file the required documentation w/ the Land Transportation Commission, & notify the
insurance company concerned of the cancellation of its policy or surety bond. (As amended by
Presidential Decree No. 1455)
SECTION 382.       In case of change of ownership of a motor vehicle, or change of the engine of an
insured vehicle, there shall be no need of issuing a new policy until the next date of registration
or renewal of registration of such vehicle, & provided that the insurance company shall agree to
continue the policy, such change of ownership or such change of the engine shall be indicated in a
corresponding endorsement by the insurance company concerned, & a signed duplicate of such
endorsement shall, within a reasonable time, be filed w/ the Land Transportation Commission.
SECTION 383.       In the settlement & payment of claims, the indemnity shall not be availed of by
any accident victim or claimant as an instrument of enrichment by reason of an accident, but as
an assistance or restitution insofar as can fairly be ascertained.
SECTION 384.       Any person having any claim upon the policy issued pursuant to this Chapter
shall, without any unnecessary delay, present to the insurance company concerned a written
notice of claim setting forth the nature, extent & duration of the injuries sustained as certified by
a duly licensed physician. Notice of claim must be filed within six months fr. date of accident,
otherwise, the claim shall be deemed waived. Action or suit for recovery of damage due to loss or
injury must be brought, in proper cases, w/ the Commissioner or the Courts within one year fr.
denial of the claim, otherwise, the claimant’s right of action shall prescribe. (As amended by
Presidential Decree 1814 & Batasang Pambansa Blg. 874)
SECTION 385.       The insurance company concerned shall forthwith ascertain the truth & extent
of the claim & make payment within five working days after reaching an agreement. If no
agreement is reached, the insurance company shall pay only the “no-fault” indemnity provided in
section three hundred seventy-eight without prejudice to the claimant fr. pursuing his claim
further, in w/c case, he shall not be required or compelled by the insurance company to execute
any quit claim or document releasing it fr. liability under the policy of insurance or surety bond
issued. (As amended by Presidential Decree No. 1455)

In case of any dispute in the enforcement of the provisions of any policy issued pursuant to this
chapter, the adjudication of such dispute shall be within the original & exclusive jurisdiction of
the Commissioner, subject to the limitations provided in section four hundred sixteen.

SECTION 386.       It shall be unlawful for a land transportation operator or owner of motor vehicle
to require his or its drivers or other employees to contribute in the payment of premiums.
SECTION 387.       No government office or agency having the duty of implementing the provisions
of this chapter nor any official or employee thereof shall act as agent in procuring the insurance
policy or surety bond provided for herein. The commission of an agent procuring the said policy or
bond shall in no case exceed ten per centum of the amount of the premiums therefor.
SECTION 388.       Any land transportation operator or owner of motor vehicle or any other person
violating any of the provisions of the preceding sections shall be punished by a fine of not less
than five hundred pesos but not more than one thousand pesos &/or imprisonment for not more
than six months. The violation of section three hundred seventy-seven by a land transportation
operator shall be a sufficient cause for the revocation of the certificate of public convenience
issued by the Board of Transportation covering the vehicle concerned.
SECTION 389.       Whenever any violation of the provisions of this chapter is committed by a
corporation or association, or by a government office or entity, the executive officer or officers of
said corporation, association or government office or entity who shall have knowingly permitted,
or failed to prevent, said violation shall be held liable as principals.
Reference:  University of the Philippines