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The Other Side of Registration

(Article published in the No. 05, 2002 issue of TODAY, Business Section)

A common wisdom is that registration is the concern of the buyer of property and not the seller. The purpose of registration is to give notice to the "whole world" on such matters as ownership or other real rights over property. As articulated in the Civil Code, regarding the registry of immovable property which many are familiar with, titles of ownership and of other rights "which are not duly inscribed or annotated in the Registry of Property shall not prejudice third persons" (Art. 709). Thus, the buyer of land who is naturally interested in binding the rest of the world to the consequences of his new ownership is the party that is seen as standing to benefit from registration.

Moreover, registration acts as an arbiter of sorts between two buyers of the same property. Thus it has been repeatedly held by the Supreme Court that when two parties claim to have acquired the same property, the one who registered the sale in his favor has a preferred right over the other who has not registered his title, even if the latter is in actual possession of the immovable property. The first to buy must be the first to register lest he receive his comeuppance from the hands of a later, but quicker, buyer.

The buyer of property therefore rightly runs to the registry of property and the seller, having received payment, sits back and relaxes, confident in the thought that he has nothing more to with the system of registration, certainly not on the sold property. The case of Equitable Leasing Corporation v. Lucita Suyom, et al, (G.R. 143360, promulgated September 5, 2002) demonstrates how seriously erroneous that belief can be. In this decision penned by Supreme Court Justice Artemio V. Panganiban, it is clear that the seller cannot rest until the property is registered out of his name and into the new owner’s. A motor vehicle, not land, was involved, but the principles on which the case turned are applicable to both.

Equitable Leasing Corp., contrary to what its name suggests, is neither a subsidiary nor an affiliate of the then Equitable Bank, now known the PCI Equitable Bank. It is a corporation engaged in the business of financial leasing, a commercial arrangement under which the corporation "leases out" to its customers personal property, primarily motor vehicles, for a certain term during which its clients, the "lessees", pay monthly rentals which are, in substance, installment payments for the subject of the "lease." At the end of the term, the price of the subject property shall have been fully paid, and so, for a nominal sum, the property is then and only then transferred to the lessees. During the term of the "lease", the property remains registered in the name of the financing corporation.

On June 4, 1991, Equitable Leasing Corp. entered into such a financial lease with a certain Edwin Lim over a Fuso Road Tractor. The agreement called for monthly rentals and the lease was to expire on December 4, 1992. After few months, Lim completed the payments needed to cover the price of the tractor. Accordingly, Equitable Leasing Corp. on December 8, 1992 executed a Deed of Sale over the tractor. The transfer was made to a corporation named "Ecatine Corporation", I presume, upon instructions of Edwin Lim who represented Ecatine in the transaction. The sale was not registered with the Land Transportation Office.

About a month and three years thereafter, the Fuso Road Tractor, driven by a Raul Tutor who is apparently an employee of Ecatine Corporation, rammed into the store that also served as the home of Myrna Tamayo located at Pier 18, Vitas, Tondo, Manila. Two persons were pinned to death under the engine of the tractor; four others were injured.

The driver was charged with and subsequently convicted of reckless imprudence resulting in multiple homicide and multiple physical injuries. When the victims tried to find out who the owner of the tractor was, the records in the Land Transportation Office showed that it was still registered in the name of "Equitable Leasing Corp./leased to Edwin Lim". Equitable Leasing Corp. was thus sued on the basis of its being the owner of the wayward tractor. When the complaint was filed, neither the Raul Tutor, the driver, nor Ecatine Corp., nor Edwin Lim, could be located. Equitable Leasing Corp. was left all alone facing the music.

What Equitable Leasing Corp. heard from the courts, initially the regional trial court, then the Court of Appeals, and ultimately the Supreme Court, was not music to its ears. The courts rebuffed its attempts at escaping liability by claiming that since it had sold the tractor to Ecatine Corp. more than three years earlier, it was no longer in control and possession of the vehicle at the time of the incident. Besides, Equitable Leasing Corp. protested, Tutor was not its employee but an employee of Ecatine.

The Supreme Court pointed out that the suit against Equitable Leasing Corp. was based on Article 2176 of the Civil Code that makes an employer directly and primarily liable for damages resulting from the negligent act or omission of its employee. The theory, under the law on torts or quasi-delicts, is that the employee is the extension of the employer and the connection is severed only if it is shown that the employer exercised due diligence in the selection and supervision of the employee.

 Sternly, the Supreme Court laid out the principles: "We hold petitioner [Equitable Leasing Corp.] liable for the deaths and the injuries complained of, because it was the registered owner of the tractor at the time of the accident on July 17, 1994. The Court has consistently ruled 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. In 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…even if the registered owner of [the] vehicle does not use it for public service."

As rationale, the high court quoted from the case of Erezo v. Jepte (102 Phil. 103 [1957]) :

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."

It is thus clear that registration, whether it be for motor vehicles or for land or any other property required to be in a public register, operates as no more than a neutral notice to the whole world. On the one hand, it tells the world which owner to respect. On the other, it tells the world which bastard to sue. It is thus in the interest of the buyer as much as it is in the interest of the seller to make sure that the transfer of ownership from the latter to the former is recorded as expeditiously as possible.