UCPB Leasing and Finance Corporation vs. Heirs of Florencio Leporgo, Sr.

A financing company is not exempt from liability for damages caused by a leased vehicle under Section 12 of Republic Act No. 8556 if the lease agreement is not registered with the Land Transportation Office pursuant to Section 5 of Republic Act No. 4136, as third parties may rely solely on the public registration of ownership as conclusive evidence; moreover, voluntary submission to jurisdiction is effected when a defendant files an Answer Ad Cautelam that raises grounds beyond lack of jurisdiction over the person, such as lack of cause of action or compulsory counterclaims.

UCPB Leasing and Finance Corporation (ULFC), a financing company, owned an International Harvester Trailer Truck leased to Subic Bay Movers, Inc. (SBMI) under a Lease Agreement dated August 21, 1998. On November 13, 2000, the truck driven by Miguelito Almazan collided with the Nissan Sentra of Florencio Leporgo, Sr. along the national road in Barangay Real, Calamba, Laguna, causing Leporgo's instantaneous death when the truck halted on top of his vehicle and exploded.

• The Lease Agreement: On August 21, 1998, ULFC entered into a Lease Agreement with SBMI covering the trailer truck and other equipment. The agreement included an indemnity clause requiring SBMI to indemnify ULFC from liability arising from injury caused by the leased property.
• The Accident: On November 13, 2000, at approximately 12:45 p.m., Almazan drove the trailer truck recklessly through stalled traffic in Calamba, Laguna, hitting multiple vehicles and structures before coming to rest on Leporgo's Nissan Sentra, causing an explosion that killed Leporgo instantly.
• Service of Summons: Initial summons was served on Rosario A. Pinguel of ULFC's Collection and Compliance Department. ULFC moved to dismiss, claiming jurisdiction was not acquired as Pinguel was not among the officers enumerated in Section 11, Rule 14 of the Rules of Court. The RTC ordered alias summons served on ULFC's Office of the President, which was received by Executive Secretary Tetchie Paredes on March 20, 2002.
• Pleadings: ULFC filed an Answer Ad Cautelam denying allegations and raising defenses including lack of cause of action, while also praying for moral damages and attorney's fees as compulsory counterclaims.
• Trial Proceedings: SBMI was impleaded as defendant and declared in default after service by publication. The RTC found Almazan grossly negligent and held ULFC liable as registered owner, noting the lease agreement failed to meet the requirements of a financial lease under RA 8556.

• Jurisdiction: ULFC insisted that jurisdiction was not acquired because summons was served on Pinguel and Paredes, who were not the president, managing partner, general manager, corporate secretary, treasurer, or in-house counsel as required by Section 11, Rule 14. The returns did not show attempts at personal service or that service could not be made within reasonable time.
• Exemption from Liability: ULFC maintained it was exempt from liability under Section 12 of RA 8556 (Financing Company Act of 1998), which absolves financing companies from liability for loss caused by leased property operated by a third party.
• Computation of Damages: ULFC argued that life expectancy should be computed based on the mandatory retirement age of 65 years for government employees (yielding 8 years) rather than the standard 80-year formula, and that income from conduction services should be excluded. ULFC also assailed the awards for moral and exemplary damages as excessive.

• Jurisdiction: The heirs argued that jurisdiction was validly acquired through service on the Executive Secretary of the Office of the President, and that ULFC's active participation constituted voluntary submission.
• Registered Owner Liability: The heirs invoked the registered owner rule, contending that non-registration of the lease agreement precluded ULFC from enjoying the exemption under Section 12 of RA 8556, and that the agreement did not qualify as a financial lease.
• Damages: The heirs maintained that the standard formula fixing life expectancy at 80 years should apply uniformly regardless of employment sector, and that conduction services income was sufficiently proven. They defended the awards for moral damages, exemplary damages, and attorney's fees as fair and reasonable.

• Jurisdiction over the Corporation: Whether the RTC acquired jurisdiction over ULFC despite service of summons on officers not enumerated in Section 11, Rule 14.
• Liability of Registered Owner: Whether ULFC, as registered owner of the trailer truck, may be held solidarily liable with the driver for damages caused by the vehicle's negligent operation.
• Computation of Monetary Awards: Whether the lower courts properly computed the loss of earning capacity, moral damages, exemplary damages, and attorney's fees.

• Jurisdiction over the Corporation: Jurisdiction was acquired through ULFC's voluntary appearance. Although service on Pinguel and Paredes did not comply strictly with Section 11, Rule 14, ULFC's filing of an Answer Ad Cautelam raising grounds beyond lack of jurisdiction (such as lack of cause of action and compulsory counterclaims) constituted voluntary submission under Section 20, Rule 14. The proper remedy to challenge defective service was a motion to dismiss or petition for certiorari under Rule 65, not participation through an answer.
• Liability of Registered Owner: ULFC is solidarily liable with Almazan. Section 12 of RA 8556 does not supersede Section 5 of RA 4136 (Land Transportation and Traffic Code), which requires registration of encumbrances to bind third parties. A lease constitutes an encumbrance that must be registered with the Land Transportation Office to affect third parties. Because the lease was unregistered, ULFC cannot invoke the statutory exemption and remains liable as registered owner. Financing companies retain recourse through third-party complaints against lessees.
• Computation of Monetary Awards: The loss of earning capacity was recalculated using the prevailing formula: Net earning capacity = [2/3(80 - age at death)] x [Gross Annual Income - Living Expenses (50% of GAI)]. Applying Leporgo's age of 57 and total annual income of P353,520.00 (salary plus conduction services), the correct award is P2,710,319.99. Life expectancy cannot be restricted to retirement age. Moral damages were reduced to P100,000.00 as the lower courts' award of P1,000,000.00 was exorbitant. Exemplary damages of P50,000.00 were imposed due to failure to register the lease and lack of insurance coverage, violating the Insurance Code. Attorney's fees were fixed at P50,000.00.

• Voluntary Appearance Doctrine — Filing an Answer Ad Cautelam that includes grounds other than lack of jurisdiction over the person (such as lack of cause of action or compulsory counterclaims) constitutes voluntary appearance equivalent to service of summons under Section 20, Rule 14 of the Rules of Court, notwithstanding repeated invocations of lack of jurisdiction.
• Registered Owner Rule in Financial Leases — A financing company remains liable as registered owner for damages caused by a leased vehicle where the lease agreement is not registered with the Land Transportation Office as an encumbrance under Section 5(e) of RA 4136. Section 12 of RA 8556 (Financing Company Act) does not impliedly repeal the registration requirements of RA 4136; non-registration precludes the lessor from claiming exemption from liability as against third-party victims.
• Computation of Loss of Earning Capacity — The standard formula applies uniformly: Net Earning Capacity = [2/3 x (80 - age of deceased)] x [Gross Annual Income - (50% of Gross Annual Income)]. Life expectancy is fixed at 80 years regardless of the deceased's employment sector or mandatory retirement age, as productivity and earning potential may continue beyond formal retirement.
• Solidary Liability of Judgment Debtors on Appeal — Where one of several solidarily liable judgment debtors appeals and the monetary award is modified, the adjustment inures to the benefit of co-judgment debtors who did not appeal, provided their rights and liabilities are so interwoven and dependent as to be inseparable from those of the appealing party.

• "The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance." — Interpretation of Section 20, Rule 14 regarding what constitutes voluntary appearance.
• "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." — Rationale for requiring registration of encumbrances to bind third parties.
• "The Court cannot restrict the computation of Leporgo's life expectancy to (2/3 x [65 – age at death]) simply because the deceased was a government employee whose mandatory age of retirement is 65 years old. The formula for the computation of loss of earning capacity is meant to be uniformly applied to all, regardless of the industry or sector they work in." — Rejection of sector-specific life expectancy calculations.

• PCI Leasing and Finance, Inc. v. UCPB General Insurance Co., Inc., 579 Phil. 418 (2008) — Controlling precedent establishing that RA 8556 does not repeal RA 4136 and that unregistered leases do not bind third parties; financing companies may resort to third-party complaints against lessees.
• Nacar v. Gallery Frames, 716 Phil. 267 (2013) — Applied for the computation of legal interest at 6% per annum on damages from date of judgment until finality, and from finality until full satisfaction.
• People v. Moreno, G.R. No. 191759, March 2, 2020 — Cited for the prevailing formula in computing net earning capacity.

• Section 11, Rule 14, Rules of Court — Enumerates the officers upon whom service of summons may be made for domestic private juridical entities (president, managing partner, general manager, corporate secretary, treasurer, or in-house counsel).
• Section 20, Rule 14, Rules of Court — Provides that voluntary appearance in the action is equivalent to service of summons.
• Section 12, Republic Act No. 8556 (Financing Company Act of 1998) — Exempts financing companies from liability for loss caused by leased property operated by third parties, provided the property is not operated by the financing company or its agents.
• Section 5, Republic Act No. 4136 (Land Transportation and Traffic Code) — Mandates compulsory registration of motor vehicles and requires recording of encumbrances (including leases) to be valid against third parties.
• Article 2199, Civil Code — Limits actual damages to pecuniary loss duly proved.
• Article 2206(3), Civil Code — Authorizes moral damages for death of deceased.
• Section 389, Republic Act No. 10607 (Insurance Code) — Requires proof of insurance for vehicle registration.

Peralta, C.J. (Chairperson), Zalameda, Gaerlan, and Caguioa, JJ.
Note: Caguioa, J. maintained his position in Lara's Gifts vs. Midtown regarding the computation of legal interest.

None.