Photo from Unsplash | Beng Ragon
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
It shall be unlawful for any individual, partnership, association, corporation or joint-stock company, their lessees, trustees, or receivers appointed by any court whatsoever, or any municipality, province, or other department of the Government of the Philippines, to engage in any public service business without having first secured from the Commission a certificate as provided for in this Act, except grantees of legislative franchises expressly exempting such grantee from the requirement of securing a certificate from this Commission, as well as concerned at present existing expressly exempted from the jurisdiction of the Commission, either totally or in part, by the provisions of section thirteen of this Act. (Section 18, Public Service Act, as amended by Section 2 of R.A. No. 11659)
While ordinarily, the agreement between parties is considered the law between them, there are instances wherein such agreement cannot be given effect for being prohibited by law.
For instance, under the Public Service Act, boundary and kabit systems are considered as unlawful arrangements. The Public Service Act (Commonwealth Act No. 146), as amended by Republic Act No. 11659, makes it unlawful for any natural or juridical person to engage in any act of public service business without a certificate of public convenience.
The law says:
“It shall be unlawful for any individual, partnership, association, corporation or joint-stock company, their lessees, trustees, or receivers appointed by any court whatsoever, or any municipality, province, or other department of the Government of the Philippines, to engage in any public service business without having first secured from the Commission a certificate as provided for in this Act, except grantees of legislative franchises expressly exempting such grantee from the requirement of securing a certificate from this Commission, as well as concerned at present existing expressly exempted from the jurisdiction of the Commission, either totally or in part, by the provisions of section thirteen of this Act.” (Section 18, Public Service Act, as amended by Section 2 of R.A. No. 11659)
Boundary System
In the case of Primo Caong v. Avelino Regualos (G.R. No. 179428, January 26, 2011), the Supreme Court noted the concept of a boundary system or scheme, to wit:
“Under a boundary scheme, the driver remits the “boundary,” which is a fixed amount, to the owner/operator and gets to earn the amount in excess thereof.”
To explain further, the boundary system by an owner or operator engaged in transporting passengers as a common carrier to primarily govern the compensation of the driver, that is, the latter’s daily earnings are remitted to the owner or operator less the excess of the boundary which represents the driver’s compensation. Under this system, the owner or operator exercises control and supervision over the driver. It is unlike a lease of chattels where the lessor loses complete control over the chattel leased but the lessee is still ultimately responsible for the consequences of its use.
The management of the business is still in the hands of the owner or operator, who, being the holder of the certificate of public convenience, must see to it that the driver follows the route prescribed by the franchising and regulatory authority, and the rules promulgated with regard to the business operations. (Oscar Villarama, Jr. v. Court of Appeals, G.R. No. 165881, April 19, 2006)
Consequently, whatever the driver earns from the passenger fares in excess of the boundary fee is his income. (Paguio v. Transport Corporation v. NLRC, G.R. No. 119500, August 28, 1998)
Kabit System
Kabit system refers to the arrangement whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the earnings. (Lim v. Court of Appeals, G.R. No. 125817, January 16, 2002)
In the case of Lim v. Court of Appeals (G.R. No. 125817, January 16, 2002), the Supreme Court ruled that kabit system is recognized as being contrary to public policy and therefore void and inexistent under Article 1409 of the New Civil Code. The arrangement is a circumvention of the requirement for a license.
Jurisprudence says:
The transfer, sale, lease, or assignment of the privilege granted is valid between the contracting parties but not upon the public or third persons. (Gelisan v. Aldau, G.R. No. L-30212, September 30, 1987)
If both the boundary system and the kabit system are unlawful, who is liable to the passengers in case of an accident?
For better protection of the public, both the owner of record and the actual operator shall be jointly and severally liable with the driver. (R Transport Corporation v. Yu, G.R. No. 174161, February 18, 2015)
Related Article/s: What is the relationship between jeepney and taxi drivers and their operators under the boundary system?
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
All rights reserved.