Lita Enterprises v. Second Civil Cases Division

Summary

The Supreme Court declared the 'kabit system' - an arrangement where a franchise holder allows another to operate vehicles under their certificate of public convenience for a fee - as void and illegal under Civil Code provisions. When spouses Ocampo sued Lita Enterprises for reconveyance of vehicle registration after operating taxicabs under this illegal arrangement, the Court applied the doctrine of 'in pari delicto' and the maxim that no action arises from illegal bargains. The Court annulled all prior proceedings, refusing to grant relief to either party and leaving them to bear the consequences of their illegal contract. This case established important precedent that courts will not enforce transportation franchise arrangements that violate public policy, regardless of subsequent disputes between the parties.