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G.R.No.L19891

TodayisThursday,August11,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
ENBANC
G.R.No.L19891July31,1964
J.R.S.BUSINESSCORPORATION,J.R.DASILVAandA.J.BELTRAN,petitioners,
vs.
IMPERIALINSURANCE,INC.,MACARIOM.OFILADA,SheriffofManilaand
HON.AGUSTINMONTESA,JudgeoftheCourtofFirstInstanceofManila,respondents.
FelipeN.Aureaforpetitioners.
Taada,TeehankeeandCarreonforrespondentImperialInsurance,Inc.
PAREDES,J.:
PetitionerJ.R.DaSilva,isthePresidentoftheJ.R.S.BusinessCorporation,anestablishmentdulyfranchisedby
the Congress of the Philippines, to conduct a messenger and delivery express service. On July 12, 1961, the
respondentImperialInsurance,Inc.,presentedwiththeCFIofManilaacomplaint(Civ.CaseNo.47520),forsum
ofmoneyagainstthepetitionercorporation.AfterthedefendantsthereinhavesubmittedtheirAnswer,theparties
entered into a Compromise Agreement, assisted by their respective counsels, the pertinent portions of which
recite:
1)WHEREAS,theDEFENDANTSadmitandconfesstheirjointandsolidaryindebtednesstothePLAINTIFF
inthefullsumofPESOSSIXTYONETHOUSANDONEHUNDREDSEVENTYTWO&32/100(P61,172.32),
PhilippineCurrency,itemizedasfollows:
a)Principal

P50,000.00

b)Interestat12%perannum

5,706.14

c)Liquidateddamagesat7%perannum

3,330.58

d)Costsofsuit
e)Attorney'sfees

135.60
2,000.00

2) WHEREAS, the DEFENDANTS bind themselves, jointly and severally, and hereby promise to pay their
aforementioned obligation to the PLAINTIFF at its business address at 301305 Banquero St., (Ground
Floor),ReginaBuilding,Escolta,Manila,withinsixty(60)daysfromMarch16,1962oronorbeforeMay14,
1962
3) WHEREAS, in the event the DEFENDANTS FAIL to pay in full the total amount of PESOS SIXTY ONE
THOUSANDONEHUNDREDSEVENTYTWO&32/100(P61,172.32),PhilippineCurrency,foranyreason
whatsoever, on May 14, 1962, the PLAINTIFF shall be entitled, as a matter of right, to move for the
executionofthedecisiontoberenderedintheaboveentitledcasebythisHonorableCourtbasedonthis
COMPROMISEAGREEMENT.
On March 17, 1962, the lower court rendered judgment embodying the contents of the said compromise
agreement,thedispositiveportionofwhichreads
WHEREFORE, the Court hereby approves the abovequoted compromise agreement and renders
judgmentinaccordancetherewith,enjoiningthepartiestocomplyfaithfullyandstrictlywiththetermsand
conditionsthereof,withoutspecialpronouncementastocosts.
Wherefore,thepartiesrespectfullypraythattheforegoingstipulationoffactsbeadmittedandapprovedby
this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not
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coveredbythisstipulationoffacts.

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On May 15, 1962, one day after the date fixed in the compromise agreement, within which the judgment debt
would be paid, but was not, respondent Imperial Insurance Inc., filed a "Motion for the Insurance of a Writ of
Execution". On May 23, 1962, a Writ of Execution was issued by respondent Sheriff of Manila and on May 26,
1962, Notices of Sale were sent out for the auction of the personal properties of the petitioner J.R.S. Business
Corporation. On June 2, 1962, a Notice of Sale of the "whole capital stocks of the defendants JRS Business
Corporation, the business name, right of operation, the whole assets, furnitures and equipments, the total
liabilities,andNetWorth,booksofaccounts,etc.,etc."ofthepetitionercorporationwas,handeddown.OnJune
9,thepetitioner,thrucounsel,presentedan"UrgentPetitionforPostponementofAuctionSaleandforReleaseof
Levy on the Business Name and Right to Operate of Defendant JRS Business Corporation", stating that
petitionerswerebusynegotiatingforaloanwithwhichtopaythejudgmentdebtthatthejudgmentwasformoney
onlyand,therefore,plaintiff(respondentInsuranceCompany)wasnotauthorizedtotakeoverandappropriatefor
its own use, the business name of the defendants that the right to operate under the franchise, was not
transferableandcouldnotbeconsideredapersonalorimmovable,property,subjecttolevyandsale.OnJune
10, 1962, a Supplemental Motion for Release of Execution, was filed by counsel of petitioner JRS Business
Corporation, claiming that the capital stocks thereof, could not be levied upon and sold under execution. Under
date of June 20, 1962, petitioner's counsel presented a pleading captioned "Very Urgent Motion for
PostponementofPublicAuctionSaleandforRulingonMotionforReleaseofLevyontheBusinessName,Right
toOperateandCapitalStocksofJRSBusinessCorporation".TheauctionsalewassetforJune21,1962.Insaid
motion,petitionersallegedthattheloantheyhadappliedfor,wastobesecuredwithinthenextten(10)days,and
theywouldbeabletodischargethejudgmentdebt.RespondentsopposedthesaidmotionandonJune21,1962,
thelowercourtdeniedthemotionforpostponementoftheauctionsale.
In the sale which was conducted in the premises of the JRS Business Corporation at 1341 Perez St., Paco,
Manila,allthepropertiesofsaidcorporationcontainedintheNoticesofSaledatedMay26,1962,andJune2,
1962 (the latter notice being for the whole capital stocks of the defendant, JRS Business Corporation, the
businessname,rightofoperation,thewholeassets,furnituresandequipments,thetotalliabilitiesandNetWorth,
booksofaccounts,etc.,etc.),wereboughtbyrespondentImperialInsurance,Inc.,forP10,000.00,whichwasthe
highestbidoffered.Immediatelyafterthesale,respondentInsuranceCompanytookpossessionoftheproperties
andstartedrunningtheaffairsandoperatingthebusinessoftheJRSBusinessCorporation.Hence,thepresent
appeal.
Itwouldseemthatthematterswhichneeddeterminationare(1)whethertherespondentJudgeactedwithoutor
inexcessofhisjurisdictionorwithgraveabuseofdiscretioninpromulgatingtheOrderofJune21,1962,denying
the motion for postponement of the scheduled sale at public auction, of the properties of petitioner and (2)
whether the business name or trade name, franchise (right to operate) and capital stocks of the petitioner are
propertiesorpropertyrightswhichcouldbethesubjectoflevy,executionandsale.
TherespondentCourt'sactofpostponingthescheduledsalewaswithinthediscretionofrespondentJudge,the
exerciseofwhich,onewayortheother,didnotconstitutegraveabuseofdiscretionand/orexcessofjurisdiction.
There was a decision rendered and the corresponding writ of execution was issued. Respondent Judge had
jurisdiction over the matter and erroneous conclusions of law or fact, if any, committed in the exercise of such
jurisdictionaremerelyerrorsofjudgment,notcorrectiblebycertiorari(VillaReyTransitv.Bello,etal.,L18957,
April23,1963,andcasescitedtherein.)
Thecorporationlaw,onforcedsaleoffranchises,provides
Any franchise granted to a corporation to collect tolls or to occupy, enjoy, or use public property or any
portionofthepublicdomainoranyrightofwayoverpublicpropertyorthepublicdomain,andanyrights
andprivilegesacquiredundersuchfranchisemaybelevieduponandsoldunderexecution,togetherwith
the property necessary for the enjoyment, the exercise of the powers, and the receipt of the proceeds of
suchfranchiseorrightofway,inthesamemannerandwithlikeeffectasanyotherpropertytosatisfyany
judgmentagainstthecorporation:Provided,Thatthesaleofthefranchiseorrightofwayandtheproperty
necessaryfortheenjoyment,theexerciseofthepowers,andthereceiptoftheproceedsofsaidfranchise
orrightofwayisespeciallydecreedandorderedinthejudgment:Andprovided,further,Thatthesaleshall
notbecomeeffectiveuntilconfirmedbythecourtafterduenotice.(Sec.56,CorporationLaw.)
InthecaseofGulfRefiningCo.v.ClevelandTrustCo.,108So.,158,itwasheld
Thefirstquestionthenfordecisionisthemeaningoftheword"franchise"inthestatute.
"Afranchiseisaspecialprivilegeconferredbygovernmentalauthority,andwhichdoesnotbelongto
citizensofthecountrygenerallyasamatterofcommonright....Itsmeaningdependsmoreorless
upon the connection in which the word is employed and the property and corporation to which it is
applied.Itmayhavedifferentsignifications.
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"Forpracticalpurposes,franchises,sofarasrelatingtocorporations,aredivisibleinto(1)corporate
orgeneralfranchisesand(2)specialorsecondaryfranchises.Theformeristhefranchisetoexistas
acorporation,whilethelatterarecertainrightsandprivilegesconferreduponexistingcorporations,
suchastherighttousethestreetsofamunicipalitytolaypipesortracks,erectpolesorstringwires."
2Fletcher'sCyclopediaCorp.See.114814C.J.p.160Adamsv.Yazon&M.V.R.Co.,24So.200,
317,28So.956,77Miss.253,60L.R.A.33etseq.
The primary franchise of a corporation that is, the right to exist as such, is vested "in the individuals who
composethecorporationandnotinthecorporationitself"(14C.J.pp.160,161Adamsv.Railroad,supra
2Fletcher'sCyclopediaCorp.Secs.1153,11583ThompsononCorporations2dEd.]Secs.2863,2864),
andcannotbeconveyedintheabsenceofalegislativeauthoritysotodo(14ACJ.543,5771Fletcher's
Cyc.Corp.Sec.1224Memphis&L.R.R.Co.v.Berry5S.Ct.299,112U.S.609,28L.E.d.837Vicksburg
Waterworks Co. v. Vicksburg, 26 S. Ct. 660, 202 U.S. 453, 50 L.E.d. 1102, 6 Ann. Cas. 253 Arthur v.
Commercial & Railroad Bank, 9 Smedes & M. 394, 48 Am. Dec. 719), but the specify or secondary
franchises of a corporation are vested in the corporation and may ordinarily be conveyed or mortgaged
underageneralpowergrantedtoacorporationtodisposeofitsproperty(Adamsv.Railroad,supra 14A
C.J.542,5573ThompsononCorp.[2ndEd.]Sec.2909),exceptsuchspecialorsecondaryfranchisesas
arechargedwithapublicuse(2Fletcher'sCyc.Corp.see.122514AC.J.5443ThompsononCorp.[2d
Ed.]sec.2908Arthurv.Commercial&R.R.Bank,supraMcAllisterv.Plant,54Miss.106).
Therighttooperateamessengerandexpressdeliveryservice,byvirtueofalegislativeenactment,isadmittedly
a secondary franchise (R.A. No. 3260, entitled "An Act granting the JRS Business Corporation a franchise to
conductamessengerandexpressservice)"and,assuch,underourcorporationlaw,issubjecttolevyandsale
on execution together and including all the property necessary for the enjoyment thereof. The law, however,
indicates the procedure under which the same (secondary franchise and the properties necessary for its
enjoyment) may be sold under execution. Said franchise can be sold under execution, when such sale is
especiallydecreedandorderedinthejudgmentanditbecomeseffectiveonlywhenthesaleisconfirmedbythe
Courtafterduenotice(Sec.56,Corp.Law).Thecompromiseagreementandthejudgmentbasedthereon,donot
containanyspecialdecreeorordermakingthefranchiseanswerableforthejudgmentdebt.Thesamethingmay
be stated with respect to petitioner's trade name or business name and its capital stock. Incidentally, the trade
nameorbusinessnamecorrespondstotheinitialsofthePresidentofthepetitionercorporationandtherecanbe
no serious dispute regarding the fact that a trade name or business name and capital stock are necessarily
includedintheenjoymentofthefranchise.Likethatofafranchise,thelawmandates,thatpropertynecessaryfor
theenjoymentofsaidfranchise,canonlybesoldtosatisfyajudgmentdebtifthedecisionespeciallysoprovides.
As We have stated heretofore, no such directive appears in the decision. Moreover, a trade name or business
namecannotbesoldseparatelyfromthefranchise,andthecapitalstockofthepetitionercorporationoranyother
corporation,forthematter,representstheinterestandisthepropertyofstockholdersinthecorporation,whocan
onlybedeprivedthereofinthemannerprovidedbylaw(Therbeev.Baker,35N.E.Eq.[8Stew.]501,505Inre
Wells'Estate,144N.W.174,177,Wis.294,citedin6WordsandPhrases,109).
It, therefore, results that the inclusion of the franchise, the trade name and/or business name and the capital
stock of the petitioner corporation, in the sale of the properties of the JRS Business Corporation, has no
justification.Thesaleofthepropertiesofpetitionercorporationissetaside,insofarasitauthorizesthelevyand
saleofitsfranchise,tradenameandcapitalstocks.Withoutpronouncementastocosts.
Bengzon,C.J.,Padilla,BautistaAngelo,Concepcion,Reyes,J.B.L.,RegalaandMakalintal,JJ.,concur.
TheLawphilProjectArellanoLawFoundation

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