Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-19891 July 31, 1964
J.R.S. BUSINESS CORPORATION, J.R. DA SILA !"# A.J. BELTRAN, petitioners,
vs.
IMPERIAL INSURANCE, INC., MACARIO M. O$ILADA, S%&'()) o) M!"(l! !"#
*ON. AGUSTIN MONTESA, Ju#+& o) ,%& Cou', o) $('-, I"-,!".& o) M!"(l!, respondents.
Felipe N. Aurea for petitioners.
Taada, Teehankee and Carreon for respondent Imperial Insurance, Inc.
PAREDES, J.:
Petitioner J. R. Da Silva, is the President of the J.R.S. Business Corporation, an establishent dul! franchised b! the Con"ress of the Philippines, to conduct a
essen"er and deliver! e#press service. $n Jul! %&, %'(%, the respondent )perial )nsurance, )nc., presented *ith the C+) of Manila a coplaint ,Civ. Case No.
-./&01, for su of one! a"ainst the petitioner corporation. After the defendants therein have subitted their Ans*er, the parties entered into a Coproise
A"reeent, assisted b! their respective counsels, the pertinent portions of *hich recite2
%1 34EREAS, the DE+ENDAN5S adit and confess their 6oint and solidar! indebtedness to the P7A)N5)++ in the full su of PES$S S)859 $NE
54$:SAND $NE 4:NDRED SE;EN59<53$ = >&?%00 ,P(%,%.&.>&1, Philippine Currenc!, itei@ed as follo*s2
a1 Principal P/0,000.00
b1 )nterest at %&A per annu /,.0(.%-
c1 7iBuidated daa"es at .A per annu >,>>0./C
d1 Costs of suit %>/.(0
e1 Attorne!Ds fees &,000.00
&1 34EREAS, the DE+ENDAN5S bind theselves, 6ointl! and severall!, and hereb! proise to pa! their aforeentioned obli"ation to the
P7A)N5)++ at its business address at >0%<>0/ BanBuero St., ,Eround +loor1, Re"ina Buildin", Escolta, Manila, *ithin si#t! ,(01 da!s fro March %(,
%'(& or on or before Ma! %-, %'(&F
>1 34EREAS, in the event the DE+ENDAN5S +A)7 to pa! in full the total aount of PES$S S)859 $NE 54$:SAND $NE 4:NDRED SE;EN59
53$ = >&?%00 ,P(%,%.&.>&1, Philippine Currenc!, for an! reason *hatsoever, on Ma! %-, %'(&, the P7A)N5)++ shall be entitled, as a atter of
ri"ht, to ove for the e#ecution of the decision to be rendered in the above<entitled case b! this 4onorable Court based on this C$MPR$M)SE
AEREEMEN5.
$n March %., %'(&, the lo*er court rendered 6ud"ent ebod!in" the contents of the said coproise a"reeent, the dispositive portion of *hich reads G
34ERE+$RE, the Court hereb! approves the above<Buoted coproise a"reeent and renders 6ud"ent in accordance there*ith, en6oinin" the
parties to copl! faithfull! and strictl! *ith the ters and conditions thereof, *ithout special pronounceent as to costs.
3herefore, the parties respectfull! pra! that the fore"oin" stipulation of facts be aditted and approved b! this 4onorable Court, *ithout pre6udice to
the parties adducin" other evidence to prove their case not covered b! this stipulation of facts. 1wph1.t
$n Ma! %/, %'(&, one da! after the date fi#ed in the coproise a"reeent, *ithin *hich the 6ud"ent debt *ould be paid, but *as not, respondent )perial
)nsurance )nc., filed a HMotion for the )nsurance of a 3rit of E#ecutionH. $n Ma! &>, %'(&, a 3rit of E#ecution *as issued b! respondent Sheriff of Manila and on
Ma! &(, %'(&, Notices of Sale *ere sent out for the auction of the personal properties of the petitioner J.R.S. Business Corporation. $n June &, %'(&, a Notice of
Sale of the H*hole capital stocIs of the defendants JRS Business Corporation, the business nae, ri"ht of operation, the *hole assets, furnitures and
eBuipents, the total liabilities, and Net 3orth, booIs of accounts, etc., etc.H of the petitioner corporation *as, handed do*n. $n June ', the petitioner, thru
counsel, presented an H:r"ent Petition for Postponeent of Auction Sale and for Release of 7ev! on the Business Nae and Ri"ht to $perate of Defendant JRS
Business CorporationH, statin" that petitioners *ere bus! ne"otiatin" for a loan *ith *hich to pa! the 6ud"ent debtF that the 6ud"ent *as for one! onl! and,
therefore, plaintiff ,respondent )nsurance Copan!1 *as not authori@ed to taIe over and appropriate for its o*n use, the business nae of the defendantsF that
the ri"ht to operate under the franchise, *as not transferable and could not be considered a personal or iovable, propert!, sub6ect to lev! and sale. $n June
%0, %'(&, a Suppleental Motion for Release of E#ecution, *as filed b! counsel of petitioner JRS Business Corporation, claiin" that the capital stocIs thereof,
could not be levied upon and sold under e#ecution. :nder date of June &0, %'(&, petitionerDs counsel presented a pleadin" captioned H;er! :r"ent Motion for
Postponeent of Public Auction Sale and for Rulin" on Motion for Release of 7ev! on the !usiness Name, "i#ht to $perate and Capital %tocks of &"% !usiness
CorporationH. 5he auction sale *as set for June &%, %'(&. )n said otion, petitioners alle"ed that the loan the! had applied for, *as to be secured *ithin the ne#t
ten ,%01 da!s, and the! *ould be able to dischar"e the 6ud"ent debt. Respondents opposed the said otion and on June &%, %'(&, the lo*er court denied the
otion for postponeent of the auction sale.
)n the sale *hich *as conducted in the preises of the JRS Business Corporation at %>-% Pere@ St., Paco, Manila, all the properties of said corporation
contained in the Notices of Sale dated Ma! &(, %'(&, and June &, %'(& ,the latter notice bein" for the *hole capital stocIs of the defendant, JRS Business
Corporation, the business nae, ri"ht of operation, the *hole assets, furnitures and eBuipents, the total liabilities and Net 3orth, booIs of accounts, etc., etc.1,
*ere bou"ht b! respondent )perial )nsurance, )nc., for P%0,000.00, *hich *as the hi"hest bid offered. )ediatel! after the sale, respondent )nsurance
Copan! tooI possession of the proper ties and started runnin" the affairs and operatin" the business of the JRS Business Corporation. 4ence, the present
appeal.
)t *ould see that the atters *hich need deterination are ,%1 *hether the respondent Jud"e acted *ithout or in e#cess of his 6urisdiction or *ith "rave abuse
of discretion in proul"atin" the $rder of June &%, %'(&, den!in" the otion for postponeent of the scheduled sale at public auction, of the properties of
petitionerF and ,&1 *hether the business nae or trade nae, franchise ,ri"ht to operate1 and capital stocIs of the petitioner are properties or propert! ri"hts
*hich could be the sub6ect of lev!, e#ecution and sale.
5he respondent CourtDs act of postponin" the scheduled sale *as *ithin the discretion of respondent Jud"e, the e#ercise of *hich, one *a! or the other, did not
constitute "rave abuse of discretion and?or e#cess of 6urisdiction. 5here *as a decision rendered and the correspondin" *rit of e#ecution *as issued.
Respondent Jud"e had 6urisdiction over the atter and erroneous conclusions of la* or fact, if an!, coitted in the e#ercise of such 6urisdiction are erel!
errors of 6ud"ent, not correctible b! certiorari ,;illa Re! 5ransit v. Bello, et al., 7<%C'/., April &>, %'(>, and cases cited therein.1
5he corporation la*, on forced sale of franchises, provides G
An! franchise "ranted to a corporation to collect tolls or to occup!, en6o!, or use public propert! or an! portion of the public doain or an! ri"ht of
*a! over public propert! or the public doain, and an! ri"hts and privile"es acBuired under such franchise a! be levied upon and sold under
e#ecution, to"ether *ith the propert! necessar! for the en6o!ent, the e#ercise of the po*ers, and the receipt of the proceeds of such franchise or
ri"ht of *a!, in the sae anner and *ith liIe effect as an! other propert! to satisf! an! 6ud"ent a"ainst the corporation2 'ro(ided, 5hat the sale of
the franchise or ri"ht of *a! and the propert! necessar! for the en6o!ent, the e#ercise of the po*ers, and the receipt of the proceeds of said
franchise or ri"ht of *a! is especiall) decreed and ordered in the 6ud"ent2 And provided, further, 5hat the sale shall not becoe effective until
confired b! the court after due notice. ,Sec. /(, Corporation 7a*.1
)n the case of *ulf "efinin# Co. (. Cle(eland Trust Co., %0C So., %/C, it *as held G
5he first Buestion then for decision is the eanin" of the *ord HfranchiseH in the statute.
HA franchise is a special privile"e conferred b! "overnental authorit!, and *hich does not belon" to citi@ens of the countr! "enerall! as
a atter of coon ri"ht. ... )ts eanin" depends ore or less upon the connection in *hich the *ord is eplo!ed and the propert! and
corporation to *hich it is applied. )t a! have different si"nifications.
H+or practical purposes, franchises, so far as relatin" to corporations, are divisible into ,%1 corporate or "eneral franchisesF and ,&1
special or secondar! franchises. 5he forer is the franchise to e#ist as a corporation, *hile the latter are certain ri"hts and privile"es
conferred upon e#istin" corporations, such as the ri"ht to use the streets of a unicipalit! to la! pipes or tracIs, erect poles or strin"
*ires.H & +letcherDs C!clopedia Corp. See. %%-CF %- C.J. p. %(0F Adas v. 9a@on = M. ;. R. Co., &- So. &00, >%., &C So. '/(, .. Miss.
&/>, (0 7.R.A. >> et seB.
The primar) franchise of a corporation that is, the ri#ht to e+ist as such, is (ested ,in the indi(iduals who compose the corporation and not in the
corporation itselfH ,%- C.J. pp. %(0, %(%F Adas v. Railroad, supraF & +letcherDs C!clopedia Corp. Secs. %%/>, %%/CF > 5hopson on Corporations &d
Ed.J Secs. &C(>, &C(-1, and cannot -e con(e)ed in the a-sence of a le#islati(e authorit) so to do ,%-A CJ. /->, /..F % +letcherDs C!c. Corp. Sec.
%&&-F Mephis = 7.R.R. Co. v. Berr! / S. Ct. &'', %%& :.S. (0', &C 7.E.d. C>.F ;icIsbur" 3ater*orIs Co. v. ;icIsbur", &( S. Ct. ((0, &0& :.S.
-/>, /0 7.E.d. %%0&, ( Ann. Cas. &/>F Arthur v. Coercial = Railroad BanI, ' Sedes = M. >'-, -C A. Dec. .%'1, -ut the specif) or secondar)
franchises of a corporation are (ested in the corporation and ma) ordinaril) -e con(e)ed or mort#a#ed under a #eneral power #ranted to a
corporation to dispose of its propert) ,Adas v. Railroad, supraF %-A C.J. /-&, //.F > 5hopson on Corp. K&nd Ed.J Sec. &'0'1, e+cept such special
or secondar) franchises as are char#ed with a pu-lic use ,& +letcherDs C!c. Corp. see. %&&/F %-A C.J. /--F > 5hopson on Corp. K&d Ed.J sec.
&'0CF Arthur v. Coercial = R.R. BanI, supraF McAllister v. Plant, /- Miss. %0(1.
5he ri"ht to operate a essen"er and e#press deliver! service, b! virtue of a le"islative enactent, is adittedl! a secondar! franchise ,R.A. No. >&(0, entitled
HAn Act "rantin" the JRS Business Corporation a franchise to conduct a essen"er and e#press service1H and, as such, under our corporation la*, is sub6ect to
lev! and sale on e#ecution to"ether and includin" all the propert! necessar! for the en6o!ent thereof. 5he la*, ho*ever, indicates the procedure under *hich
the sae ,secondar! franchise and the properties necessar! for its en6o!ent1 a! be sold under e#ecution. Said franchise can be sold under e#ecution, *hen
such sale is especiall! decreed and ordered in the 6ud"ent and it becoes effective onl! *hen the sale is confired b! the Court after due notice ,Sec. /(,
Corp. 7a*1. 5he coproise a"reeent and the 6ud"ent based thereon, do not contain an! special decree or order aIin" the franchise ans*erable for the
6ud"ent debt. 5he sae thin" a! be stated *ith respect to petitionerDs trade nae or business nae and its capital stocI. )ncidentall!, the trade nae or
business nae corresponds to the initials of the President of the petitioner corporation and there can be no serious dispute re"ardin" the fact that a trade nae
or business nae and capital stocI are necessaril! included in the en6o!ent of the franchise. 7iIe that of a franchise, the la* andates, that propert!
necessar! for the en6o!ent of said franchise, can onl! be sold to satisf! a 6ud"ent debt if the decision especiall! so provides. As 3e have stated heretofore,
no such directive appears in the decision. Moreover, a trade nae or business nae cannot be sold separatel! fro the franchise, and the capital stocI of the
petitioner corporation or an! other corporation, for the atter, represents the interest and is the propert! of stocIholders in the corporation, *ho can onl! be
deprived thereof in the anner provided b! la* ,5herbee v. BaIer, >/ N.E. EB. KC Ste*.J /0%, /0/F )n re 3ellsD Estate, %-- N.3. %.-, %.., 3is. &'-, cited in (
3ords and Phrases, %0'1.
)t, therefore, results that the inclusion of the franchise, the trade nae and?or business nae and the capital stocI of the petitioner corporation, in the sale of the
properties of the JRS Business Corporation, has no 6ustification. 5he sale of the properties of petitioner corporation is set aside, in so far as it authori@es the lev!
and sale of its franchise, trade nae and capital stocIs. 3ithout pronounceent as to costs.
!en#.on, C.&., 'adilla, !autista An#elo, Concepcion, "e)es, &.!./., "e#ala and 0akalintal, &&., concur.