J. R. S. BUSINESS CORPORATION, J. R. DA SILVA AND A. J. BELTRAN, PETITIONERS, VS. IMPERIAL INSURANCE, INC., MACARIO M. OFILADA, SHERIFF OF MANILA AND HON. AGUSTIN MONTESA, JUDGE…

Petitioner J. R. Da Silva, is the President of the J. R. S..
Business Corporation, an establishment duly franchised by the Congress
of the Philippines, to conduct n messenger and delivery express
service. On July 12, 1961. the respondent Imperial Insurance, Inc.,
presented with the CFI of Manila a complaint (Civ. Case No. 47520). for
sum of money against th/» petitioner corporation. After the defendants
therein have submitted their Answer, the parties entered into a
Compromise Acjreement, assisted by their respective counsels, the
pertinent portions of which recite:

“1) Whereas, the defendants admit and confess their
joint and solitary indebtedness to the plaintiff in the full sum of
PESOS SIXTY-ONE THOUSAND ONE HUNDRED SEVENTY-TWO AND 32/100
(P61,172.32), Philippine Currency, itemized as follows:

a)	Principal	P50.000.00
b)	Interest at 12% per annum	5.706.14
c)	Liquidated damages at 7% per annum	3.330.58
d)	Costs of suit	135.60
e)	Attorney’s fee	2,000.00

2) WHEREAS, the defendants bind themselves jointly
and severally, and hereby promise to pay their aforementioned
obligations to the plaintiff at its business address at 301-305
Banquero St., (Ground Floor), Regina Building. Escolta, Manila, within
sixty (60) days from March 16. 1962 or on or before May 14, 1962;

3)
Whereas, in the event the defendants fail to pay in full the total
amount of pesos sixty one thousand one hundred seventy-two and 32/100
(P61.172 32), Philippine Currency, for any reason whatsoever, on May
14, 1962, the PLAINTIFF, shall be entitled, as a matter of right, to
move for the execution of the decision to be rendered In the
above-entitled case by this Honorable Court based on this COMPROMISE
AGREEMENT.”

On March 17, 1962, the lower court rendered judgment, embodying the
contents of the said compromise agreement, the dispositive portion of
which reads—

“WHEREFORE, the Court hereby approves the
above-quoted compromise agreement and renders judgment in accordance
therewith. enjoining the parties to comply faithfully and strictly with
the terms and conditions thereof, without special pronouncement as to
costs.”

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 Issuance 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, and Net Worth, books
of accounts, etc., etc.” of the petitioner corporation was handed down.
On June 9, the petitioner, thru counsel, presented an “Urgent Petition
for Postponement of Auction Sale and for Release of Levy on the
Business Name and Right to Operate of Defendant JRS Business
Corporation”, stating that petitioners were busy negotiating for a loan
with which to pay the judgment debt; that the judgment was for money
only and, therefore, plaintiff (respondent Insurance Company) was not
authorized to take over and appropriate for its own use, the business
name of the defendants; that the right to operate under the franchise,
was not transferable and could not bo considered a personal or
immovable property, subject to levy and sale. On June 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 Postponement of Public Auction Sale and for
Ruling on Motion for Release of Levy on the Business Name, Right to Operate and Capital Stocks of JRS Business Corporation”.
The auction sale was set for June 21, 1962. In said motion, petitioners
alleged that the loan they had applied for, was to be secured within
the next ten (10) days, and they would be able to discharge the judgment
debt. Respondents opposed the said motion and on June 21, 1962, the
lower court denied the motion for postponement of the auction sale.

In the sale which was conducted in the premises of the JRS Business
Corporation at 1341 Perez St., Paco, Manila, all the properties of said
corporation contained in the Notices cf Sale dated May 26, 1CG2, and
June 2, 1962 (the latter notice being for the whole capital stocks of
the defendant, JRS Business Corporation, the business name, right of
operation, the whole assets, furnitures and equipments, the total
liabilities and Net Worth, books of accounts, etc., etc., were bought
by respondent Imperial Insurance, Inc., for P10,000.00, which was the
highest bid offered. Immediately after the sale, respondent Insurance
company took possession of the properties and started running ths
affairs and operating the business of the JRS Business Corporation.
Hence, the present appeal.

It would seem that the matters which need determination are (1)
whether the respondent Judge acted without or in excess of his
jurisdiction or with grave abuse of discretion in promulgating the
Order of June 21, 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 properties or
property rights which could be the subject of levy, execution and sale.

The respondent Court’s act of postponing the scheduled sale was
within the discretion of respondent judge, the exercise of which, one
way or the other, did not constitute grave abuse of discretion and/or
excess of jurisdiction. 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 cf such jurisdiction are merely
errors of judgment, not correctible by certiorari (Villa Roy Transit vs. Bollo, et al., L-18957, Apr. 23, 1963, and cases cited therein.)

The corporation law, on forced sale of franchises, provides—

“Any franchise granted to a corporation to collect
tolls or to occupy, enjoy, or use public property or any portion of
the public domain or any right of way over public property or the
public domain, and any rights and privileges acquired under such
franchise may be levied upon and sold under execution, together with
the property necessary for the enjoyment, the exercise of the powers,
and the receipt of the proceeds of such franchise or right of way, in
the same manner and with like effect as any other property to satisfy
any judgment against the corporation: Provided, That the sale of the
franchise or right of way and the property necessary for the enjoyment,
and exterctee of the powers, and the receipt of the proceeds of said
franchise or right of way is especially decreed and ordered in the
judgment: And provided, further, That the sale shall -not become
effective until confirmed by the court after due notice.” (Sec. 56
Corporation law)

In the case of Gulf Refining Co. vs. Cleveland Trust Co., 108 So., 158, it was held—

“The first question then for decision is the meaning of the word ‘franchise’ in the statute.

‘A franchise is a special privilege conferred by governmental
authority, and which does not belong to citizens of the country
generally as a matter of common right. * * * Its meaning depends more
or less upon the connection in which the word is employed and “the
property and corporation to which it la applied. It may have different
significations.”

‘For practical purposes, franchises, so fur us relating to
corporations, arc divisible into (1) corporate or general franchises;
and (2) special or secondary franchises. The former is the franchise to
exist as a corporation, white the latter are certain rights and
privileges conferred upon existing corporations, such as the right to
use the streets of a municipality to lay pipes of tracks, erect poles
or string wires’ 2 Fletcher’s Cyclopedia Corp. Sec. 1148; 14 C. J. p.
160; Adams vs. Yazon & M. V. R. Co. 24 So. 200, 317, 28 So. 956, 77 Miss. 253, 60 L.R A. 33 et scq.

“The primary franchise of a corporation, that is.
the right to exist as such, is vested ‘in the individuals who compose
the corporation and not in the corporation itself (14 CJ. pp. 169, 161;
Adams vs. Railroad, supra; 2 Fletcher’s Cyclopedia Corp.
Sees. 1153, 1158; 3 Thompson on Corporations [2d Ed.] Sees. 2863,
2864), and cannot be conveyed in the absence of legislative authority
ho to do (14A CJ. 513, 557; 1 Fletcher’s Cyc. Corp. Sec. 1224; Memphis
and L.R.R.Co. vs. Ferry, 5 S. Ct. 299, 112 U.S. 609, 28 L. Ed 837; Vicksburg Waterworks Co. vs. Vicksburg, 26 S. Ct. 660, 202 U.S. 453, 50 L. Ed. 1102, 6 Ann Cas. 253; Arthur vs. Commercial and Railroad Bank, 9 Smedes and M. 394, 48 Am. Dec. 719), but
the special or secondary franchises of a corporation are vested in the
corporation and may ordinarily be conveyed or mortgaged under a general
power granted to a corporation to dispose of its property (Adams vs. Railroad, supra; 14A CJ. 542, 557; 3 Thompson on Corp. [2d Ed.] Sec. 2909), except such special or secondary franchises an are charged with a public use (2 Fletcher’s Cyc. Corp. sec. 1225; 14A CJ. 544; 3 Thompson on Corp. [2d Ed.] sec. 2908; Arthur vs. Commercial & R. R. Bank, supra; McAllister vs. Plant, 54 Miss. 106).”

The right to operate a messenger and express delivery service, by
virtue of a legislative enactment, is admittedly a secondary franchise
(R.A. No. 3260, entitled “An Act granting the JRS Business Corporation
a franchise to conduct a messenger and express service)” and, as such,
under our corporation law, is subject to levy and sale 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 ba sold under execution. Said franchise can be sold under
execution, when such sale is especially decreed and ordered in the
judgment and it becomes effective only when the sale is confirmed by
the Court after due notice (Sec. 56, Corp. Law). The compromise
agreement and the judgment based thereon, do not contain any special
decree or order making the franchise answerable for the judgment debt.
The same thing may be stated with respect to petitioner’s trade name or
business name and its capital stock. Incidentally, the trade name or
business name corresponds to the initials of the President of the
petitioner corporation and there can be no serious dispute regarding
the fact that a trade name or business name and capital stock arc
necessarily included in the enjoyment of the franchise. Like that of
franchise, the law mandates, that property necessary for the enjoyment
of said franchise, can only be sold to satisfy a judgment debt if the
decision especially so provides. As We have stated heretofore, no such
directive appears in the decision. Moreover, a trade name or business
name cannot be sold separately from the franchise, and the capital
stock of the petitioner corporation or any other corporation, for that
matter, represents the interest and is the property of stockholders in
the corporation, who can only be deprived thereof In the manner
provided by law (Therbee vs. Baker, 35 N.E. Eq. [8 Stew.] 501, 505; In re Wells’ Estate, 144 N W. 174, 177, Wis. 294, cited in 6 Words and Phrases, 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. The sale of the properties of
petitioner corporation is set aside, in so far as it authorizes the
levy and sale of its franchise, trade name and capital stocks. Without
pronouncement as to costs.

Bengzon, C. J., Padilla, Bautista Angelo, Concepcion, Reyes, J. B. L., Regala and Makalintal, JJ., concur.