[51] Raymundo v. Luneta Motor
,
G.R. Nos. L-39902, L-39903 | November 29, 1933 | Malcolm, J.
Topic: Nature of a Franchise
SUMMARY
De Guzman bought trucks on credit from Luneta Motor. The sale was backed by a
chattel mortgage on the trucks and 3 CPCs. Upon default, Luneta Motor had the
CPCs attached and were able to buy them on execution sale. However, 9 days after
the certificates were attached by Luneta Motor Co, De Guzman sold the CPCs to
Raymundo. The two “buyers” of the CPCs now sought to have their sales approved
by the PSC. The two cases were consolidated, and the PSC upheld the sale in favor
of Luneta so Raymundo appealed the decision.
The SC now had to choose which sale to uphold – the execution sale in favor of
Luneta or the voluntary “fire sale” in favor of Raymundo which was made after the
property had been levied upon. The SC sided with Luneta Motor, holding that CPCs
may be attached and sold on execution.
DOCTRINE
Certificates of public convenience (CPC), being a form of limited franchise, are
considered as property which may be sold even on execution. CPCs have become
valuable as they are essential to the operation of transportation businesses and have
come to be sold, mortgaged and levied upon on execution. The Court sanctions these
practices as they are not prohibited under pertinent laws.
Facts:
The question squarely raised in these concerns the forced sales of certificates of
public convinced held by public service operators and the liability to execution of such
certificates.
 Nicanor de Guzman, signing as Guzco Transit, purchased trucks from
Luneta Motor Co.
o He then executed a series of promissory notes guaranteed by a
chattel mortgage on several trucks
o However, he failed to pay the promissory notes
 A suit was then brought against him in CFI Manila for the collection of the
amount outstanding and unpaid
o A writ of attachment was obtained against the properties of the
Guzco Transit, and as a consequence, garnishment was served on
the Secretary of the Public Service Commission attacking the right,
title, and participation of the Guzco Transit in the certificates of
public convenience issued in cases Nos. 25635, 23914 and 24255
covering the bus transportation lines between Manila and Cardona,
Rizal, and between Manila and Pililla, Rizal
 CFI ordered the selling of the CPCs
o [SALE 1] They were then sold to the highest bidder, respondent
Luneta Motor Co.
 [SALE 2] 9 days after the certificates were attached by Luneta Motor Co.
the CPCs and one other, together with several trucks, were sold by De
Guzman for Guzco Transit to petitioner Dominador Raymundo
 Raymundo and Luneta applied for approval of the respective sales to them
of the CPCs before the Public Service Commission (PSC). The two cases
were consolidated.
 Public Service Commission approved the sale by public auction to Luneta
Motor but disapproved the sale made to Raymundo (but reserved the right of
Raymundo to present another petition for the approval of the sale of the
other CPC which was not included in the sale in favor of Luneta Motor Co.)
Issue, Held, Ratio:
W/N a CPC may be the object of execution and garnishment sale1 – YES
Pertinent laws and decisions do not prohibit the sale of CPCs. This may be held
to extend to involuntary sales.
 The Public Service Law (Act No. 3108, as amended) authorizes CPCs to be
secured by public service operators from the Public Service Commission
(Sec. 15 [i])
o Public Utilities Commission vs. Garviloch: A CPC granted to the
owner or operator of public service motor vehicles grants a
right in the nature of a limited franchise
 General Rule: “Property, both real and personal, or any interest therein of
the judgment debtor, not exempt by law, and all property and rights of
property seized and held under attachment in the action, shall be liable
to execution." (Sec. 450, Code of Civil Procedure)
o The statutory exemptions do not include franchises or
certificates of public convenience (Sec. 452)
o The word "property" in Sec. 450 of the Code of Civil Procedure
comprehends every species of title, inchoate or complete, legal or
equitable
 Test to determine w/n the property can be attached and
sold upon execution: whether the judgment debtor has
such a beneficial interest therein that he can sell or
otherwise dispose of it for value (Reyes v. Gray)
 The language of the Code of Civil Procedure is broad
enough to include CPCs and franchises as attachable
property which may be sold on execution.
 Sec. 16 (h) of the Public Service Law permits the Public Service
Commission to approve the sale, alienation, mortgaging, encumbering,
or leasing of property, franchises, privileges, or rights or any part
thereof
1
The Court decided the case on this sole issue and brushed the other matters aside, especially
considering that the CFI decision with respect to the attachment had become final. The SC also
brushed aside Raymundo’s contention that CPCs may not be sold separately from motor
vehicles, giving respect to the policy decision of the PSC allowing sales of CPCs without motor
vehicles.
 o The Public Service Commission also has, in practice,
permitted the purchase and sale of CPCs
 If the holder of a CPC can sell it voluntarily, there is no
valid reason why the same certificate cannot be taken
and sold involuntarily pursuant to process
service operators are liable to execution, and the Public Service Commission is
authorized to approve the transfer of the certificates of public convenience to the
execution creditor. As a consequence, the decision brought on review will be
affirmed, with costs against the appellant.

CPCs have acquired considerable material value

 CPCs also have considerable material value; they are valuable assets
o In many cases, CPCs are the cornerstones on which the business
of bus transportation are built
 US SC considers a franchise granted in consideration of the
performance of public service as constituting property within the
protection of the Fourteenth Amendment to the United States Constitution
o If the holder of the CPC can thus be protected in his constitutional
rights, there is no reason why the CPC should not assume
corresponding responsibilities and be susceptible as property or an
interest therein of being liable to execution
 In practice, the PSC has approved foreclosure sales of CPCs to 3rd parties.
The Philippine Supreme Court has approved attachment of CPCs due to
chattel mortgage or court writs.
 In, CFI Manila’s order which sustained the right of the plaintiff to attachment
and garnishment, gained particular force because a later judgment by
consent was taken and no appeal was attempted
o True that the sale further required the approval of the Public
Service Commission BUT the Public Service Commission
respected the decision of the court
o SC, quoted Judge Diaz of CFI: Law is silent as to whether CPCs
are liable to attachment and seizure by legal process but “[i]t
cannot be denied that such franchises are valuable. They are
subject to being sold for a consideration as much as any other
property. They are even more valuable than ordinary properties,
taking into consideration than that they are not granted to everyone
who applies for them but only to those who undertake to furnish
satisfactory and convenient service to the public. It may also be
said that dealers in motor vehicles even extend credit to
owners of such certificates or franchises. The law permits the
seizure by means of a writ of attachment not only of chattels
but also for shares and credits. While these franchises may be
said to be intangible character, they are however of value and
are considered properties which can be seized through legal
process.”
 The result therefore, is that CPCs may be sold on execution sale, and the
PSC is authorized to approve the transfer of the CPC to the execution
creditor.

Ruling

The ruling of the Supreme Court on the question raised by the record and the
assignments of error is this: Certificates of public convenience secured by public