TOPIC: Concession Theory and Corporate Franchises

CASE NAME: JRS BUSINESS CORP VS IMPERIAL INSURANCE INC

NAME: Carmela Abergos
FACTS:
Imperial Insurance Inc., filed against JRS Business Corp, an establishment duly
franchised by the Congress of the Philippines to conduct a messenger and
delivery express service, a complaint for sum of money. The parties entered into
a Compromise Agreement where defendants promised to pay their obligation in
the amount of P 61,172.32 within 60 days and should they fail to pay, Imperial
Insurance shall be entitled to move for the execution of the decision.
JRS failed to pay its judgment debt. Imperial Insurance Inc. then filed a motion for
the issuance of a Writ of Execution. A Writ of Execution was issued and Notices
of Sale were sent out for the auction of the personal properties of J.R.S. Business
Corporation.
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., of
the petitioner corporation was, handed down.
JRS filed 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 the judgment was for money only. Thus, Imperial
Insurance may not use the business name of JRS Business Corp and its right to
operate under the franchise is not transferable and could not be subject to levy
and sale. CFI of Manila denied the petition for postponement.
Auction sale was conducted and all the properties of JRS Business Corporation,
the business name, right of operation, the whole assets, furnitures and
equipments, the total liabilities and net worth, books of accounts and etc. were
bought by respondent Imperial Insurance, Inc., for P10,000.00, which was the
highest bid offered. After the sale, respondent Insurance Company took
possession of the proper ties and started running the affairs and operating the
business of the JRS Business Corporation.
ISSUE:
Won the business name or trade name, franchise (right to operate) and capital
stocks of the petitioner could be the subject of levy, execution and sale.
SC RULING:
No. 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 be 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 are necessarily included in the
enjoyment of the franchise. Like that of a 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 the 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