Raymundo vs. Luneta Motor Co.

Certificates of public convenience secured by public service operators are liable to execution, and the Public Service Commission is authorized to approve the transfer of such certificates to the execution creditor. The test for whether property can be attached and sold upon execution is whether the judgment debtor has such a beneficial interest therein that he can sell or otherwise dispose of it for value.

The case involves certificates of public convenience issued by the Public Service Commission under the Public Service Law, Act No. 3108, as amended, which authorizes public service operators to secure such certificates. The Code of Civil Procedure establishes the general rule that 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, shall be liable to execution. The statutory exemptions do not include franchises or certificates of public convenience, and the Public Service Law and the Code of Civil Procedure are silent on the specific question of whether such certificates may be attached.

Nicanor de Guzman, signing as Guzco Transit, purchased trucks from the Luneta Motor Co. and, to pay for them, executed a series of promissory notes guaranteed by a chattel mortgage on several trucks. When De Guzman or Guzco Transit failed to pay the promissory notes, suit was brought in the Court of First Instance of Manila for the collection of the amount outstanding and unpaid. When the complaint was presented, a writ of attachment was obtained against the properties of Guzco Transit, and as a consequence garnishment was served on the Secretary of the Public Service Commission attacking the right, title, and participation of 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.

The Court of First Instance of Manila ordered these certificates sold, and certificates of public convenience Nos. 25635 and 23914 were sold to the Luneta Motor Co. as the highest bidder. The approval of the sheriff's sale was prayed for before the Public Service Commission. On July 16, 1932, nine days after the certificates were attached by the Luneta Motor Co., the same certificates, together with certificate No. 25951 and several trucks, were sold by De Guzman for the Guzco Transit to Dominador Raymundo. The approval of this sale was also sought from the Public Service Commission.

On the two cases being heard together, the commission approved the sale at public auction in favor of the Luneta Motor Co. and disapproved the sale to Dominador Raymundo, reserving to Raymundo the right to present another petition for the approval of the sale of certificate of public convenience No. 25951, which was not included in the sale in favor of the Luneta Motor Co. The commission noted that the dismissal in case No. 33033 pertaining to certificate No. 25951 was without prejudice, and the appellees disclaimed any interest in this certificate.

The Court of First Instance of Manila, through Judge Anacleto Diaz, had earlier sustained the right of the plaintiff to attachment and garnishment, ruling that certificates of public convenience are valuable, are subject to being sold for a consideration as much as any other property, and are considered properties which can be seized through legal process. A later judgment by consent was taken and no appeal was attempted to the Supreme Court from that order.

• Non-liability of Franchises to Attachment: The appellant argued that franchises cannot be the subject of attachment and sale by garnishment, opposing the motion of the plaintiff praying that the certificates of public convenience which were attached be sold at public auction.
• Reliance on Tufexis: The appellant cited Tufexis vs. Olaguera and Municipal Council of Guinobatan in support of the proposition that certificates of public convenience are not liable to execution.

• Right to Attachment and Garnishment: The Luneta Motor Co. moved for the sale at public auction of the certificates of public convenience granted by the Public Service Commission which were attached, asserting its right to attachment and garnishment of the certificates.
• Disclaimer of Interest in Certificate No. 25951: The appellees disclaimed any interest in certificate of public convenience No. 25951, which was not included in the sale in favor of the Luneta Motor Co.

• Liability to Execution: Whether certificates of public convenience secured by public service operators are liable to execution.
• Priority of Sales: Whether the sale at public auction by virtue of an attachment, or the voluntary sale made after the property had been levied upon, should prevail.

• Liability to Execution: Yes. Certificates of public convenience secured by public 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.
• Priority of Sales: The sale at public auction by virtue of the attachment prevailed. Because the certificates were attached before the voluntary sale to Raymundo, and because the certificates are liable to execution, the commission properly approved the sale to the Luneta Motor Co. and disapproved the sale to Raymundo.

• Liability to Execution: The Court applied the test announced in Reyes vs. Grey, which tests the liability of property to execution by determining if the interest of the judgment debtor in the case can be sold or conveyed to another in any way. 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, and in practice the purchase and sale of certificates of public convenience has been permitted by the commission. If the holder of a certificate of public convenience can sell it voluntarily, there is no valid reason why the same certificate cannot be taken and sold involuntarily pursuant to process. Certificates of public convenience have come to have considerable material value and are valuable assets, often serving as the cornerstones on which the business of bus transportation is built. The United States Supreme Court considers a franchise granted in consideration of the performance of public service as constituting property within the protection of the Fourteenth Amendment, and if the holder can be protected in his constitutional rights, the certificate should assume corresponding responsibilities and be susceptible as property of being liable to execution. A practice has grown up in the Public Service Commission of permitting the alienation of certificates of public convenience, including approval of sales through foreclosure proceedings to third parties, and tacit approval to the attachment of certificates has been given by the Court in prior cases.
• Priority of Sales: The question of which sale should prevail is dependent on the decision relative to the liability to execution of certificates of public convenience. Since the certificates are liable to execution, the sale at public auction by virtue of the attachment, which occurred before the voluntary sale to Raymundo, should prevail. The Court noted that the sale of certificates of public convenience without equipment may be the object of execution and garnishment sale, as this is a matter of policy to be determined by the Public Service Commission, and it appears that such sales have been approved by the commission. The articles of incorporation of the Luneta Motor Co. are broad enough to authorize the company to engage in the autotruck business, and if not, there would be nothing to preclude the company from transferring the certificates to a third party with the approval of the commission.

• Liability of Certificates of Public Convenience to Execution — A certificate of public convenience granted to the owner or operator of public service motor vehicles grants a right in the nature of a limited franchise. Such certificates are property liable to execution because the holder can sell them voluntarily with the approval of the Public Service Commission, and if a certificate can be sold voluntarily, there is no valid reason why it cannot be taken and sold involuntarily pursuant to process.
• Test for Liability of Property to Execution — The test by which to determine whether or not property can be attached and sold upon execution is whether the judgment debtor has such a beneficial interest therein that he can sell or otherwise dispose of it for value. This test was applied to hold that certificates of public convenience, being valuable assets that can be voluntarily sold, are liable to execution.

• "The test by which to determine whether or not property can be attached and sold upon execution is whether the judgment debtor has such a beneficial interest therein that he can sell or otherwise dispose of it for value." — This passage articulates the controlling test for liability of property to execution, derived from Reyes vs. Grey, and is the doctrinal foundation of the Court's ruling.
• "If the holder of a certificate of public convenience can sell it voluntarily, there is no valid reason why the same certificate cannot be taken and sold involuntarily pursuant to process." — This is the core ratio decidendi of the decision, establishing the principle that voluntary alienability implies susceptibility to execution.
• "Certificates of public convenience have come to have considerable material value. They are valuable assets. In many cases the certificates are the cornerstones on which are builded the business of bus transportation." — This passage explains the practical and economic rationale for treating certificates of public convenience as property subject to execution.

• Reyes vs. Grey, 21 Phil., 73 (1911) — Controlling precedent establishing the test for whether 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.
• Tufexis vs. Olaguera and Municipal Council of Guinobatan, 32 Phil., 654 (1915) — Cited by the appellant but distinguished; the Court found nothing in this case which sanctions a contrary test to that announced in Reyes vs. Grey.
• Public Utilities Commission vs. Garviloch, 54 Utah, 406 — Cited for the proposition that a certificate of public convenience granted to the owner or operator of public service motor vehicles grants a right in the nature of a limited franchise.
• Frost vs. Corporation Commission of Oklahoma, 278 U.S., 515 (1929) — Cited for the proposition that the United States Supreme Court considers a franchise granted in consideration of the performance of public service as constituting property within the protection of the Fourteenth Amendment.
• Willis vs. Buck, 81 Mont., 472 (1928) — Cited for the proposition that in at least one State, the certificate of the railroad commission permitting the operation of a bus line has been held to be included in the term "property" in the broad sense of the term.
• Orlanes & Banaag Transportation Co. vs. Public Service Commission, 57 Phil., 634 (1932) — Cited as an example of tacit approval given by the Court to the attachment of certificates of public convenience.
• Manila Electric Company vs. Orlanes & Banaag Transportation Co., 57 Phil., 805 (1933) — Cited as an example of tacit approval given by the Court to the attachment of certificates of public convenience.

• Section 15(i), Public Service Law, Act No. 3108, as amended — Authorizes certificates of public convenience to be secured by public service operators from the Public Service Commission.
• Section 16(h), Public Service Law, Act No. 3108, as amended — Permits the Public Service Commission to approve the sale, alienation, mortgaging, encumbering, or leasing of property, franchises, privileges, or rights or any part thereof.
• Section 450, Code of Civil Procedure — Establishes the general rule that 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.
• Section 452, Code of Civil Procedure — Lists statutory exemptions from execution, which do not include franchises or certificates of public convenience.
• Section 10, Act No. 667, as amended — Gives authority for the mortgage and sale under foreclosure proceedings of franchises granted by provincial and municipal governments; cited to show legislative treatment of similar matters.
• Sections 56 and following, Corporation Law — Express provisions for the sale on execution of franchises used in connection with corporations; cited to show legislative treatment of similar matters.

Avanceña, C.J., Villa-Real, Hull, and Imperial, JJ., concurred.