Luneta Motor Company v AD Santos, Inc et al

FACTS:
A certificate of public convenience (CPC) was granted before the war to Nicolas Concepcion to operate a
taxicab service of 27 units in the City of Manila and therefrom to any point in Luzon.
Concepcion contracted a loan from Luneta Motor and this was evidenced by a promissory note executed by
him and guaranteed by Placido Esteban.
o To secure payment of this note, Concepcion executed a chattel mortgage covering the CPC in favor
of Luneta Motors
Concepcion contracted a subsequent loan from Rehabilitation Finance Corporation (RFC; now known as
DBP), and this was secured by a second mortgage over the same CPC.
o This 2nd mortgage was approved by the Public Service Commission (PSC), subject to the mortgage
lien in favor of Luneta Motor
The CPC was later sold to Francisco Benitez, Jr. who resold it to Rodi Taxicab Company.
o Both sales were made assumption of the mortgage in favor of RFC, and were also approved
provisionally by the Commission, subject to Luneta Motors Lien.
Petitioner filed an action to foreclose the chattel mortgage in view of the failure of Concepcion and his
guarantor to pay their overdue account.
o While this case was pending, RFC also instituted foreclosure proceedings on its 2nd chattel
mortgage. As of the decision in its favor therein rendered, the CPC was sold at public auction in
favor of Amador D. Santos for P24,010.00.
o Santos immediately applied with the Commission for the approval of the sale, and the same was
approved, subject to the mortgage lien in favor of Luneta Motor.
[CFI] rendered judgment, adjudging Concepcion indebted to Luneta Motor in the sum of P15,197.84 with
12% interest thereon from December 2, 1941 until full payment, plus other assessments.
o CFI ordered the the CPC subject of the chattel mortgage be sold at a public auction.
o Said certificate was eventually sold to Luneta Motor, and after 6 days, the Sheriff of the City of
Manila issued the corresponding certificate of sale.
o Thereupon, Luneta Motor filed the application for the approval of the sale.
o In the meantime, before he died, Amador Santos sold and transferred all his rights and interests in
the CPC in favor of AD Santos, Inc., who opposed Luneta Motors application.
In the course of hearing, AD Santos Inc filed a motion to dismiss on the grounds that:
1. Under Luneta Motors Articles of Incorporation, it was not authorized to engage in the taxicab
business or operate as a common carrier;
2. The CFI decision did not affect AD Santos Inc or its predecessor inasmuch as neither of them had
been impleaded into the case;
3. What was sold to Luneta Motor were only the "rights, interests and participation" of Nicolas
Concepcion in the certificate that had been granted to him which were no longer existing at the
time of the sale.
[PSC] rendered the decision dismissing Luneta Motors application for approval of the sale in its favor,
sustaining the first ground (petitioner is not authorized in its Art. of Inc.) and ruling that as a result, it could
not acquire by purchase the CPC.
o Luneta Motor appeals , claiming that in accordance with the Corporation Law and its articles of
incorporation, it can acquire by purchase the certificate of public convenience in question,
maintaining inferentially that, after acquiring said certificate, it could make use of it by operating a
taxicab business or operate is a common carrier by land.

ISSUE: Under Corporation Law and its Articles of Incorporation, could Luneta Motor acquire the CPC by
purchase and thereafter hold the certificate and operate thereunder as a common carrier by land? (NO)
Under Section 13 (5) of the Corporation Law, a corporation created thereunder may purchase, hold, etc.,
and otherwise deal in such real and personal property is the purpose for which the corporation was formed
may permit, and the transaction of its lawful business may reasonably and necessarily require.
Petitioner Luneta Motor says: Its corporate purposes are
o to carry on a general mercantile and commercial business, etc., and that it is authorized in its
articles of incorporation to operate and otherwise deal in and concerning automobiles and
automobile accessories' business in all its multifarious ramification and
 o to operate, etc., and otherwise dispose of vessels and boats, etc., and to own and operate
steamship and sailing ships and other floating craft and deal in the same and engage in the
Philippine Islands and elsewhere in the transportation of persons, merchandise and chattels by
water;
o all this incidental to the transportation of automobiles
Court said that nothing in the legal provision and provisions in its Articles of Incorporation could justify
petitioners contention.
o To the contrary, they are precisely the best evidence that it has no authority at all to engage in the
business of land transportation and operate a taxicab service.
o That it may operate and otherwise deal in automobiles and automobile accessories; that it may
engage in the transportation of persons by water does not mean that it may engage in the
business of land transportation an entirely different line of business.
o If it could not thus engage in the line of business, it follows that it may not acquire an CPC to
operate a taxicab service, such as the one in question, because such acquisition would be without
purpose and would have no necessary connection with petitioner's legitimate business.
Appealed decision AFFIRMED.