G.R. No. L-14174; October 31, 1960
THE PHILIPPINE BANK OF COMMERCE, petitioner, vs. HIGINIO B. MACADAEG, Judge of the Court of First Instance of Manila, ET AL., respondents.

FACTS

On September 30, 1950, respondents Pedro B. Bautista, Dativa Corrales Bautista, Inocencio C. Campos, and the Flash Taxi Company obtained a credit accommodation of P100,000 from petitioner Philippine Bank of Commerce. They secured this with a single document containing both a real estate mortgage over four parcels of land and a chattel mortgage on movie equipment and thirty taxicabs. After respondents defaulted, the bank extrajudicially foreclosed the real estate mortgage on January 9, 1956, acquiring the properties for P68,365.60. Claiming a deficiency balance of P62,749.72, the bank filed a collection suit (Civil Case No. 29752) instead of foreclosing the chattel mortgage. On June 30, 1956, the Court of First Instance of Manila rendered a judgment based on respondents’ confession of judgment, ordering them to pay the bank jointly and severally.
A writ of execution was issued, and on May 13, 1957, the sheriff sold at public auction respondents’ rights, interest, or participation in a certificate of public convenience registered in the name of Flash Taxi Co. with the Public Service Commission. The bank was the highest bidder at P60,371.25, and a certificate of sale was issued on May 15, 1957. The court confirmed the sale on June 8, 1957. Subsequently, the bank sold these rights to Alberto Cruz for P66,000, and the Public Service Commission provisionally approved the transfer, allowing Cruz to operate the franchise.
On June 18, 1957, respondents filed a petition to set aside the confirmation order and nullify the sheriff’s sale, arguing they had other properties to satisfy the judgment, that the sale would cause irreparable damage to them and their drivers, and that judgment debtors have the right to designate which properties should be sold. The lower court, finding the offered properties sufficient and the sale damaging, issued an order on October 17, 1957, setting aside the sheriff’s sale. This was followed by orders dated February 20, 1958, and August 1, 1958, holding in abeyance and later denying the bank’s motion for reconsideration. The bank then filed this certiorari petition to annul these orders.

ISSUE

Whether the lower court acted without or in excess of jurisdiction or with grave abuse of discretion in setting aside the sheriff’s sale of respondents’ interest in the certificate of public convenience, not on grounds of illegality or irregularity, but on equitable considerations to prevent financial damage to respondents and allow them to satisfy the judgment with other properties.

RULING

The Supreme Court granted the petition and annulled the lower court’s orders.
1. On Procedural Defect: The petition’s lack of verification is not fatal. Verification is not an absolute necessity when material facts are matters of record and the questions are mainly of law; its absence is a formal, not jurisdictional, defect. The Court waived this requirement.
2. On Validity of the Judgment: Respondents’ claim that the judgment is void because the real estate and chattel mortgage were indivisible is untenable. The mere embodiment of both mortgages in one document does not fuse them into an indivisible whole. They remain distinct agreements governed by different legal provisions. The bank had the right to foreclose the real estate mortgage extrajudicially and waive the chattel mortgage, then maintain a personal action for the deficiency. The judgment is valid.
3. On Validity of the Execution Sale: The sale was not void for lack of a valid levy. The certificate of public convenience, being a franchise, is intangible personal property. Levy by notice of sale, as done here, is proper under Section 15 of Rule 39 of the Rules of Court. The sale was also not fraudulent; respondents were notified by registered mail, and the bank acted within its rights.
4. On Equitable Grounds for Setting Aside the Sale: The lower court’s reliance on equity to set aside the sale was erroneous. Once a sheriff’s sale is consummated by the delivery of a certificate of sale, the court loses control over the property and cannot set it aside except for lack of jurisdiction, fraud, or irregularity. None existed here. Equity cannot override settled legal rules, especially when third-party rights (Alberto Cruz) have intervened. Cruz, who purchased the franchise from the bank and invested in taxicabs upon provisional approval from the Public Service Commission, is an innocent purchaser for value. Setting aside the sale would cause him substantial injury.
5. On Respondents’ Conduct: Respondents’ financial distress was largely self-inflicted. They failed to pay their debt despite opportunities, did not oppose the confirmation of the sale, and only offered other properties after the sale was consummated. They could have sold their other properties to satisfy the judgment but did not.
WHEREFORE, the orders dated October 17, 1957, February 20, 1958, and August 1, 1958, are annulled and set aside. Costs against respondents.