GERONIMO PANIZALES, ELIAS PANIZALES AND VICENTE PANIZALES, PLAINTIFFS-APPELLEES, VS. VALERIO PALMARES, VALENTIN ESPINO, JOSE DINEROS, IN HIS CAPACITY AS PROVINCIAL SHERIFF, DEFE…

Panizales versus Palmares

The Case

This is a contest over a one fourth share of a registered lot in Passi, Iloilo, between Geronimo Panizales, who claims the land as buyer in a private sale made in March 1958, and Valerio Palmares, who bought the very same share at a public auction in March 1961, sold by the sheriff to satisfy a judgment against the original owner, Amado Panizales. The action is one for annulment of the sheriff's deed of sale, and it matters because it fixes, in plain and memorable terms, the reach of an execution sale: the auction buyer steps into the shoes of the judgment debtor and acquires nothing more than what the debtor still owned when the levy was made.

Procedural History

Geronimo Panizales and two others sued Valerio Palmares, Valentin Espino, the judgment creditor, and Jose Dineros, in his capacity as Provincial Sheriff, to annul the sheriff's deed of sale. The parties entered into a stipulation of facts at a pre-trial conference, and on the strength of that stipulation the trial court rendered its decision on November 23, 1964, in favor of the plaintiffs. It declared the levy, the notice of sale, the public auction, and the definite deed of sale illegal and without effect, declared Geronimo Panizales and Concepcion Cabanes the owners of the share of Amado Panizales and Estrella Castromayor, and ordered Palmares to vacate the portion he possessed and to deliver possession to the plaintiffs.

Palmares appealed to the Court of Appeals. After the briefs were filed, the Court of Appeals, by resolution of May 21, 1970, certified the appeal to the Supreme Court, since the judgment appealed from rested solely on a stipulation of facts and the question involved was one of law, which fell within the exclusive competence of the Supreme Court.

Facts

The entire Lot 1777 of the Cadastral Survey of Passi was originally registered in the names of four co-owners, each holding a one fourth share. One of them was Amado Panizales, married to Estrella Castromayor. On March 4, 1958, Amado, assisted by his wife, sold by notarial deed all his rights, share, title, interest, and participation in the lot to Juan Panizales. On March 19, 1958, Juan Panizales in turn sold that same share by notarial deed to Geronimo Panizales. These private sales were registered only on September 20, 1961.

Earlier, on August 2, 1956, Valentin Espino and Dolores Gustilo had sued Amado Panizales, Estrella Castromayor, and the Rehabilitation Finance Corporation. On December 3, 1958, the parties entered into an amicable settlement, which the court approved and embodied in its decision. When Amado and Estrella failed to comply with its terms, Espino moved for execution. A writ of execution was issued in December 1960 and returned unsatisfied. An alias writ followed in February 1961, and under it the sheriff levied on the share of Amado Panizales in Lot 1777. The levy was recorded on February 9, 1961, notice of sale was issued and published, and on March 16, 1961, the share was sold at public auction to Valerio Palmares for 1,535 pesos. The definite deed of sale was executed in March 1962, and possession was delivered to Palmares in June 1962.

Meanwhile, Geronimo Panizales had the land declared for taxation purposes and paid the land taxes for 1963 and 1964. The plaintiffs possessed about three fourths of the lot, while Palmares possessed about one fourth. The trial court held the levy illegal because the writ of execution did not conform to the judgment to be executed, and annulled the sale. Hence the appeal.

Issues

• Whether or not a purchaser at a public auction sale acquires the property when the judgment debtor had already sold it by private sale before the levy, so that the debtor no longer owned it at the time of the sale.
• Whether or not the trial court erred in declaring the writ of execution invalid for not conforming to the judgment in the earlier civil case.

Applicable Provisions

Section 24 of Rule 39 of the Rules of Court of 1940 provides:

Upon a sale of real property, the purchaser shall be substituted to and acquire all the right, title, interest, and claim of the judgment debtor thereto, subject to the right of redemption as hereinafter provided.

This is the provision the Court construes: the auction buyer receives only the right, title, interest, and claim that the judgment debtor still had, and nothing more.

Ruling

On the first issue, the Court held that the auction buyer acquires only what the judgment debtor owned at the time of the sale. Since the share had been sold by private sale as early as March 1958, it had ceased to form part of the property of the judgment debtor. The Court quoted its earlier ruling in Potenciano versus Dinero:

The Rules of Court provide that a purchaser of real property at an execution sale shall be substituted to and acquire all the right, title, interest, and claim of the judgment debtor thereto. In other words, the purchaser acquires only such right or interest as the judgment debtor had on the property at the time of the sale. It follows that if at that time the judgment debtor had no more right to or interest in the property because he had already sold it to another then the purchaser acquires nothing.

The Court also relied on the settled doctrine that a bona fide sale and transfer of real property, although not recorded, is good and valid against a subsequent attempt to levy execution on the same property by a creditor of the vendor. It noted that good faith is presumed, and that the defendants, who hinted that the sale was in fraud of creditors, offered no evidence to that effect.

On the second issue, the Court held that even if the trial court erred in saying the writ of execution did not conform to the judgment, that error would not help the appellants. The money judgment for 800 pesos remained unsatisfied, and the creditor was well within his rights to seek execution against whatever property still belonged to the debtor. What frustrated the effort was simply that the disputed lot had already been sold. The assignment of error was therefore of no moment.

Doctrine

A purchaser at an execution sale is substituted to and acquires all the right, title, interest, and claim of the judgment debtor, and nothing more. If the judgment debtor had already sold the property before the levy, the auction buyer acquires nothing. A bona fide sale and transfer of real property, although not recorded, is good and valid against a subsequent attempt to levy execution on the same property by a creditor of the vendor. Good faith is presumed, and fraud in the sale must be proved by the party alleging it.

Disposition

The Supreme Court affirmed the decision of the trial court, with costs against the appellant.

Remember This

The auction buyer steps into the shoes of the judgment debtor and takes only what the debtor still owned when the levy was made. Examiners use this case to test the rule that an unrecorded bona fide sale defeats a later execution levy by the vendor's creditor.