G.R. No. L-78391 October 21, 1988
Republic of the Philippines vs. Ramon G. Enriquez, Deputy Sheriff of Manila

FACTS

The Commissioner of Internal Revenue served a Warrant of Distraint and later a Notice of Seizure upon the Maritime Company of the Philippines (MCP) for deficiency taxes, taking possession of several properties including six barges designated MCP-1 to MCP-6. These actions were based on final and unappealed tax assessments. Subsequently, in a separate civil case entitled “Genstar Container Corporation vs. Maritime Company of the Philippines,” the Regional Trial Court issued a writ of execution. Respondent Deputy Sheriff Ramon G. Enriquez levied upon two of the barges, MCP-1 and MCP-4, and scheduled a public auction.
Before the auction, the Commissioner of Internal Revenue formally notified the sheriff’s office in writing that the two barges were under BIR distraint and seizure and were no longer owned by MCP, registering an adverse claim. This letter was received and acknowledged by a staff member in the sheriff’s office. Despite this notification, the sheriff proceeded with the auction sale. The Republic then filed a petition for prohibition with the Court of Appeals to annul the levy and sale, which the CA dismissed, prompting this appeal.

ISSUE

The sole issue is whether the BIR’s prior warrant of distraint and notice of seizure rendered the subsequent levy and execution sale by the sheriff null and void.

RULING

The Supreme Court granted the petition, reversed the Court of Appeals, and annulled the sheriff’s levy and sale. The Court’s legal logic rests on the superiority of the government’s tax lien and the limits of a sheriff’s authority in execution. A tax lien is superior to the claim of a private judgment creditor and attaches from the time the tax becomes due and payable. Critically, the BIR’s distraint and seizure of the barges occurred long before the trial court issued its writ of execution. Consequently, at the time of the levy, the barges were no longer properties of the judgment debtor, MCP.
The power of a court in executing judgments extends only to properties unquestionably belonging to the debtor. A sheriff has no authority to levy on property not owned by the judgment debtor, and an execution sale conveys only whatever interest the debtor possesses at the time of sale. The Court found the sheriff’s claim of ignorance regarding the adverse claim untenable, as his office had duly received the BIR’s written notification. Receipt by a staff member constitutes notice to the office. Therefore, the sheriff acted without authority in proceeding against properties already seized by the BIR under a superior claim. The Court ordered that if the barges could not be recovered, the auction proceeds must be remitted to the BIR for application to MCP’s tax liabilities.