G.R. No. 172541 ; August 8, 2010
Jay Hidalgo Uy, represented by his father, Antonio J. Uy, Petitioner, vs. Spouses Francisco Medina and Natividad Medina, Antonio Managuelod and Swift Foods, Inc., Respondents.

FACTS

Petitioner Jay Hidalgo Uy purchased a parcel of land from respondent spouses Medina through a Deed of Conditional Sale on February 16, 1996, and a Deed of Absolute Sale on February 16, 1997, upon full payment. Meanwhile, respondent Swift Foods, Inc. obtained a money judgment against the Medinas. On August 28, 1998, respondent Sheriff Managuelod issued an Amended Sheriff’s Notice of Levy and Auction Sale over the same property, which was annotated on the Medinas’ title on September 1, 1998.
Subsequently, on September 14, 1998, Uy registered his Deed of Absolute Sale, leading to the cancellation of the Medinas’ title and the issuance of a new one in his name, albeit with the levy carried over as an encumbrance. The sheriff proceeded with the auction sale on September 28, 1998, awarding the property to Swift. Uy then filed a Complaint for Annulment of Sale with Damages. The Regional Trial Court nullified the auction sale, finding the sheriff’s notice defective for non-compliance with procedural rules on notice.

ISSUE

The core issues were: (1) whether the trial court erred in deciding the case on the ground of a defective sheriff’s notice when such issue was allegedly not pleaded by the parties; and (2) whether the prior levy on execution is superior to Uy’s subsequent registration of the deed of sale.

RULING

The Supreme Court affirmed the Court of Appeals’ decision, ruling against the petitioner. On the first issue, the Court held that a judgment must conform to the pleadings and the theory of the case upon which the parties were heard. The CA’s factual finding—that the validity of the sheriff’s notice was not raised as an issue in the pleadings—was deemed conclusive. In a Rule 45 petition, factual findings of the CA are generally binding unless exceptional circumstances exist, none of which Uy successfully demonstrated. He failed to attach his Complaint to rebut the CA’s finding, so the Court relied on the appellate court’s conclusion that the trial court decided on an unpleaded matter, violating due process.
On the second issue, the Court upheld the superiority of the levy on execution. The levy, annotated on September 1, 1998, created a lien in favor of Swift that retroacted to the date of levy. Uy’s registration of his deed on September 14, 1998, was subsequent. Under settled jurisprudence, a prior levy on execution duly registered constitutes a preferential lien that attaches to the property from the moment of levy, and this preference is not defeated by a subsequent registration of a prior sale. Therefore, Swift’s lien prevailed over Uy’s subsequent claim. The auction sale was thus valid.