G.R. No. 181672 ; September 20, 2010
SPS. ANTONIO & LETICIA VEGA, Petitioner, vs. SOCIAL SECURITY SYSTEM (SSS) & PILAR DEVELOPMENT CORPORATION, Respondents.

FACTS

Magdalena Reyes obtained a housing loan from SSS, secured by a mortgage on her titled property. In 1979, she arranged for spouses Antonio and Leticia Vega to assume the loan and purchase the property, as she intended to emigrate. An SSS employee informally advised the Vegas that such private arrangements were acceptable if amortizations were paid. The Vegas paid Reyes, took possession in 1981, and Reyes’s sister, acting under a special power of attorney, executed a Deed of Assignment in their favor between 1983-1984. The Vegas subsequently made direct payments to the SSS, which were accepted. However, Reyes failed to pay a separate loan from Apex Mortgage, which was assigned to Pilar Development Corporation (PDC). PDC obtained a money judgment against Reyes.

ISSUE

The core issue is whether the sheriff validly levied and sold the subject property at public auction to satisfy Reyes’s judgment debt to PDC, considering the prior sale to the Vegas.

RULING

The Supreme Court ruled the levy and auction sale were invalid. First, the Vegas sufficiently proved the sale from Reyes through secondary evidence, as the original deed was lost, and their possession and payment history corroborated the transaction. Second, the sale was valid despite the existing mortgage; the Vegas assumed the mortgage obligation, and the SSS, by accepting their direct payments, consented to the substitution, effecting a legal subrogation under Article 1237 of the Civil Code. Consequently, Reyes no longer had any leviable interest in the property when the writ of execution was issued. A sheriff can only levy on property belonging to the judgment debtor. Since the property had already been sold to the Vegas, the levy upon it was a nullity. The Court ordered PDC to reconvey the title to the Vegas, upon reimbursement of the amount PDC paid to SSS to release the mortgage.