Overview

In Philippine remedial law, a levy is the act by which a sheriff, acting under lawful authority (typically a writ of execution or a writ of attachment), seizes or places specific property under legal hold so it may be applied to satisfy a claim—usually a judgment debt or an attached claim while a case is pending.

Once property is subject to levy, it becomes, in a practical and legal sense, property in custodia legis—within the custody of the law. That status changes what the judgment debtor (or the defendant in attachment) can validly do with the property, what third parties can safely acquire, and how security interests (mortgages/pledges) rank.

This article discusses levy primarily in two settings:

Levy under a writ of execution (to enforce a final judgment), generally under Rules of Court provisions on execution; and
Levy under a writ of attachment (to secure property during litigation), generally under the same procedural framework.

This is general legal information in the Philippines context, not legal advice for any specific case.

1) Levy Distinguished From Related Concepts

A. Levy vs. Attachment vs. Garnishment

Levy (in the execution/attachment sense) usually refers to real or personal property being placed under the sheriff’s hold.
Garnishment is often described as a form of levy directed at credits, receivables, deposits, bank accounts, wages, and other intangibles in the hands of a third person (the garnishee). Functionally, it is levy on intangible property.

B. Levy vs. Lien vs. Seizure

Levy is the procedural act.
Its legal consequence is typically the creation of a lien in favor of the attaching or executing creditor, subject to priority rules and exemptions.
For many kinds of personal property, levy involves actual seizure or constructive seizure (e.g., marking, inventory, taking possession, or placing it under a keeper).

2) What Property May Be Levied

A. General Rule

As a rule, all property of the judgment debtor not exempt from execution may be reached by levy.

B. Common Categories

Real property (land, buildings, improvements; and certain registrable real rights).
Personal property
- Tangible (vehicles, equipment, inventory, jewelry, etc.)
- Intangible (shares of stock, receivables, bank deposits, credits)
Interests less than ownership
- Leasehold rights, usufruct-like interests, or beneficial interests, to the extent transferable and not exempt.

C. Exemptions Matter

Certain property is exempt from execution or partially exempt by law and rules (e.g., limited exemptions for necessary clothing, tools of trade, and similar necessities; certain portions of wages; and other statutory exemptions). If exempt, a levy may be vulnerable to discharge and the sheriff may be required to release it.

3) How Levy Is Effected (Because “Effects” Depend on “Proper Levy”)

The effects described below generally presuppose a valid levy. A defective levy can undermine notice and priority.

A. Levy on Real Property

Common mechanics (conceptually):

The sheriff identifies the property and describes it with sufficient particularity.
A notice of levy is served on the judgment debtor and, crucially for registered land, the levy is typically recorded/annotated with the Register of Deeds so third parties are placed on notice.

Practical consequence: Annotation is what makes the levy “follow the property” against later buyers or mortgagees who check title.

B. Levy on Personal Property (Tangible)

Common mechanics:

The sheriff takes possession or exercises control (actual or constructive), often with an inventory and receipt.
For vehicles and certain registrable chattels, notice/recordation practices may also matter, but the central idea is seizure/control.

Practical consequence: Physical possession by the sheriff is strong notice; even without it, a properly documented levy can still bind parties depending on the circumstances.

C. Levy on Intangibles (Garnishment)

Mechanics:

Service of garnishment on the garnishee (e.g., a bank, employer, debtor of the judgment debtor).
The garnishee is ordered to hold the credits or deliver them as directed.

Practical consequence: Once served, the garnishee is generally prohibited from paying the debtor in a way that defeats the garnishment; it becomes answerable to the court.

4) Core Legal Effects of Levy (The Big Picture)

A. Property Becomes Subject to the Court’s Control (Custodia Legis)

Once validly levied:

The property is treated as within the custody of the law.
Private interference—by the debtor or third parties—can be restrained or sanctioned.

Operational meaning: The debtor’s freedom to deal with the property is restricted; third parties dealing with it assume risk.

B. Levy Creates a Specific Charge or Lien

A levy typically creates a specific lien on the identified property in favor of the enforcing/attaching creditor.

Operational meaning: The property is earmarked; later creditors may be junior as to that property, subject to priority rules and earlier perfected encumbrances.

C. The Levy “Follows the Property”

If properly effected (especially with appropriate recording/annotation for real property), levy generally binds the property even if it is later sold or mortgaged by the debtor.

Operational meaning: A purchaser or mortgagee may acquire the property subject to the levy.

5) Effects on Sale

A. Execution Sale (Sheriff’s Sale) After Levy

After levy, the sheriff may proceed to public auction (execution sale) following required notices and procedures.

Key effects:

Transfer by operation of law: The buyer at execution sale obtains the rights sold—generally the debtor’s interest—subject to:
- exemptions,
- superior liens/encumbrances,
- and statutory redemption rules (where applicable).
Debtor’s interest is what is sold: If the debtor owns only a partial interest, that partial interest is what passes.
Irregularities can void or voidable outcomes: Defective notice, sale of exempt property, or lack of authority may lead to:
- motion to set aside the sale,
- damages claims,
- administrative liability for the sheriff in serious cases.

B. Private Sale by the Debtor After Levy (The “Can the Debtor Still Sell?” Issue)

A debtor can physically “sell” anything, but after levy the legal question is whether the buyer takes free of the levy.

General effects:

As against the levying creditor and the execution process, a buyer from the debtor after levy commonly takes subject to the levy (especially if the levy is recorded/annotated for real property or otherwise sufficiently notorious).
The levy is designed to prevent the debtor from defeating satisfaction by disposing of the property.

Practical result: Many post-levy private sales become economically useless because the property remains exposed to execution sale, or the buyer inherits the problem.

C. Sale to an Innocent Purchaser for Value

Good faith and value matter most in registered real property contexts where the system relies on what appears on title.

If the levy is properly annotated, good faith purchasers are typically charged with notice; good faith is hard to claim against an annotated levy.
If the levy is not recorded/annotated when it should be, disputes may arise about whether a later buyer can defeat the levy.

Practical takeaway: Proper levy formalities (especially annotation) heavily influence who wins later priority contests.

D. Sale of Shares/Intangibles Under Levy

For shares of stock, receivables, and similar property:

The sheriff may sell the debtor’s interest following rules for personal property/intangibles.
Corporate transfer books, broker systems, and notice requirements can affect how the purchaser becomes recognized as the new holder.

6) Effects on Transfer (Beyond “Sale”)

A. Donations and Other Gratuitous Transfers

A debtor’s donation after levy is generally more vulnerable than a sale because:

it lacks consideration,
it more readily appears as an attempt to defeat the levy,
and it often runs into fraudulent conveyance principles.

B. Substitution, Novation, or “Parking” Assets

Schemes to “swap” title, assign rights, or shift beneficial ownership after levy are risky:

They may be treated as ineffective against the levy,
and may expose parties to contempt-like consequences if they interfere with property under court custody.

C. Partition or Transfer Among Co-Owners

If the debtor owns an undivided interest, the levy may attach to that interest. Subsequent partition may:

allocate a specific portion corresponding to the debtor’s share, but
typically cannot be used to nullify the levy’s reach as to what the debtor is entitled to receive.

D. Corporate Restructuring Transfers

If the debtor is a corporation and attempts to transfer levied assets to affiliates:

effects depend on timing, notice, corporate authority, and fraudulent conveyance analysis,
but the levy is intended to prevent asset flight.

7) Effects on Use as Security (Mortgages, Pledges, Chattel Mortgages)

This is where “levy” becomes a priority fight.

A. General Priority Idea

Earlier perfected real rights/security interests generally prevail over later claims.
A levy creates a lien at the time it is validly effected (and, for real property, typically once properly recorded/annotated).
A security interest constituted after levy is usually subordinate to the levy lien (or at least taken subject to it), unless special rules apply.

B. Real Estate Mortgage After Levy

If the debtor grants a mortgage after levy:

the mortgagee commonly takes the mortgage subject to the levy if the levy was properly annotated.
If the mortgage is recorded but the levy was not, priority disputes can arise.

Practical effect: Post-levy mortgages often do not provide the lender meaningful protection against the execution process.

C. Chattel Mortgage / Pledge After Levy of Personal Property

If personal property has been levied (especially if the sheriff has seized it or placed it under a keeper):

granting a pledge or chattel mortgage afterward may be ineffective in practice because the debtor no longer has free control.
even if documentation exists, the enforcing process may override it as a later encumbrance.

D. Attachment vs. Mortgage Priority

With attachment, the lien is meant to preserve assets pending judgment. Priority typically depends on:

who perfected first (e.g., earlier registered mortgage vs later attachment levy),
and whether the attachment levy complied with recording/notice requirements.

E. “Using Levied Property as Collateral to Raise Funds to Pay”

Even if the debtor’s purpose is to pay the judgment, lenders often require:

clear title,
or at least a predictable priority position.

Because levy clouds title and priority, levied property is usually poor collateral unless:

the levy is discharged,
the parties negotiate release/substitution,
or the court approves arrangements consistent with procedure.

8) What Encumbrances Survive Levy and Execution Sale?

A. Prior Registered Mortgages and Superior Liens

As a general principle, an execution sale often conveys the debtor’s interest subject to:

prior registered mortgages,
superior statutory liens, and
other burdens that by law outrank the levy.

So, levy does not magically wipe out earlier rights.

B. Lease Rights and Possessory Interests

Depending on circumstances and the nature of the lease/possession:

a buyer at execution sale may acquire ownership but face existing possessory rights,
especially if those rights are legally protected and not extinguished by the sale.

9) Third-Party Rights and Claims (A Major Practical “Effect”)

A. Third-Party Claim (Terceria)

If a person other than the debtor claims ownership or a right to possess levied property, that person may file a third-party claim with the sheriff and/or pursue remedies in court.

Practical effects:

the sheriff may be required to desist or require the judgment creditor to post an indemnity bond to proceed,
litigation may shift into determining true ownership or superior rights.

B. Claims of Co-Owners

A co-owner can object if the levy is treated as if it attaches to the entire property rather than only the debtor’s undivided share.

C. Banks, Employers, and Garnishees

Upon garnishment:

garnishees are effectively deputized to hold the property/credits.
improper release to the debtor can make the garnishee answerable.

10) Remedies Affecting Levied Property

A. Motions to Quash or Discharge Levy

Common grounds:

property is exempt,
levy is excessive (more than necessary),
levy is procedurally defective (notice/description/recording problems),
property does not belong to debtor.

B. Injunction or Restraining Orders

Courts may restrain execution/attachment in appropriate cases, especially where:

rights of third parties are involved,
sale would cause irreparable injury and remedies at law are inadequate.

C. Satisfaction, Redemption, and Release

If the judgment is satisfied, the levy should be lifted.
For some execution sales (notably certain real property contexts), the law may allow redemption within a period, affecting finality of transfer.

11) Criminal/Administrative Risk and Contempt-Like Consequences

Interfering with levied property can trigger serious consequences:

Administrative liability for sheriffs for improper levies or irregular sales.
Potential contempt or sanctions for parties who willfully obstruct lawful court processes.
In extreme cases involving deceit, falsification, or fraudulent transfers, criminal exposure may arise under applicable penal statutes (fact-dependent).

12) Practical Guidance for Common Scenarios

Scenario 1: “I bought land from the debtor; later I learned it was levied.”

If the levy was annotated before your purchase, you likely bought subject to the levy.
If it was not annotated, the dispute often becomes a contest of notice, registration effects, timing, and good faith.

Scenario 2: “The debtor mortgaged the property to me after levy.”

Expect subordination to the levy (especially if levy was properly recorded/annotated).
Your mortgage may not stop the execution sale.

Scenario 3: “The sheriff levied property that belongs to my business, not the debtor.”

A third-party claim and/or court action is a typical path.
Documentation of ownership and possession becomes decisive.

Scenario 4: “The levy covers more property than necessary.”

Excessive levy can be challenged; execution should be proportionate to the judgment and lawful fees.

13) Key Takeaways

Levy places property under the control of the court and restricts the debtor’s power to defeat enforcement through private dealings.
Sales or transfers after levy are generally subject to the levy, especially when proper notice/annotation exists.
Using levied property as security is usually ineffective as a way to obtain a superior position; post-levy mortgages/pledges are typically subordinate.
Prior perfected rights (e.g., earlier mortgages) generally survive levy and may outrank it.
Procedure matters: proper description, notice, seizure/control, and (for real property) recording/annotation often determine whether third parties are bound.
Third-party claim mechanisms exist to protect non-debtors from wrongful levy—but timing and proof are crucial.