Remedies of a Third Person whose Property has been Seized by Virtue of a Court Process - Prof. Manuel Riguera

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"Remedies of a Third Person whose Property has been Seized by Virtue of a Court Process

It is axiomatic that judgments are enforceable only against property unquestionably belonging to the judgment debtor or obligor. One man’s goods shall not be sold or taken for another man’s debts or obligations. Thus, a sheriff acts improperly when he subjects to execution property belonging to a third person.

Let us say that X is leasing coffee brewers to the proprietor of a coffee shop. A creditor obtains a final and executory judgment against the proprietor. Pursuant to the judgment, the sheriff levies upon and seizes the coffee brewers on the mistaken belief that these belong to the proprietor. What are the remedies available to X?

Third-Party Claim

The simplest and most expedient way for X to recover possession of the coffee brewers is to avail of a third-party claim pursuant to Section 16, Rule 39 of the Rules of Court. A third-party claim is an affidavit executed by the third person stating his right of ownership or possession to the property seized by the sheriff and the grounds thereof. The third person then serves the third-party claim upon the sheriff and upon the judgment creditor or obligee.

The mere service of a third-party claim upon the sheriff and the judgment obligee may be enough for the third person to recover the property. This is because the sheriff shall not be bound to keep the property, unless the judgment obligee files a bond approved by the court to indemnify the third-party claimant in a sum not less than the value of the property levied upon. If such indemnity bond is not filed by the judgment obligee, the sheriff will almost certainly release the property to the third person since he would want to avoid liability for damages for the improper taking of the property.

Action against the indemnity bond

However, the judgment obligee by filing an indemnity bond can compel the sheriff to hold on to the property. The reason for this is that the sheriff shall not be liable for damages for the taking or keeping of the property to any third-party claimant if the bond is filed. The third party, if he wants to enforce liability under the bond, should file an action against the surety and the judgment obligee within 120 days from the filing of the bond. This procedure to enforce liability is done through a separate action, not a motion with the court which issued the writ of execution, since the third person is not a party to the case.

Application or motion for the lifting of the levy

If the sheriff holds on to the property because of the filing of the indemnity bond, the speedy remedy available to the third person if he wants to recover possession of the property or to lift the levy is to file an application or motion with the levying court. The court will then conduct a summary hearing to determine the propriety of the levy. In this summary hearing, the court will determine if the third person’s claim of possession or ownership is justified and, if so, order that the property be released from the mistaken levy and restored to the third person.

The order lifting the levy will not ipso facto discharge the indemnity bond which remains charged with any liability to the third party within the 120-day period.

In conducting the summary hearing, the levying court is not making a conclusive determination of the title or possession of the property since this can be done only in a proper action brought for the purpose; the court is only determining the propriety of the levy in the exercise of its inherent power of supervision and control over its officers and its processes (Ong v. Tating, 149 SCRA 265 [1987]; Sy v. Discaya, 423 SCRA 356 [1990]).

Separate action to recover the possession or ownership of the levied property

Should the court deny the third person’s application or motion to lift the levy, he is still left with the recourse of filing a separate action for the recovery of possession or ownership of the seized property. The third person cannot appeal nor avail of certiorari as a remedy from the denial because he is not a party to the case (Serra v. Rodriguez, 56 SCRA 538 [1974]).

This action may be filed against the sheriff, while in possession of the property, or against the judgment obligee or the purchaser at the execution sale. The denial of the third party’s application or motion to lift the levy on execution will not preclude the filing of the separate action since, as earlier stated, such denial will not amount to a conclusive finding on ownership or possession of the levied property.

Cumulative and independent nature of the remedies of a third-party claim and action for recovery of property

The remedies of a third-party claim and a separate action are cumulative and independent of each other. The making of a third-party claim is not a requirement for the filing of a separate action nor will the making of a third-party claim bar the filing of a separate action for recovery of the property seized. Hence, the third person would not be guilty of forum shopping if he avails of these remedies simultaneously.

Intervention

Under Section 1, Rule 19 of the Rules of Court, a person who is so situated as to be adversely affected by a distribution or other disposition of the property in the custody of the court or of an officer thereof may file a motion for leave to intervene in a case. Intervention however is not available to the third person whose property has been levied upon on execution since a motion for leave to intervene may be filed only before rendition of judgment (Section 2, Rule 19, Rules of Court).

Third-party claim available also in preliminary attachment or replevin; intervention possible

A third-party claim is available also to a third person whose property has been attached (Section 14, Rule 57 of the Rules of Court) or seized under a writ of replevin (Section 7, Rule 60 of the Rules of Court). Basically, the same legal rules and principles relevant to Section 16 of Rule 39 on execution would apply. The third person however would also have available to him the remedy of intervention if judgment has not yet been rendered in the main case."