Proceedings where property is claimed by third persons | Execution, Satisfaction, and Effect of Judgments (RULE 39) | CIVIL PROCEDURE

COMPREHENSIVE DISCUSSION ON PROCEEDINGS WHERE PROPERTY IS CLAIMED BY THIRD PERSONS
(Philippine Rules of Court, Rule 39 on Execution, Satisfaction, and Effect of Judgments)

1. OVERVIEW

When a court issues a writ of execution against a judgment obligor, the sheriff or other proper officer may proceed to levy upon the properties of said obligor. However, complications arise if a person who is not a party to the case (a “third person”) claims ownership or a superior right over the property that is levied upon. This situation triggers what is commonly referred to as a “third-party claim,” embodied in Section 16, Rule 39 of the 1997 Rules of Civil Procedure (as amended).

The rule provides a mechanism for asserting and adjudicating such claims in order to protect the interests of parties who are not bound by the judgment yet whose property or rights might be mistakenly taken or impaired through execution.

2. LEGAL BASIS

The principal provision is Section 16 of Rule 39, which states:

Section 16. Proceedings where property is claimed by third person.
If the property levied on is claimed by any person other than the judgment obligor or his agent, and such person makes an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title, and serves the same upon the officer making the levy and a copy thereof upon the judgment obligee, the officer shall not be bound to keep the property under levy, unless such judgment obligee, on demand of the officer, 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 on. In case of disagreement as to such value, the same shall be determined by the court issuing the writ of execution.
No claim for damages for the taking or keeping of the property may be enforced against the bond unless the action therefor is filed within 120 days from the date of the filing of the bond.
The third-party claimant may also seek relief from the court having jurisdiction over the execution by any proper action or motion. The court shall not release the property or discharge the bond until after the proceedings shall have been finally determined.

3. NATURE AND PURPOSE OF THE THIRD-PARTY CLAIM (“TERCERIA”)

  1. Protection of Non-Parties – Rule 39, Section 16 establishes a protective measure for persons who, although not parties to the case, genuinely own or have a superior right to the property subject of execution.
  2. Affidavit of Title or Right – The third person must execute an affidavit indicating the nature of ownership or the basis for the superior right (e.g., ownership, prior lien, or lawful possession) and stating the factual grounds.
  3. Service Upon Sheriff and Judgment Obligee – The affidavit is served upon the levying officer (usually the sheriff) and the judgment obligee, placing them on notice that the property does not belong to the judgment obligor alone.

4. PROCEDURE UPON FILING A THIRD-PARTY CLAIM

  1. Filing of Third-Party Affidavit

    • The third-party claimant makes a sworn statement (affidavit) detailing ownership or superior right.
    • This affidavit is served on both the levying officer and the judgment obligee.

  2. Sheriff’s Duty After Receiving the Affidavit

    • Once the affidavit is received, the sheriff (or other officer enforcing the writ) is not bound to keep the property under levy unless the judgment obligee posts an indemnity bond.
    • If no bond is posted within a reasonable time, the sheriff is obligated to release the property from the levy to avoid potential liability.

  3. Posting of Indemnity Bond by Judgment Obligee

    • To maintain the levy over the claimed property, the judgment obligee must post a bond approved by the court.
    • The bond must be in an amount not less than the value of the property as determined by the court if there is disagreement.
    • The bond serves to indemnify the third-party claimant for any damage sustained due to the seizure or retention of the property if it later turns out that the third-person truly had a valid right or title.

  4. Effect of Filing the Bond

    • The sheriff or levying officer may continue to hold the property for execution notwithstanding the third-party claim, because the indemnity bond stands in place of the property as security for the third-party claimant’s potential damages claim.

  5. Separate Action or Motion by Third-Party Claimant

    • The third-party claimant is not limited to filing the affidavit and requesting the sheriff’s release of the property.
    • He or she may institute a separate action (e.g., accion reivindicatoria, accion publiciana, or any appropriate civil action) to vindicate ownership and seek damages, or may file a proper motion in the same court that issued the writ of execution.
    • The court that issued the writ has jurisdiction over the execution issues, and the third-party claimant may move in that court for relief (e.g., to order the release of the property, to quash the levy, etc.).

  6. Period to File Damages Against the Indemnity Bond

    • Section 16 specifies that no claim for damages against the bond may be enforced unless an action is filed within 120 days from the date of filing of the bond.

5. REMEDIES OF THE THIRD-PARTY CLAIMANT

  1. Terceria/Third-Party Claim Affidavit

    • First recourse is the administrative remedy before the sheriff to stop or prevent the levy.
    • If the obligee refuses to release the property or continues with the levy by posting an indemnity bond, the third-person can proceed further to court.

  2. Separate Action in Court

    • The third-party claimant may file a separate civil action (e.g., for ownership or possession, or injunction, depending on the circumstances) against the judgment obligee or the sheriff to establish the third-party claimant’s title.
    • This is often the more conclusive remedy because it allows the third-party claimant to fully litigate the issue of ownership in a trial-type proceeding.

  3. Motion in the Executing Court

    • As provided by the last paragraph of Section 16, the third-party claimant may also move for relief in the same court that issued the writ of execution.
    • However, the court’s power here is often limited to maintaining or dissolving the levy, or requiring the posting of a bond; the full-blown determination of title may necessitate a separate action.
    • Under jurisprudence, the court in the principal case generally does not make final determinations as to ownership unless the same has already been litigated between the same parties or is intrinsically linked to the main case.

  4. Claim for Damages

    • If the judgment obligee posts an indemnity bond and the property is eventually found by a competent court to belong to the third-party claimant, the latter may proceed against the bond for the value of damages sustained.
    • The third-party claimant must file such claim for damages within the 120-day period from the filing of the bond, as mandated by the Rules.

6. LIABILITIES AND OBLIGATIONS OF THE SHERIFF

  1. Release of Property Without Bond
    • If the third-party claimant presents a valid affidavit of ownership or superior right and the judgment obligee fails to post an indemnity bond, the sheriff should release the property. If the sheriff refuses, he may be held administratively liable.
  2. Continuing Levy With Bond
    • If the judgment obligee posts a bond approved by the court, the sheriff is protected and may proceed with the levy.
  3. Avoiding Double Liability
    • The sheriff must carefully evaluate the third-party claim to avoid personal liability. He should require the indemnity bond if the judgment obligee wants to maintain the levy.
  4. Ministerial Duty
    • Once a valid third-party claim is filed and no bond is posted, the sheriff acts ministerially to release the property.
    • If a bond is posted, the sheriff merely follows through with the levy but does not resolve the question of title.

7. EFFECT OF THIRD-PARTY CLAIM ON THE EXECUTION

  1. Execution Continues Over Uncontested Properties
    • The levy on other properties of the judgment obligor that are not subject to the third-party claim proceeds normally.
  2. Property Under Claim
    • The property subject of the third-party claim will either be released or retained under levy upon posting of the requisite bond.
  3. Possible Delay
    • The presence of a credible third-party claim may delay satisfaction of the judgment if the property in question is central to the execution and the third-party claimant seeks judicial intervention.

8. DISTINCTION FROM RELATED REMEDIES

  1. Third-Party Claim (Rule 39, Sec. 16) vs. Third-Party Complaint (Rule 6, Sec. 11)

    • A third-party complaint is a pleading filed by a defendant or respondent who seeks contribution, indemnity, or other relief from a person not yet a party to the main action. It is part of the main case.
    • A third-party claim in execution (terceria) arises after judgment, when a person not a party to the case asserts a property right that is threatened by the levy or garnishment.

  2. Claim vs. Intervention

    • Intervention (Rule 19) generally occurs before or during trial when a non-party seeks to become a party because of an interest in the subject matter.
    • A third-party claim in execution is not an intervention in the main case; it is a post-judgment proceeding where the non-party asserts property rights specifically against the levy or garnishment.

9. RELEVANT JURISPRUDENCE

Numerous Supreme Court decisions clarify the procedural and substantive aspects of third-party claims, for example:

  • Heirs of Cayetano v. Sheriff of Manila – Emphasizes that the court issuing the writ of execution generally does not determine the validity of the third-party claimant’s title; a separate action is often necessary.
  • Barrozo v. Macaraeg – Reiterates the sheriff’s duty to require an indemnity bond in order to maintain the levy and avoid personal liability when a third-party claim is filed.
  • Mata v. Court of Appeals – Explains the difference between a separate “accion reivindicatoria” and the summary process of terceria in the execution stage.

These decisions underscore the principle that, while the third-party claim procedure in Rule 39, Section 16 is designed to prevent wrongful seizure, the complete adjudication of ownership or right over the property is most often handled by a full-blown suit.

10. LEGAL FORMS AND DOCUMENTATION

Although forms may vary by jurisdiction, the core documents for a third-party claim in execution typically include:

  1. Affidavit of Third-Party Claimant

    • Stating the facts of ownership or right over the property, with details of how and when ownership or right was acquired, and attaching relevant supporting documents (e.g., Deed of Sale, Certificate of Title, official receipts, contracts, etc.).

  2. Sheriff’s Return / Report

    • After receiving the third-party claim affidavit, the sheriff will file a return or report with the executing court, informing it of the claim and whether or not the judgment obligee posted an indemnity bond.

  3. Indemnity Bond

    • If posted by the judgment obligee, this is approved by the court. It should clearly describe the property, the name of the third-party claimant, and the amount fixed by the court to indemnify the third-party claimant in case of wrongful seizure.

  4. Separate Complaint or Action (if needed)

    • If the third-party claimant decides to file a separate action, the standard rules on drafting and filing a civil complaint apply (e.g., factual allegations establishing ownership, prayer for injunction or release of property, prayer for damages, etc.).

11. ETHICAL CONSIDERATIONS FOR LAWYERS

  1. Veracity and Good Faith – Counsel preparing a third-party claim affidavit must ensure its truthfulness and refrain from filing spurious claims merely to delay execution. This is critical under the Code of Professional Responsibility.
  2. Avoid Forum Shopping – If a separate action is filed, the lawyer must ensure that no similar claim involving the same property rights is being litigated in another forum.
  3. Candor with the Court – Attorneys should be transparent about any existing liens, encumbrances, or pending litigation affecting the property in question.

12. STRATEGIC CONSIDERATIONS

  • For a judgment obligee (the winning party), posting the indemnity bond is typically prudent if there is a risk that releasing the property will prevent satisfaction of the judgment. However, the obligee must be confident that the third-party claim is baseless, otherwise the bond may become a source of liability for damages.
  • For a third-party claimant, promptly filing the affidavit with the sheriff and serving it on the judgment obligee is crucial to avoid final sale or disposition of the property. If the judgment obligee still insists on proceeding by posting a bond, the claimant should be prepared to file a separate action or a motion in court to promptly protect his rights.

CONCLUSION

When a non-party’s property is levied upon to satisfy a judgment, Rule 39, Section 16 of the Rules of Court offers the structured remedy known as a third-party claim, sometimes called terceria. It protects the legitimate property rights of third persons, balances the judgment obligee’s interest in enforcing a final and executory judgment, and safeguards the sheriff from unwarranted liability.

Key Takeaways:

  1. A valid third-party claim stops or complicates the levy unless the judgment obligee posts an indemnity bond.
  2. Ownership or superior right claims are ultimately resolved through the courts—often in a separate action to fully litigate property rights.
  3. The sheriff’s role is largely ministerial in deciding whether to continue or release the levy, depending on whether a bond has been posted.
  4. Timely recourse and proper documentation are crucial for all parties to protect their interests effectively.

By thoroughly understanding and following the procedure, parties can ensure that the execution process is carried out fairly, upholding the finality of judgments while preventing injustice to individuals whose properties were never truly subject to the court’s directive.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

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