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VOL. 390, OCTOBER 3, 2002 263

China Banking Corporation vs. Oliver
*
G.R. No. 135796. October 3, 2002.

CHINA BANKING CORPORATION, petitioner, vs. MERCEDES

M. OLIVER, respondent.

Parties; Indispensable Party; An indispensable party is a party in

interest, without whom no final determination can be had of an action.—An
indispensable party is a party in interest, without whom no final
determination can be had of an action. It is true that mortgagor Oliver One is
a party in interest, for she will be affected by the outcome of the case. She
stands to be benefited in case the mortgage is declared valid, or injured in
case her title is declared fake. However, mortgagor Oliver One’s absence
from the case does not hamper the trial court in resolving the dispute
between respondent Oliver Two and petitioner.
Same; Same; A party is not indispensable to the suit if his interest in
the controversy or subject matter is distinct and divisible from the interest of
the other parties.—In Noceda vs. Court of Appeals, et al., 313 SCRA 504
(1999), we held that a party is not indispensable to the suit if his interest in
the controversy or subject matter is distinct and divisible from the interest of
the other parties and will not necessarily be prejudiced by a judgment which
does complete justice to the parties in court. In this case, Chinabank has
interest in the loan which, however, is distinct and divisible from the
mortgagor’s interest, which involves the land used as collateral for the loan.
Further, a declaration of the mortgage’s nullity in this case will not
necessarily prejudice mortgagor Oliver One. The bank still needs to initiate
proceedings to go after the mortgagor, who in turn can raise other defenses
pertinent to the two of them. A party is also not indispensable if his presence
would merely permit complete relief between him and those already parties
to the action, or will simply avoid multiple litigation, as in the case of
Chinabank and mortgagor Oliver One. The latter’s participation in this case
will simply enable petitioner Chinabank to make its claim against her in this
case, and hence, avoid the institution of another action. Thus, it was the
bank who should have filed a third-party complaint or other action versus
the mortgagor Oliver One.
Same; Same; Non-joinder of Parties; Non-joinder of parties is not a
ground for dismissal of an action.—As to the second issue, since mortgagor

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Oliver One is not an indispensable party, Section 7, Rule 3 of the 1997

Rules of Civil Procedure, which requires compulsory joinder of indispensa-

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* SECOND DIVISION.

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264 SUPREME COURT REPORTS ANNOTATED

China Banking Corporation vs. Oliver

ble parties in a case, does not apply. Instead, it is Section 11, Rule 3, that
applies. Non-joinder of parties is not a ground for dismissal of an action.
Parties may be added by order of the court, either on its own initiative or on
motion of the parties. Hence, the Court of Appeals committed no error when
it found no abuse of discretion on the part of the trial court for denying
Chinabank’s motion to dismiss and, instead, suggested that petitioner file an
appropriate action against mortgagor Oliver One. A person who is not a
party to an action may be impleaded by the defendant either on the basis of
liability to himself or on the ground of direct liability to the plaintiff.

PETITION for review on certiorari of a decision of the Court of

Appeals.

The facts are stated in the resolution of the Court.

Lim, Vigilia, Alcala, Dumlao and Orencia for petitioner.
The Law Firm of Antonio A. Navarro III & Associates for
private respondent M. Oliver.

RESOLUTION

QUISUMBING, J.:
1
This petition for review seeks the reversal of the decision dated
June 1, 1998, of the Court of Appeals in CA-G.R. SP No. 43836,
dismissing China Banking Corporation’s petition for certiorari to
annul the two orders of the Regional Trial Court of Muntinlupa City,
Branch 276, which earlier denied petitioner’s motion to dismiss and
then declared the bank in default in Civil Case No. 96-219. The
appellate court also denied petitioner’s motion for reconsideration in
a resolution dated September 30, 1998.
The facts of this case are culled from the records.

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In August 1995, Pangan Lim, Jr. and a certain Mercedes M.

Oliver opened a joint account in China Banking Corporation
(hereinafter Chinabank) at EDSA Balintawak Branch. Lim
introduced Oliver to the bank’s branch manager as his partner in the
rice and palay trading business. Thereafter, Lim and Oliver ap-

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1 Rollo, pp. 10-47.

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VOL. 390, OCTOBER 3, 2002 265

China Banking Corporation vs. Oliver

plied for a P17 million loan, offering as collateral a 7,782 square

meter lot located in Tunasan, Muntinlupa and covered by TCT No.
S-50195 in the name of Oliver. The bank approved the application.
On November 17, 1995, Lim and Oliver executed in favor of
Chinabank a promissory note for P16,650,000, as well as a Real
Estate Mortgage on the property. The mortgage was duly registered
and annotated on the original title under the custody of the Registry
of Deeds of Makati and on the owner’s duplicate copy in the bank’s
possession. The mortgage document showed Mercedes Oliver’s
address to be No. 95 Malakas Street, Diliman, Quezon City. For
brevity, she is hereafter referred to as “Oliver One.”
On November 18, 1996, respondent claiming that she is
Mercedes M. Oliver with postal office address at No. 40 J.P. Rizal
St., San Pedro, Laguna, filed an action for annulment of mortgage
and cancellation of title with damages against Chinabank, Register
of Deeds Atty. Mila G. Flores, and Deputy Register of Deeds Atty.
Ferdinand P. Ignacio. Respondent, whom we shall call as “Oliver
Two,” claimed that she was the registered and lawful owner of the
land subject of the real estate mortgage; that the owner’s duplicate
copy of the title had always been in her possession; and2 that she did
not apply for a loan or surrender her title to Chinabank. She prayed
that: (1) the owner’s duplicate copy surrendered to Chinabank as
well as the original title with the Registry of Deeds be cancelled; (2)
the mortgage be declared null and void; and (3) the Registry 3
of
Deeds be ordered to issue a new and clean title in her name.
On January 31, 1997, Chinabank moved to dismiss the case for
lack of cause of action and non-joinder of an indispensable party, the
mortgagor.
On March 13, 1997, Judge Norma C. Perello issued an order
denying the motion to dismiss, stating that:

A reading of the COMPLAINT which of course is hypothetically admitted,

will show that a valid judgment can be rendered against defendant. Plaintiff

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having sufficiently averred that defendants negligently

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2 CA Rollo, pp. 159, 292.

3 Rollo, pp. 18-19.

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China Banking Corporation vs. Oliver

failed to ascertain the genuineness or not (sic) of the title of the land
mortgaged to it upon the claim of ownership by the mortgagors.
Furthermore, the matters alleged in the MOTION TO DISMISS are 4
all
evidentiary which Defendants may substantiate at the appointed hours.

On April 7, 1997, Chinabank filed with the Court of Appeals a

petition for certiorari with prayer for the issuance of a writ of
preliminary injunction and/or restraining order to enjoin
enforcement of the March 13, 1997 order and further action on the
case. The Court of Appeals directed respondent Oliver Two to file
her comment and deferred action on the prayer for the issuance of
the preliminary injunction pending submission of the comment.
On June 30, 1997, respondent Oliver Two moved to declare
petitioner Chinabank in default. She pointed out that since petitioner
received the order denying the motion to dismiss on March 21,
1997, it had only until April 7, 1997 to file its answer to the
complaint. However, until the filing of the motion for default, no
answer had been filed yet. The trial court granted the motion and
declared petitioner in default in its order dated July 17, 1997, thus:

Acting on the Motion To Declare Defendant Bank in Default, and finding

the same to be legally tenable is granted. Accordingly, the Defendant Bank
is declared in default as summons
was served on It as early as December 16, 1996, but until date they have
not filed an Answer nor any responsive pleading and instead, It filed a
Motion to Dismiss, which was denied by this Court on March 13, 1997.
The filing of a CERTIORARI to question the Orders by this Court did
not toll the period for Defendants to answer the complaint.
Therefore, the reglementary period for the filing of responsive pleading
has long expired.
Let the case be submitted
5
for Decision based on the complaint.
It is SO ORDERED.

Consequently, petitioner Chinabank filed a supplemental petition on

August 11, 1997, seeking annulment of the July 17, 1997 order. It
argued that the special civil action for certiorari filed in

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4 Id., at 20.
5 Id., at 22-23.

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China Banking Corporation vs. Oliver

the Court of Appeals interrupted the proceedings before the trial

court, thereby staying the period for filing the answer.
On June 1, 1998, the Court of Appeals promulgated the assailed
decision, finding no grave abuse of discretion committed by the trial
judge in ruling that the Rules of Court provided the manner of
impleading parties to a case and in suggesting that petitioner file an
appropriate action to bring the mortgagor within the court’s
jurisdiction. The appellate court said that Rule 6, Section 11 of the
Rules of Court allows petitioner to file a third-party complaint
against the mortgagor. As to the judgment by default, the Court of
Appeals said that an order denying the motion to dismiss is inter-
locutory and may not be questioned through a special civil action for
certiorari. The defendant must proceed with the case and raise the
issues in his motion to dismiss when he appeals to a higher court. In
this case, petitioner Chinabank should have filed its answer when it
received the March 13, 1997 order denying the motion to dismiss.
The special civil action for certiorari with the Court of Appeals did
not interrupt the period to file an answer, there being no temporary
restraining order or writ of preliminary injunction issued.
The Court of Appeals denied petitioner’s motion for
reconsideration. Hence, this petition anchored on the following
grounds:

SEC. 11, RULE 3, OF THE 1997 RULES OF CIVIL PROCEDURE DOES

NOT APPLY WHERE THE PARTY WHO WAS NOT IMPLEADED IS
AN INDISPENSABLE PARTY; INSTEAD, SECTION 7, RULE 3
THEREOF, APPLIES.

II

THE MORTGAGOR MERCEDES M. OLIVER IS AN

INDISPENSABLE PARTY UNDER SECTION 7, RULE 3, OF THE 1997
RULES OF CIVIL PROCEDURE, AND MUST THEREFORE
INDISPENSABLY BE JOINED AS A PARTY-DEFENDANT.

III

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RESPONDENT’S CAUSE OF ACTION IS ANCHORED ON HER

CLAIM AS THE REGISTERED AND LAWFUL OWNER OF THE
PROPERTY IN QUESTION AND THAT HER OWNER’S DUPLICATE
COPY OF THE

268

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China Banking Corporation vs. Oliver

TITLE (ANNEX “A”) IS THE TRUE AND GENUINE TITLE. THUS,

THE ACTION BEFORE THE HONORABLE COURT-A-QUO IS A
LAND DISPUTE BETWEEN TWO (2) PERSONS CLAIMING
OWNERSHIP.

IV

THE ANNULMENT OF THE MORTGAGE AND THE

CANCELLATION OF ANNEXES “B” AND “C” AS PRAYED FOR IN
THE COMPLAINT IN CIVIL CASE NO. 96-219 ARE INEXTRICABLY
INTERTWINED WITH THE ISSUE OF OWNERSHIP. HENCE, THE
LATTER MUST FIRST BE RESOLVED TO DETERMINE THE
FORMER.

THE OWNER’S DUPLICATE COPY OF THE TITLE OF

MORTGAGOR MERCEDES M. OLIVER OWNER’S DUPLICATE COPY
CANNOT, IN HER ABSENCE, BE DECLARED NULL AND VOID.
CONSEQUENTLY, INASMUCH AS THE MORTGAGE IN FAVOR OF
PETITIONER IS DEPENDENT UPON THE OWNER’S DUPLICATE
COPY OF THE MORTGAGOR, THE COMPLAINT IN CIVIL CASE NO.
96-219 CAN NOT RESOLVE THE CONTROVERSY WITH FINALITY.

VI

THE CASE OF CHURCH OF CHRIST VS. VALLESPIN, G.R. NO.

53726, AUGUST 15, 1988, DOES NOT APPLY INASMUCH AS THE
USE OF TERM “INDISPENSABLE PARTY” IN SAID CASE WAS
LOOSELY USED AND IN TRUTH WAS INTENDED TO MEAN
“PARTIES-IN-INTEREST” AS CONTEMPLATED BY SECTION 2,
RULE 3 OF THE RULES OF COURT.

VII

THE HONORABLE COURT OF APPEALS GRAVELY ERRED

WHEN IT SANCTIONED THE TRIAL COURT’S ERROR IN
DECLARING DEFENDANT CBC IN DEFAULT FOR FAILURE TO
FILE AN ANSWER, NOTWITHSTANDING THE SETTLED DOCTRINE
THAT WHERE AN INDISPENSABLE PARTY IS NOT IN COURT, THE

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TRIAL COURT SHOULD NOT PROCEED BUT INSTEAD SHOULD

DISMISS THE CASE.

VIII

THE DISMISSAL/WITHDRAWAL OF THE COMPLAINT AGAINST

DEFENDANTS REGISTER AND DEPUTY REGISTER OF DEEDS
NECESSARILY GIVE RISE TO, AND BOLSTERS, THE CONCLUSION

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China Banking Corporation vs. Oliver

THAT THE OWNER’S DUPLICATE COPY OF TCT NO. S-50195 OF

MORTGAGOR MERCEDES
6
M. OLIVER IS THE GENUINE AND
AUTHENTIC COPY.

For a clearer discussion of the issues in this controversy, we may

state them as follows:

1. Is the mortgagor who goes by the name of Mercedes M.

Oliver, herein called Oliver One, an indispensable party in
Civil Case No. 96219?
2. Should Section
7
7 Rule 3 of the 1997 Rules of Civil
Procedure apply in this case?
3. Did the Court of Appeals err when it sustained the trial
court’s declaration that petitioner was in default?
4. Were the withdrawal and consequent dismissal of the
complaint against the Registry of Deeds’ officials indicative
of the authenticity of mortgagor Oliver One’s copy of TCT
No. S-50195?

Petitioner Chinabank alleges that there are two owner’s duplicate

copies of TCT No. S-50195 involved in this case and two persons
claiming to be the real “MERCEDES MARAVILLA OLIVER.” One
is the mortgagor, Oliver One. The other is the respondent, Oliver
Two. Respondent’s complaint before the trial court was one for
cancellation of the transfer certificate of title in petitioner’s
possession (Annex “B”). According to petitioner, the issue below is
the genuineness of the titles, which is intertwined with the issue of
ownership. This being the case, said the petitioner, the mortgagor
Oliver One must necessarily be impleaded for she is the registered
owner under Annex “B.” Petitioner argues that mortgagor Oliver
One is in a better position to defend her title. She stands to suffer if
it is declared fake. Further, petitioner claims that the validity and
enforceability of the mortgage entirely depends on the validity and
authenticity of Annex “B.” The mortgage cannot be declared a

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nullity without the trial court declaring Annex “B” a nullity. Hence,
mortgagor Oliver One’s participation in the suit is indis-

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6 Id., at 26-28.
7 SEC. 7, Rule 3, 1997 Revised Rules of Court: Compulsory joinder of
indispensable parties.—Parties in interest without whom no final determination can
be had of an action shall be joined either as plaintiffs or defendants.

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China Banking Corporation vs. Oliver

pensable, according to petitioner. In brief, what petitioner Chinabank

is saying is that it was indispensable for respondent Oliver Two to
implead mortgagor Oliver One in the case before the trial court.
Failing to do that, the complaint of herein respondent Oliver Two
should have been dismissed.
Petitioner’s contention is far from tenable. An indispensable
party is a party in interest,
8
without whom no final determination can
be had of an action. It is true that mortgagor Oliver One is a party in
interest, for she will be affected by the outcome of the case. She
stands to be benefited in case the mortgage9
is declared valid, or
injured in case her title is declared fake. However, mortgagor Oliver
One’s absence from the case does not hamper the trial court in
resolving the dispute between respondent Oliver Two and petitioner.
A perusal of Oliver Two’s allegations in the complaint below shows
that it was for annulment of mortgage due to petitioner’s negligence
in not determining the actual ownership of the property, resulting in
the mortgage’s annotation on TCT No. S-50195 in the Registry of
Deeds’ custody. To support said allegations, respondent Oliver Two
had to prove (1) that she is the real Mercedes M. Oliver referred to
in the TCT, and (2) that she is not the same person using that name
who entered into a deed of mortgage with the petitioner. This,
respondent Oliver Two can do in her complaint without necessarily
impleading the mortgagor Oliver One. Hence, Oliver One is not an
indispensable party in the case filed by Oliver Two.
In Noceda vs. Court of Appeals, et al., 313 SCRA 504 (1999), we
held that a party is not indispensable to the suit if his interest in the
controversy or subject matter is distinct and divisible from the
interest of the other parties and will not necessarily be prejudiced by
a judgment which does complete justice to the parties in court. In
this case, Chinabank has interest in the loan which, however, is

_______________

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8 Nufable, et al. vs. Nufable, et al., 309 SCRA 692, 703 (1999).
9 SEC. 2, Rule 3, Rules of Court: Parties in interest.—A real party in interest is
the party who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. Unless otherwise authorized by law or these
Rules, every action must be prosecuted or defended in the name of the real party in
interest.

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China Banking Corporation vs. Oliver

distinct and divisible from the mortgagor’s interest, which involves

the land used as collateral for the loan.
Further, a declaration of the mortgage’s nullity in this case will
not necessarily prejudice mortgagor Oliver One. The bank still needs
to initiate proceedings to go after the mortgagor, who in turn can
raise other defenses pertinent to the two of them. A party is also not
indispensable if his presence would merely permit complete relief
between him and those already parties to the action, or will simply
avoid multiple 10
litigation, as in the case of Chinabank and mortgagor
Oliver One. The latter’s participation in this case will simply
enable petitioner Chinabank to make its claim against her in this
case, and hence, avoid the institution of another action. Thus, it was
the bank who should have filed a third-party complaint or other
action versus the mortgagor Oliver One.
As to the second issue, since mortgagor Oliver One is not an
indispensable party, Section 7, Rule 3 of the 1997 Rules of Civil
Procedure, which requires compulsory joinder of indispensable
parties in
11
a case, does not apply. Instead, it is Section 11, Rule 3, that
applies. Non-joinder of parties is not a ground for dismissal of an
action. Parties may be added by order12of the court, either on its own
initiative or on motion of the parties. Hence, the Court of Appeals
committed no error when it found no abuse of discretion on the part
of the trial court for denying Chinabank’s motion to dismiss and,
instead, suggested that petitioner file an appropriate action against
mortgagor Oliver One. A person who is not a party to an action may
be impleaded by the defendant either on the basis of 13liability to
himself or on the ground of direct liability to the plaintiff.

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10 Imson vs. Court of Appeals, et al., 239 SCRA 58, 65 (1994).

11 SEC. 11, Rule 3, 1997 Rules of Civil Procedure: Misjoinder and non-joinder of
parties.—Neither misjoinder nor non-joinder of parties is ground for dismissal of an
action. Parties may be dropped or added by order of the court on motion of any party
or on its own initiative at any stage of the action and on such terms as are just. Any
claim against a misjoined party may be severed and proceeded with separately.

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12 Heirs of Joaquin Asuncion, et al. vs. Hon. Gervacio, Jr., et al., 304 SCRA 322,
327 (1999).
13 Almendras vs. Court of Appeals, et al., 293 SCRA 540, 543 (1998).

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272 SUPREME COURT REPORTS ANNOTATED

China Banking Corporation vs. Oliver

Now, the third issue, did the Court of Appeals err when it sustained
the trial court’s ruling that petitioner Chinabank was in default? As
found by the Court of Appeals, petitioner did not file its answer,
although it received the March 13, 1997 order denying the motion to
dismiss. Instead, petitioner filed a petition for certiorari under Rule
65 of the Rules of Court. Said petition, however, does not interrupt
the course of the principal case unless a temporary
14
restraining order
or writ of preliminary injunction is issued. No such order or writ
was issued in this case. Hence, Chinabank as defendant below was
properly declared in default by the trial court, after the 15-day period
to file its answer or other responsive pleading lapsed.
Lastly, were the withdrawal and consequent dismissal of the
complaint against officials of the Registry of Deeds conclusive of
the authenticity of mortgagor Oliver One’s copy of TCT No. S-
50195? This is a question of fact, which is not a proper subject for
review
15
in this petition. Here, we are limited only to questions of
law, as a general rule. Petitioner failed to show that this case falls
under any of the exceptions to this rule. We need not tarry on this
issue now.
WHEREFORE, the petition is DENIED for lack of merit. The
assailed decision dated June 1, 1998 and the resolution dated Sep-
tember 30, 1998 of the Court of Appeals in CA-G.R. SP No. 43836
are AFFIRMED. Costs against petitioner.
SO ORDERED.

Bellosillo (Actg. C.J., Chairman), Austria-Martinez and

Callejo, Sr., JJ., concur.

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14 SEC. 7, Rule 65, 1997 Rules of Civil Procedure: Expediting proceedings;

injunctive relief.—The court in which the petition is filed may issue orders expediting
the proceedings, and it may also grant a temporary restraining order or a writ of
preliminary injunction for the preservation of the rights of the parties pending such
proceedings. The petition shall not interrupt the course of the principal case unless a
temporary restraining order or a writ of preliminary injunction has been issued against
the public respondent from further proceeding in the case.
15 Far East Bank & Trust Company vs. Court of Appeals, et al., 256 SCRA 15,
18 (1996).

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273

VOL. 390, OCTOBER 3, 2002 273

People vs. Lopez

Mendoza, J., On official leave.

Petition denied, judgment affirmed.

Note.—A real party-in-interest is defined as “the party who

stands to be benefited or injured by the judgment or the party
entitled to the avails of the suit,” and “interest” within the meaning
of the rule means material interest, an interest in issue and to be
affected by the decree, as distinguished from mere interest. (Ortigas
& Co. Ltd. vs. Court of Appeals, 346 SCRA 748 [2000])

——o0o——

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