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439 Phil. 50

SECOND DIVISION

[ G.R. No. 135796, October 03, 2002 ]

CHINA BANKING CORPORATION, PETITIONER, VS. MERCEDES M. OLIVER, RESPONDENT.

R E S O L U T I O N

QUISUMBING, J.:

This petition for review[1]  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.

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 applied 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; and that she did not apply for a loan or surrender her title to Chinabank.[2]  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 of Deeds be ordered to issue a new and clean title in her name.[3]

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 having sufficiently averred that defendants negligently 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 all evidentiary which Defendants may substantiate at the appointed hours.[4]

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 for Decision based on the complaint. 

It is SO ORDERED.[5]

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 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 interlocutory 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 

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 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 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 THAT THE OWNER’S DUPLICATE COPY OF TCT NO. S-50195 OF MORTGAGOR MERCEDES M. OLIVER IS THE GENUINE AND AUTHENTIC COPY.[6]

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 Rule 3 of the 1997 Rules of Civil Procedure[7] 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 nullity without the trial court declaring Annex “B” a nullity. Hence, mortgagor Oliver One’s participation in the suit is indispensable, 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, without whom no final determination can be had of an action.[8] 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.[9] 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 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.[10] 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 a case, does not apply. Instead, it is Section 11, Rule 3, that applies.[11] 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.[12] 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.[13]

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 restraining order or writ of preliminary injunction is issued.[14]  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 in this petition. Here, we are limited only to questions of law,[15] 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 September 30, 1998 of the Court of Appeals in CA-G.R. SP No. 43836 are AFFIRMED. Costs against petitioner.

SO ORDERED. 

Bellosillo, (Chairman), Austria-Martinez, and Callejo, Sr., JJ., concur.
Mendoza, J
., on official leave.  
 


[1] Rollo, pp. 10-47.

[2] CA Rollo, pp. 159/292. 

[3] Rollo, pp. 18-19. 

[4] Id. at 20. 

[5] Id. at 22-23. 

[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. 

[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. 

[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. 

[12] Heirs of Joaquin Asuncion, et al. vs. Hon. Gervacio, Jr., etc., et al., 304 SCRA 322, 327 (1999). 

[13] Almendras vs. Court of Appeals, et al., 293 SCRA 540, 543 (1998). 

[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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