China Banking Corporation v. Oliver
REITERATIONFacts
The Antecedents: Pangan Lim, Jr. and Mercedes M. Oliver (Oliver One) opened a joint account with China Banking Corporation (Chinabank). Lim introduced Oliver One as his business partner. They applied for a P17 million loan, offering a 7,782 square meter lot in Tunasan, Muntinlupa, covered by TCT No. S-50195 in Oliver One's name, as collateral. The loan was approved, and on November 17, 1995, Lim and Oliver One executed a promissory note and a Real Estate Mortgage in favor of Chinabank. The mortgage was registered, and Oliver One's address was listed as No. 95 Malakas Street, Diliman, Quezon City. Procedural History: On November 18, 1996, another Mercedes M. Oliver (Oliver Two), with a postal 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 and officials of the Registry of Deeds. Oliver Two claimed to be the lawful owner of the property, that her owner's duplicate copy of the title was always in her possession, and that she did not apply for the loan or surrender her title. Chinabank moved to dismiss the case for lack of cause of action and non-joinder of an indispensable party (the mortgagor, Oliver One). The Regional Trial Court (RTC) denied the motion to dismiss, stating that the allegations in the complaint were hypothetically admitted and that the matters raised were evidentiary. Chinabank then filed a petition for certiorari with the Court of Appeals (CA). While the certiorari petition was pending, Oliver Two moved to declare Chinabank in default for failure to file an answer within the reglementary period. The RTC granted the motion and declared Chinabank in default. Chinabank filed a supplemental petition seeking to annul the order of default, arguing that the certiorari petition interrupted the period to file an answer. The CA dismissed Chinabank's petition for certiorari, holding that the denial of the motion to dismiss was interlocutory and that the certiorari petition did not interrupt the period to file an answer as no injunctive relief was granted. The CA also found no grave abuse of discretion in the RTC's denial of the motion to dismiss and suggestion for Chinabank to file a third-party complaint. The Petition: Chinabank filed a petition for review seeking to reverse the CA's decision, arguing that the mortgagor (Oliver One) was an indispensable party and that the RTC erred in declaring Chinabank in default.
Issue(s)
Whether the mortgagor, Mercedes M. Oliver (Oliver One), is an indispensable party in the action for annulment of mortgage filed by another Mercedes M. Oliver (Oliver Two). Whether Section 7, Rule 3 of the 1997 Rules of Civil Procedure applies to the case. Whether the Court of Appeals erred in sustaining the trial court's declaration that petitioner Chinabank was in default. Whether the withdrawal and dismissal of the complaint against the Register of Deeds officials were indicative of the authenticity of mortgagor Oliver One's copy of TCT No. S-50195.
Ruling
The petition is denied for lack of merit. The assailed decision and resolution of the Court of Appeals are affirmed.
Ratio Decidendi
On the issue of indispensable party: The Court held that the mortgagor, Oliver One, is not an indispensable party in the case filed by Oliver Two. An indispensable party is one without whom no final determination can be had of the action. While Oliver One is a party in interest, her absence does not prevent the trial court from resolving the dispute between Oliver Two and Chinabank. Oliver Two's complaint for annulment of mortgage was based on Chinabank's alleged negligence in verifying ownership. To prove this, Oliver Two needed to establish that she is the real Mercedes M. Oliver and not the person who entered into the mortgage agreement. This can be done without impleading Oliver One. The Court cited Noceda vs. Court of Appeals stating that a party is not indispensable if their interest is distinct and divisible and they will not necessarily be prejudiced by a judgment. Chinabank's interest in the loan is distinct from Oliver One's interest in the land. A declaration of nullity of the mortgage would not necessarily prejudice Oliver One, as Chinabank would still need to initiate separate proceedings against her. Therefore, Oliver One's participation would merely avoid multiple litigation, and it was Chinabank's responsibility to file a third-party complaint against her. On the applicability of Section 7, Rule 3 of the 1997 Rules of Civil Procedure: Since Oliver One was determined not to be an indispensable party, Section 7, Rule 3, which mandates the compulsory joinder of indispensable parties, does not apply. Instead, Section 11, Rule 3, which states that the non-joinder of parties is not a ground for dismissal and that parties may be added by court order, is applicable. The Court of Appeals did not err in finding no abuse of discretion on the part of the trial court for denying Chinabank's motion to dismiss and suggesting that Chinabank file an appropriate action against mortgagor Oliver One. A defendant may implead a person not a party to the action based on liability to himself or direct liability to the plaintiff. On the declaration of default: The Court of Appeals did not err in sustaining the trial court's ruling that Chinabank was in default. Chinabank received the order denying its motion to dismiss on March 21, 1997, and had 15 days to file an answer. Instead of filing an answer, Chinabank filed a petition for certiorari with the Court of Appeals. However, a petition for certiorari under Rule 65 does not interrupt the period for filing an answer in the principal case unless a temporary restraining order or writ of preliminary injunction is issued. Since no such injunctive relief was granted, the reglementary period for filing an answer lapsed, and Chinabank was correctly declared in default by the trial court. On the authenticity of the title: The Court stated that the question of whether the withdrawal and dismissal of the complaint against the Registry of Deeds officials were indicative of the authenticity of mortgagor Oliver One's copy of TCT No. S-50195 is a question of fact. As a general rule, the Supreme Court is limited to reviewing questions of law in petitions for review, and Chinabank failed to demonstrate that this case falls under any of the exceptions to this rule. Therefore, the Court did not delve into this factual issue.
Main Doctrine
A petition for certiorari under Rule 65 does not interrupt the period for filing an answer in the principal case unless a temporary restraining order or writ of preliminary injunction is issued. The non-joinder of a party, who is not indispensable, is not a ground for dismissal, and such party may be impleaded later through a third-party complaint.