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 OneÊs 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 mortgagorÊs interest, which involves the land used as collateral
for the loan. Further, a declaration of the mortgageÊs 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 latterÊs 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 Oliver One is not an indispensable party, Section 7,
Rule 3 of the 1997 Rules of Civil Procedure, which requires
compulsory joinder of indispensa-

_______________

* SECOND DIVISION.

264

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 ChinabankÊs 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 CorporationÊs
petition for certiorari to annul the two orders of the
Regional Trial Court of Muntinlupa City, Branch 276,
which earlier denied petitionerÊs motion to dismiss and
then declared the bank in default in Civil Case No. 96-219.
The appellate court also denied petitionerÊs 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 bankÊs branch
manager as his partner in the rice and palay trading
business. Thereafter, Lim and Oliver ap-

_______________

1 Rollo, pp. 10-47.

265

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 ownerÊs duplicate
copy in the bankÊs possession. The mortgage document
showed Mercedes OliverÊs 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 ownerÊs
duplicate copy of the title had always been in her
possession; and that she did not 2
apply for a loan or
surrender her title to Chinabank. She prayed that: (1) the
ownerÊs 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
3
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 having sufficiently averred that defendants
negligently

_______________

2 CA Rollo, pp. 159, 292.

3 Rollo, pp. 18-19.

266

266 SUPREME COURT REPORTS ANNOTATED

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
all evidentiary which Defendants may substantiate at the
4
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 for Decision based on the complaint.
5
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

_______________

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

267

VOL. 390, OCTOBER 3, 2002 267

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 courtÊs 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 petitionerÊs 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

RESPONDENTÊS CAUSE OF ACTION IS ANCHORED ON

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

268

268 SUPREME COURT REPORTS ANNOTATED

 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 OWNERÊS DUPLICATE COPY OF THE TITLE OF

MORTGAGOR MERCEDES M. OLIVER OWNERÊS DUPLICATE
COPY CANNOT, IN HER ABSENCE, BE DECLARED NULL AND
VOID. CONSEQUENTLY, INASMUCH AS THE MORTGAGE IN
FAVOR OF PETITIONER IS DEPENDENT UPON THE OWNERÊS
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 COURTÊS 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

269

VOL. 390, OCTOBER 3, 2002 269

China Banking Corporation vs. Oliver

THAT THE OWNERÊS DUPLICATE COPY OF TCT NO. S-50195

OF MORTGAGOR MERCEDES M. OLIVER IS THE GENUINE
6
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 courtÊs declaration that petitioner was in
default?
4. Were the withdrawal and consequent dismissal of
the complaint against the Registry of DeedsÊ
officials indicative of the authenticity of mortgagor
Oliver OneÊs copy of TCT No. S-50195?

Petitioner Chinabank alleges that there are two ownerÊs

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. RespondentÊs
complaint before the trial court was one for cancellation of
the transfer certificate of title in petitionerÊs 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
OneÊs participation in the suit is indis-

_______________

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.

270

270 SUPREME COURT REPORTS ANNOTATED

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.
PetitionerÊs contention is far from tenable. An
indispensable party is a party in interest, without
8
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
9
valid, or injured
in case her title is declared fake. However, mortgagor
Oliver OneÊs absence from the case does not hamper the
trial court in resolving the dispute between respondent
Oliver Two and petitioner. A perusal of Oliver TwoÊs
allegations in the complaint below shows that it was for
annulment of mortgage due to petitionerÊs negligence in not
determining the actual ownership of the property, resulting
in the mortgageÊs annotation on TCT No. S-50195 in the
Registry of DeedsÊ 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

_______________

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.

271

VOL. 390, OCTOBER 3, 2002 271

China Banking Corporation vs. Oliver

distinct and divisible from the mortgagorÊs interest, which

involves the land used as collateral for the loan.
Further, a declaration of the mortgageÊs 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, as10 in the case of Chinabank and
mortgagor Oliver One. The latterÊs 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
11
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, 12
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 ChinabankÊs 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 13
himself or on
the ground of direct liability to the plaintiff.

_______________

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., et al., 304
SCRA 322, 327 (1999).
13 Almendras vs. Court of Appeals, et al., 293 SCRA 540, 543 (1998).

272

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 courtÊs 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 14
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 OneÊs
copy of TCT No. S-50195? This is a question of fact, which
is not a proper subject for review in this
15
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.

_______________

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).

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])

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