G.R. No. 135796; October 3, 2002
China Banking Corporation, petitioner, vs. Mercedes M. Oliver, respondent.

FACTS

In August 1995, Pangan Lim, Jr. and a person introduced as Mercedes M. Oliver (Oliver One) opened a joint account at China Banking Corporation (Chinabank). They applied for and were granted a P17 million loan, offering as collateral a lot covered by TCT No. S-50195 in the name of Oliver. On November 17, 1995, they executed a promissory note and a Real Estate Mortgage, which was duly registered. The mortgage document listed Oliver One’s address as No. 95 Malakas Street, Diliman, Quezon City.
On November 18, 1996, respondent Mercedes M. Oliver (Oliver Two), claiming a postal address at No. 40 J.P. Rizal St., San Pedro, Laguna, filed a complaint for annulment of mortgage and cancellation of title with damages against Chinabank and the Register of Deeds officials. Oliver Two alleged she was the lawful owner of the land, her owner’s duplicate copy of the title had always been in her possession, and 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 trial court denied the motion on March 13, 1997. Instead of filing an answer, Chinabank filed a petition for certiorari with the Court of Appeals on April 7, 1997. The appellate court deferred action on the prayer for a preliminary injunction. Subsequently, the trial court granted Oliver Two’s motion and declared Chinabank in default on July 17, 1997, ruling that the filing of the certiorari petition did not toll the period for filing an answer. The Court of Appeals dismissed Chinabank’s petition and affirmed the trial court’s orders. Chinabank’s motion for reconsideration was denied.

ISSUE

1. Is the mortgagor, Oliver One, an indispensable party in the case for annulment of mortgage?
2. Should Section 7, Rule 3 of the 1997 Rules of Civil Procedure (on compulsory joinder of indispensable parties) apply?
3. Did the Court of Appeals err in sustaining the trial court’s declaration of default?
4. Were the withdrawal and dismissal of the complaint against the Registry of Deeds officials indicative of the authenticity of Oliver One’s title?

RULING

1. No, Oliver One is not an indispensable party. An indispensable party is one without whom no final determination can be had of an action. While Oliver One is a party in interest who would be affected by the outcome, her absence does not prevent the trial court from resolving the dispute between Oliver Two and Chinabank. The action is for annulment of mortgage based on Chinabank’s alleged negligence in ascertaining ownership. Oliver Two needed to prove she is the real owner and not the person who mortgaged the property. The trial court could determine the validity of the mortgage and the need to cancel the title without Oliver One’s presence, as the issue primarily concerns the bank’s diligence.
2. No, Section 7, Rule 3 does not apply because Oliver One is not an indispensable party. The applicable rule is Section 11, Rule 3, which states that non-joinder of parties is not a ground for dismissal. The court may order the inclusion of the omitted party at any stage.
3. No, the Court of Appeals did not err. An order denying a motion to dismiss is interlocutory and generally cannot be challenged via certiorari. The proper course was for Chinabank to file an answer, proceed to trial, and raise the issue on appeal. The filing of the certiorari petition did not interrupt the period to file an answer because no temporary restraining order or writ of preliminary injunction was issued by the Court of Appeals. Therefore, the trial court correctly declared Chinabank in default for failing to file an answer within the reglementary period.
4. This is a question of fact not proper for review in a petition limited to questions of law. The Supreme Court found no reason to deviate from this rule.
The petition was DENIED for lack of merit. The decision and resolution of the Court of Appeals were AFFIRMED.