Indispensable party

An indispensable party to a case is a party in interest, without whom no final determination can be had of an action. But even if a party is a party in interest as he will be affected by the outcome of the case one way or another, he may still not be an indispensable party, as shown in this case.

This case involves a valuable parcel of land located in a bustling suburban city containing an area of 7,782 square meters and covered by TCT No. S-50195.Indicated in the title as registered owner is the name of "Marita Oliveros".

In August 1995, Paterno, a businessman engaged in rice and palay trading, and a woman whom he introduced as his partner in the business by the name of Marita Oliveros opened a joint account in the Quezon City branch of big bank. Thereafter, they applied for a loan of P 17M using the 7,782 square meter land as collateral. In three months time the bank approved the loan. So Paterno and the said Marita executed a promissory note in favor of the bank as well as a real estate mortgage on the property. The mortgage document wherein the address of Marita appeared to be in Quezon City was registered and annotated on the original title under the custody of the Register of Deeds of Makati.

A year later, another woman by the name of Marita Oliveros residing in the place where the land is located and possessing an owner’s duplicate copy of the title, filed an action for annulment of mortgage with damages against the bank and the Register of Deeds of Makati. She claimed that she did not apply for a loan or surrender her title to the bank. So she prayed that: (1) the owner’s duplicate surrendered to the bank as well as the original title with the Registry of Deeds be cancelled;(2) that the mortgage be declared null and void; and (3) that the Registry of Deeds be ordered to issue a new and clean title in her name.

The bank asked for the dismissal of the complaint. It alleged that there are two owner’s duplicate copies of TCT S-50195 and two persons claiming to be the real "Marita Oliveros", one who mortgage the land to it (Marita I) and the other who filed a case against it (Marita II). According to the bank, the issue is the genuineness of the title which is intertwined with the issue of ownership. So the bank contended that Marita I who mortgaged the land to it must necessarily be impleaded as an indispensable party because she stands to suffer if her title is declared fake. Besides the mortgage cannot be declared a nullity without the trial court declaring the title mortgaged to it by Marita I, a nullity.

Was the Bank correct?

No.

It is true that Marita I 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 her absence from the case does not hamper the trial court in resolving the case filed by Marita II against the bank. Marita II’s complaint was for the annulment of mortgage due to the bank’s negligence in not determining the actual ownership of the property resulting in the annotation of the mortgage on the TCT in the Register of Deeds’ custody. To support said complaint Marita II had to prove that she is the real Marita Oliveros referred to in the TCT, and that she is not the same person using that name who entered into a deed of mortgage with the bank. Marita II can do this without necessarily impleading Marita I in her complaint. Hence Marita I is not an indispensable party.

A party is not indispensable to the suit if her 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 the bank has interest in the loan which, however, is distinct and divisible from the mortgagor’s (Marita I) interest in the land used as collateral for the loan.

A declaration of the nullity of the mortgage will not necessarily prejudice Marita I. The bank still needs to initiate proceedings against her who in turn can raise defenses pertinent to the two of them. A party is not also indispensable if her presence would merely permit complete relief between her and those already parties to the action, or will simply avoid multiple litigation, as in the case of the bank and the mortgagor Marita I. The latter’s participation in this case will simply enable the bank to make its claim against her in this case, and hence, avoid the institution of another action. Thus it was the bank which should have filed a third party complaint or other action versus the mortgagor, Marita I (China Banking Corporation vs. Mercedes Oliver G.R.135796, October 3, 2002).

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