Metropolitan Bank & Trust Co. (Metrobank) v. Hon.

Alejo By: Paumig

GR No. 141970 Topic: Compulsory Joinder of Indispensable Parties (Sec.
Sept. 10, 2001 7, Rule 3)
Ponente: J. Panganiban
DOCTRINE
 Indispensable parties must always be joined either as plaintiffs or defendants, for the court cannot proceed without them. Indispensable parties
are those with such an interest in the controversy that a final decree would necessarily affect their rights, so that the courts cannot proceed
without their presence. Without the presence of indispensable parties to a suit or proceeding, a judgment of a Court cannot
attain real finality.
 The absence of an indispensable party renders all subsequent actuations of the court null and void, for want of authority to
act, not only as to the absent parties but even as to those present.

Facts
 Spouses Acampado obtained loans from Metrobank in the amounts of P5,000,000.00 and P2,000,000.00 respectively. As security, Spouses
Acampado executed a Real Estate Mortgage over a parcel of lands in their names.
 Sy Tan Se then filed a Complaint for Declaration of Nullity of TCT V-41319 (Property used as security) against the Spouses Acampado.
(Separate proceeding) Despite being registered mortgagee of the real property Metrobank was not made party of the civil case filed by Sy
Tan Se.
 Spouses Acampado defaulted with their obligations prompting the extrajudicial foreclosure proceedings with Metrobank as the winning
bidder.
 A year after the expiration of the redemption period, Metrobank moved to consolidate the title of the property in order for a new TCT be
issued in its name. The Register of Deeds informed them of the existence of the ruling of RTC annulling the title ( TCT V-41319); the RTC in
said case rendered that the TCT was void for having proceeded from an illegitimate source. (Sy Tan Se won her case)
 CA dismissed the case when it was appealed.
Issue/s
 W/N the decision rendered in the case of Sy Tan Se valid and binding with Metrobank
Ruling
Decision made in the case of Sy Tan Se is not valid for being rendered with lack of jurisdiction
 The property in dispute (TCT V-41319) was mortgaged to Metrobank and was duly annotated before the Civil Case was brought by Sy Tan Se.
 Although a mortgage affects the land itself and not merely the TCT covering it, the cancellation of the TCT and the mortgage annotation
exposed petitioner to real prejudice, because its rights over the mortgaged property would no longer be known and respected by third parties.
Necessarily, therefore, the nullification of TCT No. V-41319 adversely affected its property rights, considering that a real mortgage is a real right
and a real property by itself.
 By this circumstance, Metrobank falls within the definition of an indispensable party.

An indispensable party is a party who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence,
without injuring or affecting that interest; a party who has not only an interest in the subject matter of the controversy, but also has an interest of such
nature that a final decree cannot be made without affecting his interest or leaving the controversy in such a condition that its final determination may be
wholly inconsistent with equity and good conscience. It has also been considered that an indispensable party is a person in whose absence there cannot
be a determination between the parties already before the court which is effective, complete, or equitable. Further, an indispensable party is one who
must be included in an action before it may properly go forward.

A person is not an indispensable party, however, if his interest in the controversy or subject matter is separable from the interest of the other parties, so
that it will not necessarily be directly or injuriously affected by a decree which does complete justice between them

 Under Sec. 7, Rule 3 of Civil Procedure: “Parties in interest without whom no final determination can be had of an action shall be joined either
as plaintiffs or defendants”
 Indispensable parties must always be joined either as plaintiffs or defendants, for the court cannot proceed without them. Indispensable parties
are those with such an interest in the controversy that a final decree would necessarily affect their rights, so that the courts cannot proceed
without their presence. Without the presence of indispensable parties to a suit or proceeding, a judgment of a Court cannot
attain real finality.
 Whenever it appears to the court in the course of a proceeding that an indispensable party has not been joined, it is the duty of the court to
stop the trial and to order the inclusion of such party. Such an order is unavoidable, for the general rule with reference to the making of parties
in a civil action requires the joinder of all necessary parties wherever possible, and the joinder of all indispensable parties under any and all
conditions, the presence of those latter parties being a sine qua non of the exercise of judicial power. It is precisely when an indispensable
party is not before the court that the action should be dismissed. The absence of an indispensable party renders all subsequent
actuations of the court null and void, for want of authority to act, not only as to the absent parties but even as to those
present.
 The well-known rule in this jurisdiction is that a person dealing with a registered land has a right to rely upon the face of the Torrens Certificate
of Title and to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts and circumstances
that would impel a reasonably cautious man to make such inquiry.
 Thus, where innocent third persons relying on the correctness of the certificate of title issued, acquire rights over the property, the court cannot
disregard such rights and order the total cancellation of the certificate for that would impair public confidence in the certificate of title;
otherwise everyone dealing with property registered under the Torrens system would have to inquire in every instance as to whether the title
ha[s] been regularly or irregularly issued by the court. Indeed, this is contrary to the evident purpose of the law.
 Thus, the judgment rendered in the civil case filed by Sy Tan Se is void and the Declaration of Nullity of such TCT should not
bind Metrobank.
Notes