ASSOCIATED BANK, PETITIONER, VS. HON. COURT OF APPEALS, HON. MARINA L. BUZON, AS PRESIDING JUDGE OF RTC, QUEZON CITY, MM, BR. 91, VISITACION SERRA FLORES RTC, QUEZON CITY, MM, B…

This is a petition for review on certiorari seeking the
reversal of the decision of the Court of Appeals on November 18, 1992 affirming
in toto the Order of the Regional Trial Court of Quezon City, Branch 91
dismissing the petitioner’s third-party complaint against private respondent
banks for lack of jurisdiction.

The facts of the case, as found by both the trial court and the
Court of Appeals are undisputed:

“In a complaint for Violation of the Negotiable Instrument Law
and Damages, plaintiffs^[1] seek
the recovery of the amount of P900,913.60 which defendant bank^[2]
charged against their current account by virtue of the sixteen (16) checks
drawn by them despite the apparent alterations therein with respect to the name
of the payee, that is, the name Filipinas Shell was erased and substituted with
Ever Trading and DBL Trading by their supervisor Jeremias Cabrera, without
their knowledge and consent.

“Answering the complaint, defendant bank claimed that the
subject checks appeared to have been regularly issued and free from any
irregularity which would excite or arouse any suspicion or warrant their
dishonor when the same were negotiated and honored by it; that it observed and
exercised the required diligence, care and the prescribed standard verification
procedures before finally accepting and honoring the subject checks and that
the proximate cause of plaintiffs’ loss, if any, was their own laxity,
negligence and lack of control, due care and diligence in the conduct of their
business affairs.

“With leave of court, defendant bank filed a Third-Party
Complaint against Philippine Commercial International Bank, Far East Bank &
Trust Company, Security Bank and Trust Company and Citytrust Banking
Corporation for reimbursement, contribution, indemnity from said third-party
defendants for being the collecting banks of the subject checks and by virtue of
their bank guarantee for all checks sent for clearing to the Philippine
Clearing House Corporation (PCHC), as provided for in Section 17, PCHC), as
provided for in Section 17, PCHC Clearing House Rules and Regulations.

“In its Answer to the Third-Party Complaint, Citytrust Banking
Corporation averred that the subject checks appeared to be complete and regular
on their face with no indication that an original payee’s name was erased and
superimposed with another; that plaintiffs’ fault and negligence in failing to
examine their monthly bank statements, together with the returned checks and
their own check stubs, put them under estoppel and cannot recover the proceeds
of the checks against it, an innocent third-party, and plaintiff must suffer
the loss as their negligence was the proximate cause thereof; and that third
party plaintiff is barred from recovering from it based on the provisions of
Sections 20 and 21 of the Philippine Clearing Rules and Regulations.

“Philippine Commercial International Bank alleged that the
subject check was complete and regular on its face and was paid by it only upon
presentment to the drawee bank for clearing who, upon examination thereof,
found the same to be complete and regular on its face; that it was only after
said check was cleared by third-party plaintiff for payment that it allowed the
payee to withdraw the proceeds of the check from its account; that the cause of
action of the third-party plaintiff is barred by estoppel and/or laches for its
failure to return the check to it within the period provided for under Clearing
House Rules and Regulations; that this Court has no jurisdiction over the suit
as it and third-party plaintiff are members of the Philippine Clearing House
and bound by the Rules and Regulations thereof providing for arbitration.

“A Motion To Dismiss was filed by Security Bank and Trust
Company on the grounds that third-party plaintiff failed to resort to
arbitration as provided for in Section 36 of the Clearing House Rules and
Regulations of the Philippine Clearing House Corporation, and that it was
released from any liability with the acceptance by third-party plaintiff of the
subject check.

“The record does not show of any Answer to the Third-Party
Complaint having been filed by Far East Bank & Trust Company, although a
‘Reply To FEBTC Answer’ was filed by third-party plaintiff.

“On the other hand, third-party plaintiff maintains that this
Court has jurisdiction over the suit as the provisions of the Clearing House
Rules and Regulations are applicable only
if the suit or action is between participating member banks, whereas the
plaintiffs are private persons and the third-party complaint between
participating member banks is only a consequence of the original action
initiated by the plaintiffs.”^[3]

The trial court dismissed the third-party complaint for lack of
jurisdiction citing Section 36 of the Clearing House Rules and Regulations of
the PCHC providing for settlement of disputes and controversies involving any
check or item cleared through the body with the PCHC. It ruled — citing the Arbitration Rules of Procedure — that the
decision or award of the PCHC through its arbitration committee/arbitrator is
appealable only on questions of law to any of the Regional Trial Courts in the
National Capital Region where the head office of any of the parties is located.^[4]

On the plaintiffs’ contention that jurisdiction vests with the
court only if the suit or action is between participating member banks
without the involvement of private parties the trial court held:

“The third-party complaint concerning a dispute or controversy
among clearing participants involving the subject checks cleared through PCHC
is actually independent of, separate and distinct from the plaintiff’s
complaint. x x x

x x x

“As the plaintiffs are not parties to the third party
complaint, the provisions of the clearing house rules and regulations on
arbitration are, therefore, applicable to Third-Party plaintiff and third party
defendant. Consequently this court has
no jurisdiction over the third party complaint.”^[5]

After the trial court denied plaintiffs Motion for
Reconsideration,^[6]
petitioner appealed to the Court of Appeals which promulgated the challenged
decision on November 18, 1992 dismissing the petition for lack of merit.

Undaunted, petitioner is now before this Court seeking a review
of respondent court’s decision on a lone assignment of error:

“RESPONDENT COURT OF APPEALS ERRED IN
HOLDING THAT PETITIONER DRAWEE BANK’S THIRD PARTY COMPLAINT AGAINST PRIVATE
RESPONDENT COLLECTING BANKS FALL WITHIN THE JURISDICTION OF THE PCHC AND NOT
THE REGULAR COURT.”

We find no merit in the petition.

The Clearing House Rules and Regulations on Arbitration of the
Philippine Clearing House Corporation are clearly applicable to petitioner and
private respondents, third party plaintiff and defendants, respectively, in the
court below. Petitioner Associated
Bank’s third party complaint in the trial court was one for reimbursement,
contribution and indemnity against the Philippine Commercial and Industrial Bank
(PCIB), the Far East Bank and Trust, Co. (FEBTC), Security Bank and Trust Co.
(SBTC), and the CityTrust Banking Corporation (CTBC), in connection with
petitioner’s having honored sixteen checks which said respondent banks
supposedly endorsed to the former for collection in 1989. Under the rules and regulations of the
Philippine Clearing House Corporation (PCHC), the mere act of participation of
the parties concerned in its operations in effect amounts to a manifestation of
agreement by the parties to abide by its rules and regulations.^[7]
As a consequence of such participation, a party cannot invoke the jurisdiction
of the courts over disputes and controversies which fall under the PCHC Rules
and Regulations without first going through the arbitration processes laid out
by the body. Since claims relating to
the regularity of checks cleared by banking institutions are among those claims
which should first be submitted for resolution by the PCHC’s Arbitration Committee,
petitioner Associated Bank, having voluntarily bound itself to abide by such rules and regulations, is estopped
from seeking relief from the Regional Trial Court on the coattails of a private
claim and in the guise of a third party complaint without first having obtained
a decision adverse to its claim from the said body. It cannot bypass the arbitration process on the basis of its
averment that its third party complaint is inextricably linked to the original
complaint in the Regional Trial Court.

Under its Articles of Incorporation, the PCHC provides “an
effective, convenient, efficient, economical and relevant exchange and
facilitate service limited to check processing and sorting by way of assisting
member banks, entities in clearing checks and other clearing items as defined
and existing in future Central Bank of the Philippines Circulars, memoranda,
circular letters rules and regulations and policies in pursuance of Section 107
of RA 265.” Pursuant to its function involving the clearing of checks and
other clearing items, the PCHC has adopted rules and regulations designed to
provide member banks with a procedure whereby disputes involving the clearance
of checks and other negotiable instruments undergo a process of arbitration
prior to submission to the courts below. This procedure not only ensures a uniformity of rulings relating to
factual disputes involving checks and other negotiable instruments but also
provides a mechanism for settling minor disputes among participating and member
banks which would otherwise go directly to the trial courts. While the PCHC Rules and Regulations allow
appeal to the Regional Trial Courts only on questions of law, this does not
preclude our lower courts from dealing with questions of fact already decided
by the PCHC arbitration when warranted and appropriate.

In Banco de Oro
Savings and Mortgage Banks vs. Equitable Banking
Corporation^[8] this Court had the occasion to
rule on the validity of these rules as well as the jurisdiction of the PCHC as a
forum for resolving disputes and controversies involving checks and other
clearing items when it held that “the participation of two banks . . . in
the Clearing Operations of the PCHC (was) a manifestation of its submission to
its jurisdiction.”^[9]

The applicable PCHC provisions on the question of jurisdiction
provide:

“Sec. 3 – AGREEMENT TO THESE RULES

“It is the general agreement and understanding, that any
participant in the PCHC MICR clearing operations, by the mere act of
participation, thereby manifests its agreement to these Rules and Regulations,
and its subsequent amendments.

x x x

“Sec. 36 – ARBITRATION

“36.1 Any dispute or controversy between two or more clearing
participants involving any check/item cleared thru PCHC shall be
submitted to the Arbitration Committee, upon written complaint of any involved
participant by filing the same with the PCHC serving the same upon the other
party or parties, who shall within fifteen (15) days after receipt thereof,
file with the Arbitration Committee its written answer to such written
complaint and also within the same period serve the same upon the complaining
participant. This period of fifteen
(15) days may be extended by the Committee not more than once for another
period of fifteen (15) days, but upon agreement in writing of the complaining
party, said extension may be for such period as the latter may agree to.”

Section 36.6 is even more emphatic:

“36.6 The fact that a bank participates in the clearing
operations of PCHC shall be deemed its written and subscribed consent to the
binding effect of this arbitration agreement as if it had done so in accordance
with Section 4 of the Republic Act No. 876 otherwise known as the Arbitration
Law.”

Thus, not only do the parties manifest by mere participation
their consent to these rules, but such participation is deemed (their) written
and subscribed consent to the binding effect of arbitration agreements
under the PCHC rules. Moreover, a
participant subject to the Clearing House Rules and Regulations of the PCHC may
go on appeal to any of the Regional Trial Courts in the National Capital Region
where the head office of any of the parties is located only after a decision or
award has been rendered by the arbitration committee or arbitrator on questions
of law.^[10]

Clearly therefore, petitioner Associated Bank, by its voluntary
participation and its consent to the arbitration rules cannot go directly to
the Regional Trial Court when it finds it convenient to do so. The jurisdiction of the PCHC under the rules
and regulations is clear, undeniable and is particularly applicable to all the
parties in the third party complaint under their obligation to first seek
redress of their disputes and grievances with the PCHC before going to the
trial court.

Finally, the contention that the third party complaint should not
have been dismissed for being a necessary and inseparable offshoot of the main
case over which the court a quo
had already exercised jurisdiction misses the fundamental point
about such pleading. A third party complaint
is a mere procedural device which under the Rules of Court is allowed only with
the court’s permission. It is an action
“actually independent of, separate and distinct from the plaintiffs’
complaint” (s)uch that, were it not for the Rules of Court, it would be
necessary to file the action separately from the original complaint by the
defendant against the third party.^[11]

IN VIEW OF THE FOREGOING, the petition is DENIED for lack
of merit. With costs against
petitioner.

SO ORDERED.

Cruz, (Chairman), Davide, Jr., and
Bellosillo, JJ., concur.

Quiason, J., no part.

^[1]
Herein private respondents Visitacion Serra Flores and Ma. Asuncion Flores

^[2]
Associated Bank

^[3]
Rollo, pp. 28-30.

^[4]
CA Rollo, pp. 66-68.

^[5]
Ibid., p. 76.

^[6]
Ibid., Ibid.

^[7]
PCHC Rules and Regulations, Sec. 3 (hereinafter cited as Rules.

^[8]
157 SCRA 188 (1988)

^[9]
lbid., p. 196.

^[10]
Rules, Sec. 13.

^[11]
Allied Banking Corporation vs. Court of Appeals, 178 SCRA 526 (1989)