G.R. No.

123871 2/26/23, 10:52 PM

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Republic of the Philippines

FIRST DIVISION

G.R. No. 123871 August 31, 1998

ALLIED BANKING CORPORATION, petitioner,

PANGANIBAN, J.:

As a general rule, a trial court that has established jurisdiction over the main action also acquires jurisdiction over a
third-party complaint, even if it could not have done so had the latter been filed as an independent action. This rule,
however, does not apply to banks that have agreed to submit their disputes over check clearings to arbitration under
the rules of the Philippine Clearing House Corporation. In that event, primary recourse should be to the PCHC
Arbitration Committee, without prejudice to an appeal to the trial courts. In other words, without first resorting to the
PCHC, the third-party complaint would be premature.

The Case

Before us is a petition for review on certiorari under Rule 45, assailing the Decision dated February 12, 1996
promulgated by the Court of Appeals1 in CA-GR CV No. 44804; which affirmed the trial court's Order dated
September 16, 1991, dismissing petitioner's third-party complaint against private respondent. 2

Facts of the Case

The facts are undisputed. Reproduced hereunder is Respondent Court's narration:

Hyatt Terraces Baguio issued two crossed checks drawn against Allied Banking Corp. (hereinafter,
ALLIED) in favor of appellee Meszellen Commodities Services, Inc. (hereinafter, MESZELLEN). Said
checks were deposited on August 5, 1980 and August 18, 1980, respectively, with the now defunct
Commercial Bank and Trust Company (hereinafter, COMTRUST). Upon receipt of the above checks,
COMTRUST stamped at the back thereof the warranty "All prior endorsements and/or lack of
endorsements guaranteed." After the checks were cleared through the Philippine Clearing House
Corporation (hereinafter, PCHC), ALLIED BANK paid the proceeds of said checks to COMTRUST as
the collecting bank.

On March 17, 1981, the payee, MESZELLEN, sued the drawee, ALLIED BANK, for damages which it
allegedly suffered when the value[s] of the checks were paid not to it but to some other person.

Almost ten years later, or on January 10, 1991, before defendant ALLIED BANK could finish presenting
its evidence, it filed a third party complaint against Bank of the Philippine Islands (hereinafter, BPI,
appellee herein) as successor-in-interest of COMTRUST, for reimbursement in the event that it would
be adjudged liable in the main case to pay plaintiff, MESZELLEN. The third party complaint was

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admitted [in] an Order dated May 16, 1991 issued by the Regional Trial Court of Pasig, Branch 162. On
July 16, 1991, BPI filed a motion to dismiss said third party complaint grounded on the following: 1) that
the court ha[d] no jurisdiction over the nature of the action; and 2) that the cause of action of the third
party plaintiff ha[d] already prescribed.

On September 16, 1991, the trial court issued an order dismissing the third party complaint. Defendant-
third party plaintiff's motion for reconsideration of this order was subsequently denied. 3

Respondent Court's Ruling

Respondent Court affirmed the trial court thus:

. . . Appellant's submission that the cause of action of the third party plaintiff against the third party
defendant accrued only when the complaint in the original case was filed on March 17, 1981 is
untenable. As earlier discussed, the defendant has a separate cause of action (in respect of plaintiff's
complaint) against a third party in the original and principal case. Reviewing the third-party complaint
below, that cause of action is the supposed erroneous endorsement made by COMTRUST for which
ALLIED BANK is being held liable for damages by the payee-appellee. Without COMTRUST's
warranties as a general endorser, ALLIED BANK allegedly would not have paid on the checks. Should
such warranties prove to be false and inaccurate, COMTRUST may be held liable for any damage
arising out of the falsity of its representation.

Based on the records the subject endorsement of COMTRUST was made in August 1980[;] and in the
same period, ALLIED BANK paid on the subject checks. From that moment, ALLIED BANK could have
instituted an action against COMTRUST. It is the legal possibility of bringing the action which
determines the starting point for the computation of the period (Tolentino, Civil Code of the Philippines,
Vol. IV, p. 41, citing Manresa). This is the moment when a cause of action may be deemed to accrue.
Thus, considering that the third party complaint was filed more than ten years from August 1980,
specifically on January 10, 1991, the same can no longer be entertained.

Even granting arguendo that the lower court had jurisdiction over the third party complaint and the
cause of action thereof had not yet prescribed, the filing of the third party complaint should
nevertheless be disallowed considering that defendant has already presented several witnesses and is
about ready to rest its case because, then, the allowance of the third party complaint would only delay
the resolution of the original case. (Firestone Tire and Rubber Co. of the Phil. vs. Tempengko, supra, p.
423).

A final word. We have noted the curious situation here where, instead of the payee suing its bank, i.e.,
the collecting bank (which is COMTRUST), it opted to sue the drawee bank (ALLIED BANK). It is,
however, up to the trial court to rule on the propriety of the latter
complaint. 4

Not satisfied with the above ruling, petitioner filed the present petition before this Court.5

The Issues

Petitioner raises the following issues: 6

I. The Respondent Honorable Court of Appeals erred in holding that the cause of action of the third-
party complaint ha[d] already prescribed.

II. The Respondent Honorable Court of Appeals erred in holding that the filing of the third party
complaint should be disallowed as it would only delay the resolution of the case.

On the other hand, private respondent argues that the trial court had no authority to admit a third-party claim that
was filed by one bank against another and involved a check cleared through the Philippine Clearing House
Corporation (PCHC). To the mind of the Court, this is the critical issue.

The Court's Ruling

The petition is bereft of merit.

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Critical Issue: Mandatory Recourse to PCHC

To buttress its claim, private respondent contends that petitioner's remedy rests with the PCHC, of which both Allied
and BPI are members, in consonance with the Clearing House Rules and Regulations which, in part, states:

Sec. 38 — Arbitration

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, . . . .

Private respondent cites Banco de Oro Sayings and Mortgage Bank v. Equitable Banking Corporation 7 and
Associated Bank v. Court of Appeals,8 which upheld the right of the PCHC to settle and adjudicate disputes between
member banks. In Banco de Oro, the Court ruled:

The participation of the two banks, petitioner and private respondent, in the clearing operations of
PCHC is a manifestation of their submission to its jurisdiction. Secs. 3 and 36.6 of the PCHC-CHRR
clearing rules and regulations provide:

Sec. 3. AGREEMENT TO THESE RULES. — It is the general agreement and

Sec. 36.6. (ARBITRATION) — The fact that a bank participates in the clearing operations
of the 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.

Further[,] Section 2 of the Arbitration Law mandates:

Two or more persons or parties may submit to the arbitration of one or more arbitrators
any controversy existing between them at the time of the submission and which may be
the subject of any action, or the parties of any contract may in such contract agree to
settle by arbitration a controversy thereafter arising between them. Such submission or
contract shall be valid and irrevocable, save upon grounds as exist at law for the
revocation of any contract.

Such submission or contract may include question arising out of valuations, appraisals or
other controversies which may be collateral, incidental, precedent or subsequent to any
issue between the parties. (Emphasis supplied.)

Associated Bank also disallowed a similar third-party complaint, ruling thus:

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. 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.

xxx xxx xxx

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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 [from] 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. (Emphasis supplied.)

Banco de Oro and Associated Bank are clear and unequivocal: a third-party complaint of one bank against another
involving a check cleared through the PCHC is unavailing, unless the third-party claimant has first exhausted the
arbitral authority of the PCHC Arbitration Committee and obtained a decision from said body adverse to its claim.

Recognizing the role of the PCHC in the arbitration of disputes between participating banks, the Court in Associated
Bank further held: "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."

We defer to the primary authority of PCHC over the present dispute, because its technical expertise in this field
enables it to better resolve questions of this nature. This is not prejudicial to the interest of any party, since primary
recourse to the PCHC does not preclude an appeal to the regional trial courts on questions of law. Section 13 of the
PCHC Rules reads:

Sec. 13. The findings of facts of the decision or award rendered by the Arbitration Committee or by the
sole Arbitrator as the case may be shall be final and conclusive upon all the parties in said arbitration
dispute. The decision or award of the Arbitration Committee or of the Sole Arbitrator shall be
appealable only on questions of law to any of the Regional Trial Courts in the National Capital Judicial
Region where the Head Office of any of the parties is located. The appellant shall perfect his appeal by
filing a notice of appeal to the Arbitration Secretariat and filing a Petition with the Regional Trial Court of
the National Capital Region . . . .

Furthermore, when the error is so patent, gross and prejudicial as to constitute grave abuse of discretion, courts
may address questions of fact already decided by the arbitrator. 9

We are not unaware of the rule that a trial court, which has jurisdiction over the main action, also has jurisdiction
over the third-party complaint, even if the said court would have had no jurisdiction over it had it been filed as an
independent action. 10 However, this doctrine does not apply in the case of banks, which have given written and
subscribed consent to arbitration under the auspices of the PCHC.

By participating in the clearing operations of the PCHC, petitioner agreed to submit disputes of this nature to
arbitration. Accordingly, it cannot invoke the jurisdiction of the trial courts without a prior recourse to the PCHC
Arbitration Committee. Having given its free and voluntary consent to the arbitration clause, petitioner cannot
unilaterally take it back according to its whim. In the world of commerce, especially in the field of banking, the
promised word is crucial. Once given, it may no longer be broken.

Upon the other hand, arbitration as an alternative method of dispute resolution is encouraged by this Court. Aside
from unclogging judicial dockets, it also hastens solutions especially of commercial disputes.

In view of the foregoing, a discussion of the issues raised by the petitioners is unnecessary.

WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.

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SO ORDERED.

Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.

Footnotes

1 Fifth Division composed of JJ. Bernardo Ll. Salas, ponente; with the concurrence of J. Pedro A. Ramirez,
chairman; and J. Ma. Alicia Austria-Martinez, member.

2 Regional Trial Court of Pasig, Branch 162.

3 CA Decision, pp. 1-2; rollo, pp. 24-25.

4 Ibid., pp. 4-6; rollo, pp. 27-29.

5 This case was deemed submitted for resolution on February 26, 1998, upon receipt by the Court of
petitioner's Reply Memorandum.

6 Petition, p. 6; rollo, p. 16.

7 157 SCRA 188, January 20, 1988, per Gancayco, J.

8 233 SCRA 137, June 14, 1994, per Kapunan, J.

9 Asia Construction and Development Corporation v. Construction Industry Arbitration Commission, 218
SCRA 529, February 8, 1993; Sime Darby v. Deputy Administrator, 180 SCRA 177, December 15, 1989.

10 Regalado, Remedial Law Compendium, Vol. 1, 5th revised ed., p. 95; Republic v. Central Surety and
Insurance Co., 25 SCRA 641, October 26, 1968; Eastern Assurance & Surety Corporation v. Cui, 105 SCRA
622, July 20, 1981; Talisay-Silay Milling Co. Inc. and J. Amado Araneta v. CIR and Central Azucarera del
Danao, 18 SCRA 894, November 29, 1966.

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