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RepublicofthePhilippines
SUPREMECOURT
Manila

FIRSTDIVISION

G.R.No.107918June14,1994

ASSOCIATEDBANK,petitioner,
vs.
HON.COURTOFAPPEALS,HON.MARINAL.BUZON,asPresidingJudgeofRTC,QuezonCity,MM,Br.
91,VISITACIONSERRAFLORESRTC,QuezonCity,MM,Br.91,MA.ASUNCIONFLORES,PHILIPPINE
COMMERCIALINTERNATIONALBANK,FAREASTBANK&TRUSTCO.,SECURITYBANK&TRUSTCO.
andCITYTRUSTBANKINGCORPORATION,respondents.

Soluta,Leonidas,Marifosque,Balce,Santiago&AguilaLawOfficeforpetitioner.

RectorLawOfficeforrespondentFlores.

BalgosandPerezLawOfficeforrespondentPCIB.

Dumaraos,Oracion,Panganiban&AssociatesforrespondentFEBTC.

Cauton,Banares,Carpio,IshiwataandAssociatesforrespondentSBTC.

Gonzaga,SonejaandGaleLawOfficesforrespondentCitytrust.

KAPUNAN,J.:

ThisisapetitionforreviewoncertiorariseekingthereversalofthedecisionoftheCourtofAppealsonNovember
18, 1992 affirming in toto the Order of the Regional Trial Court of Quezon City, Branch 91 dismissing the
petitionersthirdpartycomplaintagainstprivaterespondentbanksforlackofjurisdiction.

Thefactsofthecase,asfoundbyboththetrialcourtandtheCourtofAppealsareundisputed:

In a complaint for Violation of the Negotiable Instrument Law and Damages, plaintiffs 1 seek the
recoveryoftheamountofP900,913.60whichdefendantbank2chargedagainsttheircurrentaccountbyvirtue
ofthesixteen(16)checksdrawnbythemdespitetheapparentalterationsthereinwithrespecttothenameof
thepayee,thatis,thenameFilipinasShellwaserasedandsubstitutedwithEverTradingandDBLTradingby
theirsupervisorJeremiasCabrera,withouttheirknowledgeandconsent.

Answering the complaint, defendant bank claimed that the subject checks appeared to have been
regularlyissuedandfreefromanyirregularitywhichwouldexciteorarouseanysuspicionorwarrant
theirdishonorwhenthesamewerenegotiatedandhonoredbyitthatitobservedandexercisedthe
requireddiligence,careandtheprescribedstandardverificationproceduresbeforefinallyaccepting
andhonoringthesubjectchecksandthattheproximatecauseofplaintiffsloss,ifany,wastheirown
laxity,negligenceandlackofcontrol,duecareanddiligenceintheconductoftheirbusinessaffairs.

With leave of court, defendant bank filed a ThirdParty Complaint against Philippine Commercial
InternationalBank,FarEastBank&TrustCompany,SecurityBankandTrustCompanyandCitytrust
BankingCorporationforreimbursement,contribution,indemnityfromsaidthirdpartydefendantsfor
beingthecollectingbanksofthesubjectchecksandbyvirtueoftheirbankguaranteeforallchecks
sentforclearingtothePhilippineClearingHouseCorporation(PCHC),asprovidedforinSection17,
(PCHC),asprovidedforinSection17,PCHCClearingHouseRulesandRegulations.
 In its Answer to the ThirdParty Complaint, Citytrust Banking Corporation averred that the subject
checksappearedtobecompleteandregularontheirfacewithnoindicationthatanoriginalpayees
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 thirdparty, 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 base on the provisions of
Sections20and21ofthePhilippineClearingRulesandRegulations.

PhilippineCommercialInternationalBankallegedthatthesubjectcheckwascompleteandregularon
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
saidcheckwasclearedbythirdpartyplaintiffforpaymentthatitallowedthepayeetowithdrawthe
proceedsofthecheckfromitsaccountthatthecauseofactionofthethirdpartyplaintiffisbarredby
estoppel and/or laches for its failure to return the check to it within the period provided for under
ClearingHouseRulesandRegulationsthatthisCourthasnojurisdictionoverthesuitasitandthird
partyplaintiffaremembersofthePhilippineClearingHouseandboundbytheRulesandRegulations
thereofprovidingforarbitration.

AMotionToDismisswasfiledbySecurityBankandTrustCompanyonthegroundsthatthirdparty
plaintifffailedtoresorttoarbitrationasprovidedforinSection36oftheClearingHouseRulesand
RegulationsofthePhilippineClearingHouseCorporation,andthatitwasreleasedfromanyliability
withtheacceptancebythirdpartyplaintiffofthesubjectcheck.

TherecorddoesnotshowofanyAnswertotheThirdPartyComplainthavingbeenfiledbyFarEast
Bank&TrustCompany,althougha"ReplyToFEBTCAnswer"wasfiledbythirdpartyplaintiff.

On the other hand, thirdparty 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 thirdparty
complaintbetweenparticipatingmemberbanksisonlyaconsequenceoftheoriginalactioninitiated
bytheplaintiffs.3

ThetrialcourtdismissedthethirdpartycomplaintforlackofjurisdictioncitingSection36oftheClearingHouse
RulesandRegulationsofthePCHCprovidingforsettlementofdisputesandcontroversiesinvolvinganycheckor
item cleared through the body with the PCHC. It ruled citing the Arbitration Rules of Procedure that the
decisionorawardofthePCHCthroughitsarbitrationcommittee/arbitratorisappealableonlyonquestionsoflaw
toanyoftheRegionalTrialCourtsintheNationalCapitalRegionwheretheheadofficeofanyofthepartiesis
located.4

Ontheplaintiffscontentionthatjurisdictionvestswiththecourtonlyifthesuitoractionisbetweenparticipating
memberbankswithouttheinvolvementofprivatepartiesthetrialcourtheld:

Thethirdpartycomplaintconcerningadisputeorcontroversyamongclearingparticipantsinvolving
thesubjectchecksclearedthroughPCHCisactuallyindependentof,separateanddistinctfromthe
plaintiffscomplaint....

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Astheplaintiffsarenotpartiestothethirdpartycomplaint,theprovisionsoftheclearinghouserules
and regulations on arbitration are, therefore, applicable to ThirdParty plaintiff and third party
defendant.Consequentlythiscourthasnojurisdictionoverthethirdpartycomplaint.5

AfterthetrialcourtdeniedplaintiffsMotionforReconsideration, 6 petitioner appealed to the Court of Appeals which

promulgatedthechallengeddecisiononNovember18,1992dismissingthepetitionforlackofmerit.

Undaunted, petitioner is now before this Court seeking a review of respondent courts decision on a lone
assignmentoferror:

RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER DRAWEE BANKS

THIRDPARTYCOMPLAINTAGAINSTPRIVATERESPONDENTCOLLECTINGBANKSFALLWITHIN
THEJURISDICTIONOFTHEPCHCANDNOTTHEREGULARCOURT.

Wefindnomeritinthepetition.

TheClearingHouseRulesandRegulationsonArbitrationofthePhilippineClearingHouseCorporationareclearly
applicable to petitioner and private respondents, third party plaintiff and defendants, respectively, in the court
below.PetitionerAssociatedBanksthirdpartycomplaintinthetrialcourtwasoneforreimbursement,contribution
and indemnity against the Philippine Commercial and Industrial Bank (PCIB), the Far East Bank and Trust, Co.
(FEBTC),SecurityBankandTrustCo.(SBTC),andtheCityTrustBankingCorporation(CTBC),inconnectionwith
petitionershavinghonoredsixteencheckswhichsaidrespondentbankssupposedlyendorsedtotheformerfor
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
Regulationswithoutfirstgoingthroughthearbitrationprocesseslaidoutbythebody.Sinceclaimsrelatingtotheregularity
of checks cleared by banking institutions are among those claims which should first be submitted for resolution by the
PCHCs Arbitration Committee, petitioner Associated Bank, having voluntarily bound itself to abide by such rules and
regulations,isestoppedfromseekingrelieffromtheRegionalTrialCourtonthecoattailsofaprivateclaimandintheguise
ofathirdpartycomplaintwithoutfirsthavingobtainedadecisionadversetoitsclaimfromthesaidbody.Itcannotbypass
the arbitration process on the basis of its averment that its third party complaint is inextricably linked to the original
complaintintheRegionalTrialCourt.

UnderitsArticlesofIncorporation,thePCHCprovides"aneffective,convenient,efficient,economicalandrelevant
exchangeandfacilitateservicelimitedtocheckprocessingandsortingbywayofassistingmemberbanks,entities
in clearing checks and other clearing items as defined and existing in future Central Bank of the Philippines
Circulars,memoranda,circularlettersrulesandregulationsandpoliciesinpursuanceofSection107ofRA265."
Pursuanttoitsfunctioninvolvingtheclearingofchecksandotherclearingitems,thePCHChasadoptedrulesand
regulations designed to provide member banks with a procedure whereby disputes involving the clearance of
checksandothernegotiableinstrumentsundergoaprocessofarbitrationpriortosubmissiontothecourtsbelow.
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
memberbankswhichwouldotherwisegodirectlytothetrialcourts.WhilethePCHCRulesandRegulationsallow
appealtotheRegionalTrialCourtsonlyonquestionsoflaw,thisdoesnotprecludeourlowercourtsfromdealing
withquestionsoffactalreadydecidedbythePCHCarbitrationwhenwarrantedandappropriate.

InBancodeOroSavingsandMortgageBanksvs.EquitableBankingCorporation 8 this Court had the occasion to

ruleonthevalidityoftheserulesaswellasthejurisdictionofthePCHCasaforumforresolvingdisputesandcontroversies
involvingchecksandotherclearingitemswhenitheldthat"theparticipationoftwobanks...intheClearingOperationsof
thePCHC(was)amanifestationofitssubmissiontoitsjurisdiction."9

TheapplicablePCHCprovisionsonthequestionofjurisdictionprovide:

Sec.3AGREEMENTTOTHESERULES

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,anditssubsequentamendments.

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Sec.36ARBITRATION

36.1Anydisputeorcontroversybetweentwoormoreclearingparticipantsinvolvinganycheck/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,whoshallwithinfifteen(15)daysafterreceiptthereof,filewiththeArbitrationCommitteeits
writtenanswertosuchwrittencomplaintandalsowithinthesameperiodservethesameuponthe
complainingparticipant.Thisperiodoffifteen(15)daysmaybeextendedbytheCommitteenotmore
thanonceforanotherperiodoffifteen(15)days,butuponagreementinwritingofthecomplaining
party,saidextensionmaybeforsuchperiodasthelattermayagreeto.

Section36.6isevenmoreemphatic:

36.6ThefactthatabankparticipatesintheclearingoperationsofPCHCshallbedeemeditswritten
and subscribed consent to the binding effect of this arbitration agreement as if it had done so in
accordancewithSection4oftheRepublicActNo.876otherwiseknownastheArbitrationLaw.

Thus,notonlydothepartiesmanifestbymereparticipationtheirconsenttotheserules,butsuchparticipationis
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
partiesislocatedonlyafteradecisionorawardhasbeenrenderedbythearbitrationcommitteeorarbitratoron
questionsoflaw.10
Clearlytherefore,petitionerAssociatedBank,byitsvoluntaryparticipationanditsconsenttothearbitrationrules
cannot go directly to the Regional Trial Court when it finds it convenient to do so. The jurisdiction of the PCHC
undertherulesandregulationsisclear,undeniableandisparticularlyapplicabletoallthepartiesinthethirdparty
complaintundertheirobligationtofirstseekredressoftheirdisputesandgrievanceswiththePCHCbeforegoing
tothetrialcourt.

Finally,thecontentionthatthethirdpartycomplaintshouldnothavebeendismissedforbeinganecessaryand
inseparable offshoot of the main case over which the courtaquo had already exercised jurisdiction misses the
fundamental point about such pleading. A third party complaint is a mere procedural device which under the
RulesofCourtisallowedonlywiththecourtspermission.Itisanaction"actuallyindependentof,separateand
distinctfromtheplaintiffscomplaint"(s)uchthat,wereitnotfortheRulesofCourt,itwouldbenecessarytofile
theactionseparatelyfromtheoriginalcomplaintbythedefendantagainstthethirdparty.11

INVIEWOFTHEFOREGOING,thepetitionisDENIEDforlackofmerit.Withcostsagainstpetitioner.

SOORDERED.

Cruz,Davide,Jr.andBellosillo,JJ.,concur.

Quiazon,J.,tooknopart.

#Footnotes

1HereinprivaterespondentsVisitacionSerraFloresandMa.AsuncionFlores.

2AssociatedBank.

3Rollo,pp.2830.

4CARollo,pp.6668.

5Ibid.,p.76.

6Ibid.,Ibid.

7PCHCRulesandRegulations,Sec.3(hereinaftercitedasRules).

8157SCRA188(1988).

9Ibid.,p.196.

10Rules,Sec.13.

11AlliedBankingCorporationvs.CourtofAppeals,178SCRA526(1989).

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