INSULAR SAVINGS BANK v. FAR EAST BANK and TRUST COMPANY

INSULAR SAVINGS BANK v. FAR EAST BANK AND TRUST COMPANY

G.R No. 141818; June 22, 2006

Ponente: J. Ynares-Santiago

FACTS:

 On December 11, 1991, Far East Bank and Trust Company (Respondent) filed a complaint against Home Bankers Trust and Company (HBTC) with the Philippine Clearing House Corporation’s (PCHC) Arbitration Committee.

 Respondent sought to recover from the petitioner, the sum of P25,200,000.00 representing the total amount of the three checks drawn and debited against its clearing account.  HBTC sent these checks to respondent for clearing by operation of the PCHC clearing system.  Thereafter, respondent dishonored the checks for insufficiency of funds and returned the checks to HBTC.  However, the latter refused to accept them since the checks were returned by respondent after the reglementary regional clearing period.

Meanwhile, on January 17, 1992, before the termination of the arbitration proceedings, respondent filed another complaint but this time with the Regional Trial Court (RTC) in Makati City for Sum of Money and Damages with Preliminary Attachment.  

The complaint was filed not only against HBTC but also against Robert Young, Eugene Arriesgado and Victor Tancuan (collectively known as Defendants), who were the president and depositors of HBTC respectively. Aware of the arbitration proceedings between respondent and petitioner, the RTC, in an Omnibus Order suspended the proceedings in the case against all the defendants pending the decision of the Arbitration Committee

           

On February 2, 1998, the PCHC Arbitration Committee rendered its decision in favor of respondent. The motion for reconsideration filed by petitioner was denied by the Arbitration Committee. 

Consequently, to appeal the decision of the Arbitration Committee, petitioner filed a petition for review in the earlier case filed by respondent in Branch 135 of the RTC of Makati. 

In an order dated January 20, 1999, the RTC directed both petitioner and respondent to file their respective memoranda, after which, said petition would be deemed submitted for resolution.

Both parties filed several pleadings.  On February 8, 1999, respondent filed a Motion to Dismiss Petition for Review for Lack of Jurisdiction, which was opposed by the petitioner.   

On November 9, 1999, the RTC dismissed the petition for review.

The RTC denied petitioner’s motion for reconsideration, hence, this petition.

ISSUE:

Whether the Regional Trial Court erred in dismissing the Petition of Petitioner for lack of jurisdiction on the ground that it should have been docketed as a separate case.

HELD:

No, As provided in the PCHC Rules, the findings of facts of the decision or award rendered by the Arbitration Committee shall be final and conclusive upon all the parties in said arbitration dispute.  Under Article 2044 of the New Civil Code, the validity of any stipulation on the finality of the arbitrators’ award or decision is recognized. However, where the conditions described in Articles 2038, 2039 and 2040 applicable to both compromises and arbitrations are obtaining, the arbitrators’ award may be annulled or rescinded.  Consequently, the decision of the Arbitration Committee is subject to judicial review.

Furthermore, petitioner had several judicial remedies available at its disposal after the Arbitration Committee denied its Motion for Reconsideration.  

It may petition the proper RTC to issue an order vacating the award 

• Invoking the grounds provided for under Section 24 of the Arbitration Law;  

• Filing a petition for review under Rule 43 of the Rules of Court with the Court of Appeals  on questions of fact, of law, or mixed questions of fact and law; and   Lastly, 

• Petitioner may file a petition for certiorari under Rule 65 of the Rules of Court on the  ground that the Arbitrator Committee acted without or in excess of its jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.  

Since this case involves acts or omissions of a quasi-judicial agency, the petition should be filed in and cognizable only by the Court of Appeals.

In this instance, petitioner did not avail of any of the abovementioned remedies available to it.  Instead it filed a petition for review with the RTC where Civil Case No. 92-145 is pending pursuant to Section 13 of the PCHC Rules to sustain its action.  Clearly, it erred in the procedure it chose for judicial review of the arbitral award.

Jurisdiction over the subject matter is conferred by law and not by the consent or acquiescence of any or all of the parties or by erroneous belief of the court that it exists. 

In the instant case, petitioner and respondent have agreed that the PCHC Rules would govern in case of controversy.  However, since the PCHC Rules came about only as a result of an agreement between and among member banks of PCHC and not by law, it cannot confer jurisdiction to the RTC.  Thus, the portion of the PCHC Rules granting jurisdiction to the RTC to review arbitral awards, only on questions of law, cannot be given effect. 

Consequently, the proper recourse of petitioner from the denial of its motion for reconsideration by the Arbitration Committee is to file either a motion to vacate the arbitral award with the RTC, a petition for review with the Court of Appeals under Rule 43 of the 

Rules of Court, or a petition for certiorari under Rule 65 of the Rules of Court.

Alternative dispute resolution methods or ADRs – like arbitration, mediation, negotiation and conciliation – are encouraged by the Supreme Court.  By enabling parties to resolve their disputes amicably, they provide solutions that are less time-consuming, less tedious, less confrontational, and more productive of goodwill and lasting relationships. It must be borne in mind that arbitration proceedings are mainly governed by the Arbitration Law and suppletorily by the Rules of Court