INSULAR SAVINGS BANK v.

FAR EAST BANK AND TRUST COMPANY

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.

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