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ASSOCIATED BANK v. CA

FACTS:

The petitioner filed a third-party complaint against respondent banks due to a dispute involving the alteration of payees' names on checks, which led to the debit of the plaintiffs' account. The defendant bank argued that they exercised due diligence and blamed the plaintiffs' own negligence for their loss. The third-party defendants contended that they were not liable for the loss and that the Philippine Clearing House Rules and Regulations should apply. The trial court dismissed the third-party complaint citing Section 36 of the Clearing House Rules and Regulations, which mandates arbitration for check disputes cleared through the Philippine Clearing House Corporation (PCHC). The trial court ruled that the arbitration provisions should apply since the plaintiffs were not involved in the complaint. The Court of Appeals upheld the trial court's decision.

ISSUES:

  1. Whether or not the trial court has jurisdiction over the third-party complaint filed by the defendant bank against the third-party defendants.

  2. Whether or not the provisions of the Clearing House Rules and Regulations on arbitration are applicable to the third-party complaint.

RULING:

  1. The trial court does not have jurisdiction over the third-party complaint filed by the defendant bank against the third-party defendants.

  2. The provisions of the Clearing House Rules and Regulations on arbitration are applicable to the third-party complaint.

PRINCIPLES:

  • The jurisdiction of a court is determined by the law in force at the time of the commencement of the action. (Jurisdiction)

  • The provisions of the Clearing House Rules and Regulations on arbitration are applicable to disputes or controversies among clearing participants involving checks cleared through the Philippine Clearing House Corporation. (Arbitration)

  • The decision or award of the Philippine Clearing House Corporation 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. (Appeal)