G.R. No. 107508 April 25, 1996
Lessons Applicable: Alteration (Negotiable Instruments Law)
FACTS:
- check dated August 7, 1981 in the amount of P97,650.00 was issued by the Ministry of Education and Culture (now Department of Education, Culture and Sports [DECS]) payable to F. Abante Marketing.
- drawn against Philippine National Bank (PNB)
- August 11, 1981: F. Abante Marketing deposited the check in its savings account with Capitol City Development Bank (Capitol).
- Capitol deposited the it with the Philippine Bank of Communications (PBCom) which sent it for clearing
- PNB cleared the check as good
- PBCom credited Capitol's account for the amount stated in the check.
- October 19, 1981: PNB returned the check to PBCom and debited PBCom's account for the amount covered by the check, the reason being that there was a "material alteration" of the check number.
- PBCom then debited Capitol's
- Capitol could not debit F. Abante Marketing's account since it had already withdrawn
- Capitol filed a civil suit with the filed a third-party complaint against PNB for reimbursement/indemnity who in turn filed a fourth-party complaint against F. Abante Marketing.
- RTC: PBCom to recredit Capitol
- CA: modified by exempting PBCom from liability, PNB re-credit PBCom who will re-credit Capital
ISSUE: W/N an altered serial number is considered a material alteration
HELD: NO. CA Affirmed.
Sec. 225. What constitutes a material alteration. Any alteration which changes:
(a) The date;
(b) The sum payable, either for principal or interest;
(c) The time or place of payment;
(d) The number or the relations of the parties;
(e) The medium or currency in which payment is to be made;
(f) Or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration.
- alteration is said to be material if it alters the effect of the instrument
- one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law
Sec. 1. — Form of negotiable instruments. An instrument to be negotiable must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
- examples of material and immaterial alterations:
A. Material Alterations:
(1) Substituting the words "or bearer" for "order."
(2) Writing "protest waived" above blank indorsements.
(3) A change in the date from which interest is to run.
(4) A check was originally drawn as follows: "Iron County Bank, Crystal Falls, Mich. Aug. 5, 1901. Pay to G.L. or order $9 fifty cents CTR" The insertion of the figure 5 before the figure 9, the instrument being otherwise unchanged.
(5) Adding the words "with interest" with or without a fixed rate.
(6) An alteration in the maturity of a note, whether the time for payment is thereby curtailed or extended.
(7) An instrument was payable "First Nat'l Bank" the plaintiff added the word "Marion."
(8) Plaintiff, without consent of the defendant, struck out the name of the defendant as payee and inserted the name of the maker of the original note.
(9) Striking out the name of the payee and substituting that of the person who actually discounted the note.
(10) Substituting the address of the maker for the name of a co-maker.
B. Immaterial Alterations:
(1) Changing "I promise to pay" to "We promise to pay", where there are two makers.
(2) Adding the word "annual" after the interest clause.
(3) Adding the date of maturity as a marginal notation.
(4) Filling in the date of actual delivery where the makers of a note gave it with the date in blank, "July ____."
(5) An alteration of the marginal figures of a note where the sum stated in words in the body remained unchanged.
(6) The insertion of the legal rate of interest where the note had a provision for "interest at _______ per cent."
(7) A printed form of promissory note had on the margin the printed words, "Extended to ________." The holder on or after maturity wrote in the blank space the words "May 1, 1913," as a reference memorandum of a promise made by him to the principal maker at the time the words were written to extend the time of payment.
(8) Where there was a blank for the place of payment, filling in the blank with the place desired.
(9) Adding to an indorsee's name the abbreviation "Cash" when it had been agreed that the draft should be discounted by the trust company of which the indorsee was cashier.
(10) The indorsement of a note by a stranger after its delivery to the payee at the time the note was negotiated to the plaintiff.
(11) An extension of time given by the holder of a note to the principal maker, without the consent of a surety co-maker.
- If the purpose of the serial number is merely to identify the issuing government office or agency, its alteration in this case had no material effect whatsoever on the integrity of the check. The identity of the issuing government office or agency was not changed thereby and the amount of the check was not charged against the account of another government office or agency which had no liability under the check.
- PNB cannot refuse to accept the check in question on the ground that the serial number was altered, the same being an immaterial or innocent one.