PNB V.

CA- Material Alteration

256 SCRA 491
FACTS:

DECS issued a check in favor of Abante Marketing containing a specific serial number,
drawn against PNB. The check was deposited by Abante in
its account with Capitol and the latter consequently deposited the same
with its account with PBCOM which later deposited it with petitioner for
clearing. The check was thereafter cleared. However, on a relevant date,
petitioner PNB returned the check on account that there had been a material alteration on
it. Subsequent debits were made but Capitol cannot debit the account of Abante any longer for
the latter had withdrawn all the
money already from the account. This prompted Capitol to seek
reclarification from PBCOM and demanded the recrediting of its account. PBCOM
followed suit by doing the same against PNB. Demands unheeded,
it filed an action against PBCOM and the latter filed a third-party complaint against petitioner.

HELD:

An alteration is said to be material if it alters the effect of the instrument. It means an

unauthorized change in the instrument that purports to modify
in any respect the obligation of a party or an unauthorized addition of words or numbers
or other change to an incomplete instrument relating to
the obligation of the party. In other words, a material alteration is one which changes the
items which are required to be stated under Section 1 of the NIL.

In this case, the alleged material alteration was the alteration of the serial
number of the check in issue—which is not an essential element of a negotiable
instrument under Section 1. PNB alleges that the alteration was
material since it is an accepted concept that a TCAA check by its very
nature is the medium of exchange of governments, instrumentalities and
agencies. As a safety measure, every government office or agency is assigned checks
bearing different serial numbers.

But this contention has to fail. The check’s serial number is not the sole indicia of its
origin. The name of the government agency issuing the check is clearly stated therein. Thus, the
check’s drawer is sufficiently identified, rendering redundant the referral to its serial number.

Therefore, there being no material alteration in the check committed, PNB could not return the
check to PBCOM. It should pay the same.
FACTS:

 January 15, 1962: Augusto Lim deposited in his current account with
the PCIB branch at Padre Faura, Manila a GSIS Check of P57,415.00
drawn against the PNB

o PCIB stamped the following on the back of the check: "All prior
indorsements and/or Lack of Endorsement Guaranteed,
Philippine Commercial and Industrial Bank," Padre Faura Branch,
Manila

 Same date: following an established banking practice in the

Philippines, the check was forwarded for clearing through the Central
Bank to the PNB

o did not return said check the next day, or at any other time, but
retained it and paid its amount to the PCIB, as well as debited it
against the account of the GSIS in the PNB

o PNB received a formal notice from the GSIS that the check had
been lost, with the request that payment thereof be stopped

 January 31, 1962: Upon demand from the GSIS, the P57,415.00 was
re-credited to them bec. the signatures of its officers on the check
were forged

o signatures of the General Manager and the Auditor of the GSIS

on the check, as drawer, are forged
 o payee Mariano D. Pulido indorsed it to Manuel Go and then
indorsed by Manuel Go to Augusto Lim

 February 2, 1962: PNB demanded from the PCIB the refund

 PNB filed against the PCIB

 CA affirmed CFI: dismissed

ISSUE: W/N PCIB as indorser is liable despite the fact that the check is
forged when PNB is also negligent

HELD: NO. Affirmed

 PCIB stamped on the back of the check: "All prior indorsements and/or
Lack of Endorsement Guaranteed, Philippine Commercial and Industrial
Bank," Padre Faura Branch, Manila

o indorsements falsified is immaterial to the PNB's liability as a

drawee, or to its right to recover from the PCIB, for, as against
the drawee, the indorsement of an intermediate bank does not
guarantee the signature of the drawer, since the forgery of the
indorsement is not the cause of the loss.

 Guaranteed not the authenticity of the signatures of the officers of the

GSIS who signed because the GSIS is not an indorser of the check, but
its drawer

 warranty is irrelevant to the PNB's alleged right to recover from the

PCIB
 in general, "acceptance" is not required for checks since they are
payable on demand

o acceptance

 promise to perform an act

 the acceptance of a bill is the signification by the drawee of

his assent to the order of the drawer

o payment

 actual performance

 compliance with obligation

 PNB had been guilty of a greater degree of negligence, because it had

a previous and formal notice from the GSIS that the check had been
lost, with the request that payment thereof be stopped

o PNB's negligence was the main or proximate cause for the

corresponding loss

 PNB did not return the check

  when 1 of 2 innocent persons must suffer by the wrongful act of a
third person, the loss must be borne by the one whose negligence was
the proximate cause of the loss or who put it into the power of the
third person to perpetrate the wrong

 where the collecting (PCIB) and the drawee (PNB) banks are equally at
fault, the court will leave the parties where it finds them

o applies in the case of a drawee who pays a bill without having

previously accepted it

 Section 62 of Act No. 2031 provides

The acceptor by accepting the instrument engages that he will pay it

according to the tenor of hisacceptance; and admits:
(a) The existence of the drawer, the genuineness of his signature, and his
capacity and authority to
draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.