ENRIQUE P.

MONTINOLA, plaintiff-appellant,
vs.
THE PHILIPPINE NATIONAL BANK, ET AL.,

FACTS:
Agent M. V. Ramos, as a disbursing officer of an army division of the USAFE, made
cash advancements w/ the Provincial Treasurer of Lanao. In exchange, the
Prov’l Treasurer of Lanao gave him a P500,000 check. Thereafter, Ramos
presented the check to Ubaldo Laya for encashment. Laya in his capacity as
Provincial Treasurer of Misamis Oriental as drawer, issued a check to Ramos in
the sum of P100000, on the Philippines National Bank as drawee; the P400000 value
of the check was paid in military notes.

Ramos was unable to encash the said check for he was captured by the
Japanese. But after his release, he sold P30000 of the check to Montinola for P90000
Japanese Military notes, of which only P45000 was paid by the
latter. The writing made by Ramos at the back of the check was to the effect
that he was assigning only P30000 of the value of the document with an instruction to
the bank to pay P30000 to Montinola and to deposit the
balance to Ramos's credit. This writing was, however, mysteriously obliterated
and in its place, a supposed indorsement appearing on the back of the check was made
for the whole amount of the check. At the time of
the transfer of this check to Montinola, the check was long overdue by about
2-1/2 years.

Montinola instituted an action against the PNB and the Provincial Treasurer
of Misamis Oriental to collect the sum of P100,000, the amount of the
aforesaid check. There now appears on the face of said check the words in
parenthesis "Agent, Phil. National Bank" under the signature of Laya
purportedly showing that Laya issued the check as agent of the Philippine National
Bank.
Issue: WON the insertion of the words
"Agent, Phil. National Bank" under the signature of Laya constitute material
alteration?
HELD:
The words "Agent, Phil. National Bank" now appearing on the face of the
check were added or placed in the instrument after it was issued by the
Provincial Treasurer Laya to Ramos. The check was issued by only as
Provincial Treasurer and as an official of the Government, which was under
obligation to provide the USAFE with advance funds, and not as agent of the
bank, which had no such obligation. The addition of those words was
made after the check had been transferred by Ramos to Montinola. The
insertion of the words "Agent, Phil. National Bank," which converts the bank
from a mere drawee to a drawer and therefore changes its liability,
constitutes a material alteration of the instrument without the consent of the
parties liable thereon, and so discharges the instrument.