Myline Cordial

Philippine National Bank vs. Court of Appeals, Capitol City Development Bank, Philippine Bank of Communications, and F. Abante Marketing
G.R. No. 107508. April 25, 1996
256 SCRA 491

FACTS: The Ministry of Education and Culture issued a check with serial number 7-3666-223-3, dated August 7, 1981 in the amount of P97,650.00 payable to F. Abante Marketing drawn against Philippine National Bank (PNB). F. Abante Marketing deposited the check in its savings account with Capitol City Development Bank. Then Capitol deposited the same in its account with the Philippine Bank of Communications which, in turn, sent the check to PNB for clearing. PNB cleared the check as good, however, it returned the check because there was material alteration of the check number.

ISSUES:
1. Whether or not an alteration of a serial number of a check is a material alteration.
2. Whether or not PNB is liable for attorney’s fees?

RULING:
1. Alteration of a serial number of a check is not a material alteration. An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in an 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 a party. In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instrument

Check number is not an essential requisite for negotiability under Section 1 of the Negotiable Instrument Law. This alteration did not change the relations between the parties. The name of the drawer and the drawee were not altered. The intended payee was the same. The sum of money due to the payee remained the same. The checks serial number is not the sole indication of its origin. The name of the government agency which issued the subject check was prominently printed therein. The checks issuer was therefore sufficiently identified, rendering the referral to the serial number redundant and inconsequential. Petitioner, thus 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.

2. The Court deleted the award of attorney’s fees as it requires factual, legal and equitable justification. The award of attorneys fees lies within the discretion of the court and depends upon the circumstances of each case. However, the discretion of the court to award attorneys fees under Article 2208 of the Civil Code of the Philippines demands factual, legal and equitable justification, without which the award is a conclusion without a premise and improperly left to speculation and conjecture. It becomes a violation of the proscription against the imposition of a penalty on the right to litigate (Universal Shipping Lines, Inc. v. Intermediate Appellate Court, 188 SCRA 170 [1990]). The reason for the award must be stated in the text of the courts decision. If it is stated only in the dispositive portion of the decision, the same shall be disallowed. As to the award of attorneys fees being an exception rather than the rule, it is necessary for the court to make findings of fact and law that would bring the case within the exception and justify the grant of the award (Refractories Corporation of the Philippines v. Intermediate Appellate Court, 176 SCRA 539).

NOTES:

Effects on the instrument of immaterial alteration  – In his book entitled Pandect of Commercial Law and Jurisprudence, Justice Jose C. Vitug opines that an innocent alteration (generally, changes on items other than those required to be stated under Sec. 1, N. I. L.) and spoliation (alterations done by a stranger) will not avoid the instrument, but the holder may enforce it only according to its original tenor.

Some 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 Natl 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 the 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 indorsees 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 the a surety co-maker.