PNB VS CA

Parties:
DECS drawer
PNB drawee bank
Abante Mktg payee

Facts:
*DECS issues a check in favor of Abante Marketing containing a specific serial no., drawn
against PNB
*Abante deposited check in its account with Capitol, which deposited it to PBCOM, which
deposited it to PNB for clearing - CLEARED
*However, PNB returned the check on account there had been a material alteration on it.
*Subsequent debits were made but Capitol cannot debit account of Abante any longer
because it has already withdrawn all its money from the account.
*Capitol demanded from PBCom
*PBCom demanded from PNB

Issue: WON there was a material alteration

Held:
NO. PNB cannot return the check and must pay PBCom

*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 NIL.

*In this case, the alleged material alteration was the alteration of the serial number of the
check which is not an essential element of a negotiable instrument under Sec 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 govt office or agency is assigned checks bearing
different serial numbers.

*But this has not merit. The checks SN is not the sole indication of its origin. The nae of
the govt agency is clearly stated. Thus, the drawer is sufficiently identified.


INTERNATIONAL CORP BANK VS CA
Parties:
Ministry of Educ & Culture drawer
PNB drawee bank
ICB collecting/accepting bank

Doctrine:
Since there were no material alterations on the checks, respondent as drawee bank has no
right to dishonor them and return them to petitioner, the collecting bank

Facts:
The Ministry of Education and Culture issued 15 checks5 drawn against respondent
which petitioner accepted for deposit
After 24 hours from submission of the checks to respondent for clearing, petitioner paid
the value of the checks and allowed the withdrawals of the deposits. However, on 14
October 1981, respondent returned all the checks to petitioner without clearing them
on the ground that they were materially altered. Thus, petitioner instituted an action for
collection of sums of money against respondent to recover the value of the checks.
RTC ruled in favor of PNB
CA reversed ruling and held PNB liable

Issue:
1. WON there was a material alteration?
2. WON PNB is liable?

Held:
1. NO. The alterations in the checks were made on their serial numbers. The alteration on
the serial number of a check is not a material alteration.
2. YES. The Court will not rule on the proper application of Central Bank Circular No. 580 in
this case. Since there were no material alterations on the checks, respondent as drawee
bank has no right to dishonor them and return them to petitioner, the collecting bank.
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Thus, respondent PNB is liable to petitioner for the value of the checks.


AMERICAN BANK VS MACONDRAY
Parties:
VS Wolff drawer
FH Taylor drawee
Macondray indorser; guaranteed genuineness of Wolffs signature
American Bank - holder


Doctrine:
The liability of an indorser of a bill of exchange, after due protest and notice of
nonpayment and dishonor, is the same as that of the original obligors on such a contract,
and any material alteration in the terms of this contract by the holder of the same, without
the consent of the obligor, will relieve such obligor from all liability thereon.

Facts:
*V.S. Wolff drew bill of exchange against FH Taylor & Co. payable to himself (Wolff)
*Macrondray certified that the signature of V.S. Wolff was genuine
*Bill was indorsed to American Bank (US) and later on was protested because FH Taylor &
Co could not be found nor its representative after diligent search
*American Bank then claims right to recover from Macondray upon theory that they
guaranteed payment of said bill
*Macondray DENIES the part of the statement which appears in his alleged indorsement
Payment guaranteed. Protest, demand, and notice of nonpayment waived
*Lower court ruled in favor of American Bank. Macondray is liable.

Issue:
WON Macondray is liable as indorser

Held:
NO, Macondray is not liable. LC reversed.
The liability of an indorser of a bill of exchange, after due protest and notice of
nonpayment and dishonor, is the same as that of the original obligors on such a contract,
and any material alteration in the terms of this contract by the holder of the same, without
the consent of the obligor, will relieve such obligor from all liability thereon.
Notwithstanding that the defendant is relieved from liability by reason of this material
alteration in his indorsement, his original indorsement created no liability whatsoever. The
original indorsement was for the purpose only of assuring the plaintiff that the SIGNATURE
of V.S. Wolff was GENUINE the person he represented himself to be. It was an
indorsement of identification of the person only and not for the purpose of incurring any
liability as to the payment of such bill of exchange. There was no attempt to show that the
drawer of said bill was not the person who actually drew and signed the bill.


MONTINOLA VS PNB
Parties:
Laya drawee/drawer of second check
Ramos payee 500,000
PNB drawee bank

Doctrine:
The addition of the words Agent, PNB was made after the check had been transferred by
Ramos to Montinola. The alteration 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.

Facts:
*Ramos, disbursing officer of USAFE, made cash advancements with the Provincial Treas of
Lanao (Lanao)
*Lanao gave Ramos P500,000 check
*Ramos encashed with Laya. Laya paid through the ff:
(1) Laya, Prov Treas of Misamis Oriental, issued check of P100,000 as drawer,
PNB as drawee bank
(2) P400,000 military notes
*Ramos sold P100,000 check to Montinola
***Ramos sold P3000 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 P30,000 of the value of the documents
with an instruction to the bank to pay P30,000 to Montinola and to deposit the balance to
Ramos 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 the check to Montinola, the check was
long overdue by 2 & 1//2 years.
*Montinola instituted an action against PNB and Laya to collect P100,000, amount of
check.
* On the check appears words Agent, PNB under the signature of Laya, showing that
check was issued by Laya as agent of PNB

Issue:
WON words Agent, PNB constituted material alteration

Held:
Yes. Material alteration and therefore discharges the instrument.
*The words Agent, PNB now appearing on the face of the check were added or placed in
the instrument after it was issued by Laya to Ramos. The check was issued by only the Prov
Treas and as an official of the govt, which was under obligation to proved the USAFE with
advance funds, and not as agent of the bank, which had no such obligation. The addition of
the words Agent, PNB was made after the check had been transferred by Ramos to
Montinola. The alteration 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.


STATE INVESTMENT HOUSE VS COURT OF APPEALS AND MOULIC
Parties:
Nora Moulic drawer
Victoriano payee/indorser
State Investment - holder

Facts:
Corazon Victoriano provided pieces of jewelry to Nora Moulic so that the latter may sell the
same. As security for the jewelries, Moulic issued to Victoriano two post dated checks in
the aggregate amount of P100,000.00. Moulic was not able to sell the jewelries so she
returned the same to Victoriano. Victoriano was however unable to return the checks
hence Moulic withdrew all her funds from the bank.
Apparently, the checks were negotiated by Victoriano to State Investment House. So when
the checks were dishonored, State Investment demanded Moulic to pay. Moulic refused to
pay because she said the checks were merely used as security for the jewelry. Moulic
further averred that she received no notice of dishonor.

Issue: Whether or not State Investment House is entitled to be paid.

Held: Yes. State Investment is a holder in due course as it met all the requirements to be
one pursuant to Section 52 of the Negotiable Instruments Law. In particular, it is clearly
shown that: (a) on their faces the post-dated checks were complete and regular: (b) State
Investment bought these checks from Victoriano, before their due dates;

(c) State
Investment took these checks in good faith and for value, (d) State Investment was never
informed nor made aware that these checks were merely issued to Victoriano as security
and not for value.
Further, there is no need to issue a notice of dishonor to Moulic. After Moulic withdrew her
funds, she could not have expected her checks to be honored. It would only be futile for
State Investment to be sending her notices of dishonor for the two checks.


BANK OF AMERICA VS PHIL RACING CLUB
Parties:
PRCI drawer
Philippine Racing Club drawee
Bank of America collecting bank

Doctrine:

Facts:
PRCI is a domestic corporation which maintains several accounts with different banks in
Metro Manila. Among the accounts maintained was with defendant-appellant BA.
The authorized joint signatories with respect to said Current Account were plaintiff-
appellees President (Antonia Reyes) and Vice President for Finance (Gregorio Reyes).
On or about the 2ndweek of December 1988, the President and Vice President of
plaintiff-appellee corporation were scheduled to go out of the country. In order not to
disrupt operations in their absence, they pre-signed several checks.
These checks were entrusted to the accountant with instruction to make use of the
same as the need arose. The internal arrangement was, in the event there was need to
make use of the checks, the accountant would prepare the corresponding voucher and
thereafter complete the entries on the pre-signed checks.
It turned out that on December 16, 1988, a John Doe presented to BA for encashment a
couple of corporations checks with the indicated value of P110,000.00 each. The 2
checks had similar entries with similar infirmities and irregularities. On the space where
the name of the payee should be indicated (Pay To The Order Of) the following 2-line
entries were instead type written: on the upper line was the word "CASH" while the
lower line had the following typewritten words, viz: "ONE HUNDRED TEN THOUSAND
PESOS ONLY."
Despite the highly irregular entries on the face of the checks, BA encashed said checks.
The checks appeared to have come into the hands of an employee of PRCI (one Clarita
Mesina who was subsequently criminally charged for qualified theft) who eventually
completed without authority the entries on the pre-signed checks. PRCIs demand for
defendant-appellant to pay fell on deaf ears hence the complaint.
RTC ruled in favor of PRCI
CA affirmed RTCs decision in toto

Issues:
1.WON the CA gravely erred in holding that petitioner was liable for the amount of the
checks despite the fact that petitioner was merely fulfilling its obligation under law and
contract.
2.WON the proximate cause of the wrongful encashment of the checks in question was due
to (a) petitioners failure to make a verification regarding the said checks with the
respondent in view of the misplacement of entries on the face of the checks or (b) the
practice of the respondent of pre-signing blank checks and leaving the same with its
employees.

Held:
1. No, the Court of Appeals was correct in holding petitioner bank liable for theamount
of the checks.
There is no dispute that the signatures appearing on the subject checks were
genuinesignatures of the respondents authorized joint signatories. It is likewise admitted
that neitherof the subject checks contains any material alteration or erasure. However, on
the blank spaceof each check reserved for the payee, the following typewritten words
appear: "ONE HUNDRED TEN THOUSAND PESOS ONLY." Above the same is the typewritten
word, "CASH." On the blankreserved for the amount, the same amount of One Hundred
Ten Thousand Pesos was indicatedwith the use of a check writer. The presence of these
irregularities in each check should havealerted the petitioner to be cautious before
proceeding to encash them which it did not do.
It is well-settled that banks are engaged in a business impressed with public interest,
andit is their duty to protect in return their many clients and depositors who
transactbusiness with them. They have the obligation to treat their clients account
meticulously


Issue:

Held: