PNB V. CA- Material Alteration

256 SCRA 491


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  Subsequent debits were made but Capitol cannot debit the account of Abante any longer for the latter had withdrawn all the money  already  from  the  account.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.  


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.