Sec. 124. Alteration of instrument; effect of. - Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has
himself made, authorized, or assented to the alteration and subsequent indorsers. But when an instrument has been materially altered and is in the hands of a holder in due course not a party to the alteration, he may enforce payment thereof according to its original tenor.
RIGHTS OF ONE NOT HOLDER IN DUE COURSE
• Where an instrument has been materially altered, it is avoided in the hands of one who is not a holder in due course as against a prior party who has not assented to the alteration
WHERE INSTRUMENT NOT AVOIDED AS TO HOLDER NOT IN DUE COURSE
1. A party who has made the material alteration
2. A party who has authorized the material alteration
3. A party who has assented to the material alteration
4. Any subsequent indorsers
RIGHTS OF HOLDER IN DUE COURSE
• He may enforce the instrument in its original tenor
• He could recover the altered tenor to any party who has made, authorized or assented the alteration, or any subsequent indorser of the instrument
NO DISTINCTION BETWEEN FRAUDULENT AND INNOCENT ALTERATION
RIGHT TO COLLECT ORIGINAL CONSIDERATION
• When the alteration wasn't fraudulently done, the holder may recover the original consideration
WHERE DRAWEE BANK PAYS ALTERED AMOUNT, DRAWER HAS THE RIGHT TO HAVE HIS ACCOUNT DEBITED WITH CORRECT AMOUNT ONLY
BANKS ARE BOUND BY THE 24-HOUR CLEARING HOUSE RULE AND MUST NOTIFY THE COLLECTING BANKS WITHIN 24 HOURS OF ALTERATION OF CHECKS
