532 Phil. 479
|7-3694621-4||7-20-81||Trade Factors, Inc. P||97,500.00|
|7-3694609-6||7-27-81||Romero D. Palmares||98,500.50|
|7-3666224-4||8-03-81||Trade Factors, Inc.||99,800.00|
|7-3528348-4||8-07-81||Trade Factors, Inc.||98,600.00|
|7-4535674-1||8-21-81||Golden City Trading||95,300.00|
|7-4535675-2||8-21-81||Red Arrow Trading||96,400.00|
|7-4697902-2||9-18-81||Ace Enterprises, Inc.||96,000.00|
|7-4697925-6||9-18-81||Golden City Trading||93,030.00|
|7-4697909-4||10-02-81||ABC Trading, Inc.||99,300.00|
|Check Number||Date Deposited||Account Deposited|
|7-3694621-4||7-23-81||CA 0060 02360 3|
|7-3694609-6||7-28-81||CA 0060 02360 3|
|7-3666224-4||8-4-81||CA 0060 02360 3|
|7-3528348-4||8-11-81||CA 0060 02360 3|
|7-3666225-5||8-11-81||SA 0061 32331 7|
|7-3688945-6||8-17-81||CA 0060 30982 5|
|7-4535674-1||8-26-81||CA 0060 02360 3|
|7-4535675-2||8-27-81||CA 0060 02360 3|
|7-4535699-5||8-31-81||CA 0060 30982 5|
|7-4535700-6||8-24-81||SA 0061 32331 7|
|7-4697902-2||9-23-81||CA 0060 02360 3|
|7-4697925-6||9-23-81||CA 0060 30982 5|
|7-4697011-6||10-7-81||CA 0060 02360 3|
|7-4697909-4||10-7-81||CA 0060 30982 5|
The dispositive portion of the trial court's Decision reads:Petitioner appealed the trial court's Decision before the Court of Appeals.
WHEREFORE, judgment is hereby rendered dismissing both the complaint and the counterclaim. Costs shall, however be assessed against the plaintiff.
Does this mean that, as long as the drawee bank returns a check with material alteration within 24 hour[s] after discovery of such alteration, such return would have the effect of relieving the bank of any liability whatsoever despite its failure to return the check within the 24- hour clearing house rule?The Court of Appeals rejected the trial court's opinion that petitioner could have verified the status of the checks by telephone call since such imposition is not required under Central Bank rules. The dispositive portion of the 10 October 1991 Decision reads:
We do not think so.
Obviously, such bank cannot be held liable for its failure to return the check in question not later than the next regular clearing. However, this Court is of the opinion and so holds that it could still be held liable if it fails to exercise due diligence in verifying the alterations made. In other words, such bank would still be expected, nay required, to make the proper verification before the 24-hour regular clearing period lapses, or in cases where such lapses may be deemed inevitable, that the required verification should be made within a reasonable time.
The implication of the rule that a check shall be returned within the 24-hour clearing period is that if the collecting bank paid the check before the end of the aforesaid 24- hour clearing period, it would be responsible therefor such that if the said check is dishonored and returned within the 24-hour clearing period, the drawee bank cannot be held liable. Would such an implication apply in the case of materially altered checks returned within 24 hours after discovery? This Court finds nothing in the letter of the above-cited C.B. Circular that would justify a negative answer. Nonetheless, the drawee bank could still be held liable in certain instances. Even if the return of the check/s in question is done within 24 hours after discovery, if it can be shown that the drawee bank had been patently negligent in the performance of its verification function, this Court finds no reason why the said bank should be relieved of liability.
Although banking practice has it that the presumption of clearance is conclusive when it comes to the application of the 24-hour clearing period, the same principle may not be applied to the 24-hour period vis-a-vis material alterations in the sense that the drawee bank which returns materially altered checks within 24 hours after discovery would be conclusively relieved of any liability thereon. This is because there could well be various intervening events or factors that could affect the rights and obligations of the parties in cases such as the instant one including patent negligence on the part of the drawee bank resulting in an unreasonable delay in detecting the alterations. While it is true that the pertinent proviso in C.B. Circular No. 580 allows the drawee bank to return the altered check within the period "provided by law for filing a legal action", this does not mean that this would entitle or allow the drawee bank to be grossly negligent and, inspite thereof, avail itself of the maximum period allowed by the above-cited Circular. The discovery must be made within a reasonable time taking into consideration the facts and circumstances of the case. In other words, the aforementioned C.B. Circular does not provide the drawee bank the license to be grossly negligent on the one hand nor does it preclude the collecting bank from raising available defenses even if the check is properly returned within the 24-hour period after discovery of the material alteration.
PREMISES CONSIDERED, the decision appealed from is hereby REVERSED and the defendant- appellee Philippine National Bank is declared liable for the value of the fifteen checks specified and enumerated in the decision of the trial court (page 3) in the amount of P1,447,920.00Respondent filed a motion for reconsideration of the 10 October 1991 Decision. In its 9 August 1994 Amended Decision, the Court of Appeals reversed itself and affirmed the Decision of the trial court dismissing the complaint.
- Whether the checks were materially altered;
- Whether respondent was negligent in failing to recognize within a reasonable period the altered checks and in not returning the checks within the period; and
- Whether the motion for reconsideration filed by respondent was out of time thus making the 10 October 1991 Decision final and executory.
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.The question on whether an alteration of the serial number of a check is a material alteration under the Negotiable Instruments Law is already a settled matter. In Philippine National Bank v. Court of Appeals, this Court ruled that the alteration on the serial number of a check is not a material alteration. Thus:
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.
SEC. 125. What constitutes a material alteration. - Any alteration which changes:
(a) The date;
(b) The sum payable, either for principal or interest;
(c) The time or place of payment;
(d) The number or the relations of the parties;
(e) The medium or currency in which payment is to be made;
or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is 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[s] Law.Likewise, in the present case the alterations of the serial numbers do not constitute
Section 1 of the Negotiable Instruments Law provides:
Section 1. Form of negotiable instruments. An instrument to be negotiable must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
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.
x x x x
The case at the bench is unique in the sense that what was altered is the serial number of the check in question, an item which, it can readily be observed, is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments Law. The aforementioned 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. x x x
x x x x
The check's serial number is not the sole indication of its origin. As succinctly found by the Court of Appeals, the name of the government agency which issued the subject check was prominently printed therein. The check's issuer was therefore sufficiently identified, rendering the referral to the serial number redundant and inconsequential. x x x
x x x x
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.