GR 107508; (April, 1996) (Digest)
G.R. No. 107508 . April 25, 1996.
PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS, CAPITOL CITY DEVELOPMENT BANK, PHILIPPINE BANK OF COMMUNICATIONS, and F. ABANTE MARKETING, respondents.
FACTS
The Ministry of Education issued Check No. 7-3666-223-3 for P97,650.00 payable to F. Abante Marketing, drawn against PNB. Abante deposited the check with Capitol City Development Bank, which then deposited it with PBCom. PBCom presented the check to PNB for clearing, and PNB cleared it as good, leading PBCom to credit Capitol’s account. Subsequently, on October 19, 1981, PNB returned the check to PBCom, debiting PBCom’s account on the ground of a “material alteration” of the check’s serial number. PBCom then debited Capitol’s account. Capitol could not debit Abante’s account as the funds had been withdrawn. Capitol sued PBCom, which filed a third-party complaint against PNB. The RTC held PNB liable to indemnify PBCom, which was ordered to reimburse Capitol.
ISSUE
Whether the alteration of the serial number of a check constitutes a material alteration under the Negotiable Instruments Law, discharging the drawer from liability.
RULING
No. The Supreme Court affirmed the Court of Appeals with modification regarding attorney’s fees. The alteration of the check’s serial number is not a material alteration under Section 125 of the Negotiable Instruments Law. A material alteration is one that changes the effect of the instrument by modifying the obligation of a party, such as altering the date, sum payable, time or place of payment, number or relations of the parties, or currency. The serial number is not an essential element for negotiability under Section 1 of the NIL; it is merely a clerical or administrative detail for internal bank identification and tracking. The alteration did not change the drawer’s obligation, as the check’s essential terms—drawer, payee, amount, and drawee bank—remained intact and genuine. Consequently, PNB, as drawee, was liable for wrongfully dishonoring the check after initially clearing it. The Court also deleted the award of attorney’s fees for lack of factual and legal justification.