PHILIPPINE NATIONAL BANK vs.

COURT OF APPEALS

G.R. No. 107508, April 25, 1996

FACTS:

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withdrawn all the money already from the account.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.

ISSUE:

Whether or not there was a material alteration.

RULING:

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 checks 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 checks 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.