SEC. 123.

CANCELLATION;
UNINTENTIONAL; BURDEN OF PROOF. —
A CANCELLATION MADE
UNINTENTIONALLY, OR UNDER A
MISTAKE OR WITHOUT THE AUTHORITY
OF THE HOLDER, IS INOPERATIVE; BUT
WHERE AN INSTRUMENT OR ANY
SIGNATURE THEREON APPEARS TO
HAVE BEEN CANCELLED THE BURDEN
OF PROOF LIES ON THE PARTY WHO
ALLEGES THAT THE CANCELLATION
WAS MADE UNINTENTIONALLY, OR
UNDER A MISTAKE OR WITHOUT
AUTHORITY.
 WHEN CANCELLATION
INOPERATIVE.

CANCELLATION OF AN INSTRUMENT IS NOT

LIMITED TO THE WRITING OF THE WORD
"CANCELLED" OR "PAID" OR THE DRAWING
OF CRISSCROSS LINES ACROSS THE
INSTRUMENT. IT INCLUDES TEARING,
ERASURE, OBLITERATION, OR BURNING. IT
MAY BE MADE BY ANY OTHER MEANS BY
WHICH THE INTENTION TO CANCEL THE
INSTRUMENT MAY BE EVIDENCED. (BOOTH
V. SMITH, 3 WOODS [U.S.] 19.)
IF THE CANCELLATION IS MADE: (1)
UNINTENTIONALLY, OR (2) BY
MISTAKE OR THROUGH FRAUD, OR (3)
WITHOUT AUTHORITY, IT IS
INOPERATIVE. CANCELLATION,
HOWEVER, IS PRESUMED TO BE
INTENTIONAL. HENCE, THE BURDEN
IS ON THE HOLDER CLAIMING ITS
INEFFECTIVENESS TO OVERCOME THE
PRESUMPTION BY CONTRARY PROOF.
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.
 MEANING OF MATERIAL ALTERATION.
MATERIAL ALTERATION IS DEFINED TO BE ANY
CHANGE IN THE INSTRUMENT WHICH AFFECTS OR
CHANGES THE LIABILITY OF THE PARTIES IN ANY
WAY (FOXWORTHY V. COLBY, 89 N.W. 800.), AS
SPECIFIED IN SECTION 125 OR CHANGES THE
CONTRACT OF THE PARTIES IN ANY RESPECT. ANY
OTHER ALTERATION IS IMMATERIAL AND,
THEREFORE, INOPERATIVE TO AFFECT THE
LIABILITY OF ANY PARTY TO THE INSTRUMENT
PRIOR TO THE ALTERATION. THUS, ADDING WORDS
IMPLIED BY LAW OR MAKING MARGINAL FIGURES
TO MAKE THEM CORRESPOND TO THE SUM
WRITTEN IN WORDS IS NOT A MATERIAL
ALTERATION. (SMITH V. SMITH, 1 R.1.398.)
EFFECT OF ALTERATION OF INSTRUMENT.

THIS SECTION HAS REFERENCE TO PHYSICAL ALTERATIONS OF THE

INSTRUMENT. SO, AN EXTENSION OF TIME GIVEN BY THE HOLDER OF A
NOTE TO THE PRINCIPAL MAKER WITHOUT THE CONSENT OF A SURETY
CO-MAKER IS NOT AN ALTERATION.
(1) ALTERATION BY A PARTY. — THE EFFECT OF A MATERIAL
ALTERATION BY THE HOLDER IS TO DISCHARGE THE INSTRUMENT AND
ALL PRIOR PARTIES THERETO WHO DID NOT GIVE THEIR CONSENT TO
SUCH ALTERATION.
(A) SINCE NO DISTINCTION IS MADE, IT DOES NOT MATTER WHETHER
IT IS FAVORABLE OR UNFAVORABLE TO THE PARTY MAKING THE
ALTERATION (FRANKLIN INS. CO. V. COURTNEY, 60 IND. 134.) OR TO THE
INTERESTS OF PRIOR PARTIES (KELLER V. STATE BANK, 24 N.E. 94.) OR
WHETHER IT IS INNOCENTLY OR FRAUDULENTLY MADE (FIRST NAT. BANK
OF SPARTA V. YOWELL, 294 S.W. 1101.), SINCE MATERIAL ALTERATION
INCLUDES INNOCENT CHANGES (HOOFMAN V. PLANTERS' NAT. BANK, 39
S.E. 134.) WITHOUT REGARD TO THE MOTIVE OR THE PURPOSE OF THE
PARTY MAKING IT. SO THAT, WHERE THE INSTRUMENT HAS BEEN
ALTERED, ALTHOUGH INNOCENTLY, IT IS DISCHARGED BUT THE
INNOCENT PARTY CAN SUE UPON THE ORIGINAL DEBT FOR WHICH IT HAS
BEEN GIVEN. (FIRST NAT. BANK OF SPARTA V. YOWELL, 294 S.W. 1101.)
 (B) THE LAW MAKES CERTAIN EXCEPTIONS AS TO THE EFFECT
OF MATERIAL ALTERATION. IT DOES NOT DISCHARGE THE
INSTRUMENT AS AGAINST: 1) A PARTY WHO HAS MADE THE
ALTERATION, 2) A PARTY WHO AUTHORIZED OR ASSENTED TO
THE ALTERATION, AND 3) INDORSERS WHO INDORSED
SUBSEQUENT TO THE ALTERATION.
(C) WHEN AN ALTERATION IS APPARENT, THE PARTY
CLAIMING UNDER THE INSTRUMENT HAS THE BURDEN TO
EXPLAIN THE ALTERATION OR THAT HE HAD NO PART THEREIN
OR THAT HE WAS A HOLDER IN DUE COURSE BUT WHERE THE
ALTERATION IS NOT APPARENT ON THE FACE BY THE USE OF
ORDINARY CARE IN INSPECTING THE INSTRUMENT, THE BURDEN
IS ON THE PARTY ALLEGING IT. (ARNOLD V. WOOD, 191 S.W. 960.)
WHEN THE DRAWEE-BANK PAYS A MATERIALLY ALTERED CHECK,
IT HAS NO RIGHT TO CLAIM REIMBURSEMENT FROM THE
DRAWER, MUCH LESS, THE RIGHT TO DEDUCT THE ERRONEOUS
PAYMENT IF MADE FROM THE DRAWER'S ACCOUNT SINCE IT DID
NOT PAY ACCORDING TO THE ORIGINAL TENOR OF THE
INSTRUMENT. (METROPOLITAN BANK & TRUST CO. VS. CABILZO,
510 SCRA 259 [2006].)
EXAMPLE:
M MAKES A PROMISSORY NOTE FOR P3,000.00 PAYABLE TO P
OR ORDER. P NEGOTIATES THE NOTE TO A WHO, WITH THE
CONSENT OF P, RAISES THE AMOUNT TO P8,000.00 AND
THEREAFTER INDORSES IT TO B, B TO C, AND C TO D, UNDER
CIRCUMSTANCES WHICH MAKE D NOT A HOLDER IN DUE
COURSE. THE NOTE IS DISCHARGED AS AGAINST M; HENCE, D
CANNOT ENFORCE IT AS AGAINST M EVEN FOR THE ORIGINAL
TENOR. A, HOWEVER, WOULD BE LIABLE TO D FOR P8,000.00
AS HE IS THE PARTY WHO HIMSELF MADE THE ALTERATION
ALTHOUGH D IS NOT A HOLDER IN DUE COURSE. MOREOVER,
AS INDORSER, A WARRANTS THAT THE INSTRUMENT IS
GENUINE AND IN ALL RESPECTS WHAT IT PURPORTS TO BE.
(SEES. 65 AND 66.)
P WOULD ALSO T»E LIABLE TO D FOR P8,000.00 AS HE
AUTHORIZED OR ASSENTED TO THE ALTERATION.
LIKEWISE, B AND C WOULD BE LIABLE TO D FOR P8,000.00
AS THEY ARE SUBSEQUENT INDORSERS.
 (2) ALTERATION BY A STRANGER. — WHEN THE
MATERIAL ALTERATION OF THE INSTRUMENT IS MADE BY A
STRANGER, IT IS CALLED SPOLIATION. IN ENGLAND,
SPOLIATION HAS THE SAME EFFECT AS ALTERATION.
ALTHOUGH SECTION 124 DOES NOT MAKE ANY DISTINCTION,
AMERICAN COURTS HOLD THAT SPOLIATION HAS NO EFFECT
UPON THE INSTRUMENT IF THE ORIGINAL MEANING CAN BE
ASCERTAINED. (BROOKS V. ALLEN, 62 IND. 401; SINGER
SEWING MACHINE CO. V. BAYER, B9 N.W. 741; AND OTHERS.)
(3) RIGHT OF HOLDER IN DUE COURSE. — A
MATERIAL ALTERATION AVOIDS THE INSTRUMENT IN THE
HANDS OF ONE WHO IS NOT A HOLDER IN DUE COURSE AS
AGAINST ANY PRIOR PARTY WHO HAS NOT ASSENTED TO THE
ALTERATION. BUT IF AN ALTERED INSTRUMENT IS
NEGOTIATED TO A HOLDER IN DUE COURSE, HE MAY ENFORCE
PAYMENT THEREOF ACCORDING TO ITS ORIGINAL TENOR
REGARDLESS OF WHETHER THE ALTERATION WAS INNOCENT
OR FRAUDULENT, (SEE SEC. 62.)
 EXAMPLE: IN THE EXAMPLE GIVEN, IF D WERE A
HOLDER IN DUE COURSE, HE COULD ENFORCE THE
INSTRUMENT AGAINST M FOR P3,000.00, ITS
ORIGINAL TENOR, (SEE SEC. 14.) OF COURSE, D CAN
RECOVER FROM P, A, B, OR C P8,000.00 SHOULD M
DISHONOR THE INSTRUMENT.

THE LAW IN RELATION TO MATERIAL ALTERATION OF

INSTRUMENTS, RESTS UPON PUBLIC POLICY, IN THAT, TO MAINTAIN
THE INTEGRITY SURROUNDING COMMERCIAL RELATIONS, NO
PARTY TO BEBENEFITED SHOULD BE PERMITTED UNDER ANY GUISE
TO ALTER THE WRITTEN OBLIGATION OF ANOTHER WITHOUT HIS
AUTHORITY OR ASSENT. TO DO OTHERWISE WOULD OPEN THE
DOOR TO THE PERPETRATION OF ALL KINDS OF FRAUD TO THE
PREJUDICE OF THE PARTY OR PARTIES TO BE BOUND WHO HAVE NO
CONTROL WHATEVER OVER THE POSSESSION OF SUCH
INSTRUMENTS WHICH ARE PASSED FROM HAND TO HAND AND,
THEREFORE, CANNOT PREVENT ANY PERSON IN POSSESSION
THEREOF FROM MAKING CHANGES THEREWITH IN DISREGARD OF
HONESTY AND GOOD CONSCIENCE. (BORN V. LAFAYETTE NUTE CO.,
139 N.E. 364.)
THE REASON OF THE LAW IMPOSING THE DISCHARGE OF
THE DEBT ITSELF UPON ONE WHO TAMPERS WITH THE
INSTRUMENT IS UPON THE PRINCIPLE THAT "NO MAN
SHOULD BE PERMITTED TO TAKE THE CHANCE OF GAIN
BY THE COMMISSION OF A FRAUD, WITHOUT RUNNING
THE RISK OF LOSS IN CASE OF DETECTION." (DANIELS,
OP. CIT., [5TH ED.], SEC. 1410A.)
 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;
(f) 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.
WHEN ALTERATION IS MATERIAL.
UNDER SECTION 125, A CHANGE IN ANY OF THE
MATTERS MENTIONED OR ANY OTHER CHANGE WHICH
ALTERS THE EFFECT OF THE INSTRUMENT IN ANY
RESPECT CONSTITUTES A MATERIAL ALTERATION. ANY
OTHER 330 THE NEGOTIABLE INSTRUMENTS LAW SEES.
106-107 ALTERATION IS IMMATERIAL AND WILL NOT
DISCHARGE THE INSTRUMENT.
THUS, THE ALTERATION ON THE SERIAL NUMBER OF A
CHECK IS NOT A MATERIAL ALTERATION, AN ITEM WHICH
IS NOT AN ESSENTIAL REQUISITE FOR NEGOTIABILITY
AND, THEREFORE, THE DRAWEE-BANK IS NOT JUSTIFIED
TO REFUSE THE CHECK IN QUESTION, THE REFERRAL TO
THE SERIAL NUMBER BEING REDUNDANT AND
INCONSEQUENTIAL. (INTERNATIONAL CORPORATE BANK
VS. COURT OF APPEALS, 501 SCRA 20 [2006].)