FACTS:

A check in the amount of P97,650.00 was issued by the Ministry of Education and Culture payable to F. Abante Marketing, drawn against petitioner PNB.

F. Abante Marketing, deposited the check in its savings account with Capitol Bank. In turn, Capitol deposited the same in its account with PBCom which, in turn, sent the check to petitioner for clearing.

PNB cleared the check as good and, thereafter, PBCom credited Capitol’s account for the amount stated in the check.

However, petitioner PNB returned the check to PBCom and debited PBCom’s account for the amount covered by the check, the reason being that there was a “material alteration” of the check number.

PBCom then proceeded to debit Capitol’s account for the same amount.

Capitol could not, in turn, debit F. Abante Marketing’s account since the latter had already withdrawn the amount of the check. Capitol demanded the re-crediting of the amount, but to no avail.

Capitol filed a suit against PBCom which, in turn, filed a third-party complaint against PNB for reimbursement/indemnity with respect to the claims of Capitol.

The RTC rendered its decision ordering PBCom to re-credit or reimburse plaintiff Capitol Bank the amount of P97,650.00, plus interest. PNB was ordered to reimburse and indemnify PBCom for the amount PBCom pays to plaintiff & for  F. Abante Marketing to reimburse and indemnify PNB for whatever amount PNB pays to PBCom.

On appeal, the CA ordered PNB to honor the check for P97,650.00, with interest, and pay plaintiff-appellee attorney’s fees.

After the denial of its MR, petitioner filed the instant petition.

ISSUE:

Whether or ot An Alteration of The Serial Number of A Check Is A Material Alteration under the Negotiable Instruments Law.

RULING:

We find no merit in the petition.

Petitioner anchors its position on Section 125 of the Negotiable Instruments Law (ACT No. 2031) which provides:

Sec. 225. 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.

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.8In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law.

Reproduced hereunder are some examples of material and immaterial alterations:

A. Material Alterations:

(1) Substituting the words “or bearer” for “order.”

(2) Writing “protest waived” above blank indorsements.

(3) A change in the date from which interest is to run.

(4) A check was originally drawn as follows: “Iron County Bank, Crystal Falls, Mich. Aug. 5, 1901. Pay to G.L. or order $9 fifty cents CTR” The insertion of the figure 5 before the figure 9, the instrument being otherwise unchanged.

(5) Adding the words “with interest” with or without a fixed rate.

(6) An alteration in the maturity of a note, whether the time for payment is thereby curtailed or extended.

(7) An instrument was payable “First Nat’l Bank” the plaintiff added the word “Marion.”

(8) Plaintiff, without consent of the defendant, struck out the name of the defendant as payee and inserted the name of the maker of the original note.

(9) Striking out the name of the payee and substituting that of the person who actually discounted the note.

(10) Substituting the address of the maker for the name of a co-maker.10

B. Immaterial Alterations:

(1) Changing “I promise to pay” to “We promise to pay”, where there are two makers.

(2) Adding the word “annual” after the interest clause.

(3) Adding the date of maturity as a marginal notation.

(4) Filling in the date of actual delivery where the makers of a note gave it with the date in blank, “July ____.”

(5) An alteration of the marginal figures of a note where the sum stated in words in the body remained unchanged.

(6) The insertion of the legal rate of interest where the note had a provision for “interest at _______ per cent.”

(7) A printed form of promissory note had on the margin the printed words, “Extended to ________.” The holder on or after maturity wrote in the blank space the words “May 1, 1913,” as a reference memorandum of a promise made by him to the principal maker at the time the words were written to extend the time of payment.

(8) Where there was a blank for the place of payment, filling in the blank with the place desired.

(9) Adding to an indorsee’s name the abbreviation “Cash” when it had been agreed that the draft should be discounted by the trust company of which the indorsee was cashier.

(10) The indorsement of a note by a stranger after its delivery to the payee at the time the note was negotiated to the plaintiff.

(11) An extension of time given by the holder of a note to the principal maker, without the consent of a surety co-maker.11

The case at bench is unique in the sense that what was altered is the serial number of the check in question, an item which 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.

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.