International Corporate Bank vs CA (501 SCRA 20)

International Corporate Bank, Inc vs Court of Appeals
501 SCRA 20 [G.R. No. 129910 September 5, 2006]

Facts: The Ministry of Education and Culture issued 15 checks drawn against respondent which petitioner accepted for deposit on various dates. After 24 hours from submission of the checks to respondent for clearing, petitioner paid the value of the checks and allowed the withdrawals of the deposits. However, on 14 October 1981, respondent returned all the checks to petitioner without clearing them on the ground that they were materially altered. Thus, petitioner instituted an action for collection of sums of money against respondent to recover the value of the checks.

Issue: Whether the alterations in the serial numbers of the check is a material alteration.

Held: No. Sections 124 and 125 of Act No. 2031, otherwise known as the Negotiable Instruments Law, provide: 

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. 

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 Instruments Law. 

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.

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