G.R. No
G.R. No
G.R. No
[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.
SYLLABUS
FACTS
Petitioner 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.
ISSUE
Whether or not there is “material alteration” on the check.
RULING
NO. 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. Here, the alteration of check number does not
affect its negotiability contemplated in Section 1 of the Negotiable Instruments Law.
1. COMMERCIAL LAW; NEGOTIABLE INSTRUMENTS; MATERIAL ALTERATION, DEFINED,
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.
2. ID.; ID.; IMMATERIAL ALTERATION; EFFECT ON THE INSTRUMENT. In his book entitled
Pandect of Commercial Law and Jurisprudence, Justice Jose C. Vitug opines that an innocent
alteration (generally, changes on items other than those required to be stated under Sec. 1, N. I. L.) and
spoliation (alterations done by a stranger) will not avoid the instrument, but the holder may enforce it
only according to its original tenor.
3. ID.; ID.; ID.; PRESENT IN CASE AT BAR. 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, it can readily be observed, is
not an essential requisite for negotiability under Section 1 of the Negotiable Instrument 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. The checks serial number is not the sole indication of its origin. As succinctly
found by the Court of Appeals, the name of the government agency which issued the subject check
was prominently printed therein. The checks issuer was therefore sufficiently identified, rendering the
referral to the serial number redundant and inconsequential. 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.
4. CIVIL LAW; DAMAGES; ATTORNEYS FEES; AWARD THEREOF DEMANDS FACTUAL,
LEGAL AND EQUITABLE JUSTIFICATION. The award of attorneys fees lies within the discretion of
the court and depends upon the circumstances of each case. However, the discretion of the court to
award attorneys fees under Article 2208 of the Civil Code of the Philippines demands factual, legal and
equitable justification, without which the award is a conclusion without a premise and improperly left to
speculation and conjecture. It becomes a violation of the proscription against the imposition of a
penalty on the right to litigate (Universal Shipping Lines, Inc. v. Intermediate Appellate Court, 188
SCRA 170 [1990]). The reason for the award must be stated in the text of the courts decision. If it is
stated only in the dispositive portion of the decision, the same shall be disallowed. As to the award of
attorneys fees being an exception rather than the rule, it is necessary for the court to make findings of
fact and law that would bring the case within the exception and justify the grant of the award
(Refractories Corporation of the Philippines v. Intermediate Appellate Court, 1
76 SCRA 539).
APPEARANCES OF COUNSEL
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Monsod Tamargo Valencia & Associates f or private respondent Capitol City Development Bank.
Siguion Reyna Montecillo & Ongsiako for private respondent Philippine Bank of Communications.
D E C I S I O N
KAPUNAN, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision
dated April 29, 1992 of respondent Court of Appeals in CAG.R. CV No. 24776 and its resolution dated
September 16, 1992, denying petitioner Philippine National Banks motion for reconsideration of said
decision.
The facts of the case are as follows:
A check with serial number 736662233, dated August 7, 1981 in the amount of P97,650.00 was
issued by the Ministry of Education and Culture (now Department of Education, Culture and Sports
[DECS]) payable to F. Abante Marketing. This check was drawn against Philippine National Bank
(herein petitioner).
On August 11, 1981, F. Abante Marketing, a client of Capitol City Development Bank (Capitol),
deposited the questioned check in its savings account with said bank. In turn, Capitol deposited the
same in its account with the Philippine Bank of Communications (PBCom) which, in turn, sent the
check to petitioner for clearing.
Petitioner cleared the check as good and, thereafter, PBCom credited Capitols account for the amount
stated in the check. However, on October 19, 1981, petitioner returned the check to PBCom and
debited PBComs account for the amount covered by the check, the reason being that there was a
material alteration of the check number.
PBCom, as collecting agent of Capitol, then proceeded to debit the latters account for the same
amount, and subsequently, sent the check back to petitioner. Petitioner, however, returned the check to
PBCom.
On the other hand, Capitol could not, in turn, debit F. Abante Marketings account since the latter had
already withdrawn the amount of the check as of October 15, 1981. Capitol sought clarification from
PBCom and demanded the recrediting of the amount. PBCom followed suit by requesting an
explanation and recrediting from petitioner.
Since the demands of Capitol were not heeded, it filed a civil suit with the Regional Trial Court of
Manila against PBCom which, in turn, filed a thirdparty complaint against petitioner for
reimbursement/indemnity with respect to the claims of Capitol. Petitioner, on its part, filed a fourthparty
complaint against F. Abante Marketing.
On October 3, 1989; the Regional Trial Court rendered its decision the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered as follows:
1.) On plaintiffs complaint, defendant Philippine Bank of Communications is ordered to recredit or
reimburse plaintiff Capitol City Development Bank the amount of P97,650.00, plus interest of 12
percent thereto from October 19, 1981 until the amount is fully paid;
2.) On Philippine Bank of Communications thirdparty complaint, thirdparty defendant PNB is ordered
to reimburse and indemnify Philippine Bank of Communications for whatever amount PBCom pays to
plaintiff;
3.) On Philippine National Banks fourthparty complaint, F. Abante Marketing is ordered to reimburse
and indemnify PNB for whatever amount PNB pays to PBCom;
4.) On attorneys fees, Philippine Bank of Communications is ordered to pay Capitol City Development
Bank attorneys fees in the amount of Ten Thousand (P 10,000.00) Pesos; but PBCom is entitled to
reimbursement/indemnity from PNB; and Philippine National Bank to be, in turn, reimbursed or
indemnified by F. Abante Marketing for the same amount;
5.) The Counterclaims of PBCom and PNB are hereby dismissed;
6.) No pronouncement as to costs.
SO ORDERED. [1]
An appeal was interposed before the respondent Court of Appeals which rendered its decision on April
29, 1992, the decretal portion of which reads:
WHEREFORE, the judgment appealed from is modified by exempting PBCom from liability to
plaintiffappellee for attorneys fees and ordering PNB to honor the check for P97,650.00, with interest
as declared by the trial court, and pay plaintiffappellee attorneys fees of P10,000.00. After the check
shall have been honored by PNB, PBCom shall recredit plaintiffappellees account with it with the
amount. No pronouncement as to costs.
SO ORDERED. [2]
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If the purpose of the serial number is merely to identify the issuing government office or agency, its
alteration in this case had no material effect whatsoever on the integrity of the check. The identity of
the issuing government office or agency was not changed thereby and the amount of the check was
not charged against the account of another government office or agency which had no liability under the
check. The owner and issuer of the check is boldly and clearly printed on its face, second line from the
top: MiNiSTRY OF EDUCATiON AND CULTURE, and below the name of the payee are the
rubberstamped words: Ministry of Educ. & Culture. These words are not alleged to have been falsely
or fraudulently intercalated into the check. The ownership of the check is established without the
necessity of recourse to the serial number. Neither is there any proof that the amount of the check was
erroneously charged against the account of a government office or agency other than the Ministry of
Education and Culture.Hence, the alteration in the number of the check did not affect or change the
liability of the Ministry of Education and Culture under the check and, therefore, is immaterial. The
genuineness of the amount and the signatures therein of then Deputy Minister of Education
Hermenegildo C. Dumlao and of the resident Auditor, Penomio C. Alvarez are not challenged. Neither
is the authenticity of the different codes appearing therein questioned x x x. [13] (Italics ours.)
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.
We now go to the second issue. It is petitioners submission that the certification issued by Minrado C.
Batonghinog, Cashier III of the MEC clearly shows that the check was altered. Said certification reads:
July 22, 1985
TO W HOM IT MAY CONCERN:
This is to certify that according to the records of this Office, TCAA PNB Check No. SN736662233
dated August 7, 1981 drawn in favor of F. Abante Marketing in the amount of NINETY (S)EVEN
THOUSAND SIX HUNDRED FIFTY PESOS ONLY (P97,650.00) was not issued by this Office nor
released to the payee concerned. The series number of said check was not included among those
requisition by this Office from the Bureau of Treasury.
Very truly yours,
(SGD.) MINRADO C. BATONGHINOG Cashier III. [14]
Petitioner claims that even if the author of the certification issued by the Ministry of Education and
Culture (MEC) was not presented, still the best evidence of the material alteration would be the
disputed check itself and the serial number thereon. Petitioner thus assails the refusal of respondent
court to give weight to the certification because the author thereof was not presented to identify it and
to be crossexamined thereon. [15]
We agree with the respondent court.
The one who signed the certification was not presented before the trial court to prove that the said
document was really the document he prepared and that the signature below the said document is his
own signature. Neither did petitioner present an eyewitness to the execution of the questioned
document who could possibly identify it. [16] Absent this proof, we cannot rule on the authenticity of the
contents of the certification. Moreover, as we previously emphasized, there was no material alteration
on the check, the change of its serial number not being substantial to its negotiability.
Anent the third issue whether or not the drawee bank may still recover the value of the check from the
collecting bank even if it failed to return the check within the twentyfour (24) hour clearing period
because the check was tampered suffice it to state that since there is no material alteration in the
check, petitioner has no right to dishonor it and return it to PBCom, the same being in all respects
negotiable.
However, the amount of P10,000.00 as attorneys fees is hereby deleted. In their respective decisions,
the trial court and the Court of Appeals failed to explicitly state the rationale for the said award. The trial
court merely ruled as follows:
With respect to Capitols claim for damages consisting of alleged loss of opportunity, this Court finds
that Capitol failed to adequately substantiate its claim. What Capitol had presented was a selfserving,
unsubstantiated and speculative computation of what it allegedly could have earned or realized were it
not for the debit made by PBCom which was triggered by the return and debit made by PNB. However,
this Court finds that it would be fair and reasonable to impose interest at 12% per annum on the
principal amount of the check computed from October 19, 1981 (the date PBCom debited Capitols
account) until the amount is fully paid and reasonable attorneys fees. [17] (Italics ours.)
And contrary to the Court of Appeals resolution, petitioner unambiguously questioned before it the
award of attorneys fees, assigning the latter as one of the errors committed by the trial court. [18]
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