Montinola vs PNB (88 Phil 178, 26 Feb 1951)

Montinola vs PNB (88 Phil 178, 26 Feb 1951)

​Facts:
Laya, provincial treasurer of Misamis Oriental, issued a check to Ramos. Montinola in exchange of the check paid 45K Japanese notes, instead of 85K Japanese notes, to Ramos. On the back of the check, Ramos wrote:
“Pay to the order of Enrique P. Montinola P30,000 only. The balance to be deposited in the Philippine National Bank to the credit of M. V. Ramos.”

Montinola sought to have the check encashed but PNB dishonored the check. It appears that there was an insertion made. Under the signature of Laya, the words “Agent, Philippine National Bank” was inserted, thus making it appear that Laya disbursed the check as an agent of PNB and not as provincial treasurer of Misamis Oriental.

Issue:
Whether the insertion of "Agent, Phil. National Bank" is a material alteration.

Held:
Yes, it is material alteration.
The insertion of the words "Agent, Phil. National Bank" which converts the bank from a mere drawee to a drawer and therefore changes its liability, constitutes a material alteration of the instrument without the consent of the parties liable thereon, and so discharges the instrument. (Section 124 of the Negotiable Instruments Law). The check was not legally negotiated within the meaning of the Negotiable Instruments Law. Section 32 of the NIL provides that "the indorsement must be an indorsement of the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the amount payable does not operate as a negotiation of the instrument." Montinola at most he may be regarded as a mere assignee of the P30,000 sold to him by Ramos, in which case, as such assignee, he is subject to all defenses available to the drawer Provincial Treasurer of Misamis Oriental and against Ramos.