PNB V.

CA
FACTS:

DECS issued a check in favor of Abante Marketing containing a specific

serial number, drawn against PNB. The check was deposited by Abante in
its account with Capitol and the latter consequently deposited the same
with its account with PBCOM which later deposited it with petitioner for
clearing. The check was thereafter cleared. However, on a relevant date,
petitioner PNB returned the check on account that there had been a
material alteration on it. Subsequent debits were made but Capitol cannot
debit the account of Abante any longer for the latter had withdrawn all the
money already from the account. This prompted Capitol to seek
reclarification from PBCOM and demanded the recrediting of its accou
nt. PBCOM followed suit by doing the same against PNB. Demands
unheeded,it filed an action against PBCOM and the latter filed a third-party
complaint against petitioner.

ISSUE: Whether the said alteration is material?

HELD:

An alteration is said to be material if it alters the effect of the instrument. It

means an unauthorized change in the 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 the party. In other words, a material alteration is one
which changes the items which are required to be stated under Section 1 of
the NIL.

In this case, the alleged material alteration was the alteration of the serial
number of the check in issue—which is not an essential element of a
negotiable instrument under Section 1. PNB alleges that the alteration was
material since it is an accepted concept that a TCAA check by its very
nature is the medium of exchange of governments, instrumentalities and
agencies. As a safety measure, every government office or agency is
assigned checks bearing different serial numbers.