43) Montinola v. PNB

3/12/2015 PHILIPPINEREPORTSANNOTATEDVOLUME088

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[No. L2861. February 26, 1951]

ENRIQUE P. MONTINOLA, plaintiff and appellant, vs.THE PHILIPPINE NATIONAL BANK ET AL., defendantsand appellees.

NEGOTIABLE INSTRUMENT MATERIALALTERATION WHICH DISCHARGES THEINSTRUMENT.On May 2, 1942, L in his capacity asProvincial Treasurer of Misamis Oriental as drawer,issued a check to R in the sum of P100,000, on thePhilippine National Bank as drawee. R sold P30,000 of thecheck to M for P90,000 Japanese Military notes, of whichonly P45,000 was paid by M. The writing made by R at theback of the check was to the effect that he was assigningonly P30,000 of the value of the document with aninstruction to the bank to pay P30,000 to M and to depositthe balance to R's credit. This writing was, however,mysteriously obliterated and in its place, a supposedindorsement appearing on the back of the check wasmade. At the time of the transfer of this check to M aboutthe last days of December, 1944, or the first days ofJanuary, 1945, the check was long overdue by about 2years. In August, 1947, M instituted an action against thePhilippine National Bank and the Provincial Treasurer ofMisamis Oriental to collect the sum of P100,000, theamount of the aforesaid check. There now appears on theface of said check the words in parenthesis "Agent, Phil.National Bank" under the signature of L purportedlyshowing that L issued the check as agent of the PhilippineNational Bank. Held: The words "Agent, Phil. NationalBank" now appearing on' the face of the check were addedor placed in the instrument after it was issued by theProvincial Treasurer L to R. The check was issued by Lonly as Provincial Treasurer and as an official of theGovernment, which was under obligation to provide theUSAFFE with advance funds, and not as agent of thebank, which had no such obligation. The addition of thosewords was made after the check had been transferred by R



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3.

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to M. The insertion of the words "Agent, Phil. NationalBank," which converts the bank from a mere drawee to adrawer and therefore changes its liability, constitutes amaterial alteration of the instrument without the consentof the parties liable thereon, and so discharges theinstrument.

ID. INDORSEMENT OF PART OF AMOUNT PAYABLE,is NOT NEGOTIATION OF INSTRUMENT BUT MAYBE REGARDED AS MERE ASSIGNMENT.Where theindorsement of a check is only for a part of the amountpayable, it is not legally negotiated within the meaning

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Montinola vs. Philippine National Bank

of section 32 of the Negotiable Instruments Law whichprovides that "the indorsement must be an indorsement ofthe entire instrument. An indorsement which purports totransfer to the indorsee a part only of the amount payabledoes not operate as a negotiation of the instrument." Mmay, therefore, not be regarded as an indorsee. At most hemay be regarded as a mere assignee of the P30,000 sold tohim by R, in which case, as such assignee, he is subject toall defenses available to the drawer Provincial Treasurerof Misamis Oriental against R.

ID. HOLDER IN DUE COURSE HOLDER WHO HASTAKEN THE INSTRUMENT AFTER IT WAS LONGOVERDUE ASSIGNEE IS NOT A PAYEE.Neither canM be considered as a holder in due course because section52 of the Negotiable Instruments Law defines a holder indue course as a holder who has taken the instrumentunder certain conditions, one of which is that he becamethe holder before it was overdue. When M received thecheck, it was long overdue. And, M is not even a holderbecause section 191 of the same law defines holder as thepayee or indorsee of a bill or note and M is not a payee.Neither is he an indorsee, for being only a part indorsee heis considered merely as an assignee.

ID. INSTRUMENT ISSUED TO DISBURSING OFFICER



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OF USAFFE, WHO HAS NO RIGHT TO INDORSE ITPERSONALLY.Where an instrument was issued to Rnot as a person but as the disbursing officer of theUSAFFE, he has no right to indorse the instrumentpersonally and if he does, the negotiation constitutes abreach of trust, and he transfers nothing to the indorsee.

QUESTIONED DOCUMENTS DlSCREPANCIESBETWEEN PHOTOSTATIC COPY TAKEN BEFORETEARING AND BURNING OF CHECK AND PRESENTCONDITION THEREOF SHOW WORDS IN QUESTIONWERE INSERTED AFTER SAID TEARING ANDBURNING.Recovery on a check, Exhibit A, depended onthe presence of the words "Agent, Phil. National Bank"under the signature of L, at time Exhibit A was. drawn.But the photostatic copy, Exhibit B, admittedly takenbefore Exhibit A was burned and torn, showed markeddiscrepancies between Exhibits A and B as to the positionof the words in question in relation to the words"Provincial Treasurer". Held: The inference is plain thatthe words "Agent, Phil. National Bank" were insertedafter the check was burned and torn.

APPEAL from a judgment of the Court of First Instance ofManila. Sanchez, J.

The facts are stated in the opinion of the Court.

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180 PHILIPPINE REPORTS ANNOTATEDMontinola vs. Philippine National Bank

Quijano, Rosete & Lucena for appellant.Second Assistant Corporate Counsel Hilarion U.

Jarencio for appellee Philippine National Bank.Solicitor General Felix Bautista Angelo and Solicitor

Augusto M. Luciano for appellee Provincial Treasurer ofMisamis Oriental.

MONTEMAYOR, J.:

In August, 1947, Enrique P. Montinola filed a complaint inthe Court of First Instance of Manila against the PhilippineNational Bank and the Provincial Treasurer of MisamisOriental to collect the sum of P100,000, the amount of



Check No. 1382 issued on May 2, 1942 by the ProvincialTreasurer of Misamis Oriental to Mariano V. Ramos andsupposedly indorsed to Montinola. After hearing, the courtrendered a decision dismissing the complaint with costsagainst plaintiffappellant. Montinola has appealed fromthat decision directly to this Court inasmuch as the amountin controversy exceeds P50,000.

There is no dispute as to the following facts. In April andMay, 1942, Ubaldo D. Laya was the Provincial Treasurer ofMisamis Oriental. As such Provincial Treasurer he was exofficio agent of the Philippine National Bank branch inthat province. Mariano V. Ramos worked under him asassistant agent in the bank branch aforementioned. InApril of that year 1942, the currency being used inMindanao, particularly Misamis Oriental and Lanao whichhad not yet been occupied by the Japanese invading forces,was the emergency currency which had been issued sinceJanuary, 1942 by the Mindanao Emergency CurrencyBoard by authority of the late President Quezon.

About April 26, 1942, thru the recommendation ofProvincial Treasurer Laya, his assistant agent M. V.Ramos was inducted into the United States Armed Forcesin the Far East (USAFFE) as disbursing officer of an armydivision. As such disbursing officer, M. V. Ramos on April30, 1942, went to the neighboring Province of Lanao toprocure a cash advance in the amount of P800,000 for the

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use of the USAFFE in Cagayan de Misamis. PedroEncarnacion, Provincial Treasurer of Lanao did not havethat amount in cash. So, he gave Ramos P300,000 inemergency notes and a check for P500,000. On May 2, 1942Ramos went to the office of Provincial Treasurer Laya atMisamis Oriental to encash the check for P500,000 whichhe had received from the Provincial Treasurer of Lanao.Laya did not have enough cash to cover the check so hegave Ramos P400,000 in emergency notes and a check No.1382 for P100,000 drawn on the Philippine National Bank.According to Laya he had previously deposited P500,000emergency notes in the Philippine National Bank branch inCebu and he expected to have the check issued by him



cashed in Cebu against said deposit.Ramos had no opportunity to cash the check because in

the evening of the same day the check was issued to him,the Japanese forces entered the capital of MisamisOriental, and on June 10, 1942, the USAFFE forces towhich he was attached surrendered. Ramos was made aprisoner of war until February 12, 1943, after which, hewas released and he resumed his status as a civilian.

About the last days of December, 1944 or the first daysof January, 1945, M. V. Ramos allegedly indorsed thischeck No. 1382 to Enrique P. Montinola. The circumstancesand conditions under which the negotiation or transfer wasmade are in controversy.

According to Montinola's version, sometime in June,1944, Ramos, needing money with which to buy foodstuffsand medicine, offered to sell him the check to be sure thatit was genuine and negotiable, Montinola, accompanied byhis agents and by Ramos himself, went to see PresidentCarmona of the Philippine National Bank in Manila aboutsaid check that after examining it President Carmona toldhim that it was negotiable but that he should not let theJapanese catch him with it because possession of the samewould indicate that he was still waiting for the return ofthe Americans to the Philippines that he

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and Ramos finally agreed to the sale of the check forP850,000 Japanese military notes, payable in installmentsthat of this amount, P450,000 was paid to Ramos inJapanese military notes in five installments, and thebalance of P400,000 was paid in kind, namely, four bottlesof sulphatiasole, each bottle containing 1,000 tablets, andeach tablet valued at P100 that upon payment of the fullprice, M. V. Ramos duly indorsed the check to him. Thisindorsement which now appears on the back of thedocument is described in detail by the trial court as follows:

"The endorsement now appearing at the back of the check (seeExhibit A1) may be described as follows: The words, 'pay to theorder of'in rubber stamp and in violet color are placed about oneinch from the top. This is followed by the words 'Enrique P.



Montinola' in typewriting which is approximately S of an inchbelow the stamped words 'pay to the order of'. Below 'Enrique P.Montinola', in typewriting are the words and figures also intypewriting, '517 Isabel Street' and about 1/8 of an inchtherefrom, the edges of the check appear to have been burned, butthere are words stamped apparently in rubber stamp which,according to Montinola, are a facsimile of the signature of Ramos.There is a signature which apparently reads 'M. V. Ramos' also ingreen ink but made in handwriting."

To the above description we may add that the 'name of M.V. Ramos is handprinted in green ink, under the signature.According to Montinola, he asked Ramos to handprint itbecause Ramos' signature was not clear. Ramos in his turntold the court that the agreement between himself andMontinola regarding the transfer of the check was that hewas selling only P30,000 of the check and for this reason, atthe back of the document he wrote in longhand thefollowing:

"Pay to the order of Enrique P. Montinola P30,000 only. Thebalance to be deposited in the Philippine National Bank to thecredit of M. V. Ramos."

Ramos further said that in exchange for this assignment ofP30,000 Montinola would pay him P90,000 in Japanesemilitary notes but that Montinola gave him only two checksof P20,000 and P25,000, leaving a balance unpaid of

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P45,000. In this he was corroborated by Atty. SimeonRamos Jr. who told the court that the agreement betweenRamos and Montinola was that the latter, for the sale tohim of P30,000 of the check, was to pay Ramos P90,000 inJapanese military notes that when the first check forP20,000 was issued by Montinola, he (Simeon) prepared adocument evidencing said payment of P20,000 that whenthe second check for P25,000 was issued by Montinola, he(Simeon) prepared another document with two copies, onefor Montinola and the other for Ramos, both signed byMontinola and M. V. Ramos, evidencing said payment, withthe understanding that the balance of P45,000 would be



paid in a few days.The indorsement or writing described by M. V. Ramos

which had been written by him at the back of the check,Exhibit A, does not now appear at the back of said check.What appears thereon is the indorsement testified to byMontinola and described by the trial court as reproducedabove. Bef ore going into a discussion of the merits of theversion given by Ramos and Montinola as to theindorsement or writing at the back of the check, it is well togive a further description of it as we shall do later.

When Montinola filed his complaint in 1947 he statedtherein that the check had been lost, and so in lieu thereofhe filed a supposed photostatic copy. However, at the trial,he presented the check itself and had its face markedExhibit A and the back thereof Exhibit A1. But the checkis badly mutilated, blotted, torn and partly burned, and itscondition can best be appreciated by seeing it. Roughly, itmay be stated that looking at the face of the check (ExhibitA) we see that the left third portion of the paper has beencut off perpendicularly and severed from the remaining 2/3portion a triangular portion of the upper right hand cornerof said remaining 2/3 portion has been similarly cut off andsevered, and to keep and attach this triangular portion andthe rectangular 1/3 portion to the rest of the document, theentire check is

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pasted on both sides with cellophane the edges of thesevered portions as well as of the remaining major portion,where cut bear traces of burning and searing there is a bigblot with indelible ink about the right middle portion,which seems to have penetrated to the back of the check(Exhibit A1), which back bears a larger smear right underthe blot, but not as black and sharp as the blot itselffinally, all this tearing, burning, blotting and smearing andpasting of the check renders it difficult if not impossible toread some of the words and figures on the check.

In explanation of the mutilation of the check Montinolatold the court that several months after indorsing anddelivering the check to him, Ramos demanded the return ofthe check to him, threatening Montinola with bodily harm,



even death by himself or his guerrilla forces if he did notreturn said check, and that in order to justify thenondelivery of the document and to discourage Ramos fromgetting it back, he (Montinola) had to resort to themutilation of the document.

As to what was really written at the back of the checkwhich Montinola claims to be a full indorsement of thecheck, we agree with the trial court that the originalwriting of Ramos on the back of the check was to the effectthat he was assigning only P30,000 of the value of thedocument and that he was instructing the bank to depositto his credit the balance. This writing was in somemysterious way obliterated, and in its place was placed thepresent indorsement appearing thereon. Said presentindorsement occupies a good portion of the back of thecheck. It has already been described in detail. As to howsaid present indorsement came to be written, thecircumstances surrounding its preparation, the supposedparticipation of M. V. Ramos in it and the writingoriginally appearing on the reverse side of the check,Exhibit A1, we quote with approval what the trial courtpresided over by Judge Conrado V. Sanchez, in its wellprepared decision, says on these points:

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"The alleged indorsement: 'Pay to the order of Enrique P.Montinola the amount of P30,000 only. The balance to bedeposited to the credit of M. V. Ramos', signed by M. V. Ramosaccording to the latterdoes not now appear at the back of thecheck. A different indorsement, as aforesaid, now appears'.

"Had Montinola really paid in full the sum of P850,000 inJapanese Military Notes as consideration for the check? Thefollowing observations are in point:

"(a) According to plaintiff's witness Gregorio A. Cortado, theoval line in violet, enclosing 'P.' of the words 'Enrique P.Montinola' and the line in the form of cane handle crossing theword 'street' in the words and figures '517 Isabel Street' in theendorsement Exhibit A1, are 'unusual' to him, and that as far ashe could remember this writing did not appear on the instrumentand he had no knowledge as to how it happened to be there.Obviously Cortado had no recollection as to how such marks ever



were stamped at the back of the check."(b) Again Cortado, speaking of the endorsement as it now

appears at the back of the check (Exh. A1) stated that Ramostypewrote these words outside of the premises of Montinola, thatis, in a nearby house. Montinola, on the other hand, testified thatRamos typewrote the words 'Enrique P. Montinola, 517 IsabelStreet', in his own house. Speaking of the rubber stamp used atthe back of the check and which produced the words 'pay to theorder of', Cortado stated that when he (Cortado), Atadero,Montinola and Ramos returned in group to the house ofMontinola, the rubber stamp was already in the house ofMontinola, and it was on the table of the upper floor of the house,together with the stamp pad used to stamp the same. Montinola,on the other hand, testified that Ramos carried in his pocket thesaid rubber stamp as well as the ink pad, and stamped it in hishouse.

"The unusually big space occupied by the indorsement on theback of the check and the discrepancies in the versions ofMontinola and his witness Cortado just noted, create doubts as towhether or not really Ramos made the indorsement as it nowappears at the back of Exhibit A. One thing difficult tounderstand is why Ramos should go into the laborious task ofplacing the rubber stamp 'Pay to the order of' and afterwardsmove to the typewriter and write the words 'Enrique P.Montinola' and '517 Isabel Street', and finally sign his name toofar below the main indorsement.

"(c) Another circumstance which bears heavily upon the claimof plaintiff Montinola that he acquired the full value of the checkand paid the full consideration therefor is the present condition ofsaid check. It is now so unclean and discolored it is pasted incellophane, blotted with ink on both sides torn into three parts,and

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with portions thereof burnedall done by plaintiff, the allegedowner thereof.

"The acts done by the very plaintiff on a document soimportant and valuable to him, and which according to himinvolves his life savings, approximate intentional cancellation.The only reason advanced by plaintiff as to why he tore the check,burned the torn edges and blotted out the registration at the back,



is found in the following: That Ramos came to his house, armedwith a revolver, threatened his life and demanded from him thereturn of the check that when he informed Ramos that he did nothave it in the house, but in some deposit outside thereof and thatRamos promised to return the next day that the same night hetore the check into three parts, burned the sides with a parrafincandle to show traces of burning and that upon the return ofRamos the next day he showed the two parts of the check, thetriangle on the right upper part and the torn piece on the leftpart, and upon seeing the condition thereof Ramos did not botherto get the check back. He also said that he placed the blots inindelible ink to prevent Ramosif he would be forced tosurrender the middle part of the checkfrom seeing that it wasregistered in the General Auditing Office.

"Conceding at the moment these facts to be true, the questionis: Why should Montinola be afraid of Ramos? Montinola claimsthat Ramos went there about April, 1945, that is, duringliberation. If he believed he was standing by his rights, he couldhave very well sought police protection or transferred to someplace where Ramos could not bother him. And then, if reallyRamos did not have anything more to do with this check for thereason that Montinola bad obtained in full the amount thereof,there could not be any reason why Ramos should have threatenedMontinola as stated by the latter. Under the circumstances, themost logical conclusion is that Ramos wanted the check at allcosts because Montinola did not acquire the check to such anextent that it borders on intentional cancellation thereof (seeSections 119123 Negotiable Instruments Law) there is room tobelieve that Montinola did not have so much investments in thatcheck as to have adopted an 'what do I care?' attitude.

"And there is the circumstance of the alleged loss of the check.At the time of the filing of the complaint the check was allegedlylost, so much so that a photostatic copy thereof was merelyattached to the complaint (see paragraph 7 of the complaint). Yet,during the trial the original check Exhibit A was produced incourt.

"But a comparison between the photostatic copy and theoriginal check reveals discrepancies between the two. Thecondition of the check as it was produced is such that it waspartially burned, partially blotted, badly mutilated, discoloredand pasted with cellophane. What is worse is that Montinola'sexcuse as to how it was

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lost, that it was mixed up with household effects is not plausible,considering the fact that it involves his life savings, and thatbefore the alleged loss, he took extreme pains and precautions tosave the check from the possible ravages of the war, had itphotographed, registered said check with the General AuditingOffice and he knew that Ramos, since liberation, was hot after thepossession of that check.

"(d) It seems that Montinola was not so sure as to what he hadtestified to in reference to the consideration he paid for the check.In court he testified that he paid P450,000 in cash from June toDecember 1944, and P400,000 worth of sulphatiazole in January1945 to complete the alleged consideration of P850,000. WhenMontinola testified this way in court, obviously he overlooked aletter he wrote to the provincial treasurer of Cagayan, OrientalMisamis, dated May 1, 1947, Exhibit 3 of the record. In that letterExhibit 3, Montinola told Provincial Treasurer Elizalde ofMisamis Oriental that 'Ramos endorsed it (referring to check) tome for goods in kind, medicine, etc., received by him for the use ofthe guerrillas.' In said letter Exhibit 3, Montinola did not mentionthe cash that he paid for the check.

"From the foregoing the court concludes that plaintiffMontinola came into the possession of the check in question aboutthe end of December 1944 by reason of the fact that M. V. Ramossold to him P30,000 of the face value thereof in consideration ofthe sum of P90,000 Japanese money, of which only onehalf orP45,000 (in Japanese money) was actually paid by said plaintiff toRamos." (R. on A., pp. 3133 Brief of Appellee, pp. 1420.)

At the beginning of this decision, we stated that asProvincial Treasurer of Misamis Oriental, Ubaldo D. Layawas ex officio agent of the Philippine National Bank branchin that province. On the face of the check (Exh. A) we no wfind the words in parenthesis "Agent, Phil. National Bank"under the signature of Laya, purportedly showing that heissued the check as agent of the Philippine National Bank.If this is true, then the bank is not only drawee but also adrawer of the check, and Montinola evidently is trying tohold the Philippine National Bank liable in that capacity ofdrawer, because as drawee alone, inasmuch as the bankhas not yet accepted or certified the check, it may yet avoidpayment.

Laya, testifying in court, stated that he issued the check



only as Provincial Treasurer, and that the words in pa

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renthesis "Agent, Phil. National Bank" now appearingunder his signature did not appear on the check when heissued the same. In this he was corroborated by the payeeM. V. Ramos who equally assured the court that when hereceived the check and then delivered it to Montinola, thosewords did not appear under the signature of Ubaldo D.Laya. We again quote with approval the pertinent portionof the trial court's decision:

"The question is reduced to whether or not the words, 'Agent,Phil. National Bank' were added after Laya had issued the check.In a straightforward manner and without vacillation Layapositively testified that the check Exhibit A was issued by him inhis capacity as Provincial Treasurer of Misamis Oriental and thatthe words 'Agent, Phil. National Bank' which now appear on thecheck Exhibit A were not typewritten below his signature whenhe signed the said check and delivered the same to Ramos. Layaassured the court that there could not be any mistake as to this.For, according to Laya, when he issued checks in his capacity asagent of the Misamis Oriental agency of the Philippine NationalBank the said check must be countersigned by the cashier of thesaid agencynot by the provincial auditor. He also testified thatthe said check was issued by him in his capacity as provincialtreasurer of Misamis Oriental and that is why the same wascountersigned by Provincial Auditor Flores. The ProvincialAuditor at that time had no connection in any capacity with theMisamis Oriental agency of the Philippine National Bank.Plaintiff Montinola on the other hand testified that when hereceived the check Exhibit A it already bore the words 'Agent,Phil. National Bank' below the signature of Laya and the printedwords 'Provincial Treasurer'. "After considering the testimony ofthe one and the other, the court finds that the preponderance ofthe evidence supports Laya's testimony. In the first place, histestimony was corroborated by the payee M. V. Ramos. But whatrenders more probable the testimony of Laya and Ramos is thefact that the money for which the check was issued was expresslyfor the use of the USAFFE of which Ramos was then disbursingofficer, so much so that upon the delivery of the P400,000 in



emergency notes and the P100,000 check to Ramos, Laya creditedhis depository accounts as provincial treasurer with thecorresponding credit entry. In the normal course of events thecheck could not have been issued by the bank, and this is borne bythe fact that the signature of Laya was countersigned by theprovincial auditor, not the bank cashier. And then, too there is thecircumstance that this check was issued by the provincialtreasurer of Lanao to Ramos who requisitioned the said

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funds in his capacity as disbursing officer of the USAFFE. Thecheck, Exhibit A is not what we may term in business parlance,'certified check' or 'cashier's check.'

"Besides, at the time the check was issued, Laya already knewthat Cebu and Manila were already occupied. He could not havetherefore issued the checkas a bank employeepayable at thecentral office of the Philippine National Bank.

"Upon the foregoing circumstances the court concludes that thewords 'Agent, Phil. National Bank' below the signature of UbaldoD. Laya and the printed words 'Provincial Treasurer' were addedin the check after the same was issued by the ProvincialTreasurer of Misamis Oriental."

From all the foregoing, we may safely conclude as we dothat the words "Agent, Phil. National Bank" now appearingon the face of the check (Exh. A) were added or placed inthe instrument after it was issued by Provincial TreasurerLaya to M. V. Ramos. There is no reason known to us whyProvincial Treasurer Laya should issue the check (Exh. A)as agent of the Philippine National Bank. Said check forP100,000 was issued to complete the payment of the othercheck for P500,000 issued by the Provincial Treasurer ofLanao to Ramos, as part of the advance funds for theUSAFFE in Cagayan de Misamis. The balance of P400,000in cash was paid to Ramos by Laya from the f unds, not ofthe bank but of the Provincial Treasury. Said USAFFEwere being financed not by the Bank but by theGovernment and, presumably, one of the reasons for theissuance of the emergency notes in Mindanao was for thispurpose. As already stated, according to ProvincialTreasurer Laya, upon receiving a relatively considerable



amount of these emergency notes for his office, hedeposited P500,000 of said currency in the PhilippineNational Bank branch in Cebu, and that in issuing thecheck (Exh. A), he expected to have it cashed at said Cebubank branch against his deposit of P500,000.

The logical conclusion, therefore, is that the check wasissued by Laya only as Provincial Treasurer and as anofficial of the Government which was under obligation toprovide the USAFFE with advance funds, and not by the

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Philippine National Bank which had no such obligation.The very Annex C, made part of plaintiff's complaint, andlater introduced in evidence for him as Exhibit E statesthat Laya issued the check "in his capacity as ProvincialTreasurer of Misamis Oriental", obviously, not as agent ofthe Bank.

Now, did M. V. Ramos add or place those words belowthe signature of Laya before transferring the check toMontinola? Let us bear in mind that Ramos before hisinduction into the USAFFE had been working as assistantof Treasurer Laya as exofficio agent of the MisamisOriental branch of the Philippine National Bank.Naturally, Ramos must have known the procedure followedthere as to the issuance of checks, namely, that when acheck is issued by the Provincial Treasurer as such, it iscountersigned by the Provincial Auditor as was done on thecheck (Exhibit A), but that if the Provincial Treasurerissues a check as agent of the Philippine National Bank,the check is countersigned not by the Provincial Auditorwho has nothing to do with the bank, but by the bankcashier, which was not done in this case. It is not likely,therefore, that Ramos had made the insertion of the words"Agent, Phil National Bank" after he received the check,because he should have realized that following the practicealready described, the check having been issued by Laya asProvincial Treasurer, and not as agent of the bank, andsince the check bears the countersignature not of the Bankcashier but of the Provincial Auditor, the addition of thewords "Agent, Phil. National Bank" could not change thestatus and responsibility of the bank. It is therefore more



logical to believe and to find that the addition of thosewords was made after the check had been transferred byRamos to Montinola. Moreover, there are other facts andcircumstances involved in the case which support this view.Referring to the mimeographed record on appeal filed bythe plaintiffappellant, we find that in transcribing andcopying the check, particularly the face of it (Exhibit A) inthe complaint, the words "Agent, Phil. National Bank" now

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appearing on the face of the check under the signature ofthe Provincial Treasurer, is missing. Unless the plaintiff inmaking this copy or transcription in the complaintcommitted a serious omission which is decisive as far asthe bank is concerned, the inference is, that at the time thecomplaint was filed, said phrase did not appear on the faceof the check. That probably was the reason why the bank inits motion to dismiss dated September 2, 1947, contendedthat if the check in question had been issued by theprovincial treasurer in his capacity as agent of thePhilippine National Bank, said treasurer would haveplaced below his signature the words "Agent of thePhilippine National Bank". The plaintiff because of thealleged loss of the check, allegedly attached to thecomplaint a photostatic copy of said check and marked it asAnnex A. But in transcribing and copying said Annex A inhis complaint, the phrase "Agent, Phil. National Bank"does not appear under the signature of the provincialtreasurer. We tried to verify this discrepancy by going overthe original records of the Court of First Instance so as tocompare the copy of Annex A in the complaint, with theoriginal Annex A, the photostatic copy, but said originalAnnex A appears to be missing from the record. How itdisappeared is not explained. Of course, now we have in thelist of exhibits a photostatic copy marked Annex A andExhibit B, but according to the manifestation of counsel forthe plaintiff dated October 15, 1948, said photostatic copynow marked Annex A and Exhibit B was submitted onOctober 15, 1948, in compliance with the verbal order ofthe trial court. It is therefore evident that the Annex A nowavailable is not the same original Annex A attached to the



complaint in 1947.There is one other circumstance, important and worth

noting. If Annex A also marked Exhibit B is the photostaticcopy of the original check No. 1382 particularly the facethereof (Exhibit A), then said photostatic copy should be afaithful and accurate reproduction of the check.

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particularly of the phrase "Agent, Phil. National Bank"now appearing under the signature of the ProvincialTreasurer on the face of the original check (Exhibit A). Buta minute examination of and comparison between Annex A,the photostatic copy also marked Exhibit B and the f ace ofthe check, Exhibit A, especially with the aid of a hand lens,show notable differences and discrepancies. For instance,on Exhibit A, the letter A of the word "Agent" is toward theright of the tail of the beginning letter of the signature ofUbaldo D. Laya this same letter "A" however in Exhibit Bis directly under said tail.

The letter "N" of the word "National" on Exhibit A isunderneath the space between "Provincial" and"Treasurer" but the same letter "N" is directly under theletter "I" of the word "Provincial" in Exhibit B.

The first letter "a" of the word "National" is under "T" ofthe word "Treasurer" in Exhibit A but the same letter "a"in Exhibit "B" is just below the space between the words"Provincial" and "Treasurer".

The letter "k" of the word "Bank" in Exhibit A is afterthe green perpendicular border line near the lowerrighthand corner of the edge of the check (Exh. A) thissame letter "k" however, on Exhibit B is on the very borderline itself or even before said border line.

The closing parenthesis ")" on Exhibit A is a little farfrom the perpendicular green border line and appears to bedouble instead of one single line this same ")" on Exhibit Bappears in a single line and is relatively nearer to theborder line.

There are other notable discrepancies between the checkAnnex A and the photostatic copy, Exhibit B, as regardsthe relative position of the phrase "Agent, Phil., NationalBank", with the title Provincial Treasurer, giving ground to



the doubt that Exhibit B is a photostatic copy of the check(Exhibit A).

We then have the f ollowing facts. Exhibit A was issuedby Laya in his capacity as Provincial Treasurer of Misa

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mis Oriental as drawer on the Philippine National Bank asdrawee. Ramos sold P30,000 of the check to Enrique P.Montinola for P90,000 Japanese military notes, of whichonly P45,000 was paid by Montinola. The writing made byRamos at the back of the check was an instruction to thebank to pay P30,000 to Montinola and to deposit thebalance to his (Ramos) credit. This writing was obliteratedand in its place we now have the supposed indorsementappearing on the back of the check (Exh. A1).

At the time of the transfer of this check (Exh. A) toMontinola about the last days of December, 1944, or thefirst days of January, 1945, the check which, being anegotiable instrument, was payable on demand, was longoverdue by about 2 years. It may therefore be considered,even then, a stale check. Of course, Montinola claims thatabout June, 1944 when Ramos supposedly approached himfor the purpose' of negotiating the check, he (Montinola)consulted President Carmona of the Philippine NationalBank who assured him that the check was good andnegotiable. However, President Carmona on the witnessstand flatly denied Montinola's claim and assured the courtthat the first time that he saw Montinola was after thePhilippine National Bank, of which he was President,reopened, after liberation, around August or September,1945, and that when shown the check he told Montinolathat it was stale. M. V. Ramos also told the court that it isnot true that he ever went with Montinola to see PresidentCarmona about the check in 1944.

On the basis of the facts above related there are severalreasons why the complaint of Montinola cannot prosper.The insertion of the words "Agent, Phil. National Bank"which converts the bank from a mere drawee to a drawerand therefore changes its liability, constitutes a materialalteration of the instrument without the consent of theparties liable thereon, and so discharges the instrument.



(Section 124 of the Negotiable Instruments Law). Thecheck was not legally negotiated within the meaning of

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the Negotiable Instruments Law. Section 32 of the samelaw provides that "the indorsement must be anindorsement of the entire instrument. An indorsementwhich purports to transfer to the indorsee a part only of theamount payable, * * * (as in this case) does not operate as anegotiation of the instrument." Montinola may thereforenot be regarded as an indorsee. At most he may beregarded as a mere assignee of the P30,000 sold to him byRamos, in which case, as such assignee, he is subject to alldefenses available to the drawer Provincial Treasurer ofMisamis Oriental and against Ramos. Neither canMontinola be considered as a holder in due course becausesection 52 of said law defines a holder in due course as aholder who has taken the instrument under certainconditions, one of which is that he became the holder beforeit was overdue. When Montinola received the check, it waslong overdue. And, Montinola is not even a holder becausesection 191 of the same law defines holder as the payee orindorsee of a bill or note and Montinola is not a payee.Neither is he an indorsee for as already stated, at most hecan be considered only as assignee. Neither could it be saidthat he took it in good faith. As already stated, he has notpaid the full amount of P90,000 for which Ramos sold himP30,000 of the value of the check. In the second place, aswas stated by the trial court in its decision, Montinolaspeculated on the check and took a chance on its being paidafter the war. Montinola must have known that at the timethe check was issued in May, 1942, the money circulatingin Mindanao and the Visayas was only the emergencynotes and that the check was intended to be payable in thatcurrency. Also, he should have known that a check for sucha large amount of P100,000 could not have been issued toRamos in his private capacity but rather in his capacity asdisbursing officer of the USAFFE, and that at the time thatRamos sold a part of the check to him, Ramos was nolonger connected with the USAFFE



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but already a civilian who needed the money only forhimself and his family.

As already stated, as a mere assignee Montinola issubject to all the defenses available against assignorRamos. And, Ramos had he retained the check may notnow collect its value because it had been issued to him asdisbursing officer. As observed by the trial court, the checkwas issued to M. V. Ramos not as a person but M. V.Ramos as the disbursing officer of the USAFFE. Therefore,he had no right to indorse it personally to plaintiff. It wasnegotiated in breach of trust, hence he transferred nothingto the plaintiff.

In view of all the foregoing, finding no reversible error inthe decision appealed from, the same is hereby affirmedwith costs.

In the prayer f or relief contained at the end of the brieffor the Philippine National Bank dated September 27,1949, we find this prayer:

"It is also respectfully prayed that this Honorable Court refer thecheck, Exhibit A, to the City Fiscal's Office for appropriatecriminal action against the plaintiffappellant if the facts sowarrant."

Subsequently, in a petition signed by plaintiffappellantEnrique P. Montinola dated February 27, 1950, he askedthis Court to allow him to withdraw the original check(Exh. A) for him to keep, expressing his willingness tosubmit it to the Court whenever needed for examinationand verification. The bank on March 2, 1950 opposed thesaid petition on the ground that inasmuch as theappellant's cause of action in this case is based on the saidcheck, it is absolutely necessary for the court to examinethe original in order to see the actual alterationssupposedly made thereon, and that should this Court grantthe prayer contained in the bank's brief that the check belater referred to the city fiscal for appropriate action, saidcheck may no longer be available if the appellant is allowedto withdraw said document. In view of said opposition this



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196 PHILIPPINE REPORTS ANNOTATEDPeople vs. Colicio

Court by resolution of March 6, 1950, denied said petitionfor withdrawal.

Acting upon the petition contained in the bank's briefalready mentioned, once the decision becomes final, let theClerk of Court transmit to the city fiscal the check (Exh. A)together with all pertinent papers and documents in thiscase, for any action he may deem proper in the premises.

Moran, C. J., Pars, Feria, Pablo, Bengzon, Padilla,Tuason, Reyes and Bautista Angelo, JJ., concur.

Judgment affirmed, and relief prayed for granted.

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43) Montinola v. PNB

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