G.R. No. L-2861 February 26, 1951
Lessons Applicable: Alteration (Negotiable Instruments Law)
- April-May, 1942: Ubaldo D. Laya was the Provincial Treasurer of Misamis Oriental.
- As such Provincial Treasurer he was ex officio agent of the Philippine National Bank branch in the province.
- Mariano V. Ramos worked under him as assistant agent in the bank branch
- currency being used in Mindanao, particularly Misamis Oriental and Lanao which had not yet been occupied by the Japanese invading forces, was the emergency currency which had been issued since January, 1942 by the Mindanao Emergency Currency Board by authority of the late President Quezon.
- April 26, 1942: thru the recommendation of Provincial Treasurer Laya, his assistant agent M. V. Ramos was inducted into the United States Armed Forces in the Far East (USAFFE) as disbursing officer of an army division.
- April 30, 1942: M. V. Ramos,disbursing officer, went to Province Lanao to procure a cash advance in the amount of P800K for the use of the USAFFE
- Pedro Encarnacion, Provincial Treasurer of Lanao did not have that amount in cash so he gave Ramos P300,000 in emergency notes and a check for P500,000
- Ramos had no opportunity to cash the check because in the evening, the Japanese forces entered the capital
- May 2, 1942: Ramos went to the office of Provincial Treasurer Laya at Misamis Oriental to encash the check for P500,000 which he had received from the Provincial Treasurer of Lanao. Laya did not have enough cash to cover the check so he gave 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 P500,000 emergency notes in the Philippine National Bank branch in Cebu and he expected to have the check issued by him cashed in Cebu against said deposit.
- June 10, 1942: the USAFFE forces to which he was attached surrendered.
- Ramos was made a prisoner of war until February 12, 1943
- December, 1944: M. V. Ramos allegedly indorsed the check to Enrique P. Montinola.
- August, 1947: Enrique P. Montinola filed a complaint to collect the sum of P100,000, the amount of Check issued by the Provincial Treasurer of Misamis Oriental to Mariano V. Ramos and supposedly indorsed to Montinola
- court: dismissed
- W/N Montinola cannot hold PNB liable because there is "Agent, Phil. National Bank" is an alteration - YES
- W/N Montinola is a holder in due course - NO
- Montinola's Version
- June, 1944: Ramos, needing money with which to buy foodstuffs and medicine, offered to sell him the check; to be sure that it was genuine and negotiable, Montinola, accompanied by his agents and by Ramos himself, went to see President Carmona of the Philippine National Bank in Manila about said check, agreed to the sale of the check for P850,000 Japanese military notes, payable in installments; that of this amount, P450,000 was paid to Ramos in Japanese military notes in 5 installments, and the balance of P400,000 was paid in kind, that upon payment of the full price, M. V. Ramos duly indorsed the check to him.
- "Agent, Phil. National Bank" now appearing under the signature of the Provincial Treasurer on the face of the original check - 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). - doesn't make sense so alteration
- Montinola may therefore not be regarded as an indorsee. 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.
- Neither can Montinola be considered as a holder in due course because section 52 of said law defines a holder in due course as a holder who has taken the instrument under certain conditions, one of which is that he became the holder before it was overdue. When Montinola received the check, it was long overdue.
- Neither could it be said that he took it in good faith. He has not paid the full amount of P90,000 for which Ramos sold him P30,000 of the value of the check.
- check was 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