THIRD DIVISION
THE INTERNATIONAL G.R. No. 129910
CORPORATE BANK, INC.,
Petitioner, Present:
QUISUMBING, J.,
Chairperson,
CARPIO,
-
versus - CARPIO
MORALES,
TINGA,
and
VELASCO, JR., JJ.
COURT OF APPEALS and Promulgated:
PHILIPPINE NATIONAL BANK,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - -
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D E C I S
I O N
CARPIO, J.:
The Case
Before
the Court is a petition for review[1]
assailing the
The Antecedent Facts
The
case originated from an action for collection of sum of money filed on
The
Ministry of Education and Culture issued 15 checks[5]
drawn against respondent which petitioner accepted for deposit on various
dates. The checks are as follows:
|
Check
Number |
Date |
Payee |
Amount |
|
7-3694621-4 |
|
Trade Factors, Inc. |
|
|
7-3694609-6 |
|
Romero D. Palmares |
98,500.50 |
|
7-3666224-4 |
|
Trade Factors, Inc. |
99,800.00 |
|
7-3528348-4 |
|
Trade Factors, Inc. |
98,600.00 |
|
7-3666225-5 |
|
Antonio Lisan |
98,900.00 |
|
7-3688945-6 |
|
Antonio Lisan |
97,700.00 |
|
7-4535674-1 |
|
|
95,300.00 |
|
7-4535675-2 |
|
Red Arrow Trading |
96,400.00 |
|
7-4535699-5 |
|
Antonio Lisan |
94,200.00 |
|
7-4535700-6 |
|
Antonio Lisan |
95,100.00 |
|
7-4697902-2 |
|
Ace Enterprises, Inc. |
96,000.00 |
|
7-4697925-6 |
|
|
93,030.00 |
|
7-4697011-6 |
|
Wintrade Marketing |
90,960.00 |
|
7-4697909-4 |
|
ABC Trading, Inc. |
99,300.00 |
|
7-4697922-3 |
|
Golden Enterprises |
96,630.00 |
The
checks were deposited on the following dates for the following accounts:
|
Check Number |
Date Deposited |
Account Deposited |
|
7-3694621-4 |
|
CA 0060 02360 3 |
|
7-3694609-6 |
|
CA 0060 02360 3 |
|
7-3666224-4 |
|
CA 0060 02360 3 |
|
7-3528348-4 |
|
CA 0060 02360 3 |
|
7-3666225-5 |
|
SA 0061 32331 7 |
|
7-3688945-6 |
|
CA 0060 30982 5 |
|
7-4535674-1 |
|
CA 0060 02360 3 |
|
7-4535675-2 |
|
CA 0060 02360 3 |
|
7-4535699-5 |
|
CA 0060 30982 5 |
|
7-4535700-6 |
|
SA 0061 32331 7 |
|
7-4697902-2 |
|
CA 0060 02360 3 |
|
7-4697925-6 |
|
CA 0060 30982 5 |
|
7-4697011-6 |
|
CA 0060 02360 3 |
|
7-4697909-4 |
|
CA 0060 30982 5[6] |
After
24 hours from submission of the checks to respondent for clearing, petitioner
paid the value of the checks and allowed the withdrawals of the deposits. However, on
The Ruling of the Trial Court
The
trial court ruled that respondent is expected to use reasonable business
practices in accepting and paying the checks presented to it. Thus, respondent cannot be faulted for the
delay in clearing the checks considering the ingenuity in which the alterations
were effected. The trial court observed
that there was no attempt from petitioner to verify the status of the checks
before petitioner paid the value of the checks or allowed withdrawal of
the deposits. According to the trial court, petitioner, as
collecting bank, could have inquired by
telephone from respondent, as drawee bank, about the
status of the checks before paying their value.
Since the immediate cause of petitioner’s
loss was the lack of caution of its personnel, the trial court held that
petitioner is not entitled to recover the value of the checks from respondent.
The
dispositive portion of the trial court’s Decision reads:
WHEREFORE, judgment is hereby rendered dismissing both the complaint and the counterclaim. Costs shall, however be assessed against the plaintiff.
SO ORDERED.[7]
Petitioner
appealed the trial court’s Decision before the Court of
Appeals.
The Ruling of the Court of Appeals
In
its
Does this mean that, as long as the drawee bank returns a check with material alteration within 24 hour[s] after discovery of such alteration, such return would have the effect of relieving the bank of any liability whatsoever despite its failure to return the check within the 24- hour clearing house rule?
We do not think so.
Obviously, such bank cannot be held liable for its failure to return the check in question not later than the next regular clearing. However, this Court is of the opinion and so holds that it could still be held liable if it fails to exercise due diligence in verifying the alterations made. In other words, such bank would still be expected, nay required, to make the proper verification before the 24-hour regular clearing period lapses, or in cases where such lapses may be deemed inevitable, that the required verification should be made within a reasonable time.
The implication of the rule that a check shall be returned within the 24-hour clearing period is that if the collecting bank paid the check before the end of the aforesaid 24-hour clearing period, it would be responsible therefor such that if the said check is dishonored and returned within the 24-hour clearing period, the drawee bank cannot be held liable. Would such an implication apply in the case of materially altered checks returned within 24 hours after discovery? This Court finds nothing in the letter of the above-cited C.B. Circular that would justify a negative answer. Nonetheless, the drawee bank could still be held liable in certain instances. Even if the return of the check/s in question is done within 24 hours after discovery, if it can be shown that the drawee bank had been patently negligent in the performance of its verification function, this Court finds no reason why the said bank should be relieved of liability.
Although banking
practice has it that the presumption of clearance is conclusive when it comes
to the application of the 24-hour clearing period, the same principle may not be applied to the
24-hour period vis-a-vis
material alterations in the sense that the drawee
bank which returns materially altered checks
within 24 hours after discovery would be conclusively relieved of any
liability thereon. This is because there
could well be various intervening events or factors that could affect the
rights and obligations of the parties in cases such as the instant one
including patent negligence on the part
of the drawee bank resulting in an unreasonable delay
in detecting the alterations. While it
is true that the pertinent proviso in C.B. Circular No. 580 allows the drawee bank to return the altered check within the period “provided by law for filing a legal action”, this does not mean
that this would entitle or allow the drawee bank to
be grossly negligent and, inspite thereof, avail
itself of the maximum period allowed by the above-cited Circular. The discovery must be made within a
reasonable time taking into consideration the facts and circumstances of the
case. In other words, the aforementioned
C.B. Circular does not provide the drawee bank the license
to be grossly negligent on the one hand nor does it preclude the collecting
bank from raising available defenses even if the check is properly returned
within the 24-hour period after discovery of the material alteration.[10]
The
Court of Appeals rejected the trial court’s
opinion that petitioner could have verified the status of the checks by
telephone call since such imposition is not required under Central Bank
rules. The dispositive
portion of the
PREMISES
CONSIDERED, the decision appealed from is hereby REVERSED and the defendant-appellee Philippine National Bank is declared liable for
the value of the fifteen checks specified and enumerated in the decision of the
trial court (page 3) in the amount of P1,447,920.00
SO ORDERED.[11]
Respondent
filed a motion for reconsideration of the
In
reversing itself, the Court of Appeals held that its 10 October 1991 Decision
failed to appreciate that the rule on the return of altered checks within 24
hours from the discovery of the alteration had been duly passed by the Central
Bank and accepted by the members of the banking system. Until the rule is repealed or amended, the
rule has to be applied.
Petitioner
moved for the reconsideration of the Amended Decision. In its
Hence,
the recourse to this Court.
The Issues
Petitioner
raises the following issues in its Memorandum:
1.
Whether the checks were materially
altered;
2. Whether
respondent was negligent in failing to recognize within a reasonable period the altered checks and in not returning the checks within the period; and
3. Whether the motion for reconsideration filed
by respondent was out of time thus
making the
The Ruling of This
Court
Filing of the Petition under both
Rules 45 and 65
Respondent
asserts that the petition should be dismissed outright since petitioner availed
of a wrong mode of appeal. Respondent
cites Ybañez v. Court of Appeals[13]
where the Court ruled that “a petition cannot be subsumed simultaneously under
Rule 45 and Rule 65 of the Rules of Court, and neither may petitioners delegate
upon the court the task of determining under which rule the petition should
fall.”
The
remedies of appeal and certiorari are mutually exclusive and not alternative or
successive.[14] However, this Court may set aside
technicality for justifiable reasons.
The petition before the Court is clearly meritorious. Further, the petition was filed on time both
under Rules 45 and 65.[15] Hence, in accordance with the liberal spirit
which pervades the Rules of Court and in the interest of justice,[16]
we will treat the petition as having been filed under Rule 45.
Alteration of Serial Number Not
Material
The alterations in the checks were made
on their serial numbers.
Sections
124 and 125 of Act No. 2031, otherwise known as the Negotiable Instruments Law,
provide:
SEC. 124. Alteration of instrument; effect of. ― Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized, or assented to the alteration and subsequent indorsers.
But when an instrument has been materially altered and is in the hands of a holder in due course, not a party to the alteration, he may enforce payment thereof according to its original tenor.
SEC. 125. What constitutes a material alteration. ― Any alteration which changes:
(a) The date;
(b) The sum payable, either for principal or interest;
(c) The time or place of payment;
(d) The number or the relations of the parties;
(e) The medium or currency in which payment is to be made;
or which adds a place of payment where no place of payment is specified,
or any other change or addition which alters the effect of the instrument in
any respect, is a material alteration.
The
question on whether an alteration of the serial number of a check is a material
alteration under the Negotiable Instruments Law is already a settled
matter. In Philippine National Bank
v. Court of Appeals, this Court ruled that the alteration on the serial
number of a check is not a material alteration.
Thus:
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 Instrument[s] Law.
Section 1 of the Negotiable Instruments Law provides:
Section 1. ― Form of negotiable instruments. An instrument to be negotiable must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
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.
x x x x
The case at the 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 Instruments 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. x x x
x x x x
The check’s 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 check’s issuer was therefore sufficiently identified, rendering the referral to the serial number redundant and inconsequential. x x x
x x x x
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.[17]
Likewise,
in the present case the alterations of the serial numbers do not constitute
material alterations on the checks.
Incidentally,
we agree with the petitioner’s observation that the check in the PNB case appears to belong to
the same batch of checks as in the present case. The check in the PNB case was also
issued by the Ministry of Education and Culture. It was also drawn against PNB, respondent in
this case. The serial number of the
check in the PNB case is 7-3666-223-3 and it was issued on
Timeliness of Filing of Respondent’s Motion for Reconsideration
Respondent
filed its motion for reconsideration of the
There are instances when rules of procedure
are relaxed in the interest of justice.
However, in this case, respondent did not proffer any explanation for
the late filing of the motion for reconsideration. Instead, there was a deliberate attempt to
deceive the Court of Appeals by claiming that the copy of the
The 24-Hour Clearing Time
The
Court will not rule on the proper application of Central Bank Circular No. 580 in this
case. Since there were no material
alterations on the checks, respondent as drawee bank
has no right to dishonor them and return them to petitioner, the collecting
bank.[21]
Thus, respondent is liable to petitioner for the value of the checks, with
legal interest from the time of filing of the complaint on P1,447,920, had become final and executory.
WHEREFORE,
we SET ASIDE the P1,447,920, with legal interest from
SO
ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CONCHITA CARPIO MORALES DANTE O. TINGA
Associate Justice Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice
ATTESTATION
I attest that the
conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the
Constitution, and the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
ARTEMIO V.
PANGANIBAN
Chief Justice
[1] Petitioner denonimated the petition as filed under both Rule 45 and Rule 65 of the 1997 Rules of Civil Procedure.
[2] Penned by Associate Justice Serafin V.C. Guingona with Associate Justices Jorge S. Imperial and Justo P. Torres, Jr., concurring. Rollo, pp. 25-34.
[3] Penned by Associate Justice Jorge S. Imperial with Associate Justices Ramon U. Mabutas, Jr. and Hilarion L. Aquino, concurring. Rollo, p. 23.
[4] Now the Union Bank of the
[5] The first 14 checks were the subject of the complaint while the last check was included in the amended complaint.
[6] The deposit slip of Check No. 7-4697922-3 was not presented before the trial court.
[7] Rollo, p. 295.
[8] Penned by Associate Justice Serafin V.C. Guingona with Associate Justices Luis A. Javellana and Jorge S. Imperial, concurring. Rollo, pp. 47-58.
[9] Section 4(c) provides:
SECTION
4. Clearing Procedures.
x x x x
(c) Procedure for Returned Items
Items which should be returned for any
reason whatsoever shall be presented not later than the next regular clearing
for local exchanges. Out-of-town
exchanges shall be returned within the period specified in the Memorandum to
Authorized Agent Banks announcing the opening of clearing facilities in each of
the authorized regional clearing centers.
x x x
Items which have been the subject
of a material alteration or items
bearing a forged endorsement when such endorsement is necessary for negotiation
shall be returned within twenty-four (24) hours after discovery of the
alteration or the forgery but in no event beyond the period fixed or provided by
law for filing of a legal action by the returning bank/branch, institution or
entity against the bank/branch, institution or entity sending the same.
x x x x
[10] Rollo, pp. 53-54.
[11]
[13] 323 Phil. 643 (1996).
[14] Ligon v. CA, 355 Phil. 503 (1998).
[15] Nuñez v.
GSIS Family Bank, G.R. No. 163988,
[16]
[17] 326 Phil. 504 (1996), 511-516.
[18] CA rollo, p. 86.
[19]
[20]
[21] PNB v. CA, supra note 17.
[22] Article 2209, Civil Code.