 changes the items which are required to be stated under Section 1 of the
Negotiable Instruments Law
C. ISSUANCE
3. Material Alterations
Sec.125, 124
Philippine Clearing House Corporation CHOM No. 15-460
[C 06] Metrobank vs. Cabilzo, 510 SCRA 259 (2006) – AKI
FACTS:
 November 12,1994: Renato D. Cabilzo (Cabilzo) issued a Metrobank
Check payable to "CASH" and postdated on November 24, 1994 in the
amount of P1,000 drawn against his Metrobank account to Mr. Marquez,
as his sales commission
 check was presented to Westmont Bank for payment who indorsed it
to Metrobank for appropriate clearing
 After the entries thereon were examined, including the availability of
funds and the authenticity of the signature of the drawer, Metrobank
cleared the check for encashment in accordance with the Philippine
Clearing House Corporation (PCHC) Rules
 November 16, 1994: Cabilzo’s representative was at Metrobank when he
was asked by a bank personnel if Cabilzo had issued a check in the
amount of P91K to which he replied in negative
 That afternoon: Cabilzo called Metrobank to reiterate that he did not
issue the check
 He later discovered that the check of P1K was altered to P91K and date
was changed from Nov 24 to Nov 14.
 Cabilzo demanded that Metrobank re-credit the amount of P91,000.00 to
his account
 June 30, 1995: Through counsel sent a letter-demand for the amount of
P90K
 CA affirmed RTC: Favored Cablizo
ISSUE: W/N Cablizo can recover from Metrobank
HELD: YES. CA Affirmed
 material alteration
 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 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.
 changes the effect of the instrument
 Section 125. What constitutes 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 relation 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.
 In the case at bar, the check was altered so that the amount was
increased from P1,000.00 to P91,000.00 and the date was changed from
24 November 1994 to 14 November 1994.
 Section 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,and assented to the alteration and subsequent
indorsers.
But when the 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 the
payment thereof according to its original tenor.
 Cabilzo was not the one who made nor authorized the alteration. Neither
did he assent to the alteration by his express or implied acts
 There is no showing that he failed to exercise such reasonable degree of
diligence required of a prudent man which could have otherwise
prevented the loss.
 bank must be a high degree of diligence, if not the utmost diligence
 Surprisingly, however, Metrobank failed to detect the above alterations
which could not escape the attention of even an ordinary person
 "NINETY" is also typed differently and with a lighter ink
 only 2 asterisks were placed before the amount in figures, while 3
asterisks were placed after such amount
 "NINETY" are likewise a little bigger when compared with the letters of
the words "ONE THOUSAND PESOS ONLY"
 When the drawee bank pays a materially altered check, it violates the
terms of the check, as well as its duty to charge its client’s account only
for bona fide disbursements he had made.
 The corollary liability of Westmont Ban's indorsement, if any, is separate
and independent from the liability of Metrobank to Cabilzo.
4. Consideration
Sec. 24, 25, 26, 27, 28,
Accommodation party
Sec. 29
[C 07] Aglibot vs. Santia, 687 SCRA 283 (2012) – MICHA
FACTS: Engr. Ingersol L. Santia (Santia) loaned the amount of
P2,500,000.00 to Pacific Lending & Capital Corporation (PLCC), through its
Manager, petitioner Fideliza J. Aglibot (Aglibot). The loan was evidenced by
a promissory note. Allegedly as a guaranty for the payment of the note,
Aglibot issued and delivered to Santia eleven (11) post-dated personal
checks drawn from her own account maintained at Metrobank. Upon
presentment of the checks for payment, they were dishonored by the bank
for having been drawn against insufficient funds or closed account. Santia
thus demanded payment from PLCC and Aglibot of the face value of the
checks, but neither of them heeded his demand. Consequently, eleven (11)
Informations for violation of B.P. 22 were filed before the MTCC.
MTCC acquitted Aglibot. On appeal, the RTC rendered a decision absolving
Aglibot and dismissing the civil aspect of the case on the ground of failure to
fulfill a condition precedent of exhausting all means to collect from the
principal debtor.
On appeal, the Court of Appeals ruled that the RTC erred when it dismissed
the civil aspect of the case. Hence, the CA ruled that Aglibot is personally
liable for the loan.
Thus, Aglibot filed this instant petition for certiorari. She argued that she was
merely a guarantor of the obligation and therefore, entitled to the benefit of
excussion under Article of the 2058 of the Civil Code. She further posited that
she is not personally liable on the checks since she merely contracted the
loan in behalf of PLCC.
ISSUES:
Is Aglibot entitled to the benefit of excussion?
Is Aglibot personally liable on the checks?
HELD: It is settled that the liability of the guarantor is only subsidiary, and all
the properties of the principal debtor, the PLCC in this case, must first be
exhausted before the guarantor may be held answerable for the debt. Thus,
the creditor may hold the guarantor liable only after judgment has been
obtained against the principal debtor and the latter is unable to pay, for
obviously the exhaustion of the principals property the benefit of which the
guarantor claims cannot even begin to take place before judgment has been
obtained. This rule is contained in Article 2062 of the Civil Code, which
provides that the action brought by the creditor must be filed against the
principal debtor alone, except in some instances mentioned in Article 2059
when the action may be brought against both the guarantor and the principal
debtor.
The Court must, however, reject Aglibots claim as a mere guarantor of the
indebtedness of PLCC to Santia for want of proof, in view of Article 1403(2)
of the Civil Code, embodying the Statute of Frauds. Under the above
provision, concerning a guaranty agreement, which is a promise to answer
for the debt or default of another, the law clearly requires that it, or some note
or memorandum thereof, be in writing. Otherwise, it would be unenforceable
unless ratified, although under Article 1358 of the Civil Code, a contract of
guaranty does not have to appear in a public document. Contracts are
generally obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present, and the
Statute of Frauds simply provides the method by which the contracts
enumerated in Article 1403(2) may be proved, but it does not declare them
invalid just because they are not reduced to writing. Thus, the form required
under the Statute is for convenience or evidentiary purposes only.
On the other hand, Article 2055 of the Civil Code also provides that a
guaranty is not presumed, but must be express, and cannot extend to more
than what is stipulated therein. This is the obvious rationale why a contract of
guarantee is unenforceable unless made in writing or evidenced by some
writing.
***
The appellate court ruled that by issuing her own post-dated checks, Aglibot
thereby bound herself personally and solidarily to pay Santia, and dismissed
her claim that she issued her said checks in her official capacity as PLCCs
manager merely to guarantee the investment of Santia. The facts present a
clear situation where Aglibot, as the manager of PLCC, agreed to
accommodate its loan to Santia by issuing her own post-dated checks in
payment thereof. She is what the Negotiable Instruments Law calls an
accommodation party.
The relation between an accommodation party and the party accommodated
is, in effect, one of principal and surety the accommodation party being the
surety. It is a settled rule that a surety is bound equally and absolutely with
the principal and is deemed an original promisor and debtor from the
beginning. The liability is immediate and direct. It is not a valid defense that
the accommodation party did not receive any valuable consideration when he
executed the instrument; nor is it correct to say that the holder for value is not
a holder in due course merely because at the time he acquired the
instrument, he knew that the indorser was only an accommodation party.
Unlike in a contract of suretyship, the liability of the accommodation party
remains not only primary but also unconditional to a holder for value, such
that even if the accommodated party receives an extension of the period for
payment without the consent of the accommodation party, the latter is still
liable for the whole obligation and such extension does not release him
because as far as a holder for value is concerned, he is a solidary co-debtor.
DENIED
[C 08] Travel-On Inc., 210 SCRA 351 (1992) - JEWEL
FACTS:
 Arturo S. Miranda
 had a revolving credit line with Travel-On. Inc. (Travel-On), a travel
agency selling airline tickets on commission basis for and in behalf of
different airline companies
 procured tickets from Travel-On on behalf of airline passengers and
derived commissions therefrom.
 June 14 1972: Travel-On filed bef. the CFI to collect 6 checks issued by
Miranda totaling P115,000.00
 August 5 1969 - January 16 1970: Travel-On sold and delivered airline
tickets to Miranda w/ total price of P278,201.57
 paid in cash and 6 checks = P115,000 - all dishonored by the drawee
banks
 March 1972: paid P10,000.00 reducing his debts to P105,000
 Miranda: checks were issued for to "accommodate" Travel-On's General
Manager to show the BOD of Travel-On that their receivables were still
good
 Travel-On's witness, Elita Montilla: related to situations where its
passengers needed money in Hongkong, and upon request of Travel-
On, Miranda would contact his friends in Hongkong to advance
Hongkong money to the passenger
 CA affirmed CFI: ordered Travel-On to pay Miranda P8,894.91
representing net overpayments by private respondent, moral damages of
P10,000.00 (later increased to P50,000 by CFI and reduced by CA to
P20,000) for the wrongful issuance of the writ of attachment and for the
filing of this case, P5,000.00 for attorney's fees and the costs of the suit -
decision was because Travel-On did not show that Miranda had an
outstanding balance of P115,000.00
ISSUE: W/N Miranda is liable for the 6 dishonored checks because there
was no accomodation
HELD: YES. GRANT due course to the Petition for Review on Certiorari and
to REVERSE and SET ASIDE the Decision of the CA and trial court
 failed to give due importance the checks themselves as evidence of the
debt
 check which is regular on its face is deemed prima facie to have been
issued for a valuable consideration and every person whose signature
appears thereon is deemed to have become a party thereto for value.
 negotiable instrument is presumed to have been given or indorsed for a The trial court held in favor of Salazar.
sufficient consideration unless otherwise contradicted and overcome by
other competent evidence ISSUE:
 Those checks in themselves constituted evidence of indebtedness of
Does a collecting bank, over the objections of its depositor, have
Miranda, evidence not successfully overturned or rebutted by private
the authority to withdraw unilaterally from such depositor’s account the
respondent.
amount it had previously paid upon certain unendorsed order instruments
 While the Negotiable Instruments Law does refer to accommodation
deposited by the depositor to another account that she later closed?
transactions, no such transaction was here shown
 Sec. 29. Liability of accommodation party. — An accommodation party is
HELD:
one who has signed the instrument as maker, drawer, acceptor, or
In the present case, the records do not support the finding made by the CA
indorser, without receiving value therefor, and for the purpose of lending
and the trial court that a prior arrangement existed between Salazar and
his name to some other person. Such a person is liable on the
Templonuevo regarding the transfer of ownership of the checks. This fact is
instrument to a holder for value, notwithstanding such holder, at the time
crucial as Salazar’s entitlement to the value of the instruments is based on
of taking the instrument, knew him to be only an accommodation party.
the assumption that she is a transferee within the contemplation of Section
 Having issued or indorsed the check, the accommodating party has
49 of the Negotiable Instruments Law.
warranted to the holder in due course that he will pay the same
according to its tenor.
Transferees in this situation do not enjoy the presumption of ownership in
 Travel-On obviously was not an accommodated party; it realized no
favor of holders since they are neither payees nor indorsees of such
value on the checks which bounced.
instruments. The weight of authority is that the mere possession of a
negotiable instrument does not in itself conclusively establish either the
D. NEGOTIATION
right of the possessor to receive payment, or of the right of one who has
made payment to be discharged from liability. Thus, something more than
8. Transfer without Indorsement
mere possession by persons who are not payees or indorsers of the
Sec. 49
instrument is necessary to authorize payment to them in the absence
of any other facts from which the authority to receive payment may be
[D 01] BPI vs. CA, 512 SCRA 620 (2007) – KATE
inferred.
FACTS:
Even if the delay in the demand for reimbursement is taken in conjunction
Templonuevo demanded payment from petitioner of a sum of money
with Salazar’s possession of the checks, it cannot be said that the
representing the aggregate value of three checks which were allegedly
presumption of ownership in Templonuevo’s favor as the designated payee
payable to him but which were deposited with the petitioner to Salazar
therein was sufficiently overcome. This is consistent with the principle that
’s account, without his knowledge and corresponding endorsement. Finding
if instruments payable to named payees or to their order have not bee
merit in the demands of Templonuevo, the bank then froze the account of the
n indorsed in blank, only such payees or their indorsees can be holders and
engineering firm as the account of Salazar was already closed or had
entitled to receive payment in their own right.
insufficient funds. Failure of any settlement between Templonuevo and
Salazar, this prompted the bank to debit the account of Salazar and give
The presumption that a negotiable instrument was given for a sufficient
back the money to Templonuevo through cashier’s check. The account of
consideration will not inure to the benefit of Salazar because the term
Salazar was also debited for whatever charges incurred for the issuance of
“given” does not pertain merely to a transfer of physical possession of the
the cashier’s check.
instrument. The phrase “given or indorsed” in the context of a negotiable
instrument refers to the manner in which such instrument may be
negotiated. policy and practice. It must be emphasized that the law imposes a duty of
diligence on the collecting bank to scrutinize checks deposited with it, for the
It is an exception to the general rule for a payee of an order instrument to purpose of determining their genuineness and regularity. The collecting bank,
transfer the instrument without indorsement. Precisely because the being primarily engaged in banking, holds itself out to the public as
situation is abnormal, it is but fair to the maker and to prior holders t the expert on this field, and the law thus holds it to a high standard
o of conduct. The taking and collection of a check without the proper
require possessors to prove without the aid of an initial presumption in indorsement amount to a conversion of the check by the bank.

their favor, that they came into possession by virtue of a legitimate
transaction with the last holder. Salazar failed to discharge this burden,
and the return of the check proceeds to Templonuevo was therefore
warranted under the circumstances despite the fact that Templonuevo may
not have clearly demonstrated that he never authorized Salazar to deposit
the checks or to encash the same. Noteworthy also is the fact that
petitioner stamped on the back of the checks the words: "All prior
endorsements and/or lack of endorsements guaranteed," thereby makin
g the assurance that it had ascertained the genuineness of all prior
endorsements. Having assumed the liability of a general indorser,
petitioner’s liability to the designated payee cannot be denied.
Consequently, petitioner, as the collecting bank, had the right to debit
Salazar’s account for the value of the checks it previously credited in her
favor. However, the issue of whether it acted judiciously is an entirely
different matter. As businesses affected with public interest, and because
of the nature of their functions, banks are under obligation to treat the
accounts of their depositors with meticulous care, always having in min
d
the fiduciary nature of their relationship. In this regard, petitioner was
clearly remiss in its duty to private respondent Salazar as its depositor
.
More importantly, however, solely upon the prompting of Templonuevo,
and with full knowledge of the brewing dispute between Salazar and
Templonuevo, petitioner debited the account held in the name of the sole
proprietorship of Salazar without even serving due notice upon her. Thi
s ran contrary to petitioner’s assurances to private respondent Salazar that
the account would remain untouched, pending the resolution of the
controversy between her and Templonuevo. For the above reasons, the
Court finds no reason to disturb the award of damages granted
by the CA against petitioner. This whole incident would
have been avoided had petitioner adhered to the standard of diligence
expected of one engaged in the banking business. A depositor has the right
to recover reasonable moral damages even if the bank’s negligence m
ay
not have been attended with malice and bad faith, if the former suffer
ed mental anguish, serious anxiety, embarrassment and humiliation

To begin with, the irregularity appeared plainly on the face of the checks.
Despite the obvious lack of indorsement thereon, petitioner permitted the
encashment of these checks three times on three separate occasions. This
negates petitioner’s claim that it merely made a mistake in crediting th
e value of the checks to Salazar’s account and instead bolsters the
conclusion of the CA that petitioner recognized Salazar’s claim of ownership
of checks
and acted deliberately in paying the same, contrary to ordinary banking