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Name: Rhea Jessica Otarra

Subject: Legal Instruments

Title: Metro Bank and Trust Company V. Cabilzo
Citation: GR. No. 154469
On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988, payable to
"CASH" and postdated on 24 November 1994 in the amount of One Thousand Pesos
(P1,000.00). The check was drawn against Cabilzos Account with Metrobank Pasong
Tamo Branch under Current Account No. 618044873-3 and was paid by Cabilzo to a
certain Mr. Marquez, as his sales commission. The check was presented to Westbank
and was further endorsed to Metrobank for clearing. The check was then cleared for
On 16 November 1994, Cabilzos representative was at Metrobank Pasong Tamo
Branch to make some transaction when he was asked by a bank personnel if Cabilzo
had issued a check in the amount of P91,000.00 to which the former replied in the
negative. On the afternoon of the same date, Cabilzo himself called Metrobank to
reiterate that he did not issue a check in the amount of P91,000.00 and requested that
the questioned check be returned to him for verification, to which Metrobank complied.
Upon receipt of the check, Cabilzo discovered that Metrobank Check No. 985988 which
he issued on 12 November 1994 in the amount of P1,000.00 was altered to P91,000.00
and the date 24 November 1994 was changed to 14 November 1994.
On 4 September 1998, the RTC rendered a decision in favor of Cabilzo and thereby
ordered Metrobank to pay the sum of P90,000.00, the amount of the check. In stressing
the fiduciary nature of the relationship between the bank and its clients and the
negligence of the drawee bank in failing to detect an apparent alteration on the check,
the trial court ordered for the payment of exemplary damages, attorneys fees and cost
of litigation.

Upon appeal, 8 March 2002, the Court of Appeals affirmed with modification the
Decision of the court a quo, similarly finding Metrobank liable for the amount of the
1. Whether or not the Court of Appeals erred in finding Metrobank is liable.
No, the Court of Appeals was correct.
An alteration is said to be material if it changes the effect of the instrument. It means
that 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 Instruments 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
(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.

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. Apparently, since the entries altered were among those enumerated
under Section 1 and 125, namely, the sum of money payable and the date of the check,
the instant controversy therefore squarely falls within the purview of material alteration.
In the present case, it is obvious that Metrobank was remiss in that duty and violated
that relationship. As observed by the Court of Appeals, there are material alterations on
the check that are visible to the naked eye. Thus:
x x x The number "1" in the date is clearly imposed on a white figure in the shape
of the number "2". The appellants employees who examined the said check
should have likewise been put on guard as to why at the end of the amount in
words, i.e., after the word "ONLY", there are 4 asterisks, while at the beginning of
the line or before said phrase, there is none, even as 4 asterisks have been
placed before and after the word "CASH" in the space for payee. In addition, the
4 asterisks before the words "ONE THOUSAND PESOS ONLY" have noticeably
been erased with typing correction paper, leaving white marks, over which the
word "NINETY" was superimposed. The same can be said of the numeral "9" in
the amount "91,000", which is superimposed over a whitish mark, obviously an
erasure, in lieu of the asterisk which was deleted to insert the said figure. The
appellants employees should have again noticed why only 2 asterisks were
placed before the amount in figures, while 3 asterisks were placed after such
amount. The word "NINETY" is also typed differently and with a lighter ink, when
compared with the words "ONE THOUSAND PESOS ONLY." The letters of the
word "NINETY" are likewise a little bigger when compared with the letters of the
Surprisingly, however, Metrobank failed to detect the above alterations which could not
escape the attention of even an ordinary person

Title: Bank of America NT & SA V. Philippine Racing Club

Citation: GR No. 150228
Plaintiff-appellee PRCI is a domestic corporation which maintains several accounts with
different banks in the Metro Manila area. Among the accounts maintained was Current
Account No. 58891-012 with defendant-appellant. The authorized joint signatories with
respect to said Current Account were plaintiff-appellees President and Vice President
for Finance.
On or about the 2nd week of December 1988, the President and Vice President of
plaintiff-appellee corporation were scheduled to go out of the country in connection with
the corporations business. In order not to disrupt operations in their absence, they presigned several checks relating to Current Account No. 58891-012. The intention was to
insure continuity of plaintiff-appellees operations by making available cash/money
especially to settle obligations that might become due. These checks were entrusted to
the accountant with instruction to make use of the same as the need arose. The internal
arrangement was, in the event there was need to make use of the checks, the
accountant would prepare the corresponding voucher and thereafter complete the
entries on the pre-signed checks.
It turned out that on December 16, 1988, a John Doe presented to defendant-appellant
bank for encashment a couple of plaintiff-appellee corporations checks (Nos. 401116
and 401117) with the indicated value of P110,000.00 each. It is admitted that these 2
checks were among those presigned by plaintiff-appellee corporations authorized

The two (2) checks had similar entries with similar infirmities and irregularities. On the
space where the name of the payee should be indicated (Pay To The Order Of) the
following 2-line entries were instead typewritten: on the upper line was the word "CASH"
while the lower line had the following typewritten words, "ONE HUNDRED TEN
THOUSAND PESOS ONLY." Despite the highly irregular entries on the face of the
checks, defendant-appellant bank, without as much as verifying and/or confirming the
legitimacy of the checks considering the substantial amount involved and the obvious
infirmity/defect of the checks on their faces, encashed said checks. A verification
process, even by was of a telephone call to PRCI office, would have taken less than ten
(10) minutes. But this was not done by BA. Investigation conducted by plaintiff-appellee
corporation yielded the fact that there was no transaction involving PRCI that call for the
payment of P220,000.00 to anyone. The checks appeared to have come into the hands
of an employee of PRCI (one Clarita Mesina who was subsequently criminally charged
for qualified theft) who eventually completed without authority the entries on the presigned checks. PRCIs demand for defendant-appellant to pay fell on deaf ears.

1. Whether or not the Court of Appeals gravely erred in not applying Section 14 of
the Negotiable Instruments Law, despite its clear applicability to this case.

No, The Court of Appeals did not err on making the decision
In defense of its cashier/tellers questionable action, petitioner insists that pursuant to
Sections 14 and 16 of the NIL, it could validly presume, upon presentation of the
checks, that the party who filled up the blanks had authority and that a valid and
intentional delivery to the party presenting the checks had taken place. Thus, in
petitioners view, the sole blame for this debacle should be shifted to respondent for
having its signatories pre-sign and deliver the subject checks. Petitioner argues that
there was indeed delivery in this case because, following American jurisprudence, the

gross negligence of respondents accountant in safekeeping the subject checks which

resulted in their theft should be treated as a voluntary delivery by the maker who is
estopped from claiming non-delivery of the instrument.
Petitioners contention would have been correct if the subject checks were correctly and
properly filled out by the thief and presented to the bank in good order. In that instance,
there would be nothing to give notice to the bank of any infirmity in the title of the holder
of the checks and it could validly presume that there was proper delivery to the holder.
The bank could not be faulted if it encashed the checks under those circumstances.
However, the undisputed facts plainly show that there were circumstances that should
have alerted the bank to the likelihood that the checks were not properly delivered to the
person who encashed the same. In all, we see no reason to depart from the finding in
the assailed CA Decision that the subject checks are properly characterized as
incomplete and undelivered instruments thus making Section 15 of the NIL applicable in
this case.