MATIENZO, FELIP BRYAN D.

NEGOTIABLE INSTRUMENTS
2B-JD5 OCTOBER 10, 2018

DOES CHOM NO. 15-460 VIOLATE THE NIL?

A negotiable instrument is a document contemplated by or

consisting of a contract, which promises the payment of money
without condition, which may be paid either on demand or at a future
date.
The Negotiable Instrument Law (NIL) is an enactment by
congress in 1911 which governs negotiable instruments and its
validity, with that said, the Philippine Clearing House Corporation
(PCHC) in 2015 released CHOM 15-460A which is the non-
acceptance of check with erasure, alteration and/or deficiency, the
said memorandum has its purpose of shortening the processing day
from 3 days to 1 day as it was before, and to act as an additional
security measure by the banks.
To simplify an example is Nina issued a check to Felip Del
Mundo drawn against PNB, upon presentation to the bank the bank
rejected because the indicated name was “Felip Delmundo”, Felip can
resort to ask Nina to re-issue an correct altered check which makes
the first check invalid for the mere error in its spacing.
But the main issue is the validity of the said memorandum
violates the law of NIL?
In the case Metrobank vs Cabilzo 510 SCRA 259 (2006),
where a check issued was altered from 1000 pesos to 91000 and was
released by the bank for encashment.
The Supreme Court ruled in favor of Cabilzo because the
instrument was altered referencing to the NIL Sec.1 on the
requirements to makes an instrument negotiable (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
MATIENZO, FELIP BRYAN D. NEGOTIABLE INSTRUMENTS
2B-JD5 OCTOBER 10, 2018

indicated therein with reasonable certainty. Sec124 and 125 which

also gives the effect of alteration of the instrument with the exception
in Sec.124 that is to “except as against a party who has himself
made, authorized, and assented to the alteration and subsequent
indorsers.”
Consequently, the bank is separately liable to Cabilzo from
Westmont Ban’s indorsement. 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 and a bank must
be a high degree of diligence, if not the utmost diligence.
The main issue is the validity of CHOM 15-460 against the NIL.
Let us do appreciate the effort of PCHA in doing a good job in
ensuring that the issuance and use of checks—one of the prime tools
of present-day commerce—are carefully regulated and properly
monitored.
But as PCHA is a private corporation and has no authority to
amend the law/s which is only vested to Congress, President to
Approve and implement and the Judiciary to interpret its validation.
The doctrine of Hierarchy of Laws function in a hierarchy,
which determines how they rank in authority and how the authority
and scope of each level is derived from the constitution.
The current actions being done to this matter is House
Resolution 2668 (2016) entitled “A RESOLUTION OF THE HOUSE
OF REPRESENTATIVES URGING THE BANGKO SENTRAL NG
PILIPINAS TO ENJOIN THE PHILIPPINE CLEARING HOUSE FROM
IMPLEMENTING CLEARING HOUSE OPERATING MEMO (CHOM)
NO. 15-460 A” filed by Congressman Olivarez and currently under
The Committee On Banks And Financial Intermediaries of the House
of Representative as of 2016 which intents to suspend the said
memorandum creates undue inconvenience to current holders.

To conclude CHOM 15 460 cannot supersede the provisions of

the NIL.