MONTINOLA VS. PNB ET AL.

FACTS:
Ramos, as a disbursing officer of an army division of the USAFE, made cash
advancements w/ the Provincial Treasurer of Lanao. In exchange, the Prov’l Treasurer of
Lanao gave him a P500,000 check. Thereafter, Ramos
presented the check to Laya for encashment. Laya in his capacity as
Provincial Treasurer of Misamis Oriental as drawer, issued a check to Ramos in the sum of
P100000, on the Philippines National Bank as drawee; the P400000 value of the check was paid in
military notes.

Ramos was unable to encash the said check for he was captured by the Japanese. But
after his release, he sold P30000 of the check to Montinola for P90000 Japanese Military notes, of
which only P45000 was paid by the
latter. The writing made by Ramos at the back of the check was to the effect that he was
assigning only P30000 of the value of the document with an instruction to the bank to pay P30000 to
Montinola and to deposit the
balance to Ramos's credit. This writing was, however, mysteriously obliterated and in its place,
a supposed indorsement appearing on the back of the check was made for the whole amount of the
check. At the time of the transfer of this check to Montinola, the check was long overdue by
about 2-1/2 years.

Montinola instituted an action against the PNB and the Provincial Treasurer
of Misamis Oriental to collect the sum of P100,000, the amount of the aforesaid
check. There now appears on the face of said check the words in
parenthesis "Agent, Phil. National Bank" under the signature of Laya purportedly showing that
Laya issued the check as agent of the Philippine National Bank.

ISSUE: WON a material alteration of the instrument without the consent of the parties was
constituted

HELD:
The words "Agent, Phil. National Bank" now appearing on the face of the
check were added or placed in the instrument after it was issued by the
Provincial Treasurer Laya to Ramos. The check was issued by only as Provincial Treasurer
and as an official of the Government, which was under
obligation to provide the USAFE with advance funds, and not as agent of the bank, which had
no such obligation. The addition of those words was
made after the check had been transferred by Ramos to Montinola. The
insertion of the words "Agent, Phil. National Bank," which 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