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February 15, 2019

International Corporate Bank vs. CA

International Corporate Bank, Inc. vs. Court of Appeals and Philippine National Bank
G.R. No. 129910, September 5, 2006
501 SCRA 20

FACTS: The Ministry of Education and Culture issued 15 checks drawn against Philippine National
Bank (PNB). Petitioner International Corporate Bank, Inc. (ICB) accepted the checks for deposit on
various dates.

After 24 hours from submission of the checks to PNB for clearing, ICB paid the value of the checks and
allowed the withdrawals of the deposits. However, on 14 October 1981, PNB returned all the checks to
petitioner without clearing them because the serial number of the checks were materially altered. Thus,
ICB instituted an action for collection of sums of money against PNB to recover the value of the checks.

RTC Ruling: ICB is not entitled to recover the value of the checks from PNB because the ICB failed to
inquire on the status of the checks before paying their value. PNB cannot be faulted for the delay in
clearing the checks considering the ingenuity in which the alterations were effected.

CA Ruling on its 10 October 1991 Decision: It reversed the trial court’s decision. Applying Section 4(c) of
Central Bank Circular No. 580, series of 1977, it held that checks that have been materially altered shall
be returned within 24 hours after discovery of the alteration. However, it ruled that even if the drawee
bank returns a check with material alterations after discovery of the alteration, the return would not
relieve the drawee bank from any liability for its failure to return the checks within the 24-hour clearing
period.

Respondent filed a Motion for Reconsideration on 6 November 1991 but the Registry Return Receipt
shows that counsel for respondent or his agent received a copy of the 10 October 1991 Decision on 16
October 1991. The motion was filed late.

Despite its late filing, the Court of Appeals resolved to admit the motion for reconsideration “in the
interest of substantial justice.” In its 9 August 1994 Amended Decision, the Court of Appeals reversed itself
and affirmed the Decision of the trial court dismissing the complaint. The CA held that its 10 October
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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.

In its 16 July 1997 Resolution, the Court of Appeals denied the Motion for Reconsideration of ICB for
lack of merit so the la er filed the petition before the Supreme Court under both Rules 45 and 65.

ISSUES:
1. Whether or not the checks were materially altered.
2. Whether or not the motion for reconsideration filed by respondent was out of time thus making the 10
October 1991 Decision final and executory.
3. Whether or not the filing of the petition under both Rules 45 and 65 is proper.

RULING:

1. An alteration on the serial number of a check is not a material alteration. The Court held that since
there were no material alterations on the checks, respondent Philippine National Bank is liable to
petitioner International Corporate Bank, Inc. for the value of the checks amounting to P1,447,920, with
legal interest from 16 March 1982 until full payment.

In Philippine National Bank v. Court of Appeals, it already 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 Instruments
Law.

2. With regard to the timeliness of filing of respondent’s Motion for Reconsideration, the Court reiterated
that there are instances when rules of procedure are relaxed in the interest of justice. However, in this
case, PNB did not proffer any explanation for the late filing of the motion for reconsideration. Instead,
there was a deliberate a empt to deceive the Court of Appeals by claiming that the copy of the 10
October 1991 Decision was received on 22 October 1991 instead of on 16 October 1991. The Court of
Appeals admission of the motion for reconsideration is not justified. Thus, the late filing of the motion
for reconsideration rendered the 10 October 1991 Decision final and executory.

3. The remedies of appeal and certiorari are mutually exclusive and not alternative or successive.
However, the Court found the petition to be meritorious so it resolved the issue and set aside
technicality for this justifiable reason. Additionally, the petition was filed on time both under Rules 45
and 65. Hence, in accordance with the liberal spirit which pervades the Rules of Court and in the interest
of justice, it treated the petition as having been filed under Rule 45.

NOTES:

Petitioners may not delegate upon the court the task of determining under which rule should the petition should
fall; 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–
Respondent asserts that the petition should be dismissed outright since petitioner availed of a wrong

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mode of appeal. Respondent cites Ybañez v. Court of Appeals 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.”

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