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1.
[No. L2861. February 26, 1951]
ENRIQUE P. MONTINOLA, plaintiff and appellant, vs.THE PHILIPPINE
NATIONAL BANK ET AL., defendantsand appellees.
NEGOTIABLE INSTRUMENT MATERIALALTERATION WHICH DISCHARGES
THEINSTRUMENT.On May 2, 1942, L in his capacity asProvincial
Treasurer of Misamis Oriental as drawer,issued a check to R in the
sum of P100,000, on thePhilippine National Bank as drawee. R sold
P30,000 of thecheck to M for P90,000 Japanese Military notes, of
whichonly P45,000 was paid by M. The writing made by R at theback
of the check was to the effect that he was assigningonly P30,000 of
the value of the document with aninstruction to the bank to pay
P30,000 to M and to depositthe balance to R's credit. This writing
was, however,mysteriously obliterated and in its place, a
supposedindorsement appearing on the back of the check wasmade. At
the time of the transfer of this check to M aboutthe last days of
December, 1944, or the first days ofJanuary, 1945, the check was
long overdue by about 2years. In August, 1947, M instituted an
action against thePhilippine National Bank and the Provincial
Treasurer ofMisamis Oriental to collect the sum of P100,000,
theamount of the aforesaid check. There now appears on theface of
said check the words in parenthesis "Agent, Phil.National Bank"
under the signature of L purportedlyshowing that L issued the check
as agent of the PhilippineNational Bank. Held: The words "Agent,
Phil. NationalBank" now appearing on' the face of the check were
addedor placed in the instrument after it was issued by
theProvincial Treasurer L to R. The check was issued by Lonly as
Provincial Treasurer and as an official of theGovernment, which was
under obligation to provide theUSAFFE with advance funds, and not
as agent of thebank, which had no such obligation. The addition of
thosewords was made after the check had been transferred by R
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2.
3.
4.
to M. The insertion of the words "Agent, Phil. NationalBank,"
which converts the bank from a mere drawee to adrawer and therefore
changes its liability, constitutes amaterial alteration of the
instrument without the consentof the parties liable thereon, and so
discharges theinstrument.
ID. INDORSEMENT OF PART OF AMOUNT PAYABLE,is NOT NEGOTIATION OF
INSTRUMENT BUT MAYBE REGARDED AS MERE ASSIGNMENT.Where
theindorsement of a check is only for a part of the amountpayable,
it is not legally negotiated within the meaning
179
VOL. 88, FEBRUARY 26, 1951 179
Montinola vs. Philippine National Bank
of section 32 of the Negotiable Instruments Law whichprovides
that "the indorsement must be an indorsement ofthe entire
instrument. An indorsement which purports totransfer to the
indorsee a part only of the amount payabledoes not operate as a
negotiation of the instrument." Mmay, therefore, not be regarded as
an indorsee. At most hemay be regarded as a mere assignee of the
P30,000 sold tohim by R, in which case, as such assignee, he is
subject toall defenses available to the drawer Provincial
Treasurerof Misamis Oriental against R.
ID. HOLDER IN DUE COURSE HOLDER WHO HASTAKEN THE INSTRUMENT
AFTER IT WAS LONGOVERDUE ASSIGNEE IS NOT A PAYEE.Neither canM be
considered as a holder in due course because section52 of the
Negotiable Instruments Law defines a holder indue course as a
holder who has taken the instrumentunder certain conditions, one of
which is that he becamethe holder before it was overdue. When M
received thecheck, it was long overdue. And, M is not even a
holderbecause section 191 of the same law defines holder as
thepayee or indorsee of a bill or note and M is not a payee.Neither
is he an indorsee, for being only a part indorsee heis considered
merely as an assignee.
ID. INSTRUMENT ISSUED TO DISBURSING OFFICER
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5.
OF USAFFE, WHO HAS NO RIGHT TO INDORSE ITPERSONALLY.Where an
instrument was issued to Rnot as a person but as the disbursing
officer of theUSAFFE, he has no right to indorse the
instrumentpersonally and if he does, the negotiation constitutes
abreach of trust, and he transfers nothing to the indorsee.
QUESTIONED DOCUMENTS DlSCREPANCIESBETWEEN PHOTOSTATIC COPY TAKEN
BEFORETEARING AND BURNING OF CHECK AND PRESENTCONDITION THEREOF
SHOW WORDS IN QUESTIONWERE INSERTED AFTER SAID TEARING
ANDBURNING.Recovery on a check, Exhibit A, depended onthe presence
of the words "Agent, Phil. National Bank"under the signature of L,
at time Exhibit A was. drawn.But the photostatic copy, Exhibit B,
admittedly takenbefore Exhibit A was burned and torn, showed
markeddiscrepancies between Exhibits A and B as to the positionof
the words in question in relation to the words"Provincial
Treasurer". Held: The inference is plain thatthe words "Agent,
Phil. National Bank" were insertedafter the check was burned and
torn.
APPEAL from a judgment of the Court of First Instance ofManila.
Sanchez, J.
The facts are stated in the opinion of the Court.
180
180 PHILIPPINE REPORTS ANNOTATEDMontinola vs. Philippine
National Bank
Quijano, Rosete & Lucena for appellant.Second Assistant
Corporate Counsel Hilarion U.
Jarencio for appellee Philippine National Bank.Solicitor General
Felix Bautista Angelo and Solicitor
Augusto M. Luciano for appellee Provincial Treasurer ofMisamis
Oriental.
MONTEMAYOR, J.:
In August, 1947, Enrique P. Montinola filed a complaint inthe
Court of First Instance of Manila against the PhilippineNational
Bank and the Provincial Treasurer of MisamisOriental to collect the
sum of P100,000, the amount of
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Check No. 1382 issued on May 2, 1942 by the ProvincialTreasurer
of Misamis Oriental to Mariano V. Ramos andsupposedly indorsed to
Montinola. After hearing, the courtrendered a decision dismissing
the complaint with costsagainst plaintiffappellant. Montinola has
appealed fromthat decision directly to this Court inasmuch as the
amountin controversy exceeds P50,000.
There is no dispute as to the following facts. In April andMay,
1942, Ubaldo D. Laya was the Provincial Treasurer ofMisamis
Oriental. As such Provincial Treasurer he was exofficio agent of
the Philippine National Bank branch inthat province. Mariano V.
Ramos worked under him asassistant agent in the bank branch
aforementioned. InApril of that year 1942, the currency being used
inMindanao, particularly Misamis Oriental and Lanao whichhad not
yet been occupied by the Japanese invading forces,was the emergency
currency which had been issued sinceJanuary, 1942 by the Mindanao
Emergency CurrencyBoard by authority of the late President
Quezon.
About April 26, 1942, thru the recommendation ofProvincial
Treasurer Laya, his assistant agent M. V.Ramos was inducted into
the United States Armed Forcesin the Far East (USAFFE) as
disbursing officer of an armydivision. As such disbursing officer,
M. V. Ramos on April30, 1942, went to the neighboring Province of
Lanao toprocure a cash advance in the amount of P800,000 for
the
181
VOL. 88, FEBRUARY 26, 1951 181Montinola vs. Philippine National
Bank
use of the USAFFE in Cagayan de Misamis. PedroEncarnacion,
Provincial Treasurer of Lanao did not havethat amount in cash. So,
he gave Ramos P300,000 inemergency notes and a check for P500,000.
On May 2, 1942Ramos went to the office of Provincial Treasurer Laya
atMisamis Oriental to encash the check for P500,000 whichhe had
received from the Provincial Treasurer of Lanao.Laya did not have
enough cash to cover the check so hegave Ramos P400,000 in
emergency notes and a check No.1382 for P100,000 drawn on the
Philippine National Bank.According to Laya he had previously
deposited P500,000emergency notes in the Philippine National Bank
branch inCebu and he expected to have the check issued by him
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cashed in Cebu against said deposit.Ramos had no opportunity to
cash the check because in
the evening of the same day the check was issued to him,the
Japanese forces entered the capital of MisamisOriental, and on June
10, 1942, the USAFFE forces towhich he was attached surrendered.
Ramos was made aprisoner of war until February 12, 1943, after
which, hewas released and he resumed his status as a civilian.
About the last days of December, 1944 or the first daysof
January, 1945, M. V. Ramos allegedly indorsed thischeck No. 1382 to
Enrique P. Montinola. The circumstancesand conditions under which
the negotiation or transfer wasmade are in controversy.
According to Montinola's version, sometime in June,1944, Ramos,
needing money with which to buy foodstuffsand medicine, offered to
sell him the check to be sure thatit was genuine and negotiable,
Montinola, accompanied byhis agents and by Ramos himself, went to
see PresidentCarmona of the Philippine National Bank in Manila
aboutsaid check that after examining it President Carmona toldhim
that it was negotiable but that he should not let theJapanese catch
him with it because possession of the samewould indicate that he
was still waiting for the return ofthe Americans to the Philippines
that he
182
182 PHILIPPINE REPORTS ANNOTATEDMontinola vs. Philippine
National Bank
and Ramos finally agreed to the sale of the check forP850,000
Japanese military notes, payable in installmentsthat of this
amount, P450,000 was paid to Ramos inJapanese military notes in
five installments, and thebalance of P400,000 was paid in kind,
namely, four bottlesof sulphatiasole, each bottle containing 1,000
tablets, andeach tablet valued at P100 that upon payment of the
fullprice, M. V. Ramos duly indorsed the check to him.
Thisindorsement which now appears on the back of thedocument is
described in detail by the trial court as follows:
"The endorsement now appearing at the back of the check
(seeExhibit A1) may be described as follows: The words, 'pay to
theorder of'in rubber stamp and in violet color are placed about
oneinch from the top. This is followed by the words 'Enrique P.
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Montinola' in typewriting which is approximately S of an
inchbelow the stamped words 'pay to the order of'. Below 'Enrique
P.Montinola', in typewriting are the words and figures also
intypewriting, '517 Isabel Street' and about 1/8 of an
inchtherefrom, the edges of the check appear to have been burned,
butthere are words stamped apparently in rubber stamp
which,according to Montinola, are a facsimile of the signature of
Ramos.There is a signature which apparently reads 'M. V. Ramos'
also ingreen ink but made in handwriting."
To the above description we may add that the 'name of M.V. Ramos
is handprinted in green ink, under the signature.According to
Montinola, he asked Ramos to handprint itbecause Ramos' signature
was not clear. Ramos in his turntold the court that the agreement
between himself andMontinola regarding the transfer of the check
was that hewas selling only P30,000 of the check and for this
reason, atthe back of the document he wrote in longhand
thefollowing:
"Pay to the order of Enrique P. Montinola P30,000 only.
Thebalance to be deposited in the Philippine National Bank to
thecredit of M. V. Ramos."
Ramos further said that in exchange for this assignment
ofP30,000 Montinola would pay him P90,000 in Japanesemilitary notes
but that Montinola gave him only two checksof P20,000 and P25,000,
leaving a balance unpaid of
183
VOL. 88, FEBRUARY 26, 1951 183Montinola vs. Philippine National
Bank
P45,000. In this he was corroborated by Atty. SimeonRamos Jr.
who told the court that the agreement betweenRamos and Montinola
was that the latter, for the sale tohim of P30,000 of the check,
was to pay Ramos P90,000 inJapanese military notes that when the
first check forP20,000 was issued by Montinola, he (Simeon)
prepared adocument evidencing said payment of P20,000 that whenthe
second check for P25,000 was issued by Montinola, he(Simeon)
prepared another document with two copies, onefor Montinola and the
other for Ramos, both signed byMontinola and M. V. Ramos,
evidencing said payment, withthe understanding that the balance of
P45,000 would be
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paid in a few days.The indorsement or writing described by M. V.
Ramos
which had been written by him at the back of the check,Exhibit
A, does not now appear at the back of said check.What appears
thereon is the indorsement testified to byMontinola and described
by the trial court as reproducedabove. Bef ore going into a
discussion of the merits of theversion given by Ramos and Montinola
as to theindorsement or writing at the back of the check, it is
well togive a further description of it as we shall do later.
When Montinola filed his complaint in 1947 he statedtherein that
the check had been lost, and so in lieu thereofhe filed a supposed
photostatic copy. However, at the trial,he presented the check
itself and had its face markedExhibit A and the back thereof
Exhibit A1. But the checkis badly mutilated, blotted, torn and
partly burned, and itscondition can best be appreciated by seeing
it. Roughly, itmay be stated that looking at the face of the check
(ExhibitA) we see that the left third portion of the paper has
beencut off perpendicularly and severed from the remaining
2/3portion a triangular portion of the upper right hand cornerof
said remaining 2/3 portion has been similarly cut off andsevered,
and to keep and attach this triangular portion andthe rectangular
1/3 portion to the rest of the document, theentire check is
184
184 PHILIPPINE REPORTS ANNOTATEDMontinola vs. Philippine
National Bank
pasted on both sides with cellophane the edges of thesevered
portions as well as of the remaining major portion,where cut bear
traces of burning and searing there is a bigblot with indelible ink
about the right middle portion,which seems to have penetrated to
the back of the check(Exhibit A1), which back bears a larger smear
right underthe blot, but not as black and sharp as the blot
itselffinally, all this tearing, burning, blotting and smearing
andpasting of the check renders it difficult if not impossible
toread some of the words and figures on the check.
In explanation of the mutilation of the check Montinolatold the
court that several months after indorsing anddelivering the check
to him, Ramos demanded the return ofthe check to him, threatening
Montinola with bodily harm,
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even death by himself or his guerrilla forces if he did
notreturn said check, and that in order to justify thenondelivery
of the document and to discourage Ramos fromgetting it back, he
(Montinola) had to resort to themutilation of the document.
As to what was really written at the back of the checkwhich
Montinola claims to be a full indorsement of thecheck, we agree
with the trial court that the originalwriting of Ramos on the back
of the check was to the effectthat he was assigning only P30,000 of
the value of thedocument and that he was instructing the bank to
depositto his credit the balance. This writing was in
somemysterious way obliterated, and in its place was placed
thepresent indorsement appearing thereon. Said presentindorsement
occupies a good portion of the back of thecheck. It has already
been described in detail. As to howsaid present indorsement came to
be written, thecircumstances surrounding its preparation, the
supposedparticipation of M. V. Ramos in it and the
writingoriginally appearing on the reverse side of the
check,Exhibit A1, we quote with approval what the trial
courtpresided over by Judge Conrado V. Sanchez, in its wellprepared
decision, says on these points:
185
VOL. 88, FEBRUARY 26, 1951 185Montinola vs. Philippine National
Bank
"The alleged indorsement: 'Pay to the order of Enrique
P.Montinola the amount of P30,000 only. The balance to bedeposited
to the credit of M. V. Ramos', signed by M. V. Ramosaccording to
the latterdoes not now appear at the back of thecheck. A different
indorsement, as aforesaid, now appears'.
"Had Montinola really paid in full the sum of P850,000
inJapanese Military Notes as consideration for the check?
Thefollowing observations are in point:
"(a) According to plaintiff's witness Gregorio A. Cortado,
theoval line in violet, enclosing 'P.' of the words 'Enrique
P.Montinola' and the line in the form of cane handle crossing
theword 'street' in the words and figures '517 Isabel Street' in
theendorsement Exhibit A1, are 'unusual' to him, and that as far
ashe could remember this writing did not appear on the
instrumentand he had no knowledge as to how it happened to be
there.Obviously Cortado had no recollection as to how such marks
ever
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were stamped at the back of the check."(b) Again Cortado,
speaking of the endorsement as it now
appears at the back of the check (Exh. A1) stated that
Ramostypewrote these words outside of the premises of Montinola,
thatis, in a nearby house. Montinola, on the other hand, testified
thatRamos typewrote the words 'Enrique P. Montinola, 517
IsabelStreet', in his own house. Speaking of the rubber stamp used
atthe back of the check and which produced the words 'pay to
theorder of', Cortado stated that when he (Cortado),
Atadero,Montinola and Ramos returned in group to the house
ofMontinola, the rubber stamp was already in the house ofMontinola,
and it was on the table of the upper floor of the house,together
with the stamp pad used to stamp the same. Montinola,on the other
hand, testified that Ramos carried in his pocket thesaid rubber
stamp as well as the ink pad, and stamped it in hishouse.
"The unusually big space occupied by the indorsement on theback
of the check and the discrepancies in the versions ofMontinola and
his witness Cortado just noted, create doubts as towhether or not
really Ramos made the indorsement as it nowappears at the back of
Exhibit A. One thing difficult tounderstand is why Ramos should go
into the laborious task ofplacing the rubber stamp 'Pay to the
order of' and afterwardsmove to the typewriter and write the words
'Enrique P.Montinola' and '517 Isabel Street', and finally sign his
name toofar below the main indorsement.
"(c) Another circumstance which bears heavily upon the claimof
plaintiff Montinola that he acquired the full value of the checkand
paid the full consideration therefor is the present condition
ofsaid check. It is now so unclean and discolored it is pasted
incellophane, blotted with ink on both sides torn into three
parts,and
186
186 PHILIPPINE REPORTS ANNOTATEDMontinola vs. Philippine
National Bank
with portions thereof burnedall done by plaintiff, the
allegedowner thereof.
"The acts done by the very plaintiff on a document soimportant
and valuable to him, and which according to himinvolves his life
savings, approximate intentional cancellation.The only reason
advanced by plaintiff as to why he tore the check,burned the torn
edges and blotted out the registration at the back,
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is found in the following: That Ramos came to his house,
armedwith a revolver, threatened his life and demanded from him
thereturn of the check that when he informed Ramos that he did
nothave it in the house, but in some deposit outside thereof and
thatRamos promised to return the next day that the same night
hetore the check into three parts, burned the sides with a
parrafincandle to show traces of burning and that upon the return
ofRamos the next day he showed the two parts of the check,
thetriangle on the right upper part and the torn piece on the
leftpart, and upon seeing the condition thereof Ramos did not
botherto get the check back. He also said that he placed the blots
inindelible ink to prevent Ramosif he would be forced tosurrender
the middle part of the checkfrom seeing that it wasregistered in
the General Auditing Office.
"Conceding at the moment these facts to be true, the questionis:
Why should Montinola be afraid of Ramos? Montinola claimsthat Ramos
went there about April, 1945, that is, duringliberation. If he
believed he was standing by his rights, he couldhave very well
sought police protection or transferred to someplace where Ramos
could not bother him. And then, if reallyRamos did not have
anything more to do with this check for thereason that Montinola
bad obtained in full the amount thereof,there could not be any
reason why Ramos should have threatenedMontinola as stated by the
latter. Under the circumstances, themost logical conclusion is that
Ramos wanted the check at allcosts because Montinola did not
acquire the check to such anextent that it borders on intentional
cancellation thereof (seeSections 119123 Negotiable Instruments
Law) there is room tobelieve that Montinola did not have so much
investments in thatcheck as to have adopted an 'what do I care?'
attitude.
"And there is the circumstance of the alleged loss of the
check.At the time of the filing of the complaint the check was
allegedlylost, so much so that a photostatic copy thereof was
merelyattached to the complaint (see paragraph 7 of the complaint).
Yet,during the trial the original check Exhibit A was produced
incourt.
"But a comparison between the photostatic copy and theoriginal
check reveals discrepancies between the two. Thecondition of the
check as it was produced is such that it waspartially burned,
partially blotted, badly mutilated, discoloredand pasted with
cellophane. What is worse is that Montinola'sexcuse as to how it
was
187
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VOL. 88, FEBRUARY 26, 1951 187Montinola vs. Philippine National
Bank
lost, that it was mixed up with household effects is not
plausible,considering the fact that it involves his life savings,
and thatbefore the alleged loss, he took extreme pains and
precautions tosave the check from the possible ravages of the war,
had itphotographed, registered said check with the General
AuditingOffice and he knew that Ramos, since liberation, was hot
after thepossession of that check.
"(d) It seems that Montinola was not so sure as to what he
hadtestified to in reference to the consideration he paid for the
check.In court he testified that he paid P450,000 in cash from June
toDecember 1944, and P400,000 worth of sulphatiazole in January1945
to complete the alleged consideration of P850,000. WhenMontinola
testified this way in court, obviously he overlooked aletter he
wrote to the provincial treasurer of Cagayan, OrientalMisamis,
dated May 1, 1947, Exhibit 3 of the record. In that letterExhibit
3, Montinola told Provincial Treasurer Elizalde ofMisamis Oriental
that 'Ramos endorsed it (referring to check) tome for goods in
kind, medicine, etc., received by him for the use ofthe
guerrillas.' In said letter Exhibit 3, Montinola did not mentionthe
cash that he paid for the check.
"From the foregoing the court concludes that plaintiffMontinola
came into the possession of the check in question aboutthe end of
December 1944 by reason of the fact that M. V. Ramossold to him
P30,000 of the face value thereof in consideration ofthe sum of
P90,000 Japanese money, of which only onehalf orP45,000 (in
Japanese money) was actually paid by said plaintiff toRamos." (R.
on A., pp. 3133 Brief of Appellee, pp. 1420.)
At the beginning of this decision, we stated that asProvincial
Treasurer of Misamis Oriental, Ubaldo D. Layawas ex officio agent
of the Philippine National Bank branchin that province. On the face
of the check (Exh. A) we no wfind the words in parenthesis "Agent,
Phil. National Bank"under the signature of Laya, purportedly
showing that heissued the check as agent of the Philippine National
Bank.If this is true, then the bank is not only drawee but also
adrawer of the check, and Montinola evidently is trying tohold the
Philippine National Bank liable in that capacity ofdrawer, because
as drawee alone, inasmuch as the bankhas not yet accepted or
certified the check, it may yet avoidpayment.
Laya, testifying in court, stated that he issued the check
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only as Provincial Treasurer, and that the words in pa
188
188 PHILIPPINE REPORTS ANNOTATEDMontinola vs. Philippine
National Bank
renthesis "Agent, Phil. National Bank" now appearingunder his
signature did not appear on the check when heissued the same. In
this he was corroborated by the payeeM. V. Ramos who equally
assured the court that when hereceived the check and then delivered
it to Montinola, thosewords did not appear under the signature of
Ubaldo D.Laya. We again quote with approval the pertinent portionof
the trial court's decision:
"The question is reduced to whether or not the words,
'Agent,Phil. National Bank' were added after Laya had issued the
check.In a straightforward manner and without vacillation
Layapositively testified that the check Exhibit A was issued by him
inhis capacity as Provincial Treasurer of Misamis Oriental and
thatthe words 'Agent, Phil. National Bank' which now appear on
thecheck Exhibit A were not typewritten below his signature whenhe
signed the said check and delivered the same to Ramos. Layaassured
the court that there could not be any mistake as to this.For,
according to Laya, when he issued checks in his capacity asagent of
the Misamis Oriental agency of the Philippine NationalBank the said
check must be countersigned by the cashier of thesaid agencynot by
the provincial auditor. He also testified thatthe said check was
issued by him in his capacity as provincialtreasurer of Misamis
Oriental and that is why the same wascountersigned by Provincial
Auditor Flores. The ProvincialAuditor at that time had no
connection in any capacity with theMisamis Oriental agency of the
Philippine National Bank.Plaintiff Montinola on the other hand
testified that when hereceived the check Exhibit A it already bore
the words 'Agent,Phil. National Bank' below the signature of Laya
and the printedwords 'Provincial Treasurer'. "After considering the
testimony ofthe one and the other, the court finds that the
preponderance ofthe evidence supports Laya's testimony. In the
first place, histestimony was corroborated by the payee M. V.
Ramos. But whatrenders more probable the testimony of Laya and
Ramos is thefact that the money for which the check was issued was
expresslyfor the use of the USAFFE of which Ramos was then
disbursingofficer, so much so that upon the delivery of the
P400,000 in
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emergency notes and the P100,000 check to Ramos, Laya
creditedhis depository accounts as provincial treasurer with
thecorresponding credit entry. In the normal course of events
thecheck could not have been issued by the bank, and this is borne
bythe fact that the signature of Laya was countersigned by
theprovincial auditor, not the bank cashier. And then, too there is
thecircumstance that this check was issued by the
provincialtreasurer of Lanao to Ramos who requisitioned the
said
189
VOL. 88, FEBRUARY 26, 1951 189Montinola vs. Philippine National
Bank
funds in his capacity as disbursing officer of the USAFFE.
Thecheck, Exhibit A is not what we may term in business
parlance,'certified check' or 'cashier's check.'
"Besides, at the time the check was issued, Laya already
knewthat Cebu and Manila were already occupied. He could not
havetherefore issued the checkas a bank employeepayable at
thecentral office of the Philippine National Bank.
"Upon the foregoing circumstances the court concludes that
thewords 'Agent, Phil. National Bank' below the signature of
UbaldoD. Laya and the printed words 'Provincial Treasurer' were
addedin the check after the same was issued by the
ProvincialTreasurer of Misamis Oriental."
From all the foregoing, we may safely conclude as we dothat the
words "Agent, Phil. National Bank" now appearingon the face of the
check (Exh. A) were added or placed inthe instrument after it was
issued by Provincial TreasurerLaya to M. V. Ramos. There is no
reason known to us whyProvincial Treasurer Laya should issue the
check (Exh. A)as agent of the Philippine National Bank. Said check
forP100,000 was issued to complete the payment of the othercheck
for P500,000 issued by the Provincial Treasurer ofLanao to Ramos,
as part of the advance funds for theUSAFFE in Cagayan de Misamis.
The balance of P400,000in cash was paid to Ramos by Laya from the f
unds, not ofthe bank but of the Provincial Treasury. Said
USAFFEwere being financed not by the Bank but by theGovernment and,
presumably, one of the reasons for theissuance of the emergency
notes in Mindanao was for thispurpose. As already stated, according
to ProvincialTreasurer Laya, upon receiving a relatively
considerable
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amount of these emergency notes for his office, hedeposited
P500,000 of said currency in the PhilippineNational Bank branch in
Cebu, and that in issuing thecheck (Exh. A), he expected to have it
cashed at said Cebubank branch against his deposit of P500,000.
The logical conclusion, therefore, is that the check wasissued
by Laya only as Provincial Treasurer and as anofficial of the
Government which was under obligation toprovide the USAFFE with
advance funds, and not by the
190
190 PHILIPPINE REPORTS ANNOTATEDMontinola vs. Philippine
National Bank
Philippine National Bank which had no such obligation.The very
Annex C, made part of plaintiff's complaint, andlater introduced in
evidence for him as Exhibit E statesthat Laya issued the check "in
his capacity as ProvincialTreasurer of Misamis Oriental",
obviously, not as agent ofthe Bank.
Now, did M. V. Ramos add or place those words belowthe signature
of Laya before transferring the check toMontinola? Let us bear in
mind that Ramos before hisinduction into the USAFFE had been
working as assistantof Treasurer Laya as exofficio agent of the
MisamisOriental branch of the Philippine National Bank.Naturally,
Ramos must have known the procedure followedthere as to the
issuance of checks, namely, that when acheck is issued by the
Provincial Treasurer as such, it iscountersigned by the Provincial
Auditor as was done on thecheck (Exhibit A), but that if the
Provincial Treasurerissues a check as agent of the Philippine
National Bank,the check is countersigned not by the Provincial
Auditorwho has nothing to do with the bank, but by the bankcashier,
which was not done in this case. It is not likely,therefore, that
Ramos had made the insertion of the words"Agent, Phil National
Bank" after he received the check,because he should have realized
that following the practicealready described, the check having been
issued by Laya asProvincial Treasurer, and not as agent of the
bank, andsince the check bears the countersignature not of the
Bankcashier but of the Provincial Auditor, the addition of thewords
"Agent, Phil. National Bank" could not change thestatus and
responsibility of the bank. It is therefore more
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logical to believe and to find that the addition of thosewords
was made after the check had been transferred byRamos to Montinola.
Moreover, there are other facts andcircumstances involved in the
case which support this view.Referring to the mimeographed record
on appeal filed bythe plaintiffappellant, we find that in
transcribing andcopying the check, particularly the face of it
(Exhibit A) inthe complaint, the words "Agent, Phil. National Bank"
now
191
VOL. 88, FEBRUARY 26, 1951 191Montinola vs. Philippine National
Bank
appearing on the face of the check under the signature ofthe
Provincial Treasurer, is missing. Unless the plaintiff inmaking
this copy or transcription in the complaintcommitted a serious
omission which is decisive as far asthe bank is concerned, the
inference is, that at the time thecomplaint was filed, said phrase
did not appear on the faceof the check. That probably was the
reason why the bank inits motion to dismiss dated September 2,
1947, contendedthat if the check in question had been issued by
theprovincial treasurer in his capacity as agent of thePhilippine
National Bank, said treasurer would haveplaced below his signature
the words "Agent of thePhilippine National Bank". The plaintiff
because of thealleged loss of the check, allegedly attached to
thecomplaint a photostatic copy of said check and marked it asAnnex
A. But in transcribing and copying said Annex A inhis complaint,
the phrase "Agent, Phil. National Bank"does not appear under the
signature of the provincialtreasurer. We tried to verify this
discrepancy by going overthe original records of the Court of First
Instance so as tocompare the copy of Annex A in the complaint, with
theoriginal Annex A, the photostatic copy, but said originalAnnex A
appears to be missing from the record. How itdisappeared is not
explained. Of course, now we have in thelist of exhibits a
photostatic copy marked Annex A andExhibit B, but according to the
manifestation of counsel forthe plaintiff dated October 15, 1948,
said photostatic copynow marked Annex A and Exhibit B was submitted
onOctober 15, 1948, in compliance with the verbal order ofthe trial
court. It is therefore evident that the Annex A nowavailable is not
the same original Annex A attached to the
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complaint in 1947.There is one other circumstance, important and
worth
noting. If Annex A also marked Exhibit B is the photostaticcopy
of the original check No. 1382 particularly the facethereof
(Exhibit A), then said photostatic copy should be afaithful and
accurate reproduction of the check.
192
192 PHILIPPINE REPORTS ANNOTATEDMontinola vs. Philippine
National Bank
particularly of the phrase "Agent, Phil. National Bank"now
appearing under the signature of the ProvincialTreasurer on the
face of the original check (Exhibit A). Buta minute examination of
and comparison between Annex A,the photostatic copy also marked
Exhibit B and the f ace ofthe check, Exhibit A, especially with the
aid of a hand lens,show notable differences and discrepancies. For
instance,on Exhibit A, the letter A of the word "Agent" is toward
theright of the tail of the beginning letter of the signature
ofUbaldo D. Laya this same letter "A" however in Exhibit Bis
directly under said tail.
The letter "N" of the word "National" on Exhibit A isunderneath
the space between "Provincial" and"Treasurer" but the same letter
"N" is directly under theletter "I" of the word "Provincial" in
Exhibit B.
The first letter "a" of the word "National" is under "T" ofthe
word "Treasurer" in Exhibit A but the same letter "a"in Exhibit "B"
is just below the space between the words"Provincial" and
"Treasurer".
The letter "k" of the word "Bank" in Exhibit A is afterthe green
perpendicular border line near the lowerrighthand corner of the
edge of the check (Exh. A) thissame letter "k" however, on Exhibit
B is on the very borderline itself or even before said border
line.
The closing parenthesis ")" on Exhibit A is a little farfrom the
perpendicular green border line and appears to bedouble instead of
one single line this same ")" on Exhibit Bappears in a single line
and is relatively nearer to theborder line.
There are other notable discrepancies between the checkAnnex A
and the photostatic copy, Exhibit B, as regardsthe relative
position of the phrase "Agent, Phil., NationalBank", with the title
Provincial Treasurer, giving ground to
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the doubt that Exhibit B is a photostatic copy of the
check(Exhibit A).
We then have the f ollowing facts. Exhibit A was issuedby Laya
in his capacity as Provincial Treasurer of Misa
193
VOL. 88, FEBRUARY 26, 1951 193Montinola vs. Philippine National
Bank
mis Oriental as drawer on the Philippine National Bank asdrawee.
Ramos sold P30,000 of the check to Enrique P.Montinola for P90,000
Japanese military notes, of whichonly P45,000 was paid by
Montinola. The writing made byRamos at the back of the check was an
instruction to thebank to pay P30,000 to Montinola and to deposit
thebalance to his (Ramos) credit. This writing was obliteratedand
in its place we now have the supposed indorsementappearing on the
back of the check (Exh. A1).
At the time of the transfer of this check (Exh. A) toMontinola
about the last days of December, 1944, or thefirst days of January,
1945, the check which, being anegotiable instrument, was payable on
demand, was longoverdue by about 2 years. It may therefore be
considered,even then, a stale check. Of course, Montinola claims
thatabout June, 1944 when Ramos supposedly approached himfor the
purpose' of negotiating the check, he (Montinola)consulted
President Carmona of the Philippine NationalBank who assured him
that the check was good andnegotiable. However, President Carmona
on the witnessstand flatly denied Montinola's claim and assured the
courtthat the first time that he saw Montinola was after
thePhilippine National Bank, of which he was President,reopened,
after liberation, around August or September,1945, and that when
shown the check he told Montinolathat it was stale. M. V. Ramos
also told the court that it isnot true that he ever went with
Montinola to see PresidentCarmona about the check in 1944.
On the basis of the facts above related there are severalreasons
why the complaint of Montinola cannot prosper.The insertion of the
words "Agent, Phil. National Bank"which converts the bank from a
mere drawee to a drawerand therefore changes its liability,
constitutes a materialalteration of the instrument without the
consent of theparties liable thereon, and so discharges the
instrument.
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(Section 124 of the Negotiable Instruments Law). Thecheck was
not legally negotiated within the meaning of
194
194 PHILIPPINE REPORTS ANNOTATEDMontinola vs. Philippine
National Bank
the Negotiable Instruments Law. Section 32 of the samelaw
provides that "the indorsement must be anindorsement of the entire
instrument. An indorsementwhich purports to transfer to the
indorsee a part only of theamount payable, * * * (as in this case)
does not operate as anegotiation of the instrument." Montinola may
thereforenot be regarded as an indorsee. At most he may beregarded
as a mere assignee of the P30,000 sold to him byRamos, in which
case, as such assignee, he is subject to alldefenses available to
the drawer Provincial Treasurer ofMisamis Oriental and against
Ramos. Neither canMontinola be considered as a holder in due course
becausesection 52 of said law defines a holder in due course as
aholder who has taken the instrument under certainconditions, one
of which is that he became the holder beforeit was overdue. When
Montinola received the check, it waslong overdue. And, Montinola is
not even a holder becausesection 191 of the same law defines holder
as the payee orindorsee of a bill or note and Montinola is not a
payee.Neither is he an indorsee for as already stated, at most
hecan be considered only as assignee. Neither could it be saidthat
he took it in good faith. As already stated, he has notpaid the
full amount of P90,000 for which Ramos sold himP30,000 of the value
of the check. In the second place, aswas stated by the trial court
in its decision, Montinolaspeculated on the check and took a chance
on its being paidafter the war. Montinola must have known that at
the timethe check was issued in May, 1942, the money circulatingin
Mindanao and the Visayas was only the emergencynotes and that the
check was intended to be payable in thatcurrency. Also, he should
have known that a check for sucha large amount of P100,000 could
not have been issued toRamos in his private capacity but rather in
his capacity asdisbursing officer of the USAFFE, and that at the
time thatRamos sold a part of the check to him, Ramos was nolonger
connected with the USAFFE
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195
VOL. 88, FEBRUARY 26, 1951 195Montinola vs. Philippine National
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but already a civilian who needed the money only forhimself and
his family.
As already stated, as a mere assignee Montinola issubject to all
the defenses available against assignorRamos. And, Ramos had he
retained the check may notnow collect its value because it had been
issued to him asdisbursing officer. As observed by the trial court,
the checkwas issued to M. V. Ramos not as a person but M. V.Ramos
as the disbursing officer of the USAFFE. Therefore,he had no right
to indorse it personally to plaintiff. It wasnegotiated in breach
of trust, hence he transferred nothingto the plaintiff.
In view of all the foregoing, finding no reversible error inthe
decision appealed from, the same is hereby affirmedwith costs.
In the prayer f or relief contained at the end of the brieffor
the Philippine National Bank dated September 27,1949, we find this
prayer:
"It is also respectfully prayed that this Honorable Court refer
thecheck, Exhibit A, to the City Fiscal's Office for
appropriatecriminal action against the plaintiffappellant if the
facts sowarrant."
Subsequently, in a petition signed by plaintiffappellantEnrique
P. Montinola dated February 27, 1950, he askedthis Court to allow
him to withdraw the original check(Exh. A) for him to keep,
expressing his willingness tosubmit it to the Court whenever needed
for examinationand verification. The bank on March 2, 1950 opposed
thesaid petition on the ground that inasmuch as theappellant's
cause of action in this case is based on the saidcheck, it is
absolutely necessary for the court to examinethe original in order
to see the actual alterationssupposedly made thereon, and that
should this Court grantthe prayer contained in the bank's brief
that the check belater referred to the city fiscal for appropriate
action, saidcheck may no longer be available if the appellant is
allowedto withdraw said document. In view of said opposition
this
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196
196 PHILIPPINE REPORTS ANNOTATEDPeople vs. Colicio
Court by resolution of March 6, 1950, denied said petitionfor
withdrawal.
Acting upon the petition contained in the bank's briefalready
mentioned, once the decision becomes final, let theClerk of Court
transmit to the city fiscal the check (Exh. A)together with all
pertinent papers and documents in thiscase, for any action he may
deem proper in the premises.
Moran, C. J., Pars, Feria, Pablo, Bengzon, Padilla,Tuason, Reyes
and Bautista Angelo, JJ., concur.
Judgment affirmed, and relief prayed for granted.
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