Enrique Montinola vs Philippine National Bank

written by Howard

G.R. No. L-2861 – 88 Phil. 178 – Mercantile Law – Negotiable Instruments Law – Alteration – Assignee – Partial Indorsement

In May 1942, Ubaldo Laya, as provincial treasurer of Misamis Oriental issued a P100, Philippine National Bank (PNB) check to Mariano Ramos. The said check was to be used by Ramos, as disbursing officer of the US forces at that time, for military purposes.  Before Ramos can encash the check, he was made a prisoner of war by the invading Japanese forces. When he got free in December 1944, he needed some cash for himself and so he went to a certain Enrique Montinola and made arrangements.

On the back of the check, Ramos wrote:

Pay to the order of Enrique P. Montinola P30,000 only. The balance to be deposited in the Philippine National Bank to the credit of M. V. Ramos.

In consideration thereof, Montinola promised to pay 85,000 in Japanese notes (that time peso notes are valued higher). However, he was only able to pay 45k in Japanese notes to Ramos.

Later, Montinola sought to have the check encashed but PNB dishonored the check. It appears that there was an insertion made. Under the signature of Laya, the words “Agent, Philippine National Bank” was inserted, thus making it appear that Laya disbursed the check as an agent of PNB and not as provincial treasurer of Misamis Oriental (NOTE: at that time, a provincial treasurer is an ex officio agent of the government’s bank).

ISSUE: Whether or not the subject check is a negotiable instrument.

HELD: No. It was not negotiated according to the Negotiable Instruments Law (NIL) hence it is not a negotiable instrument. There was only a partial indorsement and not a negotiation contemplated under the NIL. Only P30k of the P100k amount of the check was indorsed. This merely make Montinola a mere assignee – and this is the clear intent of Ramos. Ramos was merely assigning P30k to Montinola. Montinola may therefore not be regarded as an indorsee and PNB has all the right to dishonor the check. As mere assignee, he is subject to all defenses available to the drawer Provincial Treasurer of Misamis Oriental and against Ramos.

Anent the issue of alteration, the apparent purpose of which is to make the drawee (PNB) the drawer against which Montinola can recover from directly. Such material alteration which was done by Montinola without the consent of the parties liable thereon discharges the instrument, pursuant to Sec. 124 of the NIL.

Montinola cannot be said to be a holder. He is an assignee. And even if he is a holder, he is not in good faith because he did not pay the full amount of the consideration  for which the P30k was issued to him – he only paid 45k Japanese notes out of the 90k Japanese notes consideration.

At any rate, even assuming that there is proper negotiation, Montinola can no longer encash said check because when he sought to have it encashed in January 1945, it is already stale there being two and half years passing since its time of issuance.

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