ENRIQUE P. MONTINOLA, PLAINTIFF AND APPELLANT, VS. THE PHILIPPINE NATIONAL BANK ET AL,, DEFENDANTS AND APPELLEES.

Montinola versus Philippine National Bank

The Case

This is an action by Enrique P. Montinola against the Philippine National Bank and the Provincial Treasurer of Misamis Oriental to collect on a check. Montinola sued to recover one hundred thousand pesos, the amount of a check drawn in May 1942 by the Provincial Treasurer of Misamis Oriental in favor of Mariano V. Ramos and said to have been indorsed to Montinola. The case matters because it gathers in one record the law on negotiable instruments in wartime: the effect of material alteration, the difference between a drawer and a drawee bank, and the consequences of mutilating a document that is the very foundation of one's claim.

Procedural History

Montinola filed his complaint in the Court of First Instance of Manila. After hearing, the trial court, presided over by Judge Conrado V. Sanchez, rendered a decision dismissing the complaint, with costs against the plaintiff. Montinola appealed directly to the Supreme Court because the amount in controversy exceeded fifty thousand pesos.

Facts

In April and May 1942, Ubaldo D. Laya was Provincial Treasurer of Misamis Oriental and, by virtue of that office, ex officio agent of the Philippine National Bank branch in the province. Mariano V. Ramos worked under him as assistant agent. The currency then circulating in unoccupied Mindanao was emergency currency issued by the Mindanao Emergency Currency Board under the authority of President Quezon.

Ramos was inducted into the United States Armed Forces in the Far East as a disbursing officer. Needing funds, he went to Lanao, where the Provincial Treasurer gave him three hundred thousand pesos in emergency notes and a check for five hundred thousand pesos. Ramos brought that check to Laya, who lacked enough cash, so Laya gave him four hundred thousand pesos in emergency notes and Check Number 1382 for one hundred thousand pesos drawn on the Philippine National Bank. Ramos never cashed the check: the Japanese entered the capital that same evening, and the USAFFE forces surrendered in June 1942.

Toward the end of 1944, Ramos allegedly indorsed the check to Montinola. The versions conflict. Montinola claimed he bought the whole check for eight hundred fifty thousand pesos in Japanese military notes and medicine. Ramos claimed he assigned only thirty thousand pesos of its value, writing an indorsement to that effect and directing that the balance be deposited to his credit. That original writing no longer appears; a different indorsement now occupies the back of the check. The check itself was produced badly mutilated, cut, burned, blotted, and pasted with cellophane, and Montinola admitted doing this to discourage Ramos from reclaiming it. The words "Agent, Phil. National Bank" also appear under Laya's signature, though Laya and Ramos both testified they were not there when the check was issued.

Issues

• Whether or not Montinola acquired the full value of the check, or only thirty thousand pesos of it, under the indorsement of Ramos.
• Whether or not the Philippine National Bank may be held liable as drawer of the check by reason of the words "Agent, Phil. National Bank" appearing under the signature of the Provincial Treasurer.
• Whether or not the mutilation of the check by Montinola amounts to an intentional cancellation that defeats his claim.

Applicable Provisions

The decision invokes the Negotiable Instruments Law on cancellation, in these terms:

The holder of a negotiable instrument may cancel the same by intentionally canceling the same, or any signature thereon, apparent upon the face of the instrument.

This bears on the case because the Court treats Montinola's deliberate tearing, burning, and blotting of the check as approximating an intentional cancellation of the instrument he sues upon.

Ruling

On the first issue, the Court affirmed the trial court's finding that Ramos assigned only thirty thousand pesos of the check's value, in consideration of ninety thousand pesos in Japanese money, of which only forty-five thousand was actually paid. The Court found the present indorsement doubtful: the unusually large space it occupied, the discrepancies between Montinola and his own witness on who typed and stamped the words, and the fact that the original writing of Ramos had been obliterated.

On the second issue, the Court held that the words "Agent, Phil. National Bank" were added after Laya issued the check. Laya issued it as Provincial Treasurer, which is why it was countersigned by the Provincial Auditor and not by the bank cashier, and the funds were those of the Provincial Treasury for the use of the USAFFE, not of the bank. The Court concluded that the check was issued by Laya only as Provincial Treasurer, and not by the Philippine National Bank, which had no obligation to advance those funds. The bank, therefore, cannot be held as drawer.

On the third issue, the Court agreed that Montinola's acts on a document he called his life savings approximate intentional cancellation. His explanation that he mutilated the check out of fear of Ramos was found implausible, since he could have sought police protection, and his claim that the check was lost was contradicted by his production of the original in court.

Doctrine

A party who sues on a negotiable instrument must come with a document whose integrity he has respected. The deliberate tearing, burning, or blotting of an instrument by its holder approximates an intentional cancellation under the Negotiable Instruments Law, and the holder cannot demand payment on a document he himself has destroyed or defaced.

An indorsement is a matter of proof, and where the writing on the back of the instrument has been altered and the surrounding circumstances are doubtful, the Court will sustain the trial court's finding of what was truly written. Finally, the capacity in which a check is issued is determined by the office and the funds behind it, not by words later inserted on its face; a bank is liable as drawer only when the check is genuinely issued by it as such.

Disposition

The Supreme Court affirmed the decision of the trial court dismissing Montinola's complaint, with costs against him.

Remember This

Memorize this line: a holder who intentionally mutilates the instrument he sues upon approximates an intentional cancellation and defeats his own claim. Examiners use this case to test the Negotiable Instruments Law on material alteration and cancellation, and to test whether a candidate can separate the drawer from the drawee bank.