On 02 September 2015 pursuant to the request of member banks

and as endorsed by the Technical Working Committee of Philippine

Clearing House Corporation (PCHC), the latter issued a memo
CHOM 15-460 ON NON-ACCEPTANCE OF CHECK WITH ERASURE,
ALTERATION AND/OR DEFICIENCY, and was effective on 14
January 2016.

The memorandum reads as follows:

Any check that has the following condition shall no longer be

eligible or acceptable for clearing, except post-dated checks bearing
bank stamp specified below:

1. shows or indicates on its face any erasure or alteration of the

following, regardless of any signature or initials that appear to
indicate authorization of the alteration or erasure: date; name of
payee; amount in figures; amount in words; signature of the
Drawer/s or the Drawer’s signatory/ies; account name; account
number; check number; or MICR

2. does not indicate the following: date; payee; amount payable in

figures; amount payable in words – except checks issued by banks
using a check writer; or signature of the Drawer/s.

To my mind CHOM 15-460 is in conflict with certain provisions under

Negotiable Instruments Law (NIL).
As to Paragraph one (1) of CHOM 15-460 provides that should there
be an alteration or erasure on the face the instrument shall not be
eligible or acceptable.

The NIL provides that material alteration must be first establish to

conclude whether it is eligible or not. Section 125 of the NIL provides:

Section 125. What constitutes material alteration. Any alteration which changes:

(a) The date;

(b) The sum payable, either for principal or interest;
(c) The time or place of payment;
(d) The number or the relation of the parties;
(e) The medium or currency in which payment is to be made;

Or which adds a place of payment where no place of payment is specified, or any other
change or addition which alters the effect of the instrument in any respect is a material
alteration.

It is further supported by the ruling of the Supreme Court in

METROPOLITAN BANK AND TRUST COMPANY v. RENATO D. CABILZO

an alteration is said to be material if it changes the effect of the instrument. It

means that 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.
Thus an alteration on the face of the instrument does not
automatically makes the instrument non-eligible it must be qualified
first under Section 125 of the NIL for it to be invalid. Hence the first
paragraph of CHOM 15-460 is in conflict with the provision of under
NIL.

As to the second paragraph. Section 6 of the NIL provides:

Sec. 6. Omissions; seal; particular money. - The validity and negotiable character of an
instrument are not affected by the fact that:
(a) it is not dated; or
(b) does not specify the value given, or that any value had been given therefor; or
(c) does not specify the place where it is drawn or the place where it is payable;
or
(d) bears a seal; or
(e) designates a particular kind of current money in which payment is to be made.
But nothing in this section shall alter or repeal any statute requiring in certain
cases the nature of the consideration to be stated in the instrument.

One principle in statutory construction is that when the law is clear

there is no room for interpretation. Thus herein case, paragraph two
(2) of the CHOM 15-460 clearly violates the above provision which
states that the validity and negotiable character of an instrument are
not affected by the circumstances under par two (2) of the
memorandum.

Hence there is conflict between Par two (2) of CHOM 15-460 and Sec
6 of the NIL.
Notwithstanding that the rationale behind the issuance of CHOM 15-
460 of PCHC is that the non-acceptance of these altered instruments
by banks lessen the risks that the instrument to be accepted is forged
or the alteration is made in bad faith, there is a provision under NIL
that can be used as a defense or cause of action against the holder
of the instrument:

Sec. 23. Forged signature; effect of. - When a signature is forged or made without the
authority of the person whose signature it purports to be, it is wholly inoperative,
and no right to retain the instrument, or to give a discharge therefor, or to enforce
payment thereof against any party thereto, can be acquired through or under
such signature, unless the party against whom it is sought to enforce such right is
precluded from setting up the forgery or want of authority.

In view of a law student, my humble opinion is that the issuance of

CHOM 15-460 is not essential on the ground that there is already a
law governing the validity of the Negotiable Instruments therefore
there is no need of its issuance. Further, to my mind CHOM 15-460
must be revoked or repealed on the ground that it is violative and in
conflict with some provisions under the Negotiable Instruments law.