USJ-R School of Law
Negotiable Instruments Law | Judge Ygnacio
MATERIAL ALTERATION
Sec. 125. What constitutes a 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 relations of the parties;
(e) The medium or currency in which payment is to
be made;
(f) 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.
Sec. 124. Alteration of instrument; effect of. - Where
a negotiable instrument is materially altered without
the assent of all parties liable thereon, it is avoided,
except as against a party who has himself made,
authorized, or assented to the alteration and
subsequent indorsers.
But when an instrument has been materially altered
and is in the hands of a holder in due course not a
party to the alteration, he may enforce payment
thereof according to its original tenor.
 GR: If instrument is materially altered, the instrument
is AVOIDED. Hence, person primarily and/or
secondarily liable is NOT LIABLE.
 XPN: Instrument is NOT AVOIDED; One is liable if he
is:
 The party who made such alteration
 party who consented to the alteration
 subsequent indorsers
EXAMPLE:
A promised to pay B the sum of P100k. B indorsed it to C.
C indorsed it to D but D changed the amount to P400k.
(There is an alteration because D changed the sum
payable from 100k to 400k.)
D now indorsed it to E which in turn indorsed it to F. So if
the instrument becomes due & demandable, F must
present it for payment to the person primarily liable (A).
Is A liable to pay P400k?  NO because the instrument
is AVOIDED since there is a material alteration.
Personal notes. Rely at your own risk.
What will F do?  (refer to the XPN to the GR)
 person who made the alteration – D
 subsequent indorser/s – E
So as far as D and E are concerned, the instrument is NOT
AVOIDED.
But before you go to the person secondarily liable,
determine if makabayad ba jud si A. So F must check if A
is a holder in due course (HIDC). Thus, if A is a HIDC not
a party to the alteration, F may enforce payment from
him according to its original tenor of P100k, not P400k.
So is A liable for P400k?  NO. A is only liable for 100k
– the original tenor. But A can only be liable for 100k if F
is a HIDC.
Sec. 52. What constitutes a holder in due course. -
A holder in due course is a holder who has taken the
instrument under the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was
overdue, and without notice that it has been
previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had
no notice of any infirmity in the instrument or defect
in the title of the person negotiating it.
 But since P400K man jud ang ila negotiation, F may
issue notice of dishonor.
 If A will not pay, the liability of:
 B = 100k
 C = 100k
 But if A will pay 100k, B and C will not be liable
anymore; they will be discharged.
Sec. 68. Order in which indorsers are liable. - As
respect one another, indorsers are liable prima facie
in the order in which they indorse; but evidence is
admissible to show that, as between or among
themselves, they have agreed otherwise. Joint
payees or joint indorsees who indorse are deemed to
indorse jointly and severally.
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 USJ-R School of Law
Negotiable Instruments Law | Judge Ygnacio
 E LIABLE to F = warranty of indorser that the
instrument is genuine (P400k)
 D LIABLE to E = warranty of an indorser (P400K)
 C LIABLE to D = P100k (C indorsed the note to D, he
warrants that he will pay it at P100k; it was D who
made the alteration to P400k)
 If E paid P400k, can E go against D for the same
amount?  YES.
 If D paid P400k, can D go against C?  Yes (100k)
 Can C go against B?  Yes (100k)
 Can B go against A?  Yes (100k)
 Usa ra ang mubayad, dili kailangan sila tanan. So
bottomline the person primarily liable will pay if he
has no available defense.
FORGERY
Types of Forgery:
1. Forgery of the Signature of either the maker or
drawer –
SCENARIO:
A’s signature was forged by B. (instrument is still
negotiable because forgery is not a requisite for an
instrument to be negotiable) B indorsed it to C, then to
D, E, F. If instrument becomes due & demandable, F will
present it to to A (100k).
Is A liable?  NO because forgery is a REAL defense.
So F must issue notice of dishonor. But if D pays, it will
discharge the subsequent parties.
Can D ask C for payment of 100k?  Yes
Is B liable to C?  Yes
Is A liable to B?  NO (real defense; forgery)
But why is B, C, D and E liable to F? (assuming they have
no defences) Because even if the instrument is forged, as
indorsers, you warrant that the instrument is GENUINE –
warranty of an indorser.
2. Forgery of the Indorsement – (*only applicable
if it is an ORDER instrument because
Personal notes. Rely at your own risk.
indorsement is necessary to complete the
negotiation)
SCENARIO:
A’s signature is genuine (not forged). A issued a note
(100k) to B then indorsed it to C. And C indorsed it to D,
however, when D (present holder) met E, E forged the
signature of D to make it appear that it was indorsed to
him. E indorsed it to F.
If the instrument becomes due & demandable, F will
present it for payment to A (person primarily liable).
Is A liable for 100k?  NO
“The person whose signature was forged and those
persons prior to him, including the maker, are NOT
liable.”
 Person whose signature was forged – D (not
liable)
 Persons prior to D – C, B and A (not liable)
Why will E be liable to F?  Because E indorsed it to F
(warranty of an indorser)
If F further indorses it to G, is F liable to G?  Yes
(warranty of an indorser)
WHO ARE NOT LIABLE?
 Person whose signature was forged
 All parties prior to him
 Including the maker
So if the instrument becomes due & demandable, G will
present it for payment to A (person primarily liable). But
A is NOT liable because there is forgery of the
indorsement. B and C are also NOT liable.
Valid (or last) holder si D pa lang kay wa pa baya niya gi-
indorse unta because it was E who made the forgery.
 TAKE NOTE: A, B, and C are still liable but not as far as
G is concerned. They are only liable to the last valid
holder of the instrument.
 So G must issue notice of dishonor. E is liable because
he is the person who forged the signature, and all the
subsequent indorsers (warranty of an indorser).
What if it is a Bearer instrument but it was still indorsed.
D forged the signature of C, then indorsed it to E and E
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 USJ-R School of Law
Negotiable Instruments Law | Judge Ygnacio

indorsed it to F then to G. G presented it to A for

payment.

Is there forgery of indorsement?  YES

Is A liable?  YES. Even if there is forgery, A is liable

because it is a BEARER instrument since indorsement is
NOT necessary; it will not matter.

But if there is forgery of indorsement in an Order

instrument, as far as D and E is concerned, there is NO
VALID NEGOTIATION.

Personal notes. Rely at your own risk. <<ACCE>>

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