Daniel Anthony L.

Cabrera
3-ALM
Does CHOM No. 15-460 and its amendments violate the
Negotiable Instruments Law?

On September 2, 2015, the Philippine Clearing House

Corporation (“PCHC”) issued CHOM No. 15-460.Ai, more commonly
known as the “no erasure rule” which became effective last January
4, 2016. The said guidelines provide that checks with erasures,
corrections, and any forms of deficiencies shall no longer be accepted
for clearing by the PCHC. It further provides that any alterations
made on the date, identification, amount (figures and words),
signature, account name and number, check number, MICR
character, regardless of any signature or initials that appear to
indicate authorization of the alteration or erasure, or non-indication
of date, payee, amount payables in figures, amount payables in
words except for checks issued by banks using a check writer, or
signature of the drawer will no longer be valid and accepted.
Personally, I don’t believe that the amendments of PCHC
violated the provisions of the Negotiable Instruments Law (“NIL”) on
alteration of documentsii on the following reasons:
a) Existing provisions of the NIL already prohibited alteration
of negotiable instruments, particularly Section 124 which provides
that a materially altered negotiable instrument shall be considered
as avoided or invalid except if it is in the hands of a holder in due
course, not a party to the alteration. Section 125 further enumerates
what constitutes material alteration. CHOM 15-460.A simply
reiterated the NIL and expanded the coverage of the alteration or
erasure;
Philippine Clearing House Corporation CHOM No. 15-460.A
Articles 124 and 125 of the Negotiable Instruments Law
PCHC Clearing House Rules and Regulations
Daniel Anthony L. Cabrera
3-ALM
b) CHOM 15-460 as clarified in 15-460.A was released by PCHC
upon the Bankers’ Association of the Philippines’ request for it to
come up with clear rules on altered checks in view of public interest,
for the protection of the general public. CHOM No. 15-460 is
intended as a fraud mitigating measure to protect the banks and
their customers against fraudulent attempts to alter checks;
c) PCHC, a corporation co-equally owned by all commercial
banks enlisted as members of the Bankers Association of the
Philippines, has been designated by the Monetary Board of the
Bangko Sentral ng Pilipinas as the exclusive check clearing service
provider. As such, it was empowered by BSP, and has the authority
to come up with guidelinesiii for the effective implementation of the
check clearing system; and
d) Existing Supreme Court jurisprudence has consistently ruled
that when a negotiable instrument is materially altered without the
consent of all parties liable thereon, it is avoided, except as against a
party who has himself made, authorized, or assented to the alteration
in case of material alteration, the negotiable instrument will be
considered void (Metropolitan Bank and Trust Company vs Renato
Cabilzo, G.R. No. 154469, December 6, 2006). In G.R. No. 129015
dated August 13, 2004 entitled Samsung Construction Company
Philippines, Inc. vs. Far East Bank and Trust Company and Court of
Appeals,” the Supreme Court ruled that the general rule is to the
effect that a forged signature is “wholly inoperative,” and payment
made “through or under such signature” is ineffectual or does not
discharge the instrument.”
Philippine Clearing House Corporation CHOM No. 15-460.A
Articles 124 and 125 of the Negotiable Instruments Law
PCHC Clearing House Rules and Regulations
Daniel Anthony L. Cabrera
3-ALM
i
Philippine Clearing House Corporation CHOM No. 15-460.A
ii
Articles 124 and 125 of the Negotiable Instruments Law
iii
PCHC Clearing House Rules and Regulations

Philippine Clearing House Corporation CHOM No. 15-460.A

Articles 124 and 125 of the Negotiable Instruments Law
PCHC Clearing House Rules and Regulations