M made a promissory note for P100,000 payable to P or order. P altered the amount by increasing it to P150,000. P then indorsed it to A, and A to B, present holder in due course. Which statement is correct?

M made a promissory note for P100,000 payable to P or order. P altered the amount by increasing it to P150,000. P then indorsed it to A, and A to B, present holder in due course. Which statement is correct?

• A. M, P, and A are not liable to B for the material alteration.
• B. M is liable to B for P100,000; P and A are liable to B for P50,000.
• C. M is not liable to B; P and A are liable to B for P150,000.
• D. M, P, and A are liable to B for P150,000.

Answer: (B)

Material alteration is a change in a negotiable instrument’s terms without the signer’s consent, and it shifts liability in a specific way. The maker’s obligation is to pay the amount he promised when he signed the note; he is not bound to pay more just because someone later altered the instrument. Here, the amount was increased by 50,000 without M’s consent, so M remains liable for the original 100,000 only. The added 50,000 is the portion created by the alteration, and the party who altered the instrument (the payee) bears that risk; in this case, that responsibility falls on the endorsers who signed after the alteration as well, because they took on liability after the instrument had been altered. Consequently, the holder can collect 100,000 from M and 50,000 from the endorsers who followed the alteration (P and A), each for the portion of the added amount they are responsible for. This aligns with the idea that the original signer isn’t forced to pay more than promised, while those who facilitated or signed after the alteration shoulder the added amount. The other options ignore the effect of material alteration on who bears the added risk, or misstate the maker’s ongoing liability, or assert the full 150,000 liability without regard to who altered the note.

Material alteration is a change in a negotiable instrument’s terms without the signer’s consent, and it shifts liability in a specific way. The maker’s obligation is to pay the amount he promised when he signed the note; he is not bound to pay more just because someone later altered the instrument. Here, the amount was increased by 50,000 without M’s consent, so M remains liable for the original 100,000 only. The added 50,000 is the portion created by the alteration, and the party who altered the instrument (the payee) bears that risk; in this case, that responsibility falls on the endorsers who signed after the alteration as well, because they took on liability after the instrument had been altered. Consequently, the holder can collect 100,000 from M and 50,000 from the endorsers who followed the alteration (P and A), each for the portion of the added amount they are responsible for. This aligns with the idea that the original signer isn’t forced to pay more than promised, while those who facilitated or signed after the alteration shoulder the added amount. The other options ignore the effect of material alteration on who bears the added risk, or misstate the maker’s ongoing liability, or assert the full 150,000 liability without regard to who altered the note.