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PRESENTMENT FOR PAYMENT

G.R. No. 89802 May 7, 1992
ASSOCIATED BANK and CONRADO CRUZ, petitioners,
vs.
HON. COURT OF APPEALS, and MERLE V. REYES, doing business under the
name and style "Melissa's RTW," respondents.
Soluta, Leonidas, Marifosque, Javier, Liboon & aguila Law Offices for petitioners.
Roberto B. Lugue for private respondent.

CRUZ, J.:
The sole issue raised in this case is whether or not the private respondent has a cause
of action against the petitioners for their encashment and payment to another person of
certain crossed checks issued in her favor.
The private respondent is engaged in the business of ready-to-wear garments under the
firm name "Melissa's RTW." She deals with, among other customers, Robinson's
Department Store, Payless Department Store, Rempson Department Store, and the
Corona Bazaar.
These companies issued in payment of their respective accounts crossed checks
payable to Melissa's RTW in the amounts and on the dates indicated below:
PAYOR BANK AMOUNT DATE
Payless Solid Bank P3,960.00 January 19, 1982
Robinson's FEBTC 4,140.00 December 18, 1981
Robinson's FEBTC 1,650.00 December 24, 1981
Robinson's FEBTC 1,980.00 January 12, 1982
Rempson TRB 1,575.00 January 9, 1982
Corona RCBC 2,500.00 December 22, 1981
When she went to these companies to collect on what she thought were still unpaid
accounts, she was informed of the issuance of the above-listed crossed checks. Further
inquiry revealed that the said checks had been deposited with the Associated Bank
(hereinafter, "the Bank") and subsequently paid by it to one Rafael Sayson, one of its
"trusted depositors," in the words of its branch manager and co-petitioner, Conrado
Cruz, Sayson had not been authorized by the private respondent to deposit and encash
the said checks.

The private respondent sued the petitioners in the Regional Trial Court of Quezon City
for recovery of the total value of the checks plus damages. After trial, judgment was
rendered requiring them to pay the private respondent the total value of the subject
checks in the amount of P15,805.00 plus 12% interest, P50,000.00 actual damages,
P25,000.00 exemplary damages, P5,000.00 attorney's fees, and the costs of the suit. 1
The petitioners appealed to the respondent court, reiterating their argument that the
private respondent had no cause of action against them and should have proceeded
instead against the companies that issued the checks. In disposing of this contention,
the Court of Appeals 2 said:
The cause of action of the appellee in the case at bar arose from the
illegal, anomalous and irregular acts of the appellants in violating common
banking practices to the damage and prejudice of the appellees, in
allowing to be deposited and encashed as well as paying to improper
parties without the knowledge, consent, authority or endorsement of the
appellee which totalled P15,805.00, the six (6) checks in dispute which
were "crossed checks" or "for payee's account only," the appellee being
the payee.
The three (3) elements of a cause of action are present in the case at bar,
namely: (1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the
named defendant to respect or not to violate such right; and (3) an act or
omission on the part of such defendant violative of the right of the plaintiff
or constituting a breach thereof. (Republic Planters Bank vs. Intermediate
Appellate Court, 131 SCRA 631).
And such cause of action has been proved by evidence of great weight.
The contents of the said checks issued by the customers of the appellee
had not been questioned. There is no dispute that the same are crossed
checks or for payee's account only, which is Melissa's RTW. The appellee
had clearly shown that she had never authorized anyone to deposit the
said checks nor to encash the same; that the appellants had allowed all
said checks to be deposited, cleared and paid to one Rafael Sayson in
violation of the instructions in the said crossed checks that the same were
for payee's account only; and that the appellee maintained a savings
account with the Prudential Bank, Cubao Branch, Quezon City which
never cleared the said checks and the appellee had been damaged by
such encashment of the same.
We affirm.
Under accepted banking practice, crossing a check is done by writing two parallel lines
diagonally on the left top portion of the checks. The crossing is special where the name
of a bank or a business institution is written between the two parallel lines, which means

that the drawee should pay only with the intervention of that company. 3 The crossing is
general where the words written between the two parallel lines are "and Co." or "for
payee's account only," as in the case at bar. This means that the drawee bank should
not encash the check but merely accept it for deposit. 4
In State Investment House vs. IAC, 5 this Court declared that "the effects of crossing a
check are: (1) that the check may not be encashed but only deposited in the bank; (2)
that the check may be negotiated only once –– to one who has an account with a bank;
and (3) that the act of crossing the check serves as a warning to the holder that the
check has been issued for a definite purpose so that he must inquire if he has received
the check pursuant to that purpose."
The effects therefore of crossing a check relate to the mode of its presentment for
payment. Under Sec. 72 of the Negotiable Instruments Law, presentment for payment,
to be sufficient, must be made by the holder or by some person authorized to receive
payment on his behalf. Who the holder or authorized person is depends on the
instruction stated on the face of the check.
The six checks in the case at bar had been crossed and issued "for payee's account
only." This could only signify that the drawers had intended the same for deposit only by
the person indicated, to wit, Melissa's RTW.
The petitioners argue that the cause of action for violation of the common instruction
found on the face of the checks exclusively belongs to the issuers thereof and not to the
payee. Moreover, having acted in good faith as they merely facilitated the encashment
of the checks, they cannot be made liable to the private respondent.
The subject checks were accepted for deposit by the Bank for the account of Rafael
Sayson although they were crossed checks and the payee was not Sayson but
Melissa's RTW. The Bank stamped thereon its guarantee that "all prior endorsements
and/or lack of endorsements (were) guaranteed." By such deliberate and positive act,
the Bank had for all legal intents and purposes treated the said checks as negotiable
instruments and, accordingly, assumed the warranty of the endorser.
The weight of authority is to the effect that "the possession of check on a forged or
unauthorized indorsement is wrongful, and when the money is collected on the check,
the bank can be held 'for moneys had and received." 6The proceeds are held for the
rightful owner of the payment and may be recovered by him. The position of the bank
taking the check on the forged or unauthorized indorsement is the same as if it had
taken the check and collected without indorsement at all. The act of the bank amounts
to conversion of the check. 7
It is not disputed that the proceeds of the subject checks belonged to the private
respondent. As she had not at any time authorized Rafael Sayson to endorse or encash
them, there was conversion of the funds by the Bank.

When the Bank paid the checks so endorsed notwithstanding that title had not passed
to the endorser, it did so at its peril and became liable to the payee for the value of the
checks. This liability attached whether or not the Bank was aware of the unauthorized
endorsement. 8
The petitioners were negligent when they permitted the encashment of the checks by
Sayson. The Bank should have first verified his right to endorse the crossed checks, of
which he was not the payee, and to deposit the proceeds of the checks to his own
account. The Bank was by reason of the nature of the checks put upon notice that they
were issued for deposit only to the private respondent's account. Its failure to inquire
into Sayson's authority was a breach of a duty it owed to the private respondent.
As the Court stressed in Banco de Oro Savings and Mortgage Bank vs. Equitable
Banking Corp., 9 "the law imposes a duty of diligence on the collecting bank to scrutinize
checks deposited with it, for the purpose of determining their genuineness and
regularity. The collecting bank, being primarily engaged in banking, holds itself out to
the public as the expert on this field, and the law thus holds it to a high standard of
conduct."
The petitioners insist that the private respondent has no cause of action against them
because they have no privity of contract with her. They also argue that it was Eddie
Reyes, the private respondent's own husband, who endorsed the checks.
Assuming that Eddie Reyes did endorse the crossed checks, we hold that the Bank
would still be liable to the private respondent because he was not authorized to make
the endorsements. And even if the endorsements were forged, as alleged, the Bank
would still be liable to the private respondent for not verifying the endorser's authority.
There is no substantial difference between an actual forging of a name to a check as an
endorsement by a person not authorized to make the signature and the affixing of a
name to a check as an endorsement by a person not authorized to endorse it. 10
The Bank does not deny collecting the money on the endorsement. It was its
responsibility to inquire as to the authority of Rafael Sayson to deposit crossed checks
payable to Melissa's RTW upon a prior endorsement by Eddie Reyes. The failure of the
Bank to make this inquiry was a breach of duty that made it liable to the private
respondent for the amount of the checks.
There being no evidence that the crossed checks were actually received by the private
respondent, she would have a right of action against the drawer companies, which in
turn could go against their respective drawee banks, which in turn could sue the herein
petitioner as collecting bank. In a similar situation, it was held that, to simplify
proceedings, the payee of the illegally encashed checks should be allowed to recover
directly from the bank responsible for such encashment regardless of whether or not the
checks were actually delivered to the payee. 11 We approve such direct action in the
case at bar.

658-95 for Sum of Money with Prayer for a Writ of Replevin[1] before the Metropolitan Trial Court of Pasay City. GUECO and MA. the Banks Assistant Vice President demanded payment of the ." and thus made the assurance that it had ascertained the genuineness of all prior endorsements.respondents. GUECO. J. the Spouses executed promissory notes which were payable in monthly installments and chattel mortgage over the car to serve as security for the notes.: The respondents Gueco Spouses obtained a loan from petitioner International Corporate Bank (now Union Bank of the Philippines) to purchase a car a Nissan Sentra 1600 4DR. It is so ordered. FRANCIS S.[2] On August 25. 1995 a civil action docketed as Civil Case No. vs. In consideration thereof. 1989 Model. the Bank had stamped on the back thereof the words: "All prior endorsements and/or lack of endorsements guaranteed. DECISION KAPUNAN. We find that the respondent court committed no reversible error in holding that the private respondent had a valid cause of action against the petitioners and that the latter are indeed liable to her for their unauthorized encashment of the subject checks. the petition is DENIED. 1995.It is worth repeating that before presenting the checks for clearing and for payment. Consequently. WHEREFORE. We also agree with the reduction of the award of the exemplary damages for lack of sufficient evidence to support them. The Spouses defaulted in payment of installments. Francis Gueco was served summons and was fetched by the sheriff and representative of the bank for a meeting in the bank premises. 141968. Dr. 2001] THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE PHILIPPINES). the Bank filed on August 7. LUZ E. Desi Tomas. SPS. February 12. Branch 45. No. with costs against the petitioner. -------------------------------------------------------------------------------------- [G. petitioner.R.

[4] The case was elevated to the Court of Appeals. and 3.000. Jefferson Rivera. Gueco need not sign the motion for joint dismissal considering that they had not yet filed their Answer. over which appellants have no control. the RTC held that there was a meeting of the minds between the parties as to the reduction of the amount of indebtedness and the release of the car but said agreement did not include the signing of the joint motion to dismiss as a condition sine qua non for the effectivity of the compromise. the decretal portion of which reads: .00. After several demand letters and meetings with bank representatives.[3] On appeal to the Regional Trial Court.000.00 but the car was not released because of his refusal to sign the Joint Motion to Dismiss. counterclaims or suits for damages. and P25. Gueco went to the bank and talked with its Administrative Support.000.000. Dr. Gueco delivered a managers check in the amount of P150.00 as exemplary damages. Branch 33. insisted that the joint motion to dismiss is standard operating procedure in their bank to effect a compromise and to preclude future filing of claims. The court further ordered the bank: 1. Auto Loans/Credit Card Collection Head. the decision of the Metropolitan Trial Court Branch 33 is hereby AFFIRMED.000.The Metropolitan Trial Court dismissed the complaint for lack of merit.000. the respondents Gueco spouses initiated a civil action for damages before the Metropolitan Trial Court of Quezon City.00 which represents the unpaid balance for the car loan. to pay the cost of suit. After some negotiations and computation. issued the assailed decision.000. whereas the funds have long been paid by appellants to secure said Managers Check. On August 28. 1995. the amount was lowered to P154. In other respect. which on February 17. In its decision. 2000.amount of P184. P25. Dr. the decision of the Metropolitan Trial Court was reversed.00 as moral damages. Petitioner. to return immediately the subject car to the appellants in good working condition. The negotiations resulted in the further reduction of the outstanding loan to P150. 2. the car was detained inside the banks compound.00 as attorneys fees. however. Branch 227 of Quezon City. as a result of the non-payment of the reduced amount on that date. However. Appellee may deposit the Managers check the proceeds of which have long been under the control of the issuing bank in favor of the appellee since its issuance.00. to pay the appellants the sum of P50. On August 29. 1995. It is the contention of the Gueco spouses and their counsel that Dr.

raising the following assigned errors: I THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO AGREEMENT WITH RESPECT TO THE EXECUTION OF THE JOINT MOTION TO DISMISS AS A CONDITION FOR THE COMPROMISE AGREEMENT. [7] While there are exceptions to this rule. Branch 227. It is well settled that the findings of fact of the lower court. the petition for review on certiorari is hereby DENIED and the Decision of the Regional Trial Court of Quezon City. Q-97-31176. Costs against petitioner.[6] As to the first issue.[5] The Court of Appeals essentially relied on the respect accorded to the finality of the findings of facts by the lower court and on the latter's finding of the existence of fraud which constitutes the basis for the award of damages. the petitioners claim to the contrary. premises considered. in Civil Case No. especially when affirmed by the Court of Appeals. 1995 . are binding upon this Court. is AFFIRMED in toto.WHEREFORE. II THE COURT OF APPEALS ERRED IN GRANTING MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES IN FAVOR OF THE RESPONDENTS. notwithstanding. III THE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER RETURN THE SUBJECT CAR TO THE RESPONDENTS. for lack of any reversible error. Being an affirmative allegation. we find for the respondents. The petitioner comes to this Court by way of petition for review on certiorari under Rule 45 of the Rules of Court.[8] the present case does not fall under any one of them. SO ORDERED. WITHOUT MAKING ANY PROVISION FOR THE ISSUANCE OF THE NEW MANAGERS/CASHIERS CHECK BY THE RESPONDENTS IN FAVOR OF THE PETITIONER IN LIEU OF THE ORIGINAL CASHIERS CHECK THAT ALREADY BECAME STALE. petitioner has the burden of evidence to prove his claim that the oral compromise entered into by the parties on August 28. The issue as to what constitutes the terms of the oral compromise or any subsequent novation is a question of fact that was resolved by the Regional Trial Court and the Court of Appeals in favor of respondents.

And third. plaintiffs claim for damages is unavailing. 1995 was merely for the lowering of the price. hence - . This petitioner failed to do. (TSN. The trial court opined. for after all. in its findings of facts. Yadao. 1996. Rollo. whose factual findings are entitled to respect since it has the opportunity to directly observe the witnesses and to determine by their demeanor on the stand the probative value of their testimonies (People vs. the dismissal of the case against him is for his own good and benefit. he will recover his car. 5). In fact. In dismissing the claim of damages of the respondents. 7 [1992]).09. First. however. did not make a factual finding that the compromise agreement included the condition of the signing of a joint motion to dismiss. the case against him will be dismissed. 216 SCRA 1.985.First. p. it is equally true that there is nothing wrong for the plaintiff to affix his signature in the Joint Motion to Dismiss.included the stipulation that the parties would jointly file a motion to dismiss. pp. (Rollo. The Court of Appeals made the factual findings in this wise: In support of its claim. petitioner presented the testimony of Mr. pp. p. clearly indicated that the agreement of the parties on August 28. October 23. Plaintiffs. while ruling in favor of the petitioner and thereby dismissing the complaint. are not entitled to the award of moral damages and exemplary damages as there is no showing that the defendant bank acted fraudulently or in bad faith. Gueco was aware that the signing of the draft of the Joint Motion to Dismiss was one of the conditions set by the bank for the acceptance of the reduced amount of indebtedness and the release of the car.00 instead of its original claim of P184. 32). et al. the signing of the Joint Motion to Dismiss gives the plaintiff three (3) advantages. The trial court. Jefferson Rivera who related that respondent Dr. Respondents. that the trial court. even the Metropolitan Trial Court. 18. likewise. thus: As regards the third issue. 1995 (Rollo.000. Notably. the plaintiffs could have avoided the renting of another car and could have avoided this litigation had he signed the Joint Motion to Dismiss. failed to make a categorical finding on the issue. he will pay his obligation to the bank on its reduced amount of P150. While it is true that herein defendant can unilaterally dismiss the case for collection of sum of money with replevin. 15) The Court has noted. however. 17-21. Second. it merely observed that respondents are not entitled to indemnity since it was their unjustified reluctance to sign of the Joint Motion to Dismiss that delayed the release of the car. maintained that no such condition was ever discussed during their meeting of August 28.

Gueco. (Rollo. the lower court declared. The CA thus declared: . xxx. 1995 but he did not bother to show a copy thereof to his family or legal counsel that day August 28. The appellees would like this Court to believe that Dr. for his family or legal counsel to see to be brought signed. Gueco was not shown the Joint Motion to Dismiss in the meeting of August 28. Anent the issue of award of damages. on the other hand. being inconsistent with human experience. 1995. Gueco was not given a copy of the joint motion that day of August 28. we find the claim of petitioner meritorious. Why Dr. as the appellees allege. whereby the original claim of the bank of P184. The idea of a Joint Motion to Dismiss being signed as a condition to the pushing through a deal surfaced only on August 29. Gueco was informed by Mr. expressly made a finding that petitioner failed to include the aforesaid signing of the Joint Motion to Dismiss as part of the agreement. Gueco in the August 28. Considering the effect of the signing of the Joint Motion to Dismiss on the appellants substantive right. bolstering his claim that its signing was never put into consideration in reaching a compromise.00 in managers check form to be submitted on the following day on August 29. This Court is not convinced by the appellees posturing. In dismissing petitioners claim. Rivera of the bank requirement of signing the joint motion on August 28.985. 1995.000.00 and that upon payment of which. upon being shown the Joint Motion to Dismiss. 1995? (sic) [I]s a question whereby the answer up to now eludes this Courts comprehension. thus: If it is true. it is only reasonable and logical to assume that the joint motion should have been shown to Dr. both the Regional Trial Court and the Court of Appeals ruled that there was fraud on the part of the petitioner. plaintiff was informed that the subject motor vehicle would be released to him. 1995. In finding the petitioner liable for damages. to refuse to pay the Managers Check and for the bank to refuse to accept the manager's check.[9] We see no reason to reverse. This part of the theory of appellee is too complicated for any simple oral agreement. it is more in accord with human experience to expect Dr.000. Such claim rests on too slender a frame. 1995 meeting. p. together with the P150. The only logical explanation for this inaction is that Dr.xxx On August 28. bank representative Jefferson Rivera and plaintiff entered into an oral compromise agreement. 1995. 1995. 12) The lower court. that the signing of the joint motion was a condition sine qua non for the reduction of the appellants obligation.09 was reduced to P150.

the former intentionally evaded its obligation and thereby became liable for moral and exemplary damages.000. knowing and intending the effects which naturally and necessarily arise from such act or omission. Gueco failed to present an iota of evidence to overcome this presumption. or a willful omission. In fact. If respondent did suffer any damage. Gueco to sign the joint motion to dismiss can not be said to be a deliberate attempt on the part of petitioner to renege on the compromise agreement of the parties. It is the voluntary execution of a wrongful act. The motion to dismiss was in fact also for the benefit of Dr. oppressive or malevolent.00 is indicative of its good faith and sincere desire to settle the case. Petitioner's act of requiring Dr.[10] We disagree. Gueco. be noted that in cases of breach of contract. reckless. fraudulent.[12] The law presumes good faith. It should. However.The lower court's finding of fraud which became the basis of the award of damages was likewise sufficiently proven. petitioner may have been remiss in informing Dr.[11] We fail to see how the act of the petitioner bank in requiring the respondent to sign the joint motion to dismiss could constitute as fraud.000. Gueco refused to sign the . as well as attorneys fees. Gueco would pay his outstanding account and in return petitioner would return the car and drop the case for money and replevin before the Metropolitan Trial Court. The joint motion to dismiss was but a natural consequence of the compromise agreement and simply stated that Dr. the dismissal of the case.[13] We. this can not in anyway have prejudiced Dr. as amended is the deliberate and intentional evasion of the normal fulfillment of obligation When petitioner refused to release the car despite respondent's tender of payment in the form of a manager's check.00 to P150. as the case filed by petitioner against it before the lower court would be dismissed with prejudice.000. Gueco had fully settled his obligation. Gueco delivered a managers check representing the reduced amount ofP150. Gueco that the signing of a joint motion to dismiss is a standard operating procedure of petitioner bank. Fraud under Article 1170 of the Civil Code of the Philippines. likewise. Necessarily. since Dr. the act of petitioner bank in lowering the debt of Dr. In no way. as a result of the withholding of his car by petitioner. Gueco from P184. the fraud referred to in Article 1170 of the Civil Code is the deliberate and intentional evasion of the normal fulfillment of obligation. 1995. Dr. True.00. may the conduct of petitioner be characterized as wanton. The whole point of the parties entering into the compromise agreement was in order that Dr. a representative of respondent bank. In the meeting of August 29. he has only himself to blame. However. Said check was given to Mr. Fraud has been defined as the deliberate intention to cause damage or prejudice. moral damages may only be awarded when the breach was attended by fraud or bad faith. likewise. Rivera. Gueco. the claim for exemplary damages must fail. hence. find for the petitioner with respect to the third assigned error. respondent Dr.

[16] While there is controversy as to whether the document evidencing the order to hold payment of the check was formally offered as evidence by petitioners. vice president of the bank. a check payable on demand which was long overdue by about two and a half (21/2) years was considered a stale check. Under the negotiable instruments law. therefore. he was made to execute a statement to the effect that he was withholding the payment of the check. Appellee may deposit the Managers Check the proceeds of which have long been under the control of the issuing bank in favor of the appellee since its issuance. 1995. to return immediately the subject car to the appellants in good working condition. and the facts of the particular case. Rudimentary sense of justice and fair play would not countenance respondents position. Gueco anytime. should not be paid. Desi Tomas. It is valueless and. presentment is sufficient if made within a reasonable time after the last negotiation thereof. Gueco instructed the bank to disregard the hold order letter and demanded the immediate release of his car.[25] Failure of a payee to encash a check for .[21] A check must be presented for payment within a reasonable time after its issue.[23] The test is whether the payee employed such diligence as a prudent man exercises in his own affairs. In the case of a bill of exchange.joint motion to dismiss. When the instrument is payable on demand.[15] to which the former replied that the condition of signing the joint motion to dismiss must be satisfied and that they had kept the checkwhich could be claimed by Dr. The decision of the Regional Trial Court.[17] it appears from the pleadings that said check has not been encashed. whereas the funds have long been paid by appellants to secure said Managers Check over which appellants have no control. In a case.[18] Respondents would make us hold that petitioner should return the car or its value and that the latter. thus. presentment must be made within a reasonable time after its issue. petitioner was negligent in opting not to deposit or use said check. dated September 4. should suffer the loss occasioned by the fact that the check had become stale. A stale check is one which has not been presented for payment within a reasonable time after its issue.[24] This is because the nature and theory behind the use of a check points to its immediate use and payability. orders the petitioner: 1. Dr. an instrument not payable on demand must be presented for payment on the day it falls due.[22] and in determining what is a reasonable time. regard is to be had to the nature of the instrument.[19] It is their position that delivery of the managers check produced the effect of payment[20] and.[14]Subsequently. in a letter addressed to Ms. because of its own negligence. which was affirmed in toto by the Court of Appeals. the usage of trade or business with respect to such instruments.

afterwhich. .more than ten (10) years undoubtedly resulted in the check becoming stale.[26] Thus. thus. If treated as promissory note. andaccepted in advance by the act of its issuance. it is a bill of exchange drawn by the cashier of a bank upon the bank itself. the check involved is not an ordinary bill of exchange but a managers check. It is similar to a cashiers check both as to effect and use. there is no doubt that the petitioner bank held on the check and refused to encash the same because of the controversy surrounding the signing of the joint motion to dismiss. Definitely. WHEREFORE. the petition for review is given due course. much less shown that they or the bank which issued the managers check has suffered damage or loss caused by the delay or non-presentment. the original obligation to pay certainly has not been erased.000. the Gueco spouses have not alleged.[28] under the specific circumstances of the cited cases constituted unreasonable time as a matter of law. It has been held that.[29] It is really the banks own check and may be treated as a promissory note with the bank as a maker.[32] Failure to present on time. if the check had become stale.[31] Even assuming that presentment is needed. In fact. A managers check is one drawn by the banks manager upon the bank itself. A cashiers check is a check of the banks cashier on his own or another check.[33] In the case at bar. The decision of the Court of Appeals affirming the decision of the Regional Trial Court is SET ASIDE. the drawer would be the maker and in which case the holder need not prove presentment for payment or present the bill to the drawee for acceptance. does not totally wipe out all liability. In effect. the legal situation amounts to an acknowledgment of liability in the sum stated in the check. In the case at bar. however. [30] The check becomes the primary obligation of the bank which issues it and constitutes its written promise to pay upon demand. petitioner is to return the subject motor vehicle in good working condition. even a delay of one (1) week[27] or two (2) days. failure to present for payment within a reasonable time will result to the discharge of the drawer only to the extent of the loss caused by the delay. it becomes imperative that the circumstances that caused its non-presentment be determined. In this case. The mere issuance of it is considered an acceptance thereof. premises considered. SO ORDERED.00 to the petitioner upon surrender or cancellation of the managers check in the latters possession. We see no bad faith or negligence in this position taken by the Bank. Respondents are further ordered to pay the original obligation amounting to P150.

in the amount of P100. J. but when said check was presented with said bank. to the damage and prejudice of said Equitable Card Network Inc. and within the jurisdiction of this Honorable Court. Check No. was charged on 28 March 1994 with three (3) counts of violation of Batas Pambansa Bilang 22 (B.P. vs. February 28.000. Blg. 1993 in the amount of P100.: Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court. with deliberate intent.00 Philippine Currency.NOTICE OF DISHONOR [G. 38254-R reads: That on or about the 12th day of May. which check was issued in payment of an obligation of said accused. the same was dishonored for reason Account Closed and despite notice and demands made to redeem or make good said check. Cebu City.R. Branch 7. DECISION CHICO-NAZARIO. Accused Jaime Dico.[3] . Philippines. knowing at the time of issue of the check she/he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment. respondents. with intent of gain and of causing damage. 141669. before the Municipal Trial Court in Cities (MTCC). 1993 and for sometime subsequent thereto. docketed as Criminal Cases No. seeking the reversal of the Decision[1] of the Court of Appeals dated 30 September 1999 and its Resolution[2] dated 11 January 2000 denying petitioners motion for reconsideration. and up to the present time still fails and refuses to do so. HON. make or draw Far East Bank and Trust Co. 38254-R to No. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES. 364903 dated May 12. in the City of Cebu. 2005] JAIME DICO. now petitioner.00 payable to Equitable Banking Corp. The accusatory portion of the Information in Criminal Case No. petitioner. the said accused. did then and there issue. 22).000. 38256-R. said accused failed and refused. No.

28 (Exh. Date Amount 38255-R 369404 June 12.00 is the highest credit line that the complainant can give the accused. (Exhs. Inc. show that the accused is a credit card holder of the said network.00. 3 and 4). Manager of Equitable Card Network. that the outstanding obligation of the accused to the complainant Equitable Card Network including interests and charges thereon is P1. the filing of these cases in Court. as its sole witness. 1993.000. the defense presented two witnesses Debbie Dy. that in January. for reason Account Closed (Exhs. the credit line of the accused with the complainant Equitable Card Network was P499. collection manager of the complainant Equitable Card Network.. date. A-1.000. On cross-examination. 2. because the amount of P499. The pertinent data in the other informations are as follows: Case No. The facts. and that the obligation of the accused to the complainant rose to a million because the accused abused his credit card.00[4] 38256-R 369380 Jan.. 1993 P200. accused pleaded not guilty to each of the charges.035. 15. hence.[6] The cases were consolidated and were jointly heard. pre-trial of the cases was waived. A. Check No. That the complainant sent a letter to the accused to redeem or pay the amounts of the checks but the accused refused to comply. that the accused had a good record with the complainant until he issued the bouncing checks above-mentioned. 1).000. Canlas testified that in 1993. C.000. . B. Cebu Branch. Inc. are quoted by the Court of Appeals: The evidence of the prosecution adduced thru the testimony of Lily Canlas. Ms. as summarized by the MTCC.736.The two other Informations are similarly worded except for the number. B-1.[7] Collection Manager of Equitable Card Network. D and D-1). 1993 P296. the current obligation of the accused has not yet been settled. On the other hand. and amount of the checks.00 but this was rejected by the complainant (Exh. the accused applied with the complainant for an increase of his credit line to P699. and the petitioner himself. The prosecution presented Lily Canlas. Upon agreement of the parties. and in payment of his obligation to the complainant card network all bounced.590. as a hostile witness.27[5] When arraigned on 11 January 1995. and C-1). Inc. that the complainant filed these cases because the three (3) checks which the accused issued in its favor. and besides.

736. 1993 in the amount of P100. That as of January. B. the accused presented Ms. and because of the inconsistencies in his billings. 1993 in the amount of P200. The accused Jaime Dico testifying on direct examination admits having issued in favor of the complainant Equitable Card Network FEBTC Check No. and because he was billed every month. A).000. B) and FEBTC Check No. that the credit line of the accused with the complainant is P499.000. 369380 dated January 15. he issued said check on April 7. 369404 dated June 12.27 is quite a big amount.00.736. and when he issued the checks in question. in the amount of P100. Cebu City.27 (Exh. Branch Manager of the local branch of the complainant Equitable Card Network as his hostile witness who testified that she is familiar with the accounts of the accused with the complainant. the total obligation of the accused to the complainant is P1. 1993. and because of the nature of his work which is to travel in the Visayas and Mindanao. 369403 dated May 12. A. That since 1985.00. Debbie Dy. C). he will issue four (4) checks. he needed a credit card in his trips.For his defense.00 was rejected by the complainant. 1993.. he advised the Branch Manager then. B) dated May 12. that including interests and other charges. Bernard Chua not to present to the bank the checks that he has issued until all the said conflicts and inconsistencies in his accounts shall have been reconciled. he is a credit card holder of the complainant Equitable Card Network. that he issued above-mentioned four (4) .000.00 (Exh. FEBTC Check No.000.000. and C and subject of these cases. and the accuseds application for an increase of his credit line P699. that because P596. 1993 in the amount of P296.590.00. 1993. That due to the conflicts and inconsistencies in the billings made upon him by the complainant with regard(s) to amounts reflected in his accounts. Bernard Chua that pending reconciliation of his accounts. he was holding the position of sales manager of the Yap Auto Supply. the three (3) of which are the checks marked as the prosecutions Exhs.035. and another check.27. his credit limit with the complainant was exactly P499. he did not redeem the checks he issued because he wanted to be sure that he would be paying the right amount. Inc.736.31.000. That with respect to the check (Exh. he proposed to the Branch Manager then. and the reconciliation of his billings which he has asked the complainant over the years [was] not heeded.00 (Exh. and that the total amount of the three (3) checks issued by the accused in favor of the complainant in three (3) cases is P596.

June 12.181.389. and as a way of commitment to pay his outstanding balance to the complainant which is to [be] amortized as follows: May 12. E-4-A) include the checks which issued to the complainant in these cases and marked as Exhs.000. that as reflected in the Schedule of Creditors (Exh.888.000.035. that based on Exh.12. 12).000.19. that even if his accounts were reconciled. the accused testified that on April 6. his balance to the complainant is P652. 1993.29 (Exh. incumbent Branch Manager of the complainant network in Cebu City. Cebu City (Exh. 1993. then on January 15.389.000.checks in addition to his cash payment of P100. E-4). . he issued the check Exh. 1993 P300. he included the above-mentioned four (4) post dated checks as a sign of good faith. It is also confirmed by the accused that in the Schedule List of Check issued (Exh. 1993.00. one of his creditors is the Equitable Card Network (Exh. and on August 12. his outstanding balance to the complainant is P752. then on April 7.19. that attached to the said Petition is Schedule A which contains a Statement of his Assets and Liabilities.881. and that the problem with the complainant is that it did not return to him the checks which he sent to the complainant together with his proposal to reconcile his accounts. E-3).00 to the complainant. hence. B and C. he approached the complainants manager to reconcile his accounts and find out where the complainant was mistaken. 1993 P100.000. that in his proposal dated April 7. 1993. he made a cash payment of P100.00.00 which he has paid to Bernard Chua. 1993 P200. he filed a Petition For Insolvency with the Regional Trial Court. he issued two (2) other checks to the complainant. On cross-examination. 1993. but his proposal was rejected by the complainants top management in Manila. 1993 P300. E-3-A) which is the complainant in these cases.589. B).28 when his credit line is only P499.000. and the nature of his obligation to the said creditor is a loan in the amount of P1.000.00 he made on April 7.000. the seven (7) checks mentioned therein (Exh. 1993.00. That he does not understand why his total obligation to the complainant has already reached P1. That on May 31. A. A. July 12. B. and then on April 30.00. but with the payment of P100. and C. B-3-A). he cannot admit that his obligation to the complainant has already reached millions. 1993 (Exh.000.00. he issued the checks Exhs. and the total out of these five (5) checks which he has issued in favor of the complainant is P1. 8 which is the Summary furnished by Debbie Dy.

1 of the said law and as charged in the above-entitled three (3) Informations.[9] to suffer imprisonment of six (6) months. 22 as defined and penalized under Sec.[14] In a Judgment dated 20 February 1997.27. The dispositive portion of which reads: WHEREFORE.736. Case No. to suffer imprisonment of six (6) months. Ferdinand J. Bajarias. Branch 7. Case No. convicted petitioner of the crimes charged. Marcos.[17] On 23 June 1997. the Court finds the accused Jaime Dico guilty beyond reasonable doubt of the crime of violation of BP Blg. petitioner appealed to the Regional Trial Court (RTC) by filing a notice of appeal. the sum of P100. and since the complainant did not return to him the checks subject of these cases.The accused further testified on cross-examination that although he could not agree on his outstanding obligation to the complainant. petitioner filed a Motion for Reconsideration[11] which the prosecution opposed.[18] By way of Petition for Review.[15] Petitioner moved for its reconsideration[16] which was opposed by the prosecution. because he was made to understand in the insolvency proceedings that he has to list down the checks that he has issued but were never returned to him..[8] In a decision dated 19 June 1996. affirmed en toto the decision of the MTCC.[10] On 25 July 1996. and to indemnify the complainant the sum of P296.[13] On 30 August 1996. Amado B. Sr. the following penalties: 1) For Crim.00.00. and to indemnify the complainant.[12] In an order dated 26 August 1996. Presiding Judge of the RTC of Cebu City. Presiding Judge of the MTCC. Case No. and hereby imposes upon the accused. 38254-R. the motion for reconsideration was denied. Branch 20.[19] . and to indemnify the complainant. 3856-R. he nevertheless placed his total liability to the complainant in his Petition. and 3) For Crim.000. the motion was denied. Cebu City. accused Dico went up to the Court of Appeals seeking the reversal of the Judgment of the RTC which affirmed the decision of the MTCC. he has to include said checks in his assets and liabilities in his petition for insolvency. 38255-R. 2) For Crim. to suffer imprisonment of six (6) months.000. the sum of P200.

22 with respect to subject FEBTC Check No. it is incumbent upon the prosecution to adduce evidence to prove that petitioner has knowledge of the insufficiency of his funds or credit at the time he issued FEBTC Check No. Hence.27 representing his unpaid obligation covered by FEBTC Check No. 1993) and 369404 (dated June 12. the prosecution failed to present evidence to establish such knowledge of insufficiency of funds or credit on the part of the petitioner regarding the said check.In its Comment to the Petition for Review. 369380 dated January 15.000.P. 1993. the Office of the Solicitor General asked for the dismissal of the petition on the ground that the same had no merit.00 representing his unpaid obligation covered by FEBTC Check Nos. 1993) is AFFIRMED in toto. ordered to indemnify private complainant the sum of P296. the petitioner is nevertheless liable to pay private complainant Equitable the amount of P296. no such prima facie evidence of knowledge of insufficiency of funds or credit exists. 1993 or beyond ninety (90) days from date thereof. notwithstanding. 369380 dated January 15. said: However.27 appearing on the face of said check as it was preponderantly proven in the civil aspect of the case that said check was one of the unpaid checks issued by petitioner to settle his standing obligation which up to the present remains unpaid.736. 1993. 38256-R but is. Perforce.[22] . with respect to subject FEBTC Check No. as the record is bereft of any evidence to prove the existence thereof. 369380 dated January 15.00 and P200. This.[21] The Decision disposes: WHEREFORE. in acquitting petitioner in one of the cases. nevertheless. (2) The judgment convicting Petitioner Jaime Dico in Criminal Cases Nos. petitioner cannot be convicted of violation of B.736.000. 38254-R and 38255-R and penalizing him to suffer imprisonment of six (6) months in each of the said cases and ordering him to indemnify private complainant in the amount of P100. premises considered. 1993. Blg. which was dishonored when presented for payment on May 17. 369380 dated January 15. Unfortunately.[20] In its Decision dated 30 September 1999. 369403 (dated May 12. 1993. the challenged decision via petition for review is MODIFIED to read as follows: (1) Petitioner Jaime Dico is ACQUITTED in Criminal Case No. the Court of Appeals.

2 (KNOWLEDGE OF INSUFFICIENCY OF FUNDS OR CREDIT) OF B. OF B. III THE COURT OF APPEALS FAILED TO APPLY THE BENEFIT OF AN OBVIOUS CLOUD OF DOUBT IN FAVOR OF PETITIONER/ACCUSED.IMPRISONMENT FOR A DEBT. On 14 February 2000. and in lieu thereof. a fine be imposed. 22 IS OSTENSIBLY ABSENT. ELEMENT NO. 22 THAT THE CHECKS WERE ISSUED TO APPLY TO ACCOUNT OR FOR VALUE. or in the alternative. TO SUPPORT HIS CONVICTION. 22 CASES VIOLATES PETITIONERS RIGHT AGAINST NON. IV THE PENALTY OF IMPRISONMENT IS A HARSH AND CRUEL PENALTY CONSIDERING THE ATTENDANT CIRCUMSTANCES. DESPITE THE PROSECUTIONS SCANT AND WEAK EVIDENCE.[25] He prays that the decision and resolution of the Court of Appeals be reversed and set aside. THERE ARE ABUNDANT UNCONTRADICTED YET MISAPPRECIATED EVIDENCE EFFECTIVELY BELYING THE EXISTENCE OF ELEMENT NO. 38254-R and No. The petition makes the following submissions: I THE COURT OF APPEALS VERDICT CONVICTING PETITIONER IN TWO OF THE THREE VIOL. AS SUBJECT CHECKS ARE BEYOND THE APPLICATION OF B. the Court of Appeals denied[23] the Motion for Reconsideration[24] filed by petitioner.P. the penalty of imprisonment be deleted. 22 IN THAT: A.P. II IT WAS HIGHLY ERRONEOUS FOR THE COURT OF APPEALS TO RELY ON PETITIONERS/ACCUSEDS OWN EVIDENCE. 38255-R. accused Dico filed the instant petition.P.P. AND B. and that he be acquitted in Criminal Cases No.[26] .On 11 January 2000. 1 OF B.

overlooked the fact that the check being identified in court was different from that described in the information. . Failure to do so will necessarily result in exoneration.The resolution of the cases revolves around the question: Was the prosecution able to prove all the elements of B. 22? The essential elements of the offense penalized under Section 1. Blg. including the courts. Blg.000 payable to Equitable Banking Corporation. 364903 dated 12 May 1993 in the amount of P100. 38254-R It is axiomatic that where an accused appeals the decision against him. There being a discrepancy in the identity of the checks described in the information and that presented in court. The identity of the check enters into the first element of the offense under Section 1 of B.P. (2) the knowledge of the maker. and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer. the check involved is described as Far East Bank and Trust Company (FEBTC) Check No. without any valid cause. should be considered in favor of the petitioner. 369403 dated 12 May 1993 in the amount of P100. ordered the bank to stop payment.P.[27] The prosecution has the burden to prove all the elements of the crime beyond reasonable doubt. petitioners constitutional right to be informed of the nature of the offense charged will be violated if his conviction is upheld.000 payable to Equitable Banking Corporation. whether it was made the subject of assignment of errors or not. The issue as to the identity of the check. the parties. The variance in the identity of the check nullifies petitioners conviction. Belcia. Prosecutor II. B. he throws open the whole case for review and it then becomes the duty of the Supreme Court to correct any error as may be found in the appealed judgment. after going over the records of the case. In the cases at bar.[28] In the information filed by Felipe C. The prosecution marked as its Exhibit B FEBTC Check No. Blg. 22 are as follows: (1) the making. drawer or issuer that at the time of issue he does not have sufficient funds or credit with the drawee bank for the payment of such check in full upon its presentment. Re: Criminal Case No. though not raised as an error. petitioner argues that the first and second elements of the crime are not present. drawing and issuance of any check to apply to account or for value.P. 22 that a person draws or issues a check on account or for value.[29] However.

i. and the date thereof involves its second element. Inc. 831258) was dated 14 May 1992. otherwise.e. .P.P.[31] Re: Criminal Case No. which was contrary to that testified to by private complainant Violeta Tizon. In view of this variance. BPI check No. petitioner maintains that the notice of dishonor given for said check was not the one required by law since said notice was given before the check became due and before it was deposited. 38255-R As regards FEBTC Check No. 831258 dated 05 April 1992.. that a person makes.[30] this Court had this to say when there was a variance involving the date as regards the check described in the information and that adduced in evidence: This Court notes. Q-93-41751) cannot be sustained. there is a violation of petitioners constitutional right to be informed of the nature of the offense charged in view of the aforesaid variance. 22. drawer or issuer knew that he or she did not have sufficient funds to cover the same. however. H. thereby rendering the conviction for the third count fatally defective. namely. As the FEBTC Check No.00 was the check adduced in evidence and used as payment for petitioners unpaid obligation to Equitable Card Network. Since the identity of the check enters into the first essential element of the offense under Section 1 of B. and I).e.In the case of Alonto v.. 831258 in the amount of P25.000 dated 05 April 1992. It is on this ground that petitioners fourth assignment of error is tenable. People. draws or issues a check on account or for value. The record of the case shows the only letter received by petitioner involving the three checks subject of these cases was the one dated 08 June 1993. the conviction of petitioner on the third count (Criminal Case No. i. 369403 dated 12 May 1993 in the amount of P100.000) is excluded by the law and the rules on evidence. 369404[32] dated 12 June 1993 which was deposited on 14 June 1993.. Blg. that under the third count. the information alleged that petitioner issued a check dated 14 May 1992 whereas the documentary evidence presented and duly marked as Exhibit I was BPI Check No. petitioner cannot be held civilly liable therefor considering that this is not the check described in the information.000. Prosecution witness Fernando Sardes confirmed petitioners issuance of the three BPI checks (Exhibits G. but categorically stated that the third check (BPI Check No.[33] This letter sent by the counsel of private complainant asked petitioner to make good the checks within five (5) days from receipt thereof. Exhibit I (BPI Check No. criminal charges for violation of B. in that the prosecutions exhibit. that is. 831258 dated 05 April 1992 in the amount of P25. 22 will be filed against him. that at the time of issue the maker.

drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank. 2. drawing or issuing the check which is difficult to prove. This knowledge of insufficiency of funds or credit at the time of the issuance of the check is the second element of the offense. 22 creates a prima facie presumption of such knowledge. To hold a person liable under B. and (c) the drawer or maker of the check fails to pay the holder of the check the amount due thereon. shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon.From the evidence presented.P. he failed to pay the amount of the check or to make arrangements for its payment. Inasmuch as this element involves a state of mind of the person making. In other words. Section 2 of B. or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice that such check has not been paid by the drawee. when presented within ninety (90) days from the date of the check. 369404 was dishonored when presented for payment on the ground of Account Closed. the prosecution must not only establish that a check was issued and that the same was subsequently dishonored. or if there is no proof as to when such notice was received by the drawer. (b) the drawer or maker of the check receives notice that such check has not been paid by the drawee. if such notice of nonpayment by the drawee bank is not sent to the maker or drawer. Blg. Evidence of knowledge of insufficient funds. it has been proved that FEBTC Check No. or make arrangements for payment in full within five (5) banking days after receiving notice that such check has not been paid by the drawee. For this presumption to arise. The making. it must further be shown that accused knew at the time of the issuance of the check that he did not have sufficient funds or credit with the drawee bank for the payment of such check in full upon its presentment.P. since there would simply be no way of reckoning the crucial 5-day period. 22.[34] The presumption or prima facie evidence as provided in this section cannot arise. the prosecution must prove the following: (a) the check is presented within ninety (90) days from the date of the check. The notice of dishonor may be .[35] A notice of dishonor received by the maker or drawer of the check is thus indispensable before a conviction can ensue. Blg. Said section reads: SEC. the presumption is brought into existence only after it is proved that the issuer had received a notice of dishonor and that within five days from receipt thereof.

There is no dispute that there was indeed a demand letter from the counsel of Equitable Card Network. its sending to.sent by the offended party or the drawee bank.[40] The demand letter was sent four days before the date of the check and six days before said check was deposited.[41] petitioner did not receive the notice of dishonor contemplated by the law. Petitioner has a right to demand and the basic postulate of fairness require that the notice of dishonor be actually sent to and received by her to afford her the opportunity to avert prosecution under B.. Court of Appeals. As already stated above.P. or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice that the check has not been paid. the drawer or maker of the check gives the latter the option to prevent criminal prosecution if he pays the holder of the check the amount due thereon. This Court rules that as regards FEBTC Check No.[38] citing Lao v. 369404 be paid within five days after it has been dishonored prevents the disputable presumption . This means that the check must necessarily be due and demandable because only a check that has become due can be presented for payment and subsequently be dishonored. The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a criminal prosecution. 369404. in Ting v. the demand letter was sent to petitioner on 08 June 1993[39] and the check was deposited on 14 June 1993. . There was no valid notice of dishonor to speak of. to send another letter demanding that FEBTC Check No.that petitioner had .[37] A mere oral notice to pay a dishonored check will not suffice. procedural due process clearly enjoins that a notice of dishonor be actually served on petitioner.[36] The notice must be in writing. 22. Inc. The failure of Equitable Card Network.. A postdated check cannot be dishonored if presented for payment before its due date. Court of Appeals. the only notice received by petitioner for the three checks involved in these cases was that dated 08 June 1993. but the same was received by petitioner before the checks maturity or due date on 12 June 1993. The lack of a written notice is fatal for the prosecution. This Court. As testified to by prosecution witness Lily Canlas. The requirement of notice. . [W]e emphasized that the full payment of the amount appearing in the check within five banking days from notice of dishonor is a complete defense. Inc. said: . and its actual receipt by. The term notice of dishonor denotes that a check has been presented for payment and was subsequently dishonored by the drawee bank. Accordingly.

Cebu City. Inc. Cebu City. SO ORDERED. Blg.000. We. 38255-R. Blg. from the filing of the information until the finality of this decision. Branch 20. both testimonial and documentary.P.P. The evidence on record. 22.knowledge of the insufficiency of his funds at the time he issued the check from arising.[42] There being no evidence presented by the prosecution to show that petitioner had knowledge of the insufficiency of his funds at the time he issued the check. The decisions convicting petitioner of violation of B. the amount of P200. and the 20 February 1997 Decision of the Regional Trial Court.. petitioner must. Inc. inclusive of interest shall be subject thereafter to 12% per annum interest until the amount is fully paid.00. be acquitted in Criminal Case No. 369404 representing part of his unpaid obligation to Equitable Card Network. shows that petitioner still has an outstanding balance on his credit card with Equitable Card Network.000 which is the amount reflected on FEBTC Check No. 369404. with 12% legal interest per annum. the sum of which. therefore. He is ordered to pay Equitable Card Network. 22 before the Court of Appeals. 38255-R. Inc. Inc.[43] WHEREFORE. Petitioner is ordered to pay Equitable Card Network.P. convicting petitioner JAIME DICO of violation of B. from the filing of the information until the finality of this decision. . the amount of P200. Branch 7.00 with 12% legal interest per annum. perforce. the burden of evidence shifts to the prosecution to prove such knowledge. the RTC and the MTCC are reversed and set aside. Costs de oficio. the Court of Appeals Decision dated 30 September 1999 and Resolution dated 11 January 2000 affirming the 19 June 1996 Decision of the Municipal Trial Court in Cities. having failed to prove all the elements of B.. Accordingly. in Criminal Cases No. 22 are hereby REVERSED and SET ASIDE. the sum of which. inclusive of interest shall be subject thereafter to 12% per annum interest until the amount is fully paid. Blg.000. 38254-R and No. the second element of the offense was not satisfied. Absent such presumption. sustain the finding of the Court of Appeals holding petitioner liable for the amount of P200. and another one entered ACQUITTING petitioner of the crimes charged on the ground that his guilt has not been proved beyond reasonable doubt. representing the face value of FEBTC Check No.

R. signs blank corporate checks -. the Court hereby declares her innocent of the crime charged and she is hereby acquitted with cost de oficio.00 without subsidiary imprisonment in case of insolvency. No. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES. therefore. The dispositive portion of the said RTC decision affirmed by the respondent appellate court reads: [1] [2] [3] WHEREFORE. but not of the signatory-employee. be held criminally liable for violation of Batas Pambansa Bilang 22 (B.with the name of the payee and the amount drawn to be filled later by another signatory -.P. after a careful consideration of the evidence presented by the prosecution and that of the defense. when checks so signed are dishonored due to insufficiency of funds? Does a notice of dishonor sent to the main office of the corporation constitute a valid notice to the said employee who holds office in a separate branch and who had no actual knowledge thereof? In other words. is constructive knowledge of the corporation. for failure of the prosecution to adduce evidence against the accused. DECISION PANGANIBAN. 84-26969 where no evidence was presented by the prosecution notwithstanding the fact that there was an agreement that the cases be tried jointly and also the fact that the accused Lina Lim Lao was already arraigned. 119178. . 1994 in CA-G. sufficient? These are the questions raised in the petition filed on March 21. vs. respondents. June 20. For Criminal Case No.000. J. as part of her regular duties. does so without actual knowledge of whether such checks are funded. 1997] LINA LIM LAO. petitioner. 1990 in Criminal Case Nos. 84-26967. 22). 84-26967 to 84-26969 of the Regional Trial Court of Manila.[G. 14240 dismissing the appeal of petitioner and affirming the decision dated September 26. 1995 assailing the Decision of Respondent Court of Appeals promulgated on December 9. the Court renders judgment as follows: In Criminal Case No. Branch 33. the Court finds the accused Lina Lim Lao guilty beyond reasonable doubt of the crime charged and is hereby sentenced to suffer the penalty of ONE (1) YEAR imprisonment and to pay a fine of P150.: May an employee who.and.R. CR No.

6). the provincial treasurer of the Society of the Divine Word through Mrs. 84-26969 where she is declared acquitted is hereby ordered cancelled (sic). The Facts Version of the Prosecution The facts are not disputed. as follows: Check Date Amount . As such officer. 1993.For Criminal Case No. as evidenced by the Confirmation of Sale No. 82-6994 (Exh A) dated July 8. as follows: Appellant (and now Petitioner Lina Lim Lao) was a junior officer of Premiere Investment House (Premiere) in its Binondo Branch. Father Palijo was also issued Traders Royal Bank (TRB) checks in payment of interest. For the two cases the accused is ordered to pay the cost of suit.00 without subsidiary imprisonment in case of of (sic) insolvency. SO ORDERED.000. In the course of the business. 1990. 84-26968. the Court finds the accused Lina Lim Lao guilty beyond reasonable doubt of the crime charged and is hereby sentenced to suffer the penalty of ONE (1) YEAR imprisonment and to pay a fine of P150. Rosemarie Lachenal. Let a warrant issue for the arrest of the accused Teodulo Asprec which warrant need not be returned to this Court until the accused is finally arrested. she was authorized to sign checks for and in behalf of the corporation (TSN.04. let the same be archived without prejudice to its subsequent prosecution as soon as said accused is finally apprehended. The cash bond put up by the accused for her provisional liberty in Criminal Case No. pp. 9-10). 1987. Father Palijo was authorized to invest donations to the society and had been investing the societys money with Premiere (TSN. June 23.484. With reference to the accused Teodulo Asprec who has remained at large. We thus lift them from the assailed Decision. August 16. 5. Father Palijo had invested a total of P514. she met complainant Father Artelijo Pelijo. p. a trader for Premiere. in order that the cases as against him may not remain pending in the docket for an indefinite period.

D) and the cash disbursement voucher (Exh. Private Complainant Palijo filed an affidavit-complaint against Petitioner Lina Lim Lao and Teodulo Asprec for violation of B. After preliminary investigation. Palijo and signed by appellant (herein petitioner) and Teodulo Asprec. Palijo to apply on account or for value a Traders Royal Bank Check No.P.00 (Exh.00 (Exh. 7. For his efforts. the same were dishonored for the reason Drawn Against Insufficient Funds (DAIF).P.299961 Oct. supra. said accused failed to pay said Artelijo A. 1983 P150. 22 were filed by Assistant Fiscal Felix S. CONTRARY TO LAW. Artelijo A.73 All the checks were issued in favor of Artelijo A.00 payable to Fr. Further evidence of the transaction was the acknowledgment of postdated checks dated July 8. three Informations charging Lao and Asprec with the offense defined in the first paragraph of Section 1. Mr. Father Palijo wrote Premiere a formal letter of demand. 1984. worded as follows: [5] [6] 1. When Father Palijo presented the checks for encashment. 11-16). B. 16-19). Caballes before the trial court on May 11. 299962 for P150. In Criminal Case No. 1983 in the City of Manila. Subsequently. who was the head of operations.000. Cario. supra. TSN. He first went to the Binondo Branch but was referred to the Cubao Main Branch where he was able to talk with the President. Philippines.000.00.000.010. Palijo the amount of the said check or to make arrangement for full payment of the same within five (5) banking days from receipt of said notice. B) 299962 Oct. at pp. 84-26967: That on or about October 7. F. when presented within ninety (90) days from the date thereof. that despite notice of such dishonor. 1984. on January 24. 1983 well knowing that at the time of issue he/she did not have sufficient funds in or credit with the drawee bank for full payment of the said check upon its presentment as in fact the said check. 1983 (Exh . the said accused did then and there wilfully and unlawfully draw and issue to Artelijo A. In Criminal Case No. 7. 7. 2. Palijo dated October 7. Father Palijo immediately made demands on premiere to pay him the necessary amounts. at pp. 1983 P 26. C) 323835 Oct.000. 22. 84-26968: .[4] Thereafter. was dishonored by the drawee bank for the reason:Insufficient Funds. 1993 (sic) P150. Premiere was placed under receivership (TSN. Since no other payments followed. he was paid P5.

and even now on appeal. 83 well knowing that at the time of issue he/she did not have sufficient funds in or credit with the drawee bank for full payment of the said check upon its presentment as in fact the said check. Palijo the amount of the said check or to make arrangement for full payment of the same within five (5) banking days from receipt of said notice. the Regional Trial Court convicted Petitioner Lina Lim Lao in Criminal Case Nos. Palijo to apply on account or for value a Traders Royal Bank Check No. the said accused did then and there wilfully and unlawfully draw and issue to Artelijo A. Palijo dated October 7. he has remained at large since the trial. that despite notice of such dishonor. when presented within ninety (90) days from the date thereof. On appeal. 84-26967 and 84-26968 but acquitted her in Criminal Case No. 1983 in the City of Manila.That on or about October 7. Palijo to apply on account for value a Traders Royal Bank Check No. the Court of Appeals affirmed the decision of the trial court. And finally in Criminal Case No. petitioner assisted by counsel pleaded not guilty. said accused failed to pay said Artelijo A. 3.000. 84-26969. was dishonored by the drawee bank for the reason:Insuficient Funds. Philippines. Artelijo A. Upon being arraigned. After due trial. that despite notice of such dishonor. said accused failed to pay said Artelijo A. 84-26969: That on or about July 8. 1983 in the City of Manila. Artelijo A. [7] Version of the Defense Petitioner aptly summarized her version of the facts of the case thus: .00 payable to Fr.03 payable to Fr. 299961 for P150. 323835 for P26. the said accused did then and there wilfully and unlawfully draw and issue to Artelijo A. Palijo the amount of the said check or to make arrangement for full payment of the same within five (5) banking days from receipt of said notice. when presented within ninety (90) days from the date thereof. 1983 well knowing that at the time of issue he/she did not have sufficient funds in or credit with the drawee bank for full payment of the said check upon its presentment as in fact the said check. Palijo dated October 7. CONTRARY TO LAW. was dishonored by the drawee bank for the reason: Insufficient Funds. Asprec was not arrested. Philippines.010. CONTRARY TO LAW.

.S.S. private complainant dealtexclusively with one Rosemarie Lachenal. 8) The foregoing circumstances attended the issuance of the checks subject of the instant prosecution. Mr.N. Quezon City.N. T. (Ocampo.) In signing the checks as part of her duties as junior officer of the corporation. a corporation engaged in investment management. p. devolved on the corporations Treasury Department in its main office in Cubao. 16 August 1990.S. however.. T. who alone decided to whom the checks were to be ultimately issued and delivered. (Palijo. where petitioner was holding office.S. T. p.N. 19. In his transactions with the corporation. an employee of Premiere Financing Corporation (hereinafter referred to as the Corporation). 4. (Lao.Petitioner Lina Lim Lao was. T.S.S. 6. assigned not at its main branch but at the corporations extension office in (Binondo) Manila. Ms. 22 November 1988.S. 28 September 1989. 21-23) All bank statements regarding the corporate checking account were likewise sent to the main branch in Cubao. Teodulo Asprec. Quezon City. headed then by the Treasurer. Mr. Manila. T.. (Lao.. in 1983. and not in Binondo. Quezon City. Lao. Veronilyn Ocampo. who subsequently . T. the amounts and the dates of maturity. p. Lao. 28 September 1989. 19 July 1990. 32-34. p. it was normal procedure for her to sign the checks in blank. pp. 24. 15 May 1990. that is.N.. petitioner had no knowledge of the actual funds available in the corporate account. T. duty and responsibility of monitoring and assessing the balances against the checks issued. 28 September 1989. (Ocampo.. T.N.. 17. pp. Asprec. T. 23 June 1987. 21) The power. 19 July 1990. they were signed in advance and in blank. Cubao. 28-29. p.N. with principal business office at Miami. The other co-signor was her head of office. T. 9-11. Teodulo Asprec. When the checks were co-signed by petitioner. It was likewise Mr. 5) Petitioner Lina Lim Lao was not in any way involved in the transaction which led to the issuance of the checks. (Ocampo. and funding the checks thus issued. she was required to co-sign checks drawn against the account of the corporation. She was a junior officer at the corporation who was. 14) In the regular course of her duties as a junior officer. pp.N... Ocampo. Marqueses.S. and he never knew nor in any way dealt with petitioner Lina Lim Lao at any time before or during the issuance of the delivery of the checks.N. delivered to the Head of Operations. p. as head of office. Since part of her duties required her to be mostly in the field and out of the office.N. p.. a trader connected with the corporation.S. The checks were issued to guarantee payment of investments placed by private complainant Palijo with Premiere Financing Corporation.N. without the names of the payees.S.

S. Quezon City. pp. 51) Private complainant did not send notice of dishonor to petitioner. 19 July 1990. p. 8. (Lao. Veronilyn Ocampo testified that it was the head office in Cubao. Benigno Aquino. 28 September 1989. Quezon City.) Private complainant never contacted. T. (Lao. p.N. 19. Quezon City. 28 September 1989.. Palijo. 2425) Petitioner Lina Lim Lao did not have knowledge of the insufficiency of the funds in the corporate account against which the checks were drawn. the order of . at p. (Ocampo. which received notice of dishonor of the bounced checks.N.N. (Id. 21) It was not within her powers. T.N. never informed.filled in the names of the payee. T. which ultimately led to the corporations being placed under receivership by the Securities and Exchange Commission. private complainant sent a notice of said dishonor to Premier Financing Corporation at its head office in Cubao. p. (Palijo. much less was it within her (duties and responsibilities) to make sure that the checks were funded.S. At the time petitioner signed the checks. T..Petitioner was holding office at the extension in Binondo Manila. and the subsequent delivery of the check to private complainant Palijo. 28 September 1989.. 28 September 1989.N. Ms. 8-11. 16 August 1990. 23) All statements of account were sent to the Treasury Department located at the main office in Cubao. After Mr. (Lao.. p.. 7-8) The dishonor of the check came in the wake of the assassination of the late Sen. 12].. petitioner after the checks had bounced. Asprec signed the checks.. (Id. note also that the trial court in its decision fully accepted the testimony of petitioner [Decision of the Regional Trial Court. Premiere Financing Corporation had a Treasury Department headed by a Treasurer.N. 17. (Ocampo.N. pp. they were delivered to private complainant Palijo.N. the amounts and the corresponding dates of maturity. 24 July 1987.S. duties or responsibilities to monitor and assess the balances against the issuance. When the checks were subsequently dishonored. p. p. (Ocampo. as a consequence of which event a majority of the corporations clients pre-terminated their investments.. Lao.S.. E. (Please refer to Exh. and that the Court of Appeals affirmed said decision in toto) Petitioner Lina Lim Lao was not in any way involved in the completion. Ms. 4. which alone had access to information as to account balances and which alone was responsible for funding the issued checks.N. p. T. T. and never talked with. The Treasurer of Premiere Financing Corporation. pp. she had no knowledge of the sufficiency or insufficiency of the funds of the corporate account. 19. T. 28 September 1990.S. Please refer also to Exhibit 1. A period of extreme illiquidity and financial distress followed.S..S.N. 19 July 1990. T. T. p.S. 29) Petitioner never had notice of the dishonor of the checks subject of the instant prosecution.S. 25-26. 23 June 1987. T.S. Veronilyn Ocampo.. 10) He did not follow up his investment with petitioner. Lao.

T. 9-10) As a result of the financial crisis and distress. Hence. p. however. On appeal. 16 August 1990.S. appointing a rehabilitation receiver for the purpose of settling claims against the corporation.S.. Branch 33. 15 May 1990. 22. 18) Private complainant then filed the instant criminal action. and not to petitioner herself who holds office in that corporations branch office. 16 August 1990. private complainant filed a claim for the payment of the bounced check before and even after the corporation had been placed under receivership.. the petitioner argues that the notice of dishonor sent to the main office of the corporation. and sentencing the latter to suffer the aggregate penalty of two (2) years and to pay a fine in the total amount of P300. p. T. 1) As he himself admits.S.P. (Id.receivership issued by the Securities and Exchange Commission) Despite the Treasury Departments and (Ms.. p.N.N. the main office in Cubao. Quezon City never informed petitioner Lina Lim Lao or anybody in the Binondo office for that matter. at that time of panic withdrawals and massive pre-termination of clients investments. p..S.. pp. (Ocampo. 7-9) Moreover. this petition for review. On 26 September 1990. the Securities and Exchange Commission placed Premier Financing Corporation under receivership. there can be no prima facie presumption that she had knowledge of the insufficiency of funds.N. (Exh. does not constitute the notice mandated in Section 2 of BP 22. 10-17) A check was prepared by the receiver in favor of the private complainant but the same was not claimed by him. T. rendered a decision convicting petitioner. (Lao. 19 July 1990. 24 July 1987. 6) and that.N. T. . [8] The Issue In the main. the confusion which came in the wake of the Aquino assassination and the consequent panic withdrawals caused them to lose direct communication with the Binondo office. the Regional Trial Court of Manila. she justified her omission by saying that the checks were actually the responsibility of the main office (Ocampo. 9-10) In her testimony. Additionally.000.. (Palijo.N. at pp. (Ocampo.00. the Court of Appeals affirmed said decision. thus. petitioner contends that the public respondent committed a reversible error in concluding that lack of actual knowledge of insufficiency of funds was not a defense in a prosecution for violation of B. it was futile to inform the Binondo office since the main office was strapped for cash and in deep financial distress. T.S. Ocampos) knowledge of the dishonor of the checks.

which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer. Checks without sufficient funds. shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon. drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank. so much so that the scope of a penal statute cannot be extended by good intention. for Petitioner Lina Lim Laos acts to be penalized under the Bouncing Checks Law or B. for which reason it is dishonored by the drawee bank. when presented within ninety (90) days from the date of the check. The same penalty shall be imposed upon any person who having sufficient funds in or credit with the drawee bank when he makes or draws and issues a check. they must come clearly within both the spirit and the letter of the statute. company or entity. Where the check is drawn by a corporation. 22 read: SECTION 1. the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act.The Courts Ruling The petition is meritorious. -. SECTION 2. -.P. or even equity consideration.Any person who makes or draws and issues any check to apply on account or for value. shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two hundred thousand pesos. shall fail to keep sufficient funds or to maintain a credit or to cover the full amount of the check if presented within a period of ninety (90) days from the date appearing thereon. 22. Strict Interpretation of Penal Statutes It is well-settled in this jurisdiction that penal statutes are strictly construed against the state and liberally for the accused.P. without any valid reason. implication. Evidence of knowledge of insufficient funds. Thus. knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment. or both such fine and imprisonment at the discretion of the court. or makes arrangements for payment in full by the drawee of such check . [9] The salient portions of B. ordered the bank to stop payment.The making.

181 SCRA 1) The Court of Appeals also stated that her alleged lack of knowledge or intent to issue a bum check would not exculpate her from any responsibility under B. Blg. 22. That a person makes or draws and issues any check. That the check is subsequently dishonored by the drawee bank for insufficiency of funds or credit. (People vs. Laggui. and lack of personal notice of dishonor to her. 3. drawing and issuance of any check to apply to account or for value.P. thus: 1. 2. (s)uch alleged lack of knowledge is not material for petitioners liability under B. without any valid reason. reasoning that the makers knowledge of the insufficiency of funds is legally presumed from the dishonor of his checks for insufficiency of funds. however. ordered the bank to stop payment. Nieras vs. The respondent appellate court. ordered the bank to stop payment.[11] Crux of the Petition Petitioner raised as defense before the Court of Appeals her lack of actual knowledge of the insufficiency of funds at the time of the issuance of the checks. or would have been dishonored for the same reason had not the drawer.P. without any valid cause. 4. That the person who makes or draws and issues the check knows at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in fullupon its presentment. Auxencio C.Blg. [12] [13] [14] .within five (5) banking days after receiving notice that such check has not been paid by the drawee. since the act of making and issuing a worthless check is amalum prohibitum. and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer. 22. This Court listed the elements of the offense penalized under B. Dacuycuy. (2) the knowledge of the maker. 22. also enumerated the elements of the offense defined in the first paragraph of Section 1 of B. [10] Justice Luis B. an eminent authority in criminal law. drawer or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment. In the words of the Solicitor General. 171 SCRA 305. That the check is made or drawn and issued to apply on account or for value. Hon. affirmed the RTC decision. as follows: (1) the making. Reyes.P. 22.P.

[15] In the present case. There is a prima faciepresumption of the existence of this element from the fact of drawing. has a right to rebut the prima facie presumption. since Petitioner Lina Lim Lao was often out in the field taking charge of the marketing department of the Binondo branch. Under the organizational structure of Premiere Financing Corporation. the Court finds that Petitioner Lina Lim Lao did not have actual knowledge of the insufficiency of funds in the corporate accounts at the time she affixed her signature to the checks involved in this case. however. the prosecution is not thereby excused from its responsibility of proving beyond reasonable doubt all the elements of the offense. the fact alone that petitioner was a signatory to the checks that were subsequently dishonored merely engenders the prima facie presumption that she knew of the insufficiency of funds. petitioner.[18] Furthermore. It is important to stress. including the acts that give rise to theprima facie presumption. at the time the same were issued. Veronilyn Ocampo. Although the offense charged is a malum prohibitum. 22. that this is not a conclusive presumption that forecloses or precludes the presentation of evidence to the contrary. issuing or making a check.Lack of Actual Knowledge of Insufficiency of Funds Knowledge of insufficiency of funds or credit in the drawee bank for the payment of a check upon its presentment is an essential element of the offense. the Regional Trial Court itself found that. she signed the checks in blank as to name . The prosecution has a duty to prove all the elements of the crime. funding of checks was the sole responsibility of the Treasury Department. testified thus: [17] Q Will you please tell us whose (sic) responsible for the funding of checks in Premiere? A The one in charge is the Treasury Division up to the Treasury Disbursement and then they give it directly to Jose Cabacan. one of which is knowledge of the insufficiency of funds. The scope of petitioners duties and responsibilities did not encompass the funding of the corporations checks. former Treasurer of Premiere. and even at the time the checks were subsequently dishonored by the drawee bank. the accused should not be held liable for the offense defined under the first paragraph of Section 1 of B. but it does not render her automatically guilty under B. Therefore. on the other hand. 22.P. President of Premiere. the payment of which was subsequently refused for insufficiency of funds. her duties were limited to the marketing department of the Binondo branch. if such knowledge of insufficiency of funds is proven to be actuallyabsent or non-existent. [16] After a thorough review of the case at bar.P.

This is clear from her testimony: [19] q x x x Will you please or will you be able to tell us the condition of this check when you signed this or when you first saw this check? Witness a I signed the check in blank. sir. xxxxxxxxx COURT (to witness) q Is that your practice? Witness a Procedure. COURT That is quiet (sic) unusual. one of the accused in all these cases? a Yes. no amount and no date? a It is in order to facilitate the transaction. sir. Gonzales (to witness) q Now. in the distribution or issuance of checks which according to you. I sign first. That is why I am asking that last question if that is a practice of your office. co-signature? a Yes. no date. a As a co-signer. sir. who alone placed the name of the payee and the amount to be drawn thereon. There were no payee. q Why did you sign this check in blank when there was no payee. as a cosignee. you said that you sign first. q Is this Teodoro Asprec the same Teodoro Asprec. after you sign.of the payee and the amount to be drawn. Who determines to whom to issue or to whom to pay the check after Teodoro Asprec signs the check? Witness . and without knowledge of the transaction for which they were issued. who signs the check? a Mr. q So the check cannot be encashed without your signature. q Now. you sign. Your Honor. her signature was required in addition to that of Teodulo Asprec. No amount. Atty. As a matter of company practice. sir. Teodoro Asprec. sir. sir.

q So that when ever there is a transaction all is needed . COURT (To counsel) Proceed. . so you signed the other checks? Witness a Yes. you signed this check in order to facilitate the transaction . Gonzales (to witness) q You made reference to a transaction which according to you. .[20] Petitioner did not have any knowledge either of the identity of the payee or the transaction which gave rise to the issuance of the checks. are you telling the Honorable Court that it was Teodoro Asprec who determines to whom to issue the check? Does he do that all the time? Court q Does he all the time? (to witness) a Yes. . Atty. Your Honor. I withdraw that question. Atty. . Your Honor. Gonzales q Mr. Your Honor. . q So the check can be negotiated? So. all that is needed is for the other co-signee to sign? a Yes. It was her co- . Asprec is the one in-charge in . COURT (for clarification to witness) Witness may answer. q Only to facilitate your business transaction. Gonzales (to witness) q Why is it necessary for you to sign? a Because most of the time I am out in the field in the afternoon. in order to facilitate the transaction I sign so if I am not around they can issue the check. Atty. the check can be good only upon his signing? Without his signing or signature the check cannot be good? a Yes. Your Honor. . so.a He is the one. I will reform.

Artelijo Palijo. sir. -COURT: (before witness could finish) Q More or less? A It must have been late 1983. GONZALES: Q And that must or that was after the transactions involving alleged checks marked in evidence as Exhibits B and C? A After the transactions. sir.[21] Since Petitioner Lina Lim Lao signed the checks without knowledge of the insufficiency of funds. is that what you mean? A Yes.signatory. Teodulo Asprec. is clearly evident even from the latters testimony. is that correct? A I was introduced. knowledge she was not expected or obliged to possess . who alone filled in the blanks.: ATTY. GONZALES: Q When did you come to know the accused Lina Lim Lao? A I cannot remember the exact date because in their office Binondo. Q And so you came to know the accused Lina Lim Lao when all those transactions were already consummated? A Yes. Q And there has never been any occasion where you transacted with accused Lina Lim Lao. sir. is that correct? A None. viz. completed and issued the checks. Q And that was also before the transaction involving that confirmation of sale marked in evidence as Exhibit A? A It was also. That Petitioner Lina Lim Lao did not have any knowledge or connection with the checks payee. Q You indicated to the Court that you were introduced to the accused Lina Lim Lao. xxxxxxxxx Q After that plain introduction there was nothing which transpired between you and the accused Lina Lim Lao? A There was none. there was no occasion. Q And your coming to know Lina Lim Lao the accused in these cases was by chance when you happened to drop by in the office at Binondo of the Premier Finance Corporation. ATTY.

it was established that he dealt exclusively with Nestor Dingle. Paz appealed the judgment to the then Intermediate Appellate Court which modified the same by reducing the penalty of imprisonment to thirty days. These checks were dishonored for having been drawn against insufficient funds. The Court ruled in Dingle as follows: [23] The Solicitor General in his Memorandum recommended that petitioner be acquitted of the instant charge because from the testimony of the sole prosecution witness Ernesto Ang. In the case of Florentino Lozano vs. 1986. Hon.under the organizational structure of the corporation. The element of knowledge of insufficiency of funds having been proven to be absent.P. to represent the value of the undelivered silica sand.P. petitioner is therefore entitled to an acquittal. Martinez.P. signed by him and his wife Paz. signed by him and his wife as authorized signatories for PMD Enterprises. 22. hence. Paz filed an appeal to this Court insisting on her innocence and contending that she did not incur any criminal liability under B. he issued to Ernesto two checks. Nestor thereafter issued to Ernesto another check. Nestor failed to deliver. much less of the transaction and the fact of dishonor. In that case. Not satisfied.P. 22 because she had no knowledge of the dishonor of the checks issued by her husband and. for that matter. [22] This position finds support in Dingle vs. . 22. Ang categorically stated that it was Nestor Dingle who received his two (2) letters of demand. No payment was ever made. For in the final analysis. Nestor transacted the sale of 400 tons of silica sand to the buyer Ernesto Ang who paid for the same. 22 must be construed with such strictness as to carefully safeguard the rights of the defendant x x x. she may not be held liable under B. penal statutes such as B. promulgated December 18. it was held that an essential element of the offense is knowledge on the part of the maker or drawer of the check of the insufficiency of his funds. 22 before the trial court which found them both guilty.P. Intermediate Appellate Court where we stressed that knowledge of insufficiency of funds at the time of the issuance of the check was an essential requisite for the offense penalized under B. the spouses were charged with a violation of B. This lends credence to the testimony of Paz Dingle that she signed the questioned checks in blank together with her husband without any knowledge of its issuance. which was likewise subsequently dishonored. the spouses Paz and Nestor Dingle owned a family business known as PMD Enterprises. Thus. even the transaction of her husband with Ang. Nowhere in his testimony is the name of Paz Dingle ever mentioned in connection with the transaction and with the issuance of the check. In fact.

People vs. [25] [26] [27] [28] The statement in the two cases -. Laggui the Court ruled mainly on the adequacy of an information which alleged lack of knowledge of insufficiency of funds at the time the check was issued and not at the time of its presentment. however. As observed earlier. are inapplicable here. Lack of Adequate Notice of Dishonor There is another equally cogent reason for the acquittal of the accused. On the contrary. the drawee bank for the payment of the same in full on presentment. on reasonable doubt.WHEREFORE.Respondent Court of Appeals cited People vs. the Court inNierras vs. in People vs.does not support the CA Decision. Laggui clearly spells out as an element of the offense the fact that the drawer must have knowledge of the insufficiency of funds in.checks and did not aver lack of knowledge of insufficiency of funds or absence of personal notice of the checks dishonor. the assailed decision of the Intermediate Appellate Court (now the Court of Appeals) is hereby SET ASIDE and a new one is hereby rendered ACQUITTING petitioner on reasonable doubt. On the other hand. there is here only a prima facie presumption which does not preclude the presentation of contrary evidence.that mere issuance of a dishonored check gives rise to the presumption of knowledge on the part of the drawer that he issued the same without funds -. hence." [24] In rejecting the defense of herein petitioner and ruling that knowledge of the insufficiency of funds is legally presumed from the dishonor of the checks for insufficiency of funds. Dacuycuy held mainly that an accused may be charged under B. 22 and Article 315 of the Revised Penal Code for the same act of issuing a bouncing check.P. it even supports the petitioners position. Furthermore. Dacuycuy. There can be no prima facie evidence of knowledge of insufficiency of funds in the instant case because no notice of dishonor was actually sent to or received by the petitioner. The accused in both cases issued personal -. or of credit with. The notice of dishonor may be sent by the offended party or the drawee bank.not corporate -. The trial court itself found absent a personal notice of dishonor to Petitioner Lina Lim Lao by the drawee bank based on the unrebutted testimony of Ocampo (t)hat the checks bounced when presented with the drawee bank but she did not inform anymore the Binondo branch and Lina Lim Lao as there was no need to inform them as the corporation was in . Laggui and Nierras vs. These.

this finding is binding on this Court. and if he opts to perform it the action is abated. Quezon City. sir. Section 2 of B.distress. sir? a I was never given a notice. the full payment of the amount appearing in the check within five banking days from notice of dishonor is a complete defense. It has been observed that the State. In this light. within five banking days from receipt of the notice of dishonor. Gonzales q Will you please tell us if Father Artelejo Palejo (sic) ever notified you of the bouncing of the check or the two (2) checks marked as Exhibit B or C for the prosecution? Witness a No. making and issuing a bum check.P. The Court of Appeals affirmed this factual finding. the prima facie presumption that she knew about the insufficiency of funds cannot apply. The records show that the notice of dishonor was addressed to Premiere Financing Corporation and sent to its main office in Cubao. q What do you mean no.[31] Because no notice of dishonor was actually sent to and received by the petitioner. under this statute. Her testimony on this point is as follows: Atty. without incurring any criminal liability. 22 clearly provides that this presumption arises not from the mere fact of drawing. actually offers the violator a compromise by allowing him to perform some act which operates to preempt the criminal action. there must also be a showing that. the same had not been transmitted to Premieres Binondo Office where petitioner had been holding office. this factual matter is borne by the records. Pursuant to prevailing jurisprudence. Your Honor. The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a [32] [33] [34] . COURT (to witness) q Notice of what? a Of the bouncing check. such maker or drawer failed to pay the holder of the check the amount due thereon or to make arrangement for its payment in full by the drawee of such check. [29] [30] Indeed. I was never given notice from Father Palejo (sic). Likewise no notice of dishonor from the offended party was actually sent to or received by Petitioner Lao. Furthermore. This was also compared to certain laws allowing illegal possessors of firearms a certain period of time to surrender the illegally possessed firearms to the Government.

22. and not the other way around. is erroneous. Accordingly. are deemed convenient substitutes for currency. procedural due process clearly enjoins that a notice of dishonor be actually served on petitioner. who is the latters agent for purposes of receiving notices and other documents. [35] Epilogue In granting this appeal. It is but axiomatic that notice to the corporation. [37] [38] . 22s intent to inculcate public respect for and trust in checks which.that the notice of dishonor be actually sent to and received by her to afford her the opportunity to avert prosecution under B. which has a personality distinct and separate from the petitioner. These rights must be read into any interpretation and application of B. The public interest behind B.P. the public policy to uphold civil liberties embodied in the Bill of Rights necessarily outweighs the public policy to build confidence in the issuance of checks. especially because the corporation itself incurs no criminal liability under B. In this light.P. constructive notice to the corporation is not enough to satisfy due process. Verily. Hence. Premiere has no obligation to forward the notice addressed to it to the employee concerned. 22s requirements that the check issuer must know at the time of issue that he does not have sufficient funds in or credit with the drawee bank and that he must receive notice that such check has not been paid by the drawee. although not legal tender.criminal prosecution. as an officer of the corporation.P. Consequently. [36] At the same time. hence.P.and the basic postulates of fairness require -. the Court is not unaware of B. the postulate of Respondent Court of Appeals that (d)emand on the Corporation constitutes demand on appellant (herein petitioner). The first is a basic human right while the second is only proprietary in nature. it is petitioner. 22 is personal to the accused.P.P. Important to remember also is B. 22 was intended by the legislature to enhance commercial and financial transactions in the Philippines by penalizing makers and issuers of worthless checks. Responsibility under B.P.P. this Court deeply cherishes and is in fact bound by duty to protect our peoples constitutional rights to due process and to be presumed innocent until the contrary is proven. personal knowledge of the notice of dishonor is necessary. does not constitute notice to the latter. Moreover. Petitioner has a right to demand -. 22 for the issuance of a bouncing check. 22 must not be applied in a manner which contravenes an accuseds constitutional and statutory rights. B.P. 22 is thus clearly palpable from its intended purpose. 22. B.

By this Decision. . the questioned Decision of the Court of Appeals affirming that of the Regional Trial Court.Upon the other hand. SO ORDERED. No costs. funding and delivery of the worthless checks has escaped criminal prosecution simply because he could not be located by the authorities. this Court exhorts the prosecutors and the police authorities concerned to exert their best to arrest and prosecute Asprec so that justice in its pristine essence can be achieved in all fairness to the complainant. Because of the pendency of this case. The case against him has been archived while the awesome prosecutory might of the government and the knuckled ire of the private complainant were all focused on poor petitioner. funding and delivery of checks. Her signature is completely unnecessary for it serves no fathomable purpose at all in protecting the employer from unauthorized disbursements.who appears responsible for the issuance. not to mention the stigma of prosecution on her career and family life as a young mother. Artelijo Palijo. as well as the expenses. Lina Lim Lao stood in jeopardy -. WHEREFORE. the senior official -. Lina Lim Lao is only a minor employee who had nothing to do with the issuance. Thus.Teodulo Asprec -. Fr. The Clerk of Court is hereby ORDERED to furnish the Secretary of Justice and the Secretary of Interior and Local Government with copies of this Decision. the Court enjoins the Secretary of Justice and the Secretary of Interior and Local Government to see that essential justice is done and the real culprit(s) duly-prosecuted and punished.of losing her liberty and suffering the wrenching pain and loneliness of imprisonment. Petitioner Lina Lim Lao isACQUITTED.for over a decade -. is hereby REVERSED and SET ASIDE. Why she was required by her employer to countersign checks escapes us.There is also a social justice dimension in this case. effort and aches in defending her innocence. and the People of the Philippines.

Jr. The board resolution also authorized Arsenio to sign all papers. 1982. 105774. 1981. Branch 52. J. The second board resolution also designated Arsenio as the authorized signatory to sign all instruments.R.00. On March 17.042.[4] ordering petitioners Great Asian Sales Center Corporation (Great Asian for brevity) and Tan Chong Lin to pay. in particular household appliances. vs. 1982. 2002] GREAT ASIAN SALES CENTER CORPORATION and TAN CHONG LIN.: The Case Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules on Civil Procedure assailing the June 9. Arsenio Lim Piat.0 million. the board of directors of Great Asian approved a resolution authorizing its Treasurer and General Manager. 1988 Decision[3] of the Regional Trial Court of Manila. The Facts Great Asian is engaged in the business of buying and selling general merchandise. respondent Bancasia Finance and Investment Corporation (Bancasia for brevity) the amount of P1. solidarily. 1981.[G. (Arsenio for brevity) to secure a loan from Bancasia in an amount not to exceed P1. 1992 Decision [1] of the Court of Appeals[2] in CA-G.R. Tan Chong Lin signed a Comprehensive and Continuing Surety Agreement . On February 10. the debts of Great Asian to Bancasia. No. 20167. On March 4. documents or promissory notes necessary to secure the loan. THE COURT OF APPEALS and BANCASIA FINANCE AND INVESTMENT CORPORATION. CV No. Tan Chong Lin signed a Surety Agreement in favor of Bancasia to guarantee. respondents. solidarily. the board of directors of Great Asian approved a second resolution authorizing Great Asian to secure a discounting line with Bancasia in an amount not exceeding P2.005. On January 29. The Court of Appeals affirmed the January 26. petitioners. DECISION CARPIO. The Court of Appeals affirmed the trial courts award of interest and costs of suit but deleted the award of attorneys fees.0 million. documents and checks necessary to secure the discounting line. April 25.

500. 1982 . The total amount of the fifteen dishonored checks is P1. 1982 covering four postdated checks with a total face value of P244.00.722. The drawee banks dishonored the fifteen checks on maturity when deposited for collection by Bancasia. with any of the following as reason for the dishonor: account closed.00 March 17. Great Asian and Bancasia signed the second Deed of Assignment also on January 12.00 March 19. This last check was also dishonored. through its Treasurer and General Manager Arsenio. signed four (4) Deeds of Assignment of Receivables (Deeds of Assignment for brevity).. and insufficiency of funds. Great Asian assigned the postdated checks to Bancasia at a discount rate of less than 24% of the face value of the checks. Great Asian and Bancasia signed the third Deed of Assignment on February 11. while the rest of the dishonored checks just bore the signature of Arsenio.00. and the last three were payable to cash. All these eight checks were dishonored. 1982 covering four postdated checks with a total face value of P312. Great Asian. with maturity dates not later than March 17. the debts of Great Asian to Bancasia. 1982 covering eight postdated checks with a total face value of P344. 1982. Below is a table of the fifteen dishonored checks: Drawee Bank Check No.00.82. 23950 P47.475.00 March 19. account under garnishment. 1982 covering one postdated check with a face value of P200. Great Asian and Bancasia signed the fourth Deed of Assignment on March 5. with maturity dates not later than April 1. Nine of the checks were payable to Great Asian. two were dishonored.819. 1982. Various customers of Great Asian issued these postdated checks in payment for appliances and other merchandise.in favor of Bancasia to guarantee. assigning to Bancasia fifteen (15) postdated checks. 1982.00 March 16.00 March 23. Of these four postdated checks. 1982 2nd Deed Metrobank 030925 P68. Great Asian and Bancasia signed the first Deed of Assignment on January 12.005. 1982 030926 P45. three were payable to New Asian Emp. solidarily.000. with maturity dates not later than April 30. Arsenio endorsed all the fifteen dishonored checks by signing his name at the back of the checks.042. Tan Chong Lin signed two surety agreements (Surety Agreements for brevity) in favor of Bancasia.000. Eight of the dishonored checks bore the endorsement of Arsenio below the stamped name of Great Asian Sales Center. 1982.225.230. All these four checks were dishonored. Thus.00. 1982 Solidbank C-A097478 P140. payment stopped. 1982 Pacific Banking Corp. with maturity date on March 18. Amount Maturity Date 1st Deed Solid Bank C-A097480 P137.211.

Great Asian filed with the then Court of First Instance of Manila a petition for insolvency. Bancasia referred the matter to its lawyer.228. In its answer. 1982 237985 P46. Great Asian further raised the alleged lack of authority of Arsenio to sign the Deeds of Assignment as well as the absence of consideration and consent of all the parties to the Surety Agreements signed by Tan Chong Lin. 1982 Pacific Banking Corp. 1988 with the following findings and conclusions: .00. 1982 237988 P47. Great Asian denied the material allegations of the complaint claiming it was unfounded. 1982 3rd Deed Phil.00 April 22.748. although Great Asian subsequently withdrew its petition for voluntary insolvency. listing Bancasia as one of the creditors of Great Asian in the amount of P1.243. 1982 060836 P22. verified under oath by its Corporate Secretary. who sent by registered mail to Tan Chong Lin a letter dated March 18.385. notifying him of the dishonor and demanding payment from him. CC 769910 P58. baseless.00 April 28. Eladia Reyes.886.632. Attached to the verified petition was a Schedule and Inventory of Liabilities and Creditors of Great Asian Sales Center Corporation.00 April 30.00 March 18.00 April 28.00 April 23. 097480 dated March 16. Trust Company 060835 P21.00 April 30. 237984 P37. and unlawfully instituted since there was already a pending insolvency proceedings.00 April 1.867. 11251624 P41. On May 21. Atty.Pacific Banking Corp.00 April 29. 1982 to Tan Chong Lin. 1982. Subsequently. On June 23. 1982.773. Bancasia filed a complaint for collection of a sum of money against Great Asian and Tan Chong Lin. 1982 11251625 P38. 1982. Bancasia impleaded Tan Chong Lin because of the Surety Agreements he signed in favor of Bancasia. 1982 Security Bank & Trust Co. malicious.00 April 21.592. 1982. 22061 P88. notifying him of the dishonor of the fifteen checks and demanding payment from him. 1982 4th Deed Pacific Banking Corp. 860178 P200. 1982 Allied Banking Corp. Neither Great Asian nor Tan Chong Lin paid Bancasia the dishonored checks.000. Mario Tan.676. Ruling of the Trial Court The trial court rendered its decision on January 26. 1982 After the drawee bank dishonored Check No.187. Bancasia sent by personal delivery a letter dated June 16.

00 sought to be recovered by the latter in this case. sufficiently establish the liability of the defendant Great Asian to the plaintiff for the amount of P1. The Board Resolution (Exh. authorizing Arsenio Lim Piat. to obtain for defendant Asian Center a discounting line with Bancasia at prevailing discounting rates in an amount not to exceed Two Million Pesos (P2. dated March 17.005..000. to pay the former: (a) The amount of P1. and pursuant to which Arsenio Lim Piat.042.243. (b) Attorneys fees equivalent to twenty per cent (20%) of the total amount due. Jr. as in fact.000. both of which were intended to secure money from the plaintiff financing firm to finance the business operations of defendant Great Asian. and (c) The costs of suit. 1981. in the amount of P1. authorizing Arsenio Lim Piat. deleting only the award of attorneys fees.00). 1982.From the foregoing facts and circumstances.. dated May 12.[6] Ruling of the Court of Appeals On appeal. 1982 (pp. the Court of Appeals sustained the decision of the lower court. DD-1) attached to its Verified Petition for Insolvency.00 discounted with the plaintiff. which transactions were obviously known by the beneficiary thereof. DD. defendant Great Asian.042. was able to have the aforementioned fifteen (15) checks totaling P1. jointly and severally.00.000. judgment is hereby rendered in favor of the plaintiff and against the two (2) defendants ordering the latter.000. as follows: . in its aforementioned Schedule and Inventory of Liabilities and Creditors (Exh. 50-56).00). the defendant Great Asian admitted an existing liability to the plaintiff.[5] xxx WHEREFORE. from the said financing institution Bancasia Finance and Investment Corporation. Jr.00. plaintiff herein.632. T). secured by it.005. the Court finds that the plaintiff has established its causes of action against the defendants. plus interest thereon at the legal rate from the filing of the complaint until the same is fully paid. Jr. by way of financing accommodation. general manager and treasurer of the defendant Great Asian to apply and negotiate for a loan accommodation or credit line with the plaintiff Bancasia in an amount not exceeding One Million Pesos (P1. and the other Board Resolution approved on February 10.005. SO ORDERED.042.

to the effect that the subject deeds of assignment are but individual transactions which -. Having affixed his signature thereto. jointly and severally among themselves and likewise with the principal. at least. the appellant Tan Chong Lin is expected to have. the proposition is. Were the appellants posturings true. I and R). U and V). Y and Z). CC. and R) and the Board Resolutions of the appellant corporations Board of Directors (Exhs. xxx With the foregoing disquisition. indirectly acknowledged its indebtedness in terms of financing accommodations to the appellee. overdrafts and other obligations which the principal may now or may hereafter owe the creditor xxx. save the matter of attorneys fees. T. I. bills of exchange. W and X). at least. in an amount which. while not exactly matching the sum herein sought to be collected. the appellants position is. With the possible exception of the fixed ceiling for the amount of loan obtainable. For want . as well as the demand letters it served upon the latter as surety (Exhs. the Court is more inclined to accept the appellees version. In the petition for voluntary insolvency it filed.As against appellants bare denial of it.should not be taken singly and distinct therefrom. it seems rather strange that the appellant Tan Chong Lin did not even protest or. the appellant corporation.interposed the Surety Agreements the appellant Tan Chong Lin executed (Exhs.represented to be a corporate larceny to which all of them supposedly fell prey. more importantly. make known to the appellee what he . In addition to its plausibility. approximates the same (Exhs. read and understood the same. A. adequately backed by the documentary evidence on record.[7] xxx The appellants contend that the foregoing warranties enlarged or increased the suretys risk. 3744. the appellee -consistent with its theory -. drafts. such that appellant Tan Chong Lin should be released from his liabilities (pp. however. W and X). D.together with the appellant corporation -. 1982 and March 5. It bears emphasis that the second Resolution of the appellant corporations Board of Directors (Exh. soundly debunked by the undertaking expressed in the Comprehensive and Continuing Surety Agreements (Exhs.being collectively evidentiary of the loan accommodation and/or credit line it granted the appellant corporation -. to the effect that the xxx surety/ies. Aside from the aforesaid Deeds of Assignment (Exhs. DD and DD-1). Appellants Brief). 1982 Deeds of Assignment (Exhs. the surety undertaking in the case at bar is so comprehensive as to contemplate each and every condition. term or warranty which the principal parties may have or may be minded to agree on. the Court sees little or no reason to go into the appellants remaining assignments of error. Without saying more. instead. V) even closely coincides with the execution of the February 11. hereby agree/s and bind/s himself to pay at maturity all the notes.

the decision appealed from is MODIFIED. The respondent Court erred in holding that the assignment of the checks is a loan accommodation or credit line accorded by the private respondent to petitioner-corporation. The respondent Court erred in holding the petitioners liable to private respondent on the transactions in question. 5. . SO ORDERED. conditions. 6. although no claim was filed and proved by the private respondent in the insolvency court. 4. Jr.[8] The Issues The petition is anchored on the following assigned errors: 1. 3. and not the herein petitioners. in his individual and personal capacity and without stating or indicating the name of his supposed principal. 157 SCRA 57). under the deeds of assignment or receivables. The respondent Court erred in its appreciation and interpretation of the effect and legal consequences of the signing of the deeds of assignment and the subsequent indorsement of the checks by Arsenio Lim Piat. The rest is AFFIRMED in toto. Jr. and not a purchase and sale thereof. 2. Intermediate Appellate Court. DEEDS OF 2. The respondent Court erred in not holding that there was a material alteration of the risk assumed by the petitioner-surety under his surety agreement by the terms. INDEPENDENT OF THE NEGOTIABLE INSTRUMENTS LAW. the trial courts award of attorneys fees should be deleted and disallowed (Abrogar vs. The respondent Court erred in not holding that the proper parties against whom this action for collection should be brought are the drawers and indorser of the checks in question. The respondent Court erred in holding that the petitioner-corporation impliedly admitted its liability to private respondent when the former included the latter as one of its creditors in its petition for voluntary insolvency. WHETHER GREAT ASIAN IS LIABLE TO BANCASIA UNDER THE DEEDS OF ASSIGNMENT FOR BREACH OF CONTRACT PURSUANT TO THE CIVIL CODE. being the real parties in interest. WHETHER ARSENIO HAD AUTHORITY TO EXECUTE THE ASSIGNMENT AND THUS BIND GREAT ASIAN. WHEREFORE. to delete the trial courts award of attorneys fees.of a statement of the rationale therefore in the body of the challenged decision. The respondent Court erred in not holding that the petitioner-corporation is discharged from liability for failure of the private respondent to comply with the provisions of the Negotiable Instruments Law on the dishonor of the checks. 7.[9] The issues to be resolved in this petition can be summarized into three: 1. warranties and obligations assumed by the assignor Arsenio Lim Piat.

as certified under oath by Great Asians Corporate Secretary Mario K. a corporation can borrow funds or dispose of assets of the corporation only on authority of the board of directors. with Bancasia Finance and Investment Corporation. Tan.. If Great Asian so authorized Arsenio. Arsenio Lim Piat. be authorized as he is authorized to apply for and negotiate for a loan accommodation or credit line in the amount not to exceed ONE MILLION PESOS (P1. 23. The primordial question that must be resolved is whether Great Asian authorized Arsenio to sign the Deeds of Assignment. In the ordinary course of business. The board of directors normally designates one or more corporate officers to sign loan documents or deeds of assignment for the corporation. The Courts Ruling The petition is bereft of merit. and the second on February 10. These two board resolutions.000.000. then Great Asian is bound by the Deeds of Assignment and must honor its terms. 1982. all business conducted and all property of such corporations controlled and held by the board of directors or trustees x x x. To secure a credit accommodation from Bancasia.3. and . The Corporation Code of the Philippines vests in the board of directors the exercise of the corporate powers of the corporation.00). that the Treasurer of the corporation. Mr. The Board of Directors or Trustees. save in those instances where the Code requires stockholders approval for certain specific acts. the board of directors of Great Asian adopted two board resolutions on different dates. the first on March 17. Jr. Section 23 of the Code provides: SEC. Unless otherwise provided in this Code. state: First Board Resolution RESOLVED. the corporate powers of all corporations formed under this Code shall be exercised. WHETHER TAN CHONG LIN IS LIABLE TO GREAT ASIAN UNDER THE SURETY AGREEMENTS. First Issue: Authority of Arsenio to Sign the Deeds of Assignment Great Asian asserts that Arsenio signed the Deeds of Assignment and indorsed the checks in his personal capacity. 1981.

000.** Philippine Currency. the first resolution explicitly authorizes Arsenio to sign any document. to secure the loan or credit line from Bancasia. paper or promissory note.[10] (Emphasis supplied) Second Board Resolution RESOLVED that Great Asian Sales Center Corp. _______________________ 4. including the power to mortgage such properties of the corporation as may be needed to effectuate the same. Also. execute and deliver any and all instruments. necessary or incidental to secure any of the foregoing obligation: (signed) Specimen Signature 1. obtain a discounting line with BANCASIA FINANCE & INVESTMENT CORPORATION.likewise to sign any and all papers.00). _______________________ 3. including mortgage deeds over properties of Great Asian. that the following persons be authorized individually. RESOLVED FURTHER.000). to apply for a loan accommodation or credit line with Bancasia for not more than P1. binding and effective until revoked by the Board of Directors in the manner prescribed by law. RESOLVED FURTHER.[11] (Emphasis supplied) The first board resolution expressly authorizes Arsenio. ARSENIO LIM PIAT. checks. and that BANCASIA FINANCE & INVESTMENT CORPORATION shall not be bound by any such revocation until such time as it is noticed in writing of such revocation. etc. _______________________ PROVIDED FINALLY that this authority shall be valid. documents.000. as Treasurer of Great Asian. JR._ 2. . documents. that the corporation secure such other forms of credit lines with BANCASIA FINANCE & INVESTMENT CORPORATION in an amount not to exceed** TWO MILLION PESOS ONLY (P2.** PESOS. sureties.0 million. at prevailing discounting rates. jointly or collectively to sign.000. in an amount not to exceed** TWO MILLION PESOS ONLY (P2. and/or promissory notes in connection with said loan accommodation or credit line. under such terms and conditions as the signatories may deem fit and proper.

a domestic corporation x x x herein represented by its Treasurer Arsenio Lim Piat. BANCASIA FINANCE & . respectively. to Bancasia. thereby making Arsenio the assignor. On the face of the Deeds of Assignment. As plain as daylight. and endorsing. Great Asian claims that Arsenio signed the Deeds of Assignment in his personal capacity because Arsenio signed above his printed name. The second board resolution even gave Arsenio full authority to agree with Bancasia on the terms and conditions of the discounting line. the two board resolutions specifically refer to Bancasia as the financing institution from whom Great Asian will secure the loan accommodation or discounting line. the fifteen checks of Great Asian to Bancasia. Great Asian sold fifteen postdated checks at a discount. for Great Asian. There is no iota of doubt whatsoever about the purpose of the two board resolutions. Great Asian Sales Center. unto the ASSIGNEE. TRANSFER. and about the authority of Arsenio to act and sign for Great Asian. including checks.0 million.The second board resolution expressly authorizes Great Asian to secure a discounting line from Bancasia for not more than P2. the two board resolutions clearly authorize Great Asian to secure a loan or discounting line from Bancasia. does hereby SELL. The Deeds of Assignment uniformly state that Great Asian. execute and deliver any and all documents. CONVEY. Arsenio. the contracting parties are indisputably Great Asian and Bancasia as the names of these entities are expressly mentioned therein as the assignor and assignee. The only issue to determine is whether the Deeds of Assignment are indeed the transactions the board of directors of Great Asian authorized Arsenio to sign under the two board resolutions. Jr. The two board resolutions also categorically designate Arsenio as the authorized signatory to sign and deliver all the implementing documents. The second board resolution also expressly empowers Arsenio. Great Asian conveniently omits to state that the first paragraph of the Deeds expressly contains the following words: the ASSIGNOR. and Bancasia had a right to rely on the two board resolutions of Great Asian. checks x x x necessary or incidental to secure the discounting line. Arsenio signed the Deeds of Assignment selling. Significantly. Under the Deeds of Assignment. and ASSIGN. x x x for valuable consideration received. The assignor is undoubtedly Great Asian. Great Asian adopted the correct and proper board resolutions to secure a loan or discounting line from Bancasia. over three months. The second board resolution specifically authorizes Arsenio to secure the discounting line under such terms and conditions as (he) x x x may deem fit and proper. to sign. represented by its Treasurer. Armed with the two board resolutions. below which was the word Assignor. as the authorized signatory of Great Asian.

a financing company in an amount or for a consideration less than their face value. commercial or agricultural enterprises by discounting or factoring commercial papers or accounts receivable. (Emphasis supplied) Likewise. a domestic corporation x x x.[13] Moreover. Over three months. No. Section 3 (a) of the Financing Company Act of 1998 provides: Financing companies are corporations x x x primarily organized for the purpose of extending credit facilities to consumers and to industrial. Thus. or other evidences of indebtedness. are purchased by. (Emphasis supplied) This definition of financing companies is substantially the same definition as in the old Financing Company Act (R. on a continuing basis. 5980).A. Section 1 (h) of the New Rules and Regulations adopted by the Securities and Exchange Commission to implement the Financing Company Act of 1998 states: Discounting is a type of receivables financing whereby evidences of indebtedness of a third party. In the financing industry. Great Asian sold the checks to Bancasia at less than the total face value of the checks. such as installment contracts. this definition of discounting is an exact reproduction of the definition of discounting in the implementing rules of the old Finance Company Act. Great Asian entered into four transactions of this nature with Bancasia. The purpose of a discounting line is to enable a business entity to generate instant cash out of its receivables which are still to mature at future dates. promissory notes and similar instruments. or by buying and selling contracts. which allows a business entity to sell. showing that Great Asian availed of a discounting line with Bancasia.[12] The term discount means the sale of a receivable at less than its face value. or assigned to. which were still not due and demandable then. instead of waiting for the maturity dates of the fifteen postdated checks.INVESTMENT CORP. the following ACCOUNTS RECEIVABLES due and payable to it. having an aggregate face value of x x x. leases. . chattel mortgages. In exchange for receiving an amount less than the face value of the checks. Great Asian obtained immediately much needed cash. or by financial leasing of movable as well as immovable property. In short. The financing company or bank which buys the receivables makes its profit out of the difference between the face value of the receivable and the discounted price. The Deeds of Assignment enabled Great Asian to generate instant cash from its fifteen checks. its accounts receivable at a discount. the term discounting line means a credit facility with a financing company or bank..

by way of penalty three per cent (3%) of the total amount unpaid. binding on the board of directors and on Great Asian itself. assuming the liability to pay. the ASSIGNOR unconditionally and irrevocably agrees to pay the same. Arsenio had all the proper and necessary authority from the board of directors of Great Asian to sign the Deeds of Assignment and to endorse the fifteen postdated checks. after receiving valuable consideration for the checks assigned under the Deeds. Second Issue: Breach of Contract by Great Asian Bancasias complaint against Great Asian is founded on the latters breach of contract under the Deeds of Assignment. In such event. all other appropriate venues being hereby waived. plus attorneys fees equivalent to twenty-five (25%) per cent of the total amount due. the ASSIGNOR shall be liable for all the costs. In case of any litigation which the ASSIGNEE may institute to enforce the terms of this agreement. such that any violation of any one. The Deeds of Assignment uniformly stipulate[14] as follows: If for any reason the receivables or any part thereof cannot be paid by the obligor/s. The signature of Arsenio on the Deeds of Assignment is effectively also the signature of the board of directors of Great Asian. the discounting arrangements entered into by Arsenio under the Deeds of Assignment were the very transactions envisioned in the two board resolutions of Great Asian to raise funds for its business. or all of said warranties shall be deemed as deliberate misrepresentation on the part of the ASSIGNOR. Evidently. Arsenio acted completely within the limits of his authority under the two board resolutions. Further thereto. Arsenio signed the Deeds of Assignment as agent and authorized signatory of Great Asian under an authority expressly granted by its board of directors. the ASSIGNOR agrees that any and all actions which may be instituted relative hereto shall be filed before the proper courts of the City of Manila.Clearly. some. it is hereby understood that the warranties which the ASSIGNOR hereby made are deemed part of the consideration for this transaction. for the period of delay until the same is fully paid. the monetary obligation herein conveyed unto the ASSIGNEE shall be conclusively deemed . Arsenio did exactly what the board of directors of Great Asian directed and authorized him to do. Great Asian shows its bad faith in disowning the Deeds of Assignment signed by its own Treasurer. The last Deed of Assignment[15] contains the following added stipulation: xxx Likewise.

(4) Acts or omissions punished by law. Great Asian and Bancasia agreed on this specific with recourse stipulation. terms and conditions as they may deem convenient. Article 1157 of the Civil Code provides that Obligations arise from: (1) Law. including penalty and attorneys fees. morals. Article 1159 of the Civil Code further provides that Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. and (5) Quasi-delicts. . clauses. The failure of the drawers to pay the checks is a suspensive condition. In short. That is.[16] the happening of which gives rise to Bancasias right to demand payment from Great Asian. This conditional obligation of Great Asian arises from its written contracts with Bancasia as embodied in the Deeds of Assignment. Great Asian sold the postdated checks onwith recourse basis against itself. good customs. provided they are not contrary to law. in case the drawers fail to pay the checks on maturity. giving rise to the immediate responsibility on the part of the ASSIGNOR to make good said obligation. despite the fact that the receivables were negotiable instruments with the endorsement of Arsenio. (3) Quasi-contracts. Great Asian obligated itself to pay Bancasia the full face value of the dishonored checks. The contracting parties had the right to adopt the with recourse stipulation which is separate and distinct from the warranties of an endorser under the Negotiable Instruments Law. there is one vital suspensive condition in the Deeds of Assignment. This is an obligation that Great Asian is bound to faithfully comply because it has the force of law as between Great Asian and Bancasia. By express provision in the Deeds of Assignment.defaulted. (2) Contracts. and making the ASSIGNOR liable to pay the penalty stipulated hereinabove as if the original obligor/s of the receivables actually defaulted. public order. Great Asian unconditionally obligated itself to pay Bancasia the full value of the dishonored checks. Article 1306 of the Civil Code provides that The contracting parties may establish such stipulations. xxx Obviously. or public policy.

There is nothing in the Negotiable Instruments Law or in the Financing Company Act (old or new). therefore. giving their promissory notes or checks to the seller. the Negotiable Instruments Law would have governed Bancasias cause of action. Since in discounting of receivables the assignee is subrogated as creditor of the receivable. Had it so proceeded. that prohibits Great Asian and Bancasia parties from adopting the with recourse stipulation uniformly found in the Deeds of Assignment. Bancasia decided to sue Great Asian for breach of contract under the Civil Code. Instead. to pay the finance company in the event of dishonor of the notes or checks. in a separate and distinct contract. the finance company usually requires the assignor. consumers who purchase appliances on installment. Under the Negotiable Instruments Law. a right that Bancasia had under the expresswith recourse stipulation in the Deeds of Assignment. Bancasia had the option to proceed against Great Asian under the Negotiable Instruments Law. [17] Assignment of a negotiable instrument is actually the principal mode of conveying accounts receivable under the Financing Company Act. after paying Bancasia.[18] Otherwise. the endorsement of the negotiable instrument becomes necessary to enable the assignee to collect from the drawer. Thus. For its own protection. As endorsee of Great Asian. notice of dishonor is not required if the drawer has no right to expect or require the bank to honor the check. Instead of being negotiated. is subrogated back as creditor of the receivables. however. by agreement of the parties. This is particularly true with checks because collecting banks will not accept checks unless endorsed by the payee. the latter remains liable to Bancasia because of the with recourse stipulation which is independent of the warranties of an endorser under the Negotiable Instruments Law. The purpose of the endorsement is not to make the assignee finance company a holder in due course because policy considerations militate against according finance companies the rights of a holder in due course. Thus. still there would be no prejudice whatever to Great Asian. Great Asian.The explicit with recourse stipulation against Great Asian effectively enlarges. The exercise by Bancasia of its option to sue for breach of contract under the Civil Code will not leave Great Asian holding an empty bag. Great Asian can then proceed against the drawers who issued the checks. the endorsement does not operate to make the finance company a holder in due course. whether or not Bancasia gives notice of dishonor to Great Asian. Even if Bancasia failed to give timely notice of dishonor. the liability of Great Asian beyond that of a mere endorser of a negotiable instrument. will have no defense against the finance company should the appliances later turn out to be defective. Bancasia. did not choose this route. or if the drawer . a negotiable instrument may be assigned. The purpose of the endorsement is merely to facilitate collection of the proceeds of the checks.

[24] Great Asian cannot now claim that the listing of Bancasia as a creditor was not an admission of its debt to Bancasia but merely an acknowledgment that Bancasia had sent a demand letter to Great Asian. that of lack of consideration for the Deeds of Assignment.[21] Moreover. The Deeds of Assignment uniformly provide that the fifteen postdated checks were assigned to Bancasia for valuable consideration. in its verified petition for voluntary insolvency. unless the debtor proves the contrary. according to Great Asian. or in default thereof. However. testified that Bancasia paid Great Asian a consideration at the discount rate of less than 24% of the face value of the postdated checks. On the other hand. or payment stopped. Although the cause is not stated in the contract. ownership of the checks passed to Bancasia. claims that the assignment of the checks is not a loan accommodation but a sale of the checks. Great Asian forgets that under the Deeds of Assignment. Under Section 186 of the Negotiable Instruments Law. the drawers had no right to expect or require the bank to honor the checks. and in the last instance. the drawers had countermanded payment. an extrajudicial admission that Bancasia proved when it formally offered in evidence the verified petition for insolvency. it is presumed that it exists and is lawful. Moreover. account under garnishment. is completely unsubstantiated. moreover. delay in the presentment of checks discharges the drawer. The record is devoid of any showing on the part of Great Asian rebutting this presumption. under common law.[20] This rule finds application in this jurisdiction pursuant to Section 196 of the Negotiable Instruments Law which states. we reiterate that this obligation . Any case not provided for in this Act shall be governed by the provisions of existing legislation. Great Asian expressly undertook to pay the full value of the checks in case of dishonor. Great Asian admitted its debt to Bancasia when it listed Bancasia as one of its creditors. Again. insufficiency of funds. discharges the drawer only to the extent of the loss caused by the delay.[23] The Insolvency Law even requires the petitioner to state in his verification that the schedule of debts contains a full.[19] In the instant case. Bancasias Loan Section Manager. In the first three instances. Article 1354 of the Civil Code states that.[22]The Insolvency Law requires the petitioner to submit a schedule of debts that must contain a full and true statement of all his debts and liabilities. correct and true discovery of all my debts and liabilities x x x. by the rules of the Law Merchant. Section 186 refers only to delay in presentment of checks but is silent on delay in giving notice of dishonor. Consequently. Great Asian. One other issue raised by Great Asian. delay in notice of dishonor.has countermanded payment. sue the drawers and indorser of the check who are the parties primarily liable on the checks. Moreover. where such notice is required. Cynthia Maclan. which must now. all the checks were dishonored for any of the following reasons: account closed. the common law or Law Merchant can supply this gap in accordance with Section 196 of the Negotiable Instruments Law. With the sale.

Third Issue: The liability of surety Tan Chong Lin Tan Chong Lin. are sold for a consideration less than their face value. The Surety Agreements contain the following common condition: Upon failure of the Principal to pay at maturity. the transaction is one of discounting. However. embodied in separate Deeds of Assignment. and whether held by the Creditor as Principal or agent. its successors. and it is agreed that a certified statement by the Creditor as to the amount due from the Principal shall be accepted by the Surety/ies as correct and final for all legal intents and purposes. an obligation on the part of Great Asian arose from the four contracts.of Great Asian is separate and distinct from its warranties as indorser under the Negotiable Instruments Law. of the checks and not a loan accommodation. there is indeed a fine distinction between a discounting line and a loan accommodation. In summary. with or without demand. and that obligation is to pay Bancasia the full value of the checks. and is subject to the provisions of the Financing Company Act. the President of Great Asian. and the lender is not subrogated as creditor until there is a default and the collateral is foreclosed. that the relevant provisions of the Civil Code are applicable and not the Negotiable Instruments Law. any of the obligations above mentioned. the transaction is only a simple loan. Great Asian itself will pay Bancasia. administrators or assigns. At any rate. The assignee is immediately subrogated as creditor of the accounts receivable. it is precisely because the transaction is a sale or a discounting of receivables. whether due or not due. or in case of the Principals failure promptly to respond to any other lawful demand made by the Creditor. However. or more properly a discounting. If the accounts receivable. correct in saying that the assignment of the checks is a sale. . if the accounts receivable are merely used as collateral for the loan. Since the common condition in the contracts had transpired. Great Asians four contracts assigning its fifteen postdated checks to Bancasia expressly stipulate the suspensive condition that in the event the drawers of the checks fail to pay. however. including the stipulated penalty and attorneys fees. is being sued in his personal capacity based on the Surety Agreements he signed wherein he solidarily held himself liable with Great Asian for the payment of its debts to Bancasia. like postdated checks. Great Asian is. both the Principal and the Surety/ies shall be considered in default and the Surety/ies agree/s to pay jointly and severally to the Creditor all outstanding obligations of the Principal.

and/or services rendered in the ordinary course of its business transactions. that it has valid and genuine title to and indefeasible right to dispose of said accounts. that said receivables are genuine. Tan Chong Lin. however. confusion or remission of the debt made by the creditor with any of the solidary debtors. that the said receivables are freely and legally transferable. the soundness of the receivables herein assigned. written on the letter head of Bancasia Finance & Investment Corporation.Indisputably. 8. As surety. The condition on which Tan Chong Lins obligation hinged had happened. however. and therefore he is released from any liability to Bancasia. 2. if the drawers of the checks fail to pay on due date. 4. valid and subsisting. 7. overdrafts. 5. and that the obligor/s therein will not interpose any objection to this assignment. that said receivables are free from all liens and encumbrances. compensation. what releases a solidary debtor is a novation. The Surety Agreements. uniformly state that Great Asian Sales Center x x x has obtained and/or desires to obtain loans. These warranties. 6. Tan Chong Lin was clearly on notice that he was holding himself as surety of Great Asian which was discounting postdated checks . merchandise. that said receivables are duly noted in its books and are supported by appropriate documents.Under Article 1215 of the Civil Code. Tan Chong Lin maintains that these warranties in the Deeds of Assignment materially altered his obligations under the Surety Agreements. Tan Chong Lin automatically became liable for the entire obligation to the same extent as Great Asian. that said receivables represent bona fide sale of goods. solidarily with Great Asian. Tan Chong Lin explicitly and unconditionally bound himself to pay Bancasia. discounts and/or other forms of credits from Bancasia. contends that the following warranties in the Deeds of Assignment enlarge or increase his risks under the Surety Agreements: The ASSIGNOR warrants: 1. 3. and has in fact given his/their consent hereto. are the usual warranties made by one who discounts receivables with a financing company or bank. that the obligors of the receivables herein assigned are solvent.

jointly and severally among themselves and likewise with PRINCIPAL. including extensions and/or renewals thereof in the principal sum not to exceed TWO MILLION(P2. both the Principal and the Surety/ies shall be considered in default and the Surety/ies agree/s to pay jointly and severally to the Creditor all outstanding obligations of the Principal. any of the obligations above mentioned.There is.000. with or without demand. Philippine Currency. the warranties do not increase or enlarge the risks of Tan Chong Lin under the Surety Agreements. In any event. plus stipulated interest thereon at the rate of sixteen percent (16%) per annum. jointly and severally among themselves and likewise with principal. overdraft and other obligations of every kind which the PRINCIPAL may now or may hereafter owe the Creditor. and it is agreed that a certified statement by the Creditor as to the amount due from the Principal shall be accepted by the Surety/ies as correct and final for all legal intents and purposes. administrators or assigns. hereby agree/s and bind/s himself/themselves to pay at maturity all the notes. The first Surety Agreement states that: x x x herein Surety/ies.00). or in case of the Principals failure promptly to respond to any other lawful demand made by the Creditor. as President of Great Asian. drafts.000. bills of exchange. Tan Chong Lin. its successors. the provisions of the Surety Agreements are broad enough to include the obligations of Great Asian to Bancasia under the warranties. Thus. and whether held by the Creditor as Principal or agent. Moreover. xxx Upon failure of the Principal to pay at maturity. whether due or not due. plus stipulated interest thereon. including extensions or renewals thereof in the sum *** ONE MILLION ONLY*** PESOS (P1.000. (Emphasis supplied) The second Surety Agreement contains the following provisions: x x x herein Surety/ies. hereby agree and bind themselves to pay at maturity all the notes. or at such increased rate of interest which the Creditor may charge on the Principals obligations or renewals or the reduced amount thereof. moreover.00) PESOS.issued by its buyers of goods and merchandise. plus all the costs and expenses which the Creditor may incur in connection therewith. overdraft and other obligations of every kind which the Principal may now or may hereafter owe the Creditor. cannot feign ignorance of Great Asians business activities or discounting transactions with Bancasia. or such increased or decreased rate of interest which the Creditor may charge on the principal sum outstanding pursuant to the rules and regulations which the . bills of exchange. Philippine Currency.000. no novation of the debt of Great Asian that would warrant release of the surety. drafts.

the 3% penalty can only be considered as a one-time penalty. then both the PRINCIPAL and the SURETY/IES shall be considered in default under the terms of this Agreement. We can only award Bancasia legal interest at 12% interest per annum. together with all the cost and expenses which the CREDITOR may incur in connection therewith. The Deeds of Assignment stipulate that in case of suit Great Asian shall pay attorneys fees equivalent to 25% of the outstanding debt.Monetary Board may from time to time promulgate. Moreover. The award of attorneys fees in the instant case is justified. and only from the time it filed the complaint because the records do not show that Bancasia made a written demand on Great Asian prior to filing the complaint. the Deeds of Assignment do not provide for interest if Great Asian fails to pay. Thus. endorsee. bills of exchange. the PRINCIPAL should fail to pay at maturity any of the obligations or amounts due to the CREDITOR. or if for any reason whatsoever the PRINCIPAL fails to promptly respond to and comply with any other lawful demand made by the CREDITOR. the surety. The stipulations in the Surety Agreements undeniably mandate the solidary liability of Tan Chong Lin with Great Asian. Great Asian. xxx There is a solidary liability only when the obligation expressly so states. but the Deeds are silent on whether this penalty is a running monthly or annual penalty. expressly encompassing all the notes. overdraft and other obligations of every kind which the PRINCIPAL may now or may hereafter owe the Creditor. including penalty and attorneys fees in accordance with the Deeds of Assignment. or when the law or nature of the obligation requires solidarity. but also because Great Asian and Tan Chong Lin acted in gross and evident bad faith in refusing to pay Bancasias plainly valid. The Deeds of Assignment also provide for a 3% penalty on the total amount due in case of failure to pay. just and demandable claim. whether due or not due. Pursuant thereto. (Emphasis supplied) Article 1207 of the Civil Code provides.[25] not only because of such stipulation. but not on the principal debtor. assignee or transferee. drafts. and whether owing to the PRINCIPAL in its personal capacity or as agent of any person. If for any reason whatsoever. Tan Chong Lin must be held solidarily liable with Great Asian for the nonpayment of the fifteen dishonored checks. all outstanding obligations of the CREDITOR. the stipulations in the Surety Agreements are sufficiently broad.[26] Bancasia made an extrajudicial demand on Tan Chong Lin. Moreover. the SURETY/IES agree/s to pay jointly and severally with the PRINCIPAL. x x x. or if for any reason whatsoever any obligation of the PRINCIPAL in favor of any person or entity should be considered as defaulted. . We deem it just and equitable that the stipulated attorneys fee should be awarded to Bancasia. Consequently.

The facts. CV No. Francisco & Associates (FMF). respondent. Francisco. with legal rate of interest from January 5. and to pay complainant Fidel M. January 19.09. Inc. Jr. PEOPLE OF THE PHILIPPINES. solidarily. and (c) costs of suit. railings. owner/developer of the South Garden Homes.P. Fidel [M. Eliza. (HDI). representing HDI. SO ORDERED. 141466. 20167 is AFFIRMED with MODIFICATION. (c) attorneys fees equivalent to 25% of the total amount in item (a).] is the president of the construction firm F. Jr. Petitioners are ordered to pay.: The case is an appeal from a decision of the Court of Appeals[1] affirming in toto that of the Regional Trial Court. curbs. and Fidel. No. 2001] ELIZA T. R. are as follows:[2] Accused-appellant Eliza is the Vice-President of Hometown Development.00 plus 3% penalty thereon.042. Quezon City. -------------------------------------------------------------------------------------------- [G. Francisco.739. On January 28. private respondent the following amounts: (a) P1. located at Salitran. and gutters) at the South Garden . TAN. Cavite. Tan guilty of violation of B. Dasmarinas.WHEREFORE. for FMF. vs. 1992. the assailed Decision of the Court of Appeals in CA-G.M.005. DECISION PARDO.R. the sum of P23. entered into a Construction Agreement whereby the FMF was hired by Eliza to undertake land development (construction of roads. until fully paid. as found by the Court of Appeals. Branch 95 finding petitioner Eliza T. 22 and sentencing her to imprisonment of one year with costs. including interest at 12% per annum on the outstanding amount of the attorneys fees from the finality of this judgment until the same is fully paid. petitioner. 1994. (b) interest on the total outstanding amount in item (a) at the legal rate of 12% per annum from the filing of the complaint until the same is fully paid. J.

861776 dated August 15.00 each to FMF as advance partial payment as per voucher No. 1992 861779 50. however. Based on the testimony of Fidel. however. both parties terminated the contract. A000913 dated February 28. to wit: Check # Amount Date 861776 P50. Eliza presented a different version of the case altogether.00 August 30. 1992 When FMF failed to accomplish land development in Cavite. subject check was dishonored. Fidel sent her a demand letter by registered mail.00 Sept.000.739. the Construction Agreement set forth that the manner of payment would be on a monthly progress billing based on accomplishment reports to be submitted by the FMF. when Eliza still did not pay. 15.09. 1993. Meanwhile. Eliza was charged in court. 1993.000. Upon presentment for payment. as replacement checks for the one that got lost. 1992.000. Eliza issued to the latter. and at the behest of Fidel. Failing to heed his demand letter. As their accounting records reflected that HDI still had an account of P46. A000904 and A000913 dated January 30.000. each for P23. After receipt of the notice of dishonor. 1993 and February 28. 1992 861777 50. 30.739. Later on. she initially issued for (4) checks with P50.00 with FMF. FMF was paid P23. For its accomplishment for the month of November 1992. . 1992 861778 50. it would appear for the prosecution that when Eliza failed to pay.000. that Check No. 1992 got lost. With the excuse.00 August 15. According to accused-appellant.Homes. She replaced later on these two (2) checks with cash as evidenced by the acknowledgement signature of Fidel on Voucher No.09 by Eliza with Philtrust Bank Check No. Fidel gave back only three (3) of the for (4) checks. Among others. 1993. the Construction Agreement was terminated and Eliza asked for the return of the four (4) abovementioned checks.000. two (2) checks: Philtrust Bank Check Nos. Fidel verbally notified Eliza and the latter promised to pay. respectively. 2028 dated March 30.00 Sept. 1575 dated July 25.

22 and metes on the said accused the penalty of one (1) year imprisonment and to pay the costs.Subsequently. May 24.09 with legal rate of interest to Fidel M. 2028 dated March 30. after Eliza issued the two (2) checks in December 1992. Francisco. This was the reason why.P. She stressed that although that bank had stamped DAUD in subject check upon its presentment on March 2. disputes the allegation of Eliza who used to be her friend especially on her husband having allegedly received payment in cash in exchange for Philtrust Bank Check Nos. 1996. 1 thereof: Payment Stopped Funded. 1996. she had sufficient funds to cover the check because at that time. the amount of P23. it was realized by HDIs accounting department that Philtrust Bank Check Nos. Philippines. at the dorsal portion of subject check is written under the column Reason for Return. Mrs.[3] On May 24. Quezon City. A000913 could have been withdrawn on March 2. (S/T) DIOSDADO M. 1993. In rebuttal. SO ORDERED. This allegation was supported by Aileen Sy. Erlinda S. 1993. A000913 was dishonored not because it was drawn against insufficient funds but precisely because of her order to stop payment therefor. the trial court rendered a decision the dispositive portion of which reads: WHEREFORE. not even after the demand letter had been sent on March 18. Accused-appellant maintains that Philtrust Bank Check No. Francisco. 1993. representative of the Philippine Trust Bank who confirmed in Court that had there been no stop payment request received by their bank as early as January 27. 2028 where the data are handwritten. Francisco and her husband no longer saw accused-appellant.. she had a credit limit of P25 million with Philtrust Bank.739. 1993 because of the available credit limit of P5 million. The accused Eliza Tan is further ordered to pay the amount of P23. A000904 and A0009013 and suspects the genuineness of Voucher No. Mrs.739. 1994 until it is fully paid.09 covered by subject Philtrust Bank Check No. A000904 and A000913 had already been replaced with cash and so a request to stop payment of these two (2) checks were made by Eliza to the bank. Francisco asserts that whenever she pays them (FMF) Eliza paid in checks and never in cash and vouchers were already prepared typewritten unlike Voucher No. 1992. computed from January 5. For one. Jr. at No. PERALTA Judge[4] . Secondly. the wife of Fidel. Judgment is hereby rendered finding the accused Eliza Tan guilty beyond reasonable doubt of the offense of Violation of B.

1993. we ACQUIT petitioner of the offense charged. she knew that there were insufficient funds on deposit with the bank to honor the check upon presentment. 1999. In the first place. That a person makes or draws and issues any check. In lieu thereof. . namely.[5] On October 22. 2. In the second place.P.[6] Hence. petitioner appealed to the Court of Appeals. SO ORDERED. the banks representative testified that petitioners account at the time of the presentment of the check she issued was funded.P. That the check is subsequently dishonored by the drawee bank for insufficiency of funds or credit. the bank may honor the check at its discretion in favor of favored clients. we REVERSE the appealed decision of the Court of Appeals. Even with uncollected deposits. the third and fourth elements of the offense charged were not established or proved. 22 because when she issued Philtrust Bank Check No.[8] In this case. the check in question was not issued without sufficient funds and was not dishonored due to insufficiency of funds. 4. that the account has been paid in cash. petitioner requested the bank to stop payment of the check for a valid reason. A000913 to FMF on February 28. 3. much more than the amount of the check issued. 22 are: 1. or would have been dishonored for the same reason had not the drawer.[7] The issue raised is whether petitioner is guilty of violation of B. in which case there would be no violation of B. That the person who makes or draws and issues the check knows at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment.[9] What was stamped on the check in question was Payment Stopped-Funded at the same time DAUD meaning drawn against uncollected deposits. The elements of the offense defined and penalized in Section 1 of Batas Pambansa Blg. with costs de oficio. IN VIEW WHEREOF. ordered the bank to stop payment. as she had a credit line to the extent of P25 million. Actually.In time. even without relying on the credit line. That the check is made or drawn and issued to apply on account or for value. 22. petitioners bank account covered the check she issued because even though there were some deposits that were still uncollected the deposits became good and the bank certified that the check was funded.[10] In fact. the Court of Appeals promulgated its decision affirming in its entirely the decision of the trial court. this appeal. without any valid reason.

REYNALD R. CV No. ABAD. JJ. J.: The Case This petition for review[1] assails the Decision dated 30 November 2004[2] and Resolution dated 11 April 2005 of the Court of Appeals in CA-G.BANK OF THE G. In accordance with his clients instruction. Chairperson. Suarez had a client who planned to purchase several parcels of land in Tagaytay City. Suarez (Suarez) is a lawyer who used to maintain both savings and current accounts with petitioner Bank of the Philippine Islands (BPI) Ermita Branch from 1988 to 1997.R. DEL CASTILLO. J. Present: CARPIO. SUAREZ. 76988. Promulgated: Respondent. Sometime in 1997..R. The Facts Respondent Reynald R. Petitioner.BRION. No. 2010 x-----------------------------------------------------------------------------------------x DECISION CARPIO. March 15. . Suarez transacted with the owners of the . affirming the trial court's decision of 18 October 2002 and denying reconsideration. 167750 PHILIPPINE ISLANDS. and PEREZ. but preferred not to deal directly with the land owners.versus .

200 as penalty for the dishonor.. Consequently. Suarez and his client made an arrangement such that Suarezs client would deposit the money in Suarezs BPI account and then. During the meeting.129.[3] Suarez instructed his secretary. Suarezs client deposited a Rizal Commercial Banking Corporation (RCBC) check with a face value of P19. Suarez received a call from Fe Gregorius.S.100. the BPI officers handed Suarez a letter. on 16 June 1997. Hence.S. Garaygay informed him that the five checks he issued were all dishonored by BPI due to insufficiency of funds and that his current account had been debited a total of P57. the drawee bank for the sum of P19. As regards the payment of the purchase money. According to Garaygay.Tagaytay properties.) for a vacation. Suarez would issue checks to the sellers. to confirm from BPI whether the face value of the RCBC check was already credited to his account that same day of 16 June 1997. the checks were honored by BPI. making it appear that he was the buyer of the lots. On 19 June 1997. Suarez sent a letter to BPI demanding an apology and the reversal of the charges debited from his account.100 for the purchase of the Tagaytay properties. Aware of the banking systems 3-day check clearing policy.[4] The next day. Suarez issued on the same day five checks of different amounts totaling P19. Suarez left for the United States (U. the meeting did not transpire. who requested a meeting with him to explain BPIs side. that this amount had already been debited from the account of the drawer on 16 June 1997 and the RCBC check was fully funded. the relevant text of which reads: . Subsequently.129.100. Xavier Loinaz. Suarezs secretary further told him that the checks were dishonored despite an assurance from RCBC. BPI allegedly confirmed the same-day crediting of the RCBC check. then manager of the BPI Ermita Branch.Relying on this confirmation. BPI representatives asked another meeting with Suarez. However. representing the total consideration of the sales. While Suarez was in the U. rendering Suarezs available funds sufficient. Petronila Garaygay (Garaygay). Suarez sent another letter to BPI addressed to its president.129. the payees of the five BPI checks that Suarez issued on 16 June 1997 presented the checks again. in BPI Pasong Tamo Branch to be credited to Suarezs current account in BPI Ermita Branch. Since the RCBC check (which Suarezs client issued) had already been cleared by that time.

The sum of P1. The Regional Trial Court. thus: WHEREFORE. Hence. The sum of P3. Claiming that BPI mishandled his account through negligence. 3. Suarez filed with the Regional Trial Court a complaint for damages. and The costs of litigation. In reply.00 as attorneys fees.000.000. 2. there is a dishonor nonetheless. docketed as Civil Case No.00. Our investigation discloses that when the checks you issued against your account were received for clearing. Makati City. prompting him to send another letter informing BPI of its act of falsification by making it appear that it marked the checks with drawn against uncollected deposit (DAUD) and not drawn against insufficient fund (DAIF).Dear Atty. Loinaz dated 02 July 1997 was referred to us for investigation and reply. 98574.000. .[5] Upon Suarezs request. Branch 136 rendered judgment in favor of Suarez. BPI delivered to him the five checks which he issued on 16 June 1997. the checks you deposited were not yet cleared. specifically the reason for the dishonor. 4.200.000. judgment is hereby rendered ordering defendant bank to pay the following amounts: 1. but denied Suarezs claim for damages. Xavier P. Suarez rejected BPIs offer. We do not see much in your allegation that you have suffered damages just because the reason for the return was DAIF and not DAUD. with interest from date of first demand until full payment as actual damages.00 as and for exemplary damages. The amount of P1. In both instances. the dishonor of the your checks.00 by way of moral damages. BPI offered to reverse the penalty charges which were debited from his account. Suarez claimed that the checks were tampered with. The amount of P57. Suarez: Your letter to our President.

it was confirmed through plaintiffappellees secretary by an employee of defendant-appellant bank that the aforesaid amount was.100. It was on the basis of this confirmation which made plaintiffappellee issue five (5) checks in the amount of P19. Branch 136. The decision dated 18 October 2002 of the Regional Trial Court.129. plaintiff-appellees evidence convincingly established the latters entitlement to damages. premises considered. The Court of Appeals Ruling In affirming the trial courts decision. already credited to his account. which was the direct result of defendant-appellants negligence in handling his account. Hence.[7] The Court of Appeals denied BPIs motion for reconsideration in its 11 April 2005 Resolution. And despite RCBCs assurance that the aforementioned amount had already been debited from the account of the drawer bank. The dispositive portion of the 30 November 2004 Decision of the Court of Appeals reads: WHEREFORE.00 to different payees. on the same day. this petition.SO ORDERED.100. It was duly proven that after his client deposited a check in the amount of P19. the instant appeal is DISMISSED. of Makati is AFFIRMED in toto. the Court of Appeals ruled as follows: Contrary to its contention.[6] BPI appealed to the Court of Appeals. which affirmed the trial courts decision.00 on 16 June 1997. SO ORDERED.129. . defendant-appellant bank still dishonored the five (5) checks for DAIF as reason when the various payees presented them for payment on 17 June 1997.

Perforce. the former has offered to reverse these charges in order to mitigate the effects of the returned checks on the latter. His transaction with the would be sellers of the property in Tagaytay was aborted because the latter doubted his capacity to fulfill his obligation as buyer of their [properties. It bears to stress that there lies a big difference between a check dishonored for reasons of DAUD and a check dishonored for DAIF. A check dishonored for reasons of DAIF would unduly expose herein plaintiff-appellee to criminal prosecution for violation of B. While plaintiff-appellee had been spared from any criminal prosecution. defendant-appellant bank should not have attempted to renege on its act of debiting the charges to plaintiff-appellees account. Although the intercalation was obvious in the P12 million check. BPI raised the following issues: . to the mind of the court. was sullied on account of the dishonored checks by reason of DAIF. This. is tantamount to an admission on their (defendant-appellant banks employees) part that they have committed a blunder in handling plaintiff-appellees account. however.P. it was erroneous on the part of defendant-appellant bank to surmise that plaintiff-appellee would not suffer damages anyway for the dishonored checks for reasons of DAUD or DAIF because there was dishonor nonetheless. still the fact that there was intercalation made in the said check cannot be denied. he had a lot of explaining to do with his client.] As the agent of the true buyers. In short.It was also proven that defendant-appellant bank through its employee inadvertently marked the dorsal sides of the checks as DAIF instead of DAUD. his reputation. It is basic in the law governing human relations that no one shall be unjustly enriched at the expense of others. A closer look at the checks would indicate that intercalations were made marking the acronym DAIF thereon to appear as DAUD. Defendant-appellant bank also contends that plaintiff-appellee is liable to pay the charges mandated by the Philippine Clearing House Rules and Regulations (PCHRR). If truly these charges were mandated by the PCHRR. defendant-appellant bank should return the amount of the service charges debited to plaintiff-appellee. 22 while a check dishonored for reasons of DAUD would not. he suffered humiliation. Thus.[8] The Issues In its Memorandum. In its letter dated 28 July 1997 addressed to plaintiff-appellee.

In essence. Suarez impresses upon this Court that BPI is estopped [12] from dishonoring his checks since BPI confirmed the same-day crediting of the RCBC check deposit and assured the adequacy of funds in his account.[9] The Courts Ruling The petition is partly meritorious. WHETHER [BPI] IS LIABLE TO PAY [SUAREZ] MORAL AND EXEMPLARY DAMAGES. WHETHER [SUAREZ] IS LIABLE TO PAY THE SERVICE CHARGES IMPOSED BY THE PHILIPPINE CLEARING HOUSE CORPORATION.[10] Reviewing the records. this Court is not a trier of facts.recognized exceptions to this rule. In other words. WHETHER [BPI] WAS NEGLIGENT IN HANDLING THE ACCOUNT OF [SUAREZ]. would justify a different conclusion from the one reached in the assailed decision. However. despite the RCBC check deposit made to his account on the same day to cover the total amount of the BPI checks. Suarez points out that he relied on this confirmation for the issuance of his checks to the owners of the Tagaytay properties. would do. and C. we find that the lower courts misappreciated the evidence in this case. guided upon those considerations which ordinarily regulate the conduct of human affairs. B. ATTORNEYS FEES AND COSTS OF LITIGATION. depends on whether BPI indeed confirmed the same-day crediting of the RCBC checks face value to Suarezs BPI account. Negligence is defined as the omission to do something which a reasonable man. As a rule. Suarez claims that BPI made a . or the doing of something which a prudent man and reasonable man could not do. however.A. Suarez insists that BPI was negligent in handling his account when BPI dishonored the checks he issued to various payees on 16 June 1997. there are well. one of which is when certain relevant facts were overlooked by the lower court. if properly appreciated.[11] The question concerning BPI's negligence. which facts.

[14] However. is a condition in which a depositors balance is . on the other hand.[18] DAIF. BPI mistakenly marked the dishonored checks with drawn against insufficient funds (DAIF). BPI was not estopped from dishonoring the checks for inadequacy of available funds in Suarezs account since the RCBC check remained uncleared at that time. a same-day clearing of a P19.100 check requires approval of designated bank official or officials. Suarez failed to prove that BPI confirmed the same-day crediting of the RCBC check. instead of drawn against uncollected deposit (DAUD).[17] However. there is no sufficient evidence to show that BPI conclusively confirmed the same-day crediting of the RCBC check which Suarezs client deposited late on 16 June 1997. had not yet been cleared. Garaygay failed to (1) identify and name the alleged BPI employee. Suarez had no credit or bill purchase line with BPI which would qualify him to the exceptions to the 3-day check clearing policy. and (2) establish that this particular male employee was authorized by BPI either to disclose any information regarding a depositors bank account to a person other than the depositor over the telephone. As BPI pointed out.129. usually a check. and not any bank official can grant such approval. DAUD means that the account has.[15] and disregard the banking industrys 3-day check clearing policy. or that BPI assured Suarez that he had sufficient available funds in his account. or to assure Garaygay that Suarez could issue checks totaling the face value of the RCBC check. Suarez is mistaken.[13] Suarezs secretary. on its face. no negligence can be ascribed to BPIs dishonor of the checks precisely because BPI was justified in dishonoring the checks for lack of available funds in Suarezs account. Garaygay.representation that he had sufficient available funds to cover the total value of his checks.Accordingly. While BPI had the discretion to undertake the same-day crediting of the RCBC check.[16] Considering that there was no binding representation on BPIs part as regards the same-day crediting of the RCBC check. Moreover. testified that she was able to talk to a BPI male employee about the same-day crediting of the RCBC check. Based on the records. Clearly. Suarez failed to convincingly show his entitlement to such privilege. sufficient funds but not yet available to the drawer because the deposit.

inadequate for the bank to pay a check.[19] In other words, in the case of DAUD, the
depositor has, on its face, sufficient funds in his account, although it is not
available yet at the time the check was drawn, whereas in DAIF, the depositor
lacks sufficient funds in his account to pay the check. Moreover, DAUD does not
expose the drawer to possible prosecution for estafa and violation of BP 22, while
DAIF subjects the depositor to liability for such offenses.[20] It is clear therefore
that, contrary to BPIs contention, DAIF differs from DAUD. Now, does the
erroneous marking of DAIF, instead of DAUD, give rise to BPIs liability for
damages?
THE FOLLOWING ARE THE CONDITIONS FOR THE AWARD OF MORAL
DAMAGES: (1) THERE IS AN INJURY WHETHER PHYSICAL, MENTAL OR
PSYCHOLOGICAL CLEARLY SUSTAINED BY THE CLAIMANT; (2) THE
CULPABLE ACT OR OMISSION IS FACTUALLY ESTABLISHED; (3) THE
WRONGFUL ACT OR OMISSION OF THE DEFENDANT IS THE
PROXIMATE CAUSE OF THE INJURY SUSTAINED BY THE CLAIMANT;
AND (4) THE AWARD OF DAMAGES IS PREDICATED ON ANY OF THE
CASES STATED IN ARTICLE 2219[21] OF THE CIVIL CODE.[22]
IN THE PRESENT CASE, SUAREZ FAILED TO ESTABLISH THAT HIS
CLAIMED INJURY WAS PROXIMATELY CAUSED BY THE ERRONEOUS
MARKING OF DAIF ON THE CHECKS. PROXIMATE CAUSE HAS BEEN
DEFINED AS ANY CAUSE WHICH, IN NATURAL AND CONTINUOUS
SEQUENCE, UNBROKEN BY ANY EFFICIENT INTERVENING CAUSE,
PRODUCES THE RESULT COMPLAINED OF AND WITHOUT WHICH
WOULD NOT HAVE OCCURRED.[23] THERE IS NOTHING IN SUAREZS
TESTIMONY WHICH CONVINCINGLY SHOWS THAT THE ERRONEOUS
MARKING OF DAIF ON THE CHECKS PROXIMATELY CAUSED HIS
ALLEGED PSYCHOLOGICAL OR SOCIAL INJURIES. SUAREZ MERELY
TESTIFIED THAT HE SUFFERED HUMILIATION AND THAT THE
PROSPECTIVE CONSOLIDATION OF THE TITLES TO THE TAGAYTAY
PROPERTIES DID NOT MATERIALIZE DUE TO THE DISHONOR OF HIS
CHECKS,[24]NOT DUE TO THE ERRONEOUS MARKING OF DAIF ON HIS
CHECKS. HENCE, SUAREZ HAD ONLY HIMSELF TO BLAME FOR HIS
HURT FEELINGS AND THE UNSUCCESSFUL TRANSACTION WITH HIS
CLIENT AS THESE WERE DIRECTLY CAUSED BY THE JUSTIFIED
DISHONOR OF THE CHECKS. IN SHORT, SUAREZ CANNOT RECOVER
COMPENSATORY DAMAGES FOR HIS OWN NEGLIGENCE.[25]

WHILE THE ERRONEOUS MARKING OF DAIF, WHICH BPI BELATEDLY
RECTIFIED, WAS NOT THE PROXIMATE CAUSE OF SUAREZS CLAIMED
INJURY, THE COURT REMINDS BPI THAT ITS BUSINESS IS AFFECTED
WITH PUBLIC INTEREST. IT MUST AT ALL TIMES MAINTAIN A HIGH
LEVEL OF METICULOUSNESS AND SHOULD GUARD AGAINST INJURY
ATTRIBUTABLE TO NEGLIGENCE OR BAD FAITH ON ITS
PART.[26] SUAREZ HAD A RIGHT TO EXPECT SUCH HIGH LEVEL OF
CARE AND DILIGENCE FROM BPI. SINCE BPI FAILED TO EXERCISE
SUCH DILIGENCE, SUAREZ IS ENTITLED TO NOMINAL DAMAGES[27] TO
VINDICATE SUAREZS RIGHT TO SUCH HIGH DEGREE OF CARE AND
DILIGENCE. THUS,
WE
AWARD
SUAREZ P75,000.00 NOMINAL
DAMAGES.
ON THE AWARD OF ACTUAL DAMAGES, WE FIND THE SAME
WITHOUT
ANY
BASIS. CONSIDERING
THAT
BPI
LEGALLY
DISHONORED THE CHECKS FOR BEING DRAWN AGAINST
UNCOLLECTED DEPOSIT, BPI WAS JUSTIFIED IN DEBITING THE
PENALTY CHARGES AGAINST SUAREZS ACCOUNT, PURSUANT TO
THE
RULES
OF
THE
PHILIPPINE
CLEARING
HOUSE
[28]
CORPORATION, TO WIT:
Sec. 27. PENALTY CHARGES ON RETURNED ITEMS
27.1
A SERVICE CHARGE OF P600.00 FOR EACH
CHECK SHALL BE LEVIED AGAINST THE DRAWER
OF ANY CHECK OR CHECKS RETURNED FOR ANY
REASON, EXCEPT FOR THE FOLLOWING:
A) ACCOUNT CLOSED
B) NO ACCOUNT
C) UNDER GARNISHMENT
D) SPURIOUS CHECK
E) DOCUMENTARY STAMPS MISSING (FOR FOREIGN CHECKS/DRAFTS
ONLY)
F) POST-DATED/STALE-DATED
G) VALIDITY RESTRICTED
H) MISCLEARED ITEMS
I) DECEASED DEPOSITOR

J) VIOLATION OF CLEARING RULES AND/OR PROCEDURES
K) LOST BY PRESENTING BANK WHILE IN TRANSIT TO CLEARING
AS WELL AS OTHER EXCEPTIONS WHICH MAY
DEFINED/CIRCULATED BY PCHC FROM TIME TO TIME.[29]

BE

IN VIEW OF THE FOREGOING, THE COURT DEEMS IT UNNECESSARY
TO RESOLVE THE OTHER ISSUES RAISED IN THIS CASE.
WHEREFORE, THE COURT GRANTS THE PETITION IN PART. THE
COURT SETS ASIDE THE 30 NOVEMBER 2004 DECISION AND 11 APRIL
2005 RESOLUTION OF THE COURT OF APPEALS IN CA-G.R. CV NO.
76988, AND DELETES THE AWARD OF ALL DAMAGES AND FEES. THE
COURT AWARDS TO RESPONDENT REYNALD R. SUAREZ NOMINAL
DAMAGES IN THE SUM OF P75,000.00.
SO ORDERED.

--------------------------------------------------------------------------------------------------

JAMES SVENDSEN,
Petitioner,

-versus-

G.R. No. 175381
Present:
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

PEOPLE
THEPHILIPPINES,
Respondent.

OF

Promulgated:
February 26, 2008

x--------------------------------------------------x
DECISION
CARPIO MORALES, J.:
Assailed via Petition for Review on Certiorari is the Court of Appeals
Decision[1] of November 16, 2006 denying petitioners appeal from the December
22, 2005 Decision[2] of the Regional Trial Court (RTC) of Manila, Branch 14
which affirmed the December 17, 2003 Judgment[3] of the Metropolitan Trial Court
(MeTC) of Manila, Branch 5, finding James Svendsen (petitioner) guilty of
violation of Batas Pambansa Blg. (B.P. Blg.) 22 or the Bouncing Checks Law.
In October 1997, Cristina Reyes (Cristina) extended a loan to petitioner in
the amount of P200,000, to bear interest at 10% a month. After petitioner had
partially paid his obligation, he failed to settle the balance thereof which had
reached P380,000 inclusive of interest.[4]
Cristina thus filed a collection suit against petitioner, which was eventually
settled when petitioner paid her P200,000[5] and issued in her favor an International
Exchange Bank check postdated February 2, 1999 (the check) in the amount
of P160,000 representing interest.[6] The check was co-signed by one Wilhelm
Bolton.
When the check was presented for payment on February 9, 1999, it was dishonored
for having been Drawn Against Insufficient Funds (DAIF).[7]
Cristina, through counsel, thus sent a letter to petitioner by registered mail
informing him that the check was dishonored by the drawee bank, and demanding
that he make it good within five (5) days from receipt thereof.[8]
No settlement having been made by petitioner, Cristina filed a complaint
dated March 1, 1999 against him and his co-signatory to the check, Bolton, for
violation of B.P. Blg. 22 before the City Prosecutors Office of Manila. No counteraffidavit was submitted by petitioner and his co-respondent. An Information dated
April 13, 1999 for violation of B.P.Blg. No. 22 was thus filed on April 29,

said accused failed to pay said CRISTINA C. unlawfully. 2003. . 1999 payable to CRISTINA REYES in the amount of P160. the accusatory portion of which reads: That sometime in December 1998 the said accused did then and there willfully.00) representing his civil obligation covered by subject check. disposing as follows: WHEREFORE.00 said accused well knowing that at the time of issue she/he/they did not have sufficient funds and/or credit with the drawee bank for payment of such check in full upon its presentment. with subsidiary imprisonment in case of insolvency. REYES to apply on account or for value INTERNATIONAL EXCHANGE BANK check no.000. which check after having been depositedin the City of Manila. the trial court never acquired jurisdiction over his person.1999 before the MeTC of Manila against the two. this Court finds accused James Robert Svendson [sic] GUILTY beyond reasonable doubt of a violation of Batas Pambansa Blg.[9] Bolton having remained at large. Branch 5 of the Manila MeTC found petitioner guilty as charged.00). Reyes civil indemnity in the total amount of ONE HUNDRED SIXTY THOUSAND PESOS (P160. REYES the amount of the check or to make arrangement for full payment of the same within five (5) banking days after receiving said notice. and feloniously and jointly make or draw and issue to CRISTINA C. Accused is also made liable to pay private complainant Cristina C. Philippines. CONTRARY TO LAW.000. 0000009118 dated February 2. 22 (Bouncing Checks Law) and imposes upon him to pay a fine of ONE HUNDRED SIXTY THOUSAND PESOS (P160. and upon being presented for payment within ninety (90) days from the date thereof was subsequently dishonored by the drawee bank for INSUFFICIENCY OF FUNDS and despite receipt of notice of such dishonor.000.[10] By Judgment of December 17.

or both such fine and imprisonment at the discretion of the court. 22 or the Bouncing Checks Law reads: SECTION 1. let a warrant of arrest against him ISSUE.000 to private complainant. Blg. Section 1 of B. 22 the making. which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer. shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two Hundred Thousand pesos. drawing. Checks without sufficient funds.P. Hence. the present petition for review. having sufficient funds in or credit with the drawee bank when he makes or draws and issues a check. shall fail to keep sufficient funds or to . Pending his apprehension. considering that other accused Wilhelm Bolton remains at large. and issuance of any check to apply on account or for value was present. without any valid reason. ordered the bank to stop payment. and in violating his right to due process when it convicted him. (Emphasis in the original. notwithstanding the absence of proof of receipt by him of a written notice of dishonor. The same penalty shall be imposed upon any person who. Blg. let the case against him be sent to theARCHIVES.Meantime. the RTC affirmed the MeTC judgment and the Court of Appeals denied petitioners appeal. notwithstanding the invalidity of the interest stipulation. as the obligation to pay interest is void. in holding him civilly liable in the amount of P160. underscoring supplied) As priorly stated. knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment. the same not being in writing and the 10% monthly interest is unconscionable. Petitioner argues that the appellate court erred in finding that the first element of violation of B.P. Any person who makes or draws and issues any check to apply on account or for value. The petition is impressed with merit.

drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank. or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice that such check has not been paid by the drawee. however. was dishonored when deposited for payment in Banco de Oro due to DAIF. 22 provides that [t]he making. (2) the knowledge of the maker. drawing and issuance of any check to apply for account or for value.[12] this Court held: x x x [I]f x x x notice of non-payment by the drawee bank is not sent to the maker or drawer of the bum check. the first and the third elements obtain in the case. shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon. or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment. then the presumption of knowledge as provided in Section 2 of B. As for the second element. . Section 2 of B. Blg. when presented within ninety (90) days from the date of the check. Blg. ordered the bank to stop payment. or if there is no proof as to when such notice was received by the drawer. 22.P. the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act. Hence. The check. For petitioner to be validly convicted of the crime under B. company or entity. In Rico v. Where the check is drawn by a corporation. the following requisites must thus concur: (1) the making.P. for which reason it is dishonored by thedrawee bank. 22 cannot arise. without any valid cause. drawer. People of the Philippines. since there would simply be no way of reckoning the crucial five-day period.maintain a credit to cover the full amount of the check if presented within a period of ninety (90) days from the date appearing thereon.[11] Petitioner admits having issued the postdated check to Cristina. and (3) the subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer.P.

emphasis and underscoring supplied) The evidence for the prosecution failed to prove the second element. In our view.[16] this Court observed: x x x All that we have on record is an illegible signature on the registry receipt as evidence that someone received the letter. both the spirit and letter of the Bouncing Checks Law require for the act to be punishedthereunder not only that the accused issued a check that is dishonored. While the registry receipt. was presented.P.x x x In recent cases. Thus. and not mere registered receipt and/or return receipt.[13] (Italics in the original. x x x In fine..[14] which is said to cover the letter-notice of dishonor and of demand sent to petitioner. 22 indeed does not state that the notice of dishonor be in writing. Court of Appeals. there is no proof that he or a duly authorized agent received the same. the failure of the prosecution to prove the existence and receipt by petitioner of the requisite written notice of dishonor and that he was given at least five banking days within which to settle his account constitutes sufficient ground for his acquittal. it is possible that petitioners or their authorized agent did receive the demand . as held in Domagsang vs. i. This is consistent with the rule that penal statues must be construed strictly against the state and liberally in favor of the accused. As to whether this signature is that of one of the petitioners or of their authorized agent remains a mystery. but there must also be proof of receipt thereof that is properly authenticated. A mere oral notice or demand to pay would appear to be insufficient for conviction under the law. this must be taken in conjunction with Section 3 of the law. From the registry receipt alone. such fact shall always be explicitly stated in the notice of dishonor or refusal. Receipts for registered letters including return receipts do not themselves prove receipt. they must be properly authenticated to serve as proof of receipt of the letters. that where there are no sufficient funds in or credit with such drawee bank. we had the occasion to emphasize that not only must there be a written notice of dishonor or demand letters actually received by the drawer of a dishonored check. while Section 2 of B. but also that the accused has actually been notified in writing of the fact of dishonor. Court of Appeals.[15] Thus in Ting v.e.

inexistent and void from the beginning. ordering petitioner to pay private complainant Cristina C. the Court equitably reduced them. however.letter.[19] While the Usury Law ceiling on interest rates was lifted by Central Bank Circular No. the social injury is sought to be repaired through the imposition of the corresponding penalty. Petitioner is civilly liable.000 check petitioner issued to Cristina admittedly represented unpaid interest.[20] Stipulations authorizing such interest are contra bonos mores. which was affirmed on appeal by the RTC and the appellate court. however. By Cristinas information. And in other cases[26] where the interest rates stipulated were even less than that involved herein. reduced it to 12% per annum.[24] and in Cuaton v. however. . nothing therein grants lenders carte blanche to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. Jardines.[18] The decision of the MeTC.P. Reyes civil indemnity in the total amount of ONE HUNDRED SIXTY THOUSAND PESOS (P160.[22] The interest rate of 10% per month agreed upon by the parties in this case being clearly excessive.[25] this Court. it is sought to be compensated through indemnity. They are. Salud. cannot replace proof beyond reasonable doubt. whereas with respect to the personal injury of the victim. under Article 1409[21] of the New Civil Code.[23] Dio v. For in a criminal case. petitioners acquittal is in order. which is civil in nature. finding the 10% per month interest rate to be unconscionable. The P160. Blg. given that the obligation of petitioner to pay 10% interest per month on the loan is unconscionable and against public policy. Possibilities. iniquitous and unconscionable cannot thus be sustained.People. if not against the law. 22. 905. In Macalalag v. the interest was computed at a fixed rate of 10% per month. deserves circumspect examination.000) representing his civil obligation covered by subject check.[17] For failure then to prove all the elements of violation of B.

the same fails. plus 12% per annum interest to be computed from April 29. the amount of SIXTEEN THOUSAND PESOS (P16. consistent with existing jurisprudence. the date of the check. 1999. 22 as the purpose for the issuance of such check is irrelevant in the determination of the accuseds criminal liability. his obligation to pay the same must be void. the equivalent of petitioners unpaid interest on the P200. 1999. Reyes. It is for the purpose of determining his civil liability that the document bears significance. the date of judicial demand (date of the filing of the Information) up to the finality of this judgment. however. SO ORDERED.This Court deems it fair and reasonable then.P. In any event. the total amount due shall bear interest at 12% per annum. the Court of Appeals 2006 is REVERSED and SET ASIDE. Cristina admitted such stipulation. Notably. ordered to pay private complainant. the presentation of the promissory note may be dispensed with in a prosecution for violation of B. It was incumbent then on petitioner to prove that the check was not for a valuable consideration. to adjust the civil indemnity to P16. James Svendsen. Section 24 of the Negotiable Instruments Law provides that Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration.000 loan at 12% percent per annum as of February 2. WHEREFORE. plus 12% interest per annum computed from April 29.[27] Respecting petitioners claim that since the promissory note incorporating the stipulated 10% interest per month was not presented. there is no written proof thereof. is acquitted of the crime charged for failure of the prosecution to prove his guilt beyond reasonable doubt. and every person whose signature appears thereon to have become a party thereto for value.000. This he failed to discharge. . however. the total amount due shall earn interest at 12% per annum. After the judgment becomes final and executory until the obligation is satisfied. hence. Decision of November 16. Blg. He is.000) representing civil indemnity. After the judgment becomes final and executory until the obligation is satisfied. Petitioner. Cristina C. As reflected above. 1999 up to the finality of this judgment.