Negotiable Instruments: Finals When the books of account of the Provincial Treasurer were post-audited it has discovered that
f account of the Provincial Treasurer were post-audited it has discovered that the
Defenses:
1. Incapacity: REAL: indorsement/ assignment by corporation/ infant passes property but
corp/ infant no liability
2. Forgery: REAL:
Definition: the counterfeit- making or fraudulent alteration of any writing, and may consist in
the signing of another’s name or alteration of an instrument in the name, amount, description
of the person and the like, with intent thereby to defraud.
Bad forgery: forgery which is apparent or naked to the eye
Good Forgey: requires examination of signature if it was forged
Effect when Signature is forged or made without authority of person whose signature it purports to be
GR:
a. Wholly inoperative
b. No right to retain instrument, or give discharge, or enforce payment vs any party, can be
acquired through or under such signature (unless forged signature unnecessary to holder’s
title)
XPN:
Unless the party against whom it is sought to enforce such right is precluded from setting up
forgery/ want of authority
PRECLUDED:
a. Parties who make certain warranties, like a general indorser or acceptor
b. Estopped/ negligent parties
CASES:
Associated Bank vs. Hon. Court of Appeals, Province of Tarlac and Philippine National Bank
G.R. No: 107382/G.R. No. 107612
January 31, 1996
Facts:
The Province of Tarlac maintains a current account with the Philippine National Bank (PNB) Tarlac
Branch where the provincial funds are deposited. A portion of the funds of the province is allocated to
the Concepcion Emergency Hospital. The allotment checks for said government hospital are drawn to
the order of "Concepcion Emergency Hospital, Concepcion, Tarlac" or "The Chief, Concepcion
Emergency Hospital, Concepcion, Tarlac." The checks are released by the Office of the Provincial
Treasurer and received for the hospital by its administrative officer and cashier.
Page 1 of 24
hospital did not receive several allotment checks drawn by the Province. The Provincial Treasurer
requested the manager of the PNB to return all of its cleared checks in order to verify the regularity of
their encashment and after the checks were examined, it was found out that 30 checks amounting to
Php. 203,300 were encashed by one Fausto Pangilinan (administrative officer and cashier of payee
hospital until he retired), with Associated Bank acting as collecting bank. All the checks bore the
stamp of Associated Bank which reads “All prior endorsements guaranteed ASSOCIATED BANK.”
The manager of Associated Bank testified that Pangilinan made it appear that the checks were paid to
him for certain projects with the hospital and that he did not find as irregular the fact that the checks
were not payable to Pangilinan but to the Concepcion Emergency Hospital.
The Provincial Treasurer wrote the manager of the PNB seeking the restoration of the various
amounts debited from the current account of the Province. In turn, the PNB manager demanded
reimbursement from the Associated Bank. As both banks resisted payment, the Province of Tarlac
brought suit against PNB which impleaded Associated Bank as third-party defendant and in turn
Associated Bank filed a fourth-party complaint against Canlas and Pangilinan.
The lower court ordered Associated Bank to pay PNB the amount of Php. 203,300 and PNB to the
Province of Tarlac. It dismissed the action against Canlas for lack of cause of action and the action
against Pangilinan for lack of jurisdiction. The CA affirmed the trial court’s decision.
Issue:
Are PNB and Associated Bank liable to pay the Province of Tarlac for the checks encashed?
Ruling:
Yes. The Court finds as reasonable, the proportionate sharing of fifty percent - fifty percent (50%-
50%). Due to the negligence of the Province of Tarlac in releasing the checks to an unauthorized
person (Fausto Pangilinan), in allowing the retired hospital cashier to receive the checks for the payee
hospital for a period close to three years and in not properly ascertaining why the retired hospital
cashier was collecting checks for the payee hospital in addition to the hospital's real cashier,
respondent Province contributed to the loss amounting to P203,300.00 and shall be liable to the PNB
for fifty (50%) percent thereof. In effect, the Province of Tarlac can only recover fifty percent (50%)
of P203,300.00 from PNB.
The collecting bank, Associated Bank, shall be liable to PNB for fifty (50%) percent of P203,300.00.
It is liable on its warranties as indorser of the checks which were deposited by Fausto Pangilinan,
having guaranteed the genuineness of all prior indorsements, including that of the chief of the payee
hospital, Dr. Adena Canlas. Associated Bank was also remiss in its duty to ascertain the genuineness
of the payee's indorsement.
The Court finds the contention of Associated Bank alleging that PNB is estopped from requiring
reimbursement because the latter paid and cleared the checks is unmeritorious. Even if PNB cleared
and paid the checks, it can still recover from Associated Bank. PNB's duty was to verify the
genuineness of the drawer's signature and not the genuineness of payee's indorsement. Associated
Bank, as the collecting bank, is the entity with the duty to verify the genuineness of the payee's
indorsement. The Court also finds that even if PNB did not return the questioned checks to
Associated Bank within twenty-four hours, as mandated by the rule, PNB did not commit negligent
delay. Under the circumstances, PNB gave prompt notice to Associated Bank and the latter bank was
not prejudiced in going after Fausto Pangilinan. The rule mandates that the checks be returned within
twenty-four hours after discovery of the forgery but in no event beyond the period fixed by law for
filing a legal action. The rationale of the rule is to give the collecting bank (which indorsed the check)
adequate opportunity to proceed against the forger. If prompt notice is not given, the collecting bank
may be prejudiced and lose the opportunity to go after its depositor.
Forgery/ Indorsement/ Defenses
Gempesaw vs. CA andd Philippine Bank of Commerce
GR No: 92244
February 9, 1993
Facts:
Petitioner Natividad O. Gempesaw owns and operates four grocery stores. Among these groceries are
D.G. Shopper's Mart and D.G. Whole Sale Mart. To facilitate payment of debts to her suppliers,
petitioner draws checks against her checking account with the respondent bank as drawee. The checks
were prepared and filled up as to all material particulars by her trusted bookkeeper, Alicia Galang, an
employee for more than eight (8) years. After the bookkeeper prepared the checks, the completed
checks were submitted to the petitioner for her signature, together with the corresponding invoice
receipts which indicate the correct obligations due and payable to her suppliers. Petitioner signed each
and every check without bothering to verify the accuracy of the checks against the corresponding
invoices because she reposed full and implicit trust and confidence on her bookkeeper. The issuance
and delivery of the checks to the payees named therein were left to the bookkeeper. Petitioner
admitted that she did not make any verification as to whether or not the checks were delivered to their
respective payees. A total of eighty-two (82) checks in favor of several suppliers were issued by the
bookkeeper. All the checks issued and honored by the respondent drawee bank were crossed checks.
All the eighty-two (82) checks with forged signatures of the payees were brought to Ernest L. Boon,
Chief Accountant of respondent drawee Bank at the Buendia branch, who, without authority therefor,
accepted them all for deposit at the Buendia branch to the credit and/or in the accounts of Alfredo Y.
Romero and Benito Lam.
About thirty (30) of the payees whose names were specifically written on the checks testified that
they did not receive nor even see the subject checks and that the indorsements appearing at the back
of the checks were not theirs.
Issue:
1. Whether or not drawee can assail the defense of forgery.
2. Who bears the loss?
Ruling:
Page 2 of 24
1. No. Section 23 of the NIL states that when a signature is forged or made without the authority of
the person whose signature it purports to be, it is wholly inoperative, and no right to retain the
instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto,
can be acquired through or under such signature, unless the party against whom it is sought to enforce
such right is precluded from setting up the forgery or want of authority.
2. Under the aforecited provision, forgery is a real or absolute defense by the party whose signature is
forged.
Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument
to the payee for the purpose of giving effect thereto. The first delivery of the instrument, complete in
form, to the payee who takes it as a holder, is called issuance of the instrument. Without the initial
delivery of the instrument from the drawer of the check to the payee, there can be no valid and
binding contract and no liability on the instrument.
It is clear that under the NIL, petitioner is precluded from raising the defense of forgery by reason of
her gross negligence.
3. The Philippine Bank of Communications is liable for the loss. There is no question that there is a
contractual relation between petitioner as depositor (obligee) and the respondent drawee bank as the
obligor. In the performance of its obligation, the drawee bank is bound by its internal banking rules
and regulations which form part of any contract it enters into with any of its depositors. When it
violated its internal rules that second endorsements are not to be accepted without the approval of its
branch managers and it did accept the same upon the mere approval of Boon, a chief accountant, it
contravened the tenor of its obligation at the very least, if it were not actually guilty of fraud or
negligence. Furthermore, the fact that the respondent drawee Bank did not discover the irregularity
with respect to the acceptance of checks with second indorsement for deposit even without the
approval of the branch manager despite periodic inspection conducted by a team of auditors from the
main office constitutes negligence on the part of the bank in carrying out its obligations to its
depositors.
As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot
charge the drawer's account for the amount of said check. An exception to this rule is where the
drawer is guilty of such negligence which causes the bank to honor such a check or checks. If a check
is stolen from the payee, it is quite obvious that the drawer cannot possibly discover the forged
indorsement by mere examination of his cancelled check. This accounts for the rule that although a
depositor owes a duty to his drawee bank to examine his cancelled checks for forgery of his own
signature, he has no similar duty as to forged indorsements. A different situation arises where the
indorsement was forged by an employee or agent of the drawer, or done with the active participation
of the latter. Most of the cases involving forgery by an agent or employee deal with the payee's
indorsement. The drawer and the payee often time shave business relations of long standing. The
continued occurrence of business transactions of the same nature provides the opportunity for the
agent/employee to commit the fraud after having developed familiarity with the signatures of the
parties. One thing is clear from the records — that the petitioner failed to examine her records with
reasonable diligence whether before she signed the checks or after receiving her bank statements. Had
the petitioner examined her records more carefully, particularly the invoice receipts, cancelled checks,
check book stubs, and had she compared the sums written as amounts payable in the eighty-two (82)
checks with the pertinent sales invoices, she would have easily discovered that in some checks, the
amounts did not tally with those appearing in the sales invoices. Under Section 23 of the NIL, she is
now precluded from using the forgery to prevent the bank's debiting of her account.
Thus, it is clear that under the NIL, petitioner is precluded from raising the defense of forgery by
reason of her gross negligence. But under Section 196 of the NIL, any case not provided for in the
Act shall be governed by the provisions of existing legislation. Under the laws of quasi-delict, she
cannot point to the negligence of the respondent drawee Bank in the selection and supervision of its
employees as being the cause of the loss because negligence is the proximate cause thereof and under
Article 2179 of the Civil Code, she may not be awarded damages. However, under Article 1170 of the
same Code the respondent drawee Bank may be held liable for damages. Thus, the fact that
petitioner's negligence was found to be the proximate cause of her loss does not preclude her from
recovering damages. The reason why the decision dealt on a discussion on proximate cause is due to
the error pointed out by petitioner as allegedly committed by the respondent court. And in breaches of
contract under Article 1173, due diligence on the part of the defendant is not a defense.
Forgery; Defenses
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM v COURT OF APPEALS
G.R. No. L-62943 July 14, 1986
Facts:
Metropolitan Waterworks and Sewerage System is a government owned and controlled corporation.
The Philippine National Bank, on the other hand, is the depository bank of MWSS and its
predecessor-in-interest NWSA. Among the several accounts of NWSA with PNB is NWSA Account
No. 6. By special arrangement with the PNB, the MWSS used personalized checks in drawing from
this account. During the months of March, April and May 1969, twenty-three checks were prepared,
processed, issued and released by NWSA, all of which were paid and cleared by PNB and debited by
PNB against NWSA Account No. 6. During the same months, twenty-three checks bearing the same
numbers as the aforementioned NWSA checks were likewise paid and cleared by PNB and debited
against NWSA Account No. 6.
The foregoing checks were deposited by the payees Raul Dizon, Arturo Sison and Antonio Mendoza
in their respective current accounts with the Philippine Commercial and Industrial Bank and
Philippine Bank of Commerce in the months of March, April and May 1969. Thru the Central Bank
Clearing, these checks were presented for payment by PBC and PCIB to the defendant PNB, and
paid, also in the months of March, April and May 1969. At the time of their presentation to PNB
these checks bear the standard indorsement which reads 'all prior indorsement and/or lack of
endorsement guaranteed.’ Subsequent investigation was conducted by the NBI which showed that
Raul Dizon, Arturo Sison and Antonio Mendoza were all fictitious persons. Thus, PNB requested the
Page 3 of 24
immediate restoration to its Account No. 6, of the total sum of P3,457,903.00 corresponding to the
total amount of these twenty-three (23) checks claimed by NWSA to be forged and/or spurious
checks.
Issue:
Can MWSS set up the defense of forgery under Section 23 of the Negotiable Instruments Law?
Ruling:
No. The petitioner is barred from setting up the defense of forgery under Section 23 of the Negotiable
Instruments Law because it was guilty of negligence not only before the questioned checks were
negotiated but even after the same had already been negotiated. The records show that at the time the
twenty-three (23) checks were prepared, negotiated, and encashed, the petitioner was using its own
personalized checks, instead of the official PNB Commercial blank checks. In the exercise of this
special privilege, however, the petitioner failed to provide the needed security measures. That there
was gross negligence in the printing of its personalized checks is shown.
Moreover, even if the twenty-three (23) checks in question are considered forgeries, considering the
petitioner's gross negligence; it is barred from setting up the defense of forgery under Section 23 of
the Negotiable Instruments Law.
Signature; Defense
Philippine Commercial International Bank (PCIB) v. CA and Ford Philippines, Inc. and
Citibank, N.A
GR No. 121413
January 29, 2001
Facts:
There are three cases consolidated here: G.R. No. 121413 (PCIB vs CA and Ford and Citibank), G.R.
No. 121479 (Ford vs CA and Citibank and PCIB), and G.R. No. 128604 (Ford vs Citibank and PCIB
and CA).
G.R. No. 121413/G.R. No. 121479
In October 1977, Ford Philippines drew a Citibank check in the amount of P4,746,114.41 in favor of
the Commissioner of the Internal Revenue (CIR). The check represents Ford’s tax payment for the
third quarter of 1977. On the face of the check was written “Payee’s account only” which means that
the check cannot be encashed and can only be deposited with the CIR’s savings account which is with
Metrobank. The said check was however presented to PCIB and PCIB accepted the same. PCIB then
indorsed the check for clearing to Citibank. Citibank cleared the check and paid PCIB P4,746,114.41.
CIR later informed Ford that it never received the tax payment.
An investigation ensued and it was discovered that Ford’s accountant Godofredo Rivera, when the
check was deposited with PCIB, recalled the check since there was allegedly an error in the
computation of the tax to be paid. PCIB, as instructed by Rivera, replaced the check with two of its
manager’s checks.
It was further discovered that Rivera was actually a member of a syndicate and the manager’s checks
were subsequently deposited with the Pacific Banking Corporation by other members of the
syndicate. Thereafter, Rivera and the other members became fugitives of justice.
G.R. No. 128604
In July 1978 and in April 1979, Ford drew two checks in the amounts of P5,851,706.37 and
P6,311,591.73 respectively. Both checks are again for tax payments. Both checks are for “Payee’s
account only” or for the CIR’s bank savings account only with Metrobank. Again, these checks never
reached the CIR.
In an investigation, it was found that these checks were embezzled by the same syndicate to which
Rivera was a member. It was established that an employee of PCIB, also a member of the syndicate,
created a PCIB account under a fictitious name upon which the two checks, through high end
manipulation, were deposited. PCIB unwittingly endorsed the checks to Citibank which the latter
cleared. Upon clearing, the amount was withdrawn from the fictitious account by syndicate members.
It was established that instead of paying the crossed checks, which were written the words payable to
the payees account only to the CIR for the settlement of the appropriate quarterly percentage taxes of
Ford, the checks were diverted and encashed for the eventual distribution among the members of the
syndicate. Citibank Check No. SN-10597 amounted to P5,851,706.37, while Citibank Check No. SN-
16508 amounted to P6,311,591.73.
It was found that the pro-manager of San Andres Branch of PCIBank, Remberto Castro, received
Citibank Check Numbers SN 10597 and 16508. He passed the checks to a co-conspirator, an
Assistant Manager of PCI Banks Meralco Branch, who helped Castro open a Checking account of a
fictitious person named Reynaldo Reyes. Castro deposited a worthless Bank of America Check in
exactly the same amount of Ford checks. The syndicate tampered with the checks and succeeded in
replacing the worthless checks and the eventual encashment of Citibank Check Nos. SN 10597 and
16508. The PCIBank Pro-manager, Castro, and his co-conspirator Assistant Manager apparently
performed their activities using facilities in their official capacity or authority but for their personal
and private gain or benefit.
Issues:
1. Has petitioner Ford the right to recover from the collecting bank, (PCIBank) and the drawee bank
(Citibank) the value of the checks that were forged by an employee of the drawer (Ford) intended as
payment to the Commissioner of Internal Revenue?
2. May PCIBank use the defense that it did not participate in the embezzlement of the subject money?
3. Should Citibank as an acceptor be held liable?
Rulings:
1. Yes. The mere fact that the forgery was committed by a drawer-payor’s confidential employee or
agent, who by virtue of his position had unusual facilities for perpetrating the fraud and imposing the
forged paper upon the bank, does not entitle the bank to shift the loss to the drawer-payor, in the
absence of some circumstance raising estoppel against the drawer. This rule likewise applies to the
Page 4 of 24
checks fraudulently negotiated or diverted by the confidential employees who hold them in their
possession.
In this case, there was no evidence presented confirming the conscious participation of PCIBank in
the embezzlement.
2. No. As a general rule, a banking corporation is liable for the wrongful or tortuous acts and
declarations of its officers or agents within the course and scope of their employment. A bank will be
held liable for the negligence of its officers or agents when acting within the course and scope of their
employment. It may be liable for the tortuous acts of its officers even as regards that species of tort of
which malice is an essential element. In this case, we find a situation where the PCIBank appears also
to be the victim of the scheme hatched by a syndicate in which its own management employees had
participated.
A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by
the frauds these officers or agents were enabled to perpetrate in the apparent course of their
employment; nor will it be permitted to shirk its responsibility for such frauds, even though no benefit
may accrue to the bank therefrom. For the general rule is that a bank is liable for the fraudulent acts or
representations of an officer or agent acting within the course and apparent scope of his employment
or authority. And if an officer or employee of a bank, in his official capacity, receives money to
satisfy an evidence of indebtedness lodged with his bank for collection, the bank is liable for his
misappropriation of such sum.
3. Yes. Citibank must likewise answer for the damages incurred by Ford on Citibank Checks
Numbers SN 10597 and 16508, because of the contractual relationship existing between the two.
Citibank, as the drawee bank breached its contractual obligation with Ford and such degree of
culpability contributed to the damage caused to the latter. Citibank is likewise liable because it was
negligent in the performance of its obligations with respect to its agreement with Ford. The checks
which were drawn against Ford’s account with Citibank clearly states that they are payable to the CIR
only yet Citibank delivered said payments to PCIB. Citibank however argues that the checks were
indorsed by PCIB to Citibank and that the latter has nothing to do but to pay it. The Supreme Court
cited Section 62 of the Negotiable Instruments Law which mandates the Citibank, as an acceptor of
the checks, to engage in paying the checks according to the tenor of the acceptance which is to deliver
the payment to the “payee’s account only”.
But the Supreme Court ruled that in the consolidated cases, that PCIB and Citibank are not the only
negligent parties. Ford is also negligent for failing to examine its passbook in a timely manner which
could have avoided further loss. But this negligence is not the proximate cause of the loss but is
merely contributory. Nevertheless, this mitigates the liability of PCIB and Citibank hence the rate of
interest, with which PCIB and Citibank is to pay Ford, is lowered from 12% to 6% per annum.
Forgery
REPUBLIC BANK v. COURT OF APPEALS and FIRST NATIONAL CITY BANK G.R. No.
42725 April 22, 1991
FACTS:
On January 25, 1966, San Miguel Corporation (SMC) issued a P240.00 check in favor of Roberto
Delgado against SMC’s account with the First National City Bank (FNCB). Delgado fraudulently
changed the amount written on the check to P9, 240.00 and made a check deposit with Republic Bank
(RB). RB accepted the check without ascertaining its genuineness and regularity and thereafter
endorsed it to FNCB by stamping on the back of the check “all prior and/or lack of indorsement
guaranteed“. The check cleared and FNCB paid RB P9, 240.00 believing that the check was genuine.
On April 19, 1966, SMC notified FNCB that the amount in the check involved was forged. FNCB
refunded SMC the amount of the check and later on informed RB about the forgery. By that time,
Delgado already withdrew his account from RB. On August 15, 1966, FNCB demanded RB to refund
the amount of the check but RB refused.
RB’s refusal to pay was based on the premise that there was delay in giving it notice of the alteration;
that it was not guilty of negligence; that it was the drawer’s (SMC’s) fault in drawing the check in
such a way as to permit the insertion of numerals increasing the amount; that FNCB, as drawee, was
absolved of any liability to the drawer (SMC), thus, FNCB had no right of recourse against Republic.
ISSUE:
Is Republic Bank (collecting bank) absolved from refunding FNCB (drawee bank) despite the forged
indorsement?
RULING:
No.
Generally when an indorsement is forged, the collecting bank or last indorser (RB in this case) bears
the loss. But this should be read together with the 24-hr regulation on clearing house operation. Thus,
when the drawee bank fails to return a forged or altered check to the collecting bank within the 24-
hour clearing period, the collecting bank is absolved from liability. Under jurisprudence, once the 24-
hr period is over, the liability on such fraudulent indorsement ceases. The remedy lies not against the
collecting bank but against the party responsible for making alterations or forgery on the check,
otherwise, it bears the loss. It may not charge the amount so paid to the account of the drawer, if the
latter was free from blame, nor recover it from the collecting bank if the latter made payment after
proper clearance from the drawee. As this Court pointed out in Philippine National Bank vs. Quimpo,
et al., 158 SCRA 582, 584:
“There is nothing inequitable in such a rule for if in the regular course of business the check
comes to the drawee bank which, having the opportunity to ascertain its character,
pronounces it to be valid and pays it, it is not only a question of payment under mistake, but
payment in neglect of duty which the commercial law places upon it, and the result of its
negligence must rest upon it.”
Page 5 of 24
The Court of Appeals erred in laying upon Republic, instead of on FNCB the drawee bank, the
burden of loss for the payment of the altered SMC check, the fraudulent character of which FNCB
failed to detect and warn Republic about, within the 24-hour clearing house rule. Hence, Republic
Bank is absolved from liability.
Forgery; Defenses
Republic Bank vs. Mauricia Ebrada
G.R No. L-40796
July 31, 1975
Facts:
Defendant Ebrada encashed a Bank Pay Check dated January 15, 1963 for Php. 1,246.08 at the main
office of the plaintiff Republic Bank.The check was issued by the Bureau of Treasury. Plaintiff Bank
was later advised by the said bureau that the alleged indorsement in the reverse side of the aforesaid
check by the payee “Martin Lorenzo” was a forgery since the latter had allegedly died as of July 14,
1952. Plaintiff bank was then requested by the Bureau of Treasury ti refund the amount of Php.
1,246.08. To recover what it had refunded to the Bureau of Treasury, plaintiff Bank made verbal and
formal demands upon defendant Ebrada.
Defendant Ebrada denied the material allegations of the complaint and asserted that she was a holder
in due course and therefore is entitled to the proceeds thereof. She also alleged that the plaintiff Bank
has no cause of action against her.
Ebrada filed a Third-Party complaint against Adelaida Dominguez who, in turn, filed a Fourth-Party
complaint against Justina Tinio. The trial court rendered a decision ordering Ebrada to pay the
plaintiff.
Issues:
1. Did the lower court err in ordering appellant to pay the appellee the face value of the check after
finding that the drawer issued the subject check to a person already deceased for 11 and a half years?
2. Can Republic Bank recover from Ebrada?
Ruling:
1. No. The signature of the original payee of the check, Martin Lorenzo was a forgery because he was
already dead 7 almost 11 years before the check in question was issued by the Bureau of Treasury.
Under action 23 of the Negotiable Instruments Law (Act 2031):
When a signature is forged or made without the authority of the person whose signature it purports to
be, it is wholly inoperative, and no right to retain the instruments, or to give a discharge thereof
against any party thereto, can be acquired through or under such signature unless the party against
whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.
It is clear from the provision that where the signature on a negotiable instrument if forged, the
negotiation of the check is without force or effect. It can be safely concluded that it is only the
negotiation predicated on the forged indorsement that should be declared inoperative.
This means that the negotiation of the check in question from Martin Lorenzo, the original payee, to
Ramon R. Lorenzo, the second indorser, should be declared of no affect, but the negotiation of the
aforesaid check from Ramon R. Lorenzo to Adelaida Dominguez, the third indorser, and from
Adelaida Dominguez to the defendant-appellant who did not know of the forgery, should be
considered valid and enforceable, barring any claim of forgery.
2. Yes. The drawee of a check can recover from the holder the money paid to him on a forged
instrument. It is not supposed to be its duty to ascertain whether the signatures of the payee or
indorsers are genuine or not. This is because the indorser is supposed to warrant to the drawee that the
signatures of the payee and previous indorsers are genuine, warranty not extending only to holders in
due course.
One who purchases a check or draft is bound to satisfy himself that the paper is genuine and that by
indorsing it or presenting it for payment or putting it into circulation before presentation he impliedly
asserts that he has performed his duty and the drawee who has paid the forged check, without actual
negligence on his part, may recover the money paid from such negligent purchasers. In such cases the
recovery is permitted because although the drawee was in a way negligent in failing to detect the
forgery, yet if the encasher of the check had performed his duty, the forgery would in all probability,
have been detected and the fraud defeated.
The defendant-appellant, upon receiving the check in question from Adelaida Dominguez, was duty-
bound to ascertain whether the check in question was genuine before presenting it to plaintiff Bank
for payment. Her failure to do so makes her liable for the loss and the plaintiff Bank may recover
from her the money she received for the check. As reasoned out above, had she performed the duty of
ascertaining the genuineness of the check, in all probability the forgery would have been detected and
the fraud defeated.
The plaintiff Bank should suffer the loss when it paid the amount of the check in question to
defendant-appellant, but it has the remedy to recover from the latter the amount it paid to her.
Although the defendant-appellant to whom the plaintiff Bank paid the check was not proven to be the
author of the supposed forgery, yet as last indorser of the check, she has warranted that she has good
title to it even if in fact she did not have it because the payee of the check was already dead 11 years
before the check was issued.
Forgery; Liability of Acceptor; Defenses
SAMSUNG CONSTRUCTION COMPANY PHIL. INC., v. FAR EAST BANK AND TRUT
COMPANY AND CA G.R.129015
AUGUST 13, 2004
FACTS:
Samsung maintained a current account with FEBTC. The sole signatory to Samsung was Jong Kyu
Lee (Jong), its project manager while the checks remained in the custody of the company’s
accountant, Kyu Yong Lee (Kyu).
Page 6 of 24
A certain Roberto Gonzaga presented to FEBTC a check allegedly issued by Samsung in the amount
of P999,500.00. Bank Teller Justiani after ascertaining that the account of Samsung has sufficient
amount, checked the genuineness of the signature of Jong appearing on the check by comparing it
with the specimen signature with the check. When he was satisfied, he forwarded the check to the
Senior Asst. Cashier Velez, as it was bank policy that two bank branch officers approve checks
exceeding P100,000.00 for payment or encashment. He too concluded that the check was indeed
signed by Jong. Velez then forwarded the check to Syfu, another bank officer for approval. Syfu then
saw Jose Sempio III( Sempio), the asst. accountant of Samsung. When Syfu showed the check to
Sempio, the latter vouched for the genuineness of Jong’s Signature and said that the check was for the
purchase of equipment for Samsung. Syfu then authorized the banks encashment of the check to
Gonzaga.
The following day, when Kyu examined the balance of the bank account with FEBTC, he discovered
that a sum of P999,500.00 has been encashed with the fact that he never issued such check for Jong’s
signature. He then discovered that the last blank check of the checkbook was missing and he reported
the same with Jong. Jong then reported it immediately with the bank. Jong then discovered that the
check has been encashed and that his signature on the check was forged. He then went to the police
station and filed a case for qualified theft against Sempio.
Samsung sent a letter to FEBTC demanding it to credit to it the amount of P999,500.00, with interest.
Samsung responded that it was still conducting an investigation on the matter. Samsung then filed a
complaint for violation of Section 23 of the Negotiable Instruments Law.
Arguments
a) Petitioner Samsung
It presented NBI document Examiner Roda B. Flores where he testified that based on her
examination, she concluded that Jong’s signature had been forged on the check.
b) Respondent FEBTC
It presented Rosario C. Perez from PNP, a document examiner from PNP Crime Laboratory, and she
testified that her findings showed that Jong’s signature on the check was genuine.
It held that Jong’s signature on the check was forged and accordingly directed the bank to pay or
credit back to Samsung the amount of P999,500.00, with interest.
Court of Appeals
It held that the contradictory findings of the NBI and PNP created doubt as to whether there was
forgery. It reversed the decision of RTC and absolving FEBTC from any liability. It further ruled that
if there was indeed forgery, it was because of the negligence of Samsung and Kyu for lack of care and
prudence in keeping the checks which if observed would have prevented Sempio from gaining access
thereto.
ISSUE:
Did the CA err in concluding that there was no forgery and if there is, it is because of the negligence
of Samsung and Kyu in safekeeping the check?
Is the FEBTC Bank, as an acceptor of the check, liable for encashing a forged check?
Is Samsung Construction precluded from setting up the defense of forgery under Section 23 of the
Negotiable Instruments Law?
RULING:
1. Yes. FEBTC should bear the loss because of its own negligence.
Section 23 of Negotiable Instruments Law states:
When a signature is forged or made without the authority of the person whose signature it purports to
be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or
to enforce payment thereof against any party thereto, can be acquired through or under such
signature, unless the party against whom it is sought to enforce such right is precluded from setting
up the forgery or want of authority.
The general rule is to effect that a forged signature is wholly inoperative, and payment made through
or under such signature is ineffectual or does not discharge the instrument. If payment is made, the
FEBTC cannot charge it to the Samsung’s account. The traditional justification for the result is that
the FEBTC is in a superior position to detect a forgery because he has the Jong’s signature and is
expected to know and compare it. The rule has a healthy cautionary effect on banks by encouraging
care in the comparison of the signatures against those on the signature cards they have on file.
2. Yes. FEBTC Bank is liable as an acceptor of a forged check.
A bank, as an acceptor of checks, is bound to know its depositors signature. The rule is variously
expressed in the many decisions in which the question has been considered. But they all sum up to the
proposition that a bank must know the signatures of those whose general deposits it carries. Under
Section 23 of the Negotiable Instruments Law, forgery is a real or absolute defense by the party
whose signature is forged. On the premise that Jongs signature was indeed forged, FEBTC is liable
for the loss since it authorized the discharge of the forged check. Such liability attaches even if the
bank exerts due diligence and care in preventing such faulty discharge. Forgeries often deceive the
eye of the most cautious experts; and when a bank has been so deceived, it is a harsh rule which
compels it to suffer although no one has suffered by its being deceived. The forgery may be so near
like the genuine as to defy detection by the depositor himself, and yet the bank is liable to the
depositor if it pays the check.
3. No. Samsung is not precluded and it can raise the defense of Forgery.
Under Section 23 of the Negotiable Instruments Law, forgery is a real or absolute defense by the
party whose signature is forged. On the premise that Jong’s signature was indeed forged, FEBTC is
liable for the loss since it authorized the discharge of the forged check. Such liability attaches even if
the bank exerts due diligence and care in preventing such faulty discharge. Forgeries often deceive
the eye of the most cautious experts; and when a bank has been so deceived, it is a harsh rule which
compels it to suffer although no one has suffered by its being deceived.
Section 23 also bars a party from setting up the defense of forgery if it is guilty of negligence. Yet we
are unable to conclude that Samsung Construction was guilty of negligence in this case. It is
Page 7 of 24
incumbent upon FEBTC to prove the negative fact that Samsung was negligent since negligence is
not presumed, and the presumption remains that every person takes ordinary care of his concerns, and
that the ordinary course of business has been followed. However, it was unable to dispute the
presumption of ordinary care exercised by Samsung.
Conclusion
Quite palpably, the general rule remains that the drawee who has paid upon the forged signature bears
the loss. The exception to this rule arises only when negligence can be traced on the part of the
drawer whose signature was forged, and the need arises to weight the comparative negligence
between the drawer and the drawee to determine who should bear the burden of loss. Since the Court
finds no basis that Samsung was indeed negligent in the safekeeping of its checks, the drawee-bank or
the FEBTC should bear the loss.
And lastly, it was negligence on the part of FEBTC when it encashed the check to Robert Gonzaga.
Gonzaga, a stranger to FEBTC, was not even an employee of Samsung. He was not even designated
as the payee of the check and do not carry with him any written proof that he was authorized by
Samsung to encash the check. It was not sufficient for FEBTC to have merely complied with its
internal procedures, but mandatory that all earnest efforts be undertaken to ensure the validity of the
check, and of the authority of Gonzaga to collect payment therefor.
HOLDERS IN DUE COURSE
MARCELO A. MESINA vs. THE HONORABLE INTERMEDIATE APPELLATE COURT,
HON. ARSENIO M. GONONG, in his capacity as Judge of Regional Trial Court — Manila
(Branch VIII), JOSE GO, and ALBERT UY, G.R. No. 70145 November 13, 1986
FACTS:
Respondent Jose Go, after purchasing an Associated Bank Cashier’s check left it on the manager’s
desk when he left. The bank manager, in turn, had respondent Albert Uy safekeep the check, who
then had a visitor. After answering both the call of nature and of someone, he returned in his desk and
found the check missing, together with his visitor. When respondent Go inquired about the check, Uy
told him to rush to the bank and file a “STOP PAYMENT” order, which he did, ans subsequently,
also filed an affidavit of loss. Respondent Uy then went to the police to report the loss. On December
31, 1983, the check resurfaced at Prudential Bank, to which it was twice dishonored. An Atty.
Navarro wrote a demand letter in behalf of his unnamed client to have the cash encashed. The police
sent a letter to Prudential Bank asking for the identity of the person laying claim over the check, but
was turned down by the bank for confidentiality. Thus, Associate Bank filed and interpleader against
the respondent Go, Atty. Navarro, and a John Doe.
It was later found that Albert Uy’s visitor (Alexander Lim) apparently stole the said check and sold it
to petitioner Marcelo Mesina for a “certain transaction.” Thus, Prudential bank then received a
complaint for damages from the petitioner after the latter received summons from the RTC
impleading him in Associate Bank’s suit against the respondents.
ISSUE/S:
CAN THE CASHIER’S CHECK BE COUNTERMANDED EVEN IF IT WAS IN THE
HANDS OF THE PURPORTED HOLDER?
RULING:
YES. Since petitioner refused to divulge the information as to his possession of the cashier’s check
signify that he had notice of defect over the instrument from the start, thus, he is not a HIDC. A
HNDC cannot encash the check against the issuing bank who dishonors it. Since the check was
respondent’s Go’s property, the issuing bank knows that it is not liable to anyone except to Go, thus,
it had the right to dishonor the same in the hands of one who is not respondent Go. Since he owned
the money for which the check is to be drawn, and that he ordered the bank to place “STOP
PAYMENT” over the check, it is respondent Go who is the drawer and drawee at the same time, thus,
he did not indorse it to others at that time it was lost.
Therefore, the check suffers from the infirmity of not having been properly negotiated and for value
by respondent Go who is the real owner of said instrument, and that, petitioner, who is a HNDC,
cannot sue the respondent bank for damages as he was denied and cannot enjoy the fruits from a
stolen check.
Forgery; Defenses
PHILIPPINE NATIONAL BANK vs. Hon Romulo S. Quimpo, Presiding Judge, Court of First
Instance of Rizal, Branch XIV, and Francisco Gozon II
G.R. No. L-53194
March 14, 1988
Facts:
This is a case of a forged signature appearing on a stolen check. The check is owned by private
respondent Gozon wherein the forger and payee is Santos while the drawee bank is herein petitioner
PNB. On July 3, 1973, Francisco S. Gozon II, who was a depositor of the Caloocan City Branch of
the Philippine National Bank, went to the bank in his car accompanied by his friend Ernesto Santos
whom he left in the car while he transacted business in the bank. When Santos saw that Gozon left his
check book he took a check therefrom, filled it up for the amount of P5,000.00, forged the signature
of Gozon, and thereafter he encashed the check in the bank on the same day. The account of Gozon
was debited the said amount. Upon receipt of the statement of account from the bank, Gozon asked
that the said amount of P5,000.00 should be returned to his account as his signature on the check was
forged but the bank refused. Santos admitted such allegation when he was apprehended by police
officers. Hence Gozon filed the complaint for recovery of the amount of P5,000.00, plus interest,
damages, attorney's fees and costs against the bank in the Court of First Instance of Rizal. The CFI
ruled in favor of Gozon. The bank elevated such decision via certiorari.
Issue:
Can Gozon invoke the defense of forgery or want of authority under section 23 of the Negotiable
Instruments Law because the negligence of Gozon in leaving his check book with his friend is the
proximate cause of his loss?
Ruling:
Page 8 of 24
No. The prime duty of a bank is to ascertain the genuineness of the signature of the drawer or the
depositor on the check being encashed. It is expected to use reasonable business prudence in
accepting and cashing a check presented to it.
A bank is bound to know the signatures of its customers; and if it pays a forged check, it must be
considered as making the payment out of its own funds, and cannot ordinarily change the amount so
paid to the account of the depositor whose name was forged' (San Carlos Milling Co. vs. Bank of the
P.I., 59 Phil. 59). This rule is absolutely necessary to the circulation of drafts and checks, and is based
upon the presumed negligence of the drawee in failing to meet its obligation to know the signature of
its correspondent. The bank is bound to ascertain the signature before paying the payee.
PNB, however, interposed the defense that it exercised diligence. It presented evidence that the check
had to pass scrutiny by a signature verifier as well as an officer of the bank. A comparison of the
signature on the forged check with plaintiff’s exemplar signatures found in the PNB Form 35-A
would immediately show the negligence of the employees of the defendant bank. At first sight the
forgery is apparent. Moreover, PNB cannot blame Gozon for leaving his check book in his car with
Santos, Santos being a friend of Gozon, naturally Gozon trusts him.
Forgery; Defenses
RAMON K. ILUSORIO, petitioner, vs. HON. COURT OF APPEALS, and THE MANILA
BANKING CORPORATION, respondents.
G.R. No. 139130
November 27, 2002
Facts:
Petitioner Ilusorio is a prominent businessman who, at the time material to this case, Manager or
President of several corporations. He was a depositor in good standing of respondent bank, the Manila
Banking Corporation. As he was running about 20 corporations and was going out of the country a
number of times, petitioner entrusted to his secretary, Katherine E. Eugenio, his credit cards and his
checkbook with blank checks. It was also Eugenio who verified and reconciled the statements of said
checking account.
Between the dates September 5, 1980 and January 23, 1981, Eugenio was able to encash and deposit
to her personal account about seventeen (17) checks drawn against the account of the petitioner at the
respondent bank, with an aggregate amount of P119,634.34. Petitioner did not bother to check his
statement of account until a business partner apprised him that he saw Eugenio use his credit cards.
Petitioner fired Eugenio immediately, and instituted a criminal action against her for estafa thru
falsification before the Office of the Provincial Fiscal of Rizal.
Petitioner then requested the respondent bank to credit back and restore to its account the value of the
checks which were wrongfully encashed but respondent bank refused. Hence, petitioner filed the
instant case.
Petitioner contends that Manila Bank is liable for damages for its negligence in failing to detect the
discrepant checks. He adds that as a general rule a bank which has obtained possession of a check
upon an unauthorized or forged endorsement of the payees signature and which collects the amount of
the check from the drawee is liable for the proceeds thereof to the payee. Manila Banking Corporation
contends that they are not to be held liable. It is the banks standard operating procedure that whenever
a check is presented for encashment or clearing, the signature on the check is first verified against the
specimen signature cards on file with the bank.
The case was dismissed on the lower court for lack of sufficient basis. The Court of appeals dismissed
the same stating that it was the petitioners negligence which was the proximate cause of the loss.
Issue:
1. Does the petitioner have a cause of action against respondent? (On the concept of forgery)
2. In filing the estafa case, is the respondent barred from raising the defense that the fact of forgery
was not established.
Ruling:
1. No. The court finda that petitioner has no cause of action against Manila Bank. To be entitled to
damages, petitioner has the burden of proving negligence on the part of the bank for failure to detect
the discrepancy in the signatures on the checks. It is incumbent upon petitioner to establish the fact of
forgery, i.e., by submitting his specimen signatures and comparing them with those on the questioned
checks.
The burden to prove forgery was upon the plaintiff, which burden he failed to discharge. Manila Bank
employees exercised due diligence in cashing the checks. The banks employees in the present case
did not have a hint as to Eugenio’s modus operandi because she was a regular customer of the bank,
having been designated by petitioner himself to transact in his behalf. According to the appellate
court, the employees of the bank exercised due diligence in the performance of their duties. The
evidence shows that the verifiers of respondent bank first verified the drawer’s signatures thereon as
against his specimen signature cards, and when in doubt, the verifier went further, such as by
referring to a more experienced verifier for further verification. In some instances the verifier made a
confirmation by calling the depositor by phone. It is only after taking such precautionary measures
that the subject checks were given to the teller for payment.
As borne by the records, it was petitioner, not the bank, who was negligent. It appears that petitioner
accorded his secretary unusual degree of trust and unrestricted access to his credit cards, passbooks,
check books, bank statements, including custody and possession of cancelled checks and
reconciliation of accounts.
The petitioner had introduced his secretary to the bank for purposes of reconciliation of his account.
Thus, the said secretary became a familiar figure in the bank. What is worse, whenever the bank
verifiers call the office of the appellant, it is the same secretary who answers and confirms the checks.
Addition to that is the negligence of the petitioner in not checking his Statement of Accounts in order
to have found out about the loss of money and further prevented it from culminating into a greater
scale.
Page 9 of 24
Petitioner’s failure to examine his bank statements appears as the proximate cause of his own
damage. It is a rule that when a signature is forged or made without the authority of the person whose
signature it purports to be, the check is wholly inoperative. No right to retain the instrument, or to
give a discharge therefor, or to enforce payment thereof against any party, can be acquired through or
under such signature. However, the rule does provide for an exception, namely: unless the party
against whom it is sought to enforce such right is precluded from setting up the forgery or want
of authority. In the instant case, it is the exception that applies. In our view, petitioner is precluded
from setting up the forgery, assuming there is forgery, due to his own negligence in entrusting to his
secretary his credit cards and checkbook including the verification of his statements of account.
2. NO. The fact that Manila Bank had filed a case for estafa against Eugenio would not preclude it
from asserting the fact that forgery has not been clearly established. Petitioner cannot hold private
respondent in estoppel for the latter is not the actual party to the criminal action. In a criminal action,
the State is the plaintiff, for the commission of a felony is an offense against the State.
Further, as petitioner himself stated in his petition, respondent bank filed the estafa case against
Eugenio on the basis of petitioners own affidavit, but without admitting that he had any personal
knowledge of the alleged forgery. It is, therefore, easy to understand that the filing of the estafa case
by respondent bank was a last ditch effort to salvage its ties with the petitioner as a valuable
client, by bolstering the estafa case which he filed against his secretary.
3. Material Alteration
Where NI materially altered w/o assent of all parties liable thereon, avoided, except as
against:
1. Party who has himself made, authorized or assented to alteration
2. And subsequent indorsers
But when an instrument has been materially altered and is in the hands of a HDC not a
party to the alteration, HDC may enforce payment thereof according to original tenor
*material alteration a personal defense when used to deny liability according to original tenor of
instrument, but real defense when relied on to deny liability according to altered terms.
Hongkong & Shanghai Bank vs. People’s Bank and Trust
GR L-28226, 30 September 1970
First Division, Fernando (J)
Facts: The Philippine Long Distance Telephone Company (PLDT) drew a check on the Hongkong &
Shanghai Banking Corporation (HSBC) in the latter’s favor for P14,608.05, and sent it through mail.
The check fell into the hands of Florentino Changco, who was able to erase the name of the payee and
substituted his own, and deposited the altered check in his current account with the People’s Bank and
Trust Co. (PBTC).
The check was cleared by HSBC, and PBTC credited Changco the amount. The alteration was known
when the cancelled check was returned to PLDT. HSBC requested PBTC to refund the amount, but
the latter refused.
Issue: Whether HSBC can claim reimbursement from PBTC.
Held: A person who presents from payment checks guarantees the genuineness of the check, and the
drawee bank need to concern itself with nothing but the genuineness of the signature, and the state of
the account with it of the drawee. If at all, whatever remedy, whatever remedy HSBC has would lie
not against PBTC but as against the party responsible for changing the name of the payee (i.e.
Changco). Its failure to call the attention of PBTC as to such alteration until after the lapse of 27 days
would, in the light of Central Bank Circular 9 (24-hour clearing house rule), negate whatever right it
might have had against PBTC.
Material Alteration; Defenses
Philippine National Bank vs. Court of Appeals
G.R. No. 107508
April 25, 1996
Facts:
A check in the amount of P97,650.00 was issued by the Ministry of Education and Culture payable to
F. Abante Marketing. This check was drawn against Philippine National Bank.
F. Abante Marketing, a client of Capitol City Development Bank, deposited the questioned check in
its savings account with said bank. In turn, Capitol deposited the same in its account with the
Philippine Bank of Communications which, in turn, sent the check to petitioner for clearing.
Petitioner cleared the check as good and, thereafter, PBCom credited Capitol's account for the amount
stated in the check. However, on October 19, 1981, petitioner returned the check to PBCom and
debited PBCom's account for the amount covered by the check, the reason being that there was a
"material alteration" of the check number.
PBCom, as collecting agent of Capitol, then proceeded to debit the latter's account for the same
amount, and subsequently, sent the check back to petitioner. Petitioner, however, returned the check
to PBCom.
On the other hand, Capitol could not, in turn, debit F. Abante Marketing's account since the latter had
already withdrawn the amount of the check. Capitol sought clarification from PBCom and demanded
the re-crediting of the amount. PBCom followed suit by requesting an explanation and re-crediting
from petitioner.
Since the demands of Capitol were not heeded, it filed a civil suit with the Regional Trial Court of
Manila against PBCom which, in turn, filed a third-party complaint against petitioner for
reimbursement/indemnity with respect to the claims of Capitol. Petitioner, on its part, filed a fourth-
party complaint against F. Abante Marketing.
Page 10 of 24
Issues:
Is alteration of the serial number of a check a material alteration under the Negotiable Instruments
Law?
Can petitioner raise any defense for refusal to accept the check?
Ruling:
No. An alteration is said to be material if it alters the effect of the instrument. It means an
unauthorized change in an instrument that purports to modify in any respect the obligation of a party
or an unauthorized addition of words or numbers or other change to an incomplete instrument relating
to the obligation of a party. In other words, a material alteration is one which changes the items which
are required to be stated under Section 1 of the Negotiable Instruments Law.
What is altered in this case is the serial number of the check in question, an item which, it can readily
be observed, is not an essential requisite for negotiability under Section 1 of the Negotiable
Instruments Law. The aforementioned alteration did not change the relations between the parties. The
name of the drawer and the drawee were not altered. The intended payee was the same. The sum of
money due to the payee remained the same.
No. There being no material alteration, petitioner may not raise any valid defense for refusal to accept
the check in question.
4. FRAUD
a. fraud in execution: real defense (didn’t know it was Negotiable Instrument)
b. fraud in inducement: personal defense (knows its negotiable instrument but deceived as to value/
terms)
5. Complete, Undelivered Instrument
Personal defense (sec. 15)
If instrument not in possession of party who signed, delivery prima facie presumed
If holder is HDC, delivery conclusively presumed
6. Incomplete, Undelivered Instrument
Real defense (sec. 15)
Instrument will not, if completed and negotiated without authority, be a valid contract in the hands of
any holder, as against any person whose signature was placed thereon before delivery
SAMSON CHING vs. CLARITA NICDAO and HON. COURT OF APPEALS
[G.R. No. 141181, 27 April 2007]
Facts: Nicdao was charged eleven (11) counts of violation of Batas Pambansa Bilang
(BP) 22.
MTC found her of guilty of said offenses. RTC affirmed.
Nicdao filed an appeal to the Court of Appeals. CA reversed the decision and acquitted
accused.
Ching is now appealing the civil aspect of the case to the Supreme Court.
Ching vigorously argues that notwithstanding respondent Nicdao’s acquittal by the CA,
the Supreme Court has the jurisdiction and authority to resolve and rule on her civil
liability. He anchors his contention on Rule 111, Sec 1B: The criminal action for violation
of Batas Pambansa Blg. 22 shall be deemed to necessarily include the corresponding civil
action, and no reservation to file such civil action separately shall be allowed or
recognized. Moreover, under the above-quoted provision, the criminal action for
violation of BP 22 necessarily includes the corresponding civil action, which is the
recovery of the amount of the dishonored check representing the civil obligation of the
drawer to the payee.
Nicdao’s defense: Sec 2 of Rule 111 — Except in the cases provided for in Section 3
hereof, after the criminal action has been commenced, the civil action which has been
reserved cannot be instituted until final judgment in the criminal action. Accdg to her,
CA’s decision is equivalent to a finding that the facts upon which her civil liability may
arise do not exist. The instant petition, which seeks to enforce her civil liability based on
the eleven (11) checks, is thus allegedly already barred by the final and executory
decision acquitting her.
Issue:
1. WON Ching may appeal the civil aspect of the case within the reglementary
period? YES
2. WON Nicdao civilly liable? NO.
Held:
1. Ching is entitled to appeal the civil aspect of the case within the reglementary
period.
“Every person criminally liable for a felony is also civilly liable. Extinction of the penal
action does not carry with it extinction of the civil, unless the extinction proceeds from a
declaration in a final judgment that the fact from which the civil might arise did not exist.
Petitioner Ching correctly argued that he, as the offended party, may appeal the civil
aspect of the case notwithstanding respondent Nicdao’s acquittal by the CA. The civil
action was impliedly instituted with the criminal action since he did not reserve his right
to institute it separately nor did he institute the civil action prior to the criminal action.
If the accused is acquitted on reasonable doubt but the court renders judgment on the civil
aspect of the criminal case, the prosecution cannot appeal from the judgment of acquittal
as it would place the accused in double jeopardy. However, the aggrieved party, the
offended party or the accused or both may appeal from the judgment on the civil aspect
of the case within the period therefor.
GENERAL RULE:
Page 11 of 24
Civil liability is not extinguished by acquittal:
1. where the acquittal is based on reasonable doubt;
2. where the court expressly declares that the liability of the accused is not criminal
but only civil in nature; and
3. where the civil liability is not derived from or based on the criminal act of which
the accused is acquitted.
2. A painstaking review of the case leads to the conclusion that respondent Nicdao’s
acquittal likewise carried with it the extinction of the action to enforce her civil liability.
There is simply no basis to hold respondent Nicdao civilly liable to petitioner Ching.
CA’s acquittal of respondent Nicdao is not merely based on reasonable doubt. Rather, it
is based on the finding that she did not commit the act penalized under BP 22. In
particular, the CA found that the P20,000,000.00 check was a stolen check which was
never issued nor delivered by respondent Nicdao to petitioner Ching.
CA did not adjudge her to be civilly liable to petitioner Ching. In fact, the CA explicitly
stated that she had already fully paid her obligations. The finding relative to the
P20,000,000.00 check that it was a stolen check necessarily absolved respondent Nicdao
of any civil liability thereon as well.
7. Incomplete, Delivered
Personal defense (sec. 14)
2 kinds of writings:
1. Where instrument is wanting in any material particular: person in possession has prima facie
authority to complete it by filing up blanks therein
2. Signature on blank paper delivered by person making the signature in order that the paper
may be converted into a NI: prima facie authority to fill up as such for any amount
In order that any such instrument, when completed, may be enforced against any person who
became party thereto prior to its completion:
1. Must be filled up strictly in accordance with authority given
2. Within a reasonable time
But if any such instrument after completion is negotiated to HDC, it’s valid for all
purposes in his hands, he may enforce it as if it had been filled up properly
Real Defenses Personal Defenses
1. Material alteration 1. Absence or failure of consideration
2. Want of delivery of incomplete whether partial or total
instrument 2. Want of delivery of complete instrument
 3. Duress amounting to forgery
4. Fraud in factum or Fraud in esse
contractus
5. Minority (available to the minor only)
6. Marriage in the case of a wife
7. Insanity where the insane person has a
guardian appointed by the court
8. Ultra Vires acts of a corporation
9. Want of authority of agent
10. Execution of instrument between public
enemies
11. Illegality of declared void for any
purpose
12. Forgery
PRESENTMENT
REQUISITES OF ACTUAL ACCEPTANCE:
EFFECT OF ACCEPTANCE:
PRESENTMENT FOR ACCEPTANCE: definition: it is the production or exhibition of a bill of
exchange to the drawee for his acceptance.
GR: presentment for acceptance is NOT NECESSARY to render any party to the bill liable
PRESENTMANT FOR PAYMENT OF ACCEPTED BILL
Purpose: to collect from the acceptor; and if refused, to collect from the secondary parties.
Effect of Failure to Give Notice of Dishonor
FAR EAST REALTY INVESTMENT INC. vs. THE HONORABLE COURT OF APPEALS,
DY HIAN TAT, SIY CHEE and GAW SUY AN,
G.R. No. L-36549
October 5, 1988
3. Insertion of wrong date in an instrument
4. Filling up of blank contrary to authority
given or not within reasonable time
5. Fraud in inducement
6. Acquisition of instrument by force,
duress or fear
7. Acquisition of instrument by unlawful
means
8. Acquisition of the instrument for an
illegal consideration
9. Negotiation in breach of faith
10. Negotiation under circumstances that
amount to fraud
11. Mistake
12. Intoxication
13. Ultra Vires Acts of corporations where
the corporation has the power to issue
negotiable paper but the issuance was
not authorized for the particular purpose
for which it was issued.
Page 12 of 24
FACTS:
Petitioner Far East Realty Investment, Inc. alleged that private respondents Tat, Chee, and Suy an
asked petitioner to extend to them an accommodation loan in the sum of P4,500.00, which they
needed in their business, and which they promised to pay, jointly and severally, in one month time.
They proposed to pay the petitioner interest thereon at the rate of 14% per annum, as in fact they
delivered to the petitioner the China Banking Corporation Check No. VN-915564, dated September
13, 1960, for P4, 500.00, drawn by Dy Hian Tat, and signed by them at the back of said check, with
the assurance that after one month from September 13, 1960, the said check would be redeemed by
them by paying cash in the sum of P4, 500.00, or the said check can be presented for payment on or
immediately after one month and said bank would honor the same. The petitioner agreed and
extended to the private respondents an accommodation loan in the sum of P4, 500.00. The aforesaid
check was presented for payment to the China Banking Corporation, but said check bounced and was
not cashed by said bank, for the reason that the current account of the drawer thereof had already been
closed. The petitioner demanded from the private respondents the payment of their aforesaid loan
obligation, but the latter failed and refused to pay notwithstanding repeated demands.
Private respondent respondents filed their answer stating that the check in question was dated
September 13, 1960 and deposited only for payment on March 5, 1964 in which the unreasonable
delay in presentment wholly discharged not only the endorser but also the drawer.
ISSUE:
Is the presentment for payment and notice of dishonor of the questioned check made within
reasonable time?
HELD:
No. Presentment and notice of dishonor were not made within a reasonable time. Section 71 of the
Negotiable Instruments Law states that, where the instrument is not payable on demand, presentment
must be made on the day it is due. Where it is payable on demand, presentment must be made within
a reasonable time after issue, except that in the case of a bill of exchange, presentment for payment
will be sufficient if made within a reasonable time after the last negotiation thereof.
Section 102 of the same law also states that, notice may be given as soon as the instrument is
dishonored; and unless delay is excused must be given within the time fixed by the law.
No hard and fast demarcation line can be drawn between what may be considered as a reasonable or
an unreasonable time, because "reasonable time" depends upon the peculiar facts and circumstances
in each case (Tolentino, Commentaries and Jurisprudence on Commercial Laws of the Philippines,
Vol. I, Eighth Edition, p. 327). "Reasonable time" has been defined as so much time as is necessary
under the circumstances for a reasonable prudent and diligent man to do, conveniently, what the
contract or duty requires should be done, having a regard for the rights, and possibility of loss, if any,
to the other party (Citizens' Bank Bldg. v. L & E. Wertheirmer 189 S.W. 361, 362, 126 Ark, 38, Ann.
Cas. 1917 E, 520).
In the instant case, the check in question was issued on September 13, 1960, but was presented to the
drawee bank only on March 5, 1964, and dishonored on the same date. After dishonor by the drawee
bank, a formal notice of dishonor was made by the petitioner through a letter dated April 27, 1968.
Under these circumstances, the petitioner undoubtedly failed to exercise prudence and diligence on
what he ought to do as required by law. The petitioner likewise failed to show any justification for the
unreasonable delay.
Dishonor by Non-Payment; Effect of Failure to give notice of Dishonor
LUIS S. WONG, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES,
G.R. No. 117857. February 2, 2001
Facts:
Petitioner Wong was an agent of Limtong Press Inc. (LPI), a manufacturer of calendars. LPI would
print sample calendars, and then give them to agents to present to customers. The agents would get
the purchase orders of customers and forward them to LPI. After printing the calendars, LPI would
ship the calendars directly to the customers. Thereafter, the agents would come around to collect the
payments. Petitioner, however, had a history of unremitted collections, which he duly acknowledged
in a confirmation receipt he co-signed with his wife. Hence, petitioner’s customers were required to
issue postdated checks before LPI would accept their purchase orders.
In early December 1985, Wong issued six (6) postdated checks totaling P18,025.00, all dated
December 30, 1985 and drawn payable to the order of LPI. LPI refused to accept the checks as
guarantees. Instead, the parties agreed to apply the checks to the payment of petitioners unremitted
collections for 1984 amounting to P18,077.07. LPI waived the P52.07 difference. On June 5, 1986,
LPI deposited the checks with Rizal Commercial Banking Corporation (RCBC). The checks were
returned for the reason account closed. The dishonor of the checks was evidenced by the RCBC
return slip.
On June 20, 1986, complainant through counsel notified the petitioner of the dishonor. Petitioner
failed to make arrangements for payment within five (5) banking days. On November 6, 1987,
petitioner was charged with three (3) counts of violation of B.P. Blg.
ISSUE:
Does the law require a maker to maintain funds in his bank account for only 90 days?
RULING:
Petitioner avers that since the complainant deposited the checks on June 5, 1986, or 157 days after the
December 30, 1985 maturity date, the presumption of knowledge of lack of funds under Section 2 of
B.P. Blg. 22 should not apply to him. He further claims that he should not be expected to keep his
bank account active and funded beyond the ninety-day period.
Section 2 of B.P. Blg. 22 provides:
Evidence of knowledge of insufficient funds. -- The making, drawing and issuance of a check
payment of which is refused by the drawee because of insufficient funds in or credit with such bank,
when presented within ninety (90) days from the date of the check, 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 makes arrangements for payment in full by the drawee of such
Page 13 of 24
check within five (5) banking days after receiving notice that such check has not been paid by the
drawee.
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 in or credit with the bank to cover the check upon its presentment. Since
this involves a state of mind difficult to establish, the statute itself creates a prima facie presumption
of such knowledge where payment of the check is refused by the drawee because of insufficient funds
in or credit with such bank when presented within ninety (90) days from the date of the check. To
mitigate the harshness of the law in its application, the statute provides that such presumption shall
not arise if within five (5) banking days from receipt of the notice of dishonor, the maker or drawer
makes arrangements for payment of the check by the bank or pays the holder the amount of the check.
Contrary to petitioner’s assertions, nowhere in said provision does the law require a maker to
maintain funds in his bank account for only 90 days. Rather, the clear import of the law is to establish
a prima facie presumption of knowledge of such insufficiency of funds under the following
conditions (1) presentment within 90 days from date of the check, and (2) the dishonor of the check
and failure of the maker to make arrangements for payment in full within 5 banking days after notice
thereof.
That the check must be deposited within ninety (90) days is simply one of the conditions for the
prima facie presumption of knowledge of lack of funds to arise. It is not an element of the offense.
Neither does it discharge petitioner from his duty to maintain sufficient funds in the account within a
reasonable time thereof.
Under Section 186 of the Negotiable Instruments Law, a check must be presented for payment within
a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of
the loss caused by the delay. By current banking practice, a check becomes stale after more than six
(6) months or 180 days. Private respondent herein deposited the checks 157 days after the date of the
check. Hence said checks cannot be considered stale. Only the presumption of knowledge of
insufficiency of funds was lost, but such knowledge could still be proven by direct or circumstantial
evidence.
As found by the trial court, private respondent did not deposit the checks because of the reassurance
of petitioner that he would issue new checks. Upon his failure to do so, LPI was constrained to
deposit the said checks. After the checks were dishonored, petitioner was duly notified of such fact
but failed to make arrangements for full payment within five (5) banking days thereof. There is, on
record, sufficient evidence that petitioner had knowledge of the insufficiency of his funds in or credit
with the drawee bank at the time of issuance of the checks. And despite petitioner’s insistent plea of
innocence, we find no error in the respondent courts affirmance of his conviction by the trial court for
violations of the Bouncing Checks Law.
However, pursuant to the policy guidelines in Administrative Circular No. 12-2000, which took effect
on November 21, 2000, the penalty imposed on petitioner should now be modified to a fine of not
less than but not more than double the amount of the checks that were dishonored.
Give Notice of Dishonor; Checks: Presentment for Payment: Time/Effect of Delay
The International Corporate Bank V. Sps. Gueco
G.R. No. 141968
February 12, 2001
FACTS:
The respondent spouses obtained a loan from petitioner to purchase a car. In lieu thereof, the Spouses
Gueco executed promissory notes which were payable in monthly installments and chattel mortgage
over the car to serve as security for the notes. Unfortunately, the Guecos defaulted in payments
despite the fact that after due negotiations, the obligation was lowered, this caused now the car be
detained inside the bank's compound.
Subsequently, Dr.Gueco delivered a manager's check in amount of P150, 000.00. The checks were
not immediately encashed. Also the car was still not released because of Gueco’s refusal to sign the
Joint Motion to Dismiss. The Guecos contended that they need not sign the motion for joint dismissal
of a prior collection suit instituted by the bank considering that they had not yet filed their Answer.
International Corp Bank, however, insisted that the joint motion to dismiss is standard operating
procedure (SOP) in their bank to effect a compromise and to preclude future filing of claims,
counterclaims or suits for damages. After several demand letters and meetings with bank
representatives, the respondents Gueco spouses initiated a civil action for damages.
ISSUE:
1. Was the liability of respondent fulfilled by mere delivery of the manager’s check which has
become stale?
RULING:
No. An instrument not payable on demand must be presented for payment on the day it falls due.
When the instrument is payable on demand, presentment must be made within a reasonable time after
its issue. A stale check is one which has not been presented for payment within a reasonable time
after its issue. It is valueless and, therefore, should not be paid.
Under the negotiable instruments law, an instrument not payable on demand must be presented for
payment on the day it falls due. When the instrument is payable on demand, presentment must be
made within a reasonable time after its issue. In the case of a bill of exchange, presentment is
sufficient if made within a reasonable time after the last negotiation thereof. A check must be
presented for payment within a reasonable time after its issue, and in determining what is a reasonable
time, regard is to be had to the nature of the instrument, the usage of trade or business with respect to
such instruments, and the facts of the particular case.
A manager's check is one drawn by the bank's manager upon the bank itself. In effect, it is a bill of
exchange drawn by the cashier of a bank upon the bank itself, and accepted in advance by the act of
its issuance. It is really the bank's own check and may be treated as a promissory note with the bank
as a maker. The check becomes the primary obligation of the bank which issues it and constitutes its
written promise to pay upon demand. The mere issuance of it is considered an acceptance thereof. If
Page 14 of 24
treated as promissory note, 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.
Even assuming that presentment is needed, 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. Failure to
present on time, thus, does not totally wipe out all liability. In fact, the legal situation amounts to an
acknowledgment of liability in the sum stated in the check.
In this case, the Gueco spouses have not alleged, much less shown that they or the bank which issued
the manager's check has suffered damage or loss caused by the delay or non-presentment. Definitely,
the original obligation to pay certainly has not been erased. If the check had become stale, it becomes
imperative that the circumstances that caused its non-presentment be determined. In this case, 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 but there was no bad faith or
negligence in this position taken by the Bank hence, the liability of Sps. Geuco is still subsisting as
the checks were not considered stale.
DISHONOR
1. In PROMISSORY NOTE:
In a promissory note, dishonor by non – payment takes place when it is duly presented for
payment and payment refused or cannot be obtained; or if presentment is excused, the
instrument is overdue and unpaid.
EFFECT: There is an immediate right of recourse by the holder against person secondarily
liable, which requires notice of dishonor[SEC.84]
2. In BILLS OF EXCHANGE
In bills of exchange, where the bill is presented for acceptance and is returned dishonored, or
within twenty-four hours from presentment, is not returned accepted or unaccepted, or when
presentment for acceptance is excused and the bill is not accepted there is a dishonor by non –
acceptance.
There is a dishonor by non-payment if the bill, after it has been accepted is not paid when
presented for payment, or presentment of being excused, is not paid on the date of maturity.
Effect of Dishonor by Non– acceptance; An immediate right of recourse against the drawer
and indorsers accrues to the holder and NO PRESENTMENT for payment is necessary.
[Sec.151]
NOTICE OF DISHINOR
bringing either verbally or by writing , to the knowledge of the drawer or indorser of an
instrument , the fact that a specified negotiable instrument, upon proper proceedings taken, has not
been accepted or has not been paid and that the party notified is excepted to pay it.
REQUISITES:
ELVIRA YU OH, - versus – COURT OF APPEALS and PEOPLE OF THE PHILIPPINES
G.R. No. 125297, June 6, 2003, SECOND DIVISION, AUSTRIA-MARTINEZ, J.
It is necessary that a “notice of dishonor” be received by the issuer and the prosecution has the
burden of proving the fact of service. It thus stated in section 2 of BP 22. It is essential for the drawer
to be notified of the dishonor of her checks so she could make arrangements for its payment within
the period prescribed by law (5 days).
FACTS: Petitioner purchased pieces of jewelry from Solid Gold International Traders, Inc. Due to
her failure to pay the purchase price, the company filed civil cases against her for specific
performance before the RTC of Pasig. On September 17, 1990, petitioner and Solid Gold through it
general manager, Joaquin Novales III entered into a compromise agreement to settle said civil cases.
It was approved by the trial court provided that petitioner shall issue a total of ninety-nine post-dated
checks in the amount of PHP 50,000.00 each, dated every 15th and 30th of the month starting
October 1, 1990 and the balance of over PHP 1million to be paid in lump sum on November 16, 1994
(the due date of the 99th post dated check). Petitioner then issued ten checks at Php 50,000.00 each
for a total of Php 500,000.00 drawn against her account at the Equitable Banking Corporation (EBC).
Novales then deposited each of the ten checks on their respective due dates to the company bank
account. However, said checks were dishonored by the EBC for the reason “Account Closed”.
Dishonor slips were issued for each check that was returned to Novales. On October 5, 1992, Novales
filed 10 separate informations before the RTC of Quezon City charging the petitioner with violation
of Batas Pambansa Blg. 22. Upon arraignment, petitioner pleaded not guilty. Nonetheless, RTC
convicted her of ten counts of violation of BP 22. CA affirmed the decision.
ISSUES: Whether or not “notice of dishonor” is indispensable in this case.
RULING: Yes. It is necessary that a “notice of dishonor” be received by the issuer and the
prosecution has the burden of proving the fact of service. It thus stated in section 2 of BP 22. It is
essential for the drawer to be notified of the dishonor of her checks so she could make arrangements
for its payment within the period prescribed by law (5 days). Hence, SC reversed the decision of the
CA and acquits the petioner.
Notice of Dishonor: Parties to be notified
Page 15 of 24
Lina Lao v Court of Appeals
GR. No. 119178
June 20, 1997
Facts:
Petitioner Lao was a junior officer of Premiere Investment Binondo Branch. As such, she was
authorized to draw and sign checks for and in behalf of the corporation. She met Father Pejilo, the
provincial treasurer of Divine Word, who was also authorized to invest donations received by them.
Father Pejilo invested a total of P514,484.04 with premiere. Father Pejilio was also issued checks in
payment of interest.
When Father Pejilio presented the checks for encashment, the same was dishonored due to
Insufficiency of funds. The Father immediately made demands of payment and was referred to the
Cubao Branch. Father Pajilo made several demands but to no avail. Thereafter, complainant filed a
complaint for violation of BP 22.
Issue:
Is the notice of dishonor due to insufficiency of funds to the corporation constitute a valid notice to
the employee who have signed and drawn the checks
Ruling:
No. According to the Supreme Court, knowledge of insufficiency of funds in the drawee bank for the
payment of check is an essential element for violation of BP 22. In this case, the fact that petitioner
was the one who drew the checks do not automatically mean that she is guilty of violation of BP 22.
After a review on the case, the court finds petitioner Lao did not have actual knowledge of the
insufficiency of funds in the corporate accounts at the time she signed the checks. The scope of the
duties of the petitioner did not include the funding of the corporate checks; her duties were limited to
marketing. There was also absent of notice by the drawee bank to the petitioner. The said notice was
only sent to the main office, thus it did not reach the Binondo Branch where the petitioner was
assigned.
Campos vs pp; sept 17, 2014 FULL CASE
G.R. No. 187401               September 17, 2014
MA. ROSARIO P. CAMPOS, Petitioner, 
vs.
PEOPLE OF THE PHILIPPINES and FIRST WOMEN'S CREDIT CORPORATION, Respondents.
RESOLUTION
REYES, J.:
This resolves the petition for review on certiorari filed by petitioner Ma. Rosario P. Campos
(Campos) to assail the Decision1 dated July 21, 2008 and Resolution2 dated February 16, 2009 of the
Court of Appeals (CA) in CA-G.R. CR No. 31468, which affirmed the conviction of Campos for
fourteen (14) counts of violation of Batas Pambansa Bilang 22 (B.P. 22), otherwise known as The
Bouncing Checks Law.
On March 17, 1995, Campos obtained a loan, payable on installments, from respondent First ₱46,666.62 representing the total value of the checks, plus legal interest from date of default until full
Women's Credit Corporation (FWCC) in the amount of ₱50,000.00. She issued several postdated payment.
checks in favor of FWCC to cover the agreed installment payments. 3 Fourteen of these checks drawn With costs.
against her Current Account No. 6005-05449-92 withBPI Family Bank-Head Office, however, were SO ORDERED.6
dishonored when presented for payment, particularly: Feeling aggrieved, Campos appealed to the Regional Trial Court (RTC). On July 30, 2007, the RTC
Check No. Date Amount of Pasay City, Branch108 rendered its decision upholding Campos’ conviction. A motion for
reconsideration filed by Campos was denied for lack of merit. 7
138609 August 15, 1995 ₱3,333.33 Unyielding, Campos appealed the RTC decision to the CA, which rendered on July 21, 2008 its
decision8 affirming the ruling of the RTC. Campos moved to reconsider, but her motion was denied
138610 August 30, 1995 ₱3,333.33
via a Resolution9 dated February 16, 2009. Hence,this petition for review on certiorari which cites the
138611 September 15, 1995 ₱3,333.33 following issues:
1. WHETHER OR NOT A DEMAND LETTER THAT WAS SENT THROUGH REGISTERED
138612 September 30, 1995 ₱3,333.33 MAILIS SUFFICIENT TO SATISFY THE REQUIREMENTS OF [B.P. 22] AS TO KNOWLEDGE
138613 October 15, 1995 ₱3,333.33 OF THE FACT OF THE DISHONOR OF THE SUBJECT CHECKS.
2. WHETHER OR NOT [CAMPOS’] WANT OF INFORMATION OF THE FACT OF THE
138614 October 30, 1995 ₱3,333.33 CHECKS’ DISHONOR AND HER SUBSEQUENT ARRANGEMENTS FOR THEIR PAYMENT
[ARE] TANTAMOUNT TO GOOD FAITH SO AS TO PERSUADE THIS HONORABLE
138615 November15, 1995 ₱3,333.33
SUPREME COURT TO EXERCISE ITS EQUITY POWERS AND TO LEND SUCCOR TO
138616 November30, 1995 ₱3,333.33 [CAMPOS’] CASE.10
Campos argues that the crime’s element requiring her knowledge at the time of the check’s issuance
138617 December15, 1995 ₱3,333.33 that she did not have sufficient funds with the drawee bank for the payment of the check in full upon
138618 December31, 1995 ₱3,333.33 presentment was not established by the prosecution. She denies having received a notice of dishonor
from FWCC. Insisting on an acquittal, Campos discredits the MeTC’s reliance on a supposed notice
138619 January 15, 1996 ₱3,333.33 of dishonor that was sent to her by FWCC through registered mail. She also invokes good faith as she
138620 January 31, 1996 ₱3,333.33 allegedly made arrangements with FWCC for the payment of her obligation after the subject checks
were dishonored.
138621 February 15, 1996 ₱3,333.33 The petition lacks merit.
To be liable for violation of B.P. 22, the following essential elements must be present: (1) the making,
138622 February28, 1996 ₱3,333.33 drawing, and issuance of any check to apply for account or for value; (2) the knowledge of the maker,
drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the
₱46,666.62 drawee bank for the payment of the check in full upon its presentment; and (3) the subsequent
dishonor of the check by the drawee bank for insufficiency of funds or creditor dishonor for the same
The checks were declared by the draweebank to be drawn against a "closed account." 4
reason had not the drawer, without any valid cause, ordered the bank to stop payment. 11
After Campos failed to satisfy her outstanding obligation with FWCC despite demand, she was
The presence of the first and third elements is undisputed. An issue being advanced by Campos
charged before the Metropolitan Trial Court (MeTC) of Pasay City, Branch 48, with violations of
through the present petition concerns her alleged failure to receive a written demand letter from
B.P. 22. Campos was tried in absentia, as she failed to attend court proceedings after being arraigned. 5
FWCC, the entity in whose favor the dishonored checks were issued. In a line of cases, the Court has
On December 7, 1999, the MeTC rendered its decision with dispositive portion that reads:
emphasized the importance of proof of receipt of such notice of dishonor, 12 although not as an
WHEREFORE, all the foregoing considered, the accused is hereby CONVICTED of fourteen (14)
element of the offense,but as a means to establish that the issuer of a check was aware of
counts of violations of BATAS PAMBANSA BLG. 22. She is hereby sentenced to suffer the penalty
insufficiency of funds when he issued the check and the bank dishonored it, in relation to the second
of six (6) months imprisonment for each violation and to indemnify the complainant the sum of
element of the offense and Section 2 of B.P. 22. Considering that the second element involves a state
Page 16 of 24
of mind which is difficult to establish, Section 2 of B.P. 22 creates a presumption of knowledge of
insufficiency of funds,13 as it reads:
Sec. 2. Evidence of knowledge of insufficient funds. – The making, drawing, and issuance of a check
payment of which is refused by the drawee because of insufficient funds in or credit with such bank,
when presented within ninety days fromthe date of the check, shall be prima facie evidence of
knowledge of such insufficiency of fundsor credit unless such maker or drawer pays the holder
thereof the amount due thereon, 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.
In the instant case, both the RTC and the CA affirmed the MeTC’s finding that the required notice of
dishonor from FWCC was received by Campos. Campos, nonetheless, still maintains that her
personal receipt of the notice was not sufficiently established, considering that only a written copy of
the letter and the registry return receipt covering it were presented by the prosecution. The Court has
in truth repeatedly held that the mere presentation of registry return receipts that cover registered mail
was not sufficient to establish that written notices of dishonor had been sent to or served on issuers of
checks.1âwphi1 The authentication by affidavit of the mailers was necessary in order for service by
registered mail to be regarded as clear proof of the giving of notices of dishonor and to predicate the
existence of the second element of the offense. 14
In still finding no merit in the present petition, the Court, however, considers Campos' defense that
she exerted efforts to reach an amicable settlement with her creditor after the checks which she issued
were dishonored by the drawee bank, BPI Family Bank. Campos categorically declared in her petition
that, "[she] has in her favor evidence to show that she was in good faith and indeed made
arrangements for the payment of her obligations subsequently after the dishonor of the
checks."15 Clearly, this statement was a confirmation that she actually received the required notice of
dishonor from FWCC. The evidence referred to in her statement were receipts 16 dated January 13,
1996, February 29, 1996, April 22, 1998 and May 26, 1998 issued by FWCC to Campos for payments
in various amounts ranging from ₱2,500.00 to ₱15,700.00. Campos would not have entered into the
alleged arrangements beginning January 1996 until May 1998 if she had. not received a notice of
dishonor from her creditor, and had no knowledge of the insufficiency of her funds with the bank and
the dishonor of her checks.
Campos could have avoided prosecution by paying the amounts due on the checks or making
arrangements for payment in full within five ( 5) days after receiving notice. Unfortunately for
Campos, these circumstances were not established in the instant case. She failed to sufficiently
disclose the terms of her alleged arrangement with FWCC, and to establish that the same had been
fully complied with so as to completely satisfy the amounts covered by the subject checks. Moreover,
documents to prove such fact should have been presented before the MeTC during the trial, yet
Campos opted to be tried in absentia, and thus waived her right to present evidence. While Campos
blamed her former counsel for alleged negligence that led to her failure to be present during the
trial,17 it is settled that the negligence of counsel binds his or her client. Given the circumstances, the
Page 17 of 24
Court finds no cogent reason to reverse the ruling of the CA which affirmed the conviction of
Campos.
WHEREFORE, the petition is DENIED. The Decision dated July 21, 2008 and Resolution dated
February 16, 2009 of the Court of Appeals in CA-G.R. CR No. 31468 are AFFIRMED.
SO ORDERED
Besterio vs pp; sept 24, 2012 
FACTS:
The petitioner was charged for violation of B.P. 22 when she issued a postdated check sometime on
May 2002 allegedly being aware that the account to be drawn against does not have sufficient funds.
During trial, the accused contends that she does not own the check she used as collateral thus she
should not be held liable for B.P. 22.
 
ISSUE:
Whether or not B.P. 22 requires that the dishonored check must be owned by the accused
Whether or not the lack of a written notice of dishonor is fatal to a case for violation of B.P. 22
 
HELD:
No, the law did not look either at the actual ownership of the check or of the account against which it
was made, drawn, or issued, or at the intention of the drawee, maker or issuer.
Yes, second element or the knowledge of the petitioner as the issuer of the check that at the time of
issue there were no sufficient funds in or credit with the drawee bank for the payment of such check
in full upon its presentment is inexistent.
To establish the existence of the second element written notice of the dishonor to the drawer should
be presented. The private complainant sent his notice of dishonor by registered mail and presented the
registry return receipt. However, the mere presentment of registry return receipts is not sufficient but
must be accompanied by the authenticating affidavit of the person who had actually mailed the
written notices of dishonor. The authentication by affidavit of the mailer or mailers is necessary in
order for the giving of the notices of dishonor by registered mailto be regarded as clear proof of the
giving of the notices of dishonor to predicate the existence of the second element of the offense.
Nissan gallery-ortigas vs felipe; November 11, 2013
Facts:
This case stemmed from a criminal complaint for violation of Batas Pambansa Blg. 22 (BP 22) filed
by petitioner Nissan Gallery-Ortigas (Nissan), an entity engaged in the business of car dealership,
against respondent Purificacion F. Felipe (Purificacion)... with the Office of the City Prosecutor of
Quezon City. The said office found probable cause to indict Purificacion and filed an Information
before the Metropolitan Trial Court... or her issuance of a postdated check in the amount... of
P1,020,000.00, which was subsequently dishonored upon presentment due to "STOP PAYMENT.
Purificacion issued the said check because her son, Frederick Felipe (Frederick), attracted by a huge
discount of P220,000.00, purchased a Nissan Terrano 4x4 sports and utility vehicle (SUV) from
Nissan.
The SUV was delivered on May 14, 1997, but Frederick failed to pay upon delivery. Despite non-
payment, Frederick took possession of the vehicle.
Since then, Frederick had used and enjoyed the SUV for more than four (4) months without paying
even a single centavo of the purchase price. This constrained Nissan to send him two (2) demand
letters, on different dates, but he still refused to pay.
Nissan, through its retained... counsel, was prompted to send a final demand letter. Reacting to the
final demand, Frederick went to Nissan's office and asked for a grace period until October 30, 1997
within which to pay his full outstanding obligation amounting to P1,026,750.00.
Frederick reneged on his promise and again failed to pay.
he asked his mother, Purificacion, to issue the subject check as payment for his obligation.
Purificacion acceded to his request. Frederick then tendered her postdated check in the amount of
P1,020,000.00. The check, however, was dishonored upon presentment due to "STOP PAYMENT."
A demand letter was served upon Purificacion, through Frederick, who lived with her.
Purificacion refused to replace the check giving the reason that she was not the one who purchased
the vehicle. On January 6, 1998, Nissan filed a criminal case for violation of BP 22 against her.
During the preliminary investigation before the Assistant City Prosecutor, Purificacion gave
P200,000.00 as partial payment to amicably settle the civil aspect of the case. Thereafter, however, no
additional payment had been made.
After trial, the MeTC rendered its judgment acquitting Purificacion of the charge, but holding her
civilly liable to Nissan.
Purificacion appealed to the Regional Trial Court (RTC).
Branch 105 thereof affirmed the MeTC decision
Purificacion moved for a reconsideration, but her motion was denied.
The CA,... granted the petition... the CA reasoned out that there was no privity of contract between
Nissan and Purificacion. No civil liability could be adjudged against her because of her... acquittal
from the criminal charge. It was Frederick who was civilly liable to Nissan.
Issues:
whether or not Purificacion is civilly liable for the issuance of a worthless check despite her acquittal
from the criminal charge.
Ruling:
Well-settled is the rule that a civil action is deemed instituted upon the filing of a criminal action,
subject to certain exceptions. Section 1, Rule 111 of the Rules of Court specifically provides that:
The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to include the
corresponding civil action. No reservation to file such civil action separately shall be allowed.
Page 18 of 24
As can be gleaned from the foregoing, with respect to criminal actions for violation of BP 22, it is
explicitly clear that the corresponding civil action is deemed included and that a reservation to file
such separately is not allowed.
The rule is that every act or omission punishable by law has its accompanying civil liability. The civil
aspect of every criminal case is based on the principle that every person criminally liable is also
civilly liable.[16] If the accused, however, is not... found to be criminally liable, it does not
necessarily mean that he will not likewise be held civilly liable because extinction of the penal action
does not carry with it the extinction of the civil action.
This rule more specifically applies when (a)... the acquittal is based on reasonable doubt as only
preponderance of evidence is required; (b) the court declares that the liability of the accused is only
civil; and (c) the civil liability of the accused does not arise from or is not based upon the crime of
which the accused... was acquitted.[18] The civil action based on the delict is extinguished if there is
a finding in the final judgment in the criminal action that the act or omission from which the civil
liability may arise did not exist or where the accused did not commit... the acts or omission imputed
to him.
Purificacion was charged with violation of BP 22 for allegedly issuing a worthless check.
Purificacion was acquitted because the element of notice of dishonor was not sufficiently established.
Nevertheless, the act or omission from which her civil liability arose, which was the making or the
issuing of the subject worthless check, clearly existed. Her acquittal from... the criminal charge of BP
22 was based on reasonable doubt and it did not relieve her of the corresponding civil liability. The
Court cannot agree more when the MeTC ruled that:
If the acquittal is based merely on reasonable doubt, the accused may still be held civilly liable since
this does not mean he did not commit the... act complained of. It may only be that the facts proved did
not constitute the offense charged.
The Court is also one with the CA when it stated that the liability of Purificacion was limited to her
act of issuing a worthless check. The Court, however, does not agree with the CA when it went to
state further that by her acquittal in the criminal charge, there was no... more basis for her to be held
civilly liable to Nissan. The acquittal was just based on reasonable doubt and it did not change the
fact that she issued the subject check which was subsequently dishonored upon its presentment.
Check: is a bill of exchange drawn on a bank payable on demand. It is written order on a bank,
purporting to be drawn against a deposit of funds for the payment of all events, of a sum of money to
a certain person therein named or to his order or to cash and payable on demand.
Basic Concept of Negotiable Instruments; Check: Presentment for payment
NORBERTO TIBAJIA, JR. and CARMEN TIBAJIA vs. COURT OF APPEALS
G.R. No. 100290
June 4, 1993
Facts:
Spouses Tibajia filed a suit for collection of a sum of money. A writ of attachment was issued, the
Deputy Sheriff filed a return stating that a deposit made by the Tibajia spouses in the amount of Four
Hundred Forty P442,750.00 in another case, had been garnished by him. The Regional Trial Court
rendered its decision in Civil Case No. 54863 in favor of the plaintiff Eden Tan, ordering the Tibajia
spouses to pay her an amount in excess of P300,000.00.
The decision having become final, Eden Tan filed the corresponding motion for execution and
thereafter, the garnished funds which by then were on deposit with the cashier of the Regional Trial
Court of Pasig, Metro Manila, were levied upon. On 14 December 1990, the Spouses Tibajia
delivered to Deputy Sheriff the total money judgment in the form of a Cashier’s check. Private
respondent, Eden Tan, refused to accept the payment and instead insisted that the garnished funds
deposited with the cashier of the Regional Trial Court of Pasig, Metro Manila be withdrawn to satisfy
the judgment obligation. Thereafter, Spouses filed a motion to lift the writ of execution on the ground
that the judgment debt had already been paid. The motion was denied by the trial court on the ground
that payment in cashier's check is not payment in legal tender and that payment was made by a third
party other than the defendant.
Issue:
Is payment by means of check considered legal tender?
Ruling:
No. As discussed by the Court, the delivery of promissory notes payable to order, or bills of exchange
or other mercantile documents shall produce the effect of payment only when they have been cashed,
or when through the fault of the creditor they have been impaired.
In the recent cases of Philippine Airlines, Inc. vs. Court of Appeals and Roman Catholic Bishop of
Malolos, Inc. vs. Intermediate Appellate Court, this Court held that — A check, whether a manager's
check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid
tender of payment and may be refused receipt by the obligee or creditor. The ruling in these two (2)
cases merely applies the statutory provisions which lay down the rule that a check is not legal tender
and that a creditor may validly refuse payment by check, whether it be a manager's, cashier's or
personal check.
n the more recent case of Fortunado vs. Court of Appeals, this Court stressed that, "We are not, by
this decision, sanctioning the use of a check for the payment of obligations over the objection of the
creditor."
Basic Concept of Negotiable Instruments; Checks: Presentment for Payment
PHILIPPINE AIRLINES, INC. V. COURT OF APPEALS,
G.R. No. L-49188
January 30, 1990
FACTS:
Respondent Amelia Tan, under the name and style of Able Printing Press commenced a complaint for
damages before the Court of First Instance of Manila. The CFI of Manila rendered judgment in favor
Page 19 of 24
of private respondent Amelia Tan and against petitioner Philippine Airlines, Inc. (PAL). On appeal,
respondent court affirmed the decision of the trial court. No further appeal having been taken by the
parties, the decision became final and executory. The case was remanded to the trial court for
execution and Tan filed a motion for the issuance of a writ of execution of the judgment rendered by
the appellate court. The writ was issued and was duly referred to Deputy Sheriff Reyes for
enforcement. However, Tan moved for the issuance of an alias writ of execution stating that the
judgment rendered by the lower court, and affirmed with modification by the appellate court
remained unsatisfied. PAL filed an opposition to the motion stating that it had already fully paid its
obligation to Tan through the deputy sheriff as evidenced by cash vouchers properly signed and
receipted by Reyes. The court of appeals ordered the executing sheriff Reyes to appear with his return
and explain the reason for his failure to surrender the amounts paid to him by PAL. However, the
order could not be served because Reyes absconded. Hence, this petition for certiorari filed by PAL.
ISSUE:
Did such payments extinguish the judgment debt?
RULING:
NO. In the absence of an agreement, either express or implied, payment means the discharge of a debt
or obligation in money and unless the parties so agree, a debtor has no rights, except at his own peril,
to substitute something in lieu of cash as medium of payment of his debt. Consequently, unless
authorized to do so by law or by consent of the obligee a public officer has no authority to accept
anything other than money in payment of an obligation under a judgment being executed. Strictly
speaking, the acceptance by the sheriff of the petitioner's checks, in the case at bar, does not, per se,
operate as a discharge of the judgment debt.
Since a negotiable instrument is only a substitute for money and not money, the delivery of such an
instrument does not, by itself, operate as payment. A check, whether a manager's check or ordinary
cheek, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of
payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not
discharge the obligation under a judgment. The obligation is not extinguished and remains suspended
until the payment by commercial document is actually realized (Art. 1249, Civil Code, par. 3).
Kinds of checks:
Checks: Kinds
Ramon Tan vs. Court of Appeals
G.R. No. 108555
December 20, 1994
Facts:
Petitioner Ramon Tan had maintained since 1976 an account with Rizal Commercial Banking
Corporation’s Binondo branch.
Petitioner deposited Check No. L 406000126 from the Philippine Commercial Industrial Bank, Puerto
Princesa branch, in the amount of P30,000.00, payable to his order, in his account with RCBC
Binondo on March 15. On the same day, RCBC erroneously sent the same cashier's check for clearing
to the Central Bank which was returned for having been "missent" or "misrouted."
The next day, RCBC debited the amount covered by the same cashier's check from the account of the
petitioner. Respondent bank at this time had not informed the petitioner of its action which the latter
claims he learned of only 42 days after, when he received the bank's debit memo.
Relying on the common knowledge that a cashier's check was as good as cash, that the usual banking
practice that local checks are cleared within 3 working days and regional checks within 7 working
days, and the fact that the cashier's check was accepted, petitioner issued 2 personal checks, which
were later on dishonored.
RCBC insists that immediate payment without awaiting clearance of a cashier's check is discretionary
with the bank to whom the check is presented and such being the case, its refusal to immediately pay
the cashier's check in this case is not to be equated with negligence on its part.
Issue:
Is RCBC’s contention with regard its refusal to pay the cashier’s check correct?
Ruling:
No. A cashier's check is a primary obligation of the issuing bank and accepted in advance by its mere
issuance. By its very nature, a cashier's check is the bank's order to pay drawn upon itself, committing
in effect its total resources, integrity and honor behind the check. A cashier's check by its peculiar
character and general use in the commercial world is regarded substantially to be as good as the
money which it represents. In this case, therefore, PCIB by issuing the check created an unconditional
credit in favor of any collecting bank.
All these considered petitioner's reliance on the layman's perception that a cashier's check is as good
as cash is not entirely misplaced, as it is rooted in practice, tradition, and principle. The Court sees no
reason thus, why the so-called discretion as argued by RCBC was not exercised in favor of petitioner,
especially since PCIB and RCBC are members of the same clearing house group relying on each
other's solvency. RCBC could surely rely on the solvency of PCIB when the latter issued its cashier's
check.
Co vs. PNB
GR L-51767, 29 June 1982
Second Division, Barredo (J)
Facts: Standard Parts Manufacturing Corporation mortgaged properties to PNB. When Standard
failed to pay
its obligation (P4,296,803,56 secured by said properties), PNB extra-judicially foreclosed the
mortgages. Standard, meanwhile, transferred its rights in the mortgages to Citadel Insurance and
Surety Co., which wrote PNB its interest to redeem the Makati property (one of the property
mortgaged) for P1,621,970. PNB rejected the offer. Citadel filed suit against PNB, where the
Page 20 of 24
complaint was accompanied by an RCBC manager’s check and which was deposited under a savings
bank account with RCBC by order of the trial court.
Issue: Whether there was a valid and effective tender of payment.
Held: The unequivocal tender of redemption was made, through a manager’s check of RCBC (a well-
known, big and reputable banking institution) for the amount it believed it should pay as redemption
price. PNB rejected it on the sole and only ground that it considered the amount insufficient.
Redemption was made on time, i.e. 1 year from the date appearing as the date of the registration of
the certificate of sale. Tender by manager’s check was not inefficacious as the Court has already
sanctioned redemption by check
Give Notice of Dishonor; Checks: Presentment for Payment: Time/Effect of Delay
The International Corporate Bank V. Sps. Gueco
G.R. No. 141968
February 12, 2001
FACTS:
The respondent spouses obtained a loan from petitioner to purchase a car. In lieu thereof, the Spouses
Gueco executed promissory notes which were payable in monthly installments and chattel mortgage
over the car to serve as security for the notes. Unfortunately, the Guecos defaulted in payments
despite the fact that after due negotiations, the obligation was lowered, this caused now the car be
detained inside the bank's compound.
Subsequently, Dr.Gueco delivered a manager's check in amount of P150, 000.00. The checks were
not immediately encashed. Also the car was still not released because of Gueco’s refusal to sign the
Joint Motion to Dismiss. The Guecos contended that they need not sign the motion for joint dismissal
of a prior collection suit instituted by the bank considering that they had not yet filed their Answer.
International Corp Bank, however, insisted that the joint motion to dismiss is standard operating
procedure (SOP) in their bank to effect a compromise and to preclude future filing of claims,
counterclaims or suits for damages. After several demand letters and meetings with bank
representatives, the respondents Gueco spouses initiated a civil action for damages.
ISSUE:
1. Was the liability of respondent fulfilled by mere delivery of the manager’s check which has
become stale?
RULING:
No. An instrument not payable on demand must be presented for payment on the day it falls due.
When the instrument is payable on demand, presentment must be made within a reasonable time after
its issue. A stale check is one which has not been presented for payment within a reasonable time
after its issue. It is valueless and, therefore, should not be paid.
Under the negotiable instruments law, an instrument not payable on demand must be presented for
payment on the day it falls due. When the instrument is payable on demand, presentment must be
made within a reasonable time after its issue. In the case of a bill of exchange, presentment is
sufficient if made within a reasonable time after the last negotiation thereof. A check must be
presented for payment within a reasonable time after its issue, and in determining what is a reasonable
time, regard is to be had to the nature of the instrument, the usage of trade or business with respect to
such instruments, and the facts of the particular case.
A manager's check is one drawn by the bank's manager upon the bank itself. In effect, it is a bill of
exchange drawn by the cashier of a bank upon the bank itself, and accepted in advance by the act of
its issuance. It is really the bank's own check and may be treated as a promissory note with the bank
as a maker. The check becomes the primary obligation of the bank which issues it and constitutes its
written promise to pay upon demand. The mere issuance of it is considered an acceptance thereof. If
treated as promissory note, 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.
Even assuming that presentment is needed, 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. Failure to
present on time, thus, does not totally wipe out all liability. In fact, the legal situation amounts to an
acknowledgment of liability in the sum stated in the check.
In this case, the Gueco spouses have not alleged, much less shown that they or the bank which issued
the manager's check has suffered damage or loss caused by the delay or non-presentment. Definitely,
the original obligation to pay certainly has not been erased. If the check had become stale, it becomes
imperative that the circumstances that caused its non-presentment be determined. In this case, 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 but there was no bad faith or
negligence in this position taken by the Bank hence, the liability of Sps. Geuco is still subsisting as
the checks were not considered stale.
Checks: Kinds
PEOPLE v. NITAFAN & LIM
G.R. No. 75954
October 22, 1992
FACTS:
Lim was charged with violation of BP 22. Lim issued to one Sasaki a Philippine Trust Company
Check in the amount of P143,000 well knowing that he did not have sufficient funds in or credit with
the drawee bank. Thus, it was subsequently dishonored by the drawee bank for insufficiency of funds,
and despite receipt of notice of such dishonor, said accused failed to pay said Sasaki.
Lim claimed that the check he issued was a memorandum check which was in the nature of a
promissory note. Thus, he did not violate BP 22.
ISSUE:
Page 21 of 24
Is a memorandum check a form of ordinary check or is it in the nature of a promissory note?
RULING:
A memorandum check is in the form of an ordinary check, with the word "memorandum", "memo" or
"mem" written across its face, signifying that the maker or drawer engages to pay the bona fide holder
absolutely, without any condition concerning its presentment. Such a check is an evidence of debt
against the drawer, and although may not be intended to be presented, has the same effect as an
ordinary check, and if passed to the third person, will be valid in his hands like any other check.
It should therefore be distinguished from a promissory note, which is but a mere promise to pay. Lim
could have issued a promissory note if that is his intention which could have exempted him from
violation of the BP 22. A memorandum check comes within the meaning of Sec. 185 of the
Negotiable Instruments Law which defines a check as "a bill of exchange drawn on a bank payable on
demand."
Moreover, a memorandum check, upon presentment, is generally accepted by the bank. Hence, it does
not matter whether the check issued is in the nature of a memorandum as evidence of indebtedness or
whether it was issued is partial fulfillment of a pre-existing obligation, for what the law punishes is
the issuance itself of a bouncing check and not the purpose for which it was issuance; the mere act of
issuing a worthless check, whether as a deposit, as a guarantee, or even as an evidence of a pre-
existing debt, is malum prohibitum.
Forgery; Liability of Acceptor; Warranties; Dishonor by Non-Payment; Checks: Kinds
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.
G.R. No. 89802
May 7, 1992
FACTS:
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. When she went to these companies to collect on what she thought were still unpaid accounts,
she was informed of the issuance of the 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
damages and attorney’s fees. 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
ISSUE:
Does the private respondent have a cause of action against the petitioners for their encashment and
payment to another person of certain crossed checks issued in her favor?
RULING:
YES. 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.
Consequently, "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," the
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.
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.
BP22 CASES:
Caram Resources vs. Contreras
AM MTJ0830849, 26 October 1994
First Division, Davide Jr. (J)
Facts: Teresita Dizon obtained a loan from Caram Resources payable in installments. She issued a
promissory note and postdated BPI checks, four of which were dishonored when presented to the
bank as the account against which they were drawn had been closed. Caram charged Dizon for
violation of BP22, but where Judge Contreras acquitted Dizon on the ground of reasonable doubt.
Subsequently, Caram charged Judge Maximo Contreras with gross ignorance of the law and gross
misconduct committed in Dizon’s criminal case.
Issue: Whether malice is an essential element in BP 22.
Page 22 of 24
Held: In the 4 criminal cases before Judge Contreras, Dizon as accused admitted that a loan was
granted to her and in connection therewith she executed a promissory note wherein she bound herself
to pay the loan in 12 installments. She issued the postdated checks to cover the installments as they
fall due. The checks were drawn against her BPI current account, which she closed in the same
months she obtained the loan, so that
when the checks were presented for payment they were dishonored. Malice and intent in issuing a
worthless check are immaterial. The offense is committed by the very fact of its performance, i.e. the
mere act of issuing a worthless check. The offense is malum prohibitum. An act may not be
considered by society as inherently wrong, hence, not malum in se, but because of the harm that it
inflicts on the community, it can be outlawed
and criminally punished as malum prohibitum, pursuant to the State’s exercise of police power.
Cruz vs. CA
GR 108738, 17 June 1994
First Division, Kapunan (J)
Facts: Andrea Mayor is engaged in the business of granting interest-bearing loans and in
rediscounting checks. Roberto Cruz, on the other hand, is engaged in selling ready to wear clothes at
the Pasay Commercial Center. Cruz frequently borrows money from Mayor. In 1989, Cruz borrowed
P176,000 from mayor, which Mayor delivered. In turn, Cruz issued a Premiere Bank check for the
same amount. When the check matured, Mayor presented it to the bank but was dishonored and
marked “account closed.” When notified of the
dishonor, Cruz promised to pay in cash. No payment was made, and thus the criminal action for
violation of BP 22 was instituted.
Issue: Whether Cruz is liable for violating BP 22, even upon the claim that the check was issued to
serve a mere evidence of indebtedness, and not for circulation or negotiation.
Held: A check issued as an evidence of debt, though not intended to be presented for payment has the
same effect of an ordinary check, hence, it falls within the ambit of BP 22. When a check is presented
for payment, the drawee bank will generally accept the same regardless of whether it was issued in
payment of an obligation or merely to guarantee the said obligation. What the law punishes is the
issuance of a bouncing check, not the purpose for which it was issued nor the term and conditions
relating to its issuance. The mere
act of issuing a worthless check is malum prohibitum.
Lim vs. People
GR 130038, 18 September 2000
En Banc, Pardo (J)
Facts: Rosa Lim bought various kinds of jewelry worth P300,000 from the store of Maria Antonia
Seguan, by issuing a check payable to “cash” drawn against MetroBank. The next day, Lim again
purchased jewelry valued at P241,668 by issuing another check payable to cash likewise drawn
against MetroBank. Seguan deposited the checks with her bank. The checks were returned with a
notice of dishonor as Lim’s accounts in said bank were already closed. Upon demand, Lim promised
to pay Seguan the amounts of the two dishonored checks. She never did. Rosa Lim was charge for
two counts of violation of BP 22, where she was found guilty, and sentenced to 1 year imprisonment
with fine (P200,000).
Issue: Whether Lim has knowledge of the insufficiency of funds when issuing the checks.
Held: The elements of BP22 are (1) the making, drawing and issuance of any check to apply for
account or for value, (2) the knowledge of the maker, 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, 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, without any valid cause, ordered
the bank to stop payment. Lim never denied issuing the check. Section 2 of BP 22 creates a
presumption juris tantum that the second element prima facie exists when the first and third elements
are present. If not rebutted, it suffices to sustain a conviction. It must be noted that similar to the Vaca
case, the Court deleted the prison sentences imposed upon Lim, holding that the two fines imposed
for each of the violation (P200,000 each) are appropriate and sufficient.
Subsidiary imprisonment not exceeding 6 months is provided in case of insolvency or non-payment
of the fines as decreed.
Llamado vs. CA
GR 99032, 26 March 1997
Second Division, Torres Jr. (J)
Facts: Ricardo Llamado and Jacinto Pascual were Treasurer and President of Pan Asia Finance
Corporation. Leon Gaw delivered P180,000 to Llamado with assurance that the amount would be
repaid on 4 November 1983 with 12% interest and a share of the profits of the corporation. On said
date, Gaw deposited the check but it was dishonored. Informing Llamado of the dishonor, Llamado
offered in writing to pay Gaw a portion of the amount equivalent to 10% thereof on 14 or 15
November and the balance rolled over for a period of 90 days. Llamado failed to do so. Gaw filed a
complaint against Llamado and Pascual for violation of BP 22. Pascual remains at large. Llamado
contends he signed the check in blank.
Issue: Whether Llamado is personally liable for the bounced check.
Held: Llamado’s claim that he signed the check in blank is hardly a defense. By signing the check, he
made himself prone to being charged with violation of BP 22. It became incumbent upon him to
prove his defenses. As treasurer of the corporation who signed the check in his capacity as corporate
officer, lack of involvement in the negotiation for the transaction is not a defense. Llamado is
personally liable even if the check was in
Page 23 of 24
the name of the corporation. Third paragraph of Section 1, BP 22, states that “where the check is
drawn by a corporation, company or entity, the person(s) who actually signed the check in behalf of
such drawer shall be liable under this Act.”
It must be noted that the check was issued for a valuable consideration (P180,000). Had the money
been intended to be returned when the investment was successful, the check need not be issued. A
receipt and their written agreement would have sufficed.
Moran vs. CA
GR 105836, 7 March 1994
Second Division, Regalado (J)
Facts: George and Librada Moran maintained 3 joint accounts with CityTrust Banking Corporation.
The Morans issued checks in favor of Petrophil Corporation, which were dishonored for insufficiency
of funds. Moran deposited the amount that would cover the checks the day after the check’s clearing.
Petrophil did not deliver the Morans’ fuel orders for their Wack-Wack Petron Gasoline station,
prompting the latter to temporarily stop business operations. The Morans sued the bank for damages.
Issue: Whether a bank is liable for its refusal to pay a check on account of insufficient funds,
notwithstanding the fact the fact that a deposit was made later in the day.
Held: A check is a bill of exchange drawn on a bank payable on demand. Where the bank possesses
funds of a depositor, it is bound to honor his checks to the extent of the amount of the deposits.
Failure to do so, when deposit is sufficient, entitles the drawer to substantial damages without proof
of actual damages. Herein, however, the balance of the account maintained in the bank was not
enough to cover either of the two checks when they were dishonored. A check, as distinguished from
an ordinary bill of exchange, is supposed to be
drawn against a previous deposit of funds. As such, a drawer must remember his responsibilities
every time he issues a check. He must personally keep track of his available balance in the bank and
not rely on the bank to notify him of the necessity to fund the checks he previously issued. A bank is
under no obligation to make part payment on a check, up to only the amount of the drawer’s funds,
where the check is drawn for an
amount larger than what the drawer has on deposit. A check is intended not only to transfer a right to
the amount named in it, but to serve the further purpose of affording evidence for the bank of the
payment of such amount when the check is taken up. Clearly, a bank is not liable for its refusal to pay
a check on account of insufficient funds, notwithstanding the fact that a deposit may be made later in
the day. Before a bank depositor may maintain a suit to recover a specific amount from his bank, he
must first show that he had on
deposit sufficient funds to meet his demand.
State Investment House vs. CA
GR 101163, 11 January 1993
First Division, Bellosillo (J)
Facts: Nora B. Moulic issued to Corazon Victoriano checks, as security for pieces of jewelry sold on
commission. Victoriano negotiated the checks to the State Investment House Inc. (SIHI). Moulic
failed to sell the pieces of jewelry, so he returned them to the payee before the maturity of the checks.
The checks, however, could not be retrieved as they had already been negotiated. Before the check’s
maturity dates, Moulic withdrew her funds from the drawee bank. Upon presentment of the checks for
payment, they were dishonored for insufficiency of funds. SIHI sued to recover the value of the
checks.

Issue: Whether the personal defense of failure or absence of consideration is available, or conversely,
whether SIHI is a holder in due course.

Held: On their faces, the post-dated checks were complete and regular; SIHI bought the checks from
the payee (Victoriano) before their due dates; SIHI took the checks in good faith and for value, albeit
at a discounted price; and SIHI was never informed not made aware that the checks were merely
issued to payee as security and not for value. Complying with the requisites of Section 52 of the
Negotiable Instruments Law, SIHI is a holder in due course. As such, it holds the instruments free
from any defect of title of prior parties,
and from defenses available to prior parties among themselves. SIHI may enforce full payment of the
checks. The defense of failure or absence of consideration is not available as SIHI was not privy to
the purpose for which the checks were issued.
That the post-dated checks were merely issued as security is not a ground for the discharge of the
instrument as against a holder in due course. It is not one of the grounds outlined in Section 119 of the
Negotiable Instrument Law, for the instrument to be discharged.
It must be noted that the drawing and negotiation of a check have certain effects aside from the
transfer of title or the incurring of liability in regard to the instrument by the transferor. The holder
who takes the negotiated paper makes a contract with the parties on the face of the instrument. There
is an implied representation that funds or credit are available for the payment of the instrument in the
bank upon which it is drawn. Consequently, the withdrawal of the money from the drawee bank to
avoid liability on the checks cannot prejudice the rights of holders in due course. The drawer, Moulic,
is liable to the holder in due course, SIHI.

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