NegoCases-Notice of Dishonor

CASES ON NEGOTIABLE INSTRUMENTS
(Presentment and Notice of Dishonor)
1. Asia Banking Corporation vs. Javier, 44 Phil 779 (1923)

G.R. No. L-19051, April 4, 1923
Jose Valera Calderon for appellant.
J. A. Wolfson for appellee.
AVANCEÑA, J.:
On May 10, 1920, Salvador B. Chaves drew a check on the Philippine National Bank for
P11,000 in favor of La Insular, a concern doing business in this city. This check was indorsed by the
limited partners of La Insular, and then deposited by Salvador B. Chaves in his current account with
the plaintiff, Asia Banking Corporation. The deposit was made on July 14, 1920.
On June 25, 1920, Salvador B. Chaves drew another check for P18,785.30 on the Philippine
National Bank, in favor of the aforesaid La Insular. This check was also indorsed by the limited
partners of La Insular, and was likewise deposited by Salvador B. Chaves in his current account with
the plaintiff, Asia Banking Corporation, on July 6, 1920.
The amount represented by both checks was used by Salvador B. Chaves after they were
deposited in the plaintiff bank, by drawing checks on the plaintiff. Subsequently these checks were
presented by the plaintiff to the Philippine National Bank for payment, but the latter refused to pay on
the ground that the drawer, Salvador B. Chaves, had no funds therein.
The plaintiff now brings this action against the defendant, as indorser, for the payment of the
value of both checks.
The lower court sentenced the defendant to pay the plaintiff P11,000, upon the check of May
10, 1920, with interest thereon at 9 per cent per annum from July 10, 1920, and P18,778.34 on the
check of June 25, 1920, with interest thereon at 9 per cent per annum from August 5, 1920. From
this judgment the defendant appealed.
One of the contentions of the appellant in support of this appeal is, that at all events its
liability as indorser of the checks in question was extinguished. We may say in connection with this
assignment of error that the liability of the defendant never arose.
Section 89 of the Negotiable Instruments Law (Act No. 2031) provides that, when a
negotiable instrument is dishonored for non-acceptance or non-payment, notice thereof must be
given to the drawer and each of the indorsers, and those who are not notified shall be discharged
from liability, except where this act provides otherwise. According to this, the indorsers are not liable
unless they are notified that the document was dishonored. Then, under the general principle of the
law of procedure, it will be incumbent upon the plaintiff, who seeks to enforce the defendant's liability
upon these checks as indorser, to establish said liability by proving that notice was given to the
defendant within the time, and in the manner, required by the law that the checks in question had
been dishonored. If these facts are not proven, the plaintiff has not sufficiently established the
defendant's liability. There is no proof in the record tending to show that plaintiff gave any notice
whatsoever to the defendant that the checks in question had been dishonored, and there it has not
established its cause of action.
For the foregoing, the judgment appealed from is reversed and the defendant is absolved
from the complaint without special pronouncement as to costs. So ordered.
Araullo, C. J., Street, Malcolm, and Ostrand., concur.
Mr. Justice Johns voted for reversal, but he was absent at the time of the promulgation of the
decision and his signature therefore does not appear signed to the opinion of the court.
(Sgd.) MANUEL ARAULLO
Chief Justice
Romualdez, J., took no part
2. Nyco Sales Corp. vs. BA Finance Corp., 200 SCRA 637 (1991)
G.R. No. 71694, August 16, 1991
ABC Law Offices for petitioner.
Valera, Urmeneta & Associates for private respondent.
PARAS, J.:
In this petition for review on certiorari, petitioner challenges the April 22, 1985 decision and
*
the July 16, 1985 resolution of the then Intermediate Appellate Court in AC-G.R. CV No. 02553
*
entitled "BA Finance Corporation v. Nyco Sales Corporation, et al." which affirmed with modification
the July 20, 1983 decision of the Regional Trial Court, National Capital Region, Manila, Branch II in
**
the same case docketed as Civil Case No. 125909 ordering petitioner to pay respondent the amount
of P60,000.00 as principal obligation plus corresponding interest, the sum of P10,000.00 as and for,
attomey's fees and 1/3 of the costs of suit.
It appears on record that petitioner Nyco Sales Corporation (hereinafter referred to as Nyco)
whose president and general manager is Rufino Yao, is engaged in the business of selling
construction materials with principal office in Davao City. Sometime in 1978, the brothers Santiago
and Renato Fernandez (hereinafter referred to as the Fernandezes), both acting in behalf of
Sanshell Corporation, approached Rufino Yao for credit accommodation. They requested Nyco, thru
Yao, to grant Sanshell discounting privileges which Nyco had with BA Finance Corporation
(hereinafter referred to as BA Finance). Yao apparently acquiesced, hence on or about November
15, 1978, the Fernandezes went to Yao for the purpose of discounting Sanshell's post-dated check
which was a BPI-Davao Branch Check No. 499648 dated February 17, 1979 for the amount of
P60,000.00. The said check was payable to Nyco. Following the discounting process agreed upon,
Nyco, thru Yao, endorsed the check in favor of BA Finance. Thereafter, BA Finance issued a check
payable to Nyco which endorsed it in favor of Sanshell. Sanshell then made use of and/or negotiated
the check. Accompanying the exchange of checks was a Deed of Assignment executed by Nyco in
favor of BA Finance with the conformity of Sanshell. Nyco was represented by Rufino Yao, while
Sanshell was represented by the Fernandez brothers. Under the said Deed, the subject of the
discounting was the aforecited check (Rollo, pp- 26-28). At the back thereof and of every deed of
assignment was the Continuing Suretyship Agreement whereby the Fernandezes unconditionally
guaranteed to BA Finance the full, faithful and prompt payment and discharge of any and all
indebtedness of Nyco (Ibid., pp. 36, 46). The BPI check, however, was dishonored by the drawee
bank upon presentment for payment. BA Finance immediately reported the matter to the
Fernandezes who thereupon issued a substitute check dated February 19,1979 for the same
amount in favor of BA Finance. It was a Security Bank and Trust Company check bearing the
number 183157, which was again dishonored when it was presented for payment. Despite repeated
demands, Nyco and the Fernandezes failed to settle the obligation with BA Finance, thus prompting
the latter to institute an action in court (Ibid., p 28). Nyco and the Fernandezes, despite having been
served with summons and copies of the complaint, failed to file their answer and were consequently
declared in default. On May 16, 1980, the lower court ruled in favor of BA Finance ordering them to
pay the former jointly and severally, the sum of P65,536.67 plus 14% interest per annum from July 1,
1979 and attorney's fees in the amount of P3, 000. 00 as well as the costs of suit (Rollo, pp. 51-52).
Nyco, however, moved to set aside the order of default, to have its answer admitted and to be able
to implead Sanshell. The prayer was granted through an order dated June 23, 1980, wherein the
decision of the court was set aside only as regards Nyco. Trial ensued once more until the court
reached a second decision which states:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant Nyco Sales Corporation by ordering the latter to pay the former the following:
1) P60,000.00 as principal obligation, plus interest thereon at the rate of 14% per
annum from February 1, 1979 until fully paid;
2) The amount of P100,000.00 as and for attorney's fees; and
3) One-third (1/3) of the costs of this suit.
With respect to defendants Santiago and Renato Fernandez, the decision of May 16,
1980 stands.
The cross-claim of defendant Nyco Sales Corporation against codefendants
Santiago B. Fernandez and Renato B. Fernandez is hereby denied, as there is no showing
that Nyco's Answer with cross-claim dated May 29, 1980 was ever received by said
Fernandez brothers, even as it is noted that the latter have not been declared in default with
respect to said cross-claim, nor were evidence adduced in connection therewith.
As to the would-be litigant Sanshell Construction and Development Corporation,
defendant Nyco Sales Corporation did not properly implead said corporation which should
have been by way of a third-party complaint instead of a mere cross-claim. The same
observations are noted as regard this cross-claim against Sanshell as those made with
respect to the Fernandez brothers.
SO ORDERED.
On appeal, the appellate court also upheld BA Finance but modified the lower court's
decision by ordering that the interest should run from February 19, 1979 until paid and not from
February 1, 1979. Nyco's subsequent motion for reconsideration was denied (Ibid., pp. 33, 62).
Hence, the present recourse.
The crux of the controversy is whether or not the assignor is liable to its assignee for its
dishonored checks.
For its defense, Nyco anchors its arguments on the following premises: a) that the appellate
court erred in affirming its liability for the BPI check despite a similar finding of liability for the SBTC
check rendered by the same lower court; b) that it was actually discharged of its liability over the
SBTC check when BA Finance failed to give it a notice of dishonor; c) that there was novation when
BA Finance accepted the SBTC check in replacement of the BPI check; and d) that it cannot be held
liable for its Presidents unauthorized acts.
The petition is devoid of merit.
An assignment of credit is the process of transferring the right of the assignor to the
assignee, who would then be allowed to proceed against the debtor. It may be done either
gratuitously or generously, in which case, the assignment has an effect similar to that of a sale.
According to Article 1628 of the Civil Code, the assignor-vendor warrants both the credit
itself (its existence and legality) and the person of the debtor (his solvency), if so stipulated, as in the
case at bar. Consequently, if there be any breach of the above warranties, the assignor-vendor
should be held answerable therefor. There is no question then that the assignor-vendor is indeed
liable for the invalidity of whatever he as signed to the assignee-vendee.
Considering now the facts of the case at bar, it is beyond dispute that Nyco executed a deed
of assignment in favor of BA Finance with Sanshell Corporation as the debtor-obligor. BA Finance is
actually enforcing said deed and the check covered thereby is merely an incidental or collateral
matter. This particular check merely evidenced the credit which was actually assigned to BA
Finance. Thus, the designation is immaterial as it could be any other check. Both the lower and the
appellate courts recognized this and so it is utterly misplaced to say that Nyco is being held liable for
both the BPI and the SBTC checks. It is only what is represented by the said checks that Nyco is
being asked to pay. Indeed, nowhere in the dispositive parts of the decisions of the courts can it be
gleaned that BA Finance may recover from the two checks.
Nyco's pretension that it had not been notified of the fact of dishonor is belied not only by the
formal demand letter but also by the findings of the trial court that Rufino Yao of Nyco and the
Fernandez Brothers of Sanshell had frequent contacts before, during and after the dishonor (Rollo,
p. 40). More importantly, it fails to realize that for as long as the credit remains outstanding, it shall
continue to be liable to BA Finance as its assignor. The dishonor of an assigned check simply
stresses its liability and the failure to give a notice of dishonor will not discharge it from such liability.
This is because the cause of action stems from the breach of the warranties embodied in the Deed
of Assignment, and not from the dishonoring of the check alone (See Art. 1628, Civil Code).
Novation is the third defense set up by petitioner Nyco. It insists that novation took place
1âwphi1
when BA Finance accepted the SBTC check in replacement of the BPI cheek. Such is manifestly
untenable.
There are only two ways which indicate the presence of novation and thereby produce the
effect of extinguishing an obligation by another which substitutes the same. First, novation must be
explicitly stated and declared in unequivocal terms as novation is never presumed (Mondragon v.
Intermediate Appellate Court, G.R. No. 71889, April 17, 1990; Caneda Jr. v. Court of Appeals, G.R.
No. 81322, February 5, 1990). Secondly, the old and the new obligations must be incompatible on
every point. The test of incompatibility is whether or not the two obligations can stand together, each
one having its independent existence If they cannot, they are incompatible and the latter obligation
novates the first (Mondragon v. Intermediate Appellate Court, supra; Caneda Jr. v. Court of
Appeals, supra). In the instant case, there was no express agreement that BA Finance's acceptance
of the SBTC check will discharge Nyco from liability. Neither is there incompatibility because both
checks were given precisely to terminate a single obligation arising from Nyco's sale of credit to BA
Finance. As novation speaks of two distinct obligations, such is inapplicable to this case.
Finally, Nyco disowns its President's acts claiming that it never authorized Rufino Yao
(Nyco's President) to even apply to BA Finance for credit accommodation. It supports its argument
with the fact that it did not issue a Board resolution giving Yao such authority. However, the very
evidence on record readily belies Nyco's contention. Its corporate By-Laws clearly provide for the
powers of its President, which include, inter alia, executing contracts and agreements, borrowing
money, signing, indorsing and delivering checks, all in behalf of the corporation. Furthermore, the
appellate court correctly adopted the lower court's observation that there was already a previous
transaction of discounting of checks involving the same personalities wherein any enabling
resolution from Nyco was dispensed with and yet BA Finance was able to collect from Nyco and
Sanshell was able to discharge its own undertakings. Such effectively places Nyco under estoppel in
pais which arises when one, by his acts, representations or admissions, or by his silence when he
ought to speak out, intentionally or through culpable negligence, induces another to believe certain
facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if
the former is permitted to deny the existence of such facts (Panay Electric Co., Inc. v. Court of
Appeals, G.R. No. 81939, June 29,1989). Nyco remained silent in the course of the transaction and
spoke out only later to escape liability. This cannot be countenanced. Nyco is estopped from denying
Rufino Yao's authority as far as the latter's transactions with BA Finance are concerned.
PREMISES CONSIDERED, the decision appealed from is AFFIRMED.

SO ORDERED.
Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.
Footnotes
* Penned by Associate Justice Eduardo P. Caguioa and concurred in by Associate
Justices Ma. Rosario Quetulio-Losa and Leonor Ines-Luciano and Presiding Justice Ramon
G. Gaviola, Jr.
** Penned by Judge Rosalio A. de Leon.
3. State Investment House, Inc. vs. CA, 217 SCRA 32 (1993)

G.R. No. 101163 January 11, 1993
Escober, Alon & Associates for petitioner.
Martin D. Pantaleon for private respondents.
BELLOSILLO, J.:
The liability to a holder in due course of the drawer of checks issued to another merely as
security, and the right of a real estate mortgagee after extrajudicial foreclosure to recover the
balance of the obligation, are the issues in this Petition for Review of the Decision of respondent
Court of Appeals.
Private respondent Nora B. Moulic issued to Corazon Victoriano, as security for pieces of
jewelry to be sold on commission, two (2) post-dated Equitable Banking Corporation checks in the
amount of Fifty Thousand Pesos (P50,000.00) each, one dated 30 August 1979 and the other, 30
September 1979. Thereafter, the payee negotiated the checks to petitioner State Investment House.
Inc. (STATE).
MOULIC failed to sell the pieces of jewelry, so she returned them to the payee before
maturity of the checks. The checks, however, could no longer be retrieved as they had already been
negotiated. Consequently, before their maturity dates, MOULIC withdrew her funds from the drawee
bank.
Upon presentment for payment, the checks were dishonored for insufficiency of funds. On 20
December 1979, STATE allegedly notified MOULIC of the dishonor of the checks and requested that
it be paid in cash instead, although MOULIC avers that no such notice was given her.
On 6 October 1983, STATE sued to recover the value of the checks plus attorney's fees and
expenses of litigation.
In her Answer, MOULIC contends that she incurred no obligation on the checks because the
jewelry was never sold and the checks were negotiated without her knowledge and consent. She
also instituted a Third-Party Complaint against Corazon Victoriano, who later assumed full
responsibility for the checks.
On 26 May 1988, the trial court dismissed the Complaint as well as the Third-Party
Complaint, and ordered STATE to pay MOULIC P3,000.00 for attorney's fees.
STATE elevated the order of dismissal to the Court of Appeals, but the appellate court
affirmed the trial court on the ground that the Notice of Dishonor to MOULIC was made beyond the
period prescribed by the Negotiable Instruments Law and that even if STATE did serve such notice
on MOULIC within the reglementary period it would be of no consequence as the checks should
never have been presented for payment. The sale of the jewelry was never effected; the checks,
therefore, ceased to serve their purpose as security for the jewelry.
We are not persuaded.
The negotiability of the checks is not in dispute. Indubitably, they were negotiable. After all,
at the pre-trial, the parties agreed to limit the issue to whether or not STATE was a holder of the
checks in due course. 1
In this regard, Sec. 52 of the Negotiable Instruments Law provides —

Sec. 52. What constitutes a holder in due course. — A holder in due course
is a holder who has taken the instrument under the following conditions: (a) That it is
complete and regular upon its face; (b) That he became the holder of it before it was
overdue, and without notice that it was previously dishonored, if such was the fact;
(c) That he took it in good faith and for value; (d) That at the time it was negotiated to
him he had no notice of any infirmity in the instrument or defect in the title of the
person negotiating it.
Culled from the foregoing, a prima facie presumption exists that the holder of a negotiable
instrument is a holder in due course. Consequently, the burden of proving that STATE is not a
2
holder in due course lies in the person who disputes the presumption. In this regard, MOULIC failed.
The evidence clearly shows that: (a) on their faces the post-dated checks were complete and
regular: (b) petitioner bought these checks from the payee, Corazon Victoriano, before their due
dates; (c) petitioner took these checks in good faith and for value, albeit at a discounted price; and,
3
(d) petitioner was never informed nor made aware that these checks were merely issued to payee as
security and not for value.
Consequently, STATE is indeed 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; STATE may, therefore, enforce full payment of the checks. 4
MOULIC cannot set up against STATE the defense that there was failure or absence of
consideration. MOULIC can only invoke this defense against STATE if it was privy to the purpose for
which they were issued and therefore is not a holder in due course.
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. For the only grounds are those outlined in Sec.
119 of the Negotiable Instruments Law:
Sec. 119. Instrument; how discharged. — A negotiable instrument is
discharged: (a) By payment in due course by or on behalf of the principal debtor; (b)
By payment in due course by the party accommodated, where the instrument is
made or accepted for his accommodation; (c) By the intentional cancellation thereof
by the holder; (d) By any other act which will discharge a simple contract for the
payment of money; (e) When the principal debtor becomes the holder of the
instrument at or after maturity in his own right.
Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the
discharge of the instrument. But, the intentional cancellation contemplated under paragraph (c) is
that cancellation effected by destroying the instrument either by tearing it up, burning it, or writing
5 6
the word "cancelled" on the instrument. The act of destroying the instrument must also be made by
the holder of the instrument intentionally. Since MOULIC failed to get back possession of the post-
dated checks, the intentional cancellation of the said checks is altogether impossible.
On the other hand, the acts which will discharge a simple contract for the payment of money
under paragraph (d) are determined by other existing legislations since Sec. 119 does not specify
what these acts are, e.g., Art. 1231 of the Civil Code which enumerates the modes of extinguishing
7
obligations. Again, none of the modes outlined therein is applicable in the instant case as Sec. 119
contemplates of a situation where the holder of the instrument is the creditor while its drawer is the
debtor. In the present action, the payee, Corazon Victoriano, was no longer MOULIC's creditor at the
time the jewelry was returned.
Correspondingly, MOULIC may not unilaterally discharge herself from her liability by the
mere expediency of withdrawing her funds from the drawee bank. She is thus liable as she has no
legal basis to excuse herself from liability on her checks to a holder in due course.
Moreover, the fact that STATE failed to give Notice of Dishonor to MOULIC is of no moment.
The need for such notice is not absolute; there are exceptions under Sec. 114 of the Negotiable
Instruments Law:
Sec. 114. When notice need not be given to drawer. — Notice of dishonor is
not required to be given to the drawer in the following cases: (a) Where the drawer
and the drawee are the same person; (b) When the drawee is a fictitious person or a
person not having capacity to contract; (c) When the drawer is the person to whom
the instrument is presented for payment: (d) Where the drawer has no right to expect
or require that the drawee or acceptor will honor the instrument; (e) Where the
drawer had countermanded payment.
Indeed, MOULIC'S actuations leave much to be desired. She did not retrieve the checks
when she returned the jewelry. She simply withdrew her funds from her drawee bank and transferred
them to another to protect herself. After withdrawing her funds, she could not have expected her
checks to be honored. In other words, she was responsible for the dishonor of her checks, hence,
there was no need to serve her Notice of Dishonor, which is simply bringing to the knowledge of the
drawer or indorser of the instrument, either verbally or by writing, the fact that a specified instrument,
upon proper proceedings taken, has not been accepted or has not been paid, and that the party
notified is expected to pay it.
8
In addition, the Negotiable Instruments Law was enacted for the purpose of facilitating, not
hindering or hampering transactions in commercial paper. Thus, the said statute should not be
tampered with haphazardly or lightly. Nor should it be brushed aside in order to meet the necessities
in a single case.9
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
10
on the checks cannot prejudice the rights of holders in due course. In the instant case, such
withdrawal renders the drawer, Nora B. Moulic, liable to STATE, a holder in due course of the
checks.
Under the facts of this case, STATE could not expect payment as MOULIC left no funds with
the drawee bank to meet her obligation on the checks, so that Notice of Dishonor would be futile.
11
The Court of Appeals also held that allowing recovery on the checks would constitute unjust
enrichment on the part of STATE Investment House, Inc. This is error.
The record shows that Mr. Romelito Caoili, an Account Assistant, testified that the obligation
of Corazon Victoriano and her husband at the time their property mortgaged to STATE was
extrajudicially foreclosed amounted to P1.9 million; the bid price at public auction was only P1
million. Thus, the value of the property foreclosed was not even enough to pay the debt in full.
12
Where the proceeds of the sale are insufficient to cover the debt in an extrajudicial
foreclosure of mortgage, the mortgagee is entitled to claim the deficiency from the debtor. The step
13
thus taken by the mortgagee-bank in resorting to an extra-judicial foreclosure was merely to find a
proceeding for the sale of the property and its action cannot be taken to mean a waiver of its right to
demand payment for the whole debt. For, while Act 3135, as amended, does not discuss the
14
mortgagee's right to recover such deficiency, it does not contain any provision either, expressly or
impliedly, prohibiting recovery. In this jurisdiction, when the legislature intends to foreclose the right
of a creditor to sue for any deficiency resulting from foreclosure of a security given to guarantee an
obligation, it so expressly provides. For instance, with respect to pledges, Art. 2115 of the Civil
Code does not allow the creditor to recover the deficiency from the sale of the thing pledged.
15
Likewise, in the case of a chattel mortgage, or a thing sold on installment basis, in the event of
foreclosure, the vendor "shall have no further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary will be void". 16
It is clear then that in the absence of a similar provision in Act No. 3135, as amended, it
cannot be concluded that the creditor loses his right recognized by the Rules of Court to take action
for the recovery of any unpaid balance on the principal obligation simply because he has chosen to
extrajudicially foreclose the real estate mortgage pursuant to a Special Power of Attorney given him
by the mortgagor in the contract of mortgage. 17
The filing of the Complaint and the Third-Party Complaint to enforce the checks against
MOULIC and the VICTORIANO spouses, respectively, is just another means of recovering the
unpaid balance of the debt of the VICTORIANOs.
In fine, MOULIC, as drawer, is liable for the value of the checks she issued to the holder in
due course, STATE, without prejudice to any action for recompense she may pursue against the
VICTORIANOs as Third-Party Defendants who had already been declared as in default.
WHEREFORE, the petition is GRANTED. The decision appealed from is REVERSED and a
new one entered declaring private respondent NORA B. MOULIC liable to petitioner STATE
INVESTMENT HOUSE, INC., for the value of EBC Checks Nos. 30089658 and 30089660 in the
total amount of P100,000.00, P3,000.00 as attorney's fees, and the costs of suit, without prejudice to
any action for recompense she may pursue against the VICTORIANOs as Third-Party Defendants.
Costs against private respondent.
SO ORDERED.
Cruz and Griño-Aquino, JJ., concur.
Padilla, J., took no part.

# Footnotes
1 Rollo, pp. 13-14.
2 State Investment House, Inc. v. Court of Appeals, G.R. No. 72764, 13 July 1989;
175 SCRA 310.
3 Per Deeds of Sale of 2 July 1979 and 25 July 1979, respectively; Rollo, p. 13.
4 Salas v. Court of Appeals, G.R. No. 76788, 22 January 1990; 181 SCRA 296.
5 Montgomery v. Schwald, 177 Mo App 75, 166 SW 831; Wilkins v. Shaglund, 127
Neb 589, 256 NW 31.
6 See Henson v. Henson, 268 SW 378.
7 Art. 1231. Obligations are extinguished: (1) By payment or performance; (2) By the
loss of the thing due; (3) By the condonation or remission of the debt; (4) By the
confusion or merger of the rights of creditor and debtor; (5) By compensation; (6) By
novation . . . . .
8 Martin v. Browns, 75 Ala 442.
9 Reinhart v. Lucas, 118 W Va 466, 190 SE 772.
10 11 Am Jur 589.
11 See Agbayani, Commercial Laws of the Philippines, Vol. 1, 1984 Ed., citing
Ellenbogen v. State Bank, 197 NY Supp 278.
12 TSN, 25 April 1985, pp. 16-17.
13 Philippine Bank of Commerce v. de Vera, No. L-18816, 29 December 1962;
6 SCRA 1029.
14 Medina v. Philippine National Bank, 56 Phil 651.
15. Art. 2115. The sale of the thing pledged shall extinguish the principal obligation,
whether or not the proceeds of the sale are equal to the amount of the principal
obligation, interest and expenses in a proper case. . . . If the price of the sale is less,
neither shall the creditor be entitled to recover the deficiency, notwithstanding any
stipulation to the contrary.
16 Art. 1484 [3] of the Civil Code.
17 See Note 14.
4. State Investment House, Inc. vs. IAC, 175 SCRA 310 (1989)
G.R. No. 72764 July 13, 1989
Macalino, Salonga & Associates for petitioner.
Edgardo F. Sundiam for respondents.
FERNAN, C.J.:
Petitioner State Investment House seeks a review of the decision of respondent Intermediate
Appellate Court (now Court of Appeals) in AC-G.R. CV No. 04523 reversing the decision of the
Regional Trial Court of Manila, Branch XXXVII dated April 30, 1984 and dismissing the complaint for
collection filed by petitioner against private respondents Spouses Anita Pena Chua and Harris Chua.
It appears that shortly before September 5, 1980, New Sikatuna Wood Industries, Inc.
requested for a loan from private respondent Harris Chua. The latter agreed to grant the same
subject to the condition that the former should wait until December 1980 when he would have the
money. In view of this agreement, private respondent-wife, Anita Pena Chua issued three (3)
crossed checks payable to New Sikatuna Wood Industries, Inc. all postdated December 22, 1980 as
follows:
DRAWEE BANK CHECK NO. DATE AMOUNT
1. China Banking Corporation 589053 Dec. 22, 1980 P98,750.00
2. International Corporate Bank 04045549 Dec. 22, 1980 102,313.00
3. Metropolitan Bank & Trust Co. 036512 Dec. 22, 1980 98,387.00
The total value of the three (3) postdated checks amounted to P 299,450.00.
Subsequently, New Sikatuna Wood Industries, Inc. entered into an agreement with herein
petitioner State Investment House, Inc. whereby for and in consideration of the sum of Pl,047,402.91
under a deed of sale, the former assigned and discounted with petitioner eleven (11) postdated
checks including the aforementioned three (3) postdated checks issued by herein private
respondent-wife Anita Peña Chua to New Sikatuna Wood Industries, Inc.
When the three checks issued by private respondent Anita Pena Chua were allegedly
deposited by petitioner, these checks were dishonored by reason of "insufficient funds", "stop
payment" and "account closed", respectively. Petitioner claims that despite demands on private
respondent Anita Peña to make good said checks, the latter failed to pay the same necessitating the
former to file an action for collection against the latter and her husband Harris Chua before the
Regional Trial Court of Manila, Branch XXXVII docketed as Civil Case No. 82-10547.
Private respondents-defendants filed a third party complaint against New Sikatuna Wood
Industries, Inc. for reimbursement and indemnification in the event that they be held liable to
petitioner-plaintiff. For failure of third party defendant to answer the third party complaint despite due
service of summons, the latter was declared in default.
On April 30, 1984, the lower court rendered judgment against herein private respondents
1
spouses, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff or against the
defendants ordering the defendants to pay jointly and severally to the plaintiff the
following amounts:
1. P 229,450.00 with interest at the rate of 12% per annum from
February 24,1981 until fully paid;
2. P 29,945.00 as and for attorney's fees; and
3. the costs of suit.
On the third party complaint, third party defendant New Sikatuna Wood Industries,
Inc. is ordered to pay third party plaintiffs Anita Pena Chua and Harris Chua all
amounts said defendants' third- party plaintiffs may pay to the plaintiff on account of
this case.
2
On appeal filed by private respondents in AC-G.R. CV No. 04523, the Intermediate Appellate
Court (now Court of Appeals) reversed the lower court's judgment in the now assailed decision, the
3
dispositive portion of which reads:

WHEREFORE, finding this appeal meritorious, We Reverse and Set Aside the
appealed judgment, dated April 30, 1984 and a new judgment is hereby rendered
dismissing the complaint, with costs against plaintiff-appellee.
4
Hence, this petition.

The pivotal issue in this case is whether or not petitioner is a holder in due course as to
entitle it to proceed against private respondents for the amount stated in the dishonored checks.
Section 52(c) of the Negotiable Instruments Law defines a holder in due course as one who
takes the instrument "in good faith and for value". On the other hand, Section 52(d) provides that in
order that one may be a holder in due course, it is necessary that "at the time the instrument was
negotiated to him he had no notice of any x x x defect in the title of the person negotiating it."
However, under Section 59 every holder is deemed prima facie to be a holder in due course.
Admittedly, the Negotiable Instruments Law regulating the issuance of negotiable checks as
well as the lights and liabilities arising therefrom, does not mention "crossed checks". But this Court
has taken cognizance of the practice that a check with two parallel lines in the upper left hand corner
means that it could only be deposited and may not be converted into cash. Consequently, such
circumstance should put the payee on inquiry and upon him devolves the duty to ascertain the
holder's title to the check or the nature of his possession. Failing in this respect, the payee is
declared guilty of gross negligence amounting to legal absence of good faith and as such the
consensus of authority is to the effect that the holder of the check is not a holder in good faith.
5
Petitioner submits that at the time of the negotiation and endorsement of the checks in
question by New Sikatuna Wood Industries, it had no knowledge of the transaction and/or
arrangement made between the latter and private respondents.
We agree with respondent appellate court.
Relying on the ruling in Ocampo v. Gatchalian (supra), the Intermediate Appellate Court
(now Court of Appeals), correctly elucidated that the effects of crossing a check are: the check may
not be encashed but only deposited in the bank; the check may be negotiated only once to one who
has an account with a bank; and the act of crossing the check serves as a warning to the holder that
the check has been issued for a definite purpose so that he must inquire if he has received the
check pursuant to that purpose, otherwise he is not a holder in due course. Further, the appellate
court said:
It results therefore that when appellee rediscounted the check knowing that it
was a crossed check he was knowingly violating the avowed intention of crossing the
check. Furthermore, his failure to inquire from the holder, party defendant New
Sikatuna Wood Industries, Inc., the purpose for which the three checks were cross
despite the warning of the crossing, prevents him from being considered in good faith
and thus he is not a holder in due course. Being not a holder in due course, plaintiff
is subject to personal defenses, such as lack of consideration between appellants
and New Sikatuna Wood Industries. Note that under the facts the checks were
postdated and issued only as a loan to New Sikatuna Wood Industries, Inc. if and
when deposits were made to back up the checks. Such deposits were not made,
hence no loan was made, hence the three checks are without consideration (Sec. 28,
Negotiable Instruments Law).
Likewise New Sikatuna Wood Industries negotiated the three checks in
breach of faith in violation of Article (sic) 55, Negotiable Instruments Law, which is a
personal defense available to the drawer of the check. 6
In addition, such instruments are mentioned in Section 541 of the Negotiable Instruments
Law as follows:
Sec. 541. The maker or any legal holder of a check shall be entitled to
indicate therein that it be paid to a certain banker or institution, which he shall do by
writing across the face the name of said banker or institution, or only the words "and
company."
The payment made to a person other than the banker or institution shall not
exempt the person on whom it is drawn, if the payment was not correctly made.
Under usual practice, crossing a check is done by placing two parallel lines diagonally on the
left top portion of the check. The crossing may be special wherein between the two parallel lines is
written the name of a bank or a business institution, in which case the drawee should pay only with
the intervention of that bank or company, or crossing may be general wherein between two parallel
diagonal lines are written the words "and Co." or none at all as in the case at bar, in which case the
drawee should not encash the same but merely accept the same for deposit.
The effect therefore of crossing a check relates to the mode of its presentment for payment.
Under Section 72 of the Negotiable Instruments Law, presentment for payment to be sufficient must
be made (a) by the holder, or by some person authorized to receive payment on his behalf ... As to
who the holder or authorized person will be depends on the instructions stated on the face of the
check.
The three subject checks in the case at bar had been crossed generally and issued payable
to New Sikatuna Wood Industries, Inc. which could only mean that the drawer had intended the
same for deposit only by the rightful person, i.e., the payee named therein. Apparently, it was not the
payee who presented the same for payment and therefore, there was no proper presentment, and
the liability did not attach to the drawer.
Thus, in the absence of due presentment, the drawer did not become liable. Consequently,
7
no right of recourse is available to petitioner against the drawer of the subject checks, private
respondent wife, considering that petitioner is not the proper party authorized to make presentment
of the checks in question.
Yet it does not follow as a legal proposition that simply because petitioner was not a holder
in due course as found by the appellate court for having taken the instruments in question with
notice that the same is for deposit only to the account of payee named in the subject checks,
petitioner could not recover on the checks. The Negotiable Instruments Law does not provide that a
holder who is not a holder in due course may not in any case recover on the instrument for in the
case at bar, petitioner may recover from the New Sikatuna Wood Industries, Inc. if the latter has no
valid excuse for refusing payment. The only disadvantage of a holder who is not in due course is that
the negotiable instrument is subject to defenses as if it were non-negotiable.
8
That the subject checks had been issued subject to the condition that private respondents on
due date would make the back up deposit for said checks but which condition apparently was not
made, thus resulting in the non-consummation of the loan intended to be granted by private
respondents to New Sikatuna Wood Industries, Inc., constitutes a good defense against petitioner
who is not a holder in due course.
WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against
petitioner.
SO ORDERED.
Gutierrez, Jr., Bidin and Cortes, JJ., concur.
Feliciano, J., is on leave.

Footnotes
1 Presided over by then Judge (now Court of Appeals Justice) Bienvenido C.
Ejercito.
2 Petition, Annex "A", RTC Decision, Rollo, pp. 42- 43.
3 Penned by Justice Eduardo P. Caguioa, concurred in by Presiding Justice Ramon
G. Gaviola, Jr., Justices Ma. Rosario Quetulio-Losa and Leonor Ines-Luciano.
4 Rollo, p. 51.
5 Ocampo & Co. v. Gatchalian, 3 SCRA 603 (1961).
6 Petition, Annex "B", IAC Decision, Rollo, pp. 50- 51.
7 Chan Wan v. Tan Kim and Chen So, L-15380, September 30, 1960,109 Phil. 706
(1960).
8 Chan Wan v. Tan Kim and Chen So, supra.
5. PNB vs. Seato, 91 Phil 756 (1952) G.R. No. L-4388, August 13, 1952
Ramon B. de los Reyes for petitioner.
Montano A. Ortiz for respondent.
LABRADOR, J.:
On March 13, 1948, respondent Benito Seeto called at the branch of the Philippine National
Bank, petitioner herein, at Surigao, and presented a check, No. A-21096, in the amount of P5,000
dated at Cebu on March 10, 1948, payable to cash or bearer, and drawn by one Gan Yek Kiao
against the Cebu branch of the Philippine National Bank of Communications. After consultation with
the employees of the branch, Seeto made a general and unqualified indorsement of the check, and
petitioner's agency accepted it and paid respondent the amount of P5,000 therefor. The check was
mailed to petitioner's Cebu branch on March 20, 1948, and was presented to the drawee bank for
payment on April 9, 1948, but the check was dishonored for "insufficient funds." So the check was
returned to petitioner's Surigao agency, and upon receipt thereof by it on April 14, 1948, said branch
immediately sent a letter to the respondent herein demanding immediate refund of in the value of the
check. A second communication of the same tenor was sent on April 26, 1948, to which respondent
answered asking that plaintiff's contemplated suit be deferred while he was making inquiries about
the reasons for the dishonor of the check. Thereafter, respondent refused to make the refund
demanded, claiming that at the time of the negotiation o the check the drawer had sufficient funds in
the drawee bank, and that the petitioner's Surigao agency not delayed to forward the check until the
drawer's funds were exhausted, the same would have been paid.
Thereupon petitioner presented a complaint in the Court of First Instance of Surigao, alleging
that respondent Benito Seeto gave assurance to petitioner's agency in Surigao that the drawer of the
check had sufficient funds with the drawee bank, and that upon these assurances petitioner's
agency delivered the P5,000 to the respondent after the latter had made a general and unqualified
indorsement thereon. Respondent denied having made the alleged assurances. Upon this issue
petitioner submitted two witnesses at the time of the trial, who testified that it was not the practice of
petitioner's agency to cash out of town checks, and that the check was cashed because of the
assurances given by the respondent that the drawer had sufficient funds, and that he (respondent)
would refund the amount paid by petitioner's agency in case the check is dishonored. Respondent
denied having given the assurances. The trial court found notwithstanding respondent's denial to the
contrary, that the respondent made an undertaking to refund the amount of the checks in the event
of dishonor. In support of this finding it found that as the drawee bank is not in Cebu, it was
impossible for petitioner's agency to make an independent verification of the drawer's solvency, and
must have taken precautions to protect itself against loss by requiring the respondent to give
assurances that he would return the amount of the check in the case of nonpayment. It also found
that there was no unreasonable delay in the presentation of the check, and, therefore, rendered
judgment sentencing respondent to refund the amount he had received for the check.
On appeal to the Court of Appeals, this court held that petitioner was guilty of unreasonably
retaining and with-holding the check, and that the delay in the presentment for payment was
inexcusable, so that respondent was thereby discharged from liability. It also held that parol
evidence is incompetent to show that one signing of a check as indorser is merely a surety or
guarantor, rejecting the evidence adduced at the trial court about the respondent's assurance and
promise to refund. It, therefore, reversed the judgment of the trial court and dismissed the complaint,
with costs. Against this judgment an appeal by certiorari has been brought to this Court, petitioner
Philippine National Bank contending that the Court of Appeals erred in applying sections 143 and
144 of the Negotiable Instruments Law and declaring respondent Benito Seeto discharged of his
liability as indorser of the check, and in not admitting parol evidence to show that respondent made
oral assurances to refund the value of the check in case of dishonor.
In support of petitioner's first assignment of error, it is argued that inasmuch as a check need
not to be presented for acceptance, unlike a bill of exchange as required by Section 143, Section
144 of the law is not applicable to the case at bar but Section 84, which provides:
SEC. 84. Liability of person secondarily liable, when instrument dishonored. —
Subject to the provisions of this Act, when the instrument is dishonored by nonpayment, as
immediate right of recourse to all parties secondarily liable thereon accrues to the holder.
It is true that Section 143 and 144 of the law are not applicable, because these are
provisions having to do with the presentation of a bill of exchange for acceptance, and are not
applicable to a check, as to which presentment for acceptance is not required.
It is also true that Section 84 is applicable, but its application is subject to the condition
imposed by Section 186, to the effect that the check must be presented for payment within a
reasonable time after its issue.
SEC. 186. — Within what time a check must be presented. — 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.
Counsel for the petitioner, however, argues that inasmuch as the above section expressly
provides for the discharge of the drawer from liability to the extent of the loss caused by the delay,
and, on the other hand, it is silent as to the liability of the indorser, the latter may not be considered
discharged from liability by reason of the delay in the presentment of payment under the general
principle inclusio unius est exclusion alterius. We find no reason nor merit in the argument. The
silence of Section 186 as to the indorser is due to the fact that his discharge is already expressly
covered by the provision of Section 84, the indorser being a person secondarily liable on the
instrument. The reason for the difference between the liability of the indorser and that of the drawer
in case of dishonor is that the drawer is not probably or necessarily prejudiced thereby, while an
indorser is, actually or by legal presumption.
Innumerable decisions have already been rendered in the state courts of the United States
to the effect that although the drawer of a check is discharged only to the extent of loss caused by
unreasonable delay in presentment, an indorser is wholly discharged thereby irrespective of any
question of loss or injury. ( Swift & Co. vs. Miller, 62 Ind. App. 312, 113 N.E. 447, cited in Brannan's
Negotiable Instruments Law, p. 1134, Nuzum vs. Sheppard, 87 W. Va. 243, 104 S.E. 587, 11 A.L.R.
1024, Ibid.)
The proposition maintained in the reported case (Nuzum vs. Sheppard., ante. 1024)
that the indorser of a check, unlike the drawer, is relieved of liability thereon by an
unreasonable delay in presenting the same for payment, whether or not he is injured by the
delay, is supported by the great weight of authority, (Cases cited.)
The Court, in Gough v. Staats (N.Y.) supra, says: "Upon the question of due
diligence to charge an indorser, whether he has been prejudiced or not by the delay is
perfectly immaterial. It is not inquired into. The law presumes he has been prejudiced."
According to the Court in Caroll v. Sweet (1891) 128 N.Y. 19, 13 L.R.A. 43, 27 N.E. 763,
"presentment to due time as fixed by the law merchant was a condition upon performance of
which the liability of the defendant, as indorser, depended, and this delay was not excused,
although the drawer of the check had no funds, or was insolvent, or because presentment
would not been unavailing as a means of procuring payment." Only where there is affirmative
proof that the indorser knew when he cashed the check that there would be no funds in the
bank to meet it can the rule be avoided. Otherwise, the failure to present the check in due
course of payment will discharge the indorser even though such presentment would have
been unavailing. Start v. Tupper (Vt.) supra. (11 A.L.R. Annotation, pp. 1028-1029.)
We have been unable to find any authority sustaining the proposition that an indorser of a
check is not discharged from liability for an unreasonable delay in presentation for payment. This is
contrary to the essential nature and character of negotiable instruments — their negotiability. They
are supposed to be passed on with promptness in the ordinary course of business transactions; not
to be retained or kept for such time as the holder may want, otherwise the smooth flow of
commercial transactions would be hindered.
There seems to be an intimation in the decision appealed from that inasmuch as the check
was drawn payable elsewhere than at the place of business of the drawer, it must be presented for
acceptance or negotiable within a reasonable time, and upon failure to do so the drawer and all
indorsers thereof are discharged pursuant to Section 144 of the law. Against this insinuation the
petitioner argues that the application of sections 143 and 144 is not proper, and that it may not be
presumed that the check in question was not drawn and executed in Cebu, the residence or place of
business of the drawer. There is no evidence at all as to the place where the check was drawn.
However, we have already pointed out above that neither Section 143 nor Section 144 is applicable.
But our ruling that respondent was discharged upon the dishonor of the check is based on Sections
84 and 186, the latter expressly requiring that a check must be presented for payment within a
reasonable time after issue.
It is not claimed by the petitioner on this appeal that the conclusion of the Court of Appeals
that there was unreasonable delay in the presentation of the check for payment at the drawee bank
is erroneous. The petitioner concedes the correctness of this conclusion, although for purposes of
argument merely. We find that the conclusion is correct. The fact, admitted by the witnesses for the
petitioner, the checks for the drawer issued subsequent to March 13, 1948, drawn against the same
bank and cashed at the same Surigao agency, were not dishonored positively shows that the drawer
had enough funds when he issued the check in question, and that had it not been for the
unreasonable delay in its presentation for payment, the petitioner herein would have been able to
receive payment therefor. The check is dated March 10, and was cashed by the petitioner's agency
on March 13, 1948. It was not mailed until seven days thereafter, i.e., on March 20, 1948, or ten
days after issue. No excuse was given for this delay. Assuming that it took one week, or say ten
days, or until March 30, for the check to reach Cebu, neither can there be any excuse for not
presenting it for payment at the drawee bank until April 9, 1948, or 10 days after it reached Cebu.
We, therefore, find no reason for disturbing the conclusion of the Court of Appeals that there was
unreasonable delay in the presentation of the check for payment at the drawee bank, and that is a
consequence thereof, the indorser, respondent herein, was thereby discharged.
With respect to the second assignment of error, petitioner argues that the verbal assurances
given by the respondent to the employees of the bank that he was ready to refund the amount if the
check should be dishonored by the drawee bank is a collateral agreement, separate and distinct
from the indorsement, by virtue of which petitioner herein was induced to cash the check, and,
therefore, admissible as an exception that the parol evidence rule. Petitioners contention in this
respect is not entirely unfounded. In the case of Tan Machan vs. De La Trinidad, et al., 4 Phil., 684,
this court held that parol evidence is admissible to show that parties signing as principals merely did
so as sureties. In the case of Robles vs. Lizarraga Hermanos, 50 Phil., 387, it was also held by this
court that parol evidence is admissible to prove "an independent thereof." (Ibid., p. 395.) In Philips
vs. Preston, 5 How. (U.S.) 278, 12 L. ed, 152, the Supreme Court of the United States held that any
prior or contemporaneous conversation in connection with a note or its indorsement, may be proved
by parol evidence. And Wigmore states that "an extrinsic agreement between indorser and indorsee
which cannot be embodied in the instrument without impairing its credit is provable by parol." (9
Wigmore 148, section 2445 [3].) If, therefore, the supposed assurances that the drawer had funds
and that the respondent herein would refund the amount of the check if the drawer had no funds,
were the considerations or reasons that induced the branch agency of the petitioners to go out of its
ordinary practice of not cashing out of town checks and accept the check and to pay its face value,
the same would be provable by parol, provided, of course, that the assurances or inducements
offered would not vary, alter, or destroy the obligations attached by law to the indorsement.
We find, however, that the supposed assurances of refund in case of dishonor of the check
are precisely the ordinary obligations of an indorser, and these obligations are, under the law,
considered discharged by an unreasonable delay in the presentation of the check for payment.
SEC. 66. Liability of general indorser. — . . . .
And, in addition, he engages that on due presentment, it shall be accepted or paid, or
both, as the case may be, according to its tenor, and that if it be dishonored, and the
necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the
holder, or to any subsequent indorser who may be compelled to pay it. (Emphasis ours.)
There was no express obligation assumed by the respondent herein that the drawer would
always have funds, or that he (the indorser) would refund the amount of the check even if there was
delay in its presentation, so that while the Court of Appeals may have committed an error in
disregarding the evidence submitted by petitioner at the trial of the assurances made by respondent
herein at the time of the negotiation of the check, such error was without prejudice, because the
supposed assurances given were part of his obligations as an indorser, which were discharged by
the unreasonable delay in the presentation of the check for payment.
The judgment appealed from is, therefore, affirmed, with costs against the petitioner.
Paras, C.J., Feria, Bengzon, Padilla, Tuason, Montemayor and Bautista Angelo, JJ., concur.
6. Ambito, et.al. vs. People and CA (G.R. No. 127327 February 13, 2009)
LEONARDO-DE CASTRO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil
Procedure of the Decision1 of respondent Court of Appeals (CA), dated March 29, 1996, in CA-G.R.
CR No. 12727, entitled People of the Philippines v. Liberata Ambito, et al., filed by petitioners
Liberata Ambito, Basilio Ambito and Crisanto Ambito. The assailed CA decision affirmed the
judgment of conviction of multiple charges of violation of Batas Pambansa Blg. 22 (B.P. Blg. 22)
meted upon co-petitioner Basilio Ambito; multiple charges of the complex offense of Estafa through
Falsification of Commercial Documents, defined and penalized in Articles 48, 171, 172 and 315 of
the Revised Penal Code (RPC), meted upon co-petitioners Liberata and Basilio Ambito; and two
charges of Falsification of Commercial Document, as defined and penalized under Articles 171 and
172 of the RPC, meted upon co-petitioner Crisanto Ambito in the Decision 2 rendered by the Regional
Trial Court (RTC) of Iloilo City, Branch 26, dated November 29, 1990, in the consolidated Criminal
Case Nos. 14556 to 14587.
The facts of this case, as summarized in the assailed CA decision, are as follows:
Basilio Ambito and Liberata Ambito were the principal owners of two rural banks in the
province of Iloilo namely, the Community Rural Bank of Leon, Inc., in the municipality of Leon, and
the Rural Bank of Banate, Inc. in the municipality of Banate. In addition, the spouses Ambito were
the owners of Casette [Kajzette] Enterprises, a commercial establishment in Jaro, Iloilo City engaged
in procuring farm implements intended for the use of the agricultural loan borrowers of the said
banks. The spouses Ambito obtained their supply of farm implements and spare parts from the Iloilo
City branch of Pacific Star Inc. which was then engaged in selling ‘Yanmar’ machineries and spare
parts.
On several occasions in 1979, the spouses Basilio Ambito and Liberata Ambito transacted
business with Pacific Star, Inc. whereby they purchased Yanmar machineries and spare parts from
the said company allegedly for the use of the loan borrowers of their banks. In these transactions,
the spouses Ambito made down payments in their purchases either in case, in checks or in
certificates of time deposit issued by the Rural Bank of Banate, Inc. and the Community Rural Bank
of Leon, Inc.
However, when the Manila Banking Corporation (Manila Bank) checks issued by Basilio
Ambito as down payment of their purchases were presented for payment by the drawee bank, the
same were dishonored for insufficiency of funds. These are Check No. 79173946 dated June 20,
1979 in the amount of ₱39,168.75 (Exh. ‘A’, CC No. 14556); Check No. 79173948 dated June 15,
1979 in the amount of ₱75,595.00 (Exh. ‘A’, CC 14557); Check No. 79173947 dated June 30, 1979
in the amount of ₱45,957.00 (Exh. ‘A’, CC No. 14558); Check No. 79182639 dated October 18, 1979
in the amount of ₱4,501.36 (Exh. ‘A’, CC No. 14559); Check No. 79182638 dated September 27,
1979 in the amount of ₱1,957.60 (Exh. ‘A’, CC No. 14560); Check No. 79182637 dated September
18, 1979 in the amount of P 2,425.50 (Exh. ‘A’, CC No. 14561) and Check No. 79175930 dated
August 9, 1979 in the amount of ₱2,875.25 (Exh. ‘A’, CC No. 14562).
At the time the spouses Basilio Ambito and Liberata Ambito made purchases of farm
implements from the Pacific Star, Inc. in 1979, the general manager of the Rural Bank of Banate,
Inc. was Liberata Ambito herself and the cashier, Marilyn Traje, while the general manager of the
Community Rural Bank of Leon, Inc. was Crisanto Ambito, brother of Basilio Ambito, and the
cashier, Reynaldo Baron.
On three separate occasions, Liberata Ambito forced the cashier of the Rural Bank of
Banate, Marilyn Traje, to sign several blank certificates of time deposit and to give the same to her
alleging that she needed the said certificates in connection with some transactions involving the
bank. Marilyn Traje at first refused to give Liberata Ambito the said certificates but the latter scolded
her, at the same time assuring her that she would be responsible to anybody for the issuance of said
certificates including personnel and investigators of the Central Bank tasked with the examination of
the accounts of the bank. Afraid that she would lose her job if she would not follow Liberata Ambito.
Marilyn Traje signed and gave the blank certificates of time deposit to her without receiving any
consideration therefore.
The same thing happened to Reynaldo Baron, the cashier of the Community Rural Bank of
Leon, Inc. who was asked by the spouses Ambito as well as the manager of the bank, Crisanto
Ambito, to sign and give blank certificates of time deposit to them. Reynaldo Baron was at first
hesitant to accommodate the request of the Ambitos but due to their persistence and considering
that they were his superiors and owners of the bank, Baron signed the certificates of time deposit in
blank and gave the same to the Ambitos. When Baron asked for the duplicate copies of the
certificates, he was told that they were still negotiating with Pacific Star, Inc. Later, the Ambitos told
Baron that the transaction was cancelled and that he should just cause the printing of similar blank
certificates by the Apostol Printing Press in Iloilo City. Baron got scared and objected to the idea
vouched to him by the Ambitos until finally he resigned from his job because he could no longer
withstand the pressure exerted on him involving transactions he believed were anomalous. Baron
worked as cashier of the Community Rural Bank of Leon, Inc. from August to December 1979. When
the Central Bank investigators came and conducted examination of the records and transactions of
the bank, Baron reported the anomalies to them.
The blank certificates of time deposit of the Rural Bank of Banate, Inc. obtained by the
spouses Basilio and Liberata Ambito from Marilyn Traje were filled up with the amounts of deposit
and the name of the Pacific Star, Inc. as depositor and used by the spouses as down payments of
the purchase price of the machineries and spare parts purchased from the Pacific Star, Inc. These
certificates of time deposit are as follows:
1. Certificate of Time Deposit No. 079, due date May 7, 1979, in the amount of
₱7,276.50 (Exh. ‘A’, Crim. Case No. 14563) as down payment of the articles covered by
Sales Invoice No. 3002 dated November 9, 1978 of Pacific Star, Inc. (Exh. ‘A-1’, Crim. Case
No. 14563);
2. Certificate of Time Deposit Nos. 083 and 085 both with due date May 14, 1979 in the
amounts of ₱17,283.00 and ₱3,132.00, respectively (Exhs. ‘A’ and ‘A-1’, Crim. Case No.
14564) as down payment. Sales Invoice Nos. 3003, 3004 and 3005 (Exhs. ‘A-1’, ‘A-2’ and
‘A-3’, Crim. Case No. 14564);
₱11,896.50 (Exh. ‘A’, Crim. Case No. 14565) as down payment, Sales Invoice No. 3006
(Exh. ‘A-1’, Crim. Case No. 14565);
4. Certificate of Time Deposit No. 087, due date May 27, 1979 (Exh. ‘A’, Crim. Case No.
14566) in the amount of ₱7,945.00 as down payment, Sales Invoice No. 3007 dated
November 27, 1978 and Sales Invoice No. 3008 dated November 28, 1978 in the total
amount of ₱7,945.00 (Exhs. ‘A-1’ and ‘A-2’, Crim. Case No. 14566);
₱17,090.50 (Exh. ‘A’, Crim. Case No. 14567) as down payment, Sales Invoices Nos. 3009
and 3010 both date December 1, 1978 (Exhs. ‘A-1’ and ‘A-2’, Crim. Case No. 14567);
6. Certificate of Time Deposit No. 095, due date June 20, 1979 in the amount of
₱24,062.50 (Exh. ‘A’, Crim. Case No. 14568) as down payment in Sales Invoice Nos. 3031
dated December 11, 1978 (Exh. ‘A-1’, Crim. Case No. 14568);
₱17,090.50 (Exh. ‘A’, Crim. Case No. 14567) as down payment in Sales Invoice No. 3035
8. Certificate of Time Deposit No. 097, due date June 13, 1979, in the amount of
and 3067 both dated January 3, 1979 (Exhs. ‘A-1’ and ‘A-2’, Crim. Case No. 14570);
9. Certificate of Time Deposit No. 098, due date June 16, 1979, in the amount of
dated January 10, 1979 and Sales Invoice No. 3091 dated January 16, 1979 (Exhs. ‘A-1’
and ‘A-2’, Crim. Case No. 14571);
10. Certificate of Time Deposit No. 099, due date July 22, 1979, in the amount of
₱27,226.50 (Exh. ‘A’, Crim. Case No. 14572 as down payment in Sales Invoice No. 3097
dated January 23, 1979 (Exh. ‘A-1’, Crim. Case No. 14572);
11. Certificate of Time Deposit No. 100, due date July 25, 1979, in the amount of
dated January 25, 1979 (Exh. ‘A-1’, Crim. Case No. 14573);
12. Certificate of Time Deposit No. 101, due date July 28, 1979 in the amount of
₱3,132.50 (Exh. ‘A’; Crim. Case No. 14574) as down payment in Sales Invoice No. 3106
13. Certificate of Time Deposit No. 102, due date August 15, 1979 in the amount of
₱21,420.00 (Exh. ‘A’, Crim. Case No. 14575) in payment of Sales Invoice No. 3120 dated
February 8, 1979, Sales Invoice No, 3121 dated February 8, 1979 and Sales Invoice No.
3126 dated February 12, 1979, (Exhs. ‘A-1’, ‘A-2’ and ‘A-3’, Crim Case No. 14575);
14. Certificate of Time Deposit No. 105, due date August 14, 1979, in the amount of
₱25,375.00 (Exh. ‘A’, Crim. Case No. 14576) as down payment of Sales Invoice No. 3129
dated February 15, 1979 (Exh. ‘A-1’, Crim. Case No. 14576);
₱58,712.50 (Exh. ‘A’, Crim. Case No. 14577) as down payment of Sales Invoice No. 3134
dated February 17, 1977 (Exh. ‘A-1’, Crim. Case No. 14577);
₱16,205.00 (Exh. ‘A’, Crim. Case No. 14578) and Certificate of Time Deposit No. 104, due
date September 18, 1979, in the amount of ₱2,730.00 (Exh. ‘A-1’, Crim. Case No. 14578) as
down payment in Sales Invoice No. 3137 dated February 22, 1979 and Sales Invoice No.
3178 dated March 22, 1979;
17. Certificate of Time Deposit No. 108, due date October 15, 1979, in the amount of
₱78,277.50 (Exh. ‘A’, Crim. Case No. 14579) as down payment in Sales Invoice Nos. 3215,
3216 and 3217 all dated April 18, 1979, (Exhs. ‘A-1’, ‘A-2’ and ‘A-3’, Crim. Case No. 14579);
dated April 19, 1979 (Exh. ‘A-1’, Crim. Case No. 14580);
and 3241 both dated April 25, 1979 (Exhs. ‘A-1’ and ‘A-2’, Crim. Case No. 145810);
dated May 2, 1979 (Exh. ‘A-1’, Crim. Case No. 14582);
21. Certificates of Time Deposit Nos. 112, 113, 114, 115, 116, 117 and 118 all dated
November 1, 1979 in the amounts of ₱57,750.00, ₱93,933.00, ₱21,393.75, ₱12,285.00,
₱13,860.00, ₱20,002.50 and ₱156,555.00 respectively (Exhs. ‘A’, ‘A-1’, ‘A-2’, ‘A-3’, ‘A-4’, ‘A-
5’, ‘A-6’, Crim. Case No. 14583) as down payment in Sales Invoice Nos. 3423 to 3429,
inclusive (Exhs. ‘A-7’ to ‘A-13’, inclusive, Crim. Case No. 14583);
22. Certificate of Time Deposit No. 119, due date December 18, 1979, in the amount of
dated June 21, 1979 (Exh. ‘A-1’, Crim. Case No. 14584);
23. Certificate of Time Deposit No. 134, due date January 23, 1980, in the amount of
dated July 27, 1979 (Exh. ‘A-1’, Crim. Case No. 14585);
The certificates of time deposit of the Community Rural Bank of Leon found to have been
falsified are (1) Certificate of Time Deposit No. 039 , due date February 4, 1980 in the amount of
₱32,555.25 (Exh. ‘A’, Crim. Case No. 14586) and (2) Certificate of Time Deposit No. 040, due date
February 14, 1980 in the amount of ₱9,103.19 (Exh. ‘A’, Crim. Case No. 14587).
The said certificates of time deposit supposedly issued by the Rural Bank of the Banate, Inc.
and the Community Rural Bank of Leon, Inc. were unfunded and not covered by any deposit so that
when presented for redemption by the (sic) Pacific Star, Inc., the same were not honored. As a
consequence, Pacific Star, Inc. suffered actual damages in the amounts representing the total value
of the machineries and spare parts sold and delivered by the complainant to the Ambitos and the
latter failed and refused to pay the same despite demands on them.
In view of the anomalous transactions entered into by the Ambitos, both the Rural Bank of
Banate, Inc. and the Community Rural Bank of Leon, Inc. became insolvent and so sometime in May
7, 1980, the Central Bank of the Philippines placed both banks under receivership and liquidation.
Maria Luz Preires, bank examiner of the Central Bank, was appointed deputy receiver and later
deputy liquidator of the Community Rural Bank of Leon. The Central Bank took over the affairs and
records of the banks including their deposits, assets and liabilities. Records showed no certificate of
time deposit in the name of Pacific Star, Inc. properly funded and covered by any deposit.
Anomalous issuances of certificates of time deposit were uncovered as, for instance, Community
Rural Bank of Leon, Inc. Certificates of Time Deposit Nos. 039 (Exh. ‘A’, Crim. Case No. 14586 and
040 (Exh. ‘A’, Crim. Case No. 14587) which were supposed to be in the name of Pacific Star, Inc.
were actually issued in the name of Paciencia Cantara on October 17, 1979 and Francisco Alinsao
on November 19, 1979 and only in the amounts of ₱1,000.00 and ₱3,000.00, respectively (Exh. ‘B’,
Crim. Cases Nos. 14586 and 14587).
Subsequently, on complaint of Pacific Star, Inc., the Ambitos were charged of violations of
B.P. Blg. 22, Falsification and Estafa through Falsification of Commercial Document under the
Informations filed in the aforecited cases.
After due proceedings, the Court a quo, promulgated a Decision, dated November 29, 1990,
the decretal portion of which reads as follows:
WHEREFORE, in Criminal Cases Nos. 14556, 14557, 14558, 14559, 14560, 14561 and
14562, the Court hereby finds the accused, Basilio Ambito, guilty beyond reasonable doubt of the
offense of violation of the provisions of Section 1 of Batas Pambansa Blg. 22 and hereby sentences
the said accused to suffer in each of the seven cases, the penalty of imprisonment of SIX (6)
MONTHS and ONE (1) DAY and to indemnify the offended party, Pacific Star, Inc. the total sum of
₱173,480.55, with interest thereon at the legal rate of 12% per annum from the date of filing of the
Informations on May 10, 1982, until paid, without subsidiary imprisonment in case of insolvency, and
to pay the costs.
In Criminal Cases Nos. 14574 and 14585, the Court hereby finds the accused, Basilio
Ambito and Liberata Ambito, guilty beyond reasonable doubt of the complex offense of Estafa thru
Falsification of Commercial Document, defined and penalized in Articles 48, 171, 172 and 315 of the
Revised Penal Code and hereby sentences the said accused to suffer in each case, an
indeterminate sentence ranging from TWO (2) YEARS, FOUR (4) MONTHS and ONE (1) DAY of
prision correccional as minimum to FOUR (4) YEARS, NINE (9) MONTHS and ELEVEN (11) DAYS
of prision correccional as maximum, and pay a fine of ₱3,000.00 and to indemnify the offended
party, Pacific Star, Inc. the total sum of ₱18,287.00 with interests thereon at the legal rate of 12%
per annum from the date of the filing of the Informations on May 10, 1982 until paid, without
subsidiary imprisonment in case of insolvency, together with the accessory penalties provided for by
law, and to pay the costs.
In Criminal Cases Nos. 14563, 14570, 14580, 14582 and 14584, the Court hereby finds the
accused, Basilio Ambito and Liberata Ambito, guilty beyond reasonable doubt of the complex crime
of Estafa thru Falsification of Commercial Document, defined and penalized in Articles 48, 171, 172
and 315 of the Revised Penal Code and hereby sentences the said accused to suffer, in each of
these cases, an indeterminate prison sentence ranging from TWO (2) YEARS, ELEVEN (11)
MONTHS and ELEVEN (11) DAYS of prision correccional as minimum, to SIX (6) YEARS, EIGHT
(8) MONTHS and TWENTY ONE (21) DAYS of prision mayor as maximum, and to indemnify the
offended party, Pacific Star, Inc., the total sum of ₱83,095.00, with interests thereon at the legal rate
of 12% per annum from the date of the filing of the Informations on May 10, 1982 until paid, without
law, and to pay the costs.
In Criminal Cases Nos. 14566, 14569, 14571 and 14573, the Court hereby finds the
accused, Basilio Ambito and Liberata Ambito, guilty beyond reasonable doubt of the complex
offense of Estafa thru Falsification of Commercial Document, defined and penalized in Articles 48,
171, 172 and 315 of the Revised Penal Code and hereby sentences the said accused to suffer, in
each of these cases, an indeterminate prison sentence ranging from FOUR (4) YEARS, TWO (2)
MONTHS of prision correccional as minimum, to EIGHT (8) YEARS of prision mayor as maximum,
and to indemnify the offended party, Pacific Star, Inc., the total sum of ₱103,900.00 with interests
thereon at the legal rate of 12% per annum from the date of the filing of the Informations on May 10,
1982 until paid, without subsidiary imprisonment in case of insolvency, together with the accessory
penalties provided for by law and to pay costs.
Ambito and Liberata Ambito, guilty beyond reasonable doubt of the complex offense of Estafa thru
Revised Penal Code and hereby sentences the said accused to suffer, in each of these cases, an
indeterminate prison sentence ranging from FOUR (4) YEARS, TWO (2) MONTHS and ONE (1)
DAY of prision correccional as minimum, to ELEVEN (11) YEARS of prision mayor as maximum,
and to indemnify the offended party, Pacific Star, Inc., the total sum of ₱116,530.00 with interests
thereon at the legal rate of 12% per annum from the date of the filing of the Informations on May 10,
1982 until paid, without subsidiary imprisonment in case of insolvency, together with the accessory
In Criminal Cases Nos. 14565, the Court hereby finds the accused, Basilio Ambito and
Liberata Ambito, guilty beyond reasonable doubt of the complex offense of Estafa thru Falsification
of Commercial Document, defined and penalized in Articles 48, 171, 172 and 315 of the Revised
Penal Code and hereby sentences the said accused to suffer, in each of these cases, an
indeterminate prison sentence ranging from FOUR (4) YEARS and TWO (2) MONTHS of prision
correccional as minimum, to NINE (9) YEARS of prision mayor as maximum, and to indemnify the
offended party, Pacific Star, Inc., the sum of ₱35,190.00 with interests thereon at the legal rate of
12% per annum from the date of the filing of the Informations on May 10, 1982 until paid, without
law and to pay costs.
In Criminal Cases Nos. 14567, the Court hereby finds the accused, Basilio Ambito and
Liberata Ambito, guilty beyond reasonable doubt of the offense of Estafa thru Falsification of
Commercial Document, defined and penalized in Articles 48, 171, 172 and 315 of the Revised Penal
Code and hereby sentences the said accused each, to suffer an indeterminate prison sentence
ranging from FOUR (4) YEARS and TWO (2) MONTHS of prision correccional as minimum, to TEN
(10) YEARS of prision mayor as maximum, and to indemnify the offended party, Pacific Star, Inc.,
the sum of ₱50,555.00 with interests thereon at the legal rate of 12% per annum from the date of the
filing of the Informations on May 10, 1982 until paid, without subsidiary imprisonment in case of
insolvency, together with the accessory penalties provided for by law and to pay costs.
Ambito and Liberata Ambito, guilty beyond reasonable doubt of the offense of Estafa thru
indeterminate prison sentence ranging from FOUR (4) YEARS, TWO (2) MONTHS and ONE (1)
DAY of prision correccional as minimum, to TWELVE (12) YEARS of prision mayor as maximum,
and to indemnify the offended party, Pacific Star, Inc., the sum of ₱134,375.00 with interests thereon
at the legal rate of 12% per annum from the date of the filing of the Informations on May 10, 1982
until paid, without subsidiary imprisonment in case of insolvency, together with the accessory
penalties provided for by law and to pay costs. 1avvphi1
In Criminal Cases Nos. 14572, 14576 and 14581, the Court hereby finds the accused,
Basilio Ambito and Liberata Ambito, guilty beyond reasonable doubt of the offense of Estafa thru
indeterminate prison sentence ranging from SIX (6) YEARS and ONE (1) DAY of prision mayor as
minimum, to THIRTEEN (13) YEARS of reclusion temporal as maximum, and to indemnify the
offended party, Pacific Star, Inc., the total sum of ₱235,170.00 with interests thereon at the legal rate
of 12% per annum from the date of the filing of the Informations on May 10, 1982 until paid, without
law and to pay costs.
In Criminal Cases Nos. 14577, 14579 and 14583, the Court hereby finds the accused,
Basilio Ambito and Liberata Ambito, guilty beyond reasonable doubt of the complex offense of
Estafa thru Falsification of Commercial Document, defined and penalized in Articles 48, 171, 172
and 315 of the Revised Penal Code and hereby sentences the said accused to suffer, in each of
these cases, an indeterminate prison sentence ranging from TEN (10) YEARS and ONE (1) DAY of
prision mayor as minimum, to TWENTY (20) YEARS of reclusion temporal as maximum, and to
indemnify the offended party, Pacific Star, Inc., the total sum of ₱1,110,500.00 with interests thereon
at the legal rate of 12% per annum from the date of the filing of the Informations on May 10, 1982
until paid, without subsidiary imprisonment in case of insolvency, together with the accessory
The foregoing penalties imposed upon the accused are, however, subject to the threefold
rule as provided for in Article 70 of the Revised Penal Code so that the maximum duration of the
accused’ imprisonment shall not be more than three times the most severe of the penalties the total
period of which not to exceed Forty (40) years.
In Criminal Cases Nos. 14586 and 14587, the Court hereby finds the accused, Crisanto
Ambito, guilty beyond reasonable doubt of the offense of Falsification of Commercial Document,
defined and penalized under Articles 171 and 172 of the Revised Penal Code and hereby sentences
the said accused to suffer, in each of these two cases, an indeterminate prison sentence ranging
from ONE (1) YEAR and ONE (1) DAY of prision correccional as minimum, to FOUR (4) YEARS,
TWO (2) MONTHS of prision correccional as maximum, and pay a fine of ₱2,000.00, together with
the accessory penalties provided for by law, and to pay the costs. For insufficiency of evidence,
Basilio Ambito and Liberata Ambito are hereby ACQUITTED of the offenses charged in these
Criminal Cases Nos. 14586 and 14587.
On reasonable doubt, the accused Marilyn Traje and Reynaldo Baron, are hereby
ACQUITTED of the offense charged in all the criminal cases against them and the bail bonds posted
for their provisional liberty are hereby ordered cancelled. 3
After they were convicted by the RTC, petitioners appealed their case to respondent CA
which, in turn, denied their appeal via the assailed CA Decision, the dispositive portion of which
reads as follows:
IN THE LIGHT OF ALL THE FOREGOING, the assailed Decision is hereby AFFIRMED in
toto. With costs against the Appellants.
SO ORDERED.4
Petitioners promptly interposed a Motion for Reconsideration of the adverse CA Decision but
this was succinctly rejected by the CA in its Resolution 5 dated November 8, 1996, hence, petitioners’
recourse to this Court for review on certiorari.
This Court initially denied said Petition for Review on Certiorari 6 through a Resolution7 dated
January 29, 1997 on the ground that the said petition raised factual issues. Undaunted, petitioners
filed a Motion for Reconsideration 8dated February 25, 1997 seeking to persuade this Court to give
due course to their petition which this Court granted in a Resolution 9 dated April 28, 1997, thereby
reinstating the petition. Respondents were required to file comment on the petition as ordered in the
same Resolution. Respondents filed their Comment 10 on September 9, 1997, while petitioners filed a
delayed Reply11 on September 4, 1998. In turn, respondents filed a Rejoinder 12 on January 18, 1999.
On January 17, 2005, this Court issued a Resolution 13 directing both parties to submit their
respective memoranda within thirty (30) days from notice. Respondents submitted their
Memorandum14 on March 18, 2005 but petitioners failed to submit theirs despite the fact that this
Court had already granted numerous extensions of time to file as requested by petitioners’ counsel.
This Court even resorted to imposing a fine on petitioners’ counsel for his repeated non-compliance
as stated by our Resolution 15 dated March 8, 2006 but to no avail. Thus, in a Resolution 16 dated June
20, 2007, this Court resolved to dispense with the filing of petitioners’ memorandum. lawphil
In their Petition,17 petitioners raised the following grounds:

A. THE RESONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
FINDING THE PETITIONERS GUILTY OF THE OFFENSES IMPUTED TO THEM, THERE BEING
UNCONTROVERTED EVIDENCE SHOWING THAT FROM THE NATURE OF THE
TRANSACTIONS AND DEALINGS BETWEEN THE PETITIONERS AND PSI FOR A LONG
PERIOD OF 14 YEARS, THE LIABILITY OF THE PETITIONERS, IF ANY, IS ONLY CIVIL IN
NATURE, AND NO CRIMINAL LIABILITY ATTACHES TO THEM.
B. THE RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
FINDING THE PETITIONERS GUILTY BEYOND REASONABLE DOUBT OF ALL THE OFFENSES
IMPUTED TO THEM, THE FACTS OF THE CASE SHOWING THAT THE VALUE OF THE
SUBJECT CHECKS AND CCTDS [CREDIT CERTIFICATES OF TIME DEPOSIT] HAVE ALREADY
BEEN FULLY PAID PRIOR TO THE INSTITUTION OF THE CRIMINAL CASES BELOW.
C. ANENT CRIMINAL CASE NOS. 14556 TO 14562, THE RESPONDENT COURT OF
APPEALS COMMITTED A REVERSIBLE ERROR IN FINDING THE PETITIONER BASILIO
AMBITO GUILTY BEYOND REASONABLE DOUBT OF THE OFFENSE OF VIOLATION OF BP22
DESPITE THE LACK OF ESSENTIAL ELEMENTS OF PRIOR NOTICE OF DISHONOR AND
DEMAND FOR PAYMENT OF THE ALLEGED DISHONORED CHECKS GIVEN BY PSI TO
PETITIONERS.
D. ANENT CRIMINAL CASE NOS. 14556, 14557 AND 14558, THE RESPONDENT COURT
COMMITTED A REVERSIBLE ERROR IN FINDING PETITIONER BASILIO AMBITO GUILTY OF
VIOLATION OF BP22 DESPITE THAT THE SUBJECT CHECKS WERE NOT PRESENTED FOR
PAYMENT WITHIN 90 DAYS FROM DATE OF CHECK.
E. ANENT CRIMINAL CASE NOS. 14556 AND 14557, THE RESPONDENT COURT OF
APPEALS COMMITTED A REVERSIBLE ERROR IN FINDING PETITIONER BASILIO AMBITO
GUILTY OF THE OFFENSE OF VIOLATION OF BP22 DESPITE THAT THERE WAS IN EACH
CASE NO PROPER EVIDENCE OFFERED TO PROVE THE CRIME CHARGED.
F. ANENT CRIMINAL CASE NOS. 14563 TO 14585, THE RESPONDENT COURT OF
APPEALS COMMITTED A REVERSIBLE ERROR IN FINDING THE PETITIONERS GUILTY
BEYOND REASONABLE DOUBT OF THE OFFENSE OF ESTAFA BY FALSE PRETENSES
COMPLEXED WITH FALSIFICATION OF A COMMERCIAL DOCUMENT, THERE BEING
PROSECUTION EVIDENCE TENDING TO SHOW THE LACK OF THE ELEMENT OF DECEIT.
G. ANENT CRIMINAL CASE NOS. 14563 TO 14585, THE RESPONDENT COURT OF
APPEALS COMMITTED A REVERSIBLE ERROR IN FINDING THE PETITIONERS GUILTY
BEYOND REASONABLE DOUBT OF ESTAFA BY FALSE PRETENSES COMPLEXED WITH
FALSIFICATION OF A COMMERCIAL DOCUMENT, IT BEING CLEAR FROM THE FACE OF THE
SUBJECT CCTDS THEMSELVES THAT THERE THEREIN EXISTS NO FALSE NARRATION OF
FACTS.
H. THE RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
REFUSING TO RESOLVE THE ASSIGNED ERROR OF DOUBLE PAYMENT OF IMDEMNITY OR
CIVIL LIABILITY ON THE MERITS THEREOF, IT BEING IN A POSITION TO DO SO, AND
DESPITE TIMELY NOTICE OF THE PRIOR INSTITUTION OF THE CIVIL CASE INVOLVING THE
SAME TRANSACTIONS AS IN THE CASES AT BAR.18
In essence, petitioners’ recourse to this Court is hinged on their belief that their conviction in
the lower court was not based on proof beyond reasonable doubt and that the respondent CA failed
to perform its duty to fully ascertain whether the prosecution’s evidence was sufficient enough to
warrant a finding that would support their conviction for violation of B.P. Blg. 22 and for Estafa
through Falsification of Commercial Documents.
We hold the petition to be meritorious in part.
Anent the issue of whether or not co-petitioner Basilio Ambito’s conviction in Criminal Case
Nos. 14556 to 14562 for the seven (7) counts of violation of B.P. Blg. 22 was in accordance with law,
petitioners argue that he cannot be convicted of the same since the prosecution allegedly failed to
prove the dispensable elements of prior notice of dishonor and demand for payment of the checks at
issue.19 Furthermore, they insist that there is no violation of B.P. Blg. 22, particularly in Criminal Case
Nos. 14556, 14557 and 14558 as the subject checks therein were presented for payment more than
ninety (90) days from date.20
In response, the Office of the Solicitor General (OSG) asserts that petitioners’ claim of
necessary and indispensable elements of notice of dishonor and demand to pay cannot be found in
the statute defining the essential elements of violation of B.P. Blg. 22. The OSG further insists that,
from among the said essential elements, there is no particular manner prescribed in which the
person who made and issued the dishonored checks should be notified of the fact of dishonor.
Be that as it may, the OSG avers that as far as the checks subject of the charges of violation
of B.P. Blg. 22 in these criminal cases are concerned, co-petitioner Basilio Ambito had been more
than sufficiently notified of the fact of dishonor because on December 28, 1979, Pacific Star, Inc.
(PSI) filed with Branch 2 of the RTC of Manila a civil complaint for collection against petitioners, or
more than three (3) years before the thirty-two (32) Informations for violations of B.P. Blg. 22 and for
Estafa through Falsification of Commercial Documents were filed against petitioners on May 10,
1982. Within that three-year span of time, the OSG points out, co-petitioner Basilio Ambito failed to
pay the value of the checks despite having been notified of their dishonor. 21
As to petitioners’ contention that the prosecution was not able to prove the indispensable
element that the drawer had knowledge that the checks were not backed up by sufficient funds since
the checks subject of Criminal Case Nos. 14556, 14557 and 14558 were presented for payment
more than ninety (90) days from date, the OSG claims that the said element had been clearly
established by the petitioners’ testimony in the lower court where petitioners contend that the subject
checks were issued only as mere guarantee and, as such, were not supposed to be deposited as
previously agreed by PSI and petitioners. 22 In any case, the OSG argues that under Section 2 of B.P.
Blg. 22, the maker’s knowledge of the insufficiency of funds is legally presumed from the dishonor of
the check for insufficiency of funds.23
After carefully reviewing the records and the submissions of the parties, we find that the
prosecution’s evidence was inadequate to prove co-petitioner Basilio Ambito’s guilt beyond
reasonable doubt for seven (7) counts of violation of B.P. Blg. 22.
The elements of violation of B.P. Blg. 22 are: (1) making, drawing, and issuance of any
check to apply on account or for value; (2) 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 the
check in full upon its presentment; and (3) subsequent dishonor of the check by the drawee bank for
insufficiency of funds or credit, or dishonor for the same reason had not the drawer, without any valid
cause, ordered the bank to stop payment. 24
The gravamen of the offense punished by B.P. Blg. 22 is the act of making or issuing a
worthless check or a check that is dishonored upon its presentation for payment. It is not the
nonpayment of an obligation which the law punishes. The law is not intended or designed to coerce
a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal sanctions, the
making of worthless checks and putting them in circulation. Because of its deleterious effects on the
public interest, the practice is proscribed by the law. The law punishes the act not as an offense
against property, but an offense against public order. 25 Thus, the mere act of issuing a worthless
check – whether as a deposit, as a guarantee or even as evidence of pre-existing debt – is malum
prohibitum.26
In light of the foregoing, petitioners’ contention in the lower court that the subject checks
were only issued as mere guarantee and were not intended for deposit as per agreement with PSI is
not tenable. Co-petitioner Basilio Ambito would be liable under B.P. Blg. 22 by the mere fact that he
issued the subject checks, provided that the other elements of the crime are properly proved.
With regard to the second element, we note that the law provides for a prima facie rule of
evidence. A disputable presumption of knowledge of insufficiency of funds in or credit with the bank
is assumed from the act of making, drawing, and issuing a check, payment of which is refused by
the drawee bank for insufficiency of funds when presented within 90 days from the date of issue.
However, such presumption does not arise when the maker or drawer pays or makes arrangements
for the payment of the check within five banking days after receiving notice that such check had
been dishonored. In order for the maker or drawer to pay the value thereof or make arrangements
for its payment within the period prescribed by law, it is therefore necessary and indispensable for
the maker or drawer to be notified of the dishonor of the check.
Under B.P. Blg. 22, the prosecution must prove not only that the accused issued a check that
was subsequently dishonored. It must also establish that the accused was actually notified that the
check was dishonored, and that he or she failed, within five (5) banking days from receipt of the
notice, to pay the holder of the check the amount due thereon or to make arrangement for its
payment. Absent proof that the accused received such notice, a prosecution for violation of the
Bouncing Checks Law cannot prosper.27
The absence of a notice of dishonor necessarily deprives an accused an opportunity to
preclude a criminal prosecution. Accordingly, procedural due process clearly enjoins that a notice of
dishonor be actually sent to and received by the accused. The accused has a right to demand – and
the basic postulates of fairness require – that the notice of dishonor be actually sent to and received
by the same to afford him/her the opportunity to avert prosecution under B.P. Blg. 22. 28
In the case at bar, there is nothing in the records that would indicate that co-petitioner Basilio
Ambito was given any notice of dishonor by PSI or by Manila Bank, the drawee bank, when the
subject checks were dishonored for insufficiency of funds upon presentment for payment. In fact, all
that the OSG can aver regarding this matter is that co-petitioner Basilio Ambito had been notified of
the fact of dishonor since PSI filed a collection case against petitioners more than three (3) years
before the same filed the criminal cases before this Court. 29
Likewise, respondent CA merely cited, in its assailed Decision, co-petitioner Basilio Ambito’s
July 17, 1989 trial court testimony as basis for concluding that he was properly informed of the
dishonor of the subject checks, viz:
Appellant Basilio’s claim that he was never notified of the dishonor of the checks he issued in
partial payments of the purchases Kazette Enterprises made from PSI is belied by his own
admission made when he testified in the Court a quo thus:
xxx
Q Inspite of you agreement they deposited and when presented they bounce?
A That was in the receipts.
Q So you admit you have presented these checks already marked as Exhibit ‘A’ for the
prosecution for criminal cases Nos. 14556 to 14562, inclusive, were all returned for insufficiency of
funds by the depository bank?
A Yes, sir. (t.s.n., Ambito, page 35, July 17, 1989)
Nothwithstanding his notice of the dishonor of the checks, Appellant failed to replace the
same with cash or make arrangements with PSI, for the payments of the amounts of the checks. 30
Verily, the aforementioned circumstances are not in accord with the manner or form by which
a notice of dishonor should be made under the law and existing jurisprudence.
The notice of dishonor of a check may be sent to the drawer or maker by the drawee bank,
the holder of the check, or the offended party either by personal delivery or by registered mail. The
notice of dishonor to the maker of a check must be in writing. 31
While, indeed, Section 2 of B.P. Blg. 22 does not state that the notice of dishonor be in
writing, taken in conjunction, however with Section 3 of the law, i.e., "that where there are no
sufficient funds in or credit with such drawee bank, such fact shall always be explicitly stated in the
notice of dishonor or refusal," a mere oral notice or demand to pay would appear to be insufficient for
conviction under the law. The Court has previously held that both the spirit and letter of the Bouncing
Checks Law would require for the act to be punished thereunder not only that the accused issued a
check that is dishonored, but that likewise the accused has actually been notified in writing of the
fact of dishonor. The consistent rule is that penal statutes have to be construed strictly against the
State and liberally in favor of the accused.32
There being no proof that co-petitioner Basilio Ambito was given any written notice either by
PSI or by Manila Bank informing him of the fact that his checks were dishonored and giving him five
(5) banking days within which to make arrangements for payment of the said checks, the rebuttable
presumption that he had knowledge of the insufficiency of his funds has no application in the present
case.
Due to the failure of prosecution in this case to prove that co-petitioner Basilio Ambito was
given the requisite notice of dishonor and the opportunity to make arrangements for payment as
provided for under the law, We cannot with moral certainty convict him of violation of B.P. Blg. 22.
However, Basilio Ambito’s acquittal for his violations of B.P. Blg. 22 for failure of the
prosecution to prove all elements of the offense beyond reasonable doubt did not entail the
extinguishment of his civil liability for the dishonored checks. In a number of similar cases, 33 we have
held that an acquittal based on reasonable doubt does not preclude the award of civil damages. The
judgment of acquittal extinguishes the liability of the accused for damages only when it includes a
declaration that the facts from which the civil liability might arise did not exist. Thus, in the case at
bar, the trial court’s directive for Basilio Ambito to indemnify PSI the total sum of ₱173,480.55, with
interest thereon at the legal rate of 12% per annum from the date of filing of the Informations on May
10, 1982, until paid, and to pay the costs is affirmed.
Anent the question of whether or not petitioner spouses Liberata and Basilio Ambito’s
conviction for the offense of Estafa through Falsification of Commercial Document was proven
beyond reasonable doubt, the petitioners interposed the defense that they cannot be properly
convicted of the same as there was no finding of false narration of facts and of deceit.
Petitioners assert that PSI was not deceived by the issuance of the subject credit certificates
of time deposit (CCTDs), which did not contain a false narration of facts, for the reasons that: (i) said
CCTDs, which were undated as to their respective dates of issuance, did not state that funds had
already been deposited by PSI; (ii) during the course of their alleged fourteen-year long business
relationship, PSI, which had been accepting said CCTDs, knew that they were unfunded as said
certificates of time deposit were issued to serve as "promissory notes" to guarantee payment for the
balance of the invoice price of the machineries; 34 (iii) petitioners did not represent to PSI that "the
money was already deposited" because the subject CCTDs were "even postdated"; 35 (iv) the
amounts stated in the CCTDs were not "downpayments" but "CREDIT extended to petitioner Basilio
Ambito payable six months after the sales/purchases were made; 36 (v) petitioners’ obligation is civil
in nature because current and savings deposits constitute loans to a bank and, thus, a CCTD is an
evidence of a simple loan; 37 (vi) the essential element of fraud was absent because PSI knew that
the CCTDs issued to it by petitioners were not covered by funds because it knew that the deposits
were yet to be made when the farmers, to whom Basilio Ambito resold on credit the machineries,
shall have deposited in the rural banks their payments for those machineries; 38 (vii) the subject
certificates of time deposit issued to PSI were not ordinary certificates of time deposit but "CREDIT
certificates of Time Deposit" because the term "credit" indicates a "deferred or delayed nature of the
payment," thus, signifying a promise to pay at a future date; 39 (viii) PSI was not defrauded as it gave
discounts in its sales invoices if petitioners paid in full the value of the certificates "on or before 180
days" from delivery. By giving discounts for early payment, it was thus aware of the possibility that
said certificates might not be funded when they fell due; 40 (ix) the sales invoices issued by PSI gave
it the right to institute civil actions only and not criminal actions; 41 and (x) petitioners had already
performed their obligations to PSI by way of the payment of the amount of ₱300,000.00 and the
return of one unit Kubota machinery valued at ₱ 28,000.00. 42
We are not persuaded. We find no reason to disturb the identical findings of the CA and the
RTC regarding the particular circumstances surrounding the petitioners’ conviction of Estafa through
Falsification of Commercial Documents because the same are adequately supported by the
evidence on record.
It is not the function of this Court to analyze or weigh evidence all over again, unless there is
a showing that the findings of the lower court are totally devoid of support or are glaringly erroneous
as to constitute palpable error or grave abuse of discretion. 43
The elements of Estafa by means of deceit, whether committed by false pretenses or
concealment, are the following – (a) that there must be a false pretense, fraudulent act or fraudulent
means. (b) That such false pretense, fraudulent act or fraudulent means must be made or executed
prior to or simultaneous with the commission of the fraud. (c) That the offended party must have
relied on the false pretense, fraudulent act or fraudulent means, that is, he was induced to part with
his money or property because of the false pretense, fraudulent act or fraudulent means. (d) That as
a result thereof, the offended party suffered damage. 44
In the prosecution for Estafa under Article 315, paragraph 2(a) of the RPC, 45 it is
indispensable that the element of deceit, consisting in the false statement or fraudulent
representation of the accused, be made prior to, or at least simultaneously with, the delivery of the
thing by the complainant.
The false pretense or fraudulent act must be committed prior to or simultaneously with the
commission of the fraud, it being essential that such false statement or representation constitutes
the very cause or the only motive which induces the offended party to part with his money. In the
absence of such requisite, any subsequent act of the accused, however fraudulent and suspicious it
might appear, cannot serve as basis for prosecution for estafa under the said provision. 46
In the case at bar, the records would show that PSI was given assurance by petitioners that
they will pay the unpaid balance of their purchases from PSI when the CCTDs with petitioners’
banks, the Rural Bank of Banate, Inc. (RBBI) and/or the Rural Bank of Leon, Inc. (RBLI), and issued
under the name of PSI, would be presented for payment to RBBI and RBLI which, in turn, will pay
the amount of deposit stated thereon. The amounts stated in the CCTDs correspond to the purchase
cost of the machineries and equipment that co-petitioner Basilio Ambito bought from PSI as
evidenced by the Sales Invoices presented during the trial. It is uncontroverted that PSI did not apply
for and secure loans from RBBI and RBLI. In fine, PSI and co-petitioner Basilio Ambito were
engaged in a vendor-purchaser business relationship while PSI and RBBI/RBLI were connected as
depositor-depository. It is likewise established that petitioners employed deceit when they were able
to persuade PSI to allow them to pay the aforementioned machineries and equipment through down
payments paid either in cash or in the form of checks or through the CCTDs with RBBI and RBLI
issued in PSI’s name with interest thereon. It was later found out that petitioners never made any
deposits in the said Banks under the name of PSI. In fact, the issuance of CCTDs to PSI was not
recorded in the books of RBBI and RBLI and the Deputy Liquidator appointed by the Central Bank of
the Philippines even corroborated this finding of anomalous bank transactions in her testimony
during the trial. 47
As borne by the records and the pleadings, it is indubitable that petitioners’ representations
were outright distortions of the truth perpetrated by them for the sole purpose of inducing PSI to sell
and deliver to co-petitioner Basilio Ambito machineries and equipments. Petitioners knew that no
deposits were ever made with RBBI and RBLI under the name of PSI, as represented by the subject
CCTDs, since they did not intend to deposit any amount to pay for the machineries. PSI was an
innocent victim of deceit, machinations and chicanery committed by petitioners which resulted in its
pecuniary damage and, thus, confirming the lower courts’ finding that petitioners are guilty of the
complex crime of Estafa through Falsification of Commercial Documents.
The pronouncement by the appeals court that a complex crime had been committed by
petitioners is proper because, whenever a person carries out on a public, official or commercial
document any of the acts of falsification enumerated in Article 171 of the RPC 48 as a necessary
means to perpetrate another crime, like Estafa, Theft, or Malversation, a complex crime is formed by
the two crimes.
Under Article 48 of the RPC,49 a complex crime refers to (1) the commission of at least two
grave or less grave felonies that must both (or all) be the result of a single act, or (2) one offense
must be a necessary means for committing the other (or others). Negatively put, there is no complex
crime when (1) two or more crimes are committed, but not by a single act; or (2) committing one
crime is not a necessary means for committing the other (or others). 50
The falsification of a public, official, or commercial document may be a means of committing
Estafa, because before the falsified document is actually utilized to defraud another, the crime of
Falsification has already been consummated, damage or intent to cause damage not being an
element of the crime of falsification of public, official or commercial document. In other words, the
crime of falsification has already existed. Actually utilizing that falsified public, official or commercial
document to defraud another is estafa. But the damage is caused by the commission of Estafa, not
by the falsification of the document. Therefore, the falsification of the public, official or commercial
document is only a necessary means to commit the estafa. 51
In the case before us, the issuance by petitioners of CCTDs which reflected amounts that
were never deposited as such in either RBBI or RBLI is Falsification under Articles 171 52 and 17253 of
the RPC. The particular criminal undertaking consisted of petitioners, taking advantage of their
position as owners of RBBI and RBLI, making untruthful statements/representations with regard to
the existence of time deposits in favor of PSI by issuing the subject CCTDs without putting up the
corresponding deposits in said banks.
Under Article 171, paragraph 4 of the RPC, 54 the elements of falsification of public
documents through an untruthful narration of facts are: (1) the offender makes in a document
untruthful statements in a narration of facts; (2) the offender has a legal obligation to disclose the
truth of the facts narrated; (3) the facts narrated by the offender are absolutely false; and (4) the
perversion of truth in the narration of facts was made with the wrongful intent to injure a third
person.55
As earlier discussed, the issuance of the falsified CCTDs for the sole purpose of obtaining or
purchasing various machinery and equipment from PSI amounts to the criminal offense of Estafa
under Article 315 (2) (a) of the RPC.56The petitioners falsified the subject CCTDs, which are
commercial documents, to defraud PSI. Since the falsification of the CCTDs was the necessary
means for the commission of Estafa, the assailed judgment of the appeals court convicting
petitioners of the complex crime of Estafa through Falsification of Commercial Documents is correct.
Quite apart from the prosecution’s successful discharge of its burden of proof, we find that
the accused failed to discharge their burden to prove their defense. To begin with, there appears to
be no proof on record of the alleged 14-year financial arrangement between accused and PSI or the
purported "consignment only" agreement between them other than the uncorroborated and self-
serving testimony of the accused. Moreover, we uphold the findings of the CA and the court a quo as
to the proper characterization of the CCTDs and the lack of credible, independent evidence of the
alleged payment of the accused’s obligations to PSI.
Finally, with respect to co-petitioner Crisanto Ambito, we find no reason to disturb the trial
court’s ruling that he is liable for only the crime of Falsification of Commercial Documents in
connection with CCTD Nos. 039 and 040 of RBLI, there being no showing that the said CCTDs were
used to purchase farm implements from PSI.57
WHEREFORE, the Petition is PARTLY GRANTED. The assailed Decision dated March 29,
1996 of the Court of Appeals affirming that of the Regional Trial Court is AFFIRMED with respect to
petitioner spouses Basilio and Liberata Ambito’s conviction for Estafa through Falsification of
Commercial Documents (in Criminal Case Nos. 14563 to 14585) and with respect to co-petitioner
Crisanto Ambito’s conviction for Falsification of Commercial Documents (in Criminal Case Nos.
14586 and 14587). However, the aforesaid Decision is REVERSED with respect to co-petitioner
Basilio Ambito’s conviction for violation of B.P. Blg. 22 (in Criminal Case Nos. 14556 to 14562), who
is hereby ACQUITTED on the ground that his guilt has not been established beyond reasonable
doubt. However, the portion of the said Decision insofar as it directs Basilio Ambito to indemnify
Pacific Star, Inc. the total sum of ₱173,480.55, with interest thereon at the legal rate of 12% per
annum from the date of filing of the Informations on May 10, 1982, until paid, and to pay the costs
(also in Criminal Case Nos. 14556 to 14562) is AFFIRMED.
SO ORDERED.
TERESITA J. LEONARDO-DE CASTRO

Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
ANTONIO T. CARPIO RENATO C. CORONA
Associate Justice Associate Justice
ADOLFO S. AZCUNA
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in
the above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
Footnotes
1
Penned by then Court of Appeals (CA) and later Supreme Court (SC) Associate Justice
Romeo J. Callejo, Sr. (ret.), with then CA and later SC Associate Justice Antonio M. Martinez
(ret.) and CA Associate Justice Delilah Vidallon-Magtolis (ret.), concurring; rollo, pp. 162-
188.
2
Id., at pp. 145-161.
3
Id., at pp. 162-176.
4
Id., at pp. 187-188.
5
Id., at p. 189.
6
Id., at pp. 14-189.
7
Id., at p. 190.
8
Id., at pp. 191-250.
9
Id., at p. 252.
10
Id., at pp. 280-317.
11
Id., at pp. 409-466.
12
Id., at pp. 477-491.
13
Id., at pp. 497-498.
14
Id., at pp. 499-547.
15
Id., at p. 601.
16
Id., at p. 652.
17
Supra note 6.
18
Id., at pp. 37-38.
19
Id., at pp. 56-61.
20
Id., at pp. 61-63.
21
Id., at p. 529.
22
Id., at p. 528. (citing TSN, July 17, 1989, pp.35-36)
23
Id., at pp. 530-531.
24
Tan v. People, G.R. No. 145006, August 30, 2006, 500 SCRA 172, 182.
25
Lozano v. Martinez, No. L-63419, December 18, 1986, 146 SCRA 323, 338.
26
Ricaforte v. Jurado, G.R. No. 154438, September 5, 2007, 532 SCRA 317, 330.
27
Bax v. People, G.R. No. 149858, September 5, 2007, 532 SCRA 284, 291, citing King v.
People, G.R. 131540, December 2, 1999, 319 SCRA 654.
28
Lao v. Court of Appeals, G.R. No. 119178, June 20, 1997, 274 SCRA 572, 594.
29
Rollo, p. 529.
30
Id., at p. 179.
31
Rigor v. People, G.R. No. 144887, November 17, 2004, 442 SCRA 450, 462.
32
Domangsang v. Court of Appeals, G.R. No. 139292, December 5, 2000, 347 SCRA 75, 83.
33
Domangsang v. Court of Appeals, Id. at 84-85, Rico v. People, G. R. No. 137191,
November 18, 2002, 392 SCRA 61, 74; Bax v. People, G.R. No. 149858, September 5,
2007, 532 SCRA 284, 292-293.
34
Rollo, pp. 64-72.
35
Id., at pp. 434-435.
36
Id., at pp. 435-436.
37
Id., at p. 437.
38
Id., at p. 438.
39
Id., at p. 439.
40
Id., at pp. 439-440.
41
Id., at p. 441.
42
Id., at pp. 441-442.
43
De Jesus v. Court of Appeals, G.R. No. 127857, June 20, 2006, 491 SCRA 325, 333.
44
R.R. Paredes v. Calilung, G.R. No. 156055, March 5, 2007, 517 SCRA 369, 393.
45
Art. 315. Swindling (estafa). – Any person who shall defraud another by any of the means
mentioned herein below . . .
xxx
2. By means of any of the following false pretenses or fraudulent acts executed prior
to or simultaneously with the commission of the fraud:
(a) By using fictitious name, or falsely pretending to possess power, influence,
qualifications, property, credit, agency, business or imaginary transactions, or by
means of other similar deceits.
46
Aricheta v. People, G.R. No. 172500, September 21, 2007, 533 SCRA 695, 704.
47
Rollo, pp. 184-187.
48
Art. 171. Falsification by public officer; employee or notary or ecclesiastical minister. – The
penalty of prision mayor and a fine not to exceed 5,000 pesos shall be imposed upon any
public officer, employee, or notary who, taking advantage of his official position, shall falsify a
document by committing any of the following acts:
1. Counterfeiting or imitating any handwriting, signature, or rubric;
2. Causing it to appear that persons have participated in any act or proceeding when
they did not in fact so participate;
3. Attributing to persons who have participated in an act or proceeding statements
other than those in fact made by them;
4. Making untruthful statements in a narration of facts;
5. Altering true dates;
6. Making any alteration or intercalation in a genuine document which changes its
meaning;
7. Issuing in an authenticated form a document purporting to be a copy of an original
document when no such original exists, or including in such copy a statement
contrary to, or different from, that of the genuine original; or
8. Intercalating any instrument or note relative to the issuance thereof in a protocol,
registry, or official book.
The same penalty shall be imposed upon any ecclesiastical minister who shall
commit any of the offenses enumerated in the preceding paragraphs of this article,
with respect to any record or document of such character that its falsification may
affect the civil status of persons.
49
Art. 48. Penalty for complex crimes. – When a single act constitutes two or more grave or
less grave felonies, or when an offense is a necessary means for committing the other, the
penalty for the most serious crime shall be imposed, the same to be applied in its maximum
period.
50
Monteverde v. People, G.R. No. 139610, August 12, 2002, 387 SCRA 196, 208.
51
Cf. Reyes, The Revised Penal Code, Book II, 2001 ed., p. 226.
52
Supra note 47.
53
Art. 172. Falsification by private individuals and use of falsified documents. – The penalty
of prision correccional in its medium and maximum periods and a fine of not more than 5,000
pesos shall be imposed upon:
1. Any private individual who shall commit any of the falsifications enumerated in the
next preceding article in any public or official document or letter of exchange or any
other kind of commercial document; and
2. Any person who, to the damage of a third party, or with the intent to cause such
damage, shall in any private document commit any of the acts of falsification
enumerated in the next preceding article.
Any person who shall knowingly introduce in evidence in any judicial proceeding or to
the damage of another or who, with the intent to cause such damage, shall use any
of the false documents embraced in the next preceding article or in any of the
foregoing subdivisions of this article, shall be punished by the penalty next lower in
degree.
54
Art. 171. Falsification by public officer; employee or notary or ecclesiastical minister. – The
penalty of prision mayor and a fine not to exceed 5,000 pesos shall be imposed upon any
public officer, employee, or notary who, taking advantage of his official position, shall falsify a
document by committing any of the following acts:
xxx
(4) Making untruthful statements in a narration of facts;
55
Enemecio v. Office of the Ombudsman (Visayas), G.R. No. 146731, January 13, 2004, 419
SCRA 82, 91.
56
Supra note 44.
57
Rollo at 156.
7. Chua vs. People (G.R. No. 196853 July 13, 2015)
DEL CASTILLO, J.:
Petitioner Robert Chua (Chua) was charged with 54 counts of violation of Batas Pambansa Big. 22
(BP 22) for issuing checks which were dishonored for either being drawn against insufficient funds or
closed account.
Factual Antecedents
Chua and private complainant Philip See (See) were long-time friends and neighbors. On different
dates from 1992 until 1993, Chua issued several postdated PSBank checks of varying amounts to
See pursuant to their rediscounting arrangement at a 3% rate, to wit:
PSBANK CHECK NO. DATED AMOUNT

1 018062 December 25, 1993 Php300,000.00
2 018061 December 23, 1993 Php350,000.00
3 017996 December 16, 1993 Php100,000.00
4 017992 December 14, 1993 Php200,000.00
5 017993 December 14, 1993 Php200,000.00
6 018138 November 22, 1993 Php 6,000.00
7 018122 November 19, 1993 Php 13,000.00
8 018120 November 18, 1993 Php 6,000.00
9 018162 November 22, 1993 Php 10,800.00
10 018069 November 17, 1993 Php 9,744.25
11 018117 November 17, 1993 Php 8,000.00
12 018149 November 28, 1993 Php 6,000.00
13 018146 November 27, 1993 Php 7,000.00
14 006478 November 26, 1993 Php200,000.00
15 018148 November 26, 1993 Php300,000.00
16 018145 November 26, 1993 Php 7,000.00
17 018137 December 10, 1993 Php150,000.00
18 017991 December 10, 1993 Php150,000.00
19 018151 December 10, 1993 Php150,000.00
20 017962 December 08, 1993 Php150,000.00
21 018165 December 08, 1993 Php 14,000.00
22 018154 December 07, 1993 Php100,000.00
23 018164 December 07, 1993 Php 14,000.00
24 018157 December 07, 1993 Php600,000.00
25 018161 December 06, 1993 Php 12,000.00
26 018160 December 05, 1993 Php 12,000.00
27 018033 November 09, 1993 Php 3,096.00
28 018032 November 08, 1993 Php 12,000.00
29 018071 November 06, 1993 Php150,000.00
30 018070 November 06, 1993 Php150,000.00
31 006210 October 21, 1993 Php100,000.00
32 006251 October 18, 1993 Php200,000.00
33 006250 October 18, 1993 Php200,000.00
34 017971 October 13, 1993 Php400,000.00
35 017972 October 12, 1993 Php335,450.00
36 017973 October 11, 1993 Php464,550.00
37 006433 September 24, 1993 Php520,000.00
38 006213 August 30, 1993 Php100,000.00
39 017976 December 13, 1993 Php100,000.00
40 018139 December 13, 1993 Php125,000.00
41 018141 December 13, 1993 Php175,000.00
42 018143 December 13, 1993 Php300,000.00
43 018121 December 10, 1993 Php166,934.00
44 018063 November 12, 1993 Php 12,000.00
45 018035 November 11, 1993 Php 7,789.00
46 017970 November 11, 1993 Php600,000.00
47 018068 November 18, 1993 Php 7,800.00
48 017956 November 10, 1993 Php800,000.00
49 018034 November 10, 1993 Php 7,116.00
50 017907 December 1, 1993 Php200,000.00
51 018152 November 30, 1993 Php 6,000.00
52 018067 November 30, 1993 Php 7,800.00
53 006490 November 29, 1993 Php100,000.00
54 018150 November 29, 1993 Php 6,000.00 1
However, See claimed that when he deposited the checks, they were dishonored either due to
insufficient funds or closed account. Despite demands, Chua failed to make good the checks.
Hence, See filed on December 23, 1993 a Complaint for violations of BP 22 before the Office of the
2
City Prosecutor of Quezon City. He attached thereto a demand letter dated December 10, 1993.
3
In a Resolution dated April 25, 1994, the prosecutor found probable cause and recommended the
4
filing of charges against Chua. Accordingly, 54 counts of violation of BP 22 were filed against him
before the Metropolitan Trial Court (MeTC) of Quezon City.
Proceedings before the Metropolitan Trial Court
During the course of the trial, the prosecution formally offered as its evidence the demand letter
5
dated December 10, 1993 marked as Exhibit "B." Chua, however, objected to its admissibility on
6 7
the grounds that it is a mere photocopy and that it does not bear any proof that he actually received
it. In view of these, Chua filed on April 14, 1999 a Motion to Submit Demurrer to Evidence. Per
8
Chua’s allegation, however, the MeTC failed to act on his motion since the judge of said court
vacated his post.
Several years later, the prosecution filed a Motion to Re-Open Presentation of Prosecution’s
Evidence and Motion to Allow Prosecution to Submit Additional Formal Offer of Evidence dated
9
March 28, 2003. It averred that while See was still trying to locate a demand letter dated November
30, 1993 (which it alleged to have been personally served upon Chua), the prosecution nevertheless
decided to rest its case on February 24, 1999 so as not to further delay the proceedings. However,
sometime in February 2002, See decided to have his house rented out such that he emptied it with
all his belongings and had it cleaned. It was during this time that he found the demand letter dated
November 30, 1993. The prosecution thus prayed that it be allowed to submit a supplemental offer
10
of evidence to include said demand letter dated November 30, 1993 as part of its evidence. Again,
the records of the case bear no copy of an MeTC Order or Resolution granting the aforesaid motion
of the prosecution. Nevertheless, extant on records is a Formal Offer of Evidence filed by the
11
private prosecutor submitting the demand letter dated November 30, 1993 as additional evidence. In
his objection thereto, Chua averred that the papers on which the demand letter dated November
12
30, 1993 are written were given to him as blank papers. He affixed his signature thereon purportedly
to give See the authority to retrieve a car which was supposed to serve as payment for Chua’s
obligation to See. In an Order dated November 18, 2005, the MeTC refused to take cognizance of
13
the supplemental formal offer on the ground that the same was filed by the private prosecutor
without the conformity of the public prosecutor. Be that as it may, the demand letter dated November
30, 1993 eventually found its way into the records of this case as Exhibit "SSS."
14
Later, the defense, with leave of court, filed a Demurrer to Evidence. It again pointed out that the
15
demand letter dated December 10, 1993 attached to See’s affidavit-complaint is a mere photocopy
and not accompanied with a Post Office Registry Receipt and Registry Return Receipt. Most
importantly, it does not contain Chua’s signature that would serve as proof of his actual receipt
thereof. In view of these, the defense surmised that the prosecution fabricated the demand letter
dated November 30, 1993 to remedy the lack of a proper notice of dishonor upon Chua. At any rate,
it argued that while the November 30, 1993 demand letter contains Chua’s signature, the same
should not be given any probative value since it does not contain the date when he allegedly
received the same. Hence, there is simply no way of reckoning the crucial five-day period that the
law affords an issuer to make good the check from the date of his notice of its dishonor.
In an Order dated January 12, 2007, the MeTC denied the defense’s Demurrer to Evidence. The
16
Motion for Reconsideration thereto was likewise denied in an Order dated May 23, 2007. Hence,
17
the trial of the case proceeded.
In a Consolidated Decision dated May 12, 2008, the MeTC convicted Chua of 54 counts of violation
18
of BP 22 after it found all the elements of the offense obtaining in the case. Anent Chua’s receipt of
the notice of dishonor, it ratiocinated, viz.:
xxxx
The prosecution had proved also that private complainant personally sen[t] a written notice of
dishonor of the subject check to the accused and that the latter personally received the same. In
fact, the defense stipulated in open court the existence of the said demand letter and the signature
of the accused as reflected in the face of the demand letter. x x x In view of that stipulation, the
defense is now estopped [from] denying its receipt thereof. Although there was no date when
accused received the demand letter x x x the demand letter was dated, thus it is presumed that the
accused received the said demand letter on the date reflected on it. It has been said that "admission
verbal or written made by the party in the course of the proceedings in the same case does not
require proof."x x x
[In spite of] receipt thereof, the accused failed to pay the amount of the checks or make arrangement
for its payment "[w]ithin five (5) banking days after receiving notice that the said checks have not
been paid by the drawee bank. As a result, the presumption of knowledge as provided for in Section
2 of Batas Pambansa Bilang 22 which was the basis of reckoning the crucial five (5) day period was
established.19
Hence, the dispositive portion of the MeTC Decision:
WHEREFORE, premises considered, this court finds accused Robert Chua GUILTY, beyond
reasonable doubt, of fifty four (54) counts of Violation of Batas Pambansa Bilang 22 and hereby
sentence[s] him to suffer the penalty of six (6) months imprisonment for each case and to restitute to
the private complainant the total amount of the face value of all the subject checks in these cases
with legal interest of 12% per annum reckoned from the filing of the informations until the full amount
is fully paid and to pay the costs of suit.
SO ORDERED. 20
Ruling of the Regional Trial Court (RTC)
Aggrieved, Chua appealed to the RTC where he argued that: (1) the complaint was prematurely filed
since the demand letter dated December 10, 1993 had not yet been sent to him at the time of filing
of the Complaint; (2) the demand letter dated November 30, 1993 has no probative value since it
lacked proof of the date when Chua received the same; and, (3) since Chua was acquitted in two
other BP 22 cases involving the same parties, facts and issues, he should likewise be acquitted in
the present case based on the principle of stare decisis.
In a Decision dated July 1, 2009, the RTC likewise found all the elements of BP 22 to have been
21
sufficiently established by the prosecution, to wit:
(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 the check in full upon its
presentment;
(3) the subsequent dishonor of the check by the drawee bank for insufficient funds or credit
or dishonor for the same reason had not the drawer, without any valid cause ordered the
bank to stop payment.
As to first element, the RTC held that the evidence shows that Chua issued the checks in question.
Next, on the basis of the demand letter dated November 30, 1993 bearing Chua’s signature as proof
of receipt thereof, it was likewise established that he had knowledge of the insufficiency of his funds
with the drawee bank at the time he issued the checks, thus, satisfying the second element. It
expounded:
Thus, in order to create the prima facie presumption that the issuer knew of the insufficiency of
funds, it must be shown that he or she received a notice of dishonor and, within five banking days
thereafter, failed to satisfy the amount of the check or make arrangement for its payment. x x x
In the present case, a demand letter (Exh. "SSS") was sent to accused-appellant informing him of
the dishonor of the check and demanding he make good of the checks. The prosecution offered this
in evidence, and the accused’s signature thereon evidences his receipt of the said demand letter.
Accused-appellant argues that there is no proof that he received the same considering that there is
no date on his signature appearing on the document. But as borne out by the records of the
proceedings, the defense even stipulated in open court the existence of the demand letter. x x x
Thus, considering that the demand letter was dated November 30, 1993, the reckoning of the crucial
five day period was established. Accused failed to make arrangement for the payment of the amount
of check within five-day period from notice of the checks’ dishonor.22
Finally, the RTC ruled that the prosecution was able to prove the existence of the third element when
it presented a bank employee who testified that the subject checks were dishonored due to
insufficiency of funds or closed account.
Anent the defense’s invocation of the principle of stare decisis, the RTC found the same inapplicable
since there is a distinction between the present case and the other cases where Chua was
acquitted. In the instant case, the prosecution, as mentioned, was able to establish the second
element of the offense by way of the demand letter dated November 30, 1993 duly received by
Chua. Whereas in the other cases where Chua was acquitted, there was no proof that he received a
demand letter.
Hence, the dispositive portion of the RTC Decision:
WHEREFORE, the appealed decision dated May 12, 2008 is hereby AFFIRMED.
SO ORDERED. 23
Ruling of the Court of Appeals (CA)
Before the CA, Chua argued against the probative value of the demand letter dated November 30,
1993 by pointing out that: (1) for more than 10 years from the time the case was filed, the
prosecution never adverted to its existence. He thus surmised that this was because the document
was not really missing but in fact inexistent – a mere afterthought as to make it appear that the
second element of the offense is obtaining in the case; (2) the subject demand letter is not a newly
discovered evidence as it could have been discovered earlier through the exercise of due diligence;
and, (3) his counsel’s admission of the physical existence of the subject demand letter and Chua’s
signature thereon does not carry with it the admission of its contents and his receipt of the same.
Unpersuaded, the CA, in its November 11, 2010 Decision brushed aside Chua’s arguments in this
24
wise:
x x x [A]s aptly pointed out by the Solicitor General, See could not have waited for a decade just to
fabricate an evidence against petitioner. The contention that petitioner’s counsel was tricked by the
prosecution into stipulating on the admissibility of the demand letter is without basis. Once validly
entered into, stipulations will not be set aside unless for good cause. They should be enforced
especially when they are not false, unreasonable or against good morals and sound public policy.
When made before the court, they are conclusive. And the party who validly made them can be
relieved therefrom only upon a showing of collusion, duress, fraud, misrepresentation as to facts,
and undue influence; or upon a showing of sufficient cause on such terms as will serve justice in a
particular case. Moreover, the power to relieve a party from a stipulation validly made lies in the
court’s sound discretion which, unless exercised with grave abuse, will not be disturbed on appeal. 25
And just like the MeTC and the RTC, the CA concluded that the prosecution clearly established all
the elements of the offense of violation of BP 22. Ultimately, it ruled as follows:
WHEREFORE, the instant petition is hereby DENIED for lack of merit. The assailed decision dated
July 1, 2009 and order dated October 30, 2009 of the RTC of Quezon City, Branch 219, are hereby
AFFIRMED.
SO ORDERED. 26
Chua filed a Motion for Reconsideration, but the same was denied in a Resolution dated May 4,
27 28
2011.
Hence, this Petition for Review on Certiorari.

Issues
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT UPHELD THE RULINGS OF THE
TRIAL COURTS THAT THE ACCUSED AT THE TIME OF THE ISSUANCE OF THE DISHONORED
CHECKS HAD KNOWLEDGE OF THE INSUFFICIENCY OF FUNDS FOR THE PAYMENT OF THE
CHECKS UPON THEIR PRESENTMENT, BASED MERELY ON THE PRESUMPTION THAT THE
DATE OF THE PREPARATION OF THE LETTER IS THE DATE OF RECEIPT BY THE
ADDRESSEE.
II
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT CONSIDERED THE DEMAND LETTER
DATED 30 NOVEMBER 1993 AS A NEWLYDISCOVERED EVIDENCE. 29
The Parties’ Arguments
Chua asserts that the second element of the offense charged, i.e, knowledge of the maker, drawer,
or issuer that at the time of issue there are no sufficient funds in or credit with the drawee bank for
the payment of such check in full upon its presentment, was not proved by the prosecution. He
argues that the presumption that the issuer had knowledge of the insufficiency of funds only arises
after it is proved that the issuer actually received a notice of dishonor and within five days from
receipt thereof failed to pay the amount of the check or make arrangement for its payment. Here, the
date when Chua allegedly received the demand letter dated November 30, 1993 was not established
by the prosecution. Citing Danao v. Court of Appeals, he thus contends that since there is no date
30
of receipt from which to reckon the aforementioned five-day period, the presumption that he has
knowledge of the insufficiency of funds at the time of the issuance of the checks did not arise.
In any case, Chua argues that the demand letter dated November 30, 1993 is not a newly
discovered evidence. He points out that a newly discovered evidence is one which could not have
been discovered even in the exercise of due diligence in locating the same. In this case, See claims
that he only found the letter after having his house cleaned. This means that he could have found it
early on had he exercised due diligence, which, however, was neither shown by the prosecution.
On the other hand, respondent People of the Philippines, through the Office of the Solicitor General
(OSG), avers that Chua’s contention that there is no proof of the date when he actually received the
demand letter dated November 30, 1993 involves a factual issue which is not within the province of
a certiorari petition. As to the matter of whether the subject demand letter is a newly discovered
evidence, the OSG calls attention to the fact that the MeTC, RTC and the CA all considered the said
document as a newly discovered evidence. Hence, such finding deserves full faith and credence.
Besides, Chua was correctly convicted for violation of BP 22 since all the elements of the offense
were sufficiently proven by the prosecution.
Our Ruling
The Petition is impressed with merit.
The issues raised by Chua involve

questions of law.
The OSG argues that the issues raised by Chua involve questions of fact which are not within the
province of the present petition for review on certiorari. The Court, however upon perusal of the
petition, finds that the issues raised and the arguments advanced by Chua in support thereof,
concern questions of law. "Jurisprudence dictates that there is a ‘question of law’ when the doubt or
difference arises as to what the law is on a certain set of facts or circumstances; on the other hand,
there is a ‘question of fact’ when the issue raised on appeal pertains to the truth or falsity of the
alleged facts. The test for determining whether the supposed error was one of ‘law’ or ‘fact’ is not the
appellation given by the parties raising the same; rather, it is whether the reviewing court can resolve
the issues raised without evaluating the evidence, in which case, it is a question of law; otherwise, it
is one of fact. In other words, where there is no dispute as to the facts, the question of whether or
not the conclusions drawn from these facts are correct is a question of law. However, if the question
posed requires a re-evaluation of the credibility of witnesses, or the existence or relevance of
surrounding circumstances and their relationship to each other, the issue is factual." 31
Chua raises two issues in this petition, to wit: (1) whether the MeTC, RTC and the CA correctly
applied the legal presumption that Chua has knowledge of the insufficiency of funds at the time he
issued the check based on his alleged receipt of the demand letter dated November 30, 1993 and
his failure to make good the checks five days from such receipt; and (2) whether the said courts
correctly considered the demand letter dated November 30, 1993 as newly discovered evidence. As
to the first issue, it is not disputed that the subject demand letter, while bearing the signature of
Chua, does not indicate any date as to his receipt thereof. There being no disagreement as to this
fact, the propriety of the conclusion drawn from the same by the courts below, that is, the date of the
said letter is considered as the date when Chua received the same for the purpose of reckoning the
five-day period to make good the checks, clearly refers to a question of law. Similarly, the second
issue is one concerning a question of law because it requires the application of the provision of the
Rules of Court concerning a newly discovered evidence. 32
Nevertheless, assuming that the questions posed before this Court are indeed factual, the rule that
factual findings of the lower courts are not proper subject of certiorari petition admits of exceptions.
One of these exceptions is when the lower courts failed to appreciate certain facts and
circumstances which, if taken into account, would materially affect the result of the case. The Court
finds the said exception applicable in the instant case. Clearly, the petition deserves the
consideration of this Court.
The prosecution failed to prove all the

elements of the offenses charged.
In order to successfully hold an accused liable for violation of BP 22, the following essential
elements must be present: "(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 the 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." "Of the three (3) elements, the second element is the hardest to prove
33
as it involves a state of mind. Thus, Section 2 of BP 22 creates a presumption of knowledge of

insufficiency of funds, which, however, arises only after it is proved that the issuer had received a
written notice of dishonor and that within five days from receipt thereof, he failed to pay the amount
of the check or to make arrangements for its payment. 34
In the instant case, what is in dispute is the existence of the second element. Chua asserts that the
absence of the date of his actual receipt on the face of the demand letter dated November 30, 1993
prevented the legal presumption of knowledge of insufficiency of funds from arising. On the other
hand, the MeTC opined that while the date of Chua’s actual receipt of the subject demand letter is
not affixed thereon, it is presumed that he received the same on the date of the demand letter
(November 30, 1993). Moreover, the lower courts banked on the stipulation entered into by Chua’s
counsel as to the existence of the demand letter and of Chua’s signature thereon. By reason of such
stipulation, they all held that Chua could no longer impugn the said demand letter.
In Danao v. Court of Appeals, the Court discussed the importance of proving the date of actual
35
receipt of the notice of dishonor, viz.:
In King vs. People, this Court, through Justice Artemio V. Panganiban, held: "To hold a person liable
under B.P. Blg. 22, it is not enough to establish that a check issued was subsequently dishonored. It
must be shown further that the person who issued the check knew ‘at the time of issue that he does
not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon
its presentment.’ Because this element involves a state of mind which is difficult to establish, Section
2 of the law creates a prima facie presumption of such knowledge, as follows:
‘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 (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
check within five (5) banking days after receiving notice that such check has not been paid by the
drawee.
Thus, this Court further ruled in King, "in order to create the prima facie presumption that the issuer
knew of the insufficiency of funds, it must be shown that he or she received a notice of dishonor and,
within five banking days thereafter, failed to satisfy the amount of the check or make arrangement for
its payment."
Indeed, the prima facie presumption in Section 2 of B.P. Blg. 22 "gives the accused an opportunity
to satisfy the amount indicated in the check and thus avert prosecution. This opportunity, as this
Court stated in Lozano vs. Martinez, serves to mitigate the harshness of the law in its application.
In other words, if such notice of non-payment by the drawee bank is not sent to the maker or drawer
of the bum check, or if there is no proof as to when such notice was received by the drawer,
then the presumption or prima facie evidence as provided in Section 2 of B.P. Blg. 22 cannot
arise, since there would simply be no way of reckoning the crucial 5-day period." (Italics in
36
the original, emphasis supplied)
Similarly in the present case, there is no way to ascertain when the five-day period under Section 22
of BP 22 would start and end since there is no showing when Chua actually received the demand
letter dated November 30, 1993. The MeTC cannot simply presume that the date of the demand
letter was likewise the date of Chua’s receipt thereof. There is simply no such presumption provided
in our rules on evidence. In addition, from the inception of this case Chua has consistently denied
having received subject demand letter. He maintains that the paper used for the purported demand
letter was still blank when presented to him for signature and that he signed the same for another
purpose. Given Chua’s denial, it behooved upon the prosecution to present proof of his actual
receipt of the November 30, 1993 demand letter. However, all that the prosecution did was to
present it without, however, adducing any evidence as to the date of Chua’s actual receipt thereof. It
must be stressed that ‘[t]he prosecution must also prove actual receipt of [the notice of dishonor]
because the fact of service provided for in the law is reckoned from receipt of such notice of
dishonor by the accused." "The burden of proving notice rests upon the party asserting its
37
existence. Ordinarily, preponderance of evidence is sufficient to prove notice. In criminal cases,

however, the quantum of proof required is proof beyond reasonable doubt. Hence, for B.P. Blg. 22
cases, there should be clear proof of notice" which the Court finds wanting in this case.
38
Anent the stipulation entered into by Chua’s counsel, the MeTC stated:
In the course of the said proceedings, the defense counsel manifested that he is willing to stipulate
as to the existence of the demand letter and the signature of the accused as reflected on the face of
the demand letter. x x x
xxxx
The prosecution had proved also that private complainant personally sent a written notice of
dishonor of the subject checks to the accused and that the latter personally received the same. In
fact, the defense stipulated in open court the existence of the said demand letter and the signature
of the accused as reflected in the face of the demand letter. x x x In view of that stipulation, the
defense is now estopped in denying its receipt thereof. 39
As earlier mentioned, this ruling of the MeTC was affirmed by both the RTC and the CA.
The Court, however, disagrees with the lower courts. It is plain that the stipulation only refers to the
existence of the demand letter and of Chua’s signature thereon. In no way can an admission of
Chua’s receipt of the demand letter be inferred therefrom. Hence, Chua cannot be considered
estopped from claiming non-receipt. Also, the Court observes that Chua’s admission with respect to
his signature on the demand letter is consistent with his claim that See made him sign blank papers
where the contents of the demand letter dated November 30, 1993 were later intercalated.
In view of the above discussion, the Court rules that the prosecution was not able to sufficiently
prove the existence of the second element of BP 22.
At any rate, the demand letter dated

November 30, 1993 deserves no weight
and credence not only because it does
not qualify as a newly discovered
evidence within the purview of the law
but also because of its doubtful
character.
As may be recalled, the prosecution had already long rested its case when it filed a Motion to Re-
Open Presentation of Prosecution’s Evidence and Motion To Allow Prosecution To Submit Additional
Formal Offer of Evidence dated March 28, 2003. Intending to introduce the demand letter dated
November 30, 1993 as a newly discovered evidence, See attached to the said motion an affidavit of 40
even date where he stated the circumstances surrounding the fact of his location of the same, viz.:
2. When we initially presented our evidence in support of these criminal complaints, I was
already looking for a copy of the demand letter personally served by the affiant (See) and
duly received by [Chua];
3. That despite diligent efforts to locate the demand letter x x x dated November 30, 1993,
the same was not located until sometime in February 2002 when I was having our old
house/office located at C-5 Christian Street, Grace Village, Quezon City, cleaned and ready
to be rented out;
4. x x x [upon] showing the same to the new handling public prosecutor, he advised the
affiant to have it presented in Court.41
In Ybiernas v. Tanco-Gabaldon, the Court held that:

42
x x x The question of whether evidence is newly discovered has two aspects: a temporal one, i.e.,
when was the evidence discovered, and a predictive one, i.e., when should or could it have been
discovered. It is to the latter that the requirement of due diligence has relevance. We have held that
in order that a particular piece of evidence may be properly regarded as newly discovered to justify
new trial, what is essential is not so much the time when the evidence offered first sprang into
existence nor the time when it first came to the knowledge of the party now submitting it; what is
essential is that the offering party had exercised reasonable diligence in seeking to locate such
evidence before or during trial but had nonetheless failed to secure it.
The Rules do not give an exact definition of due diligence, and whether the movant has exercised
due diligence depends upon the particular circumstances of each case. Nonetheless, it has been
observed that the phrase is often equated with "reasonable promptness to avoid prejudice to the
defendant." In other words, the concept of due diligence has both a time component and a good faith
component. The movant for a new trial must not only act in a timely fashion in gathering evidence in
support of the motion; he must act reasonably and in good faith as well. Due diligence contemplates
that the defendant acts reasonably and in good faith to obtain the evidence, in light of the totality of
the circumstances and the facts known to him. 43
"Under the Rules of Court, the requisites for newly discovered evidence are: (a) the evidence was
discovered after trial; (b) such evidence could not have been discovered and produced at the trial
with reasonable diligence; and (c) it is material, not merely cumulative, corroborative or impeaching,
and is of such weight that, if admitted, will probably change the judgment." 44
In this case, the Court holds that the demand letter dated November 30, 1993 does not qualify as a
newly discovered evidence within the purview of the law. Per See’s statements in his affidavit, the
said evidence was already known to him at the time he filed his complaint against Chua. It was also
apparently available considering that it was just kept in his house. Undeniably, had See exercised
reasonable diligence, he could have promptly located the said demand letter and presented it during
trial. However, the circumstances suggest otherwise.
Curiously, while See claims that the demand letter dated November 30, 1993 was already existing at
the time he filed the complaint, the same was not mentioned therein. Only the demand letter dated
December 10, 1993 was referred to in the complaint, which per See’s own allegations, was also not
actually received by Chua. In addition, the prosecution failed to present the original copy of the
demand letter dated December 10, 1993 during trial. Clearly on the basis of the demand letter dated
December 10, 1993 alone, the prosecution cannot possibly establish the existence of the second
element of the offense. Indeed, the surrounding circumstances and the doubtful character of the
demand letter dated November 30, 1993 make it susceptible to the conclusion that its introduction
was a mere afterthought – a belated attempt to fill in a missing component necessary for the
existence of the second element of BP 22.
It may not be amiss to add at this point that out of the 54 cases for violation of BP 22 filed against
Chua, 22 involve checks issued on November 30, 1993 or thereafter. Hence, the lower courts
grievously erred in convicting Chua for those 22 cases on the basis of a purported demand letter
written and sent to Chua prior to the issuance of said 22 checks. Checks can only be dishonored
after they have been issued and presented for payment. Before that, dishonor cannot take place.
Thus, a demand letter that precedes the issuance of checks cannot constitute as sufficient notice of
dishonor within the contemplation of BP 22. It is likewise significant to note that aside from the
absence of a date, the signature of Chua appearing on the questioned November 30, 1993 demand
letter is not accompanied by any word or phrase indicating that he affixed his signature thereon to
signify his receipt thereof. Indeed, "conviction must rest upon the strength of the evidence of the
prosecution and not on the weakness of the evidence for the defense." In view of the foregoing, the
45
Court cannot accord the demand letter dated November 30, 1993 any weight and credence.
Consequently, it cannot be used to support Chua’s guilt of the offenses charged.
All told, the Court cannot convict Chua for violation of BP 22 with moral certainty.
Chua’s acquittal, however, does not entail the extinguishment of his civil liability for the dishonored
checks. "An acquittal based on lack of proof beyond reasonable doubt does not preclude the award
46
of civil damages." For this reason, Chua must be directed to testitute See the total amount of the
47
face value of all the checks subject of the case with legal interest at the rate of 12% per
annum reckoned from the time the said checks became due and demandable up to June 30, 2013
and 6% per annum from July 1, 2013 until fully paid. 48
WHEREFORE, the Court GRANTS the Petition. The assailed Decision dated November 11, 2010 of
the Court of Appeals in CA-GR. CR No. 33079 which affirmed the Decisions of the Metropolitan Trial
Court of Quezon City, Branch 36 and the Regional Trial Court of Quezon City, Branch 219 finding
petitioner Robert Chua guilty beyond reasonable doubt of 54 counts of Violation of Batas Pambansa
Big. 22 is REVERSED and SET ASIDE. Petitioner Robert Chua is hereby ACQUITTED on the
ground that his guilt has not been established beyond reasonable doubt and
ordered RELEASED immediately / unless he is detained for some other legal cause. He is ordered,
however, to indemnify the private complainant Philip See the total value of the 54 checks subject of
this case plus legal interest of 12% per annum from the time the said sum became due and
demandable until June 30, 2013 and 6% per annum from July 1, 2013 until fully paid.
SO ORDERED.
MARIANO C. DEL CASTILLO

Associate Justice
WE CONCUR:
DIOSDADO M. PERALTA*
Associate Justice
LUCAS P. BERSAMIN** JOSE CATRAL MENDOZA

Associate Justice Associate Justice
MARVIC M.V.F. LEONEN

Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
MARIANO C. DEL CASTILLO***

Associate Justice
Acting Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Acting Chairperson's
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P.A. SERENO

Chief Justice
Footnotes
* Per Special Order No. 2088 dated July 1, 2015.
** Per Special Order No. 2079 dated June 29, 2015.
*** Per Special Order No. 2087 (Revised) dated July 1, 2015.
1
CA rollo, pp. 136-137.
2
Id at 64-68.
3
Id. at 69-72.
4
Id. at 75-78.
5
See Formal Offer of Exhibits dated January 22, 1999, id. at 83-97.
6
Id. at 89.
7
See Comment to Prosecution’s Formal Offer of Exhibits, id. at 98-102.
8
Id. at 103-104.
9
Id. at 105-106.
10
Id. at 116-118.
11
Id. at 113-115.
See Admission/Objection with Comment to Additional Offer of Evidence by the

12
Prosecution, id. at 120-121.
13
Id. at 119.
14
As mentioned in the MeTC Order dated January 12, 2007, id. at 131-133.
15
Id. at 122-130.
16
Id. at 131-133.
17
Id. at 134-135.
18
Id. at 136-140; penned by Judge Edgardo B. Bellosillo of MeTC, Branch 36, Quezon City.
19
Id. at 139.
20
Id. at 140.
21
Id. at 59-61; penned by Judge Bayani V. Vargas of RTC, Branch 219, Quezon City.
22
Id., unpaginated, between pp. 60 and 61.
23
Id. at 61.
Id. at 252-262; penned by Associate Justice Sesinando E. Villon and concurred in by

24
Associate Justices Rebecca De Guia-Salvador and Amy C. Lazaro-Javier.
25
Id. at 259-260.
26
Id. at 262.
27
Id. at 263-272.
28
Id. at 292.
29
Rollo, p. 20.
411 Phil. 63 (2001).
30
Bases Conversion Development Authority v. Reyes, G.R. No. 194247, June 19, 2013, 699
31
SCRA 217, 225-226.
Particularly Section 1(b), Rule 37 and Section 2(b), Rule 121 of the Rules of Court which
32
provide as follows:
Rule 37
Section 1. Grounds of and period for filing motion for new trial or reconsideration. –
Within the period for taking an appeal, the aggrieved party may move the trial court
to set aside the judgment or final order and grant a new trial for one or more of the
following causes materially affecting the substantial rights of said party:
xxxx
(b) Newly discovered evidence, which he could not, with reasonable diligence, have
discovered and produced at the trial, and which if presented would probably alter the
result.
Rule 121
Section 2. Grounds for a new trial – The court shall grant a new trial on any of the
following grounds:
xxxx
(b) That a new and material evidence has been discovered which the accused could
not with reasonable diligence have discovered and produced at the trial and which if
introduced and admitted would probably change the judgment.
Rico v. People, 440 Phil. 540, 551 (2002).

33
Nissan Gallery-Ortigas v. Felipe, G.R. No.199067, November 11, 2013, 709 SCRA 215,
34
223.
Supra note 30.

35
Id. at 72-73.
36
San Mateo v. People, G.R. No. 200090, March 6, 2013, 692 SCRA 660, 667.
37
Alferez v. People, 656 Phil. 116, 124 (2011).

38
CA rollo, pp. 138-139.

39
Id. at 107.
40
Id.
41
G.R. No. 178925, June 1, 2011, 650 SCRA 154.

42
Id. at 170, citing Custodio v. Sandiganbayan, 493 Phil. 194, 206 (2005).

43
Heirs of Pacencia Racaza v. Abay-abay, G.R. No. 198402, June 13, 2012, 672 SCRA 622,
44
629.
Cabugao v. People, 479 Phil. 546, 561 (2004).

45
San Mateo v. People, supra note 37 at 668.

46
Id.
47
Nacar v. Gallery Frames, GR. No. 189871,August 13,2013, 703 SCRA439,454-456.

48

NegoCases-Notice of Dishonor

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CASES ON NEGOTIABLE INSTRUMENTS

(Presentment and Notice of Dishonor)

1. Asia Banking Corporation vs. Javier, 44 Phil 779 (1923)

PREMISES CONSIDERED, the decision appealed from is AFFIRMED.

3. State Investment House, Inc. vs. CA, 217 SCRA 32 (1993)

In this regard, Sec. 52 of the Negotiable Instruments Law provides —

1. China Banking Corporation 589053 Dec. 22, 1980 P98,750.00

2. International Corporate Bank 04045549 Dec. 22, 1980 102,313.00

spouses, the dispositive portion of which reads:

dispositive portion of which reads:

Hence, this petition.

In their Petition,17 petitioners raised the following grounds:

TERESITA J. LEONARDO-DE CASTRO

7. Chua vs. People (G.R. No. 196853 July 13, 2015)

PSBANK CHECK NO. DATED AMOUNT

Proceedings before the Metropolitan Trial Court

the trial of the case proceeded.

Ruling of the Regional Trial Court (RTC)

sufficiently established by the prosecution, to wit:

Hence, the dispositive portion of the RTC Decision:

Ruling of the Court of Appeals (CA)

Hence, this Petition for Review on Certiorari.

The Parties’ Arguments

The Petition is impressed with merit.

The issues raised by Chua involve

The prosecution failed to prove all the

as it involves a state of mind. Thus, Section 2 of BP 22 creates a presumption of knowledge of

receipt of the notice of dishonor, viz.:

the original, emphasis supplied)

existence. Ordinarily, preponderance of evidence is sufficient to prove notice. In criminal cases,

At any rate, the demand letter dated

In Ybiernas v. Tanco-Gabaldon, the Court held that:

MARIANO C. DEL CASTILLO

LUCAS P. BERSAMIN** JOSE CATRAL MENDOZA

MARVIC M.V.F. LEONEN

MARIANO C. DEL CASTILLO***

MARIA LOURDES P.A. SERENO

* Per Special Order No. 2088 dated July 1, 2015.

** Per Special Order No. 2079 dated June 29, 2015.

*** Per Special Order No. 2087 (Revised) dated July 1, 2015.

See Admission/Objection with Comment to Additional Offer of Evidence by the

Prosecution, id. at 120-121.

Id. at 252-262; penned by Associate Justice Sesinando E. Villon and concurred in by

Associate Justices Rebecca De Guia-Salvador and Amy C. Lazaro-Javier.

SCRA 217, 225-226.

Rico v. People, 440 Phil. 540, 551 (2002).

Supra note 30.

Alferez v. People, 656 Phil. 116, 124 (2011).

CA rollo, pp. 138-139.

G.R. No. 178925, June 1, 2011, 650 SCRA 154.

Id. at 170, citing Custodio v. Sandiganbayan, 493 Phil. 194, 206 (2005).

Cabugao v. People, 479 Phil. 546, 561 (2004).

San Mateo v. People, supra note 37 at 668.

Nacar v. Gallery Frames, GR. No. 189871,August 13,2013, 703 SCRA439,454-456.

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