Casabuena v.

Court of Appeals
G.R. No. 115410 – Feb. 27, 1998
Third Division| J. Romero

Digest Author: Noel Francis T. Galinato

Topic: Nego –IV. Consideration and Effects – 1. Presumption of consideration

Case Summary: Petitioner Irma L. Idos and complainant Eddie Alarilla were partners in a leather tanning
business. After one year, they decided to terminate their partnership. Upon liquidation of the partnership, it was
found that the partnership had receivables and stocks worth P1.8M. Complainant Alarilla’s share was P900K.
To pay for the share, petitioner Idos issued four postdated checks. Complainant Alarilla was able to encash the
first, second, and fourth check. However, he failed to encash the third check due to insufficiency of funds.
Complainant then demanded payment from petitioner Idos but the latter failed to pay. Hence, a formal demand
for payment was subsequently made. Petitioner Idos denied liability. She contended that the checks had been
given upon demand of complainant Alarilla only as “assurance” of his share in the assets of the partnership and
that it was not supposed to be deposited until the stocks had been sold. Complainant then filed a complaint for
violation of BP No. 22. The RTC convicted petitioner Idos. The CA also appealed. Hence, the petition.

Whether Irma Idos is guilty of violating B.P. 22.—NO. Since B.P. 22 is a penal law, it must be strictly
construed against the state and liberally in favor of the accused. The elements of a violation of B.P. 22 are as
follows. One of tis elements is: “making, drawing and issuance of any check to apply to account for value;” (see
ratio for full list of elements). In this case, the partnership is still in the winding up stage. A partnership is not
terminated upon dissolution; it continues until the winding up of partnership affairs is completed. Since the
partnership was not yet terminated, the petitioner-accused and the complainant remained as co-partners. The
check was thus issued by the petitioner to the complainant as would a partner to another, and not as payment
from a debtor to creditor. Thus, the view that is in favor of the accused is that the check was issued merely to
evidence the complainant’s share in the partnership property, or to assure the latter that he would receive his
share in due time. With this, the Supreme Court is of the view that the check was not intended to apply on
account or value; rather it should be deemed as having been drawn without consideration at the time of issue.
Evidently, the first element is absent. Therefore, petitioner is not guilty of B.P. 22. [See notes on discussion on
how the Court addressed the Solicitor General’s contention]

Doctrines/Laws Involved:
A check issued as mere evidence of debt is deemed to have been drawn without consideration at the time of
issue, thus precluding violation for B.P. Blg. 22.

FACTS:

1. Petitioner Irma L. Idos and complainant Eddie Alarilla were partners in a leather tanning business. After
one year, they decided to terminate their partnership.
2. Upon liquidation of the partnership, it was found that the partnership had receivables and stocks worth
P1,800,000.00. Complainant Alarilla’s share was P900,000.00. To pay for the share, petitioner Idos
issued four postdated checks.
 3. Complainant Alarilla was able to encash the first, second, and fourth check. However, he failed to
encash the third check due to insufficiency of funds.
4. Complainant demanded payment from petitioner Idos but the latter failed to pay. A formal demand for
payment was subsequently made.
5. Petitioner Idos denied liability. She contended that the checks had been given upon demand of
complainant Alarilla only as “assurance” of his share in the assets of the partnership and that it was not
supposed to be deposited until the stocks had been sold.
6. Complainant then filed a complaint for violation of BP No. 22. The RTC convicted petitioner Idos. The
CA also appealed. Hence, the petition.

ISSUES + HELD:
1. Whether Irma Idos is guilty of violating B.P. 22.—NO.
o Since B.P. 22 is a penal law, it must be strictly construed against the state and liberally in favor
of the accused. The elements of a violation of B.P. 22 are as follows:
 (1) making, drawing and issuance of any check to apply to account for value;
 (2) knowledge of the maker, drawer or issuer that at the time of issuance he has no
sufficient funds in or credit with the drawee bank for the payment of such check in full
upon its presentment;
 (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.
o In this case, the partnership is still in the winding up stage. The Civil Code provides that a
partnership is not terminated upon dissolution; it continues until the winding up of partnership
affairs is completed. Since the partnership was not yet terminated, the petitioner-accused and the
complainant remained as co-partners. The check was thus issued by the petitioner to the
complainant as would a partner to another, and not as payment from a debtor to creditor.
o The view that is in favor of the accused is that the check was issued merely to evidence the
complainant’s share in the partnership property, or to assure the latter that he would receive his
share in due time. With this, the Supreme Court is of the view that the check was not intended to
apply on account or value; rather it should be deemed as having been drawn without
consideration at the time of issue.
o With this view (in favor of the accused), the first element is absent. Therefore, petitioner is not
guilty of B.P. 22. [See notes on discussion on how the Court addressed the Solicitor General’s
contention]
RULING: WHEREFORE, the decision is AFFIRMED.

DISSENT (if required):

NOTES:
 The Solicitor General argues that element of deceit and damage are not essential under the Bouncing
Checks Law because it is a malum prohibitum.
o The Supreme Court ruled that to hold this absolute proposition would be absurd. For example,
when a check is issued by a kidnap victim to a kidnapper for ransom, it would be absurd if the
kidnapper can hold the kidnap victim liable under B.P. 22 for issuing a dishonored and unpaid
check. This is against public policy.
 Furthermore, Solicitor General argues that the petitioner issued the check knowing that she had no
sufficient funds.
o The Supreme Court ruled that “knowledge of the insufficiency of funds” is only a presumption.
This is rebuttable. Evidence may be presented to show: (1) lack of actual knowledge of
insufficiency of funds; and (2) lack of adequate notice of dishonor.
 In Nieva v. CA, it was held that dishonor of checks issued by the accused merely
engendered the prima facie presumption that she knew of the insufficiency, but this did
not make the accused automatically guilty under B.P. 22. All elements must still be
proven beyond reasonable doubt.
o In this case, the checks were issued merely to evidence the proportionate share of the
complainant in the partnership assets upon its dissolution. Payment of the shares were
conditioned upon the subsequent realization of profits.
o Complainant failed to present evidence that that petitioner Irma Idos signed and issued the four
checks knowing that funds therefor would be insufficient at the time the complainant would
present them to the drawee bank. It was uncertain at the time the checks were issued whether the
unsold goods would have been sold, or the receivables would have been collected when the
checks would be encashed (note it was only evidence of complainant’s share). As it turned out,
three checks were fully funded when presented to the bank; the remaining one was settled later
on.
o There was also no proof of adequate notice of dishonor. It has been held that failure to prove that
notice of dishonor was given precludes conviction for BP 22 because it deprives the accused an
opportunity to preclude criminal prosecution. In fact, when the checks bounced, the petitioner
later made good the checks.
o Thus, the SC finds that petitioner Idos issued the checks in good faith.