----BOUNCING CHECKS LAW---

A check is a negotiable instrument that serves as a substitute for money and as a convenient form of
payment in financial transactions and obligations. The use of checks as payment allows commercial and
banking transactions to proceed without the actual handling of money, thus, doing away with the need to
physically count bills and coins whenever payment is made. It permits commercial and banking transactions
to be carried out quickly and efficiently. But the convenience afforded by checks is damaged by unfunded
checks that adversely affect confidence in our commercial and banking activities, and ultimately injure
public interest.

BP 22 was enacted for the specific purpose of addressing the problem of the continued issuance and
circulation of unfunded checks by irresponsible persons. To stem the harm caused by these bouncing checks
to the community, BP 22 considers the mere act of issuing an unfunded check as an offense not only against
property but also against public order. The purpose of BP 22 in declaring the mere issuance of a
bouncing check as malum prohibitum is to punish the offender in order to deter him and others from
committing the offense, to isolate him from society, to reform and rehabilitate him, and to maintain social
order.

Purpose of BP Blg. 22:

What BP 22 punishes is the mere act of issuing a bouncing check, not the purpose for which it
was issued nor the terms and conditions relating to its issuance. The law did not look either at the
actual ownership of the check or of the account against which it was made, drawn, or issued, or at the
intention of the drawee, maker or issuer. Also, that the check was not intended to be deposited was
really of no consequence to the issuer incurring criminal liability under BP 22.

The gravamen of the offense is the act of making and issuing a worthless check or any check that is
dishonored upon its presentment for payment and putting them in circulation. The law includes all checks
drawn against banks. The law was designed to prohibit and altogether eliminate the deleterious and
pernicious practice of issuing checks with insufficient or no credit or funds therefor. Such practice is deemed
a public nuisance, a crime against public order to be abated. The mere act of issuing a worthless check,
either as a deposit, as a guarantee, or even as an evidence of a pre-existing debt or as a mode of payment is
covered by B.P. 22. The law is broad enough to include, within its coverage, the making and issuing of a
check by one who has no account with a bank, or where such account was already closed when the check
was presented for payment.

The "check flasher" does a great deal more than contract a debt; he shakes the pillars of business; and it is a
mistaken charity of judgment to place him in the same category with the honest man who is unable to pay
his debts, and for whom the constitutional inhibition against "imprisonment for debt, except in cases of
fraud" was intended as a shield and not a sword.

Considering that the law imposes a penal sanction on one who draws and issues a worthless check against
insufficient funds or a closed account in the drawee bank, there is, likewise, every reason to penalize a
person who indulges in the making and issuing of a check on an account belonging to another with
the latter’s consent, which account has been closed or has no funds or credit with the drawee bank.

Specific acts in violation of BP 22:

BP 22 provides:
Section 1. Checks Without Sufficient Funds. Any person who makes or draws and issues any check to
apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit
with the drawee bank for the payment of such check in full upon its presentment, which check is
subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been
dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop
payment, shall be punished by imprisonment of not less than thirty days but not more than one (1) year or
by a fine of not less than but not more than double the amount of the check which fine shall in no case
exceed Two Hundred Thousand Pesos, or both such fine and imprisonment at the discretion of the court.
The same penalty shall be imposed upon any person who, having sufficient funds in or credit with the
drawee bank when he makes or draws and issues a check, shall fail to keep sufficient funds or to maintain a
credit to cover the full amount of the check if presented within a period of ninety (90) days from the
date appearing thereon, for which reason it is dishonored by the drawee bank. Where the check is drawn
by a corporation, company or entity, the person or persons who actually signed the check in behalf of such
drawer shall be liable under this Act.

Where the check is drawn by a corporation, company or entity, the person or persons who actually signed
the check in behalf of such drawer shall be liable under this Act.

Based on Section 1 of BP 22, the law may be violated in two ways:

1. By making or drawing and issuing any check to apply on account or for value, knowing at the time
of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of
such check in full upon its presentment, which check is subsequently dishonored by the drawee bank
for insufficiency of funds or credit or would have been dishonored for the same reason had
not the drawer, without any valid reason, ordered the bank to stop payment; and
2. Having sufficient funds in or credit with the drawee bank when he makes or draws and issues a
check, by failing to keep sufficient funds or to maintain a credit to cover the full amount of the check
if presented within a period of 90 days from the date appearing thereon, for which reason it is
dishonored by the drawee bank.

Prima facie evidence of knowledge of insufficient funds:

Section 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 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 5 banking days after
receiving notice that such check has not been paid by the drawee.

The law enumerates the elements of the crime to be (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

Evidence of knowledge of insufficient funds

There is deemed to be a prima facie evidence of knowledge on the part of the maker, drawer or
issuer of insufficiency of funds in or credit with the drawee bank of the check issued if the dishonored
check is presented within 90 days from the date of the check and the maker or drawer fails to pay thereon
or to make arrangement with the drawee bank for that purpose . The statute has created the prima
facie presumption evidently because "knowledge" which involves a state of mind would be difficult to
establish. The presumption does not hold, however, when the maker, drawer or issuer of the check pays the
holder thereof the amount due thereon or makes arrangement for payment in full by the drawee bank of such
check within 5 banking days after receiving notice that such check has not been paid by the drawee bank.
(Notice of dishonor has to be in writing. Domangsang vs. C.A. October 2, 2001)

Section 2 of B.P. 22 clearly provides that this presumption arises not from the mere fact of drawing,
making and issuing a bum check; there must also be a showing that, within five banking days from receipt of
the notice of dishonor, such maker or drawer failed to pay the holder of the check the amount due thereon or
to make arrangement for its payment in full by the drawee of such check.

The State, under this statute, actually offers the violator a compromise by allowing him to perform
some act which operates to preempt the criminal action, and if he opts to perform it the action is abated. In
this light, the full payment of the amount appearing in the check within five banking days from notice
of dishonor is a `complete defense.’ 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 served on the issuer. The issuer of the check has a right to demand – and
the basic postulates of fairness require – that the notice of dishonor be actually sent to and
received by her to afford her the opportunity to avert prosecution under B.P. 22.

While, indeed, Section 2 of B.P. 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. 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.

Duty of the Drawee-Bank:

Section. 3. Duty of drawee; rules of evidence. – It shall be the duty of the drawee of any check, when
refusing to pay the same to the holder thereof upon presentment, to cause to be written, printed or
stamped in plain language thereon, or attached thereto, the reason for drawee's dishonor or refusal to pay
the same: Provided, 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. In all prosecutions under
this Act, the introduction in evidence of any unpaid and dishonored check, having the drawee's refusal to
pay stamped or written thereon, or attached thereto, with the reason therefor as aforesaid, shall be
prima facie evidence of the making or issuance of said check, and the due presentment to the drawee for
payment and the dishonor thereof, and that the same was properly dishonored for the reason written,
stamped or attached by the drawee on such dishonored check.

Notwithstanding receipt of an order to stop payment, the drawee shall state in the notice that there were no
sufficient funds in or credit with such bank for the payment in full of such check, if such be the fact.

To prove the first and third elements of the crime, Section 3 of the law provides that the introduction in
evidence of the unpaid or dishonored check, having the drawee’s refusal to pay stamped or written thereon,
or attached thereto, with the reason therefor as aforesaid shall be prima facie evidence of the making
or issuing of the said checks and the due presentment to the drawee for payment and the dishonor thereof,
and that the same was properly dishonored for the reason written, stamped or attached thereto by the
drawee on such dishonored checks. It is difficult for the prosecution to prove the second element
because knowledge involves a state of mind. Hence, Section 2 of the law provides for prima facie
evidence of knowledge of insufficient funds.

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 shall arrange for its payment. The prosecution is burdened to
prove the acts that gave rise to the prima facie presumption. On the other hand, the drawer has the right to
adduce evidence to rebut the same. It is important to stress that this presumption is not conclusive, or one
that forecloses or precludes the presentation of evidence to the contrary. Thus, the drawer of the check can
still overturn the prima facie presumption by proving that the holder thereof was paid the amount due
thereon, or that arrangements were made for payment in full by the drawee of the check within five banking
days after receipt of notice that such check has not been paid by the drawee bank.

Distinction between BP 22 and Estafa:

Bouncing Check Law (BP 22)
1. Making, drawing and issuance of any check
to apply on account or for value
3. 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
payment upon its presentment;
3. Subsequent dishonor of the check by the
drawee bank for insufficiency of funds or
credit or dishonor of the check for the same
reason had not the drawer, without any valid
cause, ordered the bank to stop payment.
Estafa (Art. 315, par. 2, RPC
2. That the offender postdated or issued a
check in payment of an obligation
contracted at the time the check was issued
4. That such postdating or issuing a check was
done when the offender had no funds in the
bank, or his funds deposited in the bank or
his funds deposited therein were not
sufficient to cover the amount of the check
5. Deceit or damage to the payee thereof.
 ---PHILIPPINE DEPOSIT INSURANCE CORPORATION (R.A 3519, AS AMENDED)---

PDIC is a government instrumentality created to ensure the deposits of all banks which are entitled to be the
benefit of insurance. It has the authority to determine which deposits products are covered by insurance.

PDIC exists to provide permanent and continuing deposit insurance coverage for the depositing public to
help promote public confidence and stability in the economy. Aside from being a deposit insurer, PDIC also
acts as co-regulator of banks, and receiver and liquidator of closed banks. It has the authority to conduct
independent special examination of banks and may inquire into or examine deposit accounts of failing banks
in the event there is finding of unsafe and unsound banking practices.

Maximum Deposit Insurance coverage (MDIC)

Deposits of all commercial banks, savings and mortgages banks, rural banks, private development banks,
cooperative banks, savings and loan associations, as well as branches and agencies in the Philippines of
foreign banks and all other corporations authorized to perform banking functions in the country, are insured
with PDIC. Any insured domestic bank with branch outside the Philippines may elect to include for
insurance its deposit obligations payable at such branch. Moreover, pursuant to RA 6426, foreign currency
deposits are also insured by PDIC. Depositors may receive payment in the same currency in which the
insured deposit is denominated. Membership of banks to PDIC is mandatory, hence all operating banks are
members of PDIC.

The MDIC is P5000,000.00 per depositor. To determine such amount due to any depositor in case of a
closed bank, there shall be added together all deposit accounts in the bank maintained in the same right and
capacity for his benefit either his own name or in the name of others. However, deposits in different banking
institutions are insured separately. The PDIC may propose to adjust the MDIC subject to the approval of the
President of the Philippines, in case of a condition that threatens the monetary and financial stability of the
banking system that may have systematic consequences.

And “insured deposit” is the amount due to a bona fide depositor for legitimate deposits in an insured bank
net of ant obligation of the depositor to the insured bank as of date of closure, but not to exceed P500,000.00

A “joint account” regardless of whether the conjunction ‘and’, ‘or’, ‘and/or’ is used, shall be insured
separately from any individually-owed deposit account subject to the following conditions:
1. If the account is held jointly by two or more natural persons or by two or more juridical persons or
entities, the maximum insured deposit shall be divided into as many equal shares as there are
individuals, juridical persons or entities, unless a different sharing is stipulated in the document of
deposit;
2. If the account is held by a juridical person or entity jointly with one or more natural persons, the
maximum insured deposit shall be presumed to belong entirely to such juridical person or entity;
3. The aggregate of the interests of each co-owner several joint accounts, whether owned by the same
or different combinations of individuals, juridical persons or entities, shall likewise be subject to the
maximum insured deposit of P500,000.00; and
4. No owner/holder of any negotiable certificate of deposit shall be recognized as a depositor entitled to
the rights provided under the law unless his name is registered as owner/holder thereof in the books
of the issuing bank.

Accounts or transactions not allowed to be insured with PDIC:

 1. Investment products such as bonds, securities and trust accounts;
2. Deposit accounts which are unfunded, fictitious or fraudulent;
3. Deposit products constituting or emanating from unsafe and unsound banking practices;
4. Deposits that are determined to be proceeds of an unlawful activity as defined under the Anti-Money
laundering Law.

Proof of Claims:
Whenever an insured bank shall have been closed by the Monetary Board payment of the insured deposits
on such closed bank shall be made by PDIC as soon as possible either (1) by cash or (2) by making available
to each depositor a transferred deposit in another insured bank in an account equal to insured deposit of such
depositor.

PDIC, in its discretion, may require proof of claims to be filed before paying the insured deposits, and that in
any case where PDIC is not satisfied as to the viability of a claim for an insured deposit, it may require final
determination of a court of competent jurisdiction before paying such claim.
Failure to settle the claim, within 6 months from the date of filing of claim for insured deposits, where
such failure was due to grave abuse of discretion, gross negligence, bad faith or malice: shall upon
conviction, subject the directors, officers or employees of the Corporation responsible for the delay, to
imprisonment from 6 to 1 year, provided the period shall not apply if the validity of the claim requires the
resolution of issues of facts and/or law by another office, body or agency.

Requirements of claims:
Depositors with deposit accounts of P100,000.00 and below are not required to file claims provided they
have no obligations with the closed bank and have complete and updated addresses in the bank records or
have updated these through the Mailing Addresses Form (MAUF) issued by the PDIC. These depositors are
entitled to immediate or early payment of deposit insurance claim as part of PDIC’s initiative to provide
convenience to small depositors. Payments to these depositors are sent as postal money orders to the
depositors’ mailing address.

Depositors required to file a claim:

1. Those with valid deposit accounts of more than P100,000.00
2. Those who have outstanding obligations with the closed bank, regardless of the amount of deposit;
3. Those with account balances of less than P100,000.00 but who have no updated addresses in the
bank records or who have not updated their addresses through the MAUF issued by PDIC;
4. Those who maintain their accounts under the name of business entities, regardless of the type of
account and account balance; and
5. Those with accounts not eligible for early payment, regardless of type of account and account
balance per advice of PDIC.

Documentary requirements:
1. Original evidence of deposits such as savings passbook, certificate of time deposit, bank statements,
unused checks and ATM card;
2. Original copies of two (2) valid photo-bearing identification documents with clear signature of
depositor;
3. If the depositor is below 18 years old, a photocopy of his/her birth certificate from the Philippine
Statistics Authority or duly certified copy from the local civil registrar and valid IDs of the parents;
and
 4. Original copy of a notarized Special Power of Attorney (SPA) for claimants who are not the
signatories in the bank records. In case of minor depositors, the SPA must be executed by the
parent/parents.

If the deposit account in a closed bank is more than P500,000.00, what happens to the excess of the
maximum amount of insured deposit?
 If the closed bank is not rehabilitated or taken over by another bank, amount in excess of the
P500,000 coverage can still be claimed upon the final liquidation of the remaining assets of the
closed bank.
 The claim may be filed with the Liquidator of the closed bank put payment of the said claim will
depend on the bank’s available assets to settle its preferred claims (Government taxes, labor claims,
secured credits and trust funds) and approval of the Liquidation Court. The schedule of payment
beyond the P500,000.00 maximum insurance shall be based on priorities set by law.