Checks are issued as substitute for money so that the physical counting of bills for large amount of financial transactions can be avoided. It is a negotiable instrument that allows businessmen and banks to proceed with the banking transactions without the hassle of withdrawing and depositing the physical bills or money.
One of the negative situations that may arise is that businessmen carrying large amount of bills are at constant threat of danger. However, this practice of issuing checks were taken advantage of by some people. Checks were drawn and issued even without the sufficient funds to support the same at the time of their due dates.
This had a bad effect on the banking system for these unfunded checks have a rippling effect throughout the banking world. So, to prevent this from happening or to penalize the violators, this led to the passage of Batas Pambansa [BP] No. 22.1
The elements for this crime are:
For Paragraph 1, Section 1 of BP 22
1] The accused makes, draws or issues any check to apply to account or for value;
2] The accused knows at the time of the issuance that he or she does not have sufficient funds in, or credit with, the drawee bank for the payment of the check in full upon its presentment.2
For Paragraph 2, Section 1, the elements are as follows:
1] any person, makes or draws and issues a check;
2] such person has sufficient funds in or credit with the drawee bank;
3] failure 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;
4] for which reason it is dishonored by the drawee bank.3
What happens when you bounce a check?
The check will not be honored by the drawee bank. It will not be credited to the holder thereof because it is not supported with enough funds by the drawee, issuer, or by the drawee bank. It may be supported by sufficient funds but the check itself has not been cleared by the clearing authorities, for legal and justifiable reasons.
Can one go to jail for issuing a bouncing check?
As provided in the BP22, a person who caused a check to bounce shall be imprisoned for not less than 30 days but not more than one year. However, Courts are geared towards imposing a fine rather than incarceration, unless there is a bad faith pattern in the issuance of several checks.
Why is it called bouncing a check?
It is called a bouncing check because it would simulate an object that has bounced and will return instead of passing through or being absorbed. The check here will not be credited to the payee thereof. It will not be honored by the drawee bank, hence, as a matter of course, will bounce for being unsupported with funds.
What does bouncing checks mean?
These refer to dishonored checks, which are refused by the drawee bank to be credited to the issued parties for several reasons like “DAIF” and “DAUD”
What is a check? Explain “DAIF” and “DAUD”
DAIF stands for it is drawn against insufficient funds. DAIF means that a check has been issued more that the funds available in a particular account or in the drawee bank. DAUD stands for drawn against uncollected deposit. It is a banking phrase connoting a check with insufficient funds or a check that has not yet been cleared.
Does the bouncing check law cover manager’s check and cashier’s check?
“Manager’s check and cashier’s check are transacted as cash. It has its peculiar character and general character use in the commercial world where it is transacted as money or deemed as cash.
Thus, certification by drawee bank of the check is deemed as acceptance.” There is sufficient and earmarked funds always covering the value of the check. 4
What is an accommodation check and a guarantee check?
An accommodation check is check issued by an accommodation party for the purpose of lending his name to the accommodated party, to somehow guarantee the payment or performance of the principal obligation.
This is a guarantee check, just like an accommodation or any check drawn and delivered. It is to guarantee and secure payment or the performance of a principal obligation.
Does the bouncing check law cover accommodation and guarantee check?
Yes. Nowhere in the said law states that accommodation or guaranteed checks are exempt from it. As long as the elements of the crime are present, “it was held that BP 22 does not make any distinction as to whether the bad check is issued in payment of an obligation or to guarantee an obligation.”5
What is a crossed check? Does the bouncing check law cover crossed check?
Cross checks are those checks that cannot be encashed. They are merely for deposit to payee’s account.
A cross check has the following effects:
- that the check may not be encashed but only deposited in the bank;
- that the check may be negotiated only once to one who has an account with a bank;
- that the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has secured the check pursuant to that purpose.6
What does credit mean and cite the reason behind the enactment of the bouncing check law?
What credit means:
Section 4. Credit construed. – The word “credit” as used herein shall be construed to mean an arrangement or understanding with the bank for the payment of such check.7
The main reason for the enactment of BP 22 is to safeguard the public and financial institution against the proliferation of rubber or worthless checks.
Violation of BP 22 connotes that:
1] It is not just an offense against property of the offended party
2] It is an offense against public interest or public order
3] To deter people from doing the crime
4] To rehabilitate or reform the violators by penalizing at fining him
Is the principle of conspiracy under the Revised Penal Code [RPC] applicable in violation of the bouncing check law?
Yes. The Supreme Court, in one of its settled cases, ruled that “In the absence of contrary provision in Batas Pambansa Blg. 22, the general provisions of the Revised Penal Code which, by their nature, are necessarily applicable, may be applied suppletorily, including the provisions on conspiracy.”8
In the current setting right now, how does the violation of the bouncing check law penalize by the court?
As mentioned earlier, in penalizing the offender for violation of BP 22, the courts impose merely fines as provided under the said law. They prefer not to place in jail the perpetrator, unless the convict is a perennial violator of the statute and almost always issues the checks in bad faith.
What is the gravamen of the bouncing check law?
As most of the Special Laws, violation of BP 22 is a malum prohibitum offense. The intent to commit a crime and intent to gain or intent to defraud is immaterial.
The gravamen of the offense is the act of making or issuing a worthless check or a check that is dishonored upon its presentation for payment, not the nonpayment of the obligation, which the law punishes. These are some of the principles and rules the Court has arrived from this law:
- “The law punishes the act not as an offense against property, but an offense against public order. Thus, the mere act of issuing a worthless check – whether as a deposit, as a guarantee or even as evidence of preexisting debt – is malum prohibitum.”9
- “The act effectively declares the offense to be one of malum prohibitum. The only valid query then is whether the law has been breached, i.e., by the mere act of issuing a bad check, without so much regard as to the criminal intent of the issuer.”10
- “What the law punishes is the issuance and/or drawing of a check and upon presentment for deposit or encashment, it was dishonored due to insufficient funds [or] account closed.”11
How is the violation of the bouncing check law committed? What are its elements?
The prosecution must have established proof beyond reasonable doubt the existence of the following elements:
1] The accused makes, draws or issues any check to apply to account or for value.
2] The accused knows at the time of the issuance that he or she does not have sufficient funds in, or credit with, the drawee bank for the payment of the check in full upon its presentment.
As clarified in settled case by the Supreme Court, “To be liable for violation of Batas Pambansa Blg. 22, it is not enough that the check was subsequently dishonored for insufficiency of funds. It must be shown also beyond reasonable doubt that petitioner knew of the insufficiency of funds at the time the check was issued.”12
3] “The check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or it would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment.”13
What does the term “issue” mean and the “prima facie evidence of knowledge” of insufficient funds?
In a Court ruling, the latter said that:
“Section 191 of the Negotiable Instruments Law defines ‘issue’ as the first delivery of an instrument, complete in form, to a person who takes it as a holder.14
“Significantly, delivery is the final act essential to the negotiability of an instrument. Delivery denotes physical transfer of the instrument by the maker or drawer coupled with an intention to convey title to the payee and recognize him as a holder.”15
As provided in BP22, “there is a prima facie evidence of knowledge of insufficiency of funds when the check was presented within 90 days from the date appearing on the check and was dishonored unless:3
- such maker or drawer pays the holder thereof the amount due thereon within 5 banking days after receiving notice that such check has not been paid by the drawee , or16
- makes arrangements for payment in full by the drawee of such check within (5) banking days after receiving notice of non-payment.”16
What is the difference between “simultaneous obligation” and “pre-existing obligation”?
“Simultaneous obligation” as an element of estafa connotes that the issuance of a check is used as a means to obtain valuable consideration from the payee. Deceit is the efficient cause for defraudation. To defraud is to deprive some right, interest, or property by deceitful devise.17
In the issuance of a check in payment of a “pre-existing obligation”, the drawer derives no material benefit in return as its consideration had long been delivered to him before the check was issued.
Since an obligation has already been contracted, it cannot be said that the payee parted with his property or that the drawer has obtained something in return simultaneously.
Differentiate the felony of Estafa through issuance of worthless check and the crime of violation of bouncing check law?
First, as enunciated in its ruling by the Supreme Court,18 the elements of estafa under paragraph 2(d), Article 315 of the RPC are:
1] the postdating or issuance of a check in payment of an obligation contracted at the time the check was issued;19
2] lack of sufficiency of funds to cover the check; and19
3] damage to the payee19
For violation of the “Bouncing Check Law”, deceit and damage are not essential or required. The essential element of that offense is knowledge on the part of the maker or drawer of the check of the insufficiency of his funds.
The gravamen of the offense is the issuance of a bad check, not the non- payment of an obligation.
Second, Article 315, Par.2 (d) is a crime against property because the issuance of the check is used as a means to obtain a valuable consideration from the payee.
On the other hand, in BP 22, the mere act of issuing an unfunded check is an offense against public order to stem the harm caused by these bouncing checks to the community.20
Third, in estafa, the failure of the drawer to deposit the amount necessary to secure payment of the check within 3 days from receipt of notice from the bank and or the payee or holder that said check has been dishonored for lack or insufficiency of funds is prima facie evidence of deceit constituting false pretense or fraudulent act.
In BP 22, the failure of the drawer to pay in full the payee or holder within 5 banking days after receiving notice that the check has been rejected by the drawee bank gives rise to presumption of knowledge of insufficiency of funds or credit.
Fourth, in estafa, the check is issued in payment of a simultaneous obligation to defraud the creditor. In BP. 22, the check is issued in payment of a pre-existing obligation.
Fifth, in estafa, an endorser who with knowledge that the check is worthless and had acted with deceit, is liable. In BP. 22, the persons liable are the maker, drawer and the issuer but not an endorser.
Lastly, since estafa is mala in se, good faith is a proper defense. BP 22 is mala prohibitum, it is punished by a special law and therefore, good faith is not a defense
Can a person who issues a worthless check be held liable for both Estafa under Art. 315 of the RPC and at the same time under the bouncing check law?
Yes. The violator can be held liable for both offenses separately at the same time as each offense has different cause of action. One is in violation of a special penal law and the other is a violation of a criminal act under the revised penal code.
Also, it is expressly provided under Section 5, BP22:
“Prosecution under this Act shall be without prejudice to any liability for violation of any provision of the Revised Penal Code.” 21
Explain the duty of the Drawee upon refusal to pay
“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:22
“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.23
“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.”23
When does the prima facie evidence of the making or issuance of a check arise?
It arises when the issued check was dishonored by the drawee bank, when it was refused to be credited to the party to whom the same was issued or to the payee thereof.
What are the possible defenses of the accused against violation of the bouncing check law?
In a number of settled cases, the Court laid the following defenses:
- “Checks issued to person who was not authorized to collect and receive the same are without valuable consideration and are also considered issued for a non-existing account.”24
- “The presentation of the registry card, with an unauthorized signature, does not meet the required proof beyond reasonable doubt that the petitioner received such noticed, especially considering that he denied receiving it. As there is insufficient proof that the petitioner received notice of dishonor, the presumption that he had knowledge of insufficiency of funds cannot arise.”25
- “Presumption of knowledge of insufficiency of funds is not conclusive as it may be rebutted by full payment. Payment is a complete defense that would lie regardless of the strength of the evidence presented by the prosecution.”26
- “Only a full payment at the time of its presentment or during the five-day grace period could exonerate one from criminal liability under B.P. Blg. 22 and that subsequent payments can only affect the civil, but not the criminal, liability”27
Under BP 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.
“If there being no proof that he was given any written notice 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.”28
Is an agreement surrounding the issuance of dishonored checks relevant to the prosecution for violation of the bouncing check law?
The liability of the violator arises as soon as the check is dishonored for reasons laid down by the law and upon compliance with requisite conditions sine qua non. Therefore, an agreement surrounding the issuance of dishonored checks is irrelevant to the prosecution for violation of BP 22.29
“It has been consistently declared that the cause or reason for the issuance of a check is inconsequential in determining criminal culpability under B.P. Blg. 22, the cause or reason for the issuance of a check is inconsequential in determining criminal culpability under B.P. Blg. 22. The mere act of issuing a worthless check is malum prohibitum provided the other elements of the offense are properly proved.”30
Is lack of valuable consideration for the issuance of the check a proper defense against the prosecution for violation of the bouncing check law?
The law is clear that the mere issuance of a check which is underfunded is a violation already to such law, the valuable consideration for the issuance of the check is immaterial.
“The Supreme Court stated that even in cases where there had been payment, through compensation or some other means, there could still be prosecution for violation of B.P. 22. The gravamen of the offense under this law is the act of issuing a worthless check or a check that is dishonored upon its presentment for payment, not the nonpayment of the obligation.”31
How does novation affect the liability of the drawer or issuer of a worthless check? Is novation a proper defense?
It has no effect at all as liability arises upon the issuance of underfunded check.
Novation cannot be invoke as a defense by the violators of BP 22 as the said special law punishes the act of issuing a worthless check and not the purpose for which the check was issued or the terms and conditions relating to its issuance.
As was previously discussed, mere agreements surrounding the issuance of the check will not be material to the violation of the law.
What is a stop payment order? Is it a valid defense?
Stop payment is an order, countermand, advise or instruction from the drawer to stop the crediting of the issued check for reasons other than insufficiency of funds or underfunded or uncleared check.
It depends on the circumstances of the issuance.
As enunciated by the Court in its ruling, “although the drawer ordered a STOP PAYMENT or countermand, yet if it was clear from the statement of account that the check bounced due to insufficiency of funds, the drawer of the check is still liable.”32
What is the difference between a corporate check and a personal check?
As provided in Section 1 of BP22 and as clarified in the case of Mitra v People.33 A corporate check is one signed by a natural person in the name of the corporation. The drawer, in effect, is the corporation or juridical entity while personal check is one drawn by a natural person in his name.
Who may be held liable if the worthless check is issued by a corporation?
As provided in Section 1, BP 22, “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.”34
Explaining, the Supreme Court in held:
“This provision recognizes the reality that a corporation can only act through its officers. Hence, its wording is unequivocal and mandatory – that the person who actually signed the corporate check shall be held liable for a violation of BP 22. This provision does not contain any condition, qualification or limitation.”35
It went on to elucidate:
“In the case of Llamado v. Court of Appeals, the Court ruled that the accused was liable on the unfunded corporate check which he signed as treasurer of the corporation.35
“He could not invoke his lack of involvement in the negotiation for the transaction as a defense because BP 22 punishes the mere issuance of a bouncing check, not the purpose for which the check was issued or in consideration of the terms and conditions relating to its issuance.36
“In this case, Mitra signed the LNCC checks as treasurer. Following Llamado, she must then be held liable for violating BP 22.”36
Why is the corporate officer who issued the worthless check personally liable?
As provided for in the Corporation Code and enunciated by the Supreme Court in its ruling in Gosiao vs. Ching:
“The personal liability of the corporate officer is predicated on the principle that he cannot shield himself from liability from his own acts on the ground that it was a corporate act and not his personal act.”37
Who must receive the notice of dishonor if the bounced check is drawn by a corporation?
It was ruled in Court that the one who signed the check must received the notice of dishonor and should not be not a constructive receipt by the corporation .
As explained by the Supreme Court in its ruling, it ruled that:
“if the drawer or maker is an officer of a corporation, the notice of dishonor to the said corporation is not notice to the employee or officer who drew or issued the check for and in its behalf.”38
Is a demand letter coming from the lawyer considered a notice of dishonor?
A demand letter, even coming from counsel, could be considered as a notice of dishonor provided that the same condition as with the corporate officer. It must be proven that it is actually received by the accused. The burden of proof must be within the prosecution.
May a member of the board of directors of a corporation file case for violation of bouncing check law against a corporate officer who issued the check?
A board of director can sue, on behalf of the interest of the corporation, against a party who caused injury to the corporation, in the event that the corporation itself refused to sue the offending corporate officer.
However, such injury should have been caused personally by the officer himself. It should not be occasioned by his official function as corporate officer through a board resolution or as stated in the by-laws of the corporation.
What is Administrative Circular No. 12-2000? What is Administrative Circular 13-2001?
Administrative Circular No. 12-2000 mandated the “all courts and judges concerned should henceforth take note of the foregoing policy of the Supreme Court on the matter of the imposition of penalties for violations of B.P. Blg. 22.39
On the other hand, x x x Administrative Circular No. 12-2000 establishes a rule of preference in the application of the penal provisions of B.P. Blg. 22 such that where the circumstances of both the offense and the offender clearly indicate good faith or a clear mistake of fact without taint of negligence, the imposition of a fine alone should be considered as the more appropriate penalty.40
Needless to say, the determination of whether the circumstances warrant the imposition of a fine alone rests solely upon the Judge. Should the Judge decide that imprisonment is the more appropriate penalty, Administrative Circular No. 12-2000 ought not be deemed a hindrance.41
It is, therefore, understood that:41
- Administrative Circular 12-2000 does not remove imprisonment as an alternative penalty for violations of B.P. Blg. 22;41
- The Judges concerned may, in the exercise of sound discretion, and taking into consideration the peculiar circumstances of each case, determine whether the imposition of a fine alone would best serve the interests of justice or whether forbearing to impose imprisonment would depreciate the seriousness of the offense, work violence on the social order, or otherwise be contrary to the imperatives of justice;41
- Should only a fine be imposed and the accused be unable to pay the fine, there is no legal obstacle to the application of the Revised Penal Code provisions on subsidiary imprisonment.41
Does Administrative Circular No. 13-2001 decriminalize the bouncing check law?
It does not. It is merely clarificatory guidelines that state that it as up to the judge if such penalty imposed is appropriate to be imposed to such violator in the circumstances of the case.
The Supreme Court held Lunaria vs. People, G.R. No. 160127, November 11, 2008, that “it has not decriminalized B.P. 22 violations, nor have removed imprisonment as an alternative penalty.”
The Court clarified that the determination of whether the circumstances warrant the imposition of a fine alone rests solely upon the judge.
Should the judge decide that imprisonment is the more appropriate penalty, Administrative Circular No. 12-2000 ought not to be deemed a hindrance.”
Final thoughts
Violations of BP 22 or the Bouncing Checks Law is a very serious offense It does not only affect the offended party but also public interest or public order as well. It has disturbing consequences on the banking system. Each bounced check issued is supposedly connected to another transaction or transactions and for valuable considerations.
However, those connected transactions shall not be consummated primarily because of the unfunded scheduled check.
That is why, the passage of this law is very important for it gives warning to unscrupulous people who have the habit of issuing unfunded check just to gain something in return.
In the Revised Penal Code, the intent to defraud or the intent to gain valuable consideration in return for issuing underfunded check must be proven in order to penalize the perpetrators. Some can maneuver the law to escape liability.
In BP 22, nevertheless, intent to defraud or intent to gain is no longer needed. The mere issuance of dishonored check shall be a prima facie evidence of such offense enough to convict the perpetrators guilty and liable.
This law will not only deter future violators but will also preserve and protect the health of our banking system.
- BP 22[↩]
- Vergara vs. People, G.R. No. 160328, February 04, 2005[↩]
- BP 22, Supra.[↩][↩]
- New Pacific Timber and Supply Company, Inc. vs. Seneres, 101 SCRA 686[↩]
- Que vs. People, G.R. 73217-18, September 21, 1987[↩]
- State Investment House vs. IAC, 175 SCRA 316, July 13,1989[↩]
- Section 4, BP 22[↩]
- Ladonga vs. People, 451 SCRA 673, February 17, 2005[↩]
- Ambito vs. People, 579 SCRA 68, February 13, 2009[↩]
- Jose vs. Suarez, 556 SCRA 772, June 30, 2008[↩]
- Ibid.[↩]
- Vergara vs. People, Supra.[↩]
- Azarcon vs. People, 636 SCRA 347, June 29, 2010[↩]
- Dy vs. People, 571 SCRA 59, November 14, 2008[↩]
- Ibid.[↩]
- Ibid.[↩][↩]
- People vs. Fortuno, G.R. No. L-48458, November 7, 1941[↩]
- Cajigas vs. People, 580 SCRA 54, February 23, 2009[↩]
- Id.[↩][↩][↩]
- Mitra vs. People, G.R. NO. 191404, July 05, 2010[↩]
- Section 5, BP 22[↩]
- Section 3, BP 22.[↩]
- Id.[↩][↩]
- Cariño v. De Castro, 553 SCRA 688, April 30, 2008[↩]
- Suarez v. People 555, SCRA 238, June 19, 2008[↩]
- Tan vs. Philippine Commercial International Bank 552 SCRA 532, April 23, 2008[↩]
- Ibid.[↩]
- Ambito vs. People and CA, G.R. No. 127327, 13 February 2009[↩]
- Tan vs. People, 349 SCRA 777, 2001[↩]
- Dreamwork Construction, Inc. v. Janiola 591 SCRA 466, June 30, 2009[↩]
- Lunaria vs. People, G.R. No. 160127, November 11, 2008[↩]
- Chang vs. IAC, 146 SCRA 464, December 29,1986[↩]
- Supra., G.R. NO. 191404, July 5, 2010[↩]
- Section 1, BP 22[↩]
- G.R. No. 191404, July 5, 2010[↩][↩]
- Ibid.[↩][↩]
- Gosiaco vs. Ching and Casta, G.R. 173807, 16 April 2009[↩]
- Marigomen vs. People, 459 SCRA 169[↩]
- Administrative Circular No. 12-2000[↩]
- Administrative Circular No. 13-2001[↩]
- Id.[↩][↩][↩][↩][↩]