NIL Finals (2018) PDF

NEGOTIABLE INSTRUMENTS LAW (2018) FINALS (EH 403) ATTY.
BERNARDINO AMAGO
Negotiable Instruments Law

FINALS (AY 2018-2019)
Based on the Syllabus and Discussions of Atty. Bernardino Amago
Credits to EH 403 (2018), EH403 & EH404 Notes (2016-2017), EH403 Notes (2017-2018), case
digests online and other notes. :D
IX. Discharge of Negotiable Instrument

a. How instrument is discharged (Sec. 119) _______________________________ 2
b. When person secondarily liable are discharged (Sec. 120)____________________3
c. Right of party who discharges instrument (Sec. 121)________________________5
d. Renunciation by holder (Sec. 122) ____________________________________6
e. Cancellation (Sec. 123) ____________________________________________6
X. Bills in set
a. Bills in set constitute one bill (Sec. 178)_________________________________6
b. Right of holders where different parts are negotiated (Sec.179) ________________6
c. Liability of holder who indorses two or more parts of a set to diff. persons (Sec. 180) __7
d. Acceptance of bill drawn in sets (Sec. 181)_______________________________ 7
e. Payment of acceptor of bills drawn in septs (Sec. 182) _______________________7
f. Effect of discharging one of a set (Sec. 183) ______________________________7
Checks (Sec. 185)

Types of checks___________________________________________________8
Presentment for payment of a check ____________________________________9
Certification of Check (Sec. 187) _______________________________________9
Holder procures it to be certified (Sec. 188)_______________________________10
Check operates as an assignment (Sec. 189)______________________________ 10
XI. BP Blg. 22 — Bouncing Checks Law

a. Elements ____________________________________________________10
b. Evidence and Presumption ________________________________________11
c. Duty of Drawee ________________________________________________ 11
d. Liability under the revised penal code ________________________________ 11
Applicability to foreign checks _______________________________________ 11
Novation theory _________________________________________________12
Subsequent payment by the drawer ___________________________________12
Prescriptive period _______________________________________________12
Additional Question & Answers ________________________________13
Cases
1. State Investment House, Inc. v. CA _____________________________ 14
2. Papa v. A.U. Valencia & Co. , Inc. _______________________________ 14
3. Tan v. People ____________________________________________ 15
4. Vaca v. CA ______________________________________________ 16
5. Macalaglag V. People ______________________________________ 16
6. Cruz v. Cruz_____________________________________________ 17
7. Del Rosario vs. Cedillo _____________________________________ 18
8. Resterio v. People ________________________________________ 18
9. Cheng v. Sy_____________________________________________ 18
SUAN "One day you will thank yourself for never giving up.” PAGE 1 OF 19
NEGOTIABLE INSTRUMENTS LAW (2018) FINALS (EH 403) ATTY. BERNARDINO AMAGO
IX. DISCHARGE OF NEGOTIABLE will not discharge the instrument since he is not the principal
debtor)
INSTRUMENT
A. HOW INSTRUMENT IS DISCHARGED (SEC. 119) Will that cause the discharge of the principal debtor?
Sec. 119. Instrument; how discharged. — A negotiable Yes. It will not just cause the discharge of principal debtor but
instrument is discharged:
also the discharge of all the parties to the instrument because
it is the instrument itself which is discharged here.
a) By payment in due course by or on behalf of the principal

debtor;
b) By payment in due course by the party accommodated, PAYMENT TO A THIEF

where the instrument is made or accepted for his Does payment to a thief constitute payment in due course?
accommodation;
It depends.
c) By the intentional cancellation thereof by the holder;
d) By any other act which will discharge a simple contract If it is an ORDER Instrument — this cannot be payment in
for the payment of money;
due course because the thief cannot be a holder. For a person
to be a holder he must be the payee or an indorsee thereof.
e) When the principal debtor becomes the holder of the

instrument at or after maturity in his own right.
If it is a BEARER Instrument — this constitutes payment in

due course because the possessor is considered a holder.
Discharge of an instrument — release of all parties whether However, this payment only discharges the principal, not the
primary or secondary, from obligations arising thereunder.
instrument. There are still parties who can derive rights from
the instrument.
Discharge causes an end to the life of a negotiable instrument.
GROUNDS: b) BY PAYMENT IN DUE COURSE BY THE PARTY

1. Payment in due course by or on behalf of the principal
ACCOMMODATED…
debtor;
By payment in due course by the party accommodated, where
2. Payment in due course by the party accommodated;
the instrument is made or accepted for his accommodation.
3. Intentional cancellation of the instrument by the holder;
Payment made by the accommodated party discharges the

4. Any other act which will discharge simple contract;
instrument because he is also considered as the principal

5. Principal debtor becomes the holder of the instrument at or debtor.
after maturity.
TN: Between the accommodation party and the

Note: the NIL contains no express provision for release of a accommodated party, the one that is really liable is the
party primarily liable for none is necessary. This is because accommodated party.
they are absolutely bound to pay and can be relieved only by

a discharge of the instrument itself.
Example
I promise to pay B or his order P10,000.
a) BY PAYMENT IN DUE COURSE BY OR ON BEHALF Sgd. A
OF THE PRINCIPAL DEBTOR;
PAYMENT IN DUE COURSE The instrument was drafted by A to accommodate B so that B

can use it as payment for his debt.
Sec. 88. What constitutes payment in due course. —

Payment is made in due course when it is made at or after
the maturity of the payment to the holder thereof in good
faith and without notice that his title is defective.
c) BY THE INTENTIONAL CANCELLATION THEREOF

TN: Notice, as used in this section, pertains to the Payor.
BY THE HOLDER;
For Sec. 119(a) to apply, the following requirements must be INTENTIONAL CANCELLATION; REQUISITES
made…
1) Intentionally made; and
1) Made by or on behalf of the principal debtor

2) By the holder thereof.
2) At or after its maturity (so as to be considered as payment

in due course)
BURDEN OF PROOF
3) Paid to the holder thereof
Burden of proving that the instrument HAS NOT been
4) In good faith and without notice that the holder’s title is cancelled is on the holder.
defective
FORMS OF CANCELLATION
This is not the discharge of the principal debtor, but the 1) Marking the instrument as cancelled;
discharge of the instrument.

2) Tearing, mutilation, or other overt acts that destroy the
instrument.
Principal debtor – refers to the person ULTIMATELY bound to

pay the debt and not necessarily to the person primarily liable What if cancellation was unintentional but there is no longer an
on the instrument. (thus, payment by accommodation party instrument to be exhibited?
Instrument is deemed cancelled, with the burden of proof that (c) By the discharge of a prior party;
it was unintentionally cancelled being on the holder.

(d) By a valid tender or payment made by a prior party;
Holder may issue an affidavit of loss stating the incidence of

how the instrument was loss and that it was unintentional. (e) By a release of the principal debtor unless the holder’s
right of recourse against the party secondarily liable is
This may be used as proof that there was really no intention.
expressly reserved;
(f) By any agreement binding upon the holder to extend the

d) BY ANY OTHER ACT WHICH WILL DISCHARGE A time of payment or to postpone the holder's right to
enforce the instrument unless made with the assent of
SIMPLE CONTRACT FOR THE PAYMENT OF the party secondarily liable or unless the right of
MONEY; recourse against such party is expressly reserved.
Art. 1231. Obligations are extinguished:
1) By payment or performance;
TOTAL DISCHARGE
(a) By any act which discharges the instrument;
2) By the loss of the thing due;
(e) By a release of the principal debtor, unless the holder’s right

3) By the condonation or remission of the debt;
of recourse against the party secondarily liable is expressly
4) By the confusion or merger of the rights of creditor and reserved
debtor;
5) By compensation;
ONLY SECONDARY PARTIES DISCHARGED
6) By novation.
(b) By the intentional cancellation of his signature by the
holder;
Other causes of extinguishment of obligations, such as

annulment, rescission, fulfillment of a resolutory condition, (c) By the discharge of a prior party;
and prescription, are governed elsewhere in this Code.

(d) By a valid tender of payment made by a prior party;
(f) By any agreement binding upon the holder to extend the

time of payment, or to postpone the holder’s right to enforce
GROUNDS FOR THE DISCHARGE OF CONTRACT: (PALOREMECONO-ARFP) the instrument, unless made with the assent of the party
1. Pa-yment or performance
secondarily liable, or unless the right of recourse against such
2. Lo-ss of the thing due
party is expressly reserved
3. Re-mission / Condonation
4. Me-rger / Confusion
Important: That the discharge of parties secondarily liable can
5. Co-mpensation
cause the discharge of negotiable instrument is not true in all
instances. It is important to know when there is discharge of
6. No-vation
negotiable instrument and when there is a discharge of parties

7. A-nnulment
secondarily liable. While discharge of negotiable instrument
8. R-escission
can cause the discharge of parties secondarily liable, it is not
9. F-ulfillment of a resolutory condition
the other way around.
10. P-rescription
TN: Whatever extinguishes an obligation will also discharge a

(a) BY ANY ACT WHICH DISCHARGES THE
negotiable instrument.
INSTRUMENT;
Refer to Section 119.
Discharge of the instrument necessarily discharges all parties,

e) WHEN THE PRINCIPAL DEBTOR BECOMES THE HOLDER whether primary or secondary, to the instrument.
OF THE INSTRUMENT AT OR AFTER MATURITY

This is a case of merger or confusion.  
(b) BY THE INTENTIONAL CANCELLATION OF HIS
REQUIREMENTS FOR MERGER TO APPLY: SIGNATURE BY THE HOLDER;
1. Person primarily liable becomes the h
SECTION 48. Striking Out Indorsement. — The holder may
2. At or after maturity.
at any time strike out any indorsement which is not
necessary to his title. The indorser whose indorsement is
struck out, and all indorsers subsequent to him, are thereby
PAYMENT BY A PERSON SECONDARILY LIABLE AS TO THE relieved from liability on the instrument.
DISCHARGE OF THE INSTRUMENT

■ General Rule: No discharge of the instrument. It will only
discharge the liability of the one who makes payment.
This pertains to intentional cancellation of the signatures of the
parties who are not necessary to the title of the holder.
However, this does not prevent the holder from cancelling
—Exceptions: Payment by an accommodated party.
everyone all together.
No consideration is necessary to support such discharge
B. WHEN PERSON SECONDARILY LIABLE ARE

DISCHARGED (SEC. 120) Limitation: the indorsement that you want to cancel should
Sec. 120. When persons secondarily liable on the not be necessary to the holder’s title (see section 48) —
instrument are discharged. — A person secondarily liable bearer instrument or when indorsement comes after when
on the instrument is discharged:
instrument becomes a bearer instrument
(a) By any act which discharges the instrument;
(b) By the intentional cancellation of his signature by the

holder;
(c) BY THE DISCHARGE OF A PRIOR PARTY; holder E at the time of maturity and was accepted by E, it
would discharge C and D, the party subsequent to him.
The discharge of a party as by intentional cancellation of his

signature by the holder also operates as a discharge of parties
subsequent to the party discharged.
C would be discharged of his liability but he will be subrogated
to the rights of the holder. He is now considered the holder of
the instrument because he will require the surrender of the
REASON instrument to him if he will be the one to make payment.
The subsequent parties are deprived of their right of recourse

against the party discharged by the holder. Thus, they should If, however, C is willing to make payment but E refused, D
also be discharged.
would still be discharged.
Situation: discharge due to holder’s failure to give notice of Reason: What it talks about is valid tender of payment only, so
dishonor
it actually presupposes that the instrument has been
• Law contemplates discharge by the act of the holder and not dishonored. Persons secondarily liable could receive notice of
discharge by operation of law such as failure to give notice dishonor of the instrument but still decide to make payment. If
of dishonor
the holder refused to make payment, all parties subsequent to
• No automatic discharge by mere failure to give notice of the person who paid would still be discharged because then,
dishonor to a prior party
they would have been discharged of their liability had the
payment been accepted.
This does not apply to discharges caused by operation of law,

such as:
After payment made by C and it accepted by E, C will be
1. Discharge by bankruptcy
discharged so that would fall under Discharge of a Prior Party.
But to make a distinction, mere tender of payment by C to E
2. Discharge by the statute of limitations
would already discharge D because supposedly C, di paman

3. Discharge of a party for failure of the holder to give him unta siya ma-discharge because it was just a tender of
notice of dishonor
payment but had E accepted the instrument, he would have
been discharged by it and still fall under letter C.
Important: Take note however that warranties of a party are

different from liabilities of a party. If you discharge a party by Note: this does NOT discharge the debt but the tender stops
cancelling their indorsement, it does not mean that they are the running of interest and relieves the party making the
discharged from their warranty. They are not liable for tender from subsequent liability for costs and attorney’s fees
negotiating the instrument but they can be held liable for their in case of litigation.
breach of warranty.
(d) BY A VALID TENDER OR PAYMENT MADE BY A (e) BY A RELEASE OF THE PRINCIPAL DEBTOR…
PRIOR PARTY; By a release of the principal debtor unless the holder’s right of
recourse against the party secondarily liable is expressly
Tender of payment — the act by which one produces and reserved;
offers to a person holding a claim or demand against him the
amount of money which he considers and admits to be due, in ■ General Rule: Release of a principal debtor would release
satisfaction of such claim or demand without any stipulation persons secondarily liable because it would tantamount to
or condition.
an intentional cancellation on the part of the holder of the
liability of the principal debtor.
EFFECT
A valid tender of payment even if not accepted is enough to —Exception: When there is an express reservation made
discharge parties secondarily liable.
by the holder against the subsequent parties to the
principal debtor.
It would discharge a party secondarily liable because had it

been accepted by the holder, the parties secondarily liable If the principal debtor is released, all those subsequent to him
would have been discharged. But because the holder refused are also released from their obligation because then that is
to accept payment it is just to release the subsequent parties.
tantamount to payment or discharge of negotiable instrument.
TN: It would be a different case if prescription would set in. In EFFECT IF THERE IS RESERVATION
such case, it would discharge an instrument even without The instrument is not discharged because there is a party who
actual payment made to the instrument.
remains liable.
Example: Promissory note made by A is negotiated to B,

EFFECT OF RENUNCIATION
payee, then to C, D, and E. C validly tenders payment. C’s Principal debtor would still be liable to the instrument. He will
valid tender discharges D and E. C is then subrogated to the
not be liable to the holder of the instrument but he will be
rights of E and becomes the holder of the instrument as C will
liable to whoever is the party secondarily liable that the holder
require the surrender of the instrument as he will make
will pursue later on.
payment.
If prior party makes a tender of payment to the holder thereof, HOW TO RENOUNCE
the prior party is discharged, as well as those subsequent to 1. Must be made by in writing
him. In that case, if tender of payment is made by C to the 2. Delivery of the instrument to the principal debtor
If there is a reservation of the right to go after parties secondarily liable will be remitted to his original position as
secondarily liable, it cannot be considered as renunciation as against the prior parties.
contemplated under Section 122.
This is actually referring to an instrument renegotiated to a

Person primarily liable continues to be liable to all parties prior party.
secondarily liable whose obligation was reserved. It would be

inequitable to them if the principal debtor is already Say for example C makes payment to E, what will happen? And
discharged of his liability and yet, the persons secondarily the instrument is not yet matured, then what can C do?
liable are still compelled to make payment.
C can further negotiate the instrument.
Important: Since the holder reserved his or her rights of But since these are not necessary to his title, he can strike
recourse against the party or parties secondarily liable, the their indorsements and he is reverted to his original position.
latter may go after the person primarily liable.
■ General Rule: If the instrument is paid by the party

(f) EXTENSION OF TIME OF PAYMENT… secondarily liable, he has the option either to (1) strike out
his own and all subsequent parties’ indorsements or
By any agreement binding upon the holder to extend the time (2)negotiate the instrument
of payment or to postpone the holder's right to enforce the

instrument unless made with the assent of the party
secondarily liable or unless the right of recourse against such —Exceptions:
party is expressly reserved.

1. Where it is payable to the order of a third person,
and has been paid by the drawer; and
This pertains to agreement binding on the holder made with

the principal debtor for the extension of time to pay.
2. W h e r e i t w a s m a d e o r a c c e p t e d f o r
accommodation, and has been paid by the party
accommodated.
REQUISITES
1. Agreement is for a valuable consideration; and
What is precluded there by the exception?
2. For a definite period.
What is precluded is the further negotiation of the instrument.
■ General Rule: The parties secondarily liable are discharged

due to such extension of time.
1. WHERE IT IS PAYABLE TO THE ORDER OF A
—Exceptions:
THIRD PERSON, AND HAS BEEN PAID BY THE
(a) Where the extension of time is consented to by DRAWER
such party; and
There cannot be another re-issuance of the instrument. The
(b) Where the holder expressly reserves his right of drawer issues the instrument. If the drawer will be allowed to
recourse against such party.
further negotiate it, it would tantamount to re-issuance
because he is reverted back to his original position and the
Important: It is incumbent upon the holder to give notices to person he can actually transfer it, is the payee. If you transfer
those secondarily liable so that they will be notified of such it back to the payee, of course, the payee will no longer
extension. In effect, the parties secondarily liable must give a accept it.
reply, otherwise, they are deemed to have assented to the

extension.
Another reason is that the drawer can make another
instrument and make another payee to whom he can issue the
If they did assent expressly, then they are not discharged. But instrument instead of further negotiating the instrument.
if they did not assent, then they are discharged.
Important: Let us take the position that Sec. 121 (a) is one
cause for discharge of a negotiable instrument.
C. RIGHT OF PARTY WHO DISCHARGES INSTRUMENT

(SEC. 121)
Sec. 121. Right of party who discharges instrument. — 2. WHERE IT WAS MADE OR ACCEPTED FOR
Where the instrument is paid by a party secondarily liable ACCOMMODATION, AND HAS BEEN PAID BY
thereon, it is not discharged; but the party so paying it is
remitted to his former rights as regards all prior parties, and
THE PARTY ACCOMMODATED.
he may strike out his own and all subsequent indorsements, If the accommodated party is the one who made the payment,
and again negotiate the instrument, except —
it is not actually a payment made by a secondary party. It is
(a) Where it is payable to the order of a third person, and has actually payment made by the person primarily liable.
been paid by the drawer; and
(b) Where it was made or accepted for accommodation, and In this case, the accommodated party is prevented in further
has been paid by the party accommodated.
negotiating the instrument because it for the protection of the
accommodation party because if the accommodated party is
allowed to negotiate the instrument, the accommodation party
PAYMENT MADE BY A PRIOR PARTY would remain liable when he could have been just discharged
When C tendered payment to E and you said that D will be by the payment made by the accommodated party.
discharged from his liability. Will C be discharged when he

makes payment? What’s the effect when he makes payment
and subsequently was accepted by E? Important: The title of the section, “Right of a party who
If persons secondarily liable makes the payment, the discharges instrument” is a misnomer because the instrument
instrument is not discharged. What will happen is the person is not even discharged as can be seen by the very first line,
“Where the instrument is paid by a party secondarily liable, it Note: an instrument may be re-negotiated before maturity.
is not discharged”.
Granting the new holder was in good faith, renunciation does
not affect him (the rights of a holder in due course without
notice). Renunciation is only a PERSONAL DEFENSE.
D. RENUNCIATION BY HOLDER (SEC. 122)

Sec. 122. Renunciation by holder. — The holder may Remember: you can still renegotiate instrument even after
expressly renounce his rights against any party to the renunciation for as long as renunciation was made before it
instrument, before, at, or after maturity. An absolute and
unconditional renunciation of his rights against the principal was overdue
debtor made at or after the maturity of the instrument

discharges the instrument. But a renunciation does not
affect the rights of a holder in due course without notice. A E. CANCELLATION (SEC. 123)
renunciation must be in writing, unless the instrument is Sec. 123. Cancellation; unintentional; burden of proof. —
delivered up to the person primarily liable thereon.
A cancellation made unintentionally or under a mistake or
without the authority of the holder, is inoperative but where
an instrument or any signature thereon appears to have
Renunciation — the act of surrendering a right or claim with been cancelled, the burden of proof lies on the party who
or without authority.
alleges that the cancellation was made unintentionally or
under a mistake or without authority.
■ General Rule: The renunciation must be made in a written

declaration to that effect.
Cancellation — any act by which the intention to cancel the
—Exceptions: If there is surrender of the instrument to instrument may be evidenced.
the person primarily liable, renunciation may be made

orally.
In cancellation, there is a change in the physical condition of
the instrument by placing ‘cancelled’ on the instrument,
How is renunciation made? tearing, mutilating and burning unlike in renunciation where
It should be made by a WRITTEN DECLARATION to that there is no change in physical condition.
effect. If oral it should be accompanied by a surrender of the

instrument to the person primarily liable thereon.
When is cancellation inoperative?
If made
Note: This article does not apply to prevent a discharge by (1) unintentionally,
oral novation under which the obligation of the other persons (2) by mistake or through fraud,
is accepted in lieu of the maker of the instrument
(3) without authority
RENUNCIATION MAY BE IN FAVOR OF THE PRESUMPTION

PRIMARY OR SECONDARY PARTY There is a presumption that cancellation is intentional.
Hence, the burden is on the holder claiming its ineffectiveness.
A. RENUNCIATION IN FAVOR OF A SECONDARY PARTY

A renunciation in favor of a secondary party may be made by
the holder before, at, or after maturity of the instrument. The X. BILLS IN SET
effect of the renunciation is to discharge only such secondary
party and all parties subsequent to him but the instrument A. BILLS IN SET CONSTITUTE ONE BILL (SEC. 178)
itself remains in force
Sec. 178. Bill in set constitute one bill. — Where a bill is
drawn in set, each part of the set being numbered and
containing a reference to the other parts, the whole of the
B. RENUNCIATION IN FAVOR OF THE PRIMARY PARTY part constitutes one bill.
A renunciation in favor of the principal debtor may be effected

at or after maturity. The effect of the renunciation is to Bill in a set — is one composed of several parts, each part
discharge the instrument and all parties thereto, provided the being numbered and containing a reference to the other parts,
renunciation is made absolutely and unconditionally.
the whole of the parts constituting but one bill.
Important: In either case, said renunciation does not affect the What is Bills in set?
rights of a holder in due course without notice. If the Where a bill is drawn in a set, each part of the set being
renunciation is made before maturity of the instrument, it runs numbered and containing a reference to the other parts, the
the risk of being negotiated later so as to gain new life in the whole of the parts constitute one bill.
hands of a holder in due course since renunciation is only a

personal defense
PURPOSE
Obtain greater assurance that at least one part will reach the
Atty: For an instrument to be discharged by renunciation, such
payee or its destination safely
must be a renunciation on the liability of the person primarily

liable. It has to happen at or after maturity in favor of a person
primarily liable.
B. RIGHT OF HOLDERS WHERE DIFFERENT PARTS ARE
NEGOTIATED (SEC.179)
If such happens before maturity, the instrument is still not Sec. 179. Right of holders where different parts are
discharged and can be negotiated, unless it would fall under negotiated. — Where two or more parts of a set are
Section 121 A or B. Those who do not know about the negotiated to different holders in due course, the holder
renunciation will not be affected and can thus still demand whose title first accrues is as between such holders the true
from the person primarily liable.
owner of the bill. But nothing in this section affects the
rights of a person, who in due course accepts or pays the
part first presented to him.
E. PAYMENT OF ACCEPTOR OF BILLS DRAWN IN SEPTS

Atty: It is also possible that two instruments of the same kind (SEC. 182)
will reach its destination. If it happens, there is a risk that
these instruments will be transferred to different persons.
Sec. 182. Payment by acceptor of bills drawn in set. —
When the acceptor of a bill drawn in a set pays it without
requiring the part bearing his acceptance to be delivered up
If in the example given above, the first instrument is delivered to him, and that part at maturity is outstanding in the hands
to A, and the second instrument is delivered to B, these of a holder in due course, he is liable to the holder thereon.
instruments will be treated as separate instruments at least

in relation to the party who caused such to be negotiated to Atty: If the instrument is presented to the drawee for payment
different parties.
and he allowed the payment without the surrender of the
portion of the instrument which bears the acceptance, he will
C. LIABILITY OF HOLDER WHO INDORSES TWO OR MORE be compelled to pay to the person who later on presents the
portion which bears the acceptance.
PARTS OF A SET TO DIFF. PERSONS (SEC. 180)

Sec. 180. Liability of holder who indorses two or more
parts of a set to different persons. — Where the holder of Therefore, it is always incumbent upon the acceptor to require
a set indorses two or more parts to different persons, he is the surrender of the portion which bears his acceptance.
liable on every such part, and every indorser subsequent to

him is liable on the part he has himself indorsed, as if such
parts were separate bills.
F. EFFECT OF DISCHARGING ONE OF A SET (SEC. 183)
Sec. 183. Effect of discharging one of a set. — Except as
herein otherwise provided, where any one part of a bill
Atty: The person holding both instruments (or more) who drawn in a set is discharged by payment or otherwise, the
caused the transfer to different parties, then that person will whole bill is discharged.
be liable to the instrument separately as if he issued to

This bill in set was practiced before when the mails were still
different bills. After all, when he issues the instruments, he
travelled through sea and there was no assurance that a
receives payment from different parties.
particular boat will reach its destination.
Question: But between the parties, who will be preferred?

If these bills are being transferred to different persons, the
A: It is the party whose right first accrues. First in time, first in
person who caused the transfer will be liable to all persons
right.
and they will now be treated as separate bills. But the person
considered as the owner of the bill is the one whose right first
If the first instrument is issued today and the second accrues. The person’s right accrued first when he is the first
instrument is issued tomorrow, then between A and B, A has a one to receive the instrument.
better right because he received the instrument first. But if B

presented the instrument first to the maker, and the maker
Atty: If the drawee discharges one part of the bill, then the
caused payment to the instrument, he is entitled to such
other parts of the bill are discharged as well. Payment of the
payment.
portion which bears the acceptance is a discharge of all the
portion of the instrument.
Question: What will happen to A?

A: He will have to go to the maker as well and demand Bills of set is not applicable anymore today. Only one bill of
payment. But if the maker did not cause the instrument to be exchange is required. Because of the change of the
transferred to different persons, then the recourse of A will be circumstances, there is already a presumption that the bill will
to go to the person who issued the instrument as well.
reach its destination. The means of transportation is already
reliable.
D. ACCEPTANCE OF BILL DRAWN IN SETS (SEC. 181)

Sec. 181. Acceptance of bill drawn in sets. — The
acceptance may be written on any part and it must written
on one part only. If the drawee accepts more than one part CHECKS (SEC. 185)
and such accepted parts are negotiated to different holders
in due course, he is liable on every such part as if it were a Sec. 185. Check, defined. — A check is a bill of exchange
separate bill.
drawn on a bank payable on demand. Except as herein
otherwise provided, the provisions of this Act applicable to
a bill of exchange payable on demand apply to a check.
Atty: If two or more sets of the instrument is presented to the

drawee for acceptance, the drawee will have to accept only
one part of the bill as a means of control. Because if the The drawee is always a bank. You cannot call it a check
drawee accepted all parts of the instruments, it is possible if the drawee is not the bank and it is always payable on
that such will be transferred to separate persons. If the demand.
drawee does that, it is fine but he will bear the risk of having
copies of the same bill and pay them since all of the parts are
accepted.
Is there always a drawee?
Yes, which is a bank. One of the elements of a bill of
exchange is that “where the instrument is addressed to
That is why as a control, the drawee has to accept only one.
a drawee, he must be named or otherwise indicated
When the instrument is presented for payment, what the
drawee would require is to present to him the portion which therein with reasonable certainty.” The drawee here is
bears the acceptance. The drawee will only pay to whoever always a bank, otherwise, it is most likely not a check.
can present that portion which bears the acceptance.
A check is
1) drawn on a bank, and
2) payable on demand
- It is one drawn by a depositor upon funds to his credit in
a bank which a proper officer of the bank certifies. It will
It is ALWAYS payable on demand. Postdating does not make a be paid when duly presented for payment.
check not payable on demand; it merely postpones the

maturity date.
In a certified check, the bank is already holding funds for the
check. Only a depositor with ample funds may ask to be
drawn a manager’s or cashier’s check and a check will only be
THE PROVISIONS ON BILL OF EXCHANGE ARE APPLICABLE certified if the drawee depositor has enough funds in his
If there are provisions lacking in the chapter under checks, account which may be set aside as payment for the check.
refer to provisions of bill of exchange.
5) CROSSED CHECK
POST-DATED CHECK - It is one which bears across its face two parallel lines
It is a check. The moment the date of the check arrives, it will drawn diagonally, usually on the upper left side. It may
be considered payable on demand.
be crossed either specially or generally.
A check, even if it is almost money, is never money. There are The two parallel lines may contain an entity and it is
types of checks in banking practice that are already deemed considered crossed specially.
cash, but effect is not that of a cash.
Example: You have a manager’s check used to pay an A CHECK MAY BE CROSSED EITHER SPECIALLY OR GENERALLY
obligation. The payment of such will extinguish an obligation (a) Crossed specially — the name of a particular bank or
when encashed. It will only have the effect of payment when company is written or appears between the parallel line in
encashed. While in banking practice it will be deemed as which the drawee bank must pay the check only upon
cash, the effect of which will still be that of any other check.
presentment
(b) Crossed generally — only the words “and Co.” are written
between parallel lines or when nothing is written at all
TYPES OF CHECKS between said lines. The drawee bank must pay the check
through the intervention of some bank or banker.
1) MEMORANDUM CHECK
- indicates “memo”, “memorandum”, or “mem”on its face.
Important: The difference between the two is that a specially
- The drawer engages to pay the check as a party crossed check indicates that the indicated company must be
primarily liable
the owner of the account where the check is to be deposited.
- The effect of which is that the drawer is primarily liable If it is crossed generally, anyone can deposit the check but
even if there is a drawee. This is usually given when you never encash it.
don’t want to pay the check, but you just want to

present something to your creditor as a proof of your
EFFECT
good faith. When that check is presented, there are
They are both the same. Both cannot be encashed, they can
instances that the debtor will require the return of the
only be deposited. Supposedly, it will be deposited in the
check without it being encashed. In fact you don’t need
account of the person made as payee. But, there are people
to wait for the maturity of the check to be paid by the
who cannot wait for the clearance of the check so they prefer
drawer because most likely, it is just used for purposes to discount the check.
of exhibition.
The current holder (who is not the payee) can deposit the
2) CASHIER’S CHECK check but he cannot encash it. However, you cannot do this if
- Signed by a banks cashier
the check is crossed specially. The entity written in the parallel
- Certified payable by the bank
lines should be the one to have the check deposited in its
- It is one which is certified by a bank’s cashier. When it is account.
signed by the cashier, it becomes the absolute

obligation of the bank to pay that check. This type of It can be that what is written in between is the name of the
check is almost like a manager’s check in terms of drawee or the name of the bank which will pay the check.
effect. It’s just that different persons certify them.
6) STALE CHECK
3) MANAGER’S CHECK - Based on banking practice, a check becomes stale six
- Same as cashier’s check but signed by the manager.
months reckoned from the date of the check or the
- Certified payable by the bank
issuance of the check.
- It is signed by the manager. It becomes the absolute

obligation of the bank to pay it. There is more security Important: The reckoning period for a post-dated check is the
when it is a manager’s check or cashier’s check.
date of the check because it is the only time that the check is
demandable. It would be unfair for the holder if the rule were
4) CERTIFIED CHECK otherwise. If such were the case then a check postdated for a
- Bank assumes to pay unconditionally and absolutely.
year will become stale when it is presented for payment.
- When check is certified, the drawer and all parties

secondarily liable are discharged.
If the check is payable to bearer, they say that the indorsement
- Bank sets aside funds for the payment of such check.
of the drawer is required.
- Cannot be dishonored.
Atty: However, in actual practice, the one who signs is the one
who wants to encash the check. As the holder, he will sign at
the back of the check, indicating his name, contact number Amount insured/balance = Recoverable percentage
and address. The purpose of which is for the bank to contact

him if the check bounces later on.
2. Compute for the Recoverable Amount
Amount of the check x Recoverable percentage =
At times, certain banks require you to present your proof of Recoverable amount
identity, especially if the amount is very significant.
Solution:
PRESENTMENT FOR PAYMENT OF A CHECK 1. 500,000/ 3 Million = 1/6 or 16.67%
Sec. 186. Within what time a check must be presented. — 2. 1 Million x 16.67% = 166,666.67
A check must be presented for payment within a reasonable

time after its issue or the drawer will be discharged from Out of the 100%, Ms. Alegado can only recover up to 1/6
liability thereon to the extent of the loss caused by the
delay.
percent or 166,666.67
Sec. 193. Reasonable time, what constitutes. — In

determining what is a "reasonable time" regard is to be had Loss – 5/6 or 83.33 percent or 833,333.33
to the nature of the instrument, the usage of trade or

business with respect to such instruments, and the facts of Recoverable – 1/6 or 16.67 percent or 166,666.67
the particular case.
IF THE QUESTION IS HOW MUCH IS THE LIABILITY

WHEN MUST A CHECK BE PRESENTED It should be the percentage relating to the recovery. In this
It must be presented within a reasonable time.
case it is 166,666.67 or the 1/6 or the 16.67%
Reasonable time is a question of fact, depending upon the

usage, custom, trade or business and the facts in the IF THE QUESTION IS HOW MUCH IS THE DISCHARGE FROM
particular case.
LIABILITY
You compute the extent of the loss. In this case it is the
833,333.33 or the 5/6 or the 83.33%.
REASONABLE TIME IN THE PHILIPPINE PRACTICE

Within 6 months from the date of the issuance of the check
Scenario 2. Account balance is 4,000,000 and the amount of
otherwise it would become stale.
the check is 1,000,000.
TN: If a check becomes stale, it doesn’t mean that payment is

Solution:
barred. The drawer may make another check because the

obligation still exists.
1. 500,000/ 4 Million = 1/8 or 12.5%
2. 1 Million x 12.5% = 125,000
EFFECT OF NON-PRESENTMENT OF THE CHECK WITHIN

REASONABLE TIME Out of the 100%, Ms. Alegado can only recover up to 1/8
percent or 125,000
1. The drawer will be liable thereon to the extent of the loss

caused by the delay; and
2. The indorsers will be discharged from their liabilities.

Loss – 7/8 or 87.5 percent or 875,000
Recoverable – 1/8 or 12.5 percent or 125,000
Atty: Go back to the general rule. When instruments required

to be presented for payment are not presented, parties REQUISITES FOR THE DISCHARGE FROM LIABILITY
secondarily liable are discharged. In the same way, if a check Discharge from liability will only happen if these 3 requisites
is not presented within reasonable time from its issuance, are complied with:
parties secondarily liable should be discharged.
1. That the check is not presented within reasonable time after

its issue
DRAWER DISCHARGED ONLY TO THE EXTENT OF LOSS CAUSED BY 2. That the drawer suffers loss, and
DELAY
To the holder, the drawer may be discharged but only to the 3. The loss suffered by the drawer is attributable to the delay.
extent of the loss caused by the delay. To all other persons

secondarily liable, as in the case of an indorser, they are CERTIFICATION OF CHECK (SEC. 187)
discharged completely, without condition.
Sec. 187. Certification of check; effect of. — Where a

check is certified by the bank on which it is drawn, the
Example/s: certification is equivalent to an acceptance.
Scenario 1. Ms. Alegado has an account with BDO. She has 3

Million in such account. She issued a check worth 1 Million to
Ms. Montor. Thereafter, BDO become bankrupt.
EFFECT OF CERTIFICATION OF A CHECK
The certification is equivalent to an acceptance. The
certification has the effect of setting aside a fund of the
Given:
drawer.
3 Million – Balance
1 Million – Amount of the check issued in favor of Ms. Montor Atty: When the drawee bank certified a check, it cannot validly
500,000 (constant) – Amount insured by the PDIC
raise a defense of forgery of signature of the drawer. It is like
that drawee bank accepted the check whose warranty extend
Formula:
to the genuineness of the signature of the drawer.
1. Get first the recoverable percentage
When the drawee bank certified a check, it cannot validly raise can only be payment when the check has already been
a defense of insufficiency of funds because it already set encashed.
aside the fund of the drawer for the payment of the check.
The same principle is true under NIL. Just because a check is

Important: The drawer is indebted to the bank for the issued does not mean that there are already funds set aside to
insufficiency of the funds for the payment of the check.
pay the check, unless the check is certified. If it is certified,
the check will have to be paid because there is already an
amount set aside for the payment of the check.
EFFECT OF CERTIFIED CHECK NOT PRESENTED WITHIN

REASONABLE TIME
If a certified check will not be presented within reasonable time The rest of the discussion on checks, especially section 189 is
and there is bankruptcy of drawee bank, it will have the same just a repetition of what are the liabilities of a bank. This
effect with any other check even if the deposit is set aside should have been better discussed in the book involving
already because it remains a deposit.
banking laws. What is important for NIL is liability of the bank
in relation to defective checks or checks which are
dishonored.
HOW TO CERTIFY A CHECK

Holder presents the check to the drawee bank, the drawee
bank checks if there are funds in the account of the drawer XI. BP BLG. 22 — BOUNCING CHECKS LAW
enough for the payment of the check.
WHEN APPROVED
If there are, the cashier annotates the word “certified,” or
Approved on April 3, 1979 which was during the time of
similar words, and signs the check.
Marcos. Until now, this law remains effective. It has not been
repealed.
TN: Certification is akin to acceptance. The liabilities of an

acceptor apply to a certifying bank.
WHEN IT TOOK EFFECT

Took effect on June 29, 1979.
HOLDER PROCURES IT TO BE CERTIFIED (SEC. 188)

Sec. 188. Effect where the holder of check procures it to Atty: This is nothing compared to Negotiable Instruments Law
be certified. — Where the holder of a check procures it to which took effect on June 2, 1911.
be accepted or certified, the drawer and all indorsers are

discharged from liability thereon.
A. ELEMENTS
Atty: Under Art. 186, it does not distinguish whether it is Section 1. Checks without sufficient funds. — Any person
certified or uncertified check in order for the drawer will be who makes or draws and issues any check to apply on
discharged from liability to the extent of the loss caused by account or for value, knowing at the time of issue that he
does not have sufficient funds in or credit with the drawee
delay. However, it is qualified under Section 188 where the bank for the payment of such check in full upon its
holder of check procures it to be certified.
presentment, which check is subsequently dishonored by
the drawee bank for insufficiency of funds or credit or would
EFFECT WHERE HOLDER OF CHECK PROCURES IT TO BE CERTIFIED have been dishonored for the same reason had not the
drawer, without any valid reason, ordered the bank to stop
The effect is that drawer and all indorsers are discharge from payment, shall be punished by imprisonment of not less
liability.
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
Important: Here, the drawer is discharged of liability in relation check which fine shall in no case exceed Two Hundred
Thousand Pesos, or both such fine and imprisonment at the
to Section 186. If this Section applies, Section 186 becomes discretion of the court.
irrelevant.
The same penalty shall be imposed upon any person who,

having sufficient funds in or credit with the drawee bank
Atty: In short, when the check is certified, all parties when he makes or draws and issues a check, shall fail to
secondarily liable will be discharged regardless if the check is keep sufficient funds or to maintain a credit to cover the full
presented within reasonable time or not.
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.
CHECK OPERATES AS AN ASSIGNMENT (SEC. 189) Where the check is drawn by a corporation, company or
Sec. 189. When check operates as an assignment. — A entity, the person or persons who actually signed the check
check of itself does not operate as an assignment of any in behalf of such drawer shall be liable under this Act.
part of the funds to the credit of the drawer with the bank,
and the bank is not liable to the holder unless and until it
accepts or certifies the check.
ELEMENTS OF BP 22
a. Making, drawing or issuance of a check to apply on
■ General Rule: A check does not operate as an assignment account or for value;
of funds to the credit of the drawer. Issuance of the check b. Knowledge of the maker, drawer, issuer that at the time of
does not mean that there is already a fund set aside to pay issue he does not have sufficient funds in or credit with the
the amount in the check.
drawee bank for payment of such check in full upon its
presentment;
—Exception: Certified check

c. 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
Atty: Just because the check is issued, it does not mean that any valid reason, ordered the bank to stop payment.
you can automatically expect payment of the check. There
C. DUTY OF DRAWEE
GRAVAMEN OF THE OFFENSE Section 3. Duty of drawee; rules of evidence. — It shall be
The gravamen of this Act is the issuance of a worthless check the duty of the drawee of any check, when refusing to pay
or one with insufficient funds. Deceit is immaterial. That is why the same to the holder thereof upon presentment, to cause
to be written, printed, or stamped in plain language thereon,
this closely related to estafa in the RPC but the latter should or attached thereto, the reason for drawee's dishonor or
be intended to defraud or deceive another.
refusal to pay the same: Provided, That where there are no
sufficient funds in or credit with such drawee bank, such
For purposes of estafa, the element of deceit is important and fact shall always be explicitly stated in the notice of
it has to be established. But for the purposes of BP 22, deceit dishonor or refusal. In all prosecutions under this Act, the
introduction in evidence of any unpaid and dishonored
is not part of the element.
check, having the drawee's refusal to pay stamped or
written thereon or attached thereto, with the reason therefor
DECEIT IS NOT AN ELEMENT as aforesaid, shall be prima facie evidence of the making or
issuance of said check, and the due presentment to the
Based on the provision, regardless of presence or absence of drawee for payment and the dishonor thereof, and that the
deceit, as long as there is issuance of a check which is same was properly dishonored for the reason written,
worthless and subsequently dishonored, there is liability.
stamped or attached by the drawee on such dishonored
check.
REQUIREMENT OF KNOWLEDGE OF THE INSUFFICIENCY Not with standing receipt of an order to stop payment, the
There must be knowledge of insufficiency of funds on the part drawee shall state in the notice that there were no sufficient
of the person issuing. Therefore, it is the act of “KNOWINGLY funds in or credit with such bank for the payment in full of
issuing a worthless check along with its subsequent such check, if such be the fact.
dishonor,” which gives rise to liability under BP. 22.
DUTY OF THE DRAWEE BANK

B. EVIDENCE AND PRESUMPTION The drawee bank must write the reason for the dishonor of the
Section 2. Evidence of knowledge of insufficient funds. — check. Otherwise, one will not be able to prove the element
The making, drawing and issuance of a check payment of that the instrument is dishonored due to insufficiency of funds.
which is refused by the drawee because of insufficient

funds in or credit with such bank, when presented within Presumption cannot arise if no notice of dishonor is sent to
ninety (90) days from the date of the check, shall be prima drawer or maker or no proof as when such notice is received
facie evidence of knowledge of such insufficiency of funds Generally, in case of failure to give notice of dishonor, drawer
or credit unless such maker or drawer pays the holder
thereof the amount due thereon, or makes arrangements for is discharged from liability. But under BP 22, drawer is still
payment in full by the drawee of such check within (5) liable.
banking days after receiving notice that such check has not
been paid by the drawee.
Burden of proof is on the complainant that there is knowledge
on the part of the respondent despite failure to give notice of
REQUISITES FOR THE PRESUMPTION TO ARISE dishonor.
a. Check must be presented within 90 days from the date of

the check;
Atty: If you want the notice accepted by the drawer, as much
as possible, give it by registered mail, and along with the
b. Notice of dishonor has been given; and
registered mail receipt, an affidavit of service from the mailer.
TN: “Receives notice” means that it is not enough that the

notice was “given,” you must make sure that it was
“received.”
D. LIABILITY UNDER THE REVISED PENAL CODE
c. Failure of the drawer to pay, within 5 days from his receipt of Section 5. Liability under the Revised Penal Code. —
notice of dishonor.
Prosecution under this Act shall be without prejudice to any
liability for violation of any provision of the Revised Penal
Code.
If all of the three requisites have been complied, there is a

presumption that the drawer had knowledge of the
insufficiency of the funds in his account.
Pursuant to this provision, a person can be prosecuted for
both BP 22 and Estafa under the Revised Penal Code.
Prima facie presumption does not arise in case of failure to

present check for payment within 90 days APPLICABILITY TO FOREIGN CHECKS
If you present the check for payment beyond 90 days, issuer
can still be held liable but knowledge will not be presumed. Drawn and issued in the Philippines though payable outside
The three requisites are only necessary for the presumption to BP 22 may apply to foreign checks if the foreign checks are
apply.
issued here in the Philippines even if payable abroad.
The burden of proof falls on the complainant to prove that the

drawer had knowledge of issuing such worthless check.
REMEDY IF IT IS ONLY PAYABLE IN PHILS.
If the check is issued in US (or abroad) and payable here in the
Phil, you cannot file a case under BP 22 because you have no
One way of proving it is to look into the account of the issuer, cause of action. But you may file a case of Estafa, after all it
but the Bank Secrecy law limits you. So in order to avoid the was consummated here and deceit continues until here in the
bank Secrecy Law, then ask the waiver of the respondent.
Philippines.
NO CAUSE OF ACTION IF NOT ISSUED/DRAWN IN PHILS.

The basis for violation of BP 22 is the fact of the issuance of
the check and the place where it is issued. The check must be
issued here in the Philippines. Otherwise, there will be no Important: If made within 5 days from receipt of notice, then
cause of action in filing a case for violation of BP 22.
the issuer is exonerated.
NOVATION THEORY The liability already attaches the moment the issuer failed to
comply with its obligation after the lapse of 5 days from
Novation theory — previously dishonoured but is replaced by receipt of notice. Thus, even if the issuer is willing to pay but
another check. So there is change in obligation because it’s the five-day period from receipt of notice of dishonor had
not already the dishonoured check but the new check issued
already lapsed this will not discharge the issuer from criminal
liability.
Previously dishonored check is replaced by another check

This means that there is already a change of obligation. What SIA V. COURT OF APPEALS
governs the parties now is the new check recently issued and SC said that “the law is intended to safeguard die interests of
no longer the previously dishonored check.
the banking system and the legitimate checking account
users. Considering that petitioner had paid the amount of the
check even before respondent filed his complaint, we believe
Atty: Sometimes, that is what people do. The issuer will and so hold that no injury was caused to the public interests
request or ask the holder not to deposit the check yet or the banking system, or specifically to herein respondent”
because the issuer will just replace it with a new one.
It is because offer for payment was made prior to filing of the

Example: Check 1 is replaced by Check 2. Maturity date had case.
already lapsed and yet still, no payment was made. Can you
no longer pursue the issuer of the check for the first check
that he issued?
This presupposes then that the complainant has not incurred
so much collection cost. Because if complainant had incurred
so much collection cost and the issuer does not want to
A: Yes, you can still pursue because the novation theory is not shoulder the cost of collection, it would also be unfair if the
applicable if the check which was used to replace the issuer will not shoulder the cost.
previous check was also worthless. In fact, there are two

worthless checks now so the issuer can held liable for 2
counts of violation of BP 22.
The exception to the rule is just and reasonable because the
complainant did not incur so much collection cost but he just
wants to pursue the case despite the offer of payment. In
Only applicable if the check which was used to replace the other words, there is already prejudice when cost of collection
previous check has indeed been paid. If there is no payment, is already incurred.
then you cannot escape liability. Otherwise, what people

would do to escape liability is to keep replacing worthless
checks with also worthless checks.
CRUZ V. CRUZ
Petitioner issued a check in 1986, and 10 years, she forgot
having issued the check. She remitted the amount of
Important: Theory does not apply if the replacement check is
P100,000 in 1996, 11 days after she learned that her check
also a worthless check.
was dishonored. Respondent then filed the complaint almost

six (6) months after petitioner had paid the amount of the
VACA V. NIETO check in question.
Even if such check was intended to replace the bad one, its
issuance 15 days after petitioners had been notified of the While indeed the gravamen of violation of B.P. Blg. 22 is the
dishonor of their previous check — cannot negate the act of issuing worthless checks, nonetheless, courts should
presumption that petitioners knew of the insufficiency of funds not apply the law strictly or harshly. Its spirit and purpose
to cover the amount of their previous check. Sec. 2 of BP22 must be considered.
requires that such check be given within five (5) days from the
notice of dishonor to them.
Since petitioner had paid the amount of the check even before
respondent filed his complaint, no injury was caused to the
SUBSEQUENT PAYMENT BY THE DRAWER public interests or the banking system, or specifically to herein
respondent.
EFFECT OF SUBSEQUENT PAYMENT BEFORE CASE IS FILED

The subsequent payment by the drawer of the check after
criminal liability had already attached or incurred, can affect PRESCRIPTIVE PERIOD
only his civil, not criminal, liability.
Prescriptive period for filing of the case for violation of BP 22 is

four (4) years
Subsequent payment of the check will not exonerate the issuer Since BP Blg. 22 is a special law that imposes a penalty of
from liability if such subsequent payment was made after the imprisonment of not less than thirty (30) days but not more
lapse of 5 days from receipt of the notice of dishonor.
than one year or by a fine for its violation, it prescribes in four
(4) years.
■ General Rule: Payment made after 5 days from receipt of

notice will not exonerate issuer from criminal liability.
The running of the prescriptive period should be tolled upon
the institution of proceedings against the guilty person. The
—Exception: Purpose and spirit of the law, if the issuer of filing of complaint even merely for purposes of preliminary
the check offers to make payment, then no one is investigation interrupts period of prescription.
actually prejudiced by the worthless check because the

check is indeed paid, though belatedly.
Additional Question & Answers accused that he did not receive the notice of dishonor. So
better give the notice of dishonor by registered mail. You need
to have your mailer execute an affidavit of service where
Whether or not BP22 applies where the check is not intended mailer will state that he mail the notice. From that receipt,
to be deposited, as when it merely serves as a collateral.
drawer is given by law 5 days to settle or pay the
YES. What Batas Pambansa Blg. 22 punishes is the mere act corresponding debt. Supreme Court said, if you did not give
of issuing a worthless check. The law did not look either at the notice, grace period of 5 days will not start to run.
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 Atty Amago: Does BP 22 apply to foreign checks?
intended to be deposited was really of no consequence to Answer: It applies to foreign checks granting that checks are
incurring criminal liability under Batas Pambansa Blg. 22. The issued here in the Philippines even if payable abroad. If check
mere act of issuing a worthless check, either as a deposit, as is issued abroad and payable here, BP 22 does not apply. You
a guarantee, or even as an evidence of a pre-existing debt or can file estafa instead for deceit continues here man. Take
as a mode of payment is covered by B.P. 22. It is a crime note that BP 22, it is the issuance of a worthless check that is
classified as malum prohibitum.
punishable.
Atty. A: Even if the check is not intended to be deposited, it is Atty Amago: When do you apply the novation theory?
not material. We go back to the gravamen of the violation of The check which was previously dishonored is replaced by
the law, that is, the mere act of issuing a worthless check. another check. So there is a change of the obligation. The
Whatever happens after that – issuing of a worthless check – new check now governs the obligation. Like, check 1 replaced
is of no consequence.
by check 2. This theory applies only if the new check is
indeed paid, if wala, it will not exonerate you class. You will
Who can give notice? liable for multiple counts of violation of BP 22.
A notice of dishonor received by the maker or drawer of the

check is indispensable before a conviction can ensue. The Atty Amago: What if you decided to pay the check just before
notice of dishonor may be sent by the offended party or the the case was filed and complainant still refuses to accept
payment. Kay iya jud gusto dapat jud ka patagamon. Even if
drawee bank. The notice must be in writing. A mere oral willing jud mubayad pero lapas na sa 5 days. Kay ang liability
notice to pay a dishonored check will not suffice. The lack of already attaches after 5 days from receipt of notice. Will
written notice is fatal for the prosecution.
payment possibly exonerate you?
Generally NO, however SC in Sia vs CA, it said that the main
purpose of the law is to safeguard the banking system. So if
What is required where the notice is sent via registered mail?
willing na mubayad, wala man daw na prejudice class. But
1. Affidavit of the mailer or mailers; and
take note that this offer is made prior to the filing of the case
2. Present the person in court who sent the notice via class. This presupposes that the payee did not incur so much
registered mail.
collection cost. If dako na kaay ka ug gasto, murag lisod na
pud na e accept, clearly naa na jud na prejudice.
The authentication by affidavit of the mailer or mailers is

necessary in order for the giving of the notices of dishonor by Atty Amago: What is the prescriptive period for filing BP 22? 4
registered mail to be regarded as clear proof of the giving of years, why?
the notices of dishonor to predicate the existence of the Because it is a special law man class.
second element of the offense.
Atty. A: The mailer or mailers or person actually mailing must

testify in court as to the sending of the registered mail.
Present the person who sent the notice via registered mail.
Can a crossed check be negotiated?

Generally or Specially crossed check cannot be negotiated. It
can only be deposited in the bank.
In real practice, can a check only be negotiated once?

Yes, that is really the intention.
But there is this practice of discounting (Pagibig checks). It is

not prohibited under the law because it is still a negotiable
instrument.
But then, there is a risk that these people are facing by getting
and discounting these checks. But the security blanket is that
it is the government issuing the checks, so, there’s no way it
will be dishonored.
Atty Amago: What if class you failed to give notice of dishonor

to the issuer of the check? What happens?
Answer: He will still be liable but then again, you have to prove
that there is knowledge of dishonor. Because again for the
presumption to apply is that the drawer must have receive the
notice of dishonor. In fact this is always the argument of the
CASES 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
1. State Investment House, Inc. v. CA that cancellation effected by destroying the instrument either
by tearing it up, 5 burning it, or writing the word "cancelled"
217 SCRA 32 (1993) on the instrument. The act of destroying the instrument must
FACTS: Private respondent Nora B. Moulic issued to Corazon also be made by the holder of the instrument intentionally.
Victoriano, as security for pieces of jewelry to be sold on Since MOULIC failed to get back possession of the post-
commission, two (2) post-dated Equitable Banking dated checks, the intentional cancellation of the said checks
Corporation checks in the amount of Fifty Thousand Pesos is altogether impossible.
(P50,000.00) each, one dated 30 August 1979 and the other, On the other hand, the acts which will discharge a simple
30 September 1979. Thereafter, the payee negotiated the contract for the payment of money under paragraph (d) are
checks to petitioner State Investment House. Inc. (STATE).
determined by other existing legislations since Sec. 119 does
MOULIC failed to sell the pieces of jewelry, so she returned not specify what these acts are, e.g., Art. 1231 of the Civil
them to the payee before maturity of the checks. The checks, Code which enumerates the modes of extinguishing
however, could no longer be retrieved as they had already obligations. Again, none of the modes outlined therein is
been negotiated. Consequently, before their maturity dates, applicable in the instant case as Sec. 119 contemplates of a
MOULIC withdrew her funds from the drawee bank.
situation where the holder of the instrument is the creditor
while its drawer is the debtor. In the present action, the
Upon presentment for payment, the checks were dishonored payee, Corazon Victoriano, was no longer MOULIC's creditor
for insufficiency of funds. On 20 December 1979, STATE at the time the jewelry was returned.
allegedly notified MOULIC of the dishonor of the checks and

requested that it be paid in cash instead, although MOULIC Correspondingly, MOULIC may not unilaterally discharge
avers that no such notice was given her.
herself from her liability by the mere expediency of
withdrawing her funds from the drawee bank. She is thus
On 6 October 1983, STATE sued to recover the value of the liable as she has no legal basis to excuse herself from liability
checks plus attorney's fees and expenses of litigation.
on her checks to a holder in due course.
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 3) Notice of dishonor is not necessary in this case since
consent. She also instituted a Third-Party Complaint against MOULIC has no right to expect or require that the drawee
Corazon Victoriano, who later assumed full responsibility for or acceptor will honor the instrument.
the checks.
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
ISSUES:
same person; (b) When the drawee is a fictitious person or a
1) Whether STATE is a holder in due course.
person not having capacity to contract; (c) When the drawer
is the person to whom the instrument is presented for
2) Whether there is discharge of the instrument.
payment: (d) Where the drawer has no right to expect or
require that the drawee or acceptor will honor the instrument;
3) Whether there is valid notice of dishonor.
(e) Where the drawer had countermanded payment.
Indeed, MOULIC'S actuations leave much to be desired. She

HELD:
simply withdrew her funds from her drawee bank and
transferred them to another to protect herself. After
1) Yes. The STATE is a holder in due course. withdrawing her funds, she could not have expected her
A prima facie presumption exists that the holder of a checks to be honored. In other words, she was responsible
negotiable instrument is a holder in due course. 2 for the dishonor of her checks, hence, there was no need to
Consequently, the burden of proving that STATE is not a serve her Notice of Dishonor, which is simply bringing to the
holder in due course lies in the person who disputes the knowledge of the drawer or indorser of the instrument, either
presumption. In this regard, MOULIC failed.
verbally or by writing, the fact that a specified instrument,
upon proper proceedings taken, has not been accepted or
The evidence clearly shows that: (a) on their faces the post- has not been paid, and that the party notified is expected to
dated checks were complete and regular: (b) petitioner pay it.
bought these checks from the payee, Corazon Victoriano,

before their due dates; 3 (c) petitioner took these checks in
good faith and for value, albeit at a discounted price; and, (d)
petitioner was never informed nor made aware that these
checks were merely issued to payee as security and not for
value.
2. Papa v. A.U. Valencia & Co. , Inc.
284 SCRA 648 (1998)
Consequently, STATE is indeed a holder in due course. As
such, it holds the instruments free from any defect of title of FACTS: Myron C. Papa, acting as attorney-in-fact of Butte,
prior parties, and from defenses available to prior parties sold to respondent Peñarroyo, through respondent Valencia, a
among themselves; STATE may, therefore, enforce full parcel of land. Prior to the alleged sale, the said property,
payment of the checks.
together with several other parcels of land likewise owned by
Angela M. Butte, had been mortgaged by her to the
Associated Banking Corporation. The bank refused to release
2) No. There is no discharge of the instrument. it unless and until all the mortgaged properties of the late
Sec. 119. Instrument; how discharged. — A negotiable Butte were also redeemed.
instrument is discharged: (a) By payment in due course by or Private respondent Delfin Jao was allowed to intervene in the
on behalf of the principal debtor; (b) By payment in due case. Making common cause with respondents Valencia and
course by the party accommodated, where the instrument is Peñarroyo, respondent Jao alleged that the subject lot which
made or accepted for his accommodation; (c) By the had been sold to respondent Peñarroyo through respondent
intentional cancellation thereof by the holder; (d) By any other Valencia was in turn sold to him on 20 August 1973 for the
act which will discharge a simple contract for the payment of sum of P71,500.00, upon his paying earnest money in the
money; (e) When the principal debtor becomes the holder of amount of P5,000.00.
the instrument at or after maturity in his own right.
The subject decision is the one rendered by the trial court

ordering plaintiff Felix Peñarroyo to execute and deliver to
intervenor a deed of absolute sale over the same property, having deducted the 5% interest from said loan. Thereafter,
upon the latter's payment to the former of the balance of the the accused issued several PCI Bank Checks which were
purchase price of P71,500.00.
deposited at her account with City Trust Bank. The checks
bounced for reason “Account Closed”. She thereafter tried to
Petitioner appealed the aforesaid decision of the trial court to contact the accused but tan refused to talk to her. The
the Court of Appeals, alleging among others that the sale was accused was sent, by her lawyer, a formal demand through
never "consummated" as he did not encash the check (in the registered him for him to pay cash in the bounced checks but
amount of P40,000.00) given by respondents Valencia and to no avail.
Peñarroyo in payment of the full purchase price of the subject

lot. He maintained that what said respondent had actually They filed a case against Tan and the MTC found him guilty
paid was only the amount of P5,000.00 (in cash) as earnest beyond reasonable doubt of the crime of violation of BP22.
money.
Petitioner filed a motion for reconsideration where he argued
that no evidentiary weight should be given to the demand
letter sent to him because, although included in the formal
ISSUE: Whether or not the sale has been consummated.
offer of evidence of the prosecution but it was not presented
during trial. Petitioner insists that prosecution did not have
proof of notice of dishonor, thus his guilt has not been proven
HELD: Yes. It is an undisputed fact that respondents Valencia beyond reasonable doubt.
and Peñarroyo had given petitioner Myron C. Papa the

amounts of P5,000.00 in cash on 24 May 1973, and
P40,000.00 in check on 15 June 1973, in payment of the ISSUE: Whether or not a notice of dishonor is indispensable in
purchase price of the subject lot. Petitioner himself admits determining guilt of the maker or drawer.
having received said amounts, and having issued receipts

therefor. Petitioner's assertion that he never encashed the
aforesaid check is not substantiated and is at odds with his HELD: Yes. For prima facie evidence of knowledge to arise in
statement in his answer that "he can no longer recall the so far as insufficiency of funds are concerned, there are three
transaction which is supposed to have happened 10 years requisites:
ago.
(a) That the check is presented within 90 days from the date
After more than ten (10) years from the payment in party by of the check.
cash and in part by check, the presumption is that the check

had been encashed. As already stated, he even waived the (b) Drawer/Maker receives notice that such check has not
presentation of oral evidence. Granting that petitioner had been paid by the drawee.
never encashed the check, his failure to do so for more than (c) The drawer/maker of the check fails to pay the holder of
ten (10) years undoubtedly resulted in the impairment of the the check the amount due thereon, or make arrangements
check through his unreasonable and unexplained delay.
for payment in full within 5 banking days after receiving
While it is true that the delivery of a check produces the effect notice that such check has not been paid by the drawee.
of payment only when it is cashed, pursuant to Art. 1249 of Thus, the presumption or the prima facie evidence cannot
the Civil Code, the rule is otherwise if the debtor is prejudiced arise when such notice is not sent to the maker, drawer or of
by the creditor's unreasonable delay in presentment.
there is no proof as to when such notice was received. There
The acceptance of a check implies an undertaking of due would be no way of reckoning the crucial 5-day period.
diligence in presenting it for payment, and if he from whom it Moreover, a written, not verbal notice, is required. Since the
is received sustains loss by want of such diligence, it will be prosecution failed to present the evidence during trial that a
held to operate as actual payment of the debt or obligation written demand had been sent to and received by petitioner,
for which it was given. It has, likewise, been held that if no the second element, that the accused had knowledge of
presentment is made at all, the drawer cannot be held liable insufficiency of funds has not been established.
irrespective of loss or injury unless presentment is otherwise

excused.
Notice of dishonor must be in writing, a verbal notice is not

This is in harmony with Article 1249 of the Civil Code under
which payment by way of check or other negotiable enough. The statute itself has created a prima facie
instrument is conditioned on its being cashed, except when presumption that the drawer had knowledge of the
through the fault of the creditor, the instrument is impaired. insufficiency of the funds at time of issuance and the check’s
The payee of a check would be a creditor under this provision presentment if he fails to pay the amount of the check within
and if its no-payment is caused by his negligence, payment 5 banking days from notice of dishonor. Thus only after failure
will be deemed effected and the obligation for which the to pay and receipt of dishonor will the presumption arise. If no
check was given as conditional payment will be discharged.
proof of notice of dishonor was served on the drawer, there is
no way to reckon the crucial 5 day period.
■ General Rule: Payment in check does not effect payment.
—Exceptions:
TAN V. PEOPLE
Demand letter was never presented in the course of the trial
1. When the check is encased; or
thus there is no proof of notice of dishonor.
2. When through the fault of the creditor, the check

is impaired. (Art. 249 of NCC)
The presumption or prima facie evidence of knowledge cannot

arise, if notice of non-payment by the drawee bank is not sent
In this case, the check was only encashed after 10 years. The to the maker or drawer, or if there is no proof as to when such
check was already impaired due to the fault of the creditor. notice was received by the drawer, since there would simply
Thus, it is as if there was payment made.
be no way of reckoning the crucial 5-day period. Furthermore,
the notice of dishonor must be in writing; a verbal notice is not
enough.
3. Tan v. People
500 SCRA 172 (2006) Knowledge of notice of dishonor when issuer filed his answer
on a case filed against him
FACTS: Carolyn Zaragosa met the accused David Tan through
a common friend. They had multiple loan transactions, the The issuer already knows that the check is already dishonored
latest in the amount of P1 million, and for which she gave the because of the fact that the case is already filed against him.
accused a Metrobank check in the amount of P950,000 Five days had already lapsed since the filing of the case and
supposed the issuer had already filed an answer within 10 unnecessary deprivation of personal liberty and economic
days at the very least.
usefulness with due regard to the protection of social order.
So one of the best arguments would be that the issuer tried to

make payment after knowing that the case is already filed Damage to the payee is not an element of the crime punished
against him and yet the complainant refused to accept in BP 22. The “making, drawing & issuance of a check
payment.
payment of which is refused by the drawee because of
insufficient funds . . .” shall be prima facie evidence of
knowledge of such insufficiency of funds or credit unless such
Important: If ever you received a check which is worthless,
maker or drawer pays the holder thereof the amount due
take note of the requirements for the presumption to apply for
thereon, or makes arrangement for payment in full by the
filing of the case for violation of BP 22.
drawee of such check within 5 banking days after receiving

notice that such check has not been paid by the drawee.
4. Vaca v. CA
298 SCRA 658 (1998) VACA V. NIETO
Petitioners in this case cannot pretend ignorance of the
FACTS: Petitioners, Eduarda Vaca and Fernando Nieto are the insufficiency of funds. While it may be true that it was the
President and Purchasing Manager of Ervine International company's accountant who actually prepared the rubber
Inc., respectively. They issued a check for P10,000 to the check, the fact remains that petitioners are the owners and
General Agency for Reconnaissance Detection & Security Inc.
(GARDS) in partial payment for the security services rendered officers of the company. Sec. 1 of BP22 provides that "Where
by the latter to the former’s company. However, when GARDS the check is drawn by a corporation, company, or entity, the
deposited the check in PCI Bank, the same has dishonored person or persons who actually signed the check in behalf of
for insufficiency of funds. Thus, a demand letter for the such drawer shall be liable under this Act."
payment in cash of the amount of the check within 7 days

was sent to Ervine Int’l but no such payment was made within
the time given.
In fact, petitioner Nieto testified that after the check in
question was dishonored, he instructed their company
Meanwhile, petitioners issued another check for P19,860.16 to accountant to prepare a replacement check. This belies
GARDS supposedly as a replacement for the dishonored petitioners' claim that they had no hand in the preparation of
check, the P9,860.16 excess being partial payment for checks and shows that petitioners were in control of the
Ervine’s outstanding account.
finances of the company.
The following day, a criminal complaint for violation of BP22

was filed against petitioners by GARDS. When said case was
dismissed upon motion of the prosecution on the ground that
Ervine had already paid the amount of the check, another 5. Macalaglag V. People
criminal complaint for violation of BP22 was instituted against 511 SCRA 400 (2006)
petitioners, where petitioners were found guilty of the charge
and each was sentenced to 1-year imprisonment and a fine of FACTS: On two separate occasions, Macalalag obtained loans
P10,000. Thus, this petition.
from Estrella, each in the amount of P100,000 each bearing
an interest of 10% per month.
As security for the payment of the aforesaid loans, Macalalag

ISSUE: Whether petitioners are guilty of violation of BP22.
issued two Philippine National Bank (PNB) Checks each in the
amount of P100,000 in favor of Estrella. However, when
Estrella presented said checks for payment with the drawee
HELD: Yes. Petitioners’ conviction was well founded. All the bank, the same were dishonored for the reason that the
elements of the offense are present in the case at bar, which account against which the same was drawn was already
are:
closed. Estrella sent a notice of dishonor and demand to
make good the said checks to Macalalag, but the latter failed
1) Making, drawing and issuance of any check to apply to the to do so.
account.
2) Knowledge of the maker, drawer or issuer that at the time of

issue, he does not have sufficient funds in a credit with ISSUE: Whether the petitioner violated the Batas Pambansa
drawee bank.
Blg. 22?
3) Subsequent dishonor of the check by the drawee bank for

insufficiency of funds.
HELD: Yes. There is no violation of Batas Pambansa Blg. 22 if

It bears stressing that the maker’s knowledge is presumed the complainant was actually told by the drawer that he has
from the dishonor of the checks for the insufficiency of funds.
no sufficient funds in a bank. Where, as in the case at bar, the
checks were issued as security for a loan, payment by the
Petitioners cannot pretend ignorance of the insufficiency of accused of the amount of the check prior to its presentation
funds, because while it may be true that it was the company’s for payment would certainly serve the same purpose.
accountant who actually prepared the check, the fact remains

that petitioners are the owners and officers of the company. However, petitioner is guilty for violation of BP 22.
Section 1 of BP 22 provides that “Where the check is drawn

by a company, the persons who actually signed the check in Petitioner Macalalag herself declares she has made a total
behalf of such drawer shall be liable.
payment of P156,000 Applying this amount to the first check,
what will be left is P56,000, an amount insufficient to cover
However, as regards the penalty, the sentence of imprisonment her obligation with respect to the second check. When
is deleted, doubling only the fine each had to pay (P20,000 Estrella presented the checks for payment, the same were
each). This is so not just because petitioners are first time dishonored on the ground that they were drawn against a
offenders but also because they brought the appeal, believing closed account. Despite notice of dishonor, petitioner
in good faith, although mistakenly, that they had not Macalalag failed to pay the full face value of the second
committed a violation of BP 22.
check issued. Only a full payment of the face value of the
second check at the time of its presentment or during the
It would best serve the ends of criminal justice in fixing the five-day grace period could have exonerated her from
penalty within the range of discretion allowed under the law to criminal liability.
redeem the valuable human material and preventing
A contrary interpretation would defeat the purpose of BP 22 – Respondent alleged that petitioner issued to him an undated
that of safeguarding the interest of the banking system and check in the sum of P100,000 On December 29, 1995, he
the legitimate public checking account user, as the drawer placed this date on the check and deposited the same, but it
could very well have himself exonerated by the mere was dishonored by the drawee bank due to account closed.
expediency of paying a minimal fraction of the face value of On January 5, 1996, he sent the notice of dishonor to
the check.
petitioner. Without his knowledge, petitioner, on January 16,
1996, deposited P100,000 in his savings account.
In her Counter-Affidavit, petitioner declared that in 1986, she

Subsequent payment will not affect criminal liability issued to respondent BPI Check No. 349866 as a guarantee
Neither could petitioner Macalalag's subsequent payment for the loan of spouses Arturo and Malou Ventura obtained
during the pendency of the cases against her before the from him. Later, they informed her that they had paid the loan.
MTCC result in freeing her from criminal liability because the However, she forgot to ask for the return of the check. In
same had already attached after the check was dishonored. 1987, she closed her account and opened a new one with the
Said subsequent payments can only affect her civil, not drawee bank. For 10 years, she forgot having issued the
criminal, liability. A subsequent payment by the accused check. She claimed that respondent filed the complaint
would not obliterate the criminal liability theretofore already against her because her husband, Atty. Francisco Galman
incurred.
Cruz, instituted criminal and civil complaints against Carlos
Cruz. Jr., respondents brother, involving a parcel of land.
Only after 11 days from January 5, 1996 when she learned that
The gravamen of BP 22 is the issuance of a check her check was dishonored, she deposited P100,000 in the
The gravamen of BP 22 is the issuance of a check, not the account of respondent at the Westmont Bank, Sta. Mesa
non-payment of an obligation. The law has made the act of Branch.
issuing a bum check a malum prohibitum. Consequently, the

lack of criminal intent on the part of the accused is irrelevant,
and the accused will be convicted for violation thereof as long ISSUE: Whether petitioner is liable for violation of BP 22.
as the following elements are proven:
1) The accused makes, draws or issues any check to apply to HELD: No. In paragraph 7 of respondents complaint, he
account or for value.
alleged that petitioner failed to pay the amount of the check.
2) The accused knows at the time of the issuance that he or However, in paragraph 7 (d) of his reply, he admitted that she
she does not have sufficient funds in, or credit with, the already remitted the amount of P100,000 on January 16,
drawee bank for the payment of the check in full upon its 1996. Respondent filed the complaint almost six (6) months
presentment; and
after petitioner had paid the amount of the check in question.
3) The check is subsequently dishonored by the drawee bank In Griffith v. Court of Appeals, we ruled that where the creditor
for insufficiency of funds or credit, or it would have been had collected more than a sufficient amount to cover the
dishonored for the same reason had not the drawer, value of the checks, charging the debtor with a criminal
without any valid reason, ordered the bank to stop offense under the Bouncing Checks Law, two years after the
payment.
collection, is no longer tenable nor justified by law or
equitable consideration.
All these elements have been conclusively proven in Court, the

second element by the prima facie evidence established by While indeed the gravamen of violation of B.P. Blg. 22 is the
Section 2 of Batas Pambansa Blg. 22, which provides:
act of issuing worthless checks, nonetheless, courts should
not apply the law strictly or harshly. Its spirit and purpose
SEC. 2. Evidence of knowledge of insufficient funds. — the must be considered.
making, drawing and issuance of a check payment of which

is refused by the drawee because of insufficient funds in or In Lozano v. Martinez, we held that the Bouncing Checks Law
credit with such bank, when presented within ninety (90) days is aimed at putting a stop to or curbing the practice of issuing
from the date of the check, shall be prima facie evidence of worthless checks or those that end up being dishonored for
knowledge of such insufficiency of funds or credit unless payment because of the injury it causes to the public
such maker or drawer pays the holder thereof the amount due interests. In Sia v. People, we explained that the law is
thereon, or makes arrangements for payment in full by the intended to safeguard the interests of the banking system and
drawee of such check within five (5) banking days after the legitimate checking account users.
receiving notice that such check has not been paid by the Considering that petitioner had paid the amount of the check
drawee.
even before respondent filed his complaint, we believe and so
hold that no injury was caused to the public interests or the
banking system, or specifically to herein respondent.
MACALALAG V. PEOPLE
When Estrella presented the checks for payment, the same
were dishonored on the ground that they were drawn against While indeed the gravamen of violation of B.P. Blg. 22 is the
a closed account.
act of issuing worthless checks, nonetheless, courts should
not apply the law strictly or harshly. Its spirit and purpose
Only a full payment of the face value of the second check at must be considered.
the time of its presentment or during the five-day grace period

could have exonerated her from criminal liability. A contrary Considering that petitioner had already paid the amount of the
interpretation would defeat the purpose of BP22 that of check even before respondent filed his complaint, the SC
safeguarding the interest of the banking system and the believed and so hold that no injury was caused to the public
legitimate public checking account user, as the drawer could interest or the banking system, or specifically to herein
very well have himself exonerated by the mere expediency of respondent
paying a minimal fraction of the face value of the check.
CRUZ IN COMPARISON WITH THE VACA CASE

In the Vaca Case, payment was made after the case was filed
6. Cruz v. Cruz thus as ruled by SC, “even if the payee suffered no damage
515 SCRA 89 (2007) as a result of the issuance of the bouncing check, the damage
FACTS: On June 5, 1996, respondent filed a complaint for to the integrity of the banking system cannot be denied”.
violation of Batas Pambansa (B.P.) Blg. 22 against petitioner.
On the other hand, in Cruz, payment was made even before

filing of the complaint.
8. Resterio v. People
681 SCRA 592 (2012)
FACTS: Amada Resterio issued Chinabank check worth
7. Del Rosario vs. Cedillo P50,000 to Bernardo Villadolid. When the check became due,
441 SCRA 70 (2004) Villadolid tried to encash it but the same was dishonored
because the account was closed. Thereafter, Villadolid sent 2
FACTS: Complainant extended P12 Million loan to Filipina notices of dishonor to Resterio via registered mail. Resterio
Estrella which was secured by 3 postdated checks and 2 real however failed to make good the check compelling Villadolid
estate mortgages. The TCT of the lots were later discovered to file a case for violation of BP22.
to be fake hence a criminal case for falsification was filed.

Thereafter, upon presentment of the three checks, the same During trial, Villadolid presented the registry return receipts as
were dishonored for insufficiency of funds prompting the filing proof that the notices of dishonor were sent and received by
of a criminal case for violation of BP22.
Resterio. Resterio was convicted by the trial court and was
affirmed by the Court of Appeals.
Estrella contended that the requisite notice of dishonor was

not sent to her.
ISSUES:
ISSUE: Whether or not there was violation of BP22.

1) Whether or not BP22 applied if the issuer of the check is not
the account/check owner.
2) Whether or not registry return receipts constitute as

RULING: No. Sec. 24 of BP22 creates a presumption that the sufficient proof of service of notice of dishonor.
second element prima facie exist when the first and third
elements are present. The presumption is brought only after it
is proved that the issuer had received a notice of dishonor RULING:
and that he failed to pay within 5 days thereafter.
1) Yes. BP22 punished the mere act of issuing a worthless

In the case at bar, there was failure to establish receipt of check. The law does not look either at the actual
notice of dishonor in the form of a demand letter. The ownership of the check or of the account against which it
presentation of said letter and said registry of receipts, with was made, drawn, or issued or at the intention of the
an unauthenticated signature do not meet the required proof drawee, maker or issuer.
of notice. Receipts for registered letter and return receipts do

not prove themselves; they must be properly authenticated in 2) No. The notice of dishonor required by BP 22 to be given to
the order to serve as proof of receipt of the letters.
the drawer, maker or issuer of a check should be written. If
the service of the written notice of dishonor is by registered
In addition, no effort was made to show that the demand letter mail, the proof of service consists not only in the
was received by petitioners or their agent. Insufficient proof of presentation or evidence of the registry return receipt but it
notice that the checks had been dishonored were received by must be accompanied by the authenticating affidavit of the
petitioners, the presumption that they knew of the person mailing the notice of dishonor. Without the
insufficiency of the funds cannot arise.
authenticating affidavit, the proof of giving notice of
dishonor is insufficient unless the mailer personally testifies
in court on the sending by registered mail.
DEL ROSARIO V. CEDILLO Resterio was acquitted of BP22 for failure to establish guilt
The rule is that receipts for registered letters and return beyond reasonable doubt but was ordered to pay the face
receipts do not prove themselves; they must be properly value of the Chinabank check with legal interest.
authenticated in order to serve as proof of receipt of the

letters.
RESTERIO V. PEOPLE
It is a general rule that when service of notice is an issue, the What BP22 punished was the mere act of issuing a worthless
person alleging that the notice was served must prove the fact check. The law did not look either at the actual ownership of
of service. The burden of proving notice rests upon the party the check or of the account against which it was made,
asserting its existence. Service made through registered mail drawn, or issued, or at the intention of the drawee, maker or
is proved by the registry receipt issued by the mailing office issuer. Also, that the check was not intended to be deposited
and an affidavit of the person mailing the notice of dishonor.
was really of no consequence to her incurring criminal liability.
Without the authenticating affidavit, the proof of giving the The mere act of issuing a worthless check, either as a deposit,
notice of dishonor is insufficient unless the mailer personally as a guarantee, or even as an evidence of a pre-existing debt
testifies in court on the sending by registered mail. Likewise, or as a mode of payment is covered by BP22. It is a crime
for notice by mail, it must appear that the same was served on classified as malum prohibitum. The law is broad enough to
the addressee or a duly authorized agent of the addressee.
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
Period of notice for payment.
The notice is important because it is the period from where the

5 days grace period to settle shall be counted.
9. Cheng v. Sy
SC Opinion: If there is no notice, grace period will not begin to 592 SCRA 155 (2009)
run.
FACTS: Petitioner Cheng filed 2 cases of estafa against

spouses Sy and 2 cases for violation of BP Blg. 22, both for
Atty: Issuer of the check can be exonerated. Because he can issuing to her 2 PBC Checks in payment of their loan for
still give payment of the check, after knowing that the check which were dishonoured upon presentment for having been
has been dishonored.
drawn against a closed account. Estafa cases were dismissed
for failure to prove elements of the crime and BP Blg. 22 were
dismissed due to failure of petitioner to identify accused in
open court. A complaint for collection of sum of money with

damages filed by petitioner was likewise denied.
ISSUE: Whether the Rules of Criminal Procedure and Supreme

Court Circular on the Rules and Guidelines in the filing and
prosecution of criminal cases under BP Blg. 22 are applicable
to the present cases where the nature of the order dismissing
the cases for bouncing checks against respondent was based
on failure of prosecution to identify both of the accused.
HELD: The rule is that upon filing of the estafa and BP Blg. 22
cases against respondents, where petitioner has not made
any waiver, express reservation to litigate separately, or has
not instituted the corresponding civil action to collect and
damages prior to the criminal action, the civil action is
deemed instituted with criminal cases. During the pendency
of both cases, the action to recover civil action is deemed
instituted with criminal cases. During the pendency of both
cases, the action to recover civil liability was impliedly
instituted and remained pending before respective trial courts.
Although civil action could have been litigated separately on

account of the dismissal of estafa cases on reasonable doubt,
petitioner was deemed to have elected that such civil action
be prosecuted together with BP Blg. 22 cases.
The 2000 Rules on Criminal Procedure may apply even to

cases already pending of its time of promulgation. Under
these Rules, the criminal violation of BO Blg.22 includes the
corresponding civil action to recover amounts of the checks
to discourage separate filing of civil action. The Rules
encourage consolidation of Civil and Criminal cases. Thus,
where petitioner’s rights may be fully adjudicated in the
proceedings before the court trying the BP Blg.22 cases,
resort to a separate action to recover civil liability is
unwarranted on account of res judicata for failure of petitioner
to appeal the civil aspect of the cases.

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NEGOTIABLE INSTRUMENTS LAW (2018) FINALS (EH 403) ATTY.

Negotiable Instruments Law

IX. Discharge of Negotiable Instrument

Checks (Sec. 185)

XI. BP Blg. 22 — Bouncing Checks Law

a) By payment in due course by or on behalf of the principal

b) By payment in due course by the party accommodated, PAYMENT TO A THIEF

c) By the intentional cancellation thereof by the holder;

e) When the principal debtor becomes the holder of the

If it is a BEARER Instrument — this constitutes payment in

Discharge causes an end to the life of a negotiable instrument.

GROUNDS: b) BY PAYMENT IN DUE COURSE BY THE PARTY

Payment made by the accommodated party discharges the

instrument because he is also considered as the principal

TN: Between the accommodation party and the

they are absolutely bound to pay and can be relieved only by

PAYMENT IN DUE COURSE The instrument was drafted by A to accommodate B so that B

Sec. 88. What constitutes payment in due course. —

c) BY THE INTENTIONAL CANCELLATION THEREOF

1) Made by or on behalf of the principal debtor

2) At or after its maturity (so as to be considered as payment

discharge of the instrument.

Principal debtor – refers to the person ULTIMATELY bound to

it was unintentionally cancelled being on the holder.

Holder may issue an aﬃdavit of loss stating the incidence of

(f) By any agreement binding upon the holder to extend the

Art. 1231. Obligations are extinguished:

2) By the loss of the thing due;

(e) By a release of the principal debtor, unless the holder’s right

Other causes of extinguishment of obligations, such as

and prescription, are governed elsewhere in this Code.

(f) By any agreement binding upon the holder to extend the

negotiable instrument and when there is a discharge of parties

TN: Whatever extinguishes an obligation will also discharge a

Discharge of the instrument necessarily discharges all parties,

OF THE INSTRUMENT AT OR AFTER MATURITY

DISCHARGE OF THE INSTRUMENT

No consideration is necessary to support such discharge

B. WHEN PERSON SECONDARILY LIABLE ARE

(a) By any act which discharges the instrument;

(b) By the intentional cancellation of his signature by the

The discharge of a party as by intentional cancellation of his

The subsequent parties are deprived of their right of recourse

This does not apply to discharges caused by operation of law,

would already discharge D because supposedly C, di paman

Important: Take note however that warranties of a party are

It would discharge a party secondarily liable because had it

Example: Promissory note made by A is negotiated to B,

contemplated under Section 122.

This is actually referring to an instrument renegotiated to a

secondarily liable whose obligation was reserved. It would be

latter may go after the person primarily liable.

■ General Rule: If the instrument is paid by the party

of payment or to postpone the holder's right to enforce the

party is expressly reserved.

This pertains to agreement binding on the holder made with

■ General Rule: The parties secondarily liable are discharged

reply, otherwise, they are deemed to have assented to the

if they did not assent, then they are discharged.

C. RIGHT OF PARTY WHO DISCHARGES INSTRUMENT

been paid by the drawer; and

discharged from his liability. Will C be discharged when he