44) Metrobank Vs. Renato D. Cabilzo, G.R. No.

154469, December 6, 2006

DOCTRINE: The bank on which the check is drawn, known as the drawee bank, is under strict liability to
pay to the order of the payee in accordance with the drawer’s instructions as reflected on the face and by
the terms of the check. Payment made under materially altered instrument is not payment done in
accordance with the instruction of the drawer.

FACTS: Respondent Renato Cabilzo was one of Metrobank’s clients. On November 12, 1994, Cabilzo
issued a Metrobank Check payable to "CASH" and postdated on November 24, 1994 in the amount of
P1,000. The check was drawn against Cabilzo’s Account with Metrobank Pasong Tamo Branch and was
paid by Cabilzo to a certain Mr. Marquez, as his sales commission. Subsequently, the check was
presented to Westmont Bank for payment. Westmont Bank, in turn, indorsed the check to Metrobank
for appropriate clearing. Metrobank cleared the check for encashment in accordance with the Philippine
Clearing House Corporation (PCHC) Rules.

On November 16, 1994, Cabilzo’s representative was at Metrobank Pasong Tamo Branch to make some
transaction when he was asked by a bank personnel if Cabilzo had issued a check in the amount of
P91,000 to which the former replied in the negative. On the afternoon of the same date, Cabilzo himself
called Metrobank to reiterate that he did not issue a check in the amount of P91,000 and requested that
the questioned check be returned to him for verification, to which Metrobank complied.

Upon receipt of the check, Cabilzo discovered that Metrobank Check No. 985988 which he issued on 12
November 1994 in the amount of P1,000 was altered to P91,000 and the date November 24, 1994 was
changed to November 14, 1994. He demanded that Metrobank re-credit the amount of P91,000 to his
account. Metrobank failed to re-credit the amount of P91,000.00 to Cabilzo’s account. Consequently,
Cabilzo instituted a civil action for damages against Metrobank before the RTC.

RTC: in favor of Cabilzo

CA: affirmed

1st ISSUE: WON there is material alteration in this case?

HELD: YES. An alteration is said to be material if it changes the effect of the instrument. It means that an
unauthorized change in an instrument that purports to modify in any respect the obligation of a party or
an unauthorized addition of words or numbers or other change to an incomplete instrument relating to
the obligation of a party. In other words, a material alteration is one which changes the items which are
required to be stated under Section 1 of the Negotiable Instruments Law.

Section 1 of the Negotiable Instruments Law provides: An instrument to be negotiable must conform to
the following requirements: (a) It must be in writing and signed by the maker or drawer; (b) Must
contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on
demand or at a fixed determinable future time; (d) Must be payable to order or to bearer; and (e)
Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with
reasonable certainty.

Also pertinent is the following provision in the Negotiable Instrument Law which states:
 Section 125. What constitutes material alteration. – Any alteration which changes:

(a) The date;

(b) The sum payable, either for principal or interest;

(c) The time or place of payment;

(d) The number or the relation of the parties;

(e) The medium or currency in which payment is to be made;

Or which adds a place of payment where no place of payment is specified, or any other change
or addition which alters the effect of the instrument in any respect is a material alteration.

In the case at bar, the check was altered so that the amount was increased from P1,000.00 to
P91,000.00 and the date was changed from 24 November 1994 to 14 November 1994. Apparently, since
the entries altered were among those enumerated under Section 1 and 125, namely, the sum of money
payable and the date of the check, the instant controversy therefore squarely falls within the purview of
material alteration.

2nd ISSUE: WON Metrobank is bound to re-credit the amount of the check?

HELD: YES. The following provision of the Negotiable Instrument Law will shed us some light in threshing
out this issue:

Section 124. Alteration of instrument; effect of. – Where a negotiable instrument is materially
altered without the assent of all parties liable thereon, it is avoided, except as against a party
who has himself made, authorized, and assented to the alteration and subsequent indorsers.

But when the instrument has been materially altered and is in the hands of a holder in due
course not a party to the alteration, he may enforce the payment thereof according to its
original tenor. (Emphasis ours.)

Indubitably, Cabilzo was not the one who made nor authorized the alteration. Neither did he assent to
the alteration by his express or implied acts. There is no showing that he failed to exercise such
reasonable degree of diligence required of a prudent man which could have otherwise prevented the
loss. Cabilzo was never remiss in the preparation and issuance of the check, and there were no indicia of
evidence that would prove otherwise. Indeed, Cabilzo placed asterisks before and after the amount in
words and figures in order to forewarn the subsequent holders that nothing follows before and after the
amount indicated other than the one specified between the asterisks. Undoubtedly, Cabilzo was an
innocent party in this instant controversy.

As observed by the Court of Appeals, there are material alterations on the check that are visible to the
naked eye. Thus:
 x x x The number "1" in the date is clearly imposed on a white figure in the shape of the number
"2". The appellant’s employees who examined the said check should have likewise been put on
guard as to why at the end of the amount in words, i.e., after the word "ONLY", there are 4
asterisks, while at the beginning of the line or before said phrase, there is none, even as 4
asterisks have been placed before and after the word "CASH" in the space for payee. In addition,
the 4 asterisks before the words "ONE THOUSAND PESOS ONLY" have noticeably been erased
with typing correction paper, leaving white marks, over which the word "NINETY" was
superimposed. The same can be said of the numeral "9" in the amount "91,000", which is
superimposed over a whitish mark, obviously an erasure, in lieu of the asterisk which was deleted
to insert the said figure. The appellant’s employees should have again noticed why only 2
asterisks were placed before the amount in figures, while 3 asterisks were placed after such
amount. The word "NINETY" is also typed differently and with a lighter ink, when compared with
the words "ONE THOUSAND PESOS ONLY." The letters of the word "NINETY" are likewise a little
bigger when compared with the letters of the words "ONE THOUSAND PESOS ONLY".

Surprisingly, however, Metrobank failed to detect the above alterations which could not escape the
attention of even an ordinary person. This negligence was exacerbated by the fact that, as found by the
trial court, the check in question was examined by the cash custodian whose functions do not include
the examinations of checks indorsed for payment against drawer’s accounts. Obviously, the employee
allowed by Metrobank to examine the check was not verse and competent to handle such duty.

In addition, the bank on which the check is drawn, known as the drawee bank, is under strict liability to
pay to the order of the payee in accordance with the drawer’s instructions as reflected on the face and
by the terms of the check. Payment made under materially altered instrument is not payment done in
accordance with the instruction of the drawer. Since the drawee bank, in the instant case, did not pay
according to the original tenor of the instrument, as directed by the drawer, then it has no right to claim
reimbursement from the drawer, much less, the right to deduct the erroneous payment it made from
the drawer’s account which it was expected to treat with utmost fidelity.

Metrobank’s contention that it relied on the strength of collecting bank’s indorsement may be merely a
lame excuse to evade liability, or may be indeed an actual banking practice. In either case, such act
constitutes a deplorable banking practice and could not be allowed by this Court bearing in mind that
the confidence of public in general is of paramount importance in banking business. Anyway, Metrobank
is not left with no recourse for it can still run after the one who made the alteration or with the
collecting bank, which it had already done.

PROTEST

45) Allied Banking Corp. vs. CA, G.G. Sportswear Mfg. Corp., et. al., G.R. No. 125851, July 11, 2006
DOCTRINE: The contract of indorsement is primarily that of transfer, while the contract of guaranty is
that of personal security. The liability of a guarantor/surety is broader than that of an indorser.

FACTS: Petitioner Allied Bank, Manila (ALLIED) purchased an Export Bill in the amount of US $20,085
from respondent GGS. The bill, drawn under a letter of credit, covered Men's Valvoline Training Suit that
was in transit to West Germany. With the purchase of the bill, ALLIED credited GGS the peso equivalent
of the bill amounting to P151,474.52 and the receipt of which was acknowledged by the latter in its
letter. On the same date, respondents Nari Gidwani and Alcron International Ltd. executed their
respective Letters of Guaranty, holding themselves liable on the export bill if it should be dishonored or
retired by the drawee for any reason.

The spouses de Villa and Nari Gidwani also executed a Continuing Guaranty/Comprehensive Surety
guaranteeing payment of any and all such credit accommodations which ALLIED may extend to GGS.
When ALLIED negotiated the export bill to Chekiang, payment was refused due to some material
discrepancies in the documents submitted by GGS. ALLIED demanded payment from all the respondents
based on the Letters of Guaranty and Surety executed in favor of ALLIED. However, respondents refused
to pay, prompting ALLIED to file an action for a sum of money.

GGS and Nari Gidwani filed a Motion for Summary Judgment on the ground that since the plaintiff
admitted not having protested the dishonor of the export bill, it thereby discharged GGS from liability.

RTC dismissed the complaint. The CA held GGS liable to ALLIED but it exonerated the guarantors from
liability since a guaranty is an accessory contract and that what the guarantors guaranteed in the instant
case was the bill which had been discharged.

ISSUE: Can respondents, in their capacity as guarantors and surety, be held jointly and severally liable
under the Letters of Guaranty and Continuing Guaranty/Comprehensive Surety, in the absence of
protest on the bill in accordance with Section 152 of the Negotiable Instruments Law?

HELD: YES.

Respondents claim that the petitioner did not protest upon dishonor of the export bill by Chekiang First
Bank, Ltd. According to respondents, since there was no protest made upon dishonor of the export bill,
all of them, as indorsers were discharged under Section 152 of the Negotiable Instruments Law.

Section 152 of the Negotiable Instruments Law pertaining to indorsers, relied on by respondents, is not
pertinent to this case. There are well-defined distinctions between the contract of an indorser and that
of a guarantor/surety of a commercial paper, which is what is involved in this case. The contract of
indorsement is primarily that of transfer, while the contract of guaranty is that of personal security. The
liability of a guarantor/surety is broader than that of an indorser. Unless the bill is promptly presented
for payment at maturity and due notice of dishonor given to the indorser within a reasonable time, he
will be discharged from liability thereon On the other hand, except where required by the provisions of
the contract of suretyship, a demand or notice of default is not required to fix the surety's liability. He
cannot complain that the creditor has not notified him in the absence of a special agreement to that
effect in the contract of suretyship. Therefore, no protest on the export bill is necessary to charge all the
respondents jointly and severally liable with G.G. Sportswear since the respondents held themselves
liable upon demand in case the instrument was dishonored and on the surety, they even waived notice
of dishonor as stipulated in their Letters of Guarantee.

As to respondent Alcron, it is bound by the Letter of Guaranty executed by its representative Hans-
Joachim Schloer. As to the other respondents, not to be overlooked is the fact that, the "Suretyship
Agreement" they executed, expressly contemplated a solidary obligation, providing as it did that "… the
sureties hereby guarantee jointly and severally the punctual payment of any and all such credit
accommodations, instruments, loans, … which is/are now or may hereafter become due or owing … by
the borrower". It is a cardinal rule that if the terms of a contract are clear and leave no doubt as to the
intention of the contracting parties, the literal meaning of its stipulation shall control.19 In the present
case, there can be no mistaking about respondents' intent, as sureties, to be jointly and severally
obligated with respondent G.G. Sportswear.

CROSSED CHECKS

46) Vicente Go vs. Metrobank., G.R. No. 168842, August 11, 2010

DOCTRINE: The Court has taken judicial cognizance of the practice that a check with two parallel lines in
the upper left hand corner means that it could only be deposited and not converted into cash; The
crossing of a check is a warning that the check should be deposited only in the account of the payee.

FACTS: Petitioner filed two separate cases before the RTC Cebu. In both cases, Petitioner alleged that he
was doing business under the name "Hope Pharmacy" which sells medicine and other pharmaceutical
products in the City of Cebu. Petitioner had in his employ Chua as his pharmacist and trustee or
caretaker of the business; Tabañag, on the other hand, took care of the receipts and invoices and
assisted Chua in making deposits for petitioner’s accounts in the business operations of Hope Pharmacy.

In the first case, filed against Ma. Teresa Chua and Glyndah Tabañag, petitioner claimed that there were
unauthorized deposits and encashments made by both in the total amount of ₱109,433.30. In the
second case, there were thirty-two (32) checks with Hope Pharmacy as payee, for varying sums,
amounting to ₱1,492,595.06, that were not endorsed by him but were deposited under the personal
account of Chua with respondent bank. Petitioner claimed that the said checks were crossed checks
payable to Hope Pharmacy only; and that without the participation and connivance of respondent bank,
the checks could not have been accepted for deposit to any other account, except petitioner’s account.

RTC: dismissed the complaint against Chua and Tabañag but ordered Metrobank to pay moral damagaes
and costs (for being negligent in allowing the deposit of crossed checks without the proper indorsement)

CA: affirmed

ISSUE: WON Metrobank is liable for the amount of the crossed checks

HELD: It is only liable for moral damages. A crossed check is one where two parallel lines are drawn
across its face or across the corner thereof. It may be crossed generally or specially.

A check is crossed specially when the name of a particular banker or a company is written between the
parallel lines drawn. It is crossed generally when only the words "and company" are written or nothing is
written at all between the parallel lines, as in this case. It may be issued so that presentment can be
made only by a bank.

In order to preserve the credit worthiness of checks, jurisprudence has pronounced that crossing of a
check has the following effects: (a) the check may not be encashed but only deposited in the bank; (b)
the check may be negotiated only once — to one who has an account with a bank; and (c) the act of
crossing the check serves as warning to the holder that the check has been issued for a definite purpose
so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a
holder in due course.
The Court has taken judicial cognizance of the practice that a check with two parallel lines in the upper
left hand corner means that it could only be deposited and not converted into cash. The effect of
crossing a check, thus, relates to the mode of payment, meaning that the drawer had intended the
check for deposit only by the rightful person, i.e., the payee named therein. The crossing of a check is a
warning that the check should be deposited only in the account of the payee. Thus, it is the duty of the
collecting bank to ascertain that the check be deposited to the payee’s account only.

In the instant case, there is no dispute that the subject 32 checks were crossed checks with petitioner as
the named payee. It is the submission of petitioner that respondent bank should be held accountable for
the entire amount of the checks because it accepted the checks for deposit under Chua’s account
despite the fact that the checks were crossed and that the payee named therein was not Chua.

In its defense, respondent bank countered that petitioner is not entitled to reimbursement of the total
sum of ₱1,492,595.06 from either Maria Teresa Chua or respondent bank because petitioner was not
damaged thereby. Respondent bank’s contention is meritorious. Respondent bank should not be held
liable for the entire amount of the checks considering that the checks were actually given to Chua as
payments by petitioner for loans obtained from the parents of Chua. Furthermore, petitioner’s non-
inclusion of Chua and Tabañag in the petition before this Court is, in effect, an admission by the
petitioner that Chua, in representation of her parents, had rightful claim to the proceeds of the checks,
as payments by petitioner for money he borrowed from the parents of Chua. Therefore, petitioner
suffered no pecuniary loss in the deposit of the checks to the account of Chua.

However, respondent bank was negligent in permitting the deposit and encashment of the crossed
checks without the proper indorsement. An indorsement is necessary for the proper negotiation of
checks specially if the payee named therein or holder thereof is not the one depositing or encashing it.
Knowing fully well that the subject checks were crossed, that the payee was not the holder and that the
checks contained no indorsement, respondent bank should have taken reasonable steps in order to
determine the validity of the representations made by Chua. Respondent bank was amiss in its duty as
an agent of the payee. Prudence dictates that respondent bank should not have merely relied on the
assurances given by Chua.

Davis, the officer-in-charge of the bank, also testified that he allowed Ma. Teresa Chua to deposit the
checks subject of this litigation which were payable to Hope Pharmacy. Davis stressed that Metrobank
granted the privilege to Chua that for every check she deposited with Metrobank, the same would be
credited outright to her account, meaning that she could immediately make use of the amount credited;
this arrangement went on for about three years, without any complaint from Mr. Go/Hope Pharmacy,
and Ma. Teresa Chua made warranty that she would reimburse Metrobank if Mr. Go complained. He did
not however call or inform Mr. Go about this arrangement, because their bank being a Chinese bank,
transactions are based on trust and confidence, and for him to inform Mr. Vicente Go about it, was
tantamount to questioning the integrity of their client, Chua.

Negligence was committed by respondent bank in accepting for deposit the crossed checks without
indorsement and in not verifying the authenticity of the negotiation of the checks. The law imposes a
duty of extraordinary diligence on the collecting bank to scrutinize checks deposited with it, for the
purpose of determining their genuineness and regularity. As a business affected with public interest and
because of the nature of its functions, the banks are under obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of the relationship. The fact
that this arrangement had been practiced for three years without Mr. Go/Hope Pharmacy raising any
objection does not detract from the duty of the bank to exercise extraordinary diligence. Thus, the
Decision of the RTC, as affirmed by the CA, holding respondent bank liable for moral damages is
sufficient to remind it of its responsibility to exercise extraordinary diligence in the course of its business
which is imbued with public interest.

47) Traders Royal Bank vs. Radio Phils. Network, Inc., et. al., G.R. No. 138510. October 10, 2002

DOCTRINE: The crossing of a check should put a bank on guard; The effects of a crossed check are that
(a) the check may not be encashed but only deposited in the bank, (b) the check may be negotiated only
once to one who has an account with a bank, and, (c) the act of crossing the check serves as a warning to
the holder that the check has been issued for a definite purpose so that he must inquire if he has received
the check pursuant to that purpose, otherwise, he is not a holder in due course.

FACTS: The BIR assessed plaintiffs Radio Philippines Network (RPN), Intercontinental Broadcasting
Corporation (IBC), and Banahaw Broadcasting Corporation (BBC) of their tax obligations for the taxable
years 1978 to 1983.

Mrs. Vera, plaintiffs’ comptroller, sent a letter to the BIR requesting settlement of plaintiffs’ tax
obligations. The BIR granted the request and plaintiffs purchased from defendant TRB three (3)
manager’s checks to be used as payment for their tax liabilities. Defendant TRB, through Aida Nuñez,
TRB Branch Manager, turned over the checks to Mrs. Vera who was supposed to deliver the same to the
BIR in payment of plaintiffs’ taxes.

Later, the BIR again assessed plaintiffs for their tax liabilities for the years 1979-82. It was then they
discovered that the three (3) managers checks intended as payment for their taxes were never delivered
nor paid to the BIR by Mrs. Vera. Instead, the checks were presented for payment by unknown persons
to defendant SBTC.vFor failure of the plaintiffs to settle their obligations, the BIR issued warrants of levy,
distraint and garnishment against them. Thus, they were constrained to enter into a compromise.
Thereafter, plaintiffs sent letters to both defendants, demanding that the amounts covered by the
checks be reimbursed or credited to their account. The defendants refused, hence, the instant suit.

RTC: in favor of plaintiffs and ordered TRB to pay the amount of the checks, and ordered SBTC as
collecting bank to reimburse TRB

CA: absolved SBTC of liabilityirtua1 1aw 1ibr

ISSUE: WON TRB should be held solely liable when it paid the amount of the checks in question to a
person other than the payee indicated on the face of the check, the BIR

HELD: YES. Petitioner ought to have known that, where a check is drawn payable to the order of one
person and is presented for payment by another and purports upon its face to have been duly indorsed
by the payee of the check, it is the primary duty of petitioner to know that the check was duly indorsed
by the original payee and, where it pays the amount of the check to a third person who has forged the
signature of the payee, the loss falls upon petitioner who cashed the check. Its only remedy is against
the person to whom it paid the money.

It should be noted further that one of the subject checks was crossed. The crossing of one of the subject
checks should have put petitioner on guard; it was duty-bound to ascertain the indorser’s title to the
check or the nature of his possession. Petitioner should have known the effects of a crossed check: (a)
the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only
once to one who has an account with a bank and (c) the act of crossing the check serves as a warning to
the holder that the check has been issued for a definite purpose so that he must inquire if he has
received the check pursuant to that purpose, otherwise, he is not a holder in due course.

By encashing in favor of unknown persons checks which were on their face payable to the BIR, a
government agency which can only act only through its agents, petitioner did so at its peril and must
suffer the consequences of the unauthorized or wrongful endorsement. In this light, petitioner TRB
cannot exculpate itself from liability by claiming that respondent networks were themselves negligent.

NOTE: Petitioner argues that respondent SBTC, as the collecting bank and indorser, should be held
responsible instead for the amount of the checks.

The SC subscribed to the conclusions of the CA, thus:

As to the alleged liability of appellant SBTC, a close examination of the records constrains us to deviate
from the lower court’s finding that SBTC, as a collecting bank, should similarly bear the loss. A collecting
bank where a check is deposited and which indorses the check upon presentment with the drawee bank,
is such an indorser. So even if the indorsement on the check deposited by the bank’s client is forged, the
collecting bank is bound by his warranties as an indorser and cannot set up the defense of forgery as
against the drawee bank.

"SECTION 63. When person deemed indorser. — A person placing his signature upon an instrument
otherwise than as maker, drawer, or acceptor, is deemed to be an indorser unless he clearly indicates by
appropriate words his intention to be bound in some other capacity."

Upon the other hand, the Philippine Clearing House Corporation (PCHC) rules provide: All checks cleared
through the PCHC shall bear the guarantee affixed thereto by the Presenting Bank/Branch which shall
read as follows: "Cleared thru the Philippine Clearing House Corporation. All prior endorsements and/or
lack of endorsement guaranteed. NAME OF BANK/BRANCH BRSTN (Date of clearing)."

Here, not one of the disputed checks bears the requisite endorsement of appellant SBTC. What appears
to be a guarantee stamped at the back of the checks is that of the PNB thereby indicating that it was the
latter Bank which received the same. It was likewise established during the trial that whenever
appellant SBTC receives a check for deposit, its practice is to stamp on its face the words, "non-
negotiable."

Unfortunately, the words "non-negotiable" do not appear on the face of either of the three (3) disputed
checks.Also, does not show that the checks were among those that passed for clearing with the PCHC.
The foregoing circumstances taken altogether create a serious doubt on whether the disputed checks
passed through the hands of appellant SBTC."

A collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee
bank guarantees all prior indorsements, including the forged indorsement itself, and ultimately should
be held liable therefor. However, it is doubtful if the subject checks were ever presented to and
accepted by SBTC so as to hold it liable as a collecting bank, as held by the Court of Appeals.

Since TRB did not pay the rightful holder or other person or entity entitled to receive payment, it has no
right to reimbursement. Petitioner TRB was remiss in its duty and obligation, and must therefore suffer
the consequences of its own negligence and disregard of established banking rules and procedures. We
agree with petitioner, however, that it should not be made to pay exemplary damages to RPN, IBC and
BBC because its wrongful act was not done in bad faith, and it did not act in a wanton, fraudulent,
reckless or malevolent manner.

CASES FOR BOUNCING CHECKS LAW

48) Eumelia R. Mitra vs. PP and Felicisimo S. Tarcelo, G.R. NO. 191404, July 5, 2010

DOCTRINE: The third paragraph of Section 1 of BP 22 reads: "Where the check is drawn by a corporation,
company or entity, the person or persons who actually signed the check in behalf of such drawer shall be
liable under this Act." This provision recognizes the reality that a corporation can only act through its
officers. Hence, its wording is unequivocal and mandatory - that the person who actually signed the
corporate check shall be held liable for a violation of BP 22. This provision does not contain any
condition, qualification or limitation.

FACTS: Petitioner Eumelia Mitra was the Treasurer, and Florencio L. Cabrera (now deceased) was the
President, of Lucky Nine Credit Corporation, a corporation engaged in money lending activities.

Private respondent Felicisimo Tarcelo invested money in Lucky Nine. As the usual practice in money
placement transactions, Tarcelo was issued checks equivalent to the amounts he invested plus the
interest on his investments. The subject checks, signed by Mitra and Cabrera, were issued by Lucky Nine
to Tarcelo.

When Tarcelo presented these checks for payment, they were dishonored for the reason "account
closed." Tarcelo made several oral demands on Lucky Nine for the payment of these checks but he was
frustrated. Constrained, in 2002, he caused the filing of seven informations for violation of BP 22 in the
total amount of P925,000 with the MTCC in Batangas City.

MTCC: found Mitra and Cabrera guilty of the charges and they were ordered to pay the amount of the
checks

RTC: Affirmed (meanwhile, Cabrera died)

ISSUES: WON the elements of violation of BP bilang 22 must be proved beyond reasonable doubt as
against the corporation who owns the current account where the subject checks were drawn before
liability attaches to the signatories.

HELD: NO.

BP 22 or the Bouncing Checks Law was enacted for the specific purpose of addressing the problem of
the continued issuance and circulation of unfunded checks by irresponsible persons. To stem the harm
caused by these bouncing checks to the community, BP 22 considers the mere act of issuing an
unfunded check as an offense not only against property but also against public order. The purpose of BP
22 in declaring the mere issuance of a bouncing check as malum prohibitum is to punish the offender in
order to deter him and others from committing the offense, to isolate him from society, to reform and
rehabilitate him, and to maintain social order. The penalty is stiff. BP 22 imposes the penalty of
imprisonment for at least 30 days or a fine of up to double the amount of the check or both
imprisonment and fine.

Specifically, BP 22 provides: SECTION 1. Checks Without Sufficient Funds. - Any person who makes or
draws and issues any check to apply on account or for value, knowing at the time of issue that he does
not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its
presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds or
credit or would have been dishonored for the same reason had not the drawer, without any valid
reason, ordered the bank to stop payment, shall be punished by imprisonment of not less than thirty
days but not more than one (1) year or by a fine of not less than but not more than double the amount
of the check which fine shall in no case exceed Two Hundred Thousand Pesos, or both such fine and
imprisonment at the discretion of the court.

The same penalty shall be imposed upon any person who, having sufficient funds in or credit with the
drawee bank when he makes or draws and issues a check, shall fail to keep sufficient funds or to
maintain a credit to cover the full amount of the check if presented within a period of ninety (90) days
from the date appearing thereon, for which reason it is dishonored by the drawee bank.

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

SECTION 2. Evidence of Knowledge of Insufficient Funds. - The making, drawing and issuance of a check
payment of which is refused by the drawee because of insufficient funds in or credit with such bank,
when presented within ninety (90) days from the date of the check, shall be prima facie evidence of
knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof
the amount due thereon, or makes arrangements for payment in full by the drawee of such check within
five (5) banking days after receiving notice that such check has not been paid by the drawee.

Mitra posits in this petition that before the signatory to a bouncing corporate check can be held liable,
all the elements of the crime of violation of BP 22 must first be proven against the corporation. The
corporation must first be declared to have committed the violation before the liability attaches to the
signatories of the checks.

The Court finds Itself unable to agree with Mitra's posture. The third paragraph of Section 1 of BP 22
reads: "Where the check is drawn by a corporation, company or entity, the person or persons who
actually signed the check in behalf of such drawer shall be liable under this Act." This provision
recognizes the reality that a corporation can only act through its officers. Hence, its wording is
unequivocal and mandatory - that the person who actually signed the corporate check shall be held
liable for a violation of BP 22. This provision does not contain any condition, qualification or limitation.

In Llamado v. CA, the Court ruled that the accused was liable on the unfunded corporate check which he
signed as treasurer of the corporation. He could not invoke his lack of involvement in the negotiation for
the transaction as a defense because BP 22 punishes the mere issuance of a bouncing check, not the
purpose for which the check was issued or in consideration of the terms and conditions relating to its
issuance. In this case, Mitra signed the Lucky Nine checks as treasurer. Following Llamado, she must
then be held liable for violating BP 22.
Another essential element of a violation of BP 22 is the drawer's knowledge that he has insufficient
funds or credit with the drawee bank to cover his check. Because this involves a state of mind that is
difficult to establish, BP 22 creates the prima facie presumption that once the check is dishonored, the
drawer of the check gains knowledge of the insufficiency, unless within five banking days from receipt of
the notice of dishonor, the drawer pays the holder of the check or makes arrangements with the drawee
bank for the payment of the check. The service of the notice of dishonor gives the drawer the
opportunity to make good the check within those five days to avert his prosecution for violating BP 22.

The prosecution positively alleged and proved that the questioned demand letter was served upon the
accused on April 10, 2000, that was at the time they were attending Court hearing before Branch I of this
Court. The Court accepts the prosecution's narrative that the accused refused to sign the same to
evidence their receipt thereof. With the notice of dishonor duly served and disregarded, there arose the
presumption that Mitra and Cabrera knew that there were insufficient funds to cover the checks upon
their presentment for payment. In fact, the account was already closed.

To reiterate the elements of a violation of BP 22 as contained in the above-quoted provision, a violation

exists where:

1. a person makes or draws and issues a check to apply on account or for value;

2. the person who makes or draws and issues the check knows at the time of issue that he does not have
sufficient funds in or credit with the drawee bank for the full payment of the check upon its
presentment; and

3. the check is subsequently dishonored by the drawee bank for insufficiency of funds or credit, or
would have been dishonored for the same reason had not the drawer, without any valid reason, ordered
the bank to stop payment.

There is no dispute that Mitra signed the checks and that the bank dishonored the checks because the
account had been closed. Notice of dishonor was properly given, but Mitra failed to pay the checks or
make arrangements for their payment within five days from notice. With all the above elements duly
proven, Mitra cannot escape the civil and criminal liabilities that BP 22 imposes for its breach.

49) Amada Resterio vs. People of the Phils., G.R. No. 177438, Sept. 24, 2012

DOCTRINE: 1. What Batas Pambansa Blg. 22 punished was the mere act of issuing a worthless check.
The law did not look either at the actual ownership of the check or of the account against which it was
made, drawn, or issued, or at the intention of the drawee, maker or issuer.

2. A notice of dishonor received by the maker or drawer of the check is thus indispensable before a
conviction can ensue. The notice of dishonor may be sent by the offended party or the drawee bank. The
notice must be in writing. A mere oral notice to pay a dishonored check will not suffice. The lack of a
WRITTEN notice is fatal for the prosecution.

FACTS: The petitioner was charged for violation of B.P. 22 when petitioner issued a postdated check
sometime on May 2002 allegedly being aware that the account to be drawn against does not have
sufficient funds.
MTCC: found petitioner guilty as charged
CA: denied the petition for review

ISSUE: WON all the elements of a violation of BP 22 were established beyond reasonable doubt.

HELD: NO. For a violation of BP 22, the Prosecution must prove the following essential elements,
namely:

(1) The making, drawing, and issuance of any check to apply for account or for value;

(2) The knowledge of the maker, drawer, or issuer that at the time of issue there were no sufficient
funds in or credit with the drawee bank for the payment of such check in full upon its presentment; and

(3) The dishonor of the check by the drawee bank for insufficiency of funds or credit or the dishonor for
the same reason had not the drawer, without any valid cause, ordered the drawee bank to stop
payment.

AS TO THE 1ST ELEMENT: According to the petitioner, she was "required to issue a check as a collateral
for the obligation," and that "she was left with no alternative but to borrow the check of her friend xxx
and used the said check as a collateral of her loan." Yet, to avoid criminal liability, the petitioner
contends that BP 22 was applicable only if the dishonored check was actually owned by her; and that
she could not be held liable because the check was issued as a mere collateral of the loan and not
intended to be deposited. The petitioner's contentions do not persuade. What Batas Pambansa Blg. 22
punished was the mere act of issuing a worthless check. The law did not look either at the actual
ownership of the check or of the account against which it was made, drawn, or issued, or at the
intention of the drawee, maker or issuer. Also, that the check was not intended to be deposited was
really of no consequence to her incurring criminal liability under Batas Pambansa Blg. 22.

In Ruiz v. People, the court held that the mere act of issuing a worthless check, either as a deposit, as a
guarantee, or even as an evidence of a pre-existing debt or as a mode of payment is covered by B.P. 22.
It is a crime classified as malum prohibitum. The law is broad enough to include, within its coverage, the
making and issuing of a check by one who has no account with a bank, or where such account was
already closed when the check was presented for payment.

As the Court in Lozano also explained: Considering that the law imposes a penal sanction on one who
draws and issues a worthless check against insufficient funds or a closed account in the drawee bank,
there is, likewise, every reason to penalize a person who indulges in the making and issuing of a check
on an account belonging to another with the latter's consent, which account has been closed or has
no funds or credit with the drawee bank. (Bold emphases supplied)

AS TO THE 3RD ELEMENT: The State likewise proved the existence of the third element. On direct
examination, Villadolid declared that the check had been dishonored upon its presentment to the
drawee bank through BPI as the collecting bank. The return check memorandum issued by BPI indicated
that the account had already been closed. The petitioner did not deny or contradict the fact of dishonor.

AS TO THE 2ND ELEMENT:

To establish the existence of the second element, the State should present the giving of a written notice
of the dishonor to the drawer, maker or issuer of the dishonored check. The rationale for this
requirement is rendered in Dico v. CA, to wit: “ it must further be shown that accused knew at the time
of the issuance of the check that he did not have sufficient funds or credit with the drawee bank for
the payment of such check in full upon its presentment.

Inasmuch as this element involves a state of mind of the person making, drawing or issuing the check
which is difficult to prove, Section 2 of B.P. Blg. 22 creates a prima facie presumption of such
knowledge.

For this presumption to arise, the prosecution must prove the following: (a) the check is presented
within ninety (90) days from the date of the check; (b) the drawer or maker of the check receives notice
that such check has not been paid by the drawee; and (c) the drawer or maker of the check fails to pay
the holder of the check the amount due thereon, or make arrangements for payment in full within five
(5) banking days after receiving notice that such check has not been paid by the drawee. In other words,
the presumption is brought into existence only after it is proved that the issuer had received a notice of
dishonor and that within five days from receipt thereof, he failed to pay the amount of the check or to
make arrangements for its payment. The presumption or prima facie evidence as provided in this
section cannot arise, if such notice of nonpayment by the drawee bank is not sent to the maker or
drawer, or if there is no proof as to when such notice was received by the drawer, since there would
simply be no way of reckoning the crucial 5-day period.

A notice of dishonor received by the maker or drawer of the check is thus indispensable before a
conviction can ensue. The notice of dishonor may be sent by the offended party or the drawee
bank. The notice must be in writing. A mere oral notice to pay a dishonored check will not
suffice. The lack of a WRITTEN notice is fatal for the prosecution.

To prove mailing, it presented a copy of the demand letter as well as the registry return receipt.
However, no attempt was made to show that the demand letter was indeed sent through registered
mail nor was the signature on the registry return receipt authenticated or identified. It cannot even be
gleaned from the testimony of private complainant as to who sent the demand letter and when the
same was sent. In fact, the prosecution seems to have presumed that the registry return receipt was
proof enough that the demand letter was sent through registered mail and that the same was actually
received by petitioners or their agents.

In criminal cases, however, the quantum of proof required is proof beyond reasonable doubt. Hence,
for Batas Pambansa Blg. 22 cases, there should be clear proof of notice. In the instant case, the
prosecution did not present proof that the demand letter was sent through registered mail, relying as
it did only on the registry return receipt. In the instant case, the prosecution failed to present the
testimony, or at least the affidavit, of the person mailing that, indeed, the demand letter was sent.

In the case at bar, no effort was made to show that the demand letter was received by petitioners or
their agent. There being insufficient proof that petitioners received notice that their checks had been
dishonored, the presumption that they knew of the insufficiency of the funds therefor cannot arise.

Also, that the wife of Villadolid verbally informed the petitioner that the check had bounced did not
satisfy the requirement of showing that written notices of dishonor had been made to and received by
the petitioner. The verbal notices of dishonor were not effective because it is already settled that a
notice of dishonor must be in writing.

In light of the foregoing, the proof of the guilt of the petitioner for a violation of BP 22 for issuing to
Villadolid the unfunded Chinabank Checkin the amount of P50,000 did not satisfy the quantum of proof
beyond reasonable doubt. Nonetheless, the civil liability of the petitioner in the principal sum of
P50,000.00, being admitted, was established. She was further liable for legal interest of 6% per annum
on that principal sum, reckoned from the filing of the information in the trial court. That rate of interest
will increase to 12% per annum upon the finality of this decision.

50) Ma. Rosario Campos vs. People of the Phils. Et. al., G.R. No. 187401, Sept. 17, 2014

DOCTRINE: In a line of cases, the Supreme Court (SC) has emphasized the importance of proof of receipt
of such notice of dishonor, although not as an element of the offense, but as a means to establish that
the issuer of a check was aware of insufficiency of funds when he issued the check and the bank
dishonored it, in relation to the second element of the offense and Section 2 of Batas Pambansa (BP) Blg.
22.

FACTS: Campos obtained a loan, payable on installments, from respondent First Women’s Credit
Corporation (FWCC) in the amount of P50,000. She issued several postdated checks in favor of FWCC to
cover the agreed installment payments. Fourteen of these checks drawn against her Current Account
with BPI, however, were dishonored when presented for payment. The checks were declared by the
drawee bank to be drawn against a “closed account.” After Campos failed to satisfy her outstanding
obligation with FWCC despite demand, she was charged before the MeTC with violations of B.P. 22.

MeTC: convicted of fourteen (14) counts of violations of BP 22

RTC: upheld her conviction

CA: affirmed RTC decision

Campos denies having received a notice of dishonor from FWCC. She also invokes good faith as she
allegedly made arrangements with FWCC for the payment of her obligation after the subject checks
were dishonored.

ISSUE: WON the required notice of dishonour was received by Campos?

HELD: YES. An issue being advanced by Campos through the present petition concerns her alleged
failure to receive a written demand letter from FWCC, the entity in whose favor the dishonored checks
were issued. Considering that the second element involves a state of mind which is difficult to establish,
Section 2 of B.P. 22 creates a presumption of knowledge of insufficiency of funds.

In the instant case, both the RTC and the CA affirmed the MeTC’s finding that the required notice of
dishonor from FWCC was received by Campos. Campos, nonetheless, still maintains that her personal
receipt of the notice was not sufficiently established, considering that only a written copy of the letter
and the registry return receipt covering it were presented by the prosecution.
The Court has in truth repeatedly held that the mere presentation of registry return receipts that cover
registered mail was not sufficient to establish that written notices of dishonor had been sent to or
served on issuers of checks. The authentication by affidavit of the mailers was necessary in order for
service by registered mail to be regarded as clear proof of the giving of notices of dishonor and to
predicate the existence of the second element of the offense.

In still finding no merit in the present petition, the Court, however, considers Campos’ defense that she
exerted efforts to reach an amicable settlement with her creditor after the checks which she issued
were dishonored by the drawee bank, BPI. Campos categorically declared in her petition that, “[she] has
in her favor evidence to show that she was in good faith and indeed made arrangements for the
payment of her obligations subsequently after the dishonor of the checks.” Clearly, this statement was a
confirmation that she actually received the required notice of dishonor from FWCC.

Campos could have avoided prosecution by paying the amounts due on the checks or making
arrangements for payment in full within five ( 5) days after receiving notice. Unfortunately for Campos,
these circumstances were not established in the instant case. She failed to sufficiently disclose the terms
of her alleged arrangement with FWCC, and to establish that the same had been fully complied with so
as to completely satisfy the amounts covered by the subject checks. Moreover, documents to prove
such fact should have been presented before the MeTC during the trial, yet Campos opted to be tried in
absentia, and thus waived her right to present evidence. Given the circumstances, the Court finds no
cogent reason to reverse the ruling of the CA which affirmed the conviction of Campos.