BOUNCING
CHECKS
LAW
WHAT IS A CHECK?
Under Sec. 185 of the
Negotiable Instruments Law, is
a bill of exchange drawn on a
bank payable on demand.
WHAT IS A CHECK?
In Mitra v. People, G.R. No. 191404, 5 July 2010, “a
check is a negotiable instrument that serves as a substitute for money and as a convenient form of payment in financial transaction and obligations. The use of checks allows commercial and banking transactions to proceed without the actual handling of money, thus, doing away with the need to physically count bills and coins whenever payment is made. It permits “c and b” transactions to be carried out quickly and efficiently. But the convenience afforded by checks is damaged by unfunded checks that adversely affect confidence in our “c and b” activities, and ultimately injure public interest.
A CHECK IS
NOT A LEGAL
TENDER.
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Checks representing deposit of
payment do not have legal
tender power and their
acceptance in payment of
debts, both public and private,
is at the option of the creditor,
provided, however, that a check
which has been cleared and
credited to the account of the
creditor shall be equivalent to
a delivery to the creditor in
cash in an amount equal to the
amount credited to his account.
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The payment of debts in money shall
be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.
The delivery of promissory notes
payable, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived
from the original obligation shall be held in abeyance.
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Unless there is an express
stipulation to that effect, the creditor cannot be compelled partially to receive the presentation in which the obligation consists. Neither may the debtor be required to make partial payments.
However, when the debt is in part
liquidated and in part unliquidated, the creditor may demand and the debtor may effect the payment of the former without waiting for the liquidation of the latter.
PURPOSE OF
THE
BOUNCING
PURPOSE
To address the problem of the continued issuance
and circulation of unfunded checks by irresponsible persons (specific purpose). It aims
to put a stop to or curbing the practice of issuing checks that are worthless (those that end up being rejected and dishonored in payment). It is proscribed by the state because of the injury it causes to public interests.
It considers the act as an offense property and
PURPOSE
To declare the issuance of an unfunded check as malum prohibitum is 1) to punish the offender
in order to stop him and other from committing the offense, 2) to isolate him from society, 3) to reform and rehabilitate him, and 4) to maintain social order.
The thrust of the law is to prohibit under pain of
legal sanctions the making of worthless checks and putting them in circulation and not to coerce the debtor to pay his debt. Therefore, it is punished as an act against public order and not against property. Lozano vs. Martinez, G.R. No. L-63419, 18 December 1986.
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An ordinary check is not a mere
undertaking to pay an amount of money. There is an element if certainty or assurance that it will be paid upon presentation that is why it is perceived as a convenient
substitute for currency in
commercial and financial
transactions. The basis of the perception being confidence. Any
practice that destroys that
confidence will impair the
usefulness of the check as a currency substitute and create havoc in trade circles and the banking community
.
BOUNCING CHECK
Bouncing or rubber
check
is
the
issuance of checks
without
funds.
Cruz v. IAC, G.R.
No. L-66327, 28
May 1984.
DAIF
NSF
DAUD
BOUNCING CHECK
Drawn against a
bank account with
insufficient funds
Drawn
against
non-sufficient
funds
Drawn
against
uncollected
deposit.
DAIF
NSF
DAUD
DRAWER
(ISSUER)
DRAWEE BANK
•
DAIF
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NSF
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DAUD
RETURN TO ISSUER
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By drawing the instrument, the
drawer admits the existence of the payee and the latter’s capacity to indorse
As such, he engages or vouches that
upon presentment of the check, it will be accepted or paid, or both and that should it be dishonored (where the necessary proceedings for dishonor is duly taken), he will pay the amount to the holder or the subsequent indorser who may be compelled to pay it.
As drawer however, he may insert a
stipulation limiting his own liability to the holder
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The maker or drawer must pay the
holder of the check of the amount due;
Or make arrangements for payment
in full by the drawee of such check within 5 banking days after receiving notice that such check has not been paid by the drawee (done
after 5 days from the notice of dishonor or demand letter or notice that the check issued has not been paid by the drawee bank).
Failure to comply shall constitute
the violation of BP 22 where the drawer shall be held liable
CHECKS COVERED BY BP 22
Checks in general
Checks issued to pay a pre-existing obligation Crossed check
Accommodation or guarantee check Current checks
Post-dated checks Deposit check
Corporate check
Memorandum check
Foreign check (drawn against a foreign bank)
WHY A MANAGER’S CHECK AND A CASHIER’S CHECK IS NOT COVERED BY BP 22
It is a well-known and accepted practice in the business sector that a Cashier’s Check is deemed as cash. Moreover, since the said check had been certified by the drawee bank, by the certification, the funds represented by check are transferred from the credit of the maker to that of the payee or holder, and for all intents and purposes, the latter becomes the depositor of the drawee bank, with rights and duties of one in such situation.
Where a check is certified by the bank on which it is drawn, the certification is equivalent to acceptance,
WHY A MANAGER’S CHECK AND A CASHIER’S CHECK IS NOT COVERED BY BP 22
said certification “implies that the check is drawn
upon sufficient funds in the hands of the drawee, that they have been set apart for its satisfaction, and that they shall be so applied whenever the check is presented for payment. It is an
understanding that the check is good, and this agreement is as binding on the bank as its noted in circulation, a certificate of deposit payable to the order of the depositor, or any obligation it can assume. The object of certifying a check, as regards both parties, is to enable the holder to
use it as a money. When the holder procures the check to
be certified, the check operates as an assignment of a part of the funds to the creditors. New Pacific Timber
and Supply Company v. Seneris, G.R. No. L-41764, December 19, 1980.
WHAT DOES BP 22 PUNISH?
The issuance of a bouncing check and not the
purpose for which it is issued.
It holds true for checks issued to support another
contract or any other consideration regardless of the outcome of the contract or consideration.
It is not the non-payment but the mere issuance
of a check that is worthless or of a check that is dishonored upon presentation for payment.
ACTS PUNISHABLE UNDER BP22
Under Section 1, paragraph 1
When the drawer orders the bank to stop payment
because at the time of the issuance of the said check he was aware that he has no sufficient funds in or credit with the drawee bank or because it would have been dishonored had it been presented for payment.
It shall be punished with imprisonment of not less
than 30 days but not more than one year or by a fine of not less than but not more than double the amount of the check which shall in no case exceed P200,000.00 or both, at the discretion of the court.
ACTS PUNISHABLE UNDER BP22
The elements of Violation under Section 1,
paragraph 1
Making , drawing and issuance of any check to apply
on account or for value;
Knowledge of the maker, drawer, or issuer that at the
time of the issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and
Subsequent dishonor of the check by the drawee bank
fir insufficiency of funds or credit, or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.
ACTS PUNISHABLE UNDER BP22
Under Section 1, paragraph 2 When the drawer fails to maintain or keep a sufficient fund
to cover the check he issued, although at the time of the issuance of the same, he has sufficient funds in or credit with the drawee bank, when the check has been presented for payment within 90 days from the date appearing thereon and for which reason, the bank dishonored the same.
It shall be punished with imprisonment of not less than 30
days but not more than one year or by a fine of not less than but not more than double the amount of the check which shall in no case exceed P200,000.00 or both, at the discretion of the court.
In case of a corporation, company or entity, the person who
ACTS PUNISHABLE UNDER BP22
Under Section 1, paragraph 2
Any person who, who makes or draws and issues a
check;
The drawer had sufficient funds or credit with the
drawee bank to cover the full amount of the check;
Failure to keep sufficient funds or to maintain a credit
to cover the full amount of the check if presented within a period of 90 days from the date appearing thereon; and
PRIMA FACIE EVIDENCE OF
VIOLATION OF BP22
Under Section 3
Evidence of knowledge of insufficient funds – the
making, drawing and issuance of a check of which, it is refused by the drawee bank for insufficiency of funds, when presented within 90 days from the date of the check (prima facie evidence of insufficiency of funds)
Cured by the payment to the holder of the amount due
thereon by the maker or drawer or by making arrangements for payment in full by the drawee of such bank within 5 days after receiving notice that such check has been paid by the drawee.
PERSONS LIABLE FOR VIOLATION
OF BP22
Natural person
The signatory or signatories of the bounced checks
(e.g. personal checks)
The person or persons who actually signed the
check in behalf of such drawer which is a corporation, company or entity
LIABILITY AS PRESCRIBED IN
SECTION 5OF BP22
The prosecution of the Act shall be without prejudice to any
liability for violation of any provision under the Revised Penal Code (Par. 2(d), Art. 315 of the RPC) which provides:
Art. 315. Swindling (estafa) – any person who shall defraud
another by any of the means mentioned hereinbelow x x x
2. By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneously with the commission of the fraud:
x x x
(d) By postdating a check, or issuing a check in payment of an obligation when the offender had no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check. The failure of the drawer of the check to deposit the
amount necessary to cover his check within three days from receipt of notice from the bank and/or insufficiency of funds shall be
prima facie evidence of deceit constituting false pretense or fraudulent act.
THE INSTITUTION OF A CIVIL
ACTION UNDER BP22
The well-established rule is that a civil action is instituted
upon the filing of the criminal action subject to certain exception under Section 1, Rule 111 of the Rules of Court:
SECTION 1. Institution of criminal and civil actions. –
(a) when the criminal action is instituted, the civil action for the recovery of civil liability arising from the offense charged shall be deemed instituted with the criminal action unless the offended party waives the civil action, reserved the right to institute it separately or institutes the civil action prior to the criminal action.
x x x
(b) The criminal action for violation of BP Blg. 22 shall be deemed to include the corresponding civil action. No reservation to file such civil action
DEFENSES IN BP 22 CASES
Forgery
A forged signature renders the check inoperative No notice of Dishonor
Without notice giving him the chance to make payment arrangements within 5
working days, one cannot raise the issue that he had knowledge of the insufficiency of funds
Stop payment order with valid cause
The right of every person to suspend payments for valid cause (e.g., dissatisfaction)
shall not render him liable for BP 22. (Sycip v. CA)
Speedy trial act
Under Rule 119, Section 9, Revised Rules on Criminal Procedure, and action against
the accused may be dismissed if not brought to trial within the time limit required under Sec. 1 (g), Rule 116 and Section 1 as extended by Section 6 thereof. Failure of the accused to move for dismissal shall be a waiver of such right to dismiss.
Prescription
Prescribes in 4 years from the commission of the offense, or if not known, from the
time of the discovery of such
Full payment
It is a general rule that only a full payment at the time of its presentment or
during the five-day grace period shall could exonerate one from criminal
