Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago Bouncing Checks Law Case Digests
1.) State Investment House, Inc. vs CA, 217 SCRA 32
Facts: Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to be sold on commission, two postdated checks in the amount of fifty thousand each. Thereafter, Victoriano negotiated the checks to State Investment House, Inc. When Moulic failed to sell the jewellry, she returned it to Victoriano before the maturity of the checks. However, the checks cannot be retrieved as they have been negotiated. Before the maturity date Moulic withdrew her funds from the bank contesting that she incurred no obligation on the checks because the jewellery was never sold and the checks are negotiated without her knowledge and consent. Upon presentment of for payment, the checks were dishonoured for insufficiency of f unds. Issues: 1. Whether or not State Investment House inc. was a holder of the check in due course 2. Whether or not Moulic can set up against the petitioner the defense that there was failure or absence of consideration Held: Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence shows that: on the faces of the post dated checks were complete and regular; that State Investment House Inc. bought the checks from Victoriano before the due dates; that it was taken in good faith and for value; and there was no knowledge with regard that the checks were issued as security and not for value. A prima facie presumption exists that a holder of a negotiable instrument is a holder in due course. Moulic failed to prove the contrary. No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose for which they were issued and therefore is not a holder in due course. Section 119 of NIL provides how an instruments be discharged. Moulic can only invoke paragraphs c and d as possible grounds for the discharge of the instruments. Since Moulic failed to get back the possession of the checks as provided by
paragraph c, intentional cancellation of instrument is impossible. As provided by paragraph d, the acts which will discharge a simple contract of payment of money will discharge the instrument. Correlating Article 1231 of the Civil Code which enumerates the modes of extinguishing obligation, none of those modes outlined therein is applicable in the instant case. Thus, Moulic may n ot unilaterally discharge herself from her liability by mere expediency of withdrawing her funds from the drawee bank. She is thus liable as she has no legal basis to excuse herself from liability on her check to a holder in due course. Moreover, the fact that the petitioner failed to give notice of dishonor is of no moment. The need for such notice is not absolute; there are exceptions provided by Sec 114 of NIL.
2.) Papa vs A.U. Valencia & Co., Inc, 284 SCRA 648
Facts: In 1973, Angela Butte sold a parcel of land to Penarroyo. Prior to the alleged sale, property was mortgaged to Associated Bank. After the alleged sale but before the title was transferred Butte died. Penarroyo asked the bank to release the title but the bank refused until all the mortgaged properties are also redeemed. Only in 1977 did they have knowledge of the mortgaged. Penarroyo filed a complaint for specific performance praying that the petitioner PAPA — attorney-in attorney-in fact of Butte deliver the title of the property and the accrued rentals. While the case was pending, Jao intervened saying that he bought the property from Penarroyo praying that title be released in favor of Penarroyo so that it will be transferred to him from Penarroyo. TC ruled in favor of Penarroyo ordering PAPA to execute Deed of Absolute Sale in favor of Penarroyo. Papa on appeal contended that the sale was never consummated as he did not encash the check given by Penarroyo in payment of the full purchase price of the subject lot, therefore, its delivery never produced the effect of payment. He maintained that respondents had actually paid only the amount of P5000 for the earnest money. Petitioner, while admitting that he issued receipts for the payments, asserts that said receipts do not prove payment. Petitioner avers that t here must be a showing that said check had been encashed.||| encashed.|||
Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago CA affirmed the decision of TC
WON the sale had been consummated.
Tan filed a motion for reconsideration with the MTC denying the receipt of the demand letter dated October 30, 1995 and alleged that said evidence was not included in the formal letter of evidence. This motion was denied.
RULING:
Tan also appealed to RTC and CA, but same was dismissed.
ISSUE:
The Supreme Court finds no merit in petitioner's arguments. Granting that petitioner had never encashed the check, his failure to do so for more than ten (10) years resulted in the impairment of the check through his unreasonable and unexplained delay. While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditor's unreasonable delay in presentment. The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debtor or obligation for which it was given. Considering that respondents had fulfilled their part of the contract of sale by delivering the payment of the purchase price, said respondents, therefore, had the right to compel petit ioner to deliver to them the owner's duplicate of TCT No. 28993 and the peaceful possession and enjoyment to the lot in question.
3.) Tan vs People, 500 SCRA 172
FACTS: David Tan was charged with 6 counts of violation of BP 22 from the following facts: Carolyn Zaragoza (complainant) granted a loan to Tan amounting to P1, 000,000.00. For payment of such. Tan issued several checks which all bounced upon deposit to Zaragoza’s account for the reason that the account was closed. Zaragoza contacted Tan several times but was refused. Thus, a formal demand to pay in cash for the dishonored checks was sent to Tan, but still there was no payment. Thereafter, Zaragoza filed a case to the Municipal Trial court which found him guilty of the crime charged.
ISSUE: Whether or not there was sufficient proof of notice of dishonor served to the accused to create a prima facie presumption that the drawer had knowledge of insufficiency of funds in or credit with the bank.
HELD: There was insufficient proof of notice, thus presumption of knowledge does not arise. Tan is acquitted. In Ongson vs. People, the court expounded that the statute itself has created a prima facie presumption that the drawer had knowledge of the insufficiency of the funds at time of issuance and the check’s presentment if he fails to pay the amount of the check within 5 banking days from notices of dishonor. Thus only after failure to pay and receipt of dishonor will the presumption arise. If no proof notice of nonpayment was served on the drawer, there is no way to reckon the crucial 5 day period. Furthermore, notice of dishonor must be in writing, a verbal notice is not enough. Lack of notice is fatal to the prosecution.
4.) Vaca vs CA, 298 SCRA 658
FACTS: Eduardo Vaca is the president and owner of Ervine International while Fernando Nieto, Vaca’s son-in-law, is the firm’s purchasing manager. They issued a check to the General Agency for Reconnaissance, Detection and Security (GARDS) and drawn against China Bank. When the check was presented to the bank on March 29, 1988 for
Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago deposit, the check was dishonored for insufficiency of funds. On April 13, 1988, petitioners issued a new check to replace the dishonored check. ISSUE:
Note: In this case, the Court recognized the contribution of Filipino entrepreneurs to the national economy; and that to serve the ends of criminal justice, instead of the 1 year imprisonment, a fine of double the amount of the check involved was imposed as penalty. This was made to redeem valuable human material and prevent unnecessary deprivation of personal liberty and economic usefulness with due regard to the protection of the social order.
1.) Whether or not petitioners had knowledge of lack of funds 2.) Whether or not damage to the payee is an element of the crime
5.) Macalaglag vs People, 511 SCRA 400
3.) Whether the sentence of imprisonment can be deleted FACTS: HELD: 1.) Yes. Section 2 of BP 22 provides “The making, drawing & issuance of a check 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 maker or drawer pays the holder thereof the amount due thereon, or makes arrangement 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. Even if such check was intended to replace the bad one, its issuance on April 13, 1988 15 days after petitioners had been notified on March 29, 1988 of the dishonor of their previous check — cannot negate the presumption that petitioners knew of the insufficiency of funds to cover the amount of their previous check. Section 2 of BP 22 requires that such check be given within 5 days from the notice of dishonor to them. 2.) No. The petitioners contended that this case was simply a result of a misunderstanding & that GARDS did not really suffered damage t hus they should be acquitted. Even if the payee suffered no damage as a result of the issuance of the bouncing check, the damage to the integrity of the banking system cannot be denied. Damage to the payee is not an element of the crime punished in BP 22. 3.) Petitioners are first-time offenders. They are Filipino entrepreneurs who presumably contribute to the national economy. In this case we believe that a fine in an amount equal to double amount of the check involved is an appropriate penalty to impose on each of the petitioners.
On two separate occasions, particularly on 30 July 1995 and 16 October 1995, petitioner Theresa Macalalagobtained loans from Grace Estrella (Estrella), each in the amount of P100,000.00, each bearing an interest of 10% per month. Macalalag consistently paid the interests starting 30 August 1995. Finding the interest rates so burdensome, Macalalag requested Estrella for a reduction of the same to which the latter agreed. On 16 April 1996 and 1 May 1996, Macalalag executed Acknowledgment/Affirmation Receipts promising to pay Estrella the face value of the loans in the total amount of P200,000.00 within two months from the date of its execution plus 6% interest per month for each loan. Under the two Acknowledgment/Affirmation Receipts, she further obligated herself to pay for the two (2) loans the total sum of P100,000.00 as liquidated damages and attorney's fees in the total sum of P40,000.00 as stipulated by the parties the moment she breaches the terms and conditions thereof.
As security for the payment of the aforesaid loans, Macalalag issued two Philippine National Bank (PNB) Checks (Check No. C-889835 and No. 889836) on 30 June 1996, each in the amount of P100,000.00, in favor of Estrella. However, when Estrella presented said checks for payment with the drawee bank, the same were dishonored for the reason that the account against which the same was drawn was already closed. Estrella sent a notice of dishonor and demand to make good the said checks to Macalalag, but the latter failed to do so
Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago ISSUES: 1) Whether or not the stipulated interest of 10% per month, and even the reduced rate of 6% per month, is a valid interest? 2) Whether or not the petitioner violated the Batas Pambansa Blg. 22? HELD: 1) The stipulated interest of 10% per month, and even the reduced rate of 6% per month, are higher than the interest rates declared unconscionable in Medel case and in several other cases with allegations of unconscionable interests. We held that while the Usury Law has been suspended by Central Bank Circular No. 905, s. 1982, effective on January 1, 1983, and parties to a loan agreement have been given wide latitude to agree on any interest rate, still stipulated interest rates are illegal if they are unconscionable. Nothing in the said circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets .2) There is no doubt that Macalalag is liable under B.P. Blg. 22. Macalalag admitted having issued the said check and that said check, when presented for payment for payment with the drawee bankbounced for the reason "account closed". Despite notice of dishonor, Macalalag failed to make good the said check. All the elements of violation of B.P. Blg. 22, viz: a) the making, drawing or issuance of any check to apply to account or for value; b) the 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, c) the subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit, or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment are, therefore, present.
6.) Cruz vs Cruz, 515 SCRA 89
FACTS: On June 5, 1996, respondent filed with the Office of the City Prosecutor, Quezon City a complaint for violation of Batas Pambansa (B.P.) Blg. 22 against petitioner. Respondent alleged that petitioner issued to him an undated check in the sum of P100, 000.00 but it was dishonored by the drawee bank due to "account closed" on December 29, 1995. On January 5, 1996, he sent the notice of dishonor to petitioner. Without his knowledge, petitioner, on January 16, 1996, deposited P100, 000.00 in his savings account. Petitioner declared that in 1986, she issued to respondent the check as a guarantee for the loan of spouses Arturo and Malou Ventura obtained from him. Later, they informed her that they had paid the loan. However, she forgot to ask for the return of the check. In 1987, she closed her account and opened a new one with the drawee bank. For ten years, she forgot having issued the check. On January 16, 1996, or only after eleven (11) days from January 5, 1996 when she learned that her check was dishonored, she deposited P100, 000.00 in the account of respondent. Chief State Prosecutor Jovencito R. Zuño dismissed respondent’s petition. Respondent then filed with the Court of Appeals a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, as amended. In its Decision, the Court of Appeals granted respondent’s petition and directed the Secretary of Justice to file the proper information against petitioner. ISSUE: Whether the Court of Appeals erred in directing the Secretary of Justice to file an information for violation of B.P. Blg. 22 against petitioner RULING: In the respondent’s complaint, he alleged that petitioner failed to pay the amount of the check. However, in his reply, he admitted that she already remitted the amount of P100, 000.00 on January 16, 1996.
Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago Respondent filed the complaint almost six months after petitioner had paid the amount of the check in question. While indeed the gravamen of violation of B.P. Blg. 22 is the act of issuing worthless checks, nonetheless, courts should not apply the law strictly or harshly. Its spirit and purpose must be considered. In Lozano v. Martinez, we held that the Bouncing Checks Law is aimed at putting a stop to or curbing the practice of issuing worthless checks or those that end up being dishonored for payment because of the injury it causes to the public interests. In Sia v. People, we explained that the law is intended to safeguard the interests of 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 and so hold that no injury was caused to the public interests or the banking system, or specifically to herein respondent. #
7.) Del Rosario vs Cedillo, 441 SCRA 70
FACTS: Del Rosario allegedly extended 12 million pesos to Estrella and was secured by the latter with 3 postdated checks and 2 real estate mortgages. All such securities were however, questioned (on the OH) The issue on falsification of the real estate mortgages is still pending in Malolos, Bulacan while case for violation of BP 22 was raffled to Judge Cedillo. The said checks were dishonored for insufficiency of funds upon presentment on their due dates. In the BP 22 cases, after the prosecution rested its case, Estrella filed demurrer to Evidence claiming, inter alia, that the requisite of notice of dishonor in the form of a demand letter presented by the prosecution was truly received by her or her authorized agent. Also added that such letter was defective because it sought payment of the amount of P 13,680,000 when the total amount of the dishonored checks was only P 12,680,000, and that said demand did not state the account number as well as the amount, date and number of checks.
Judge Cedillo granted such Demurrer to Evidence, dismissed not only the criminal case but also the civil case for violation of BP 22 for such reason, Del Rosario filled an administrative case against Judge Cedillo for gross ignorance of law ISSUE: Whether or not the third element of BP 22 (notice of dishonor) was proven in this case RULING: No. It is an element in BP 22 that it must be shown that the issuer, at the time of the checks issuance, had knowledge that he did not have enough funds or credit in the bank for payment thereof upon its presentment. Since the second element involves a state of mind which is difficult to verify. Section 2 of BP 22 creates a presumption juris tantum that the second element prima facie exists when the first and third elements of the offense are present. This presumption however, does not arise when the issuer pays t he amount of the checks or makes arrangement for its payment within 5 banking days after receiving notice that such check has not been paid by the drawee. The law gives the accused the opportunity to satisfy the amount indicated in the check upon a receipt of notice of dishonor. Thus, the presumption that the issuer had knowledge of the insufficiency of funds is brought into existence only after it is proved that the issuer had received a notice of dishonor and that within 5 days from receipt thereof, he failed to pay the amount of the check or to make arrangement for its payment. In this case, the respondent Judge correctly dismissed the criminal aspect of the BP 22 cases for failure to establish that Estrella received the notice of dishonor in the form of demand latter. The presentation of the said letter and the registry receipt, with an unauthenticated signature do not meet the required proof beyond reasonable doubt that Estrella received such notice, especially considering that she denied receipt thereof. The rule is that receipt for registered letters and return receipts do not prove themselves, they must be properly authenticated in order to serve as proof of receipt of letters. Moreover, the prosecution never made an effort to identi fy the person who allegedly received the latter and signed the registry receipt as A. Estrella. The matter of which among the accused, Estrel la herself or her
Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago authorized agent signed the registry receipt was never proven by the prosecution.
dishonor by registered mailto be regarded as clear proof of the giving of the notices of dishonor to predicate the existence of the second element of the offense.
8.) Resterio vs People, 681 SCRA 592 9.) Cheng vs Sy, 592 SCRA 155 FACTS: The petitioner was charged for violation of B.P. 22 when she issued a postdated check sometime on May 2002 allegedly being aware that the account to be drawn against does not have sufficient funds. During trial, the accused contends that she does not own the check she used as collateral thus she should not be held liable for B.P. 22.
FACTS:
ISSUE: 1.
2.
Whether or not B.P. 22 requires that the dishonored check must be owned by the accused Whether or not the lack of a written notice of dishonor is fatal to a case for violation of B.P. 22
HELD: 1.
No, 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.
Yes, second element or the knowledge of the petitioner as the issuer of the check that at the time of issue there were no sufficient funds in or credit with the drawee bank for the payment of such check i n full upon its presentment is inexistent.
To establish the existence of the second element written notice of the dishonor to the drawer should be presented. The private complainant sent his notice of dishonor byregistered mail and presented the registry return receipt. However, the mere presentment of registry return receipts is not sufficient but must be accompanied by the authenticating affidavit of the person who had actually mailed the written notices of dishonor. The authentication by affidavit of the mailer or mailers is necessary in order for the giving of the notices of
Petitioner Anita Cheng filed two (2) estafa cases before the RTC, Branch 7, Manila against respondent spouses William and Tessie Sy 7 for issuing to her Philippine Bank of Commerce (PBC) Check Nos. 171762 and 71860 for P300,000.00 each, in payment of their loan, both of which were dishonored upon presentment for having been drawn against a closed account On March 16, 2004, the RTC dismissed the estafa cases for failure of the prosecution to prove the elements of the crime. The Order dismissing Criminal Case No. 98-969952 contained no declaration as to the civil liability of Tessie Sy. On the other hand, the Order in Criminal Case No. 98-969953 contained a statement, Hence, if there is any liability of the accused, the same is purely civil, not criminal in nature. based on the same facts, petitioner, on January 20, 1999, filed against respondents two (2) cases for violation of Batas Pambansa Bilang (BP Blg.) 22 before the Metropolitan Trial Court (MeTC), Branch 25, Manila Later, the MeTC, dismissed, on demurrer, the BP Blg. 22 cases in its Order dated February 7, 2005 on account of the failure of petitioner to identify the accused respondents in open court. The Order also did not make any pronouncement as to the civil liability of accused respondents. On April 26, 2005, petitioner lodged against respondents before the RTC, Branch 18, Manila, a complaint for collection of a sum of money with damages based on the same loaned amount of P600,000.00 covered by the two PBC checks previously subject of the estafa and BP Blg. 22 cases.
Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago
In the assailed Order dated January 2, 2006, the RTC dismissed the complaint for lack of jurisdiction, ratiocinating that the civil action to collect the amount ofP600,000.00 with damages was already impliedly instituted in the BP Blg. 22 cases in light of Sec. 1, para (b) of Rule 111 of the Revised Rules of Court.
ISSUE:
WON Sec. 1 of Rule 111 of the 2000 Rules of Criminal Procedure and SC Circular No. 57-97 on the Rules and Guidelines in the filing and prosecution of criminal cases under BP Blg. 22 are applicable to the present case where the nature of the order dismissing the cases for bouncing checks against the respondents was [based] on the failure of the prosecution to identify both the accused (respondents herein)? SC RULING:
Yes. the 2000 Revised Rules on Criminal Procedure applies in this case.
BP Blg. 22 cases were filed on January 20, 1999, the 2000 Revised Rules on Criminal Procedure promulgated on December 1, 2000. It is now settled that rules of procedure apply even to cases already pending at the time of their promulgation . The reason for this is that, as a general rule, no vested right may attach to, nor arise from, procedural laws. The rule is that upon the filing of the estafa and BP Blg. 22 cases against respondents, where the petitioner has not made any waiver, express reservation to litigate separately, or has not instituted the corresponding civil action to collect the amount of P600,000.00 and damages prior to the criminal action, the civil action is deemed instituted with the criminal cases. This is consonant with our ruling in Rodriguez v. Ponferrada that the possible single civil liability arising from the act of issuing a bouncing check can be the subject of both civil actions deemed instituted with the estafa case and the prosecution for violation of BP Blg. 22, simultaneously available to the complaining party, without traversing the prohibition against forum shopping. Thus, although this civil action could have been litigated separately on account of the dismissal of the estafa cases on reasonable doubt, the petitioner was deemed to have also
elected that such civil action be prosecuted together with the BP Blg. 22 cases in light of the Rodriguez v. Ponferrada ruling. Under the present revised Rules, it prohibits the reservation of a separate civil action, i.e., one can no longer file a separate civil case after the criminal complaint is filed in court. The only instance when separate proceedings are allowed is when the civil action is filed ahead of the criminal case. Even then, the Rules encourages the consolidation of the civil and criminal cases Thus, where petitioners 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 clearly unwarranted on account of res judicata, for failure of petitioner to appeal the civil aspect of the cases. However, in applying the procedure discussed above, it appears that petitioner would be left without a remedy to recover from respondents the P600,000.00 allegedly loaned from her. It is in this light that we find petitioners contention that she was not assisted by a private prosecutor during the BP Blg. 22 proceedings critical. Petitioner indirectly protests that the public prosecutor failed to protect and prosecute her cause when he failed to have her establish the identities of the accused during the trial and when he failed to appeal the civil action deemed impliedly instituted with the BP Blg. 22 cases. due to the gross mistake of the prosecutor in the BP Blg. 22 cases, we are constrained to digress from this rule. Apparently, the public prosecutor neglected to equip himself with the knowledge of the proper procedure for BP Blg. 22 cases under the 2000 Rules on Criminal Procedure such that he failed to appeal the civil action impliedly instituted with the BP Blg. 22 cases, the only remaining remedy available to petitioner to be able to recover the money she loaned to respondents, upon the dismissal of the criminal cases on demurrer. By this failure, petitioner was denied her day in court to prosecute the respondents for their obligation to pay their loan. if the loan be proven true, the inability to recover the loaned amount would be tantamount to unjust enrichment of respondents
Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago
Court litigations are primarily designed to search for the truth, and a liberal interpretation and application of the rules which will give the parties the fullest opportunity to adduce proof is the best way to ferret out the truth. The dispensation of justice and vindication of legitimate grievances should not be barred by technicalities. For reasons of substantial justice and equity, we thus rule, pro hac vice, in favor of petitioner.
WHEREFORE, the petition is GRANTED. Civil Case No. 05-112452 entitled Anita Cheng v. Spouses William Sy and Tessie Sy is hereby ordered REINSTATED.
