Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION
MARLOU L. VELASQUEZ,
Petitioner,

G.R. No. 157309

Present:

- versus -

AUSTRIA-MARTINEZ,* J.,
Acting Chairperson,
TINGA,**
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:

SOLIDBANK CORPORATION,
Respondent.

March 28, 2008

x--------------------------------------------------x
DECISION
REYES, R.T., J.:
PARTIES may not impugn the effectivity of a contract, after much benefit has
been gained to the prejudice of another. They are bound by the obligations they expressly
set out to do.
Before Us is a petition for review on certiorari of the Decision[1] of the Court of
Appeals (CA) which affirmed with modification that of the Regional Trial Court (RTC) in
Cebu City,[2] holding petitioner Marlou Velasquez liable under his letter of undertaking to
respondent Solidbank Corporation.
The Facts
Petitioner is engaged in the export business operating under the name Wilderness
Trading. Respondent is a domestic banking corporation organized under Philippine laws.

The case arose out of a business transaction for the sale of dried sea cucumber for
export to South Koreabetween Wilderness Trading, as seller, and Goldwell Trading of
Pusan, South Korea, as buyer. To facilitate payment of the products, Goldwell Trading
opened a letter of credit in favor of Wilderness Trading in the amount of US$87,500.00 [3]
with the Bank of Seoul, Pusan, Korea.
On November 12, 1992, petitioner applied for credit accommodation with
respondent bank for pre-shipment financing. The credit accommodation was granted.
Petitioner was successful in his first two export transactions both drawn on the letter of
credit. The third export shipment, however, yielded a different result.
On February 22, 1993, petitioner submitted to respondent the necessary
documents for his third shipment. Wanting to be paid the value of the shipment in
advance, petitioner negotiated for a documentary sight draft to be drawn on the letter of
credit, chargeable to the account of Bank of Seoul. The sight draft represented the value
of the shipment in the amount of US$59,640.00.[4]
As a condition for the issuance of the sight draft, petitioner executed a letter of
undertaking in favor of respondent. Under the terms of the letter of undertaking,
petitioner promised that the draft will be accepted and paid by Bank of Seoul according to
its tenor. Petitioner also held himself liable if the sight draft was not accepted. The letter
of undertaking provided:
SOLIDBANK CORPORATION
32 Borromeo Street

Feb. 22, 1993

Cebu City
Gentlemen:

Re: PURCHASE OF ONE DOC. SIGHT DRAFT

DRAWN
UNDER
LC#M2073210NS00040
FOR
US$59,640.00 UNDER OUR CEBP93/102.

In consideration of your negotiating the above described draft(s),

we hereby warrant that the above referred to draft(s) and accompanying
documents are genuine and accurately represent the facts stated therein
and that the draft(s) will be accepted and paid in accordance with its/their
tenor. We further undertake and agree, jointly and severally, to hold you
free and harmless from and to defend all actions, claims and demands
whatsoever, and to pay on demand all damages, actual or compensatory,
including attorneys fees, in case of suit, at least equal to __% of the
amount due, which you may suffer arising by reason of or on account of
your negotiating the above draft(s) because of the following discrepancies
or reasons or any other discrepancy or reason whatever:
1)

B/L MARKED SAID TO CONTAIN &

SHIPPERS LOAD, STOWAGE & COUNT.

2)
3)

LATE SHIPMENT.
QUANTITY SHIPPED @ US$14.00 OVERDRAWN
BY 0.06 TON.
4) NO INSPECTION CERTIFICATE PRESENTED.
We hereby undertake to pay on demand the full amount of the
draft(s) or any unpaid balance of the draft(s), with interest at the
prevailing rate of today from the date of negotiation, plus all charges and
expenses whatsoever incurred in connection therewith. You shall neither
be obligated to contest or dispute any refusal to accept or to pay the whole
or any part of the above draft(s) nor to proceed in anyway against the
drawee thereof, the issuing bank, or against any indorser thereof before
making a demand on us for the payment of the whole or any unpaid
balance of the draft(s).[5] (Emphasis added)
By virtue of the letter of undertaking, respondent advanced the value of the
shipment which, at the current rate of exchange at that time was P1,495,115.16, less bank
charges, to petitioner. Respondent then sent all the documents pertinent to the export
transaction to the Bank of Seoul.
Respondent failed to collect on the sight draft as it was dishonored by nonacceptance by the Bank of Seoul. The reasons given for the dishonor were late shipment,
forged inspection certificate, and absence of countersignature of the negotiating bank on
the inspection certificate.[6] Goldwell Trading likewise issued a stop payment order on
the sight draft because most of the bags of dried sea cucumber exported by petitioner
contained soil.
Due to the dishonor of the sight draft and the stop payment order, respondent
demanded restitution of the sum advanced.[7] Petitioner failed to heed the demand.
On June 3, 1993, respondent filed a complaint for recovery of sum of money [8]
with the RTC in Cebu City. In his answer, petitioner alleged that his liability under the
sight draft was extinguished when respondent failed to protest its non-acceptance, as
required under the Negotiable Instruments Law (NIL). He also alleged that the letter of
undertaking is not binding because it is a superfluous document, and that he did not
violate any of the provisions of the letter of credit.[9]
RTC and CA Dispositions
On September 25, 1996, the RTC rendered judgment[10] in favor of respondent with
the following fallo:
IN VIEW OF THE FOREGOING, judgment is hereby rendered
ordering the defendant:

(1)

to pay the plaintiff the principal sum of P1,495,

115.16 plus interest at 20% per annum counted
fromFebruary 22, 1993 up to the time the entire
amount shall have been fully paid;

(2)

to pay attorneys fees equivalent to 10% of the total

amount due the plaintiff; and

(3)

to pay the costs.

SO ORDERED.[11]
The RTC ratiocinated:
This court is not convinced with the defendants argument that
because of plaintiffs failure to protest the dishonor of the sight draft, his
liability is extinguished because his liability remains under the letter of
undertaking which he signed and without which plaintiff would not have
advanced or credited to him the amount.
Section 152 of the Negotiable Instruments Law under which
defendant claims extinguishment of his liability to plaintiff is not a bar to
the filing of other appropriate remedies which the aggrieved party may
pursue to vindicate his rights and in this instant case, plaintiff wants his
right vindicated by virtue of the letter of undertaking which defendant
signed. By the letter of undertaking, defendant bound himself to pay on
demand all damages including attorneys fees which plaintiff may suffer
arising by reason of or on account of negotiating the above draft because
of the following discrepancies or any other discrepancy or reasons
whatsoever and further to pay on demand full amount of any unpaid
balance with interest at the prevailing rate. He should be bound to the
fulfillment of what he expressly obligated himself to do and perform in the
letter of undertaking without which, plaintiff would not have advance (sic)
and credited to him the amount in the draft. He should not enrich himself
at the expense of plaintiff.[12] (Emphasis added)
Disagreeing, petitioner elevated the matter to the CA.
On June 27, 2002, the CA affirmed with modification the RTC decision, disposing
as follows:
WHEREFORE, premises considered, the assailed Decision is
hereby AFFIRMED with MODIFICATION. Defendant-appellant Marlou

L. Velasquez is hereby ordered to pay plaintiff-appellee Solidbank

Corporation, the following: (1) the principal amount of One Million Four
Hundred Ninety-Five Thousand One Hundred Fifteen and Sixteen
Centavos (P1,495,115.16) plus interest at twelve percent (12%) per annum
from February 22, 1993 until fully paid, (2) attorneys fees equivalent to
five percent (5%) of the total amount due, and (3) costs of the suit.
SO ORDERED.[13]
In ruling against petitioner, the CA opined:
The fact that said draft was dishonored and not paid by the Bank of
Seoul-Korea, (sic) it is incumbent upon defendant-appellant Velasquez to
comply with his obligation under the Letter of Undertaking. He cannot be
allowed to impugn the contract of undertaking he entered into by saying
that it was a superfluous document, and therefore, not binding on him.
The contract of undertaking is the law between them, and must be
enforced accordingly. This is in accord with Article 1159 of the New Civil
Code, which provides that obligations arising from contracts have the
force of law between the contracting parties and should be complied with
in good faith. And parties to a contract are bound to the fulfillment of
what has expressly been stipulated therein, regardless of the fact that it
turn (sic) out to be financially disadvantageous.[14]
xxxx
The fact that Defendant-appellant benefited from the advance
payment made by Plaintiff appellee, (sic) it is incumbent upon him to
return what he received because the purpose of the advance payment was
not attained and/or realized, as the sight draft was not paid accordingly,
otherwise, it will result to unjust enrichment on the part of Defendantappellant at the expense of Plaintiff-appellee, in violation of Articles 19
and 22 of the New Civil Code. The doctrine of unjust enrichment and
restitution simply means that the exercise of a right ends when the right
disappears, and it disappears when it is abused, especially to the prejudice
of others.[15] (Emphasis added)
Petitioner moved for reconsideration[16] but his motion was denied.[17] Hence, the
present recourse.
Issues
Petitioner raises twin issues for Our consideration, to wit:
THE COURT OF APPEALS HAS DECIDED A QUESTION OF
SUBSTANCE, NOT HERETOFORE DETERMINED BY THIS

HONORABLE COURT, OR HAS DECIDED IT IN A WAY PROBABLY

NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THIS HONORABLE COURT, IN THAT:
I.
THE COURT OF APPEALS RULED THAT PETITIONER IS
LIABLE ON THE ACCESSORY CONTRACT, THE LETTER OF
UNDERTAKING, DESPITE THE FACT THAT PETITIONER
WAS ALREADY RELEASED FROM LIABILITY UNDER THE
SIGHT DRAFT, THE PRINCIPAL CONTRACT, UNDER THE
PROVISIONS OF THE NEGOTIABLE INSTRUMENTS LAW
AND THE CIVIL CODE.
II.
THE COURT OF APPEALS HELD PETITIONER LIABLE
UNDER THE ACCESSORY CONTRACT, THE LETTER OF
UNDERTAKING, DESPITE THE FACT THAT THERE WAS NO
PROOF WHATSOEVER THAT PETITIONER VIOLATED
EITHER THE PRINCIPAL CONTRACT, THE SIGHT DRAFT,
OR EVEN THE LETTER OF UNDERTAKING.[18] (Underscoring
supplied)
The main issue is whether or not petitioner should be held liable to respondent
under the sight draft or the letter of undertaking. There is no dispute that petitioner duly
signed and executed these documents. It is likewise admitted that the sight draft was
dishonored by non acceptance by the Bank of Seoul.
Our Ruling
The petition is without merit.
Petitioner is not liable under the sight draft
but he is liable under his letter of
undertaking; liability under the letter of
undertaking was not extinguished by nonprotest of the dishonor of the sight draft.
Petitioner argues that he cannot be held liable under either the sight draft or the
letter of undertaking. He claims that the failure of respondent to protest the dishonor of
the sight draft under Section 152 of the NIL discharged him from liability under the
negotiable instrument. It is also contended that his liability under the letter of
undertaking is that of a mere guarantor; that the letter of undertaking is only an accessory
contract to the sight draft. Since he was discharged from liability under the sight draft, he
cannot be held liable under the letter of undertaking.
For its part, respondent counters that petitioners liability springs from the letter of

undertaking, independently of the sight draft. It would not have advanced the amount
without the letter of undertaking. According to respondent, the letter of undertaking is an
independent agreement and not merely an accessory contract. To permit petitioner to
escape liability under the letter of undertaking would result in unjust enrichment.
Petitioners liability under the letter of undertaking is independent from his
liability under the sight draft. He may be held liable under either the sight draft or the
letter of undertaking or both.
Admittedly, petitioner was discharged from liability under the sight draft when
respondent failed to protest it for non-acceptance by the Bank of Seoul. A sight draft
made payable outside the Philippines is a foreign bill of exchange. [19] When a foreign bill
is dishonored by non-acceptance or non-payment, protest is necessary to hold the drawer
and indorsers liable. Verily, respondents failure to protest the non-acceptance of the
sight draft resulted in the discharge of petitioner from liability under the instrument.
Section 152 of the NIL is explicit:
Section 152. In what cases protest necessary. Where a foreign
bill appearing on its face to be such is dishonored by non-acceptance, it
must be duly protested for non-acceptance, and where such a bill which
has not been previously dishonored by non-acceptance, is dishonored by
non-payment, it must be duly protested for non-payment. If it is not so
protested, the drawer and indorsers are discharged. Where a bill does not
appear on its face to be a foreign bill, protest thereof in case of dishonor is
unnecessary. (Emphasis added)
Petitioner, however, can still be made liable under the letter of undertaking. It
bears stressing that it is a separate contract from the sight draft. The liability of petitioner
under the letter of undertaking is direct and primary. It is independent from his liability
under the sight draft. Liability subsists on it even if the sight draft was dishonored for
non-acceptance or non-payment.
Respondent agreed to purchase the draft and credit petitioner its value upon the
undertaking that he will reimburse the amount in case the sight draft is dishonored. The
bank would certainly not have agreed to grant petitioner an advance export payment were
it not for the letter of undertaking. The consideration for the letter of undertaking was
petitioners promise to pay respondent the value of the sight draft if it was dishonored for
any reason by the Bank of Seoul.
We cannot accept petitioners thesis that he is only a mere guarantor under the
letter of credit. Petitioner cannot be both the primary debtor and the guarantor of his own
debt. This is inconsistent with the very purpose of a guarantee which is for the creditor to
proceed against a third person if the debtor defaults in his obligation. Certainly, to accept
such an argument would make a mockery of commercial transactions.

Petitioner bound himself liable to respondent under the letter of undertaking if the
sight draft is not accepted. He also warranted that the sight draft is genuine; will be paid
by the issuing bank in accordance with its tenor; and that he will be held liable for the full
amount of the draft upon demand, without necessity of proceeding against the drawee
bank.[20] Petitioner breached his undertaking when the Bank of Seoul dishonored the
sight draft and Goldwell Trading ordered a stop payment order on it for discrepancies in
the export documents.
Petitioner is liable without need for
respondent to establish collateral facts
such as violations of the letter of credit.
It is also argued that petitioner cannot be held liable under the letter of
undertaking because respondent failed to prove that he violated any of the provisions in
the letter of credit or that sixty (60) of the seventy-one (71) bags shipped to Goldwell
Trading contained soil instead of dried sea cucumber.
We cannot agree. Respondent need not prove that petitioner violated the
provisions of the letter of credit in order to be held liable under the letter of undertaking.
Parties are bound to fulfill what has been expressly stipulated in the contract. [21]
Petitioners liability under the letter of undertaking is clear. He is liable to respondent if
the sight draft is not accepted by the Bank of Seoul. Mere non-acceptance of the sight
draft is sufficient for liability to attach. Here, the sight draft was dishonored for nonacceptance. The non-acceptance of the sight draft triggered petitioners liability under
the letter of undertaking.
Records also show that the Bank of Seoul found discrepancies in the documents
submitted by petitioner. Goldwell Trading issued a stop payment order because the
products shipped were defective. It found that most of the bags shipped contained soil
instead of dried sea cucumber. If petitioner disputes the finding of Goldwell Trading, he
can file a case against said company but he cannot dispute his liability under either the
sight draft or the letter of undertaking.
As We see it, this is a straightforward case of collection of sum of money on the
basis of a letter of undertaking. Respondent advanced the export payment to petitioner on
the understanding that the draft will be honored and paid. The draft was dishonored.
Justice and equity dictate that petitioner be held liable to respondent bank.
WHEREFORE, the petition is DENIED for lack of merit. The Decision of the
Court of Appeals dated June 27, 2002 is hereby AFFIRMED.
SO ORDERED.
FIRST DIVISION
[G.R. No. 112392. February 29, 2000]

BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF APPEALS and

BENJAMIN C. NAPIZA,respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari of the Decision[1] of the Court of Appeals in
CA-G.R. CV No. 37392 affirming in totothat of the Regional Trial Court of Makati,
Branch 139,[2] which dismissed the complaint filed by petitioner Bank of the Philippine
Islands against private respondent Benjamin C. Napiza for sum of money. Sdaad
On September 3, 1987, private respondent deposited in Foreign Currency Deposit Unit
(FCDU) Savings Account No. 028-187[3] which he maintained in petitioner banks
Buendia Avenue Extension Branch, Continental Bank Managers Check No. 00014757[4]
dated August 17, 1984, payable to "cash" in the amount of Two Thousand Five Hundred
Dollars ($2,500.00) and duly endorsed by private respondent on its dorsal side.[5] It
appears that the check belonged to a certain Henry Chan who went to the office of private
respondent and requested him to deposit the check in his dollar account by way of
accommodation and for the purpose of clearing the same. Private respondent acceded,
and agreed to deliver to Chan a signed blank withdrawal slip, with the understanding that
as soon as the check is cleared, both of them would go to the bank to withdraw the
amount of the check upon private respondents presentation to the bank of his passbook.
Using the blank withdrawal slip given by private respondent to Chan, on October 23,
1984, one Ruben Gayon, Jr. was able to withdraw the amount of $2,541.67 from FCDU
Savings Account No. 028-187. Notably, the withdrawal slip shows that the amount was
payable to Ramon A. de Guzman and Agnes C. de Guzman and was duly initialed by the
branch assistant manager, Teresita Lindo.[6]
On November 20, 1984, petitioner received communication from the Wells Fargo Bank
International of New York that the said check deposited by private respondent was a
counterfeit check[7] because it was "not of the type or style of checks issued by
Continental Bank International."[8] Consequently, Mr. Ariel Reyes, the manager of
petitioners Buendia Avenue Extension Branch, instructed one of its employees,
Benjamin D. Napiza IV, who is private respondents son, to inform his father that the
check bounced.[9] Reyes himself sent a telegram to private respondent regarding the
dishonor of the check. In turn, private respondents son wrote to Reyes stating that the
check had been assigned "for encashment" to Ramon A. de Guzman and/or Agnes C. de
Guzman after it shall have been cleared upon instruction of Chan. He also said that upon
learning of the dishonor of the check, his father immediately tried to contact Chan but the
latter was out of town.[10]
Private respondents son undertook to return the amount of $2,500.00 to petitioner bank.
On December 18, 1984, Reyes reminded private respondent of his sons promise and
warned that should he fail to return that amount within seven (7) days, the matter would
be referred to the banks lawyers for appropriate action to protect the banks interest.[11]
This was followed by a letter of the banks lawyer dated April 8, 1985 demanding the
return of the $2,500.00.[12]
In reply, private respondent wrote petitioners counsel on April 20, 1985[13] stating that he
deposited the check "for clearing purposes" only to accommodate Chan. He added:
"Further, please take notice that said check was deposited on September 3,
1984 and withdrawn on October 23, 1984, or a total period of fifty (50)

days had elapsed at the time of withdrawal. Also, it may not be amiss to
mention here that I merely signed an authority to withdraw said deposit
subject to its clearing, the reason why the transaction is not reflected in the
passbook of the account. Besides, I did not receive its proceeds as may be
gleaned from the withdrawal slip under the captioned signature of
recipient.
If at all, my obligation on the transaction is moral in nature, which (sic) I
have been and is (sic) still exerting utmost and maximum efforts to collect
from Mr. Henry Chan who is directly liable under the
circumstances.Scsdaad
xxx......xxx......xxx."
On August 12, 1986, petitioner filed a complaint against private respondent, praying for
the return of the amount of $2,500.00 or the prevailing peso equivalent plus legal interest
from date of demand to date of full payment, a sum equivalent to 20% of the total amount
due as attorney's fees, and litigation and/or costs of suit.
Private respondent filed his answer, admitting that he indeed signed a "blank" withdrawal
slip with the understanding that the amount deposited would be withdrawn only after the
check in question has been cleared. He likewise alleged that he instructed the party to
whom he issued the signed blank withdrawal slip to return it to him after the bank drafts
clearance so that he could lend that party his passbook for the purpose of withdrawing the
amount of $2,500.00. However, without his knowledge, said party was able to withdraw
the amount of $2,541.67 from his dollar savings account through collusion with one of
petitioners employees. Private respondent added that he had "given the Plaintiff fifty one
(51) days with which to clear the bank draft in question." Petitioner should have
disallowed the withdrawal because his passbook was not presented. He claimed that
petitioner had no one to blame except itself "for being grossly negligent;" in fact, it had
allegedly admitted having paid the amount in the check "by mistake" x x x "if not
altogether due to collusion and/or bad faith on the part of (its) employees." Charging
petitioner with "apparent ignorance of routine bank procedures," by way of counterclaim,
private respondent prayed for moral damages of P100,000.00, exemplary damages of
P50,000.00 and attorneys fees of 30% of whatever amount that would be awarded to him
plus an honorarium of P500.00 per appearance in court.
Private respondent also filed a motion for admission of a third party complaint against
Chan. He alleged that "thru strategem and/or manipulation," Chan was able to withdraw
the amount of $2,500.00 even without private respondents passbook. Thus, private
respondent prayed that third party defendant Chan be made to refund to him the amount
withdrawn and to pay attorneys fees of P5,000.00 plus P300.00 honorarium per
appearance.
Petitioner filed a comment on the motion for leave of court to admit the third party
complaint, wherein it asserted that per paragraph 2 of the Rules and Regulations
governing BPI savings accounts, private respondent alone was liable "for the value of the
credit given on account of the draft or check deposited." It contended that private
respondent was estopped from disclaiming liability because he himself authorized the
withdrawal of the amount by signing the withdrawal slip. Petitioner prayed for the denial
of the said motion so as not to unduly delay the disposition of the main case asserting that
private respondents claim could be ventilated in another case.

Private respondent replied that for the parties to obtain complete relief and to avoid
multiplicity of suits, the motion to admit third party complaint should be granted.
Meanwhile, the trial court issued orders on August 25, 1987 and October 28, 1987
directing private respondent to actively participate in locating Chan. After private
respondent failed to comply, the trial court, on May 18, 1988, dismissed the third party
complaint without prejudice.
On November 4, 1991, a decision was rendered dismissing the complaint. The lower
court held that petitioner could not hold private respondent liable based on the checks
face value alone. To so hold him liable "would render inutile the requirement of
clearance from the drawee bank before the value of a particular foreign check or draft
can be credited to the account of a depositor making such deposit." The lower court
further held that "it was incumbent upon the petitioner to credit the value of the check in
question to the account of the private respondent only upon receipt of the notice of final
payment and should nothave authorized the withdrawal from the latters account of the
value or proceeds of the check." Having admitted that it committed a "mistake" in not
waiting for the clearance of the check before authorizing the withdrawal of its value or
proceeds, petitioner should suffer the resultant loss.
On appeal, the Court of Appeals affirmed the lower courts decision. The appellate court
held that petitioner committed "clear gross negligence" in allowing Ruben Gayon, Jr. to
withdraw the money without presenting private respondents passbook and, before the
check was cleared and in crediting the amount indicated therein in private respondents
account. It stressed that the mere deposit of a check in private respondents account did
not mean that the check was already private respondents property. The check still had to
be cleared and its proceeds can only be withdrawn upon presentation of a passbook in
accordance with the banks rules and regulations. Furthermore, petitioners contention
that private respondent warranted the checks genuineness by endorsing it is untenable for
it would render useless the clearance requirement. Likewise, the requirement of
presentation of a passbook to ascertain the propriety of the accounting reflected would be
a meaningless exercise. After all, these requirements are designed to protect the bank
from deception or fraud.
The Court of Appeals cited the case of Roman Catholic Bishop of Malolos, Inc. v. IAC,[14]
where this Court stated that a personal check is not legal tender or money, and held that
the check deposited in this case must be cleared before its value could be properly
transferred to private respondent's account.
Without filing a motion for the reconsideration of the Court of Appeals Decision,
petitioner filed this petition for review on certiorari, raising the following issues:
1.......WHETHER OR NOT RESPONDENT NAPIZA IS LIABLE
UNDER HIS WARRANTIES AS A GENERAL INDORSER.
2.......WHETHER OR NOT A CONTRACT OF AGENCY WAS
CREATED BETWEEN RESPONDENT NAPIZA AND RUBEN
GAYON.
3.......WHETHER OR NOT PETITIONER WAS GROSSLY NEGLIGENT
IN ALLOWING THE WITHDRAWAL.
Petitioner claims that private respondent, having affixed his signature at the dorsal side of
the check, should be liable for the amount stated therein in accordance with the following
provision of the Negotiable Instruments Law (Act No. 2031):

"SEC. 66. Liability of general indorser. Every indorser who indorses

without qualification, warrants to all subsequent holders in due course
(a)......The matters and things mentioned in subdivisions (a), (b), and (c) of
the next preceding section; and
(b)......That the instrument is at the time of his indorsement, valid and
subsisting.
And, in addition, he engages that on due presentment, it shall be accepted
or paid, or both, as the case may be, according to its tenor, and that if it be
dishonored, and the necessary proceedings on dishonor be duly taken, he
will pay the amount thereof to the holder, or to any subsequent indorser
who may be compelled to pay it."
Section 65, on the other hand, provides for the following warranties of a person
negotiating an instrument by delivery or by qualified indorsement: (a) that the instrument
is genuine and in all respects what it purports to be; (b) that he has a good title to it, and
(c) that all prior parties had capacity to contract.[15] In People v. Maniego,[16] this Court
described the liabilities of an indorser as follows: Juris
"Appellants contention that as mere indorser, she may not be liable on
account of the dishonor of the checks indorsed by her, is likewise
untenable. Under the law, the holder or last indorsee of a negotiable
instrument has the right to enforce payment of the instrument for the full
amount thereof against all parties liable thereon. Among the parties liable
thereon is an indorser of the instrument, i.e., a person placing his
signature upon an instrument otherwise than as a maker, drawer or
acceptor * * unless he clearly indicated by appropriate words his intention
to be bound in some other capacity. Such an indorser who indorses
without qualification, inter alia engages that on due presentment, * * (the
instrument) shall be accepted or paid, or both, as the case may be,
according to its tenor, and that if it be dishonored, and the necessary
proceedings on dishonor be duly taken, he will pay the amount thereof to
the holder, or any subsequent indorser who may be compelled to pay it.
Maniego may also be deemed an accommodation party in the light of the
facts, i.e., a person who has signed the instrument as maker, drawer,
acceptor, or indorser, without receiving value therefor, and for the purpose
of lending his name to some other person. As such, she is under the law
liable on the instrument to a holder for value, notwithstanding such holder
at the time of taking the instrument knew * * (her) to be only an
accommodation party, although she has the right, after paying the holder,
to obtain reimbursement from the party accommodated, since the relation
between them is in effect that of principal and surety, the accommodation
party being the surety."
It is thus clear that ordinarily private respondent may be held liable as an indorser of the
check or even as an accommodation party.[17] However, to hold private respondent liable
for the amount of the check he deposited by the strict application of the law and without
considering the attending circumstances in the case would result in an injustice and in the
erosion of the public trust in the banking system. The interest of justice thus demands
looking into the events that led to the encashment of the check.

Petitioner asserts that by signing the withdrawal slip, private respondent "presented the
opportunity for the withdrawal of the amount in question." Petitioner relied "on the
genuine signature on the withdrawal slip, the personality of private respondents son and
the lapse of more than fifty (50) days from date of deposit of the Continental Bank draft,
without the same being returned yet."[18] We hold, however, that the propriety of the
withdrawal should be gauged by compliance with the rules thereon that both petitioner
bank and its depositors are duty-bound to observe.
In the passbook that petitioner issued to private respondent, the following rules on
withdrawal of deposits appear:
"4.......Withdrawals must be made by the depositor personally but in some
exceptional circumstances, the Bank may allow withdrawal by another
upon the depositors written authority duly authenticated; and neither a
deposit nor a withdrawal will be permitted except upon the presentation of
the depositors savings passbook, in which the amount deposited
withdrawn shall be entered only by the Bank.
5.......Withdrawals may be made by draft, mail or telegraphic transfer in
currency of the account at the request of the depositor in writing on the
withdrawal slip or by authenticated cable. Such request must indicate the
name of the payee/s, amount and the place where the funds are to be paid.
Any stamp, transmission and other charges related to such withdrawals
shall be for the account of the depositor and shall be paid by him/her upon
demand. Withdrawals may also be made in the form of travellers checks
and in pesos. Withdrawals in the form of notes/bills are allowed subject
however, to their (availability).
6.......Deposits shall not be subject to withdrawal by check, and may be
withdrawn only in the manner above provided, upon presentation of the
depositors savings passbook and with the withdrawal form supplied by
the Bank at the counter."[19] Scjuris
Under these rules, to be able to withdraw from the savings account deposit under the
Philippine foreign currency deposit system, two requisites must be presented to petitioner
bank by the person withdrawing an amount: (a) a duly filled-up withdrawal slip, and (b)
the depositors passbook. Private respondent admits that he signed a blank withdrawal
slip ostensibly in violation of Rule No. 6 requiring that the request for withdrawal must
name the payee, the amount to be withdrawn and the place where such withdrawal should
be made. That the withdrawal slip was in fact a blank one with only private respondents
two signatures affixed on the proper spaces is buttressed by petitioners allegation in the
instant petition that had private respondent indicated therein the person authorized to
receive the money, then Ruben Gayon, Jr. could not have withdrawn any amount.
Petitioner contends that "(i)n failing to do so (i.e., naming his authorized agent), he
practically authorized any possessor thereof to write any amount and to collect the
same."[20]
Such contention would have been valid if not for the fact that the withdrawal slip itself
indicates a special instruction that the amount is payable to "Ramon A. de Guzman &/or
Agnes C. de Guzman." Such being the case, petitioners personnel should have been duly
warned that Gayon, who was also employed in petitioners Buendia Ave. Extension
branch,[21] was not the proper payee of the proceeds of the check. Otherwise, either

Ramon or Agnes de Guzman should have issued another authority to Gayon for such
withdrawal. Of course, at the dorsal side of the withdrawal slip is an "authority to
withdraw" naming Gayon the person who can withdraw the amount indicated in the
check. Private respondent does not deny having signed such authority. However,
considering petitioners clear admission that the withdrawal slip was a blank one except
for private respondents signature, the unavoidable conclusion is that the typewritten
name of "Ruben C. Gayon, Jr." was intercalated and thereafter it was signed by Gayon or
whoever was allowed by petitioner to withdraw the amount. Under these facts, there
could not have been a principal-agent relationship between private respondent and Gayon
so as to render the former liable for the amount withdrawn.
Moreover, the withdrawal slip contains a boxed warning that states: "This receipt must be
signed and presented with the corresponding foreign currency savings passbook by the
depositor in person. For withdrawals thru a representative, depositor should accomplish
the authority at the back." The requirement of presentation of the passbook when
withdrawing an amount cannot be given mere lip service even though the person making
the withdrawal is authorized by the depositor to do so. This is clear from Rule No. 6 set
out by petitioner so that, for the protection of the banks interest and as a reminder to the
depositor, the withdrawal shall be entered in the depositors passbook. The fact that
private respondents passbook was not presented during the withdrawal is evidenced by
the entries therein showing that the last transaction that he made with the bank was on
September 3, 1984, the date he deposited the controversial check in the amount of
$2,500.00.[22]
In allowing the withdrawal, petitioner likewise overlooked another rule that is printed in
the passbook. Thus:
"2.......All deposits will be received as current funds and will be repaid in
the same manner; provided, however, that deposits of drafts, checks,
money orders, etc. will be accepted as subject to collection only and
credited to the account only upon receipt of the notice of final payment.
Collection charges by the Banks foreign correspondent in effecting such
collection shall be for the account of the depositor. If the account has
sufficient balance, the collection shall be debited by the Bank against the
account. If, for any reason, the proceeds of the deposited checks, drafts,
money orders, etc., cannot be collected or if the Bank is required to return
such proceeds, the provisional entry therefor made by the Bank in the
savings passbook and its records shall be deemed automatically cancelled
regardless of the time that has elapsed, and whether or not the defective
items can be returned to the depositor; and the Bank is hereby authorized
to execute immediately the necessary corrections, amendments or changes
in its record, as well as on the savings passbook at the first opportunity to
reflect such cancellation." (Italics and underlining supplied.) Jurissc
As correctly held by the Court of Appeals, in depositing the check in his name, private
respondent did not become the outright owner of the amount stated therein. Under the
above rule, by depositing the check with petitioner, private respondent was, in a way,
merely designating petitioner as the collecting bank. This is in consonance with the rule
that a negotiable instrument, such as a check, whether a managers check or ordinary
check, is not legal tender.[23] As such, after receiving the deposit, under its own rules,

petitioner shall credit the amount in private respondents account or infuse value thereon
only after the drawee bank shall have paid the amount of the check or the check has been
cleared for deposit. Again, this is in accordance with ordinary banking practices and with
this Courts pronouncement that "the collecting bank or last endorser generally suffers the
loss because it has the duty to ascertain the genuineness of all prior endorsements
considering that the act of presenting the check for payment to the drawee is an assertion
that the party making the presentment has done its duty to ascertain the genuineness of
the endorsements."[24] The rule finds more meaning in this case where the check involved
is drawn on a foreign bank and therefore collection is more difficult than when the
drawee bank is a local one even though the check in question is a managers check.[25]
In Banco Atlantico v. Auditor General,[26] Banco Atlantico, a commercial bank in Madrid,
Spain, paid the amounts represented in three (3) checks to Virginia Boncan, the finance
officer of the Philippine Embassy in Madrid. The bank did so without previously clearing
the checks with the drawee bank, the Philippine National Bank in New York, on account
of the "special treatment" that Boncan received from the personnel of Banco Atlanticos
foreign department. The Court held that the encashment of the checks without prior
clearance is "contrary to normal or ordinary banking practice specially so where the
drawee bank is a foreign bank and the amounts involved were large." Accordingly, the
Court approved the Auditor Generals denial of Banco Atlanticos claim for payment of
the value of the checks that was withdrawn by Boncan.
Said ruling brings to light the fact that the banking business is affected with public
interest. By the nature of its functions, a bank is under obligation to treat the accounts of
its depositors "with meticulous care, always having in mind the fiduciary nature of their
relationship."[27] As such, in dealing with its depositors, a bank should exercise its
functions not only with the diligence of a good father of a family but it should do so with
the highest degree of care.[28]
In the case at bar, petitioner, in allowing the withdrawal of private respondents deposit,
failed to exercise the diligence of a good father of a family. In total disregard of its own
rules, petitioners personnel negligently handled private respondents account to
petitioners detriment. As this Court once said on this matter:
"Negligence is the omission to do something which a reasonable man,
guided by those considerations which ordinarily regulate the conduct of
human affairs, would do, or the doing of something which a prudent and
reasonable man would do. The seventy-eight (78)-year-old, yet still
relevant, case of Picart v. Smith, provides the test by which to determine
the existence of negligence in a particular case which may be stated as
follows: Did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would
have used in the same situation? If not, then he is guilty of negligence. The
law here in effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet pater-familias of the Roman law. The
existence of negligence in a given case is not determined by reference to
the personal judgment of the actor in the situation before him. The law
considers what would be reckless, blameworthy, or negligent in the man of
ordinary intelligence and prudence and determines liability by that."[29]
Petitioner violated its own rules by allowing the withdrawal of an amount that is

definitely over and above the aggregate amount of private respondents dollar deposits
that had yet to be cleared. The banks ledger on private respondents account shows that
before he deposited $2,500.00, private respondent had a balance of only $750.00.[30] Upon
private respondents deposit of $2,500.00 on September 3, 1984, that amount was
credited in his ledger as a deposit resulting in the corresponding total balance of
$3,250.00.[31] On September 10, 1984, the amount of $600.00 and the additional charges
of $10.00 were indicated therein as withdrawn thereby leaving a balance of $2,640.00.
On September 30, 1984, an interest of $11.59 was reflected in the ledger and on October
23, 1984, the amount of $2,541.67 was entered as withdrawn with a balance of $109.92.
[32]
On November 19, 1984 the word "hold" was written beside the balance of $109.92.[33]
That must have been the time when Reyes, petitioners branch manager, was informed
unofficially of the fact that the check deposited was a counterfeit, but petitioners
Buendia Ave. Extension Branch received a copy of the communication thereon from
Wells Fargo Bank International in New York the following day, November 20, 1984.[34]
According to Reyes, Wells Fargo Bank International handled the clearing of checks
drawn against U.S. banks that were deposited with petitioner.[35] Jjlex
From these facts on record, it is at once apparent that petitioners personnel allowed the
withdrawal of an amount bigger than the original deposit of $750.00 and the value of the
check deposited in the amount of $2,500.00 although they had not yet received notice
from the clearing bank in the United States on whether or not the check was funded.
Reyes contention that after the lapse of the 35-day period the amount of a deposited
check could be withdrawn even in the absence of a clearance thereon, otherwise it could
take a long time before a depositor could make a withdrawal,[36] is untenable. Said
practice amounts to a disregard of the clearance requirement of the banking system.
While it is true that private respondents having signed a blank withdrawal slip set in
motion the events that resulted in the withdrawal and encashment of the counterfeit
check, the negligence of petitioners personnel was the proximate cause of the loss that
petitioner sustained. Proximate cause, which is determined by a mixed consideration of
logic, common sense, policy and precedent, is "that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces the injury,
and without which the result would not have occurred."[37] The proximate cause of the
withdrawal and eventual loss of the amount of $2,500.00 on petitioners part was its
personnels negligence in allowing such withdrawal in disregard of its own rules and the
clearing requirement in the banking system. In so doing, petitioner assumed the risk of
incurring a loss on account of a forged or counterfeit foreign check and hence, it should
suffer the resulting damage.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision of the
Court of Appeals in CA-G.R. CV No. 37392 is AFFIRMED.
SO ORDERED. Newmiso
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.

SECOND DIVISION

[G.R. No. 117857. February 2, 2001]

LUIS S. WONG, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE

PHILIPPINES, respondents.
DECISION
QUISUMBING, J.:
For review on certiorari is the decision dated October 28, 1994 of the Court of
Appeals in C.A. G.R. CR 11856[1] which affirmed the decision of the Regional Trial
Court of Cebu City, Branch 17, convicting petitioner on three (3) counts of Batas
Pambansa Blg. 22 (the Bouncing Checks Law) violations, and sentencing him to
imprisonment of four (4) months for each count, and to pay private respondent the
amounts of P5,500.00, P6,410.00 and P3,375.00, respectively, corresponding to the value
of the checks involved, with the legal rate of interest from the time of filing of the
criminal charges, as well as to pay the costs.
The factual antecedents of the case are as follows:
Petitioner Wong was an agent of Limtong Press Inc. (LPI), a manufacturer of
calendars. LPI would print sample calendars, then give them to agents to present to
customers. The agents would get the purchase orders of customers and forward them to
LPI. After printing the calendars, LPI would ship the calendars directly to the customers.
Thereafter, the agents would come around to collect the payments. Petitioner, however,
had a history of unremitted collections, which he duly acknowledged in a confirmation
receipt he co-signed with his wife.[2] Hence, petitioners customers were required to
issue postdated checks before LPI would accept their purchase orders.
In early December 1985, Wong issued six (6) postdated checks totaling P18,025.00,
all dated December 30, 1985 and drawn payable to the order of LPI, as follows:
(1) Allied Banking Corporation (ABC) Check No. 660143464-C for P6,410.00 (Exh.
B);
(2) ABC Check No. 660143460-C for P 540.00 (Exh. C);
(3) ABC Check No. PA660143451-C for P5,500.00 (Exh. D);
(4) ABC Check No. PA660143465-C for P1,100.00 (Exh. E);
(5) ABC Check No. PA660143463-C for P3,375.00 (Exh. F);
(6) ABC Check No. PA660143452-C for P1,100.00 (Exh. G).
These checks were initially intended to guarantee the calendar orders of customers
who failed to issue post-dated checks. However, following company policy, LPI refused
to accept the checks as guarantees. Instead, the parties agreed to apply the checks to the
payment of petitioners unremitted collections for 1984 amounting to P18,077.07.[3]
LPI waived the P52.07 difference.
Before the maturity of the checks, petitioner prevailed upon LPI not to deposit the
checks and promised to replace them within 30 days. However, petitioner reneged on his

promise. Hence, on June 5, 1986, LPI deposited the checks with Rizal Commercial
Banking Corporation (RCBC). The checks were returned for the reason account closed.
The dishonor of the checks was evidenced by the RCBC return slip.
On June 20, 1986, complainant through counsel notified the petitioner of the
dishonor. Petitioner failed to make arrangements for payment within five (5) banking
days.
On November 6, 1987, petitioner was charged with three (3) counts of violation of
B.P. Blg. 22[4] under three separate Informations for the three checks amounting to
P5,500.00, P3,375.00, and P6,410.00.[5]
The Information in Criminal Case No. CBU-12055 reads as follows:[6]
That on or about the 30th day of December, 1985 and for sometime subsequent thereto, in
the City of Cebu, Philippines, and within the jurisdiction of this Honorable Court, the said
accused, knowing at the time of issue of the check she/he does not have sufficient funds
in or credit with the drawee bank for the payment of such check in full upon its
presentment, with deliberate intent, with intent of gain and of causing damage, did then
and there issue, make or draw Allied Banking Corporation Check No. 660143451 dated
12-30-85 in the amount of P5,500.00 payable to Manuel T. Limtong which check was
issued in payment of an obligation of said accused, but when the said check was
presented with said bank, the same was dishonored for reason ACCOUNT CLOSED
and despite notice and demands made to redeem or make good said check, said accused
failed and refused, and up to the present time still fails and refuses to do so, to the
damage and prejudice of said Manuel T. Limtong in the amount of P5,500.00 Philippine
Currency.
Contrary to law.
Petitioner was similarly charged in Criminal Case No. 12057 for ABC Check No.
660143463 in the amount of P3,375.00, and in Criminal Case No. 12058 for ABC Check
No. 660143464 for P6,410.00. Both cases were raffled to the same trial court.
Upon arraignment, Wong pleaded not guilty. Trial ensued.
Manuel T. Limtong, general manager of LPI, testified on behalf of the company.
Limtong averred that he refused to accept the personal checks of petitioner since it was
against company policy to accept personal checks from agents. Hence, he and petitioner
simply agreed to use the checks to pay petitioners unremitted collections to LPI.
According to Limtong, a few days before maturity of the checks, Wong requested him to
defer the deposit of said checks for lack of funds. Wong promised to replace them within
thirty days, but failed to do so. Hence, upon advice of counsel, he deposited the checks
which were subsequently returned on the ground of account closed.
The version of the defense is that petitioner issued the six (6) checks to guarantee
the 1985 calendar bookings of his customers. According to petitioner, he issued the
checks not as payment for any obligation, but to guarantee the orders of his customers. In
fact, the face value of the six (6) postdated checks tallied with the total amount of the
calendar orders of the six (6) customers of the accused, namely, Golden Friendship
Supermarket, Inc. (P6,410.00), New Society Rice and Corn Mill (P5,500.00), Cuesta

Enterprises (P540.00), Pelrico Marketing (P1,100.00), New Asia Restaurant (P3,375.00),

and New China Restaurant (P1,100.00). Although these customers had already paid their
respective orders, petitioner claimed LPI did not return the said checks to him.
On August 30, 1990, the trial court issued its decision, disposing as follows:[7]
Wherefore, premises considered, this Court finds the accused Luis S. Wong GUILTY
beyond reasonable doubt of the offense of Violations of Section 1 of Batas Pambansa
Bilang 22 in THREE (3) Counts and is hereby sentenced to serve an imprisonment of
FOUR (4) MONTHS for each count; to pay Private Complainant Manuel T. Limtong the
sums of Five Thousand Five Hundred (P5,500.00) Pesos, Six Thousand Four Hundred
Ten (P6,410.00) Pesos and Three Thousand Three Hundred Seventy-Five (P3,375.00)
Pesos corresponding to the amounts indicated in Allied Banking Checks Nos. 660143451,
66[0]143464 and 660143463 all issued on December 30, 1985 together with the legal rate
of interest from the time of the filing of the criminal charges in Court and pay the
costs.[8]
Petitioner appealed his conviction to the Court of Appeals. On October 28, 1994, it
affirmed the trial courts decision in toto.[9]
Hence, the present petition.[10] Petitioner raises the following questions of law [11]
May a complainant successfully prosecute a case under BP 22 --- if there is no more
consideration or price or value -- ever the binding tie that it is in contracts in general
and in negotiable instruments in particular -- behind the checks? -- if even before he
deposits the checks, he has ceased to be a holder for value because the purchase
orders (PO's) guaranteed by the checks were already paid?
Given the fact that the checks lost their reason for being, as above stated, is it not
then the duty of complainant -- knowing he is no longer a holder for value -- to
return the checks and not to deposit them ever? Upon what legal basis then may such
a holder deposit them and get paid twice?
Is petitioner, as the drawer of the guarantee checks which lost their reason for being,
still bound under BP 22 to maintain his account long after 90 days from maturity of
the checks?
May the prosecution apply the prima facie presumption of knowledge of lack of
funds against the drawer if the checks were belatedly deposited by the complainant
157 days after maturity, or will it be then necessary for the prosecution to show
actual proofof lack of funds during the 90-day term?
Petitioner insists that the checks were issued as guarantees for the 1985 purchase
orders (POs) of his customers. He contends that private respondent is not a holder for
value considering that the checks were deposited by private respondent after the
customers already paid their orders. Instead of depositing the checks, private respondent
should have returned the checks to him. Petitioner further assails the credibility of
complainant considering that his answers to cross-examination questions included: I
cannot recall, anymore and We have no more record.
In his Comment,[12] the Solicitor General concedes that the checks might have
been initially intended by petitioner to guarantee payments due from customers, but upon

the refusal of LPI to accept said personal checks per company policy, the parties had
agreed that the checks would be used to pay off petitioners unremitted collections.
Petitioners contention that he did not demand the return of the checks because he trusted
LPIs good faith is contrary to human nature and sound business practice, according to
the Solicitor General.
The issue as to whether the checks were issued merely as guarantee or for payment
of petitioners unremitted collections is a factual issue involving as it does the credibility
of witnesses. Said factual issue has been settled by the trial court and Court of Appeals.
Although initially intended to be used as guarantee for the purchase orders of customers,
they found the checks were eventually used to settle the remaining obligations of
petitioner with LPI. Although Manuel Limtong was the sole witness for the prosecution,
his testimony was found sufficient to prove all the elements of the offense charged.[13]
We find no cogent reason to depart from findings of both the trial and appellate courts. In
cases elevated from the Court of Appeals, our review is confined to alleged errors of law.
Its findings of fact are generally conclusive. Absent any showing that the findings by the
respondent court are entirely devoid of any substantiation on record, the same must stand.
[14] The lack of accounting between the parties is not the issue in this case. As
repeatedly held, this Court is not a trier of facts.[15] Moreover, in Llamado v. Court of
Appeals,[16] we held that [t]o determine the reason for which checks are issued, or the
terms and conditions for their issuance, will greatly erode the faith the public reposes in
the stability and commercial value of checks as currency substitutes, and bring about
havoc in trade and in banking communities. So what the law punishes is the issuance of a
bouncing check and not the purpose for which it was issued nor the terms and conditions
relating to its issuance. The mere act of issuing a worthless check is malum prohibitum.
Nothing herein persuades us to hold otherwise.
The only issue for our resolution now is whether or not the prosecution was able to
establish beyond reasonable doubt all the elements of the offense penalized under B.P.
Blg. 22.
There are two (2) ways of violating B.P. Blg. 22: (1) by making or drawing and
issuing a check to apply on account or for value knowing at the time of issue that the
check is not sufficiently funded; and (2) by having sufficient funds in or credit with the
drawee bank at the time of issue but failing to keep sufficient funds therein or credit with
said bank to cover the full amount of the check when presented to the drawee bank within
a period of ninety (90) days.[17]
The elements of B.P. Blg. 22 under the first situation, pertinent to the present case,
are:[18]
(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 he does not
have sufficient funds in or credit with the drawee bank for the payment of such check in
full upon its presentment; and
(3) 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.

Petitioner contends that the first element does not exist because the checks were not
issued to apply for account or for value. He attempts to distinguish his situation from the
usual cut-and-dried B.P. 22 case by claiming that the checks were issued as guarantee
and the obligations they were supposed to guarantee were already paid. This flawed
argument has no factual basis, the RTC and CA having both ruled that the checks were in
payment for unremitted collections, and not as guarantee. Likewise, the argument has no
legal basis, for what B.P. Blg. 22 punishes is the issuance of a bouncing check and not the
purpose for which it was issued nor the terms and conditions relating to its issuance.[19]
As to the second element, B.P. Blg. 22 creates a presumption juris tantum that the
second element prima facie exists when the first and third elements of the offense are
present.[20] Thus, the makers knowledge is presumed from the dishonor of the check
for insufficiency of funds.[21]
Petitioner avers that since the complainant deposited the checks on June 5, 1986, or
157 days after the December 30, 1985 maturity date, the presumption of knowledge of
lack of funds under Section 2 of B.P. Blg. 22 should not apply to him. He further claims
that he should not be expected to keep his bank account active and funded beyond the
ninety-day period.
Section 2 of B.P. Blg. 22 provides:
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 beprima 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.
An essential element of the offense is knowledge on the part of the maker or
drawer of the check of the insufficiency of his funds in or credit with the bank to cover
the check upon its presentment. Since this involves a state of mind difficult to establish,
the statute itself creates a prima facie presumption of such knowledge where payment of
the check 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. To mitigate the
harshness of the law in its application, the statute provides that such presumption shall
not arise if within five (5) banking days from receipt of the notice of dishonor, the maker
or drawer makes arrangements for payment of the check by the bank or pays the holder
the amount of the check.[22]
Contrary to petitioners assertions, nowhere in said provision does the law require a
maker to maintain funds in his bank account for only 90 days. Rather, the clear import of
the law is to establish a prima facie presumption of knowledge of such insufficiency of
funds under the following conditions (1) presentment within 90 days from date of the
check, and (2) the dishonor of the check and failure of the maker to make arrangements
for payment in full within 5 banking days after notice thereof. That the check must be
deposited within ninety (90) days is simply one of the conditions for the prima facie
presumption of knowledge of lack of funds to arise. It is not an element of the offense.

Neither does it discharge petitioner from his duty to maintain sufficient funds in the
account within a reasonable time thereof. Under Section 186 of the Negotiable
Instruments Law, a check must be presented for payment within a reasonable time after
its issue or the drawer will be discharged from liability thereon to the extent of the loss
caused by the delay. By current banking practice, a check becomes stale after more than
six (6) months,[23] or 180 days. Private respondent herein deposited the checks 157
days after the date of the check. Hence said checks cannot be considered stale. Only the
presumption of knowledge of insufficiency of funds was lost, but such knowledge could
still be proven by direct or circumstantial evidence. As found by the trial court, private
respondent did not deposit the checks because of the reassurance of petitioner that he
would issue new checks. Upon his failure to do so, LPI was constrained to deposit the
said checks. After the checks were dishonored, petitioner was duly notified of such fact
but failed to make arrangements for full payment within five (5) banking days thereof.
There is, on record, sufficient evidence that petitioner had knowledge of the insufficiency
of his funds in or credit with the drawee bank at the time of issuance of the checks. And
despite petitioners insistent plea of innocence, we find no error in the respondent courts
affirmance of his conviction by the trial court for violations of the Bouncing Checks Law.
However, pursuant to the policy guidelines in Administrative Circular No. 12-2000,
which took effect on November 21, 2000, the penalty imposed on petitioner should now
be modified to a fine of not less than but not more than double the amount of the checks
that were dishonored.
WHEREFORE, the petition is DENIED. Petitioner Luis S. Wong is found liable for
violation of Batas Pambansa Blg. 22 but the penalty imposed on him is hereby
MODIFIED so that the sentence of imprisonment is deleted. Petitioner is ORDERED to
pay a FINE of (1) P6,750.00, equivalent to double the amount of the check involved in
Criminal Case No. CBU-12057, (2) P12,820.00, equivalent to double the amount of the
check involved in Criminal Case No. CBU-12058, and (3) P11,000.00, equivalent to
double the amount of the check involved in Criminal Case No. CBU-12055, with
subsidiary imprisonment[24] in case of insolvency to pay the aforesaid fines. Finally, as
civil indemnity, petitioner is also ordered to pay to LPI the face value of said checks
totaling P18,025.00 with legal interest thereon from the time of filing the criminal
charges in court, as well as to pay the costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.