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NEGOTIATION

LAW 10.7.2017 1

[G.R. No. 131540. December 2, 1999]

BETTY KING, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.

D E C I S I O N
PANGANIBAN, J.:

Under Batas Pambansa Blg. 22 (BP 22), the prosecution must prove not only that the accused issued a check that was
subsequently dishonored. It must also establish that the accused was actually notified that the check was dishonored, and that
he or she failed, within five banking days from receipt of the notice, to pay the holder of the check the amount due thereon or
to make arrangement for its payment. Absent proof that the accused received such notice, a prosecution for violation of the
Bouncing Checks Law cannot prosper.

The Case

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the January 30, 1997
Decision[1] of the Court of Appeals[2] (CA) in CA-GR CR No. 18226 and its November 5, 1997 Resolution[3] denying
reconsideration. The CA affirmed the June 14, 1994 Decision[4] of the Regional Trial Court (RTC) of Makati, Metro Manila[5] in
Criminal Case Nos. 93-3335 to 93-3345 which convicted petitioner of 11 counts of violation of BP 22, otherwise known as the
Bouncing Checks Law.
On April 28, 1993, Second Assistant Provincial Prosecutor Jaime A. Adoc filed against petitioner eleven separate
Informations,[6] which are identically worded, except for the check number, the amount and the date, as follows:

That in or about the month of January, 1992 in the Municipality of Las Pias, Metro Manila, Philippines and within the jurisdiction
of this Honorable Court, the above-named accused, did, then and there willfully, unlawfully and feloniously make or draw and
issue to EILEEN FERNANDEZ herein represented by ________ to apply on account or for value the check described below:

EQUITABLE BANK
Check No. 021711
In the amount of P50,000.00
Postdated July 24, 1992

said accused well knowing that at the time of issue she/he did not have sufficient funds in or credit with the drawee bank for the
payment in full of the face amount of such check upon their presentment, which check when presented for payment within
ninety (90) days from the date thereof were subsequently dishonored by the drawee bank for the reason Account Closed and
despite receipt of notice of such dishonor the accused failed to pay the face amount thereof or make arrangement for the full
payment thereof within five (5) working days after receiving notice.[7]

When arraigned, petitioner, assisted by counsel, pleaded not guilty. After the prosecution presented its evidence and
rested its case, petitioner filed a Demurrer to Evidence without leave of court, on the ground that the prosecution failed to
prove her guilt beyond reasonable doubt. The trial court denied the Demurrer in its assailed Decision, the dispositive portion of
which reads:

WHEREFORE, premises considered, the demurrer to evidence without prior leave of court is DENIED for lack of merit.

Since accused has waived her right to present evidence, judgment is hereby rendered finding accused guilty beyond reasonable
doubt of Violation of Batas Pambansa Bilang 22 in the eleven (11) above-entitled cases and is ordered to:
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1. Suffer imprisonment for thirty (30) days, to pay a fine in the amount of P50,000.00, and to pay complainant Eileen
Fernandez the amount of P50,000.00 as actual damages in Criminal Case No. 93-3335;

2. Suffer imprisonment for thirty (30) days, to pay a fine in the amount of P50,000.00, and to pay complainant Eileen Fernandez
the amount of P50,000.00 as actual damages in Criminal Case No. 93-3336;

3. Suffer imprisonment for thirty (30) days, to pay a fine in the amount of P50,000.00, and to pay complainant Eileen Fernandez
the amount of P50,000.00 as actual damages in Criminal Case No. 93-3337;

4. Suffer imprisonment for thirty (30) days, to pay a fine in the amount of P64,200.00, and to pay complainant Eileen Fernandez
the amount of P64,200.00 as actual damages in Criminal Case No. 93-3338;

5. Suffer imprisonment for thirty (30) days, to pay a fine in the amount of P66,000.00, and to pay complainant Eileen Fernandez
the amount of P66,000.00 as actual damages in Criminal Case No. 93-3339;

6. Suffer imprisonment for thirty (30) days, to pay a fine in the amount of P100,000.00, and to pay complainant Eileen Fernandez
the amount of P100,000.00 as actual damages in Criminal Case No. 93-3340;

7. Suffer imprisonment for thirty (30) days, to pay a fine in the amount of P150,000.00, and to pay complainant Eileen Fernandez
the amount of P150,000.00 as actual damages in Criminal Case No. 93-3341;

8. Suffer imprisonment for thirty (30) days, to pay a fine in the amount of P150,000.00, and to pay complainant Eileen Fernandez
the amount of P150,000.00 as actual damages in Criminal Case No. 93-3342;

9. Suffer imprisonment for thirty (30) days, to pay a fine in the amount of P130,000.00, and to pay complainant Eileen Fernandez
the amount of P130,000.00 as actual damages in Criminal Case No. 93-3343;

10. Suffer imprisonment for thirty (30) days, to pay a fine in the amount of P130,000.00, and to pay complainant Eileen
Fernandez the amount of P130,000.00 as actual damages in Criminal Case No. 93-3344; and,

11. Suffer imprisonment for thirty (30) days, to pay a fine in the amount of P130,000.00, and to pay complainant Eileen
Fernandez the amount of P130,000.00 as actual damages in Criminal Case No. 93-3345.[8]

As already stated, the Court of Appeals affirmed the RTC in this wise:[9]

WHEREFORE, the appealed decision is hereby affirmed [I]N TOTO. Costs against appellant.

Hence, this Petition.[10]


The Facts

Evidence for the Prosecution

The Office of the Solicitor General[11] summarized the facts, as viewed by the prosecution, in this wise:

On several occasions in January, 1992, at Las Pias, Metro Manila, petitioner discounted with complainant Ellen Fernandez several
Equitable Bank checks postdated from July 23 to 29, 1992 in the total amount of P1,070,000.00 in exchange for cash in the
amount of P1,000,000.00. When the checks were deposited for payment, they were dishonored by the drawee bank because
they were drawn against an account without sufficient funds. Petitioner failed to make good the checks despite
demand. (Memorandum dated April 7, 1993 of Assistant Provincial Prosecutor to the Rizal Provincial Prosecutor)

During the hearing on the merits of this case on September 17, 1998, the prosecution offered in evidence its documentary
evidence. Petitioner admitted the genuineness and due execution of the documents presented.[12]

Evidence for the Defense



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As noted earlier, petitioner filed a Demurrer to Evidence without leave of court. In doing so, she waived her right to
present evidence and submitted the case for judgment on the basis of the documentary exhibits adduced by the prosecution.[13]

Ruling of the Court of Appeals


In affirming the trial court, the Court of Appeals explained that the prosecution proved all the elements of the crime. The
CA also pointed out that the failure of petitioner to sign the pretrial order was not fatal to the prosecution, because her
conviction was based on the evidence presented during the trial.

The Issues

Petitioner submits the following issues for the Court's consideration:

Whether or not the trial court and the Court of Appeals gravely erred in admitting in evidence all the documentary evidence of
the prosecution though their due execution and genuineness were not duly established in evidence pursuant to the provisions
of the Rules of Court and prevailing jurisprudence;

II

Whether or not the trial court and the Court of Appeals gravely erred in declaring that Rule 118, Section 4 of the Rules of Court,
as applied in the case of Fule vs. Court of Appeals, 162 SCRA 446, which states that no agreement or admission made or entered
during the pre-trial conference shall be used in evidence against the accused unless reduced to writing and signed by him and his
counsel, is inapplicable in the case at bar;

III

Whether or not the trial court and the Court of Appeals gravely erred in ruling that the burden of evidence has already been
shifted from the prosecution to the defense despite the definite factual issues in the pre-trial order; and

IV

Whether or not the trial court and the Court of Appeals erred in ruling that the prosecution has proven the guilt of the accused
beyond reasonable doubt albeit the prosecution did not produce any evidence.[14]

In the main, the resolution of the Petition hinges on (1) the admissibility and (2) the sufficiency of the prosecution evidence.

This Courts Ruling


The Petition has merit insofar as it contends that the elements of the crime charged have not all been proven beyond
reasonable doubt.
First Issue:

Admissibility of Documentary Evidence

Because the first, the second and the third issues raised by petitioner all refer to the same matter, they will be discussed
together. She contends that the pieces of documentary evidence presented by the prosecution during pretrial are inadmissible,
because she did not sign the pretrial agreement as required under Section 4 of Rule 118 of the Rules of Court.[15] Hence, she
argues that there is no basis for her conviction.
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True, a pretrial agreement not signed by a party is inadmissible. However, the conviction of petitioner was based not on
that agreement but on the documents submitted during the trial, all of which were admitted without any objection from her
counsel. During the hearing on September 17, 1993, the prosecution offered as evidence the dishonored checks, the return
check tickets addressed to private complainant, the notice from complainant addressed to petitioner that the checks had been
dishonored, and the postmasters letter that the notice had been returned to sender.Petitioner's counsel did not object to their
admissibility. This is shown by the transcript of stenographic notes taken during the hearing on September 17, 1993:
COURT:
You have no objection to the admissibility, not that the Court will believe it.
ATTY. MANGERA
No, Your Honor.
COURT:
Exhibits A to A to K are admitted.
ATTY. MAKALINTAL:
We offer Exhibit L, the return-check ticket dated July 27, 1992, relative to checks No. 021745 and 021746 indicating that
these checks were returned DAIF, drawn against insufficient funds; Exh. M, returned check ticket dated July 28, 1992,
relative to Check No. 021727, 021711 and 021720 likewise indicating the said checks to have been drawn against
insufficient funds, Your Honor. Exhibit N, returned check ticket dated July 29, 1992, relative to Check Nos. 021749 and
021748, having the same indications;
Exhibits O, returned check ticket dated July 29, 1992 relative to Check Nos. 021750 and 021753, with the same
indications;
Exhibits P, returned check ticket dated August 4, 1992 relative to Check No. 021752, having the same indication as being
drawn against insufficient funds;
Exhibit Q, the demand letter sent to the accused by Atty. Horacio Makalintal dated August 3, 1992;
Exhibit R, the letter-request for certification addressed to the Postmaster General sent by the same law office dated 17
September 1992, showing that the said letter was dispatched properly by the Central Post Office of Makati;
Exhibit S, 1st Indorsement of the Makati Central Post Office dated 21 September 1992;
Exhibit T, the Philippine Postal Corporation Central Post Office letter dated 24 September 1992, addressed to this
representation showing that there were 3 notices sent to the herein accused who received the said letter.
COURT:
Lets go to the third check slip; any objection to the third slip?
ATTY. MANGERA:
We have no objection as to the due execution and authenticity.
COURT:
Admitted.
ATTY. MAKALINTAL:
We are offering Exhibits Q, R, S and T, for the purpose of showing that there was demand duly made on the accused
and that the same had been appropriately served by the Central Post Office Services of Manila.
ATTY. MANGERA:
We admit as to the due execution and authenticity only as to that portion, Your Honor.
COURT:
We are talking of admissibility now, so admitted. In other words, at this point, he makes an offer and the Court will
either grant admission, [admit] it in evidence or deny it. It can deny admission if it is not properly identified etcetera.
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ATTY. MANGERA:
I think it is already provided.
COURT:
So, admitted.
ATTY. MAKALINTAL:
With the admission of our offer, Your Honor, the prosecution rests.[16]
From the foregoing, it is clear that the prosecution evidence consisted of documents offered and admitted during the
trial. In view of this, the CA correctly ruled that Fule v. Court of Appeals[17]would not apply to the present controversy. In that
case, a hearing was conducted during which the prosecution presented three exhibits. However, Fule's conviction was based
solely on the stipulation of facts made during the pre-trial on August 8, 1985, which was not signed by the petitioner, nor by his
counsel. Because the stipulation was inadmissible in evidence under Section 4 of Rule 118, the Court held that there was no
proof of his guilt.
In the present case, petitioners conviction was based on the evidence presented during trial, and not on the stipulations
made during the pretrial. Hence, petitioners admissions during the trial are governed not by the Fule ruling or by Section 4 of
Rule 118, but by Section 4 of Rule 129 which reads:

SEC. 4. Judicial Admissions. --- An admission, verbal or written, made by a party in the course of the proceedings in the same case,
does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that
no such admission was made.

Hence, the trial court and the Court of Appeals did not err in taking cognizance of the said documentary evidence.
Second Issue:

Sufficiency of Prosecution Evidence

Petitioner argues that the prosecution failed to prove beyond reasonable doubt the elements of the offense. After a
careful consideration of the records of this case, we believe and so rule that the totality of the evidence presented does not
support petitioners conviction for violation of BP 22.
Section 1 of BP 22 defines the offense as follows:

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

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

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

Accordingly, this Court has held that the elements of the crime are as follows:[18]
1. The accused makes, draws or issues any check to apply to account or for value.
2. The check is subsequently dishonored by the drawee bank for insufficiency of funds or credit; or it would have been
dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment.
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3. The accused knows at the time of the issuance that he or she does not have sufficient funds in, or credit with, drawee
bank for the payment of the check in full upon its presentment.
We shall analyze the evidence, purportedly establishing each of the aforementioned elements which the trial and the
appellate courts relied upon.

Issuance of the Questioned Checks


Contending that the prosecution failed to prove the first element, petitioner maintains that she merely signed the
questioned checks without indicating therein the date and the amount involved.She adds that they were improperly filled up by
Eileen Fernandez. Thus, she concludes, she did not issue the dishonored checks in the context of the Negotiable Instruments
Law, which defines issue as the first delivery of the instrument complete in form to a person who takes it as a holder.[19]
Petitioners contentions are not meritorious. The questioned checks, marked as Exhibits A to K, contained the date of issue
and the amount involved. In fact, petitioner even admitted that she signed those checks. On the other hand, no proof was
adduced to show that petitioner merely signed them in blank, or that complainant filled them up in violation of the former's
instructions or their previous agreement. The evidence on record is clear that petitioner issued eleven checks, all of which were
duly filled up and signed by her.

Checks Dishonored

Neither are we persuaded by petitioners argument that there appears no evidence on record that the subject checks were
unpaid and dishonored.[20] Under Section 3 of BP 22, the introduction in evidence of any unpaid and dishonored check, having
the drawees refusal to pay stamped or written thereon, or attached thereto, with the reason therefor as aforesaid, shall
be prima facie evidence of the making or issuance of said check, and the due presentment to the drawee for payment and
the dishonor thereof, and that the same was properly dishonored for the reason written, stamped, or attached by the drawee
on such dishonored check.
In the present case, the fact that the checks were dishonored was sufficiently shown by the checks themselves, which
were stamped with the words ACCOUNT CLOSED. This was further supported by the returned check tickets issued by PCI Bank,
the depository bank, stating that the checks had been dishonored.
Clearly, these documents constitute prima facie evidence that the drawee bank dishonored the checks. Again, no evidence
was presented to rebut the prosecutions claim.

Knowledge of Insufficiency of Funds


To hold a person liable under BP 22, it is not enough to establish that a check issued was subsequently dishonored. It must
be shown further that the person who issued the check knew at the time of issue that that he does not have sufficient funds in
or credit with the drawee bank for the payment of such check in full upon its presentment. Because this element involves a
state of mind which is difficult to establish, Section 2 of the law creates a prima facie presumption of such knowledge, as
follows:[21]

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

In other words, the prima facie presumption arises when a check is issued. But the law also provides that the presumption
does not arise when the issuer pays the amount of the check or makes arrangement for its payment within five banking days
after receiving notice that such check has not been paid by the drawee. Verily, BP 22 gives the accused an opportunity to satisfy
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the amount indicated in the check and thus avert prosecution. As the Court held in Lozano v. Martinez, the aforecited provision
serves to mitigate the harshness of the law in its application.[22] This opportunity, however, can be used only upon receipt by the
accused of a notice of dishonor. This point was underscored by the Court in Lina Lim Lao v. Court of Appeals:[23]

It has been observed that the State, under this statute, actually offers the violator a compromise by allowing him to perform
some act which operates to preempt the criminal action, and if he opts to perform it the action is abated. This was also
compared to certain laws allowing illegal possessors of firearms a certain period of time to surrender the illegally possessed
firearms to the Government, without incurring any criminal liability. In this light, the full payment of the amount appearing in the
check within five banking days from notice of dishonor is a complete defense. The absence of a notice of dishonor necessarily
deprives an accused an opportunity to preclude a criminal prosecution. Accordingly, procedural due process clearly enjoins that
a notice of dishonor be actually served on petitioner. Petitioner has a right to demand and the basic postulates of fairness
require -- that the notice of dishonor be actually sent to and received by her to afford her the opportunity to avert prosecution
under BP 22.

Thus, in order to create the prima facie presumption that the issuer knew of the insufficiency of funds, it must be shown
that he or she received a notice of dishonor and, within five banking days thereafter, failed to satisfy the amount of the check or
make arrangement for its payment.
To prove that petitioner knew of the insufficiency of her funds, the prosecution presented Exhibits Q to T. Based on these
documents, the Court of Appeals concluded that [p]rivate complainant sent a demand letter to appellant to make good said
checks x x x. Appellant failed to pay the face value of the eleven checks or make arrangement for the full payment thereof
within 90 days after receiving the notice.[24]
Upon closer examination of these documents, we find no evidentiary basis for the holding of the trial court and the Court
of Appeals that petitioner received a notice that the checks had been dishonored.
True, complainant sent petitioner a registered mail, as shown in Exhibit "Q," informing the latter that the checks had been
dishonored. But the records show that petitioner did not receive it. In fact, Postmaster Wilfredo Ulibarris letter addressed to
complainants counsel certified that the subject registered mail was returned to sender on September 22, 1992 x x x.[25]
Notwithstanding the clear import of the postmasters certification, the prosecution failed to adduce any other proof that
petitioner received the post office notice but unjustifiably refused to claim the registered mail. It is possible that the drawee
bank sent petitioner a notice of dishonor, but the prosecution did not present evidence that the bank did send it, or that
petitioner actually received it.It was also possible that she was trying to flee from complainant by staying in different
addresses. Speculations and possibilities, however, cannot take the place of proof. Conviction must rest on proof beyond
reasonable doubt. Clearly, the evidence on hand demonstrates the indelible fact that petitioner did not receive notice that the
checks had been dishonored. Necessarily, the presumption that she knew of the insufficiency of funds cannot arise.
Be that as it may, the Court must point out that it cannot rule on petitioners civil liability, for the issue was not raised in the
pleadings submitted before us.
We must stress that BP 22, like all penal statutes, is construed strictly against the State and liberally in favor of the
accused.[26] Likewise, the prosecution has the burden to prove beyond reasonable doubt each element of the crime. Hence, the
prosecutions case must rise or fall on the strength of its own evidence, never on the weakness or even absence of that of the
defense.
WHEREFORE, the assailed Decision of the Court of Appeals is hereby REVERSED and SET ASIDE. Petitioner Betty King
is ACQUITTED for failure of the prosecution to prove all the elements of the crimes charged. No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 80599 September 15, 1989


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ERNESTINA CRISOLOGO-JOSE, petitioner,
vs.
COURT OF APPEALS and RICARDO S. SANTOS, JR. in his own behalf and as Vice-President for Sales of Mover Enterprises,
Inc., respondents.

Melquiades P. de Leon for petitioner.

Rogelio A. Ajes for private respondent.

REGALADO, J.:

Petitioner seeks the annulment of the decision 1 of respondent Court of Appeals, promulgated on September 8, 1987, which
reversed the decision of the trial Court 2 dismissing the complaint for consignation filed by therein plaintiff Ricardo S. Santos, Jr.

The parties are substantially agreed on the following facts as found by both lower courts:

In 1980, plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises, Inc. in-charge of marketing
and sales; and the president of the said corporation was Atty. Oscar Z. Benares. On April 30, 1980, Atty.
Benares, in accommodation of his clients, the spouses Jaime and Clarita Ong, issued Check No. 093553 drawn
against Traders Royal Bank, dated June 14, 1980, in the amount of P45,000.00 (Exh- 'I') payable to defendant
Ernestina Crisologo-Jose. Since the check was under the account of Mover Enterprises, Inc., the same was to
be signed by its president, Atty. Oscar Z. Benares, and the treasurer of the said corporation. However, since at
that time, the treasurer of Mover Enterprises was not available, Atty. Benares prevailed upon the plaintiff,
Ricardo S. Santos, Jr., to sign the aforesaid chEck as an alternate story. Plaintiff Ricardo S. Santos, Jr. did sign
the check.

It appears that the check (Exh. '1') was issued to defendant Ernestina Crisologo-Jose in consideration of the
waiver or quitclaim by said defendant over a certain property which the Government Service Insurance System
(GSIS) agreed to sell to the clients of Atty. Oscar Benares, the spouses Jaime and Clarita Ong, with the
understanding that upon approval by the GSIS of the compromise agreement with the spouses Ong, the check
will be encashed accordingly. However, since the compromise agreement was not approved within the
expected period of time, the aforesaid check for P45,000.00 (Exh. '1') was replaced by Atty. Benares with
another Traders Royal Bank cheek bearing No. 379299 dated August 10, 1980, in the same amount of
P45,000.00 (Exhs. 'A' and '2'), also payable to the defendant Jose. This replacement check was also signed by
Atty. Oscar Z. Benares and by the plaintiff Ricardo S. Santos, Jr. When defendant deposited this replacement
check (Exhs. 'A' and '2') with her account at Family Savings Bank, Mayon Branch, it was dishonored for
insufficiency of funds. A subsequent redepositing of the said check was likewise dishonored by the bank for
the same reason. Hence, defendant through counsel was constrained to file a criminal complaint for violation
of Batas Pambansa Blg. 22 with the Quezon City Fiscal's Office against Atty. Oscar Z. Benares and plaintiff
Ricardo S. Santos, Jr. The investigating Assistant City Fiscal, Alfonso Llamas, accordingly filed an amended
information with the court charging both Oscar Benares and Ricardo S. Santos, Jr., for violation of Batas
Pambansa Blg. 22 docketed as Criminal Case No. Q-14867 of then Court of First Instance of Rizal, Quezon City.

Meanwhile, during the preliminary investigation of the criminal charge against Benares and the plaintiff herein,
before Assistant City Fiscal Alfonso T. Llamas, plaintiff Ricardo S. Santos, Jr. tendered cashier's check No. CC
160152 for P45,000.00 dated April 10, 1981 to the defendant Ernestina Crisologo-Jose, the complainant in that
criminal case. The defendant refused to receive the cashier's check in payment of the dishonored check in the
amount of P45,000.00. Hence, plaintiff encashed the aforesaid cashier's check and subsequently deposited
said amount of P45,000.00 with the Clerk of Court on August 14, 1981 (Exhs. 'D' and 'E'). Incidentally, the
cashier's check adverted to above was purchased by Atty. Oscar Z. Benares and given to the plaintiff herein to
be applied in payment of the dishonored check. 3

After trial, the court a quo, holding that it was "not persuaded to believe that consignation referred to in Article 1256 of the Civil
Code is applicable to this case," rendered judgment dismissing plaintiff s complaint and defendant's counterclaim. 4
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As earlier stated, respondent court reversed and set aside said judgment of dismissal and revived the complaint for
consignation, directing the trial court to give due course thereto.

Hence, the instant petition, the assignment of errors wherein are prefatorily stated and discussed seriatim.

1. Petitioner contends that respondent Court of Appeals erred in holding that private respondent, one of the
signatories of the check issued under the account of Mover Enterprises, Inc., is an accommodation party under
the Negotiable Instruments Law and a debtor of petitioner to the extent of the amount of said check.

Petitioner avers that the accommodation party in this case is Mover Enterprises, Inc. and not private respondent who merely
signed the check in question in a representative capacity, that is, as vice-president of said corporation, hence he is not liable
thereon under the Negotiable Instruments Law.

The pertinent provision of said law referred to provides:

Sec. 29. Liability of accommodation party an accommodation party is one 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. Such a person is liable on the instrument to a holder for value, notwithstanding
such holder, at the time of taking the instrument, knew him to be only an accommodation party.

Consequently, to be considered an accommodation party, a person must (1) be a party to the instrument, signing as maker,
drawer, acceptor, or indorser, (2) not receive value therefor, and (3) sign for the purpose of lending his name for the credit of
some other person.

Based on the foregoing requisites, it is not a valid defense that the accommodation party did not receive any valuable
consideration when he executed the instrument. From the standpoint of contract law, he differs from the ordinary concept of a
debtor therein in the sense that he has not received any valuable consideration for the instrument he signs. Nevertheless, he is
liable to a holder for value as if the contract was not for accommodation 5 in whatever capacity such accommodation party
signed the instrument, whether primarily or secondarily. Thus, it has been held that in lending his name to the accommodated
party, the accommodation party is in effect a surety for the latter. 6

Assuming arguendo that Mover Enterprises, Inc. is the accommodation party in this case, as petitioner suggests, the inevitable
question is whether or not it may be held liable on the accommodation instrument, that is, the check issued in favor of herein
petitioner.

We hold in the negative.

The aforequoted provision of the Negotiable Instruments Law which holds an accommodation party liable on the instrument to
a holder for value, although such holder at the time of taking the instrument knew him to be only an accommodation party,
does not include nor apply to corporations which are accommodation parties. 7 This is because the issue or indorsement of
negotiable paper by a corporation without consideration and for the accommodation of another is ultra vires. 8 Hence, one who
has taken the instrument with knowledge of the accommodation nature thereof cannot recover against a corporation where it
is only an accommodation party. If the form of the instrument, or the nature of the transaction, is such as to charge the indorsee
with knowledge that the issue or indorsement of the instrument by the corporation is for the accommodation of another, he
cannot recover against the corporation thereon. 9

By way of exception, an officer or agent of a corporation shall have the power to execute or indorse a negotiable paper in the
name of the corporation for the accommodation of a third person only if specifically authorized to do so. 10 Corollarily, corporate
officers, such as the president and vice-president, have no power to execute for mere accommodation a negotiable instrument
of the corporation for their individual debts or transactions arising from or in relation to matters in which the corporation has no
legitimate concern. Since such accommodation paper cannot thus be enforced against the corporation, especially since it is not
involved in any aspect of the corporate business or operations, the inescapable conclusion in law and in logic is that the
signatories thereof shall be personally liable therefor, as well as the consequences arising from their acts in connection
therewith.
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The instant case falls squarely within the purview of the aforesaid decisional rules. If we indulge petitioner in her aforesaid
postulation, then she is effectively barred from recovering from Mover Enterprises, Inc. the value of the check. Be that as it may,
petitioner is not without recourse.

The fact that for lack of capacity the corporation is not bound by an accommodation paper does not thereby absolve, but
should render personally liable, the signatories of said instrument where the facts show that the accommodation involved was
for their personal account, undertaking or purpose and the creditor was aware thereof.

Petitioner, as hereinbefore explained, was evidently charged with the knowledge that the cheek was issued at the instance and
for the personal account of Atty. Benares who merely prevailed upon respondent Santos to act as co-signatory in accordance
with the arrangement of the corporation with its depository bank. That it was a personal undertaking of said corporate officers
was apparent to petitioner by reason of her personal involvement in the financial arrangement and the fact that, while it was
the corporation's check which was issued to her for the amount involved, she actually had no transaction directly with said
corporation.

There should be no legal obstacle, therefore, to petitioner's claims being directed personally against Atty. Oscar Z. Benares and
respondent Ricardo S. Santos, Jr., president and vice-president, respectively, of Mover Enterprises, Inc.

2. On her second assignment of error, petitioner argues that the Court of Appeals erred in holding that the
consignation of the sum of P45,000.00, made by private respondent after his tender of payment was refused
by petitioner, was proper under Article 1256 of the Civil Code.

Petitioner's submission is that no creditor-debtor relationship exists between the parties, hence consignation is not proper.
Concomitantly, this argument was premised on the assumption that private respondent Santos is not an accommodation party.

As previously discussed, however, respondent Santos is an accommodation party and is, therefore, liable for the value of the
check. The fact that he was only a co-signatory does not detract from his personal liability. A co-maker or co-drawer under the
circumstances in this case is as much an accommodation party as the other co-signatory or, for that matter, as a lone signatory
in an accommodation instrument. Under the doctrine in Philippine Bank of Commerce vs. Aruego, supra, he is in effect a co-surety
for the accommodated party with whom he and his co-signatory, as the other co-surety, assume solidary liability ex lege for the
debt involved. With the dishonor of the check, there was created a debtor-creditor relationship, as between Atty. Benares and
respondent Santos, on the one hand, and petitioner, on the other. This circumstance enables respondent Santos to resort to an
action of consignation where his tender of payment had been refused by petitioner.

We interpose the caveat, however, that by holding that the remedy of consignation is proper under the given circumstances, we
do not thereby rule that all the operative facts for consignation which would produce the effect of payment are present in this
case. Those are factual issues that are not clear in the records before us and which are for the Regional Trial Court of Quezon
City to ascertain in Civil Case No. Q-33160, for which reason it has advisedly been directed by respondent court to give due
course to the complaint for consignation, and which would be subject to such issues or claims as may be raised by defendant
and the counterclaim filed therein which is hereby ordered similarly revived.

3. That respondent court virtually prejudged Criminal Case No. Q-14687 of the Regional Trial Court of Quezon
City filed against private respondent for violation of Batas Pambansa Blg. 22, by holding that no criminal liability
had yet attached to private respondent when he deposited with the court the amount of P45,000.00 is the
final plaint of petitioner.

We sustain petitioner on this score.

Indeed, respondent court went beyond the ratiocination called for in the appeal to it in CA-G.R. CV. No. 05464. In its own
decision therein, it declared that "(t)he lone issue dwells in the question of whether an accommodation party can validly consign
the amount of the debt due with the court after his tender of payment was refused by the creditor." Yet, from the commercial
and civil law aspects determinative of said issue, it digressed into the merits of the aforesaid Criminal Case No. Q-14867, thus:

Section 2 of B.P. 22 establishes the prima facie evidence of knowledge of such insufficiency of funds or credit.
Thus, the making, drawing and issuance of a check, payment of which is refused by the drawee because of
NEGOTIATION LAW 10.7.2017 11
insufficient funds in or credit with such bank is prima facie evidence of knowledge of insufficiency of funds
or credit, when the check is presented within 90 days from the date of the check.

It will be noted that the last part of Section 2 of B.P. 22 provides that the element of knowledge of insufficiency
of funds or credit is not present and, therefore, the crime does not exist, when the drawer pays the holder the
amount due 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.

Based on the foregoing consideration, this Court finds that the plaintiff-appellant acted within Ms legal rights
when he consigned the amount of P45,000.00 on August 14, 1981, between August 7, 1981, the date when
plaintiff-appellant receive (sic) the notice of non-payment, and August 14, 1981, the date when the debt due
was deposited with the Clerk of Court (a Saturday and a Sunday which are not banking days) intervened. The
fifth banking day fell on August 14, 1981. Hence, no criminal liability has yet attached to plaintiff-appellant when
he deposited the amount of P45,000.00 with the Court a quo on August 14, 1981. 11

That said observations made in the civil case at bar and the intrusion into the merits of the criminal case pending in another
court are improper do not have to be belabored. In the latter case, the criminal trial court has to grapple with such factual issues
as, for instance, whether or not the period of five banking days had expired, in the process determining whether notice of
dishonor should be reckoned from any prior notice if any has been given or from receipt by private respondents of the
subpoena therein with supporting affidavits, if any, or from the first day of actual preliminary investigation; and whether there
was a justification for not making the requisite arrangements for payment in full of such check by the drawee bank within the
said period. These are matters alien to the present controversy on tender and consignation of payment, where no such period
and its legal effects are involved.

These are aside from the considerations that the disputed period involved in the criminal case is only a presumptive rule, juris
tantum at that, to determine whether or not there was knowledge of insufficiency of funds in or credit with the drawee bank;
that payment of civil liability is not a mode for extinguishment of criminal liability; and that the requisite quantum of evidence in
the two types of cases are not the same.

To repeat, the foregoing matters are properly addressed to the trial court in Criminal Case No. Q-14867, the resolution of which
should not be interfered with by respondent Court of Appeals at the present posture of said case, much less preempted by the
inappropriate and unnecessary holdings in the aforequoted portion of the decision of said respondent court. Consequently, we
modify the decision of respondent court in CA-G.R. CV No. 05464 by setting aside and declaring without force and effect its
pronouncements and findings insofar as the merits of Criminal Case No. Q-14867 and the liability of the accused therein are
concerned.

WHEREFORE, subject to the aforesaid modifications, the judgment of respondent Court of Appeals is AFFIRMED.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-56169 June 26, 1992

TRAVEL-ON, INC., petitioner,


vs.
COURT OF APPEALS and ARTURO S. MIRANDA, respondents.

R E S O L U T I O N
NEGOTIATION LAW 10.7.2017 12

FELICIANO, J.:

Petitioner Travel-On. Inc. ("Travel-On") is a travel agency selling airline tickets on commission basis for and in behalf of different
airline companies. Private respondent Arturo S. Miranda had a revolving credit line with petitioner. He procured tickets from
petitioner on behalf of airline passengers and derived commissions therefrom.

On 14 June 1972, Travel-On filed suit before the Court of First Instance ("CFI") of Manila to collect on six (6) checks issued by
private respondent with a total face amount of P115,000.00. The complaint, with a prayer for the issuance of a writ of
preliminary attachment and attorney's fees, averred that from 5 August 1969 to 16 January 1970, petitioner sold and delivered
various airline tickets to respondent at a total price of P278,201.57; that to settle said account, private respondent paid various
amounts in cash and in kind, and thereafter issued six (6) postdated checks amounting to P115,000.00 which were all
dishonored by the drawee banks. Travel-On further alleged that in March 1972, private respondent made another payment of
P10,000.00 reducing his indebtedness to P105,000.00. The writ of attachment was granted by the court a quo.

In his answer, private respondent admitted having had transactions with Travel-On during the period stipulated in the
complaint. Private respondent, however, claimed that he had already fully paid and even overpaid his obligations and that
refunds were in fact due to him. He argued that he had issued the postdated checks for purposes of accommodation, as he had
in the past accorded similar favors to petitioner. During the proceedings, private respondent contested several tickets alleged to
have been erroneously debited to his account. He claimed reimbursement of his alleged over payments, plus litigation expenses,
and exemplary and moral damages by reason of the allegedly improper attachment of his properties.

In support of his theory that the checks were issued for accommodation, private respondent testified that he bad issued the
checks in the name of Travel-On in order that its General Manager, Elita Montilla, could show to Travel-On's Board of Directors
that the accounts receivable of the company were still good. He further stated that Elita Montilla tried to encash the same, but
that these were dishonored and were subsequently returned to him after the accommodation purpose had been attained.

Travel-On's witness, Elita Montilla, on the other hand explained that the "accommodation" extended to Travel-On by private
respondent related to situations where one or more of its passengers needed money in Hongkong, and upon request of Travel-
On respondent would contact his friends in Hongkong to advance Hongkong money to the passenger. The passenger then paid
Travel-On upon his return to Manila and which payment would be credited by Travel-On to respondent's running account with it.

In its decision dated 31 January 1975, the court a quo ordered Travel-On to pay private respondent the amount of P8,894.91
representing net overpayments by private respondent, moral damages of P10,000.00 for the wrongful issuance of the writ of
attachment and for the filing of this case, P5,000.00 for attorney's fees and the costs of the suit.

The trial court ruled that private respondent's indebtedness to petitioner was not satisfactorily established and that the
postdated checks were issued not for the purpose of encashment to pay his indebtedness but to accommodate the General
Manager of Travel-On to enable her to show to the Board of Directors that Travel-On was financially stable.

Petitioner filed a motion for reconsideration that was, however, denied by the trial court, which in fact then increased the award
of moral damages to P50,000.00.

On appeal, the Court of Appeals affirmed the decision of the trial court, but reduced the award of moral damages to
P20,000.00, with interest at the legal rate from the date of the filing of the Answer on 28 August 1972.

Petitioner moved for reconsideration of the Court of Appeal's' decision, without success.

In the instant Petition for Review, it is urged that the postdated checks are per se evidence of liability on the part of private
respondent. Petitioner further argues that even assuming that the checks were for accommodation, private respondent is still
liable thereunder considering that petitioner is a holder for value.

Both the trial and appellate courts had rejected the checks as evidence of indebtedness on the ground that the various
statements of account prepared by petitioner did not show that Private respondent had an outstanding balance of P115,000.00
NEGOTIATION LAW 10.7.2017 13
which is the total amount of the checks he issued. It was pointed out that while the various exhibits of petitioner showed
various accountabilities of private respondent, they did not satisfactorily establish the amount of the outstanding indebtedness
of private respondent. The appellate court made much of the fact that the figures representing private respondent's unpaid
accounts found in the "Schedule of Outstanding Account" dated 31 January 1970 did not tally with the figures found in the
statement which showed private respondent's transactions with petitioner for the years 1969 and 1970; that there was no
satisfactory explanation as to why the total outstanding amount of P278,432.74 was still used as basis in the accounting of 7 April
1972 considering that according to the table of transactions for the year 1969 and 1970, the total unpaid account of private
respondent amounted to P239,794.57.

We have, however, examined the record and it shows that the 7 April 1972 Statement of Account had simply not been updated;
that if we use as basis the figure as of 31 January 1970 which is P278,432.74 and from it deduct P38,638.17 which represents
some of the payments subsequently made by private respondent, the figure — P239,794.57 will be obtained.

Also, the fact alone that the various statements of account had variances in figures, simply did not mean that private
respondent had no more financial obligations to petitioner. It must be stressed that private respondent's account with
petitioner was a running or open one, which explains the varying figures in each of the statements rendered as of a given date.

The appellate court erred in considering only the statements of account in determining whether private respondent was
indebted to petitioner under the checks. By doing so, it failed to give due importance to the most telling piece of evidence of
private respondent's indebtedness — the checks themselves which he had issued.

Contrary to the view held by the Court of Appeals, this Court finds that the checks are the all important evidence of petitioner's
case; that these checks clearly established private respondent's indebtedness to petitioner; that private respondent was liable
thereunder.

It is important to stress that a check which is regular on its face is deemed prima facie to have been issued for a valuable
consideration and every person whose signature appears thereon is deemed to have become a party thereto for value. 1 Thus,
the mere introduction of the instrument sued on in evidence prima facie entitles the plaintiff to recovery. Further, the rule is
quite settled that a negotiable instrument is presumed to have been given or indorsed for a sufficient consideration unless
otherwise contradicted and overcome by other competent evidence. 2

In the case at bar, the Court of Appeals, contrary to these established rules, placed the burden of proving the existence of
valuable consideration upon petitioner. This cannot be countenanced; it was up to private respondent to show that he had
indeed issued the checks without sufficient consideration. The Court considers that Private respondent was unable to rebut
satisfactorily this legal presumption. It must also be noted that those checks were issued immediately after a letter demanding
payment had been sent to private respondent by petitioner Travel-On.

The fact that all the checks issued by private respondent to petitioner were presented for payment by the latter would lead to
no other conclusion than that these checks were intended for encashment. There is nothing in the checks themselves (or in any
other document for that matter) that states otherwise.

We are unable to accept the Court of Appeals' conclusion that the checks here involved were issued for "accommodation" and
that accordingly private respondent maker of those checks was not liable thereon to petitioner payee of those checks.

In the first place, while the Negotiable Instruments Law does refer to accommodation transactions, no such transaction was
here shown. Section 29 of the Negotiable Instruments Law provides as follows:

Sec. 29. Liability of accommodation party. — An accommodation party is one 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. Such a person is liable on the instrument to a holder for value, notwithstanding
such holder, at the time of taking the instrument, knew him to be only an accommodation party.

In accommodation transactions recognized by the Negotiable Instruments Law, an accommodating party lends his
credit to the accommodated party, by issuing or indorsing a check which is held by a payee or indorsee as a holder in
due course, who gave full value therefor to the accommodated party. The latter, in other words, receives or realizes full
value which the accommodated party then must repay to the accommodating party, unless of course the
NEGOTIATION LAW 10.7.2017 14
accommodating party intended to make a donation to the accommodated party. But the accommodating party is
bound on the check to the holder in due course who is necessarily a third party and is not the accommodated party.
Having issued or indorsed the check, the accommodating party has warranted to the holder in due course that he will
pay the same according to its tenor. 3

In the case at bar, Travel-On was payee of all six (6) checks, it presented these checks for payment at the drawee bank but the
checks bounced. Travel-On obviously was not an accommodated party; it realized no value on the checks which bounced.

Travel-On was entitled to the benefit of the statutory presumption that it was a holder in due course, 4 that the checks were
supported by valuable consideration. 5 Private respondent maker of the checks did not successfully rebut these presumptions.
The only evidence aliunde that private respondent offered was his own self-serving uncorroborated testimony. He claimed that
he had issued the checks to Travel-On as payee to "accommodate" its General Manager who allegedly wished to show those
checks to the Board of Directors of Travel-On to "prove" that Travel-On's account receivables were somehow "still good." It will
be seen that this claim was in fact a claim that the checks were merely simulated, that private respondent did not intend to bind
himself thereon. Only evidence of the clearest and most convincing kind will suffice for that purpose; 6 no such evidence was
submitted by private respondent. The latter's explanation was denied by Travel-On's General Manager; that explanation, in any
case, appears merely contrived and quite hollow to us. Upon the other hand, the "accommodation" or assistance extended to
Travel-On's passengers abroad as testified by petitioner's General Manager involved, not the accommodation transactions
recognized by the NIL, but rather the circumvention of then existing foreign exchange regulations by passengers booked by
Travel-On, which incidentally involved receipt of full consideration by private respondent.

Thus, we believe and so hold that private respondent must be held liable on the six (6) checks here involved. Those checks in
themselves constituted evidence of indebtedness of private respondent, evidence not successfully overturned or rebutted by
private respondent.

Since the checks constitute the best evidence of private respondent's liability to petitioner Travel-On, the amount of such
liability is the face amount of the checks, reduced only by the P10,000.00 which Travel-On admitted in its complaint to have been
paid by private respondent sometime in March 1992.

The award of moral damages to Private respondent must be set aside, for the reason that Petitioner's application for the writ of
attachment rested on sufficient basis and no bad faith was shown on the part of Travel-On. If anyone was in bad faith, it was
private respondent who issued bad checks and then pretended to have "accommodated" petitioner's General Manager by
assisting her in a supposed scheme to deceive petitioner's Board of Directors and to misrepresent Travel-On's financial
condition.

ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Review on Certiorari and to REVERSE and SET ASIDE
the Decision dated 22 October 1980 and the Resolution of 23 January 1981 of the Court of Appeals, as well as the Decision dated
31 January 1975 of the trial court, and to enter a new decision requiring private respondent Arturo S. Miranda to pay to
petitioner Travel-On the amount of P105,000.00 with legal interest thereon from 14 June 1972, plus ten percent (10%) of the total
amount due as attorney's fees. Costs against Private respondent.

Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

THIRD DIVISION


PEOPLE OF THE PHILIPPINES, G.R. No. 194719
Appellee,
Present:
VELASCO, JR., J., Chairperson,
- versus - PERALTA,
ABAD,
MENDOZA, and
PERLAS-BERNABE, JJ.
RODEL SINGSON,
Appellant. Promulgated:
NEGOTIATION LAW 10.7.2017 15
________________
x --------------------------------------------------------------------------------------- x

DECISION

ABAD, J.:


In this rape case, when the victims mother got home and found her daughters bedroom locked, she looked for the key, opened
her daughters bedroom with it, and found her naked in bed with the accused hiding underneath it.

The Facts and the Case

The Provincial Prosecutor of Cabarroguis, Quirino, charged the accused Rodel Singson with rape before the Regional
Trial Court (RTC) of that province[1] in Criminal Case 1841.

MJ[2] testified that, through text messages by mobile phones, Rodel became her boyfriend and their relation lasted
from January to September 2003. But they hardly saw each other after MJ studied in Manila. They met when MJ came home to
Santiago for vacation in the summer of 2003. After a few months, however, she broke up with Rodel to concentrate on her
studies.

In the evening of December 22, 2003 MJ and her mother, LK, attended the simbang gabi from 9:00 p.m. to 10:00 p.m. After the
mass, LK wanted to join some church members to go caroling. Since MJ felt sleepy, she bade her mother leave to go home at
about 11:30 p.m. On reaching home, MJ prepared to go to bed but someone knocked at their door. Thinking it was her mother,
she opened it and, to her surprise, saw Rodel standing at the door.

Rodel said that he wanted to talk to MJ about renewing their relation. She was at first hesitant to entertain him because he
appeared drunk but she eventually let him in.After talking with Rodel at the living room for about 45 minutes, MJ asked him to
leave and he did. MJ then entered her room. But, suddenly, Rodel appeared and sprayed something on her face that made her
feel weak and dizzy. Her vision also became blurred. After undressing her, Rodel touched her body in various parts.Eventually,
he violated her. She could only cry until she lost consciousness.

MJ woke up to the screams of her brother who was gripping Rodel by the bedroom window. As it turned out, when LK came
home at 2:00 a.m., she knocked at MJs bedroom to check if she had gotten home safely but LK got no answer. Worried, LK used
a key to open the door and she saw MJ naked and unconscious on the bed.Noticing unfamiliar clothes on the floor, LK became
suspicious and looked around. When she checked under the bed, she saw Rodel there in his underwear. LK shouted for help,
waking up her sister who happened to be the barangay chairman of their village. Some barangay tanods came. They moved MJ
to another room and arrested Rodel. It was to her aunt that MJ told her story because the incident affected her mother deeply.

Rodel, on the other hand, insisted that he and MJ freely had sexual intercourse borne of their mutual affection. He did
not rape her. But, declining to give credence to his defense, on November 26, 2007 the RTC found Rodel guilty of rape,
NEGOTIATION LAW 10.7.2017 16
sentenced him to life imprisonment, and ordered him to pay MJ P50,000.00 as civil indemnity and another P50,000.00 as
moral damages.

On March 25, 2010 the Court of Appeals (CA) in CA-G.R. CR-H.C. 03161 affirmed the RTC decision, hence, this appeal.

The Issue Presented

The only issue presented in this case is whether or not Rodel raped MJ after spraying her with drugs that weakened her
resistance and eventually rendered her unconscious.

The Ruling of the Court

One of the ways of committing rape, according to Article 335 of the Revised Penal Code, as amended by Section 11 of
Republic Act 7659,[3] is by having carnal knowledge of a woman when she has been deprived of reason or otherwise rendered
unconscious. The prosecution claims that this was Rodels crime.

But the Court doubts MJs story. She testified that Rodel sprayed something on her face, causing her to feel weak and
dizzy. Rodel then brought her into her room and took off her clothes. He kissed her neck and breasts and successfully ravished
her. She said that she was unable to scream for help because she suddenly became unconscious when Rodel entered her. It was
only when she heard her brother scream that she woke up.[4]

But, MJs story is at variance with what she said in her December 23, 2003 affidavit[5] which she executed only hours
after the incident. MJ there said that she was fully conscious during the time Rodel was raping her. Indeed, she described Rodels
pumping motion until he discharged into her. She even felt pain afterwards in her genitals and in the other parts of her body. MJ
claimed that it was only after it was over that her eyes felt heavy and she lost consciousness. When the defense counsel
confronted her with this inconsistency between her testimony and her affidavit, MJ could not offer an explanation.[6]

The testimony of LK, MJs mother, is just as dubious. She said that on entering her daughters room, she saw MJ naked in
bed. Seeing a mans pants on the floor, LK looked under the bed and saw Rodel hiding there. LK tried to rouse her daughter but
she would not wake up, prompting LK to cry for help. When the barangaychairman and the tanods arrived, they pulled Rodel
from under the bed. It was only then that MJ came around and told her mother that she had been raped.[7]

On cross-examination, however, LKs story of what happened followed a different sequence. Rather than try to wake
her daughter up, she immediately screamed for help on seeing Rodel under the bed.[8] His son came, wrapped a blanket around
MJ, and brought her still unconscious into another room.[9] And LK claimed that MJ woke up only after Rodel and the others had
left.[10] LK also said that when she started screaming for help, MJ asked her, What happen now to you?[11] This shows that MJ
regained consciousness at about the time her mother saw Rodel under the bed. Only afterwards did they move MJ out of the
room.

NEGOTIATION LAW 10.7.2017 17
LKs revised version somehow corroborates Rodels story of what really happened. Rodel testified:

Q: And what did you do when [MJ] instructed you to hide under her bed?
A: I went under the bed, sir.[12]

x x x x

A: Her brother peeped under the bed and he saw me so he pulled me and punched me, sir.[13]
x x x x

A: After that, they took [MJ] out of her room and brought her to another room, sir.

Q: Who took [MJ] to another room?
A: Her mother, sir.[14]
x x x x

Q: How about you, what did they do to you, if any?
A: I was locked inside the room of [MJ], sir.


Q: What happened next?
A: I heard her mother talking to [MJ] whether she wants to continue her studies or she wants to get marry
already.

Q: So, what happened after that?
A: No more, sir.[15]

Consider also that, although MJ claimed that Rodel sprayed her face with something that made her dizzy and weak, the
prosecution never produced the spray can or bottle he used, which the barangay chairman or her tanods would have seized and
kept as evidence if it existed. MJs mother did not mention seeing it. Surely, Rodel who only had his underwear on when they
arrested him could not have taken or concealed it. It seems doubtful, therefore, that there had been a spraying of some
immobilizing drugs that morning.

Testimonial evidence, to be believed, must not only come from credible lips but must be credible in substance. A story
that defies reason and logic and above all runs against the grain of common experience cannot persuade.[16] Here, the
prosecutions account failed to pass these tests.

In her Affidavit, MJ said that Rodel sought to walk her home because he wanted to talk to her about fixing their
relationship.[17] In her testimony, however, MJ insisted that she had no conversation with Rodel prior to his showing up at her
house near midnight of December 23, 2003. Thus:

Q: When was the first time you saw Rodel?
A: At the start of the caroling, sir.

Q: Did you talk to each other when you saw him?
A: No, sir.

Q: You just saw him?
A: Yes, sir.
NEGOTIATION LAW 10.7.2017 18

Q: So, that was the first and last time you have seen him while caroling?
A: Yes, sir.

Q: You are very sure about that?
A: Yes, sir.[18] (Emphasis supplied)

When confronted by her contradictory statements, MJ had to admit that Rodel indeed talked to her about walking her
home during the caroling. Thus:

A: Only that part- he volunteered to accompany me, when we were in the terrace he said he wanted to talk to
me, sir.[19]

MJ also testified that she and Rodel never really had a deep relationship because they seldom saw each other and
communicated only through text messages on their mobile phones.[20] Indeed, she broke up with him three months before
December 2003. Yet, when Rodel came by their house at around midnight of December 23, she let him in when Rodel was visibly
drunk. Then she let him stay for nearly an hour before asking him to leave.

And when Rodel left, MJ did not see him off at the door to lock it as he went out. Her excuse in not locking the door
was that her mother was still out.[21] But, notably, when Rodel supposedly came and knocked at the door after she got home at
11:30 p.m., she had to let him in because it was already locked.[22]

MJ also said that she was no longer naked when she woke up and heard her brother screaming by the bedroom
window, with Rodel in a tight grip.[23] If this were true, somebody must have slipped her clothes back on while she was out
cold. This contradicts LKs testimony that her son had to wrap MJ in a blanket before taking her out of the room.

In insisting that she already had her dress on when she woke up, MJ was apparently steering clear of the fact that her
mother had caught her naked, with Rodel in his underwear beneath the bed. MJ simply wanted to save her dignity at Rodels
expense. Apparently, what bothered MJ more was not the supposed rape but how she would explain the compromising
situation in which her mother found her. Thus MJ testified:
Q: So, when you recovered consciousness, what did you do?
A: I cried and cried, sir.

Q: Why did you cry?
x x x x

A: Because I could not accept what happened because my mother was asking me what happened, sir.[24]
x x x x

Q: What did you tell your mother after you regained consciousness?
A: I cried, sir.

Q: What else did you tell your mother after you regained your consciousness?
A: I was just crying, sir.

Q: Did you not tell her that Rodel Singson sprayed something to your face?
A: I told her, sir.
NEGOTIATION LAW 10.7.2017 19

Q: Immediately after you regained your consciousness, is that what you mean?
A: No, sir it took sometime.

Q: Why did you not tell immediately?
A: (No answer of the witness).

Court: What is the span of time did you tell to your mother?
A: I do not know because I was crying and crying, sir.[25] (Emphasis supplied)

MJs above testimony also contradicts her mothers original claim that when her daughter woke up she immediately said that
Rodel raped her.[26] Of course, LK had to remedy this contradiction by subsequently saying that MJ mentioned the supposed
rape only when the barangay authorities showed up. Thus, LK said:

Q: Now, what did your daughter tell you?
A: Actually my daughter narrated the incident to the barangay captain not to me because during that time I
can not speak and I was shocked, sir.

Q: So when did your daughter tell to the barangay captain what happened to her?
A: I can no longer remember because that whole afternoon I was very weak and my body can not go through
it, sir.

Q: So it was the barangay captain who told you that your daughter was raped because your daughter told to
her about that?
A: Yes, sir. [27]

x x x x

Q: So you did not know that morning that your daughter was raped?
A: I dont know, sir.

Q: When did you talk first with your daughter after that incident?
A: Maybe two days after the incident because she herself was also crying. She was always in tears and we can
not talk to her, sir.[28] (Emphasis supplied)

The barangay chairman, MJs aunt and LKs sister, testified that on her arrival the first thing she heard was that a man
entered the house and that her sister found MJ naked. No one told the barangay chairman at that point that MJ had been
raped. No wonder, the first thing the barangay chairman did was to go into the room and ask MJ if Rodel had taken her virginity
from her. Thus:

Q: Who told you that her daughter was raped?
A: My elder sister told me that a man entered their house but I was not yet informed that [MJ] was raped.

Q: So, how did the mother of [MJ] tell you that her daughter [MJ] was raped?
A: She was the first one who saw [MJ] naked.

Q: That was told to you by her, is that correct?
A: Yes, sir.

x x x x

Q: When did you ask [MJ] about that Madam Witness?
NEGOTIATION LAW 10.7.2017 20
A: After my elder sister told me that she saw [MJ] naked so I went to [MJ] to verify if her womanhood was
taken.[29]

x x x x

Q: Do you remember if [MJ] told you about what the accused did first that he sprayed something in the face
of [MJ]?
A: No sir because the only thing I asked is that if he had taken her womanhood.[30] (Emphasis supplied)

It is uncanny that even after so much time had passed, still no one told the barangay chairman right off when she
arrived that MJ had been raped. It was MJs nakedness in her room and Rodels presence under the bed that preoccupied
the barangay chairman and made her ask if MJs virginity had been taken from her, which fact in itself did not amount to
rape. How Rodel succeeded in taking that virginitysupposedly by spraying MJ with something that made her dizzyapparently did
not have relevance to the barangay chairmans line of inquiry.

The sequence of events that the prosecution tried to establish did not also make sense. The story is that MJ got home
at about 11:30 p.m.[31] Rodel came around midnight and they talked for about 30 to 45 minutes. This means that Rodel left at
12:45 a.m. at the latest. Since he came right back into the house, this means that, if the prosecution evidence were to be
believed, he raped MJ at about 12:45 a.m. Thus, at least one hour would have passed before MJs mother, LK, came home at 2:00
a.m.[32] So what reason would Rodel have for staying around in his underwear after raping MJ? And, although the bedroom had
a window through which Rodel could easily have escaped, he chose to dive under the bed. These circumstances indicate that
Rodel did not believe he committed a crime. He hid simply to avoid exposing MJ to her mothers wrath.

It seems, considering all the testimonies that what happened is that, since they were alone in the house, Rodel and MJ
lost control and made love. When MJs mother suddenly showed up and opened her daughters room with a key, Rodel hid under
the bed. But the suspicious mother, finding her daughter naked, looked for him under the bed. LK summoned her sister,
the barangay chairman, her son and her brother-in-law, both tanods and seized Rodel. Asked if she preferred getting married to
continuing her studies, MJ must have chosen the latter. And, to save face, her relatives who had political power made it look like
Rodel raped her.

Although the weight of jurisprudence is that the Court must respect the factual findings of the trial court and the CA,
this case presents an exception. On close examination, the prosecutions evidence left much to be desired. With so many
inconsistencies and incompatibilities with common experience, the Court is unable to see the unfiltered truth. To conclude, the
evidence failed to overcome the constitutional presumption of innocence of the accused.
WHEREFORE, the Court GRANTS the appeal, SETS ASIDE the decision of the Court of Appeals dated March 25, 2010 in CA-G.R.
CR-HC 03161 as well as the decision of the Regional Trial Court of Cabarroguis, Quirino, Branch 31 in Criminal Case 1841,
and ACQUITS the accused-appellant Rodel Singson of the crime charged on ground of reasonable doubt.

The Court orders his immediate RELEASE from custody unless he is being held for some other lawful cause
and ORDERS the Director of the Bureau of Corrections to immediately implement this Decision and to inform the Court within
five days from its receipt of the date appellant was actually released from confinement. Costs de oficio.
NEGOTIATION LAW 10.7.2017 21

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 177438 September 24, 2012

AMADA RESTERIO, Petitioner,


vs.
PEOPLE OF THE PHILIPPINES Respondent.

D E C I S I O N

BERSAMIN, J.:

The notice of dishonor required by Batas Pambansa Blg. 22 to be given to the drawer, maker or issuer of a check should be
written. If the service of the written notice of dishonor on the maker, drawer or issuer of the dishonored check is by registered
mail, the proof of service consists not only in the presentation as evidence of the registry return receipt but also of the registry
receipt together with the authenticating affidavit of the person mailing the notice of dishonor. Without the authenticating
affidavit, the proof of giving the notice of dishonor is insufficient unless the mailer personally testifies in court on the sending by
registered mail.

Antecedents

The petitioner was charged with a violation of Batas Pambansa Blg. 22 in the Municipal Trial Court in Cities (MTCC) in Mandaue
City through the information that alleged as follows:

That on May, 2002, or thereabouts, in the City of Mandaue, Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused, with deliberate intent of gain, did there and then willfully, unlawfully and feloniously make, draw and
issue ChinaBank Check bearing No. AO141332, dated June 3, 2002, in the amount of ₱ 50,000.00 payable to the order of
Bernardo T. Villadolid to apply on account or for value, the accused fully knowing well that at the time of the issuance of said
check that she does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its
presentment; or the accused having sufficient funds in or credit with the drawee bank when she make/s or draw/s and issue/s a
check but she failed to keep sufficient funds or maintain a credit to cover the full amount of the check, which check when
presented for encashment was dishonored by the drawee bank for the reason "ACCT. CLOSED" or would have been dishonored
for the same reason had not the drawer, without any valid reason ordered the bank to stop payment, and despite notice of
dishonor and demands for payment, said accused failed and refused and still fails and refuses to redeem the check or to make
arrangement for payment in full by the drawee of such check within five (5) banking days after receiving the notice of dishonor,
to the damage and prejudice of the aforenamed private complainant, in the aforestated amount and other claims and charges
allowed by civil law.

CONTRARY TO LAW.1

After trial, the MTCC found the petitioner guilty as charged, disposing as follows:

WHEREFORE, decision is hereby rendered finding the accused, AMADA Y. RESTERIO, GUILTY beyond reasonable doubt for
Violation of Batas Pambansa Bilang 22 and sentences her to pay a fine of FIFTY THOUSAND PESOS (₱ 50,000.00) and to pay her
NEGOTIATION LAW 10.7.2017 22
civil liabilities to the private complainant in the sum of FIFTY THOUSAND PESOS (₱ 50,000.00), TEN THOUSAND PESOS (₱
10,000.00) as attorney’s fees and FIVE HUNDRED SEVENTY-FIVE PESOS (₱ 575.00) as eimbursement of the filing fees.

SO ORDERED.2

The petitioner appealed, but the RTC affirmed the conviction.3

By petition for review, the petitioner appealed to the CA, stating that: (a) the RTC erred in affirming the conviction and in not
finding instead that the Prosecution did not establish her guilt beyond reasonable doubt; and (b) the conviction was contrary to
existing laws and jurisprudence, particularly Yu Oh v. Court of Appeals.4

On December 4, 2006, the CA found the petition to be without merit, and denied the petition for review.5

Issues

The petitioner assails the affirmance of her conviction by the CA based on the following grounds, to wit:

THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS AND REVERSIBLE ERROR AND WITH GRAVE ABUSE OF
DISCRETION IN IGNORING THE APPLICABILITY IN THE PRESENT CASE THE DECISION OF THE SUPREME COURT IN THE
CASE OF ELVIRA YU OH VS. COURT OF APPEALS, G.R. NO. 125297, JUNE 26, 2003.

THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS AND REVERSIBLE ERROR AND WITH GRAVE ABUSE OF
DISCRETION IN NOT FINDING THAT THE PROSECUTION FAILED TO PROVE ALL THE ESSENTIAL ELEMENTS OF THE
CRIME OF VIOLATION OF BATAS PAMBANSA BILANG 22.

THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS AND REVERSIBLE ERROR AND WITH GRAVE ABUSE OF
DISCRETION IN NOT FINDING THAT NO NOTICE OF DISHONOR WAS ACTUALLY SENT TO THE PETITIONER.

THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS AND REVERSIBLE ERROR AND WITH GRAVE ABUSE OF
DISCRETION IN NOT FINDING THAT THE PROSECUTION FAILED TO ESTABLISH THE GUILT OF THE PETITIONER BEYOND
REASONABLE DOUBT.6

The appeal hinges on whether or not all the elements of a violation of Batas Pambansa Blg. 22 were established beyond
reasonable doubt.

Ruling

The petition is meritorious.

For a violation of Batas Pambansa Blg. 22, the Prosecution must prove the following essential elements, namely:

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

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

(3) The dishonor of the check by the drawee bank for insufficiency of funds or credit or the dishonor for the same
reason had not the drawer, without any valid cause, ordered the drawee bank to stop payment.7

The existence of the first element of the violation is not disputed. According to the petitioner, she was "required to issue a
check as a collateral for the obligation," and that "she was left with no alternative but to borrow the check of her friend xxx and
used the said check as a collateral of her loan."8 During her cross-examination, she stated that she did not own the check that
she drew and issued to complainant Bernardo Villadolid.9
NEGOTIATION LAW 10.7.2017 23
Yet, to avoid criminal liability, the petitioner contends that Batas Pambansa Blg. 22 was applicable only if the dishonored
check was actually owned by her; and that she could not be held liable because the check was issued as a mere collateral of the
loan and not intended to be deposited.

The petitioner’s contentions do not persuade.

What Batas Pambansa Blg. 22 punished was the mere act of issuing a worthless check. The law did not look either at the actual
ownership of the check or of the account against which it was made, drawn, or issued, or at the intention of the drawee, maker
or issuer. Also, that the check was not intended to be deposited was really of no consequence to her incurring criminal liability
under Batas Pambansa Blg. 22. In Ruiz v. People,10 the Court debunked her contentions and cogently observed:

In Lozano v. Martinez, this Court ruled that the gravamen of the offense is the act of making and issuing a worthless check or
any check that is dishonored upon its presentment for payment and putting them in circulation. The law includes all checks
drawn against banks. The law was designed to prohibit and altogether eliminate the deleterious and pernicious practice of
issuing checks with insufficient or no credit or funds therefor. Such practice is deemed a public nuisance, a crime against public
order to be abated. The mere act of issuing a worthless check, either as a deposit, as a guarantee, or even as an evidence of a
pre-existing debt or as a mode of payment is covered by B.P. 22. It is a crime classified as malum prohibitum. The law is broad
enough to include, within its coverage, the making and issuing of a check by one who has no account with a bank, or where such
account was already closed when the check was presented for payment. As the Court in Lozano explained:

The effects of the issuance of a worthless check transcends the private interests of the parties directly involved in the
transaction and touches the interests of the community at large. The mischief it creates is not only a wrong to the payee or
holder, but also an injury to the public. The harmful practice of putting valueless commercial papers in circulation, multiplied a
thousandfold, can very well pollute the channels of trade and commerce, injure the banking system and eventually hurt the
welfare of society and the public interest. As aptly stated –

The "check flasher" does a great deal more than contract a debt; he shakes the pillars of business; and to my mind, it is a
mistaken charity of judgment to place him in the same category with the honest man who is unable to pay his debts, and for
whom the constitutional inhibition against "imprisonment for debt, except in cases of fraud" was intended as a shield and not a
sword.

Considering that the law imposes a penal sanction on one who draws and issues a worthless check against insufficient funds or
a closed account in the drawee bank, there is, likewise, every reason to penalize a person who indulges in the making and
issuing of a check on an account belonging to another with the latter’s consent, which account has been closed or has no funds
or credit with the drawee bank.11 (Bold emphases supplied)

The State likewise proved the existence of the third element. On direct examination, Villadolid declared that the check had been
dishonored upon its presentment to the drawee bank through the Bank of the Philippine Islands (BPI) as the collecting bank.
The return check memorandum issued by BPI indicated that the account had already been closed.12 The petitioner did not deny
or contradict the fact of dishonor.

The remaining issue is whether or not the second element, that is, 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 in full
upon its presentment, was existent.

To establish the existence of the second element, the State should present the giving of a written notice of the dishonor to the
drawer, maker or issuer of the dishonored check. The rationale for this requirement is rendered in Dico v. Court of Appeals,13 to
wit:

To hold a person liable under B.P. Blg. 22, the prosecution must not only establish that a check was issued and that the same
was subsequently dishonored, it must further be shown that accused knew at the time of the issuance of the check that he did
not have sufficient funds or credit with the drawee bank for the payment of such check in full upon its presentment.

This knowledge of insufficiency of funds or credit at the time of the issuance of the check is the second element of the offense.
Inasmuch as this element involves a state of mind of the person making, drawing or issuing the check which is difficult to prove,
Section 2 of B.P. Blg. 22 creates a prima facie presumption of such knowledge. Said section reads:
NEGOTIATION LAW 10.7.2017 24
SEC. 2. Evidence of knowledge of insufficient funds. – The making, drawing and issuance of a check payment of which is
refused by the drawee because of insufficient funds in or credit with such bank, when presented within ninety (90) days from
the date of the check, shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or
drawer

pays the holder thereof the amount due thereon, or makes arrangements for payment in full by the drawee of such check within
five (5) banking days after receiving notice that such check has not been paid by the drawee.

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

A notice of dishonor received by the maker or drawer of the check is thus indispensable before a conviction can ensue. The
notice of dishonor may be sent by the offended party or the drawee bank. The notice must be in writing. A mere oral notice to
pay a dishonored check will not suffice. The lack of a written notice is fatal for the prosecution.14 (Bold emphases supplied)

The giving of the written notice of dishonor does not only supply the proof for the second element arising from the
presumption of knowledge the law puts up but also affords the offender due process. The law thereby allows the offender to
avoid prosecution if she pays the holder of the check the amount due thereon, or makes arrangements for the payment in full of
the check by the drawee within five banking days from receipt of the written notice that the check had not been paid.15 The
Court cannot permit a deprivation of the offender of this statutory right by not giving the proper notice of dishonor. The nature
of this opportunity for the accused to avoid criminal prosecution has been expounded in Lao v. Court of Appeals:16

It has been observed that the State, under this statute, actually offers the violator ‘a compromise by allowing him to perform
some act which operates to preempt the criminal action, and if he opts to perform it the action is abated’ xxx In this light, the
full payment of the amount appearing in the check within five banking days from notice of dishonor is a ‘complete defense.’ The
absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a criminal prosecution. Accordingly,
procedural due process clearly enjoins that a notice of dishonor be actually served on petitioner. Petitioner has a right to
demand – and the basic postulate of fairness require – that the notice of dishonor be actually sent to and received by her to
afford her the opportunity to avert prosecution under B.P. 22."17 (Bold emphases supplied)

To prove that he had sent the written notice of dishonor to the petitioner by registered mail, Villadolid presented the registry
return receipt for the first notice of dishonor dated June 17, 2002 and the registry return receipt for the second notice of
dishonor dated July 16, 2002. However, the petitioner denied receiving the written notices of dishonor.

The mere presentment of the two registry return receipts was not sufficient to establish the fact that written notices of
dishonor had been sent to or served on the petitioner as the issuer of the check. Considering that the sending of the written
notices of dishonor had been done by registered mail, the registry return receipts by themselves were not proof of the service
on the petitioner without being accompanied by the authenticating affidavit of the person or persons who had actually mailed
the written notices of dishonor, or without the testimony in court of the mailer or mailers on the fact of mailing. The
authentication by affidavit of the mailer or mailers was necessary in order for the giving of the notices of dishonor by registered
mail to be regarded as clear proof of the giving of the notices of dishonor to predicate the existence of the second element of
the offense. No less would fulfill the quantum of proof beyond reasonable doubt, for, as the Court said in Ting v. Court of
Appeals:18

Aside from the above testimony, no other reference was made to the demand letter by the prosecution. As can be noticed from
the above exchange, the prosecution alleged that the demand letter had been sent by mail. To prove mailing, it presented a
copy of the demand letter as well as the registry return receipt. However, no attempt was made to show that the demand letter
was indeed sent through registered mail nor was the signature on the registry return receipt authenticated or identified. It
cannot even be gleaned from the testimony of private complainant as to who sent the demand letter and when the same was
NEGOTIATION LAW 10.7.2017 25
sent. In fact, the prosecution seems to have presumed that the registry return receipt was proof enough that the demand
letter was sent through registered mail and that the same was actually received by petitioners or their agents.

As adverted to earlier, it is necessary in cases for violation of Batas Pambansa Blg. 22, that the prosecution prove that the issuer
had received a notice of dishonor. It is a general rule that when service of notice is an issue, the person alleging that the notice
was served must prove the fact of service (58 Am Jur 2d, Notice, § 45). The burden of proving notice rests upon the party
asserting its existence. Now, ordinarily, preponderance of evidence is sufficient to prove notice. In criminal cases, however, the
quantum of proof required is proof beyond reasonable doubt. Hence, for Batas Pambansa Blg. 22 cases, there should be clear
proof of notice. Moreover, it is a general rule that, when service of a notice is sought to be made by mail, it should appear that
the conditions on which the validity of such service depends had existence, otherwise the evidence is insufficient to establish
the fact of service (C.J.S., Notice, § 18). In the instant case, the prosecution did not present proof that the demand letter was
sent through registered mail, relying as it did only on the registry return receipt. In civil cases, service made through registered
mail is proved by the registry receipt issued by the mailing office and an affidavit of the person mailing of facts showing
compliance with Section 7 of Rule 13 (See Section 13, Rule 13, 1997 Rules of Civil Procedure). If, in addition to the registry receipt,
it is required in civil cases that an affidavit of mailing as proof of service be presented, then with more reason should we hold in
criminal cases that a registry receipt alone is insufficient as proof of mailing. In the instant case, the prosecution failed to
present the testimony, or at least the affidavit, of the person mailing that, indeed, the demand letter was sent. xxx

Moreover, petitioners, during the pre-trial, denied having received the demand letter (p. 135, Rollo). Given petitioners’ denial of
receipt of the demand letter, it behooved the prosecution to present proof that the demand letter was indeed sent through
registered mail and that the same was received by petitioners. This, the prosecution miserably failed to do. Instead, it merely
presented the demand letter and registry return receipt as if mere presentation of the same was equivalent to proof that some
sort of mail matter was received by petitioners. Receipts for registered letters and return receipts do not prove themselves;
they must be properly authenticated in order to serve as proof of receipt of the letters (Central Trust Co. v. City of Des Moines,
218 NW 580).

Likewise, for notice by mail, it must appear that the same was served on the addressee or a duly authorized agent of the
addressee. In fact, the registry return receipt itself provides that "[a] registered article must not be delivered to anyone but the
addressee, or upon the addressee’s written order, in which case the authorized agent must write the addressee’s name on the
proper space and then affix legibly his own signature below it." In the case at bar, no effort was made to show that the demand
letter was received by petitioners or their agent. All that we have on record is an illegible signature on the registry receipt as
evidence that someone received the letter. As to whether this signature is that of one of the petitioners or of their authorized
agent remains a mystery. From the registry receipt alone, it is possible that petitioners or their authorized agent did receive the
demand letter. Possibilities, however, cannot replace proof beyond reasonable doubt. There being insufficient proof that
petitioners received notice that their checks had been dishonored, the presumption that they knew of the insufficiency of the
funds therefor cannot arise.

As we stated in Savage v. Taypin (G.R. No. 134217, May 11, 2000, 311 SCRA 397), "penal statutes must be strictly construed against
the State and liberally in favor of the accused." Likewise, the prosecution may not rely on the weakness of the evidence for the
defense to make up for its own blunders in prosecuting an offense. Having failed to prove all the elements of the offense,
petitioners may not thus be convicted for violation of Batas Pambansa Blg. 22. (Bold emphases supplied)1âwphi1

Also, that the wife of Villadolid verbally informed the petitioner that the check had bounced did not satisfy the requirement of
showing that written notices of dishonor had been made to and received by the petitioner. The verbal notices of dishonor were
not effective because it is already settled that a notice of dishonor must be in writing.19 The Court definitively ruled on the
specific form of the notice of dishonor in Domagsang v. Court of Appeals:20

Petitioner counters that the lack of a written notice of dishonor is fatal. The Court agrees.

While, indeed, Section 2 of B.P. Blg. 22 does not state that the notice of dishonor be in writing, taken in conjunction, however,
with Section 3 of the law, i.e., "that where there are no sufficient funds in or credit with such drawee bank, such fact shall
always be explicitly stated in the notice of dishonor or refusal," a mere oral notice or demand to pay would appear to be
insufficient for conviction under the law. The Court is convinced that both the spirit and letter of the Bouncing Checks Law
would require for the act to be punished thereunder not only that the accused issued a check that is dishonored, but that
likewise the accused has actually been notified in writing of the fact of dishonor. The consistent rule is that penal statutes have
NEGOTIATION LAW 10.7.2017 26
to be construed strictly against the State and liberally in favor of the accused. (Bold emphases supplied; italics in the original
text)

In light of the foregoing, the proof of the guilt of the petitioner for a violation of Batas Pambansa Blg. 22 for issuing to Villadolid
the unfunded Chinabank Check No. LPU-A0141332 in the amount of ₱ 50,000.00 did not satisfy the quantum of proof beyond
reasonable doubt. According to Section 2 of Rule 133, Rules of Court, the accused is entitled to an acquittal, unless his guilt is
shown beyond reasonable doubt, which does not mean such a degree of proof as, excluding possibility of error, produces
absolute certainty; only a moral certainty is required, or that degree of proof that produces conviction in an unprejudiced mind.
This is the required quantum, firstly, because the accused is presumed to be innocent until the contrary is proved, and, secondly,
because of the inequality of the position in which the accused finds herself, with the State being arrayed against her with its
unlimited command of means, with counsel usually of authority and capacity, who are regarded as public officers, "and with an
attitude of tranquil majesty often in striking contrast to that of (the accused) engaged in a perturbed and distracting struggle
for liberty if not for life."21

Nonetheless, the civil liability of the petitioner in the principal sum of ₱ 50,000.00, being admitted, was established. She was
further liable for legal interest of 6% per annum on that principal sum, reckoned from the filing of the information in the trial
court. That rate of interest will increase to 12% per annum upon the finality of this decision.

WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of Appeals promulgated on December 4, 2006, and
ACQUITS petitioner AMADA RESTERIO of the violation of Batas Pambansa Blg. 22 as charged for failure to establish her guilt
beyond reasonable doubt.

The Court ORDERS the petitioner to pay to BERNARDO VILLADOLID the amount of ₱ 50,000.00, representing the face value of
Chinabank Check No. LPU-A0141332, with legal interest of 6% per annum from the filing of the information until the finality of this
decision, and thereafter 12% per annum until the principal amount of₱ 50,000.00 is paid.

No pronouncement on costs of suit.

SO ORDERED.


THIRD DIVISION

[G.R. No. 119178. June 20, 1997]

LINA LIM LAO, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

D E C I S I O N
PANGANIBAN, J.:

May an employee who, as part of her regular duties, signs blank corporate checks -- with the name of the payee and the
amount drawn to be filled later by another signatory -- and, therefore, does so without actual knowledge of whether such
checks are funded, be held criminally liable for violation of Batas Pambansa Bilang 22 (B.P. 22), when checks so signed are
dishonored due to insufficiency of funds? Does a notice of dishonor sent to the main office of the corporation constitute a valid
notice to the said employee who holds office in a separate branch and who had no actual knowledge thereof? In other words, is
constructive knowledge of the corporation, but not of the signatory-employee, sufficient?
These are the questions raised in the petition filed on March 21, 1995 assailing the Decision[1] of Respondent Court of
Appeals[2] promulgated on December 9, 1994 in CA-G.R. CR No. 14240 dismissing the appeal of petitioner and affirming the
NEGOTIATION LAW 10.7.2017 27
decision dated September 26, 1990 in Criminal Case Nos. 84-26967 to 84-26969 of the Regional Trial Court of Manila, Branch
33. The dispositive portion of the said RTC decision affirmed by the respondent appellate court reads:[3]

WHEREFORE, after a careful consideration of the evidence presented by the prosecution and that of the defense, the Court
renders judgment as follows:

In Criminal Case No. 84-26969 where no evidence was presented by the prosecution notwithstanding the fact that there was an
agreement that the cases be tried jointly and also the fact that the accused Lina Lim Lao was already arraigned, for failure of the
prosecution to adduce evidence against the accused, the Court hereby declares her innocent of the crime charged and she is
hereby acquitted with cost de oficio.

For Criminal Case No. 84-26967, the Court finds the accused Lina Lim Lao guilty beyond reasonable doubt of the crime charged
and is hereby sentenced to suffer the penalty of ONE (1) YEAR imprisonment and to pay a fine of P150,000.00 without subsidiary
imprisonment in case of insolvency.

For Criminal Case No. 84-26968, the Court finds the accused Lina Lim Lao guilty beyond reasonable doubt of the crime charged
and is hereby sentenced to suffer the penalty of ONE (1) YEAR imprisonment and to pay a fine of P150,000.00 without subsidiary
imprisonment in case of of (sic) insolvency.

For the two cases the accused is ordered to pay the cost of suit.

The cash bond put up by the accused for her provisional liberty in Criminal Case No. 84-26969 where she is declared acquitted is
hereby ordered cancelled (sic).

With reference to the accused Teodulo Asprec who has remained at large, in order that the cases as against him may not remain
pending in the docket for an indefinite period, let the same be archived without prejudice to its subsequent prosecution as soon
as said accused is finally apprehended.

Let a warrant issue for the arrest of the accused Teodulo Asprec which warrant need not be returned to this Court until the
accused is finally arrested.

SO ORDERED.

The Facts

Version of the Prosecution

The facts are not disputed. We thus lift them from the assailed Decision, as follows:

Appellant (and now Petitioner Lina Lim Lao) was a junior officer of Premiere Investment House (Premiere) in its Binondo
Branch. As such officer, she was authorized to sign checks for and in behalf of the corporation (TSN, August 16, 1990, p. 6). In
the course of the business, she met complainant Father Artelijo Pelijo, the provincial treasurer of the Society of the Divine Word
through Mrs. Rosemarie Lachenal, a trader for Premiere. Father Palijo was authorized to invest donations to the society and had
been investing the societys money with Premiere (TSN, June 23, 1987, pp. 5, 9-10). Father Palijo had invested a total
of P514,484.04, as evidenced by the Confirmation of Sale No. 82-6994 (Exh A) dated July 8, 1993. Father Palijo was also issued
Traders Royal Bank (TRB) checks in payment of interest, as follows:

Check Date Amount

299961 Oct. 7, 1993 (sic) P150,000.00 (Exh. B)

299962 Oct. 7, 1983 P150,000.00 (Exh. C)


NEGOTIATION LAW 10.7.2017 28
323835 Oct. 7, 1983 P 26,010.73

All the checks were issued in favor of Artelijo A. Palijo and signed by appellant (herein petitioner) and Teodulo Asprec, who was
the head of operations. Further evidence of the transaction was the acknowledgment of postdated checks dated July 8, 1983
(Exh . D) and the cash disbursement voucher (Exh. F, TSN, supra, at pp. 11-16).

When Father Palijo presented the checks for encashment, the same were dishonored for the reason Drawn Against Insufficient
Funds (DAIF). Father Palijo immediately made demands on premiere to pay him the necessary amounts. He first went to the
Binondo Branch but was referred to the Cubao Main Branch where he was able to talk with the President, Mr. Cario. For his
efforts, he was paid P5,000.00. Since no other payments followed, Father Palijo wrote Premiere a formal letter of
demand. Subsequently, Premiere was placed under receivership (TSN, supra, at pp. 16-19).[4]

Thereafter, on January 24, 1984, Private Complainant Palijo filed an affidavit-complaint against Petitioner Lina Lim Lao and
Teodulo Asprec for violation of B.P. 22. After preliminary investigation,[5] three Informations charging Lao and Asprec with the
offense defined in the first paragraph of Section 1, B.P. 22 were filed by Assistant Fiscal Felix S. Caballes before the trial court on
May 11, 1984,[6] worded as follows:
1. In Criminal Case No. 84-26967:

That on or about October 7, 1983 in the City of Manila, Philippines, the said accused did then and there wilfully and unlawfully
draw and issue to Artelijo A. Palijo to apply on account or for value a Traders Royal Bank Check No. 299962 for P150,000.00
payable to Fr. Artelijo A. Palijo dated October 7, 1983 well knowing that at the time of issue he/she did not have sufficient funds
in or credit with the drawee bank for full payment of the said check upon its presentment as in fact the said check, when
presented within ninety (90) days from the date thereof, was dishonored by the drawee bank for the reason: Insufficient Funds;
that despite notice of such dishonor, said accused failed to pay said Artelijo A. Palijo the amount of the said check or to make
arrangement for full payment of the same within five (5) banking days from receipt of said notice.

CONTRARY TO LAW.

2. In Criminal Case No. 84-26968:

That on or about October 7, 1983 in the City of Manila, Philippines, the said accused did then and there wilfully and unlawfully
draw and issue to Artelijo A. Palijo to apply on account or for value a Traders Royal Bank Check No. 299961 for P150,000.00
payable to Fr. Artelijo A. Palijo dated October 7, 83 well knowing that at the time of issue he/she did not have sufficient funds in
or credit with the drawee bank for full payment of the said check upon its presentment as in fact the said check, when
presented within ninety (90) days from the date thereof, was dishonored by the drawee bank for the reason: Insuficient Funds;
that despite notice of such dishonor, said accused failed to pay said Artelijo A. Palijo the amount of the said check or to make
arrangement for full payment of the same within five (5) banking days from receipt of said notice.

CONTRARY TO LAW.

3. And finally in Criminal Case No. 84-26969:

That on or about July 8, 1983 in the City of Manila, Philippines, the said accused did then and there wilfully and unlawfully draw
and issue to Artelijo A. Palijo to apply on account for value a Traders Royal Bank Check No. 323835 for P26,010.03 payable to Fr.
Artelijo A. Palijo dated October 7, 1983 well knowing that at the time of issue he/she did not have sufficient funds in or credit
with the drawee bank for full payment of the said check upon its presentment as in fact the said check, when presented within
ninety (90) days from the date thereof, was dishonored by the drawee bank for the reason: Insufficient Funds; that despite
notice of such dishonor, said accused failed to pay said Artelijo A. Palijo the amount of the said check or to make arrangement
for full payment of the same within five (5) banking days from receipt of said notice.

CONTRARY TO LAW.

Upon being arraigned, petitioner assisted by counsel pleaded not guilty. Asprec was not arrested; he has remained at large
since the trial, and even now on appeal.
NEGOTIATION LAW 10.7.2017 29
After due trial, the Regional Trial Court convicted Petitioner Lina Lim Lao in Criminal Case Nos. 84-26967 and 84-26968
but acquitted her in Criminal Case No. 84-26969.[7] On appeal, the Court of Appeals affirmed the decision of the trial court.

Version of the Defense

Petitioner aptly summarized her version of the facts of the case thus:

Petitioner Lina Lim Lao was, in 1983, an employee of Premiere Financing Corporation (hereinafter referred to as the
Corporation), a corporation engaged in investment management, with principal business office at Miami, Cubao, Quezon
City. She was a junior officer at the corporation who was, however, assigned not at its main branch but at the corporations
extension office in (Binondo) Manila. (Ocampo, T.S.N., 16 August 1990, p. 14)

In the regular course of her duties as a junior officer, she was required to co-sign checks drawn against the account of the
corporation. The other co-signor was her head of office, Mr. Teodulo Asprec.Since part of her duties required her to be mostly in
the field and out of the office, it was normal procedure for her to sign the checks in blank, that is, without the names of the
payees, the amounts and the dates of maturity. It was likewise Mr. Asprec, as head of office, who alone decided to whom the
checks were to be ultimately issued and delivered. (Lao, T.S.N., 28 September 1989, pp. 9-11, 17, 19.)

In signing the checks as part of her duties as junior officer of the corporation, petitioner had no knowledge of the actual funds
available in the corporate account. (Lao, T.S.N., 28 September 1989, p. 21) The power, duty and responsibility of monitoring and
assessing the balances against the checks issued, and funding the checks thus issued, devolved on the corporations Treasury
Department in its main office in Cubao, Quezon City, headed then by the Treasurer, Ms. Veronilyn Ocampo. (Ocampo, T.S.N., 19
July 1990, p. 4; Lao, T.S.N., 28 September 1989, pp. 21-23) All bank statements regarding the corporate checking account were
likewise sent to the main branch in Cubao, Quezon City, and not in Binondo, Manila, where petitioner was holding
office. (Ocampo, T.S.N., 19 July 1990, p. 24; Marqueses, T.S.N., 22 November 1988, p. 8)

The foregoing circumstances attended the issuance of the checks subject of the instant prosecution.

The checks were issued to guarantee payment of investments placed by private complainant Palijo with Premiere Financing
Corporation. In his transactions with the corporation, private complainant dealt exclusively with one Rosemarie Lachenal, a
trader connected with the corporation, and he never knew nor in any way dealt with petitioner Lina Lim Lao at any time before
or during the issuance of the delivery of the checks. (Palijo, T.S.N., 23 June 1987, pp. 28-29, 32-34; Lao, T.S.N., 15 May 1990, p. 6;
Ocampo, T.S.N., p. 5) Petitioner Lina Lim Lao was not in any way involved in the transaction which led to the issuance of the
checks.

When the checks were co-signed by petitioner, they were signed in advance and in blank, delivered to the Head of Operations,
Mr. Teodulo Asprec, who subsequently filled in the names of the payee, the amounts and the corresponding dates of
maturity. After Mr. Asprec signed the checks, they were delivered to private complainant Palijo. (Lao, T.S.N., 28 September 1989,
pp. 8-11, 17, 19; note also that the trial court in its decision fully accepted the testimony of petitioner [Decision of the Regional Trial
Court, p. 12], and that the Court of Appeals affirmed said decision in toto)

Petitioner Lina Lim Lao was not in any way involved in the completion, and the subsequent delivery of the check to private
complainant Palijo.

At the time petitioner signed the checks, she had no knowledge of the sufficiency or insufficiency of the funds of the corporate
account. (Lao, T.S.N., 28 September 1989, p. 21) It was not within her powers, duties or responsibilities to monitor and assess the
balances against the issuance; much less was it within her (duties and responsibilities) to make sure that the checks were
funded. Premiere Financing Corporation had a Treasury Department headed by a Treasurer, Ms. Veronilyn Ocampo, which alone
had access to information as to account balances and which alone was responsible for funding the issued checks. (Ocampo,
T.S.N., 19 July 1990, p. 4; Lao, T.S.N., 28 September 1990, p. 23) All statements of account were sent to the Treasury Department
located at the main office in Cubao, Quezon City. Petitioner was holding office at the extension in Binondo Manila. (Lao, T.S.N.,
28 September 1989, p. 24-25) Petitioner Lina Lim Lao did not have knowledge of the insufficiency of the funds in the corporate
account against which the checks were drawn.
NEGOTIATION LAW 10.7.2017 30
When the checks were subsequently dishonored, private complainant sent a notice of said dishonor to Premier Financing
Corporation at its head office in Cubao, Quezon City. (Please refer to Exh. E; Palijo, T.S.N., 23 June 1987, p. 51) Private complainant
did not send notice of dishonor to petitioner. (Palijo, T.S.N., 24 July 1987, p. 10) He did not follow up his investment with
petitioner. (Id.)Private complainant never contacted, never informed, and never talked with, petitioner after the checks had
bounced. (Id., at p. 29) Petitioner never had notice of the dishonor of the checks subject of the instant prosecution.

The Treasurer of Premiere Financing Corporation, Ms. Veronilyn Ocampo testified that it was the head office in Cubao, Quezon
City, which received notice of dishonor of the bounced checks.(Ocampo, T.S.N., 19 July 1990, pp. 7-8) The dishonor of the check
came in the wake of the assassination of the late Sen. Benigno Aquino, as a consequence of which event a majority of the
corporations clients pre-terminated their investments. A period of extreme illiquidity and financial distress followed, which
ultimately led to the corporations being placed under receivership by the Securities and Exchange Commission. (Ocampo, T.S.N.,
16 August 1990, p. 8, 19; Lao, T.S.N., 28 September 1989, pp. 25-26; Please refer also to Exhibit 1, the order of receivership issued by
the Securities and Exchange Commission) Despite the Treasury Departments and (Ms. Ocampos) knowledge of the dishonor of
the checks, however, the main office in Cubao, Quezon City never informed petitioner Lina Lim Lao or anybody in the Binondo
office for that matter. (Ocampo, T.S.N., 16 August 1990, pp. 9-10) In her testimony, she justified her omission by saying that the
checks were actually the responsibility of the main office (Ocampo, T.S.N., 19 July 1990, p. 6) and that, at that time of panic
withdrawals and massive pre-termination of clients investments, it was futile to inform the Binondo office since the main office
was strapped for cash and in deep financial distress. (Id., at pp. 7-9) Moreover, the confusion which came in the wake of the
Aquino assassination and the consequent panic withdrawals caused them to lose direct communication with the Binondo
office. (Ocampo, T.S.N., 16 August 1990, p. 9-10)

As a result of the financial crisis and distress, the Securities and Exchange Commission placed Premier Financing Corporation
under receivership, appointing a rehabilitation receiver for the purpose of settling claims against the corporation. (Exh. 1) As he
himself admits, private complainant filed a claim for the payment of the bounced check before and even after the corporation
had been placed under receivership. (Palijo, T.S.N., 24 July 1987, p. 10-17) A check was prepared by the receiver in favor of the
private complainant but the same was not claimed by him. (Lao, T.S.N., 15 May 1990, p. 18)

Private complainant then filed the instant criminal action. On 26 September 1990, the Regional Trial Court of Manila, Branch 33,
rendered a decision convicting petitioner, and sentencing the latter to suffer the aggregate penalty of two (2) years and to pay a
fine in the total amount of P300,000.00. On appeal, the Court of Appeals affirmed said decision. Hence, this petition for
review.[8]

The Issue

In the main, petitioner contends that the public respondent committed a reversible error in concluding that lack of actual
knowledge of insufficiency of funds was not a defense in a prosecution for violation of B.P. 22. Additionally, the petitioner
argues that the notice of dishonor sent to the main office of the corporation, and not to petitioner herself who holds office in
that corporations branch office, does not constitute the notice mandated in Section 2 of BP 22; thus, there can be no prima
facie presumption that she had knowledge of the insufficiency of funds.

The Courts Ruling

The petition is meritorious.

Strict Interpretation of Penal Statutes

It is well-settled in this jurisdiction that penal statutes are strictly construed against the state and liberally for the
accused, so much so that the scope of a penal statute cannot be extended by good intention, implication, or even equity
consideration. Thus, for Petitioner Lina Lim Laos acts to be penalized under the Bouncing Checks Law or B.P. 22, they must come
clearly within both the spirit and the letter of the statute.[9]
NEGOTIATION LAW 10.7.2017 31
The salient portions of B.P. 22 read:

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

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

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

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

This Court listed the elements of the offense penalized under B.P. 22, as follows: (1) the making, drawing and issuance of
any check to apply to 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)
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.[10]
Justice Luis B. Reyes, an eminent authority in criminal law, also enumerated the elements of the offense defined in the first
paragraph of Section 1 of B.P. 22, thus:
1. That a person makes or draws and issues any check.
2. That the check is made or drawn and issued to apply on account or for value.
3. That the person who makes or draws and issues the check knows at the time of issue that he does not have
sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment.
4. That the check is subsequently dishonored by the drawee bank for insufficiency of funds or credit, or would have
been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop
payment.[11]

Crux of the Petition

Petitioner raised as defense before the Court of Appeals her lack of actual knowledge of the insufficiency of funds at the
time of the issuance of the checks, and lack of personal notice of dishonor to her. The respondent appellate court, however,
affirmed the RTC decision, reasoning that the makers knowledge of the insufficiency of funds is legally presumed from the
dishonor of his checks for insufficiency of funds. (People vs. Laggui, 171 SCRA 305; Nieras vs. Hon. Auxencio C. Dacuycuy, 181 SCRA
1)[12] The Court of Appeals also stated that her alleged lack of knowledge or intent to issue a bum check would not exculpate her
from any responsibility under B.P. Blg. 22, since the act of making and issuing a worthless check is a malum prohibitum.[13] In the
words of the Solicitor General, (s)uch alleged lack of knowledge is not material for petitioners liability under B.P.Blg. 22.[14]

Lack of Actual Knowledge of Insufficiency of Funds


NEGOTIATION LAW 10.7.2017 32
Knowledge of insufficiency of funds or credit in the drawee bank for the payment of a check upon its presentment is an
essential element of the offense.[15] There is a prima facie presumption of the existence of this element from the fact of drawing,
issuing or making a check, the payment of which was subsequently refused for insufficiency of funds. It is important to stress,
however, that this is not a conclusive presumption that forecloses or precludes the presentation of evidence to the contrary.
In the present case, the fact alone that petitioner was a signatory to the checks that were subsequently dishonored merely
engenders the prima facie presumption that she knew of the insufficiency of funds, but it does not render her automatically
guilty under B.P. 22. The prosecution has a duty to prove all the elements of the crime, including the acts that give rise to
the prima facie presumption; petitioner, on the other hand, has a right to rebut the prima facie presumption.[16] Therefore, if
such knowledge of insufficiency of funds is proven to be actually absent or non-existent, the accused should not be held liable
for the offense defined under the first paragraph of Section 1 of B.P. 22. Although the offense charged is a malum prohibitum,
the prosecution is not thereby excused from its responsibility of proving beyond reasonable doubt all the elements of the
offense, one of which is knowledge of the insufficiency of funds.
After a thorough review of the case at bar, the Court finds that Petitioner Lina Lim Lao did not have actual knowledge of
the insufficiency of funds in the corporate accounts at the time she affixed her signature to the checks involved in this case, at
the time the same were issued, and even at the time the checks were subsequently dishonored by the drawee bank.
The scope of petitioners duties and responsibilities did not encompass the funding of the corporations checks; her duties
were limited to the marketing department of the Binondo branch.[17] Under the organizational structure of Premiere Financing
Corporation, funding of checks was the sole responsibility of the Treasury Department. Veronilyn Ocampo, former Treasurer of
Premiere, testified thus:
Q Will you please tell us whose (sic) responsible for the funding of checks in Premiere?
A The one in charge is the Treasury Division up to the Treasury Disbursement and then they give it directly to Jose
Cabacan, President of Premiere.[18]
Furthermore, the Regional Trial Court itself found that, since Petitioner Lina Lim Lao was often out in the field taking
charge of the marketing department of the Binondo branch, she signed the checks in blank as to name of the payee and the
amount to be drawn, and without knowledge of the transaction for which they were issued.[19] As a matter of company practice,
her signature was required in addition to that of Teodulo Asprec, who alone placed the name of the payee and the amount to be
drawn thereon. This is clear from her testimony:
q x x x Will you please or will you be able to tell us the condition of this check when you signed this or when you first
saw this check?
Witness
a I signed the check in blank. There were no payee. No amount, no date, sir.
q Why did you sign this check in blank when there was no payee, no amount and no date?
a It is in order to facilitate the transaction, sir.
x x x x x x x x x
COURT
(to witness)
q Is that your practice?
Witness
a Procedure, Your Honor.
COURT
That is quiet (sic) unusual. That is why I am asking that last question if that is a practice of your office.
a As a co-signer, I sign first, sir.
q So the check cannot be encashed without your signature, co-signature?
a Yes, sir.
NEGOTIATION LAW 10.7.2017 33
Atty. Gonzales
(to witness)
q Now, you said that you sign first, after you sign, who signs the check?
a Mr. Teodoro Asprec, sir.
q Is this Teodoro Asprec the same Teodoro Asprec, one of the accused in all these cases?
a Yes, sir.
q Now, in the distribution or issuance of checks which according to you, as a co-signee, you sign. Who determines to
whom to issue or to whom to pay the check after Teodoro Asprec signs the check?
Witness
a He is the one.
Atty. Gonzales
q Mr. Asprec is the one in-charge in . . . are you telling the Honorable Court that it was Teodoro Asprec who
determines to whom to issue the check? Does he do that all the time?
Court
q Does he all the time?
(to witness)
a Yes, Your Honor.
q So the check can be negotiated? So, the check can be good only upon his signing? Without his signing or signature
the check cannot be good?
a Yes, Your Honor.
Atty. Gonzales
(to witness)
q You made reference to a transaction which according to you, you signed this check in order to facilitate the
transaction . . . I withdraw that question. I will reform.
COURT
(for clarification to witness)
Witness may answer.
q Only to facilitate your business transaction, so you signed the other checks?
Witness
a Yes, Your Honor.
q So that when ever there is a transaction all is needed . . . all that is needed is for the other co-signee to sign?
a Yes, Your Honor.
COURT
(To counsel)
Proceed.
Atty. Gonzales
(to witness)
q Why is it necessary for you to sign?
NEGOTIATION LAW 10.7.2017 34
a Because most of the time I am out in the field in the afternoon, so, in order to facilitate the transaction I sign so if I am
not around they can issue the check.[20]
Petitioner did not have any knowledge either of the identity of the payee or the transaction which gave rise to the issuance
of the checks. It was her co-signatory, Teodulo Asprec, who alone filled in the blanks, completed and issued the checks. That
Petitioner Lina Lim Lao did not have any knowledge or connection with the checks payee, Artelijo Palijo, is clearly evident even
from the latters testimony, viz.:
ATTY. GONZALES:
Q When did you come to know the accused Lina Lim Lao?
A I cannot remember the exact date because in their office Binondo, --
COURT: (before witness could finish)
Q More or less?
A It must have been late 1983.
ATTY. GONZALES:
Q And that must or that was after the transactions involving alleged checks marked in evidence as Exhibits B and C?
A After the transactions.
Q And that was also before the transaction involving that confirmation of sale marked in evidence as Exhibit A?
A It was also.
Q And so you came to know the accused Lina Lim Lao when all those transactions were already consummated?
A Yes, sir.
Q And there has never been any occasion where you transacted with accused Lina Lim Lao, is that correct?
A None, sir, there was no occasion.
Q And your coming to know Lina Lim Lao the accused in these cases was by chance when you happened to drop by in
the office at Binondo of the Premier Finance Corporation, is that what you mean?
A Yes, sir.
Q You indicated to the Court that you were introduced to the accused Lina Lim Lao, is that correct?
A I was introduced.
x x x x x x x x x
Q After that plain introduction there was nothing which transpired between you and the accused Lina Lim Lao?
A There was none.[21]
Since Petitioner Lina Lim Lao signed the checks without knowledge of the insufficiency of funds, knowledge she was not
expected or obliged to possess under the organizational structure of the corporation, she may not be held liable under B.P.
22. For in the final analysis, penal statutes such as B.P. 22 must be construed with such strictness as to carefully safeguard the
rights of the defendant x x x.[22] The element of knowledge of insufficiency of funds having been proven to be absent, petitioner
is therefore entitled to an acquittal.
This position finds support in Dingle vs. Intermediate Appellate Court[23] where we stressed that knowledge of insufficiency
of funds at the time of the issuance of the check was an essential requisite for the offense penalized under B.P. 22. In that case,
the spouses Paz and Nestor Dingle owned a family business known as PMD Enterprises. Nestor transacted the sale of 400 tons
of silica sand to the buyer Ernesto Ang who paid for the same. Nestor failed to deliver. Thus, he issued to Ernesto two checks,
signed by him and his wife as authorized signatories for PMD Enterprises, to represent the value of the undelivered silica
sand. These checks were dishonored for having been drawn against insufficient funds. Nestor thereafter issued to Ernesto
another check, signed by him and his wife Paz, which was likewise subsequently dishonored. No payment was ever made;
hence, the spouses were charged with a violation of B.P. 22 before the trial court which found them both guilty. Paz appealed
the judgment to the then Intermediate Appellate Court which modified the same by reducing the penalty of imprisonment to
NEGOTIATION LAW 10.7.2017 35
thirty days. Not satisfied, Paz filed an appeal to this Court insisting on her innocence and contending that she did not incur
any criminal liability under B.P. 22 because she had no knowledge of the dishonor of the checks issued by her husband and, for
that matter, even the transaction of her husband with Ang. The Court ruled in Dingle as follows:

The Solicitor General in his Memorandum recommended that petitioner be acquitted of the instant charge because from the
testimony of the sole prosecution witness Ernesto Ang, it was established that he dealt exclusively with Nestor Dingle. Nowhere
in his testimony is the name of Paz Dingle ever mentioned in connection with the transaction and with the issuance of the
check. In fact, Ang categorically stated that it was Nestor Dingle who received his two (2) letters of demand. This lends credence
to the testimony of Paz Dingle that she signed the questioned checks in blank together with her husband without any
knowledge of its issuance, much less of the transaction and the fact of dishonor.

In the case of Florentino Lozano vs. Hon. Martinez, promulgated December 18, 1986, it was held that 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.

WHEREFORE, on reasonable doubt, the assailed decision of the Intermediate Appellate Court (now the Court of Appeals) is
hereby SET ASIDE and a new one is hereby rendered ACQUITTING petitioner on reasonable doubt."[24]

In rejecting the defense of herein petitioner and ruling that knowledge of the insufficiency of funds is legally presumed
from the dishonor of the checks for insufficiency of funds,Respondent Court of Appeals cited People vs. Laggui[25] and Nierras vs.
Dacuycuy.[26] These, however, are inapplicable here. The accused in both cases issued personal -- not corporate -- checks and did
not aver lack of knowledge of insufficiency of funds or absence of personal notice of the checks
dishonor. Furthermore, in People vs. Laggui[27] the Court ruled mainly on the adequacy of an information which alleged lack of
knowledge of insufficiency of funds at the time the check was issued and not at the time of its presentment. On the other hand,
the Court in Nierras vs. Dacuycuy[28] held mainly that an accused may be charged under B.P. 22 and Article 315 of the Revised
Penal Code for the same act of issuing a bouncing check.
The statement in the two cases -- that mere issuance of a dishonored check gives rise to the presumption of knowledge on
the part of the drawer that he issued the same without funds -- does not support the CA Decision. As observed earlier, there is
here only a prima facie presumption which does not preclude the presentation of contrary evidence.On the contrary, People vs.
Laggui clearly spells out as an element of the offense the fact that the drawer must have knowledge of the insufficiency of funds
in, or of credit with, the drawee bank for the payment of the same in full on presentment; hence, it even supports the
petitioners position.

Lack of Adequate Notice of Dishonor

There is another equally cogent reason for the acquittal of the accused. There can be no prima facie evidence of knowledge
of insufficiency of funds in the instant case because no notice of dishonor was actually sent to or received by the petitioner.
The notice of dishonor may be sent by the offended party or the drawee bank. The trial court itself found absent a personal
notice of dishonor to Petitioner Lina Lim Lao by the drawee bank based on the unrebutted testimony of Ocampo (t)hat the
checks bounced when presented with the drawee bank but she did not inform anymore the Binondo branch and Lina Lim Lao as
there was no need to inform them as the corporation was in distress.[29] The Court of Appeals affirmed this factual
finding. Pursuant to prevailing jurisprudence, this finding is binding on this Court.[30]
Indeed, this factual matter is borne by the records. The records show that the notice of dishonor was addressed to
Premiere Financing Corporation and sent to its main office in Cubao, Quezon City. Furthermore, the same had not been
transmitted to Premieres Binondo Office where petitioner had been holding office.
Likewise no notice of dishonor from the offended party was actually sent to or received by Petitioner Lao. Her testimony
on this point is as follows:
Atty. Gonzales
q Will you please tell us if Father Artelejo Palejo (sic) ever notified you of the bouncing of the check or the two (2)
checks marked as Exhibit B or C for the prosecution?
Witness
NEGOTIATION LAW 10.7.2017 36
a No, sir.
q What do you mean no, sir?
a I was never given a notice. I was never given notice from Father Palejo (sic).
COURT
(to witness)
q Notice of what?
a Of the bouncing check, Your Honor.[31]
Because no notice of dishonor was actually sent to and received by the petitioner, the prima facie presumption that she
knew about the insufficiency of funds cannot apply.Section 2 of B.P. 22 clearly provides that this presumption arises not from
the mere fact of drawing, making and issuing a bum check; there must also be a showing that, within five banking days from
receipt of the notice of dishonor, such maker or drawer failed to pay the holder of the check the amount due thereon or to make
arrangement for its payment in full by the drawee of such check.
It has been observed that the State, under this statute, actually offers the violator a compromise by allowing him to
perform some act which operates to preempt the criminal action, and if he opts to perform it the action is abated. This was also
compared to certain laws[32] allowing illegal possessors of firearms a certain period of time to surrender the illegally possessed
firearms to the Government, without incurring any criminal liability.[33] In this light, the full payment of the amount appearing in
the check within five banking days from notice of dishonor is a complete defense.[34] The absence of a notice of dishonor
necessarily deprives an accused an opportunity to preclude a criminal prosecution.Accordingly, procedural due process clearly
enjoins that a notice of dishonor be actually served on petitioner. Petitioner has a right to demand -- and the basic postulates of
fairness require -- that the notice of dishonor be actually sent to and received by her to afford her the opportunity to avert
prosecution under B.P. 22.
In this light, the postulate of Respondent Court of Appeals that (d)emand on the Corporation constitutes demand on
appellant (herein petitioner),[35] is erroneous. Premiere has no obligation to forward the notice addressed to it to the employee
concerned, especially because the corporation itself incurs no criminal liability under B.P. 22 for the issuance of a bouncing
check. Responsibility under B.P. 22 is personal to the accused; hence, personal knowledge of the notice of dishonor is
necessary. Consequently, constructive notice to the corporation is not enough to satisfy due process. Moreover, it is petitioner,
as an officer of the corporation, who is the latters agent for purposes of receiving notices and other documents, and not the
other way around. It is but axiomatic that notice to the corporation, which has a personality distinct and separate from the
petitioner, does not constitute notice to the latter.

Epilogue

In granting this appeal, the Court is not unaware of B.P. 22s intent to inculcate public respect for and trust in checks which,
although not legal tender, are deemed convenient substitutes for currency. B.P. 22 was intended by the legislature to enhance
commercial and financial transactions in the Philippines by penalizing makers and issuers of worthless checks. The public
interest behind B.P. 22 is thus clearly palpable from its intended purpose.[36]
At the same time, this Court deeply cherishes and is in fact bound by duty to protect our peoples constitutional rights to
due process and to be presumed innocent until the contrary is proven.[37] These rights must be read into any interpretation and
application of B.P. 22. Verily, the public policy to uphold civil liberties embodied in the Bill of Rights necessarily outweighs the
public policy to build confidence in the issuance of checks. The first is a basic human right while the second is only proprietary in
nature.[38] Important to remember also is B.P. 22s requirements that the check issuer must know at the time of issue that he
does not have sufficient funds in or credit with the drawee bank and that he must receive notice that such check has not been
paid by the drawee. Hence, B.P. 22 must not be applied in a manner which contravenes an accuseds constitutional and statutory
rights.
There is also a social justice dimension in this case. Lina Lim Lao is only a minor employee who had nothing to do with the
issuance, funding and delivery of checks. Why she was required by her employer to countersign checks escapes us. Her
signature is completely unnecessary for it serves no fathomable purpose at all in protecting the employer from unauthorized
disbursements. Because of the pendency of this case, Lina Lim Lao stood in jeopardy -- for over a decade -- of losing her liberty
and suffering the wrenching pain and loneliness of imprisonment, not to mention the stigma of prosecution on her career and
NEGOTIATION LAW 10.7.2017 37
family life as a young mother, as well as the expenses, effort and aches in defending her innocence. Upon the other hand, the
senior official -- Teodulo Asprec -- who appears responsible for the issuance, funding and delivery of the worthless checks has
escaped criminal prosecution simply because he could not be located by the authorities. The case against him has been archived
while the awesome prosecutory might of the government and the knuckled ire of the private complainant were all focused on
poor petitioner. Thus, this Court exhorts the prosecutors and the police authorities concerned to exert their best to arrest and
prosecute Asprec so that justice in its pristine essence can be achieved in all fairness to the complainant, Fr. Artelijo Palijo, and
the People of the Philippines. By this Decision, the Court enjoins the Secretary of Justice and the Secretary of Interior and Local
Government to see that essential justice is done and the real culprit(s) duly-prosecuted and punished.
WHEREFORE, the questioned Decision of the Court of Appeals affirming that of the Regional Trial Court, is
hereby REVERSED and SET ASIDE. Petitioner Lina Lim Lao is ACQUITTED. The Clerk of Court is hereby ORDERED to furnish the
Secretary of Justice and the Secretary of Interior and Local Government with copies of this Decision. No costs.
SO ORDERED.
THIRD DIVISION

[G.R. NO. 139292. December 5, 2000]

JOSEPHINE DOMAGSANG, petitioner, vs. THE HONORABLE COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

D E C I S I O N
VITUG, J.:

Petitioner was convicted by the Regional Trial Court of Makati, Branch 63, of having violated Batas Pambansa ("B.P.") Blg.
22 (Anti-Bouncing Check Law), on eighteen (18) counts, and sentenced to "suffer the penalty of One (1) Year imprisonment for
each count (eighteen [18] counts)." Petitioner was likewise ordered to pay the private complainant the amount of
P573,800.00.[1] The judgment, when appealed to the Court of Appeals (CA-G.R. CR No. 18497), was affirmed in toto by the
appellate court.
It would appear that petitioner approached complainant Ignacio Garcia, an Assistant Vice President of METROBANK, to ask
for financial assistance. Garcia accommodated petitioner and gave the latter a loan in the sum of P573,800.00. In exchange,
petitioner issued and delivered to the complainant 18 postdated checks for the repayment of the loan.When the checks were, in
time, deposited, the instruments were all dishonored by the drawee bank for this reason: Account closed. The complainant
demanded payment allegedly by calling up petitioner at her office. Failing to receive any payment for the value of the
dishonored checks, the complainant referred the matter to his lawyer who supposedly wrote petitioner a letter of demand but
that the latter ignored the demand.
On 08 May 1992, Criminal Case No. 92-4465 was lodged against petitioner before the Regional Trial Court ("RTC") of
Makati. The Information read:

"That on or about the 24th day of June, 1991, in the Municipality of Makati, Metro Manila, Philippines, and within the jurisdiction
of this Honorable Court, the above-named accused, did then and there willfully, unlawfully and feloniously make out, draw and
issue to complainant Ignacio H. Garcia, Jr., to apply on account or for value the dated check/described below:

"Check No. : 149900

Drawn Against : Traders Royal Bank

In the Amount of : P50,000.00

Dated/Postdated : June 24, 1991

Payable to : Ignacio H. Garcia, Jr.


NEGOTIATION LAW 10.7.2017 38
"said accused well knowing that at the time of issue thereof, she did not have sufficient funds in or credit with the
drawee bank for the payment in full of the face amount of such check upon its presentment, which check when presented
for payment within ninety (90) days from the date thereof was subsequently dishonored by the drawee bank for the
reason `ACCOUNT CLOSED' and despite receipt of notice of such dishonor, the accused failed to pay said payee the face
amount of said check or to make arrangement for full payment thereof within five (5) banking days after receiving notice.

"CONTRARY TO LAW."[2]

Subsequent Informations, docketed Criminal Cases No. 92-4466 to No. 92-4482, inclusive, similarly worded as in Criminal Case
No. 92-4465 except as to the dates, the number, and the amounts of the checks hereunder itemized -
"Check Number Dated/Postdated Amount
TRB No. 161181 July 18, 1991 P6,000.00
TRB No. 149906 July 24, 1991 3,000.00
No. 182074 July 30, 1991 29,700.00
No. 182084 August 30, 1991 9,300.00
No. 182078 September 15, 1991 6,000.00
No. 161183 September 18, 1991 6,000.00
No. 161177 September 18, 1991 100,000.00
No. 182085 September 30, 1991 9,000.00
No. 182079 October 15, 1991 6,000.00
No. 182086 October 30, 1991 10,500.00
No. 182080 November 15, 1991 6,000.00
No. 182087 November 30, 1991 11,400.00
No. 182081 December 15, 1991 6,000.00
No. 182082 December 15, 1991 100,000.00
No. 182088 December 30, 1991 12,000.00
No. 182089 December 30, 1991 100,000.00
No. 182090 December 30, 1991 100,000.00"[3]
were also filed against petitioner. The cases were later consolidated and jointly tried following the "not guilty" plea of petitioner
when arraigned on 02 November 1992.
On 07 September 1993, petitioner filed a demurrer to the evidence, with leave of court, premised on the absence of a
demand letter and that the checks were not issued as payment but as evidence of indebtedness of petitioner or as collaterals of
the loans obtained by petitioner. Opposed by the prosecution, the demurrer was denied by the trial court.In the hearing of 17
February 1994, petitioner, through counsel, waived her right to present evidence in her defense. Relying solely then on the
evidence submitted by the prosecution, the lower court rendered judgment convicting petitioner. The decision, as heretofore
stated, was affirmed by the Court of Appeals in its decision of 15 February 1999.Reconsideration was also denied in the
resolution, dated 09 July 1999, of the appellate court.
Hence, the instant petition where petitioner raised the following issues for resolution by the Court -

"1. Whether or not an alleged verbal demand to pay sufficient to convict herein petitioner for the crime of violation of B.P. Blg.
22;

"2. Whether or not the Honorable Court of Appeals committed reversible error when it affirmed the judgment of conviction
rendered by the trial court, on the ground that a written notice of dishonor is not necessary in a prosecution for violation of B.P.
Blg. 22, contrary to the pronouncement of the Supreme Court in the case of Lao vs. Court of Appeals, 274 SCRA 572; (and)

"3. Whether or not the Honorable Court of Appeals erred in considering the alleged written demand letter, despite failure of the
prosecution to formally offer the same."[4]

The pertinent provisions of B.P. Blg. 22 "Bouncing Checks Law," provide:

"SECTION 1. Checks without sufficient funds. Any person who makes or draws and issues any check to apply on account or for
value, knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of
such check in full upon its presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds
NEGOTIATION LAW 10.7.2017 39
or credit or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the
bank to stop payment, shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by fine
of not less than but not more than double the amount of the check which fine shall in no case exceed Two Hundred Thousand
pesos, or both such fine and imprisonment at the discretion of the court.

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

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

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

"SEC. 3. Duty of drawee; rules of evidence. It shall be the duty of the drawee of any check, when refusing to pay the same to the
holder thereof upon presentment, to cause to be written, printed or stamped in plain language thereon, or attached thereto,
the reason for drawee's dishonor or refusal to pay the same: Provided, That where there are no sufficient funds in or credit with
such drawee bank, such fact shall always be explicitly stated in the notice of dishonor or refusal. In all prosecutions under this
Act, the introduction in evidence of any unpaid and dishonored check, having the drawee's refusal to pay stamped or written
thereon, or attached thereto, with the reason therefor as aforesaid, shall be prima facieevidence of the making or issuance of
said check, and the due presentment to the drawee for payment and the dishonor thereof, and that the same was properly
dishonored for the reason written, stamped or attached by the drawee on such dishonored check.

"Notwithstanding receipt of an order to stop payment, the drawee shall state in the notice that there were no sufficient funds in
or credit with such bank for the payment in full of such check, if such be the fact."[5] (Underscoring supplied.)

The law enumerates the elements of the crime to be (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 the 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.[6]
There is deemed to be a prima facie evidence of knowledge on the part of the maker, drawer or issuer of insufficiency of
funds in or credit with the drawee bank of the check issued if the dishonored check is presented within 90 days from the date of
the check and the maker or drawer fails to pay thereon or to make arrangement with the drawee bank for that purpose. The
statute has created the prima facie presumption evidently because "knowledge" which involves a state of mind would be
difficult to establish.[7] The presumption does not hold, however, when the maker, drawer or issuer of the check pays the holder
thereof the amount due thereon or makes arrangement for payment in full by the drawee bank of such check within 5 banking
days after receiving notice that such check has not been paid by the drawee bank.
In Lao vs. Court of Appeals,[8] this Court explained:

x x x. Section 2 of B.P. Blg. 22 clearly provides that this presumption arises not from the mere fact of drawing, making and
issuing a bum check; there must also be a showing that, within five banking days from receipt of the notice of dishonor, such
maker or drawer failed to pay the holder of the check the amount due thereon or to make arrangement for its payment in full by
the drawee of such check.

It has been observed that the State, under this statute, actually offers the violator `a compromise by allowing him to perform
some act which operates to preempt the criminal action, and if he opts to perform it the action is abated. This was also
compared `to certain laws allowing illegal possessors of firearms a certain period of time to surrender the illegally possessed
firearms to the Government, without incurring any criminal liability. In this light, the full payment of the amount appearing in the
check within five banking days from notice of dishonor is a `complete defense. The absence of a notice of dishonor necessarily
NEGOTIATION LAW 10.7.2017 40
deprives an accused an opportunity to preclude a criminal prosecution. Accordingly, procedural due process clearly enjoins
that a notice of dishonor be actually served on petitioner. Petitioner has a right to demand and the basic postulates of fairness
require that the notice of dishonor be actually sent to and received by her to afford her the opportunity to avert prosecution
under B.P. Blg. 22.[9]

In the assailed decision, the Court of Appeals predicated the conviction of petitioner on the supposed fact that petitioner
was informed of the dishonor of the checks through verbal notice when the complainant had called her up by telephone
informing her of the dishonor of the checks and demanding payment therefor. The appellate court said:

"The maker's knowledge of the insufficiency of his funds is legally presumed from the dishonor of his check (People vs. Laggui,
171 Phil. 305). The law does not require a written notice of the dishonor of such check.

"In the instant case, appellant had knowledge that her checks were dishonored by the bank when complainant Garcia made
several oral demands upon her to pay the value of the checks in the amount of P573,800.00. Despite said demands, appellant
failed and refused to pay the same. Moreover, complaining witness further testified that his lawyer made a written demand
upon appellant but the latter ignored said demand (tsn., May 27, 1993, pp. 13-14). In this connection, appellant waived her right
to present evidence or rebut complainant's testimony that he made oral demands upon appellant to make good the dishonored
checks and his lawyer wrote her a demand letter.

"Likewise, appellant did not object to the admission of the complainant's testimony with regard to the written demand by
moving that it be stricken off the record for being hearsay, hence, the same is admissible evidence. In the case of People vs.
Garcia, 89 SCRA 440, the Supreme court ruled:

"`x x x (It) must be noted that neither the defendant nor his counsel below objected to the admission of the testimonies which
are now being assailed as hearsay. This is fatal to defendant-appellant's present posture since the failure to object to hearsay
evidence constitutes a waiver of the x x right to cross-examine the actual witness to the occurrence, rendering the evidence
admissible.'"[10]

Petitioner counters that the lack of a written notice of dishonor is fatal. The Court agrees.
While, indeed, Section 2 of B.P. Blg. 22 does not state that the notice of dishonor be in writing, taken in conjunction,
however, with Section 3 of the law, i.e., "that where there are no sufficient funds in or credit with such drawee bank, such
fact shall always be explicitly stated in the notice of dishonor or refusal,"[11] a mere oral notice or demand to pay would appear
to be insufficient for conviction under the law. The Court is convinced that both the spirit and letter of the Bouncing Checks Law
would require for the act to be punished thereunder not only that the accused issued a check that is dishonored, but that
likewise the accused has actually been notified in writing of the fact of dishonor.[12] The consistent rule is that penal statutes
have to be construed strictly against the State and liberally in favor of the accused.[13]
Evidently, the appellate court did not give weight and credence to the assertion that a demand letter was sent by a counsel
of the complainant because of the failure of the prosecution to formally offer it in evidence. Courts are bound to consider as
part of the evidence only those which are formally offered[14]for judges must base their findings strictly on the evidence
submitted by the parties at the trial.[15] Without the written notice of dishonor, there can be no basis, considering what has
heretofore been said, for establishing the presence of "actual knowledge of insufficiency of funds."[16]
The prosecution may have failed to sufficiently establish a case to warrant conviction, however, it has clearly proved
petitioner's failure to pay a just debt owing to the private complainant. The total face value of the dishonored checks, to wit-
Check Number Dated/Postdated Amount
TRB No. 149900 June 24, 1991 P50,000.00
TRB No. 161181 July 18, 1991 6,000.00
TRB No. 149906 July 24, 1991 3,000.00
No. 182074 July 30, 1991 29,700.00
No. 182084 August 30, 1991 1,300.00
No. 182078 September 15, 1991 6,000.00
No. 161183 September 18, 1991 6,000.00
No. 161171 September 18, 1991 100,000.00
No. 182085 September 30, 1991 9,900.00
No. 182079 October 15, 1991 6,000.00
NEGOTIATION LAW 10.7.2017 41
No. 182086 October 30, 1991 10,500.00
No. 182080 November 15, 1991 6,000.00
No. 182087 November 30, 1991 11,400.00
No. 182081 December 15, 1991 6,000.00
No. 182082 December 15, 1991 100,000.00
No. 182088 December 30, 1991 12,000.00
No. 182089 December 30, 1991 100,000.00
No. 182090 December 30, 1991 100,000.00"[17]
or the sum of P563,800, has yet to be made good by petitioner. This amount, with 12% legal interest per annum from the filing of
the information until the finality of this decision, must be forthwith settled.
WHEREFORE, the decision of the Court of Appeals is MODIFIED. Petitioner Josephine Domagsang is acquitted of the crime
charged on reasonable doubt. She is ordered, however, to pay to the offended party the face value of the checks in the total
amount of P563,800.00 with 12% legal interest, per annum, from the filing of the informations until the finality of this decision,
the sum of which, inclusive of the interest, shall be subject thereafter to 12%, per annum, interest until the due amount is
paid. Costs against petitioner.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 107382/G.R. No. 107612 January 31, 1996

ASSOCIATED BANK, petitioner,


vs.
HON. COURT OF APPEALS, PROVINCE OF TARLAC and PHILIPPINE NATIONAL BANK, respondents.

x x x x x x x x x x x x x x x x x x x x x

G.R. No. 107612 January 31, 1996

PHILIPPINE NATIONAL BANK, petitioner,


vs.
HONORABLE COURT OF APPEALS, PROVINCE OF TARLAC, and ASSOCIATED BANK, respondents.

D E C I S I O N

ROMERO, J.:

Where thirty checks bearing forged endorsements are paid, who bears the loss, the drawer, the drawee bank or the collecting
bank?

This is the main issue in these consolidated petitions for review assailing the decision of the Court of Appeals in "Province of
Tarlac v. Philippine National Bank v. Associated Bank v. Fausto Pangilinan, et. al." (CA-G.R. No. CV No. 17962). 1

The facts of the case are as follows:

The Province of Tarlac maintains a current account with the Philippine National Bank (PNB) Tarlac Branch where the provincial
funds are deposited. Checks issued by the Province are signed by the Provincial Treasurer and countersigned by the Provincial
Auditor or the Secretary of the Sangguniang Bayan.
NEGOTIATION LAW 10.7.2017 42
2
A portion of the funds of the province is allocated to the Concepcion Emergency Hospital. The allotment checks for said
government hospital are drawn to the order of "Concepcion Emergency Hospital, Concepcion, Tarlac" or "The Chief, Concepcion
Emergency Hospital, Concepcion, Tarlac." The checks are released by the Office of the Provincial Treasurer and received for the
hospital by its administrative officer and cashier.

In January 1981, the books of account of the Provincial Treasurer were post-audited by the Provincial Auditor. It was then
discovered that the hospital did not receive several allotment checks drawn by the Province.

On February 19, 1981, the Provincial Treasurer requested the manager of the PNB to return all of its cleared checks which were
issued from 1977 to 1980 in order to verify the regularity of their encashment. After the checks were examined, the Provincial
Treasurer learned that 30 checks amounting to P203,300.00 were encashed by one Fausto Pangilinan, with the Associated Bank
acting as collecting bank.

It turned out that Fausto Pangilinan, who was the administrative officer and cashier of payee hospital until his retirement on
February 28, 1978, collected the questioned checks from the office of the Provincial Treasurer. He claimed to be assisting or
helping the hospital follow up the release of the checks and had official receipts. 3 Pangilinan sought to encash the first
check 4 with Associated Bank. However, the manager of Associated Bank refused and suggested that Pangilinan deposit the
check in his personal savings account with the same bank. Pangilinan was able to withdraw the money when the check was
cleared and paid by the drawee bank, PNB.

After forging the signature of Dr. Adena Canlas who was chief of the payee hospital, Pangilinan followed the same procedure
for the second check, in the amount of P5,000.00 and dated April 20, 1978, 5 as well as for twenty-eight other checks of various
amounts and on various dates. The last check negotiated by Pangilinan was for f8,000.00 and dated February 10, 1981. 6 All the
checks bore the stamp of Associated Bank which reads "All prior endorsements guaranteed ASSOCIATED BANK."

Jesus David, the manager of Associated Bank testified that Pangilinan made it appear that the checks were paid to him for
certain projects with the hospital. 7 He did not find as irregular the fact that the checks were not payable to Pangilinan but to the
Concepcion Emergency Hospital. While he admitted that his wife and Pangilinan's wife are first cousins, the manager denied
having given Pangilinan preferential treatment on this account. 8

On February 26, 1981, the Provincial Treasurer wrote the manager of the PNB seeking the restoration of the various amounts
debited from the current account of the Province. 9

In turn, the PNB manager demanded reimbursement from the Associated Bank on May 15, 1981. 10

As both banks resisted payment, the Province of Tarlac brought suit against PNB which, in turn, impleaded Associated Bank as
third-party defendant. The latter then filed a fourth-party complaint against Adena Canlas and Fausto Pangilinan. 11

After trial on the merits, the lower court rendered its decision on March 21, 1988, disposing as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1. On the basic complaint, in favor of plaintiff Province of Tarlac and against defendant Philippine National Bank (PNB),
ordering the latter to pay to the former, the sum of Two Hundred Three Thousand Three Hundred (P203,300.00) Pesos
with legal interest thereon from March 20, 1981 until fully paid;

2. On the third-party complaint, in favor of defendant/third-party plaintiff Philippine National Bank (PNB) and against
third-party defendant/fourth-party plaintiff Associated Bank ordering the latter to reimburse to the former the amount
of Two Hundred Three Thousand Three Hundred (P203,300.00) Pesos with legal interests thereon from March 20, 1981
until fully paid;.

3. On the fourth-party complaint, the same is hereby ordered dismissed for lack of cause of action as against fourth-
party defendant Adena Canlas and lack of jurisdiction over the person of fourth-party defendant Fausto Pangilinan as
against the latter.
NEGOTIATION LAW 10.7.2017 43
4. On the counterclaims on the complaint, third-party complaint and fourth-party complaint, the same are hereby
ordered dismissed for lack of merit.

SO ORDERED. 12

PNB and Associated Bank appealed to the Court of Appeals. 13 Respondent court affirmed the trial court's decision in toto on
September 30, 1992.

Hence these consolidated petitions which seek a reversal of respondent appellate court's decision.

PNB assigned two errors. First, the bank contends that respondent court erred in exempting the Province of Tarlac from liability
when, in fact, the latter was negligent because it delivered and released the questioned checks to Fausto Pangilinan who was
then already retired as the hospital's cashier and administrative officer. PNB also maintains its innocence and alleges that as
between two innocent persons, the one whose act was the cause of the loss, in this case the Province of Tarlac, bears the loss.

Next, PNB asserts that it was error for the court to order it to pay the province and then seek reimbursement from Associated
Bank. According to petitioner bank, respondent appellate Court should have directed Associated Bank to pay the adjudged
liability directly to the Province of Tarlac to avoid circuity. 14

Associated Bank, on the other hand, argues that the order of liability should be totally reversed, with the drawee bank (PNB)
solely and ultimately bearing the loss.

Respondent court allegedly erred in applying Section 23 of the Philippine Clearing House Rules instead of Central Bank Circular
No. 580, which, being an administrative regulation issued pursuant to law, has the force and effect of law. 15 The PCHC Rules are
merely contractual stipulations among and between member-banks. As such, they cannot prevail over the aforesaid CB Circular.

It likewise contends that PNB, the drawee bank, is estopped from asserting the defense of guarantee of prior indorsements
against Associated Bank, the collecting bank. In stamping the guarantee (for all prior indorsements), it merely followed a
mandatory requirement for clearing and had no choice but to place the stamp of guarantee; otherwise, there would be no
clearing. The bank will be in a "no-win" situation and will always bear the loss as against the drawee bank. 16

Associated Bank also claims that since PNB already cleared and paid the value of the forged checks in question, it is now
estopped from asserting the defense that Associated Bank guaranteed prior indorsements. The drawee bank allegedly has the
primary duty to verify the genuineness of payee's indorsement before paying the check. 17

While both banks are innocent of the forgery, Associated Bank claims that PNB was at fault and should solely bear the loss
because it cleared and paid the forged checks.

xxx xxx xxx

The case at bench concerns checks payable to the order of Concepcion Emergency Hospital or its Chief. They were properly
issued and bear the genuine signatures of the drawer, the Province of Tarlac. The infirmity in the questioned checks lies in the
payee's (Concepcion Emergency Hospital) indorsements which are forgeries. At the time of their indorsement, the checks were
order instruments.

Checks having forged indorsements should be differentiated from forged checks or checks bearing the forged signature of the
drawer.

Section 23 of the Negotiable Instruments Law (NIL) provides:

Sec. 23. FORGED SIGNATURE, EFFECT OF. — When a signature is forged or made without authority of the person whose
signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge
therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature
unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of
authority.
NEGOTIATION LAW 10.7.2017 44
A forged signature, whether it be that of the drawer or the payee, is wholly inoperative and no one can gain title to the
instrument through it. A person whose signature to an instrument was forged was never a party and never consented to the
contract which allegedly gave rise to such instrument. 18 Section 23 does not avoid the instrument but only the forged
signature. 19 Thus, a forged indorsement does not operate as the payee's indorsement.

The exception to the general rule in Section 23 is where "a party against whom it is sought to enforce a right is precluded from
setting up the forgery or want of authority." Parties who warrant or admit the genuineness of the signature in question and
those who, by their acts, silence or negligence are estopped from setting up the defense of forgery, are precluded from using
this defense. Indorsers, persons negotiating by delivery and acceptors are warrantors of the genuineness of the signatures on
the instrument. 20

In bearer instruments, the signature of the payee or holder is unnecessary to pass title to the instrument. Hence, when the
indorsement is a forgery, only the person whose signature is forged can raise the defense of forgery against a holder in due
course. 21

The checks involved in this case are order instruments, hence, the following discussion is made with reference to the effects of a
forged indorsement on an instrument payable to order.

Where the instrument is payable to order at the time of the forgery, such as the checks in this case, the signature of its rightful
holder (here, the payee hospital) is essential to transfer title to the same instrument. When the holder's indorsement is forged,
all parties prior to the forgery may raise the real defense of forgery against all parties subsequent thereto. 22

An indorser of an order instrument warrants "that the instrument is genuine and in all respects what it purports to be; that he
has a good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his indorsement
valid and subsisting." 23 He cannot interpose the defense that signatures prior to him are forged.

A collecting bank where a check is deposited and which indorses the check upon presentment with the drawee bank, is such an
indorser. So even if the indorsement on the check deposited by the banks's client is forged, the collecting bank is bound by his
warranties as an indorser and cannot set up the defense of forgery as against the drawee bank.

The bank on which a check is drawn, known as the drawee bank, is under strict liability to pay the check to the order of the
payee. The drawer's instructions are reflected on the face and by the terms of the check. Payment under a forged indorsement
is not to the drawer's order. When the drawee bank pays a person other than the payee, it does not comply with the terms of
the check and violates its duty to charge its customer's (the drawer) account only for properly payable items. Since the drawee
bank did not pay a holder or other person entitled to receive payment, it has no right to reimbursement from the drawer. 24 The
general rule then is that the drawee bank may not debit the drawer's account and is not entitled to indemnification from the
drawer. 25 The risk of loss must perforce fall on the drawee bank.

However, if the drawee bank can prove a failure by the customer/drawer to exercise ordinary care that substantially contributed
to the making of the forged signature, the drawer is precluded from asserting the forgery.

If at the same time the drawee bank was also negligent to the point of substantially contributing to the loss, then such loss from
the forgery can be apportioned between the negligent drawer and the negligent bank. 26

In cases involving a forged check, where the drawer's signature is forged, the drawer can recover from the drawee bank. No
drawee bank has a right to pay a forged check. If it does, it shall have to recredit the amount of the check to the account of the
drawer. The liability chain ends with the drawee bank whose responsibility it is to know the drawer's signature since the latter is
its customer. 27

In cases involving checks with forged indorsements, such as the present petition, the chain of liability does not end with the
drawee bank. The drawee bank may not debit the account of the drawer but may generally pass liability back through the
collection chain to the party who took from the forger and, of course, to the forger himself, if available. 28 In other words, the
drawee bank canseek reimbursement or a return of the amount it paid from the presentor bank or person. 29 Theoretically, the
latter can demand reimbursement from the person who indorsed the check to it and so on. The loss falls on the party who took
the check from the forger, or on the forger himself.
NEGOTIATION LAW 10.7.2017 45
In this case, the checks were indorsed by the collecting bank (Associated Bank) to the drawee bank (PNB). The former will
necessarily be liable to the latter for the checks bearing forged indorsements. If the forgery is that of the payee's or holder's
indorsement, the collecting bank is held liable, without prejudice to the latter proceeding against the forger.

Since a forged indorsement is inoperative, the collecting bank had no right to be paid by the drawee bank. The former must
necessarily return the money paid by the latter because it was paid wrongfully. 30

More importantly, by reason of the statutory warranty of a general indorser in section 66 of the Negotiable Instruments Law, a
collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior
indorsements, including the forged indorsement. It warrants that the instrument is genuine, and that it is valid and subsisting at
the time of his indorsement. Because the indorsement is a forgery, the collecting bank commits a breach of this warranty and
will be accountable to the drawee bank. This liability scheme operates without regard to fault on the part of the
collecting/presenting bank. Even if the latter bank was not negligent, it would still be liable to the drawee bank because of its
indorsement.

The Court has consistently ruled 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." 31

The drawee bank is not similarly situated as the collecting bank because the former makes no warranty as to the genuineness.
of any indorsement. 32 The drawee bank's duty is but to verify the genuineness of the drawer's signature and not of the
indorsement because the drawer is its client.

Moreover, the collecting bank is made liable because it is privy to the depositor who negotiated the check. The bank knows him,
his address and history because he is a client. It has taken a risk on his deposit. The bank is also in a better position to detect
forgery, fraud or irregularity in the indorsement.

Hence, the drawee bank can recover the amount paid on the check bearing a forged indorsement from the collecting bank.
However, a drawee bank has the duty to promptly inform the presentor of the forgery upon discovery. If the drawee bank
delays in informing the presentor of the forgery, thereby depriving said presentor of the right to recover from the forger, the
former is deemed negligent and can no longer recover from the presentor. 33

Applying these rules to the case at bench, PNB, the drawee bank, cannot debit the current account of the Province of Tarlac
because it paid checks which bore forged indorsements. However, if the Province of Tarlac as drawer was negligent to the point
of substantially contributing to the loss, then the drawee bank PNB can charge its account. If both drawee bank-PNB and
drawer-Province of Tarlac were negligent, the loss should be properly apportioned between them.

The loss incurred by drawee bank-PNB can be passed on to the collecting bank-Associated Bank which presented and indorsed
the checks to it. Associated Bank can, in turn, hold the forger, Fausto Pangilinan, liable.

If PNB negligently delayed in informing Associated Bank of the forgery, thus depriving the latter of the opportunity to recover
from the forger, it forfeits its right to reimbursement and will be made to bear the loss.

After careful examination of the records, the Court finds that the Province of Tarlac was equally negligent and should, therefore,
share the burden of loss from the checks bearing a forged indorsement.

The Province of Tarlac permitted Fausto Pangilinan to collect the checks when the latter, having already retired from
government service, was no longer connected with the hospital. With the exception of the first check (dated January 17, 1978),
all the checks were issued and released after Pangilinan's retirement on February 28, 1978. After nearly three years, the
Treasurer's office was still releasing the checks to the retired cashier. In addition, some of the aid allotment checks were
released to Pangilinan and the others to Elizabeth Juco, the new cashier. The fact that there were now two persons collecting
the checks for the hospital is an unmistakable sign of an irregularity which should have alerted employees in the Treasurer's
office of the fraud being committed. There is also evidence indicating that the provincial employees were aware of Pangilinan's
retirement and consequent dissociation from the hospital. Jose Meru, the Provincial Treasurer, testified:.

ATTY. MORGA:
NEGOTIATION LAW 10.7.2017 46
Q Now, is it true that for a given month there were two releases of checks, one went to Mr. Pangilinan and one went
to Miss Juco?

JOSE MERU:

A Yes, sir.

Q Will you please tell us how at the time (sic) when the authorized representative of Concepcion Emergency Hospital is
and was supposed to be Miss Juco?

A Well, as far as my investigation show (sic) the assistant cashier told me that Pangilinan represented himself as also
authorized to help in the release of these checks and we were apparently misled because they accepted the
representation of Pangilinan that he was helping them in the release of the checks and besides according to them they
were, Pangilinan, like the rest, was able to present an official receipt to acknowledge these receipts and according to
them since this is a government check and believed that it will eventually go to the hospital following the standard
procedure of negotiating government checks, they released the checks to Pangilinan aside from Miss Juco.34

The failure of the Province of Tarlac to exercise due care contributed to a significant degree to the loss tantamount to
negligence. Hence, the Province of Tarlac should be liable for part of the total amount paid on the questioned checks.

The drawee bank PNB also breached its duty to pay only according to the terms of the check. Hence, it cannot escape liability
and should also bear part of the loss.

As earlier stated, PNB can recover from the collecting bank.

In the case of Associated Bank v. CA, 35 six crossed checks with forged indorsements were deposited in the forger's account with
the collecting bank and were later paid by four different drawee banks. The Court found the collecting bank (Associated) to be
negligent and held:

The Bank should have first verified his right to endorse the crossed checks, of which he was not the payee, and to
deposit the proceeds of the checks to his own account. The Bank was by reason of the nature of the checks put upon
notice that they were issued for deposit only to the private respondent's account. . . .

The situation in the case at bench is analogous to the above case, for it was not the payee who deposited the checks with the
collecting bank. Here, the checks were all payable to Concepcion Emergency Hospital but it was Fausto Pangilinan who
deposited the checks in his personal savings account.

Although Associated Bank claims that the guarantee stamped on the checks (All prior and/or lack of endorsements guaranteed)
is merely a requirement forced upon it by clearing house rules, it cannot but remain liable. The stamp guaranteeing prior
indorsements is not an empty rubric which a bank must fulfill for the sake of convenience. A bank is not required to accept all
the checks negotiated to it. It is within the bank's discretion to receive a check for no banking institution would consciously or
deliberately accept a check bearing a forged indorsement. When a check is deposited with the collecting bank, it takes a risk on
its depositor. It is only logical that this bank be held accountable for checks deposited by its customers.

A delay in informing the collecting bank (Associated Bank) of the forgery, which deprives it of the opportunity to go after the
forger, signifies negligence on the part of the drawee bank (PNB) and will preclude it from claiming reimbursement.

It is here that Associated Bank's assignment of error concerning C.B. Circular No. 580 and Section 23 of the Philippine Clearing
House Corporation Rules comes to fore. Under Section 4(c) of CB Circular No. 580, items bearing a forged endorsement shall be
returned within twenty-Sour (24) hours after discovery of the forgery but in no event beyond the period fixed or provided by
law for filing of a legal action by the returning bank. Section 23 of the PCHC Rules deleted the requirement that items bearing a
forged endorsement should be returned within twenty-four hours. Associated Bank now argues that the aforementioned
Central Bank Circular is applicable. Since PNB did not return the questioned checks within twenty-four hours, but several days
later, Associated Bank alleges that PNB should be considered negligent and not entitled to reimbursement of the amount it paid
on the checks.
NEGOTIATION LAW 10.7.2017 47
The Court deems it unnecessary to discuss Associated Bank's assertions that CB Circular No. 580 is an administrative
regulation issued pursuant to law and as such, must prevail over the PCHC rule. The Central Bank circular was in force for all
banks until June 1980 when the Philippine Clearing House Corporation (PCHC) was set up and commenced operations. Banks in
Metro Manila were covered by the PCHC while banks located elsewhere still had to go through Central Bank Clearing. In any
event, the twenty-four-hour return rule was adopted by the PCHC until it was changed in 1982. The contending banks herein,
which are both branches in Tarlac province, are therefore not covered by PCHC Rules but by CB Circular No. 580. Clearly then,
the CB circular was applicable when the forgery of the checks was discovered in 1981.

The rule mandates that the checks be returned within twenty-four hours after discovery of the forgery but in no event beyond
the period fixed by law for filing a legal action. The rationale of the rule is to give the collecting bank (which indorsed the check)
adequate opportunity to proceed against the forger. If prompt notice is not given, the collecting bank maybe prejudiced and
lose the opportunity to go after its depositor.

The Court finds that even if PNB did not return the questioned checks to Associated Bank within twenty-four hours, as
mandated by the rule, PNB did not commit negligent delay. Under the circumstances, PNB gave prompt notice to Associated
Bank and the latter bank was not prejudiced in going after Fausto Pangilinan. After the Province of Tarlac informed PNB of the
forgeries, PNB necessarily had to inspect the checks and conduct its own investigation. Thereafter, it requested the Provincial
Treasurer's office on March 31, 1981 to return the checks for verification. The Province of Tarlac returned the checks only on April
22, 1981. Two days later, Associated Bank received the checks from PNB. 36

Associated Bank was also furnished a copy of the Province's letter of demand to PNB dated March 20, 1981, thus giving it notice
of the forgeries. At this time, however, Pangilinan's account with Associated had only P24.63 in it. 37 Had Associated Bank
decided to debit Pangilinan's account, it could not have recovered the amounts paid on the questioned checks. In addition,
while Associated Bank filed a fourth-party complaint against Fausto Pangilinan, it did not present evidence against Pangilinan
and even presented him as its rebuttal witness. 38 Hence, Associated Bank was not prejudiced by PNB's failure to comply with
the twenty-four-hour return rule.

Next, Associated Bank contends that PNB is estopped from requiring reimbursement because the latter paid and cleared the
checks. The Court finds this contention unmeritorious. Even if PNB cleared and paid the checks, it can still recover from
Associated Bank. This is true even if the payee's Chief Officer who was supposed to have indorsed the checks is also a customer
of the drawee bank. 39 PNB's duty was to verify the genuineness of the drawer's signature and not the genuineness of payee's
indorsement. Associated Bank, as the collecting bank, is the entity with the duty to verify the genuineness of the payee's
indorsement.

PNB also avers that respondent court erred in adjudging circuitous liability by directing PNB to return to the Province of Tarlac
the amount of the checks and then directing Associated Bank to reimburse PNB. The Court finds nothing wrong with the mode
of the award. The drawer, Province of Tarlac, is a clientor customer of the PNB, not of Associated Bank. There is no privity of
contract between the drawer and the collecting bank.

The trial court made PNB and Associated Bank liable with legal interest from March 20, 1981, the date of extrajudicial demand
made by the Province of Tarlac on PNB. The payments to be made in this case stem from the deposits of the Province of Tarlac
in its current account with the PNB. Bank deposits are considered under the law as loans. 40 Central Bank Circular No. 416
prescribes a twelve percent (12%) interest per annum for loans, forebearance of money, goods or credits in the absence of
express stipulation. Normally, current accounts are likewise interest-bearing, by express contract, thus excluding them from the
coverage of CB Circular No. 416. In this case, however, the actual interest rate, if any, for the current account opened by the
Province of Tarlac with PNB was not given in evidence. Hence, the Court deems it wise to affirm the trial court's use of the legal
interest rate, or six percent (6%) per annum. The interest rate shall be computed from the date of default, or the date of judicial
or extrajudicial demand. 41 The trial court did not err in granting legal interest from March 20, 1981, the date of extrajudicial
demand.

The Court finds as reasonable, the proportionate sharing of fifty percent - fifty percent (50%-50%). Due to the negligence of the
Province of Tarlac in releasing the checks to an unauthorized person (Fausto Pangilinan), in allowing the retired hospital cashier
to receive the checks for the payee hospital for a period close to three years and in not properly ascertaining why the retired
hospital cashier was collecting checks for the payee hospital in addition to the hospital's real cashier, respondent Province
contributed to the loss amounting to P203,300.00 and shall be liable to the PNB for fifty (50%) percent thereof. In effect, the
Province of Tarlac can only recover fifty percent (50%) of P203,300.00 from PNB.
NEGOTIATION LAW 10.7.2017 48
The collecting bank, Associated Bank, shall be liable to PNB for fifty (50%) percent of P203,300.00. It is liable on its warranties
as indorser of the checks which were deposited by Fausto Pangilinan, having guaranteed the genuineness of all prior
indorsements, including that of the chief of the payee hospital, Dr. Adena Canlas. Associated Bank was also remiss in its duty to
ascertain the genuineness of the payee's indorsement.

IN VIEW OF THE FOREGOING, the petition for review filed by the Philippine National Bank (G.R. No. 107612) is hereby PARTIALLY
GRANTED. The petition for review filed by the Associated Bank (G.R. No. 107382) is hereby DENIED. The decision of the trial
court is MODIFIED. The Philippine National Bank shall pay fifty percent (50%) of P203,300.00 to the Province of Tarlac, with legal
interest from March 20, 1981 until the payment thereof. Associated Bank shall pay fifty percent (50%) of P203,300.00 to the
Philippine National Bank, likewise, with legal interest from March 20, 1981 until payment is made.

SO ORDERED.