Caution: Bouncing Checks (Part I)

Posted by Admin | Posted in Offenses (Special Penal Laws) | Posted on 05-02-2010

Commercial documents that serve as substitute for money are must-haves in the business world.  Checks, promissory notes, and letters of credit are the most common ones.  They make transactions fast and easy.  But when used improperly and with bad intentions, this may bring serious civil and criminal liabilities.  The use of bouncing checks is a common, if not abused, trick that many insincere and deceitful people use to take advantage of others.

Now what is a bouncing check or a bounced check?  When a person (called the “drawer”) writes a check, he is actually commanding his bank (the “drawee”) to pay for the amount stated to the person (“payee”) whose name appears in the check.  The payee may either use the check for his own transactions (if the check is negotiable) or most likely deposit it with his bank (usually when it is a crossed check).  When his bank processes the check, it will communicate with the drawee bank if there are sufficient funds to answer for the amount stated in the check.  If there is sufficient funding, the amount will be credited to the account of the payee.  But when there are no funds or when the funds are insufficient, the check is dishonored.  It “bounces” back to the payee or depositor.

What are the consequences for issuing bad checks? Aside from bank charges, the drawer may also be prosecuted for violating the Bouncing Checks Law (Batas Pambansa Blg 22).  He may also be charged with estafa, if circumstances show that there was deceit and damage was caused to the victim.

Bouncing Checks Law (Batas Pambansa Blg. 22)

Under Section 1, paragraph 1, a person commits a violation when:

1)      He or she makes or draws and issues a check;

2)      The check is made or drawn and issued to apply on account or for value;

3)      At the time of issue, he knew that he does not have sufficient funds in or credit with the drawee bank for the payment  of such check in full upon presentment; and

4)      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.

Under paragraph 2 of the same Section 1, one may violate the law when:

1)      He or she has sufficient funds in or credit with the drawee bank when he makes or draws and issues a check;

2)      He or she fails to keep sufficient funds or to maintain a credit to cover the full amount of the check if presented within 90 days from the date appearing on said check; and

3)      The check is dishonored by the drawee bank.

The most important element under this law is knowledge of the insufficiency or lack of funds at the time of issue of the check. “Issue” means the first delivery of the instrument complete in form to a person who takes it as a holder (Section 191, Negotiable Instruments Law). “Holder” could refer to a payee or an indorsee who is in possession of the instrument (Section , NIL).

Since the element of knowledge is difficult to establish, being merely a state of mind, BP Blg. 22 creates a prima facie presumption of knowledge of the insufficiency of funds.

The presumption arises when:

1)  After having received a notice of dishonor for fund insufficiency or stop payment order, the issuer failed to pay the amount of the check or make arrangement for its payment, within five days from receipt of the notice of dishonor; or

2)   Despite having sufficient funds at the time of issue, the issuer failed to pay a check presented to the drawee bank within 90 days from the date appearing on said check.

For the presumption of knowledge to arise, it is important that a notice of dishonor was sent and received by the issuer because it is from such date of receipt that the five-day period is reckoned (Abarquez vs. CA, 408 SCRA 5 10). If there is no evidence to prove that the issuer of the check actually received a notice of its dishonor, a prosecution for violation of BP 22 cannot succeed.

Points to remember for BP 22:

1) Knowledge by the issuer of the insufficiency of funds is essential.

2) The law creates a presumption of knowledge.

3) Presumption arises only when notice of dishonor is given and received by the issuer.

4) Presumption of knowledge cannot hold if there is contrary evidence (Cabrera vs. People,  407 SCRA 247)

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