Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty.
Amago
Bouncing Checks Law Case Digests
1.) State Investment House, Inc. vs CA, 217 SCRA 32
Facts:
Nora Moulic issued to Corazon Victoriano, as security for pieces of
jewellery to be sold on commission, two postdated checks in the
amount of fifty thousand each. Thereafter, Victoriano negotiated the
checks to State Investment House, Inc. When Moulic failed to sell the
jewellry, she returned it to Victoriano before the maturity of the
checks. However, the checks cannot be retrieved as they have been
negotiated. Before the maturity date Moulic withdrew her funds from
the bank contesting that she incurred no obligation on the checks
because the jewellery was never sold and the checks are negotiated
without her knowledge and consent. Upon presentment of for
payment, the checks were dishonoured for insufficiency of funds.
Issues:
1. Whether or not State Investment House inc. was a holder of the
check in due course
2. Whether or not Moulic can set up against the petitioner the defense
that there was failure or absence of consideration
Held:
Yes, Section 52 of the NIL provides what constitutes a holder in due
course. The evidence shows that: on the faces of the post dated
checks were complete and regular; that State Investment House Inc.
bought the checks from Victoriano before the due dates; that it was
taken in good faith and for value; and there was no knowledge with
regard that the checks were issued as security and not for value. A
prima facie presumption exists that a holder of a negotiable
instrument is a holder in due course. Moulic failed to prove the
contrary.
No, Moulic can only invoke this defense against the petitioner if it was
a privy to the purpose for which they were issued and therefore is not
a holder in due course. Section 119 of NIL provides how an instruments
be discharged. Moulic can only invoke paragraphs c and d as
possible grounds for the discharge of the instruments. Since Moulic
failed to get back the possession of the checks as provided by
1
paragraph c, intentional cancellation of instrument is impossible. As
provided by paragraph d, the acts which will discharge a simple
contract of payment of money will discharge the instrument.
Correlating Article 1231 of the Civil Code which enumerates the
modes of extinguishing obligation, none of those modes outlined
therein is applicable in the instant case. Thus, Moulic may not
unilaterally discharge herself from her liability by mere expediency of
withdrawing her funds from the drawee bank. She is thus liable as she
has no legal basis to excuse herself from liability on her check to a
holder in due course. Moreover, the fact that the petitioner failed to
give notice of dishonor is of no moment. The need for such notice is
not absolute; there are exceptions provided by Sec 114 of NIL.
2.) Papa vs A.U. Valencia & Co., Inc, 284 SCRA 648
Facts:
In 1973, Angela Butte sold a parcel of land to Penarroyo. Prior to the
alleged sale, property was mortgaged to Associated Bank. After the
alleged sale but before the title was transferred Butte died. Penarroyo
asked the bank to release the title but the bank refused until all the
mortgaged properties are also redeemed. Only in 1977 did they have
knowledge of the mortgaged. Penarroyo filed a complaint for specific
performance praying that the petitioner PAPAattorney-in fact of
Butte deliver the title of the property and the accrued rentals. While
the case was pending, Jao intervened saying that he bought the
property from Penarroyo praying that title be released in favor of
Penarroyo so that it will be transferred to him from Penarroyo.
TC ruled in favor of Penarroyo ordering PAPA to execute Deed of
Absolute Sale in favor of Penarroyo. Papa on appeal contended that
the sale was never consummated as he did not encash the check
given by Penarroyo in payment of the full purchase price of the
subject lot, therefore, its delivery never produced the effect of
payment. He maintained that respondents had actually paid only the
amount of P5000 for the earnest money. Petitioner, while admitting
that he issued receipts for the payments, asserts that said receipts do
not prove payment. Petitioner avers that there must be a showing that
said check had been encashed.|||

CA affirmed the decision of TC
ISSUE:
WON the sale had been consummated.
RULING:
The Supreme Court finds no merit in petitioner's arguments. Granting
that petitioner had never encashed the check, his failure to do so for
more than ten (10) years resulted in the impairment of the check
through his unreasonable and unexplained delay. While it is true that
the delivery of a check produces the effect of payment only when it is
cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if
the debtor is prejudiced by the creditor's unreasonable delay in
presentment. The acceptance of a check implies an undertaking of
due diligence in presenting it for payment, and if he from whom it is
received sustains loss by want of such diligence, it will be held to
operate as actual payment of the debtor or obligation for which it
was given. Considering that respondents had fulfilled their part of the
contract of sale by delivering the payment of the purchase price, said
respondents, therefore, had the right to compel petitioner to deliver to
them the owner's duplicate of TCT No. 28993 and the peaceful
possession and enjoyment to the lot in question.
3.) Tan vs People, 500 SCRA 172
FACTS:
David Tan was charged with 6 counts of violation of BP 22 from the
following facts:
Carolyn Zaragoza (complainant) granted a loan to Tan amounting to
P1, 000,000.00. For payment of such. Tan issued several checks which
all bounced upon deposit to Zaragozas account for the reason that
the account was closed. Zaragoza contacted Tan several times but
was refused. Thus, a formal demand to pay in cash for the dishonored
checks was sent to Tan, but still there was no payment. Thereafter,
Zaragoza filed a case to the Municipal Trial court which found him
guilty of the crime charged.
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Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago
Tan filed a motion for reconsideration with the MTC denying the
receipt of the demand letter dated October 30, 1995 and alleged
that said evidence was not included in the formal letter of evidence.
This motion was denied.
Tan also appealed to RTC and CA, but same was dismissed.
ISSUE:
Whether or not there was sufficient proof of notice of dishonor served
to the accused to create a prima facie presumption that the drawer
had knowledge of insufficiency of funds in or credit with the bank.
HELD:
There was insufficient proof of notice, thus presumption of knowledge
does not arise. Tan is acquitted.
In Ongson vs. People, the court expounded that the statute itself has
created a prima facie presumption that the drawer had knowledge of
the insufficiency of the funds at time of issuance and the checks
presentment if he fails to pay the amount of the check within 5
banking days from notices of dishonor. Thus only after failure to pay
and receipt of dishonor will the presumption arise. If no proof notice of
nonpayment was served on the drawer, there is no way to reckon the
crucial 5 day period. Furthermore, notice of dishonor must be in
writing, a verbal notice is not enough. Lack of notice is fatal to the
prosecution.
4.) Vaca vs CA, 298 SCRA 658
FACTS:
Eduardo Vaca is the president and owner of Ervine International while
Fernando Nieto, Vacas son-in-law, is the firms purchasing manager.
They issued a check to the General Agency for Reconnaissance,
Detection and Security (GARDS) and drawn against China Bank.
When the check was presented to the bank on March 29, 1988 for
 Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago

deposit, the check was dishonored for insufficiency of funds. On April Note: In this case, the Court recognized the contribution of Filipino entrepreneurs to the
national economy; and that to serve the ends of criminal justice, instead of the 1 year
13, 1988, petitioners issued a new check to replace the dishonored
imprisonment, a fine of double the amount of the check involved was imposed as
check. penalty. This was made to redeem valuable human material and prevent unnecessary
deprivation of personal liberty and economic usefulness with due regard to the
ISSUE: protection of the social order.

1.) Whether or not petitioners had knowledge of lack of funds

2.) Whether or not damage to the payee is an element of the crime 5.) Macalaglag vs People, 511 SCRA 400
3.) Whether the sentence of imprisonment can be deleted

FACTS:
HELD: On two separate occasions, particularly on 30 July 1995 and 16
October 1995, petitioner Theresa Macalalagobtained loans from
1.) Yes. Section 2 of BP 22 provides The making, drawing & issuance of
Grace Estrella (Estrella), each in the amount of P100,000.00, each
a check payment of which is refused by the drawee because of
bearing an interest of 10% per month. Macalalag consistently paid the
insufficient funds . . . shall be prima facie evidence of knowledge of
interests starting 30 August 1995. Finding the interest rates so
such insufficiency of funds or credit unless such maker or drawer pays
burdensome, Macalalag requested Estrella for a reduction of the
the holder thereof the amount due thereon, or makes arrangement
same to which the latter agreed. On 16 April 1996 and 1 May 1996,
for payment in full by the drawee of such check within 5 banking days
Macalalag executed Acknowledgment/Affirmation Receipts
after receiving notice that such check has not been paid by the
promising to pay Estrella the face value of the loans in the total
drawee. Even if such check was intended to replace the bad one, its
amount of P200,000.00 within two months from the date of its
issuance on April 13, 1988 15 days after petitioners had been notified
execution plus 6% interest per month for each loan. Under the two
on March 29, 1988 of the dishonor of their previous checkcannot
Acknowledgment/Affirmation Receipts, she further obligated herself
negate the presumption that petitioners knew of the insufficiency of
to pay for the two (2) loans the total sum of P100,000.00 as liquidated
funds to cover the amount of their previous check. Section 2 of BP 22
damages and attorney's fees in the total sum of P40,000.00 as
requires that such check be given within 5 days from the notice of
stipulated by the parties the moment she breaches the terms and
dishonor to them.
conditions thereof.
2.) No. The petitioners contended that this case was simply a result of
a misunderstanding & that GARDS did not really suffered damage thus
they should be acquitted. Even if the payee suffered no damage as a As security for the payment of the aforesaid loans, Macalalag issued
result of the issuance of the bouncing check, the damage to the two Philippine National Bank (PNB) Checks (Check No. C-889835 and
integrity of the banking system cannot be denied. Damage to the No. 889836) on 30 June 1996, each in the amount of P100,000.00, in
payee is not an element of the crime punished in BP 22. favor of Estrella. However, when Estrella presented said checks for
payment with the drawee bank, the same were dishonored for the
3.) Petitioners are first-time offenders. They are Filipino entrepreneurs
reason that the account against which the same was drawn was
who presumably contribute to the national economy. In this case we
already closed. Estrella sent a notice of dishonor and demand to
believe that a fine in an amount equal to double amount of the
make good the said checks to Macalalag, but the latter failed to do
check involved is an appropriate penalty to impose on each of the
so
petitioners.

3

ISSUES:
1) Whether or not the stipulated interest of 10% per month, and even
the reduced rate of 6% per month, is a valid interest?
2) Whether or not the petitioner violated the Batas Pambansa Blg. 22?
HELD:
1) The stipulated interest of 10% per month, and even the
reduced rate of 6% per month, are higher than the interest
rates declared unconscionable in Medel case and in several
other cases with allegations of unconscionable interests. We
held that while the Usury Law has been suspended by Central
Bank Circular No. 905, s. 1982, effective on January 1, 1983,
and parties to a loan agreement have been given wide
latitude to agree on any interest rate, still stipulated interest
rates are illegal if they are unconscionable. Nothing in the said
circular grants lenders carte blanche authority to raise interest
rates to levels which will either enslave their borrowers or lead
to a hemorrhaging of their assets
.2) There is no doubt that Macalalag is liable under B.P. Blg. 22.
Macalalag admitted having issued the said check and that said
check, when presented for payment for payment with the drawee
bankbounced for the reason "account closed". Despite notice of
dishonor, Macalalag failed to make good the said check. All the
elements of violation of B.P. Blg. 22, viz: a) the making, drawing or
issuance of any check to apply to account or for value; b) the
knowledge of the maker[,] drawer, or issuer that at the time of the
issue he does not have sufficient funds in, or credit with, the drawee
bank for the payment of the check in full upon its presentment; and,
c) the subsequent dishonor of the check by the drawee bank for
insufficiency of funds or credit, or dishonor for the same reason had
not the drawer, without any valid cause, ordered the bank to stop
payment are, therefore, present.
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Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago
6.) Cruz vs Cruz, 515 SCRA 89
FACTS:
On June 5, 1996, respondent filed with the Office of the City
Prosecutor, Quezon City a complaint for violation of Batas Pambansa
(B.P.) Blg. 22 against petitioner. Respondent alleged that petitioner
issued to him an undated check in the sum of P100, 000.00 but it was
dishonored by the drawee bank due to "account closed" on
December 29, 1995. On January 5, 1996, he sent the notice of dishonor
to petitioner. Without his knowledge, petitioner, on January 16, 1996,
deposited P100, 000.00 in his savings account.
Petitioner declared that in 1986, she issued to respondent the check
as a guarantee for the loan of spouses Arturo and Malou Ventura
obtained from him. Later, they informed her that they had paid the
loan. However, she forgot to ask for the return of the check. In 1987,
she closed her account and opened a new one with the drawee
bank. For ten years, she forgot having issued the check. On January
16, 1996, or only after eleven (11) days from January 5, 1996 when she
learned that her check was dishonored, she deposited P100, 000.00 in
the account of respondent.
Chief State Prosecutor Jovencito R. Zuo dismissed respondents
petition. Respondent then filed with the Court of Appeals a petition for
review under Rule 43 of the 1997 Rules of Civil Procedure, as
amended. In its Decision, the Court of Appeals granted respondents
petition and directed the Secretary of Justice to file the proper
information against petitioner.
ISSUE:
Whether the Court of Appeals erred in directing the Secretary of
Justice to file an information for violation of B.P. Blg. 22 against
petitioner
RULING:
In the respondents complaint, he alleged that petitioner failed to pay
the amount of the check. However, in his reply, he admitted that she
already remitted the amount of P100, 000.00 on January 16, 1996.

Respondent filed the complaint almost six months after petitioner had
paid the amount of the check in question.
While indeed the gravamen of violation of B.P. Blg. 22 is the act of
issuing worthless checks, nonetheless, courts should not apply the law
strictly or harshly. Its spirit and purpose must be considered.
In Lozano v. Martinez, we held that the Bouncing Checks Law is aimed
at putting a stop to or curbing the practice of issuing worthless checks
or those that end up being dishonored for payment because of the
injury it causes to the public interests. In Sia v. People, we explained
that the law is intended to safeguard the interests of the banking
system and the legitimate checking account users.
Considering that petitioner had paid the amount of the check even
before respondent filed his complaint, we believe and so hold that no
injury was caused to the public interests or the banking system, or
specifically to herein respondent. #
7.) Del Rosario vs Cedillo, 441 SCRA 70
FACTS:
Del Rosario allegedly extended 12 million pesos to Estrella and was
secured by the latter with 3 postdated checks and 2 real estate
mortgages. All such securities were however, questioned
(on the OH) The issue on falsification of the real estate mortgages is still
pending in Malolos, Bulacan while case for violation of BP 22 was
raffled to Judge Cedillo. The said checks were dishonored for
insufficiency of funds upon presentment on their due dates.
In the BP 22 cases, after the prosecution rested its case, Estrella filed
demurrer to Evidence claiming, inter alia, that the requisite of notice
of dishonor in the form of a demand letter presented by the
prosecution was truly received by her or her authorized agent. Also
added that such letter was defective because it sought payment of
the amount of P 13,680,000 when the total amount of the dishonored
checks was only P 12,680,000, and that said demand did not state the
account number as well as the amount, date and number of checks.
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Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago
Judge Cedillo granted such Demurrer to Evidence, dismissed not only
the criminal case but also the civil case for violation of BP 22 for such
reason, Del Rosario filled an administrative case against Judge Cedillo
for gross ignorance of law
ISSUE:
Whether or not the third element of BP 22 (notice of dishonor) was
proven in this case
RULING:
No. It is an element in BP 22 that it must be shown that the
issuer, at the time of the checks issuance, had knowledge that he did
not have enough funds or credit in the bank for payment thereof
upon its presentment. Since the second element involves a state of
mind which is difficult to verify. Section 2 of BP 22 creates a
presumption juris tantum that the second element prima facie exists
when the first and third elements of the offense are present. This
presumption however, does not arise when the issuer pays the amount
of the checks or makes arrangement for its payment within 5 banking
days after receiving notice that such check has not been paid by the
drawee. The law gives the accused the opportunity to satisfy the
amount indicated in the check upon a receipt of notice of dishonor.
Thus, the presumption that the issuer had knowledge of the
insufficiency of funds is brought into existence only after it is proved
that the issuer had received a notice of dishonor and that within 5
days from receipt thereof, he failed to pay the amount of the check
or to make arrangement for its payment.
In this case, the respondent Judge correctly dismissed the criminal
aspect of the BP 22 cases for failure to establish that Estrella received
the notice of dishonor in the form of demand latter. The presentation
of the said letter and the registry receipt, with an unauthenticated
signature do not meet the required proof beyond reasonable doubt
that Estrella received such notice, especially considering that she
denied receipt thereof. The rule is that receipt for registered letters
and return receipts do not prove themselves, they must be properly
authenticated in order to serve as proof of receipt of letters.
Moreover, the prosecution never made an effort to identify the person
who allegedly received the latter and signed the registry receipt as A.
Estrella. The matter of which among the accused, Estrella herself or her

authorized agent signed the registry receipt was never proven by the
prosecution.
8.) Resterio vs People, 681 SCRA 592
FACTS:
The petitioner was charged for violation of B.P. 22 when she issued a
postdated check sometime on May 2002 allegedly being aware that
the account to be drawn against does not have sufficient funds.
During trial, the accused contends that she does not own the check
she used as collateral thus she should not be held liable for B.P. 22.
ISSUE:
1. Whether or not B.P. 22 requires that the dishonored check must
be owned by the accused
2. Whether or not the lack of a written notice of dishonor is fatal
to a case for violation of B.P. 22
HELD:
1. No, the law did not look either at the actual ownership of the
check or of the account against which it was made, drawn, or
issued, or at the intention of the drawee, maker or issuer.
2. Yes, second element or the knowledge of the petitioner as the
issuer of the check that at the time of issue there were
no sufficient funds in or credit with the drawee bank for
the payment of such check in full upon its presentment is
inexistent.
To establish the existence of the second element written notice of the
dishonor to the drawer should be presented. The private complainant
sent his notice of dishonor byregistered mail and presented the registry
return receipt. However, the mere presentment of registry return
receipts is not sufficient but must be accompanied by the
authenticating affidavit of the person who had actually mailed the
written notices of dishonor. The authentication by affidavit of the
mailer or mailers is necessary in order for the giving of the notices of
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Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago
dishonor by registered mailto be regarded as clear proof of the giving
of the notices of dishonor to predicate the existence of the second
element of the offense.
9.) Cheng vs Sy, 592 SCRA 155
FACTS:
Petitioner Anita Cheng filed two (2) estafa cases before the
RTC, Branch 7, Manila against respondent spouses William and
Tessie Sy 7
for issuing to her Philippine Bank of Commerce (PBC) Check
Nos. 171762 and 71860 for P300,000.00 each, in payment of
their loan,
both of which were dishonored upon presentment for having
been drawn against a closed account
On March 16, 2004, the RTC dismissed the estafa cases for
failure of the prosecution to prove the elements of the crime.
The Order dismissing Criminal Case No. 98-969952 contained
no declaration as to the civil liability of Tessie Sy.
On the other hand, the Order in Criminal Case No. 98-969953
contained a statement, Hence, if there is any liability of the
accused, the same is purely civil, not criminal in nature.
based on the same facts, petitioner, on January 20, 1999, filed
against respondents two (2) cases for violation of Batas
Pambansa Bilang (BP Blg.) 22 before the Metropolitan Trial
Court (MeTC), Branch 25, Manila
Later, the MeTC, dismissed, on demurrer, the BP Blg. 22 cases in
its Order dated February 7, 2005 on account of the failure of
petitioner to identify the accused respondents in open court.
The Order also did not make any pronouncement as to the
civil liability of accused respondents.
On April 26, 2005, petitioner lodged against respondents
before the RTC, Branch 18, Manila, a complaint for collection
of a sum of money with damages
based on the same loaned amount of P600,000.00 covered by
the two PBC checks previously subject of the estafa and BP
Blg. 22 cases.
 Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago
In the assailed Order dated January 2, 2006, the RTC dismissed
the complaint for lack of jurisdiction, ratiocinating that the civil
action to collect the amount ofP600,000.00 with damages was
already impliedly instituted in the BP Blg. 22 cases in light of
Sec. 1, para (b) of Rule 111 of the Revised Rules of Court.
ISSUE:
WON Sec. 1 of Rule 111 of the 2000 Rules of Criminal Procedure and
SC Circular No. 57-97 on the Rules and Guidelines in the filing and
prosecution of criminal cases under BP Blg. 22 are applicable to the
present case where the nature of the order dismissing the cases for
bouncing checks against the respondents was [based] on the failure
of the prosecution to identify both the accused (respondents herein)?
SC RULING:
Yes. the 2000 Revised Rules on Criminal Procedure applies in this case.
BP Blg. 22 cases were filed on January 20, 1999, the 2000
Revised Rules on Criminal Procedure promulgated on
December 1, 2000.
It is now settled that rules of procedure apply even to cases
already pending at the time of their promulgation. The reason
for this is that, as a general rule, no vested right may attach to,
nor arise from, procedural laws.
The rule is that upon the filing of the estafa and BP Blg. 22 cases
against respondents, where the petitioner has not made any
waiver, express reservation to litigate separately, or has not
instituted the corresponding civil action to collect the amount
of P600,000.00 and damages prior to the criminal action, the
civil action is deemed instituted with the criminal cases.
This is consonant with our ruling in Rodriguez v. Ponferrada that
the possible single civil liability arising from the act of issuing a
bouncing check can be the subject of both civil actions
deemed instituted with the estafa case and the prosecution
for violation of BP Blg. 22, simultaneously available to the
complaining party, without traversing the prohibition against
forum shopping.
Thus, although this civil action could have been litigated
separately on account of the dismissal of the estafa cases on
reasonable doubt, the petitioner was deemed to have also
7
elected that such civil action be prosecuted together with the
BP Blg. 22 cases in light of the Rodriguez v. Ponferrada ruling.
Under the present revised Rules, it prohibits the reservation of a
separate civil action, i.e., one can no longer file a separate
civil case after the criminal complaint is filed in court.
The only instance when separate proceedings are allowed is
when the civil action is filed ahead of the criminal case.
Even then, the Rules encourages the consolidation of the civil
and criminal cases
Thus, where petitioners rights may be fully adjudicated in the
proceedings before the court trying the BP Blg. 22 cases, resort
to a separate action to recover civil liability is clearly
unwarranted on account of res judicata, for failure of petitioner
to appeal the civil aspect of the cases.
However, in applying the procedure discussed above, it
appears that petitioner would be left without a remedy to
recover from respondents the P600,000.00 allegedly loaned
from her.
It is in this light that we find petitioners contention that she was
not assisted by a private prosecutor during the BP Blg. 22
proceedings critical.
Petitioner indirectly protests that the public prosecutor failed to
protect and prosecute her cause when he failed to have her
establish the identities of the accused during the trial and
when he failed to appeal the civil action deemed impliedly
instituted with the BP Blg. 22 cases.
due to the gross mistake of the prosecutor in the BP Blg. 22
cases, we are constrained to digress from this rule.
Apparently, the public prosecutor neglected to equip himself
with the knowledge of the proper procedure for BP Blg. 22
cases under the 2000 Rules on Criminal Procedure such that he
failed to appeal the civil action impliedly instituted with the BP
Blg. 22 cases, the only remaining remedy available to
petitioner to be able to recover the money she loaned to
respondents, upon the dismissal of the criminal cases on
demurrer.
By this failure, petitioner was denied her day in court to
prosecute the respondents for their obligation to pay their
loan.
if the loan be proven true, the inability to recover the loaned
amount would be tantamount to unjust enrichment of
respondents
 Negotiable Instruments Law EH 403 A.Y. 2016-2017 Atty. Amago

Court litigations are primarily designed to search for the truth,

and a liberal interpretation and application of the rules which
will give the parties the fullest opportunity to adduce proof is
the best way to ferret out the truth.
The dispensation of justice and vindication of legitimate
grievances should not be barred by technicalities. For reasons
of substantial justice and equity, we thus rule, pro hac vice, in
favor of petitioner.

WHEREFORE, the petition is GRANTED. Civil Case No. 05-112452

entitled Anita Cheng v. Spouses William Sy and Tessie Sy is hereby
ordered REINSTATED.