LEGAL RESEARCH

Simulated Checks,
Checks Without Consideration, and Exceptions

Submitted by
Tonifranz F Sareno

Submitted on
October 23, 2014
 Summary of Cases of violations of B.P. 22, of
simulated checks, and Exceptions

One of the frequent defences that the accused makes in cases

about the violation of BP 22, or the Bouncing Checks Law, was that
the checks were allegedly issued without consideration or that the
checks were simulated, and therefore, that should free them from
criminal liability.

However, in all cases, the Supreme Court ruled that the checks
issued were for some consideration.

In Ty vs People, Ty claimed that the issuance of her checks were

not for consideration since it was not her who was confined in the
hospital. Therefore, her checks issued to the hospital to get her
mother released were not issued for valuable consideration.

The Supreme Court disagreed. The issuance of a check is prima

facie issued for valuable consideration. And in this case, the valuable
consideration is the obligation to pay the bills that her mother and
sister incurred when they were confined in the hospital.
Simply defined, valuable consideration means an obligation to give, to do, or
not to do in favor of the party who makes the contract, such as the maker or
indorser."

In Benjamin Lee vs Court of Appeals, petitioner claimed that he

was not the proper party, and thus, he could not have issued the
checks for valuable consideration, because he is not anymore
associated with the real party of the case, Unlad. Unlad got a loan
from Bergado, and issued the checks signed by petitioner to cover the
loan.

The Supreme Court said that looking at the records, Lee was a
major investor to the amount of P500,000 during the time of the loan,
and the affidavits executed by Unlad sole proprietor Cesar Bautista
describing petitioner as having nothing to do with the company was
only issued in 1994, and that without Bautista taking the witness
stand, it should be dismissed as hearsay. Thus, petitioner did not
rebut the presumption of consideration of an issued check.

In Wong vs Court of Appeals, petitioner claimed that the checks

were issued as guarantee of the payment of the LSI customers for
their orders. However, the Supreme Court, looking at the evidence,
sustained the lower courts assertion that it was to settle the unremitted
amounts that petitioner had collected from customers.

In Meriz vs People of the Philippines, petitioner claimed that the

checks issued were to guarantee the loans it received from Amelia
Santos. However, the Supreme Court declared that it is
inconsequential the reason the check was issued, or that it was
intended by the issuer to be encashed. Only the fact that the checks
were issued and there were no sufficient funds to the knowledge of
the issuer, and that they fail to pay five days after a demand letter was
sent, is enough to violate B.P. 22.

The exception was when a check was issue to cover a warranty.

Thus, in Magno vs Court of Appeals, petitioner issued checks to cover
the warranty deposit for the purchase of equipment for his business.
The business failed, and the equipment was pulled out. The checks
bounced.

The Supreme Court acquitted petitioner because to convict is to

make him pay an unjust debt since he did not receive the amount in
question, as the amount was kept all the while in the company that
financed the operation.
 Case Digests
Ty vs People
G.R. No. 149275September 27, 2004
Nature

Simulated Checks

Facts

From October 30, 1990 until June 4, 1962, Chua Lao So Un was confined at the
Manila Doctors Hospital (hospital). Petitioner Vicky Ty, daughter of Chua Lao So Un,
signed the Acknowledgement of Responsibility for Payment in the Contract of
Admission dated October 30, 1992. On June 4, 1992, her Tys mother had still owed the
hospital P657,182.40. Similarly, Judy Chua, Tys sister, was also confined at the
hospital from May 13, 1991 until May 2, 1992, incurring liabilities of P418,410.55. The
total amount owed to the hospital is P1,075,592.95.

On June 5, Ty executed a promissory note wherein she agreed to pay the amount
owed in installments. She also drew several postdated checks against Metrobank
payable to the hospital to assure payment of the obligation. There are 7 checks of
P30,000. Upon their deposit on their due dates, all were dishonored by the drawee bank
and returned unpaid to the hospital due to insufficiency of funds, with the Account
Closed advice.

Complainant sent demand letters to Ty, which were not heeded. Complainant then
filed seven Informations subject of the instant case.

Ty for her part argued that there was absence of valuable consideration for the
issuance of the checks and the payee had knowledge of the insufficiency of funds in the
account.
The Court of Appeals affirmed the lower court decision.

Issue

Whether of not Ty had violated B.P. 22.

Held

The petition is without merit.

 It is presumed, upon issuance of the checks, in the absence of evidence to the
contrary, that the same was issued for valuable consideration. Section 24 of the
Negotiable Instruments Law creates a presumption that every party to an instrument
acquired the same for a consideration or for value. In alleging otherwise, Ty has the
onus to prove that the checks were issued without consideration. She must present
convincing evidence to overthrow the presumption.

A scrutiny of the records reveals that petitioner failed to discharge her burden of
proof. "Valuable consideration may in general terms, be said to consist either in some
right, interest, profit, or benefit accruing to the party who makes the contract, or some
forbearance, detriment, loss or some responsibility, to act, or labor, or service given,
suffered or undertaken by the other aide. Simply defined, valuable consideration means
an obligation to give, to do, or not to do in favor of the party who makes the contract,
such as the maker or indorser."

In this case, Tys mother and sister availed of the services and the facilities of the
hospital. For the care given to her kin, Ty had a legitimate obligation to pay the hospital
by virtue of her relationship with them and by force of her signature on her mothers
Contract of Admission acknowledging responsibility for payment, and on the promissory
note she executed in favor of the hospital.

Anent Tys claim that the obligation to pay the hospital bills was not her personal
obligation because she was not the patient, and therefore there was no consideration
for the checks, the case of Bridges v. Vann, et al. tells us that "it is no defense to an
action on a promissory note for the maker to say that there was no consideration which
was beneficial to him personally; it is sufficient if the consideration was a benefit
conferred upon a third person, or a detriment suffered by the promisee, at the instance
of the promissor. It is enough if the obligee foregoes some right or privilege or suffers
some detriment and the release and extinguishment of the original obligation of George
Vann, Sr., for that of appellants meets the requirement. Appellee accepted one debtor in
place of another and gave up a valid, subsisting obligation for the note executed by the
appellants. This, of itself, is sufficient consideration for the new notes."

At any rate, the law punishes the mere act of issuing a bouncing check, not the
purpose for which it was issued nor the terms and conditions relating to its
issuance. B.P. 22 does not make any distinction as to whether the checks within its
contemplation are issued in payment of an obligation or to merely guarantee the
obligation.
 Benjamin Lee vs Court of Appeals
G.R. No. 145498, January 17, 2005

Facts

Private complainant Rogelio Bergado lent Unlad Commercial Enterprises (Unlad)

P500,000 at 4% a month on July 19, 1992, and on September, another P400,000 was
loaned by Bergado to Unlad at the same rate. Unlad gave Bergado 26 checks in
exchange, four of which were dishonoured because of insufficient funds. Bergado
talked with Cesar Bautista, who issued him a new check worth P980,000, signed by
Bautista and petitioner Benjamin Lee, which included the principal and interest. It too,
bounced, because of account closed. Demand letters were sent, but there was no
payment.

A complained for violation of B.P. 22 was then filed.

Petitioner then claimed that he signed the checks in 1988 in exchange of having a
2.5% interest a month from the proceeds of the loans that will be given to other people,
that he was partners with Bautista before but terminated the relationship in 1989, and
now, he was just a mere investor to Unlad (to the amount of P500,000), and that
Bautista refused to return the checks that he had signed after that. He had Bautista sign
an affidavit to the effect that he was not connected with Unlad since July 1989. He
neglected, however, to inform the bank of the checks of such.

Thus, there was no pre-existing obligation between Petitioner and Bergado, and
thus, the check was issued for no consideration.

Issue

Whether or not petitioner was liable for violation of B.P. 22.

Held

Petitioner tried to rebut the prima facie presumption by insisting that he is not an
owner of Unlad and he has already severed his accommodation arrangement with
Bautista as early as 1989. He argues that the affidavits of Bautista exonerating him from
any responsibility as well as the private complainants own testimony that he never dealt
with petitioner, should be given weight.

We are not persuaded.

It is a hornbook doctrine that unless the affiant himself takes the witness stand to
affirm the averments in his affidavits, the affidavits must be excluded from the judicial
proceeding, being inadmissible hearsay. The trial court and the Court of Appeals were
correct in considering the same as hearsay evidence and in not giving probative weight
to such affidavits.

Moreover, petitioner had admitted that he continued investing in Unlad until April
1994. Hence, he now cannot claim that he has completely severed his ties with Bautista
as of 1989. With nothing but his bare assertions, which are ambiguous at best,
petitioner has failed to rebut the prima facie presumption laid down by the statute and
established by the prosecution.

Petitioners insistence that since he is not an owner of Unlad, he could not have had
any knowledge as to the insufficiency of funds is devoid of merit. As clarified in Lao vs.
Court of Appeals, the very case petitioner is invoking, the doctrine that a mere
employee tasked to sign checks in blanks may not be deemed to have knowledge of the
insufficiency of funds applies only to corporate checks and not to personal checks. In
this case, what is involved is a personal and not a corporate check.
 Wong vs Court of Appeals
G.R. No. 117857, February 2, 2001

Facts

Petitioner Wong was an agent of Limtong Press. Inc. (LPI), a manufacturer of

calendars. He would take orders from customers, and LPI would ship the calendars to
the customers. Petitioner Wong would then make the collections. Wong has a history of
unremitted collections which he duly acknowledged.

These checks were initially intended to guarantee the calendar orders of customers
who failed to issue post-dated checks. However, following company policy, LPI refused
to accept the checks as guarantees. Instead, the parties agreed to apply the checks to
the payment of petitioners unremitted collections for 1984 amounting to P18,077.07.
LPI waived the P52.07 difference.

Before the maturity of the checks, petitioner prevailed upon LPI not to deposit the
checks and promised to replace them within 30 days. However, petitioner reneged on
his promise. Hence, on June 5, 1986, LPI deposited the checks with Rizal Commercial
Banking Corporation (RCBC). The checks were returned for the reason "account
closed." The dishonor of the checks was evidenced by the RCBC return slip.

On June 20, 1986, complainant through counsel notified the petitioner of the
dishonor. Petitioner failed to make arrangements for payment within five (5) banking
days.

Petitioner was charged with violation of B.P. 22. However, he issued the checks not
as payment for any obligation, but to guarantee the orders of his customers.

Issue

Whether petitioner was guilty of violating B.P. 22

Held

The petition lack merit.

Although initially intended to be used as guarantee for the purchase orders of

customers, they found the checks were eventually used to settle the remaining
obligations of petitioner with LPI. The consideration therefore is petitioners debt to LPI
for his unremitted collections.
 Meriz vs People
G.R. No. 134498, November 13, 2001

Facts

Petitioner Celia Meriz obtained loans from Amelia Santos (santos) and Summit
Financing Corporation. In 1988, she issued checks in favour of Santos for Pilipinas
Bank checks in the aggregate amount of P188,400.

When Santos deposited the checks, it bounced. After sending two demand letters,
one on December 15, 1988 and another on January 12, 1990, petitioner still refused to
pay.

Thus, she was charged with violation of B.P. 22.

Petitioner would have it that there was an absolute lack of consideration for the
subject checks which were issued only as condition for the grant of loan in her favour.

Held

Petition has no merit.

Check issued as evidence of debt, although not intended for encashment, has the
same effect like any other check, and must thus be held to be within the contemplation
of BP 22.

The cause or reason for the issuance of the check is inconsequential in determining
criminal culpability under BP 22.
 Magno vs Court of Appeals
G.R. 96132, June 26, 1992

Facts

The accused, who was in the process of putting up a car repair shop, was provided
with credit facilities by LS Finance and Management Corporation (LS Finance) to enable
him to lease from MANCOR the needed equipments. As part of their arrangement, LS
Finance required a 30% warranty deposit of the "purchase/lease" value of the
equipments to be transacted upon. Accused then asked the LS Finance Vice President
Joey Gomez to look for a third party who could lend him the equivalent amount of the
warranty deposit as he did not have such amount, however, unknown to the accused, it
was Corazon Teng (Vice President of MANCOR) who advanced the deposit in question
on condition that the same would be paid as a short term loan at 3% interest.

The accused subsequently issued checks to collateralize an accommodation made

by Teng amounting to Twenty Nine Thousand Seven Hundred Pesos (P29,700.00) as
warranty deposit. Subsequently, the said checks bounced; thus the accused was
prosecuted and the lower courts convicted him of B.P. Blg. 22.

Issues

Is accused liable for violation of B.P. 22?

Held

On a Petition for Review on Certiorari, the court however acquitted the accused and
held that the "cash out" made by Teng was not used by the accused who was just
paying rental on the equipments.

To charge him for the refund of a "warranty deposit" he did not withdraw, because it
was not his own account and it remained with LS Finance, would be to make him pay
an unjust "debt," to say the least, since he did not actually receive the amount involved.
We also held that this is a scheme whereby Teng as the supplier of the equipment in
the name of Mancor, would be able to sell or lease its goods as in this case, and at the
same time privately finance those who desperately needed petty accommodations as
obtaining in said case; that this modus operandi, in so many instances, victimized
unsuspecting businessmen who likewise needed protection from the law by availing
themselves of the deceptively called "warranty deposit," not realizing that they would fall
prey to a leasing equipment under the guise of a lease-purchase agreement, when it
was a scheme designed to skim off a business client.