15. Svendsen v People ceiling on interest rates was lifted by Central Bank Circular No.
905, nothing
February 26, 2008. G.R. No. 175381.*
JAMES SVENDSEN, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.
Criminal Law; Bouncing Checks Law (B.P. Blg. 22); Elements.—For
petitioner to be validly convicted of the crime under B.P. Blg. 22, the following
requisites must thus concur: (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.
Same; Same; Postal Service; Registry Receipts; Receipts for registered letters
including return receipts do not themselves prove receipt—they must be properly
authenticated to serve as proof of receipt of the letters.—The evidence for the
prosecution failed to prove the second element. While the registry receipt, which
is said to cover the letter-notice of dishonor and of demand sent to petitioner, was
presented, there is no proof that he or a duly authorized agent received the same.
Receipts for registered letters including return receipts do not themselves prove
receipt; they must be properly authenticated to serve as proof of receipt of the
letters. Thus in Ting v. Court of Appeals, 344 SCRA 551 (2000), this Court
observed: x x x 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.
Same; Same; Loans; Interests; Usury; An obligation to pay 10% interest per
month on the loan is unconscionable and against public
_______________
* SECOND DIVISION.
660policy—while the Usury Law ceiling on interest rates was lifted by
Central Bank Circular No. 905, nothing therein grants lenders carte blanche to
raise interest rates to levels which will either enslave their borrowers or lead to a
hemorrhaging of their assets, and stipulations authorizing such interest are contra
bonos mores, if not against the law.—The decision of the MeTC, which was
affirmed on appeal by the RTC and the appellate court, ordering petitioner “to
pay private complainant Cristina C. Reyes civil indemnity in the total amount of
ONE HUNDRED SIXTY THOUSAND PESOS (P160,000) representing his civil
obligation covered by subject check,” deserves circumspect examination, however,
given that the obligation of petitioner to pay 10% interest per month on the loan
is unconscionable and against public policy. The P160,000 check petitioner issued
to Cristina admittedly represented unpaid interest. By Cristina’s information, the
interest was computed at a fixed rate of 10% per month. While the Usury Law
therein grants lenders carte blanche to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging of their assets.
Stipulations authorizing such interest are contra bonos mores, if not against the
law. They are, under Article 1409 of the New Civil Code, inexistent and void from
the beginning.
Same; Same; Same; Evidence; The presentation of the promissory note may
be dispensed with in a prosecution for violation of B.P. Blg. 22 as the purpose for
the issuance of such check is irrelevant in the determination of the accused’s
criminal liability.—Respecting petitioner’s claim that since the promissory note
incorporating the stipulated 10% interest per month was not presented, there is
no written proof thereof, hence, his obligation to pay the same must be void, the
same fails. As reflected above, Cristina admitted such stipulation. In any event,
the presentation of the promissory note may be dispensed with in a prosecution
for violation of B.P. Blg. 22 as the purpose for the issuance of such check is
irrelevant in the determination of the accused’s criminal liability. It is for the
purpose of determining his civil liability that the document bears significance.
Notably, however, Section 24 of the Negotiable Instruments Law provides that
“Every negotiable instrument is deemed prima facie to have been issued for a
valuable consideration, and every person whose signature appears thereon to
have become a party thereto for value.” It was incumbent then on petitioner to
prove that661the check was not for a valuable consideration. This he failed to
discharge.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Florosco P. Fronda for petitioner.
The Solicitor General for respondent.
CARPIO-MORALES,J.:
Assailed via Petition for Review on Certiorari is the Court of Appeals
Decision1 of November 16, 2006 denying petitioner’s appeal from the December
22, 2005 Decision2 of the Regional Trial Court (RTC) of Manila, Branch 14 which
affirmed the December 17, 2003 Judgment3 of the Metropolitan Trial Court
(MeTC) of Manila, Branch 5, finding James Svendsen (petitioner) guilty of
violation of Batas Pambansa Blg. (B.P. Blg.) 22 or the Bouncing Checks Law.
In October 1997, Cristina Reyes (Cristina) extended a loan to petitioner in the
amount of P200,000, to bear interest at 10% a month. After petitioner had
partially paid his obligation, he failed to settle the balance thereof which had
reached P380,000 inclusive of interest.4
Cristina thus filed a collection suit against petitioner, which was eventually
settled when petitioner paid her P200,0005 and issued in her favor an
International Exchange
_______________
1 Rollo, pp. 108-116. Penned by Associate Justice Estela Perlas-Bernabe and
concurred in by Associate Justices Renato Dacudao and Rosmari Carandang.
2 Id., at pp. 45-50. Penned by Judge Cesar M. Solis.
Page 1 of 5
 3 Id., at pp. 21-30. Penned by Acting Presiding Judge Ma. Theresa Dolores
Gomez-Estoesta.
4 Id., at p. 109.
5 Ibid.
662Bank check postdated February 2, 1999 (the check) in the amount of
P160,000 representing interest.6 The check was co-signed by one Wilhelm Bolton.
When the check was presented for payment on February 9, 1999, it was
dishonored for having been Drawn Against Insufficient Funds (DAIF).7
Cristina, through counsel, thus sent a letter to petitioner by registered mail
informing him that the check was dishonored by the drawee bank, and
demanding that he make it good within five (5) days from receipt thereof. 8
No settlement having been made by petitioner, Cristina filed a complaint
dated March 1, 1999 against him and his co-signatory to the check, Bolton, for
violation of B.P. Blg. 22 before the City Prosecutor’s Office of Manila. No counter-
affidavit was submitted by petitioner and his co-respondent. An Information
dated April 13, 1999 for violation of B.P. Blg. No. 22 was thus filed on April 29,
1999 before the MeTC of Manila against the two, the accusatory portion of which
reads:
“That sometime in December 1998 the said accused did then and there
willfully, unlawfully, and feloniously and jointly make or draw and issue to
CRISTINA C. REYES to apply on account or for value INTERNATIONAL
EXCHANGE BANK check no. 0000009118 dated February 2, 1999 payable to
CRISTINA REYES in the amount of P160,000.00 said accused well knowing that
at the time of issue she/he/they did not have sufficient funds and/or credit with
the drawee bank for payment of such check in full upon its presentment, which
check after having been deposited in the City of Manila, Philippines, and upon
being presented for payment within ninety (90) days from the date thereof was
subsequently dishonored by the drawee bank for INSUFFICIENCY OF FUNDS
and despite receipt of notice of such dishonor, said accused failed to pay said
CRISTINA C. REYES the amount of the check or to make arrangement for full
_______________
6 TSN, October 11, 1999, p. 23.
7 Rollo, p. 109.
8 Id., at pp. 109-110.
663payment of the same within five (5) banking days after receiving said notice.
CONTRARY TO LAW.”9
Bolton having remained at large, the trial court never acquired jurisdiction
over his person.10
By Judgment of December 17, 2003, Branch 5 of the Manila MeTC found
petitioner guilty as charged, disposing as follows:
“WHEREFORE, this Court finds accused James Robert Svendson
[sic] GUILTY beyond reasonable doubt of a violation of Batas Pambansa Blg. 22
(Bouncing Checks Law) and imposes upon him to pay a fine of ONE HUNDRED
SIXTY THOUSAND PESOS (P160,000.00), with subsidiary imprisonment in
case of insolvency.
Accused is also made liable to pay private complainant Cristina C. Reyes civil
indemnity in the total amount of ONE HUNDRED SIXTY THOUSAND
PESOS (P160,000.00) representing his civil obligation covered by subject check.
Meantime, considering that other accused Wilhelm Bolton remains at large,
let a warrant of arrest against him ISSUE. Pending his apprehension, let the
case against him be sent to the ARCHIVES.” (Emphasis in the original; italics
supplied)
As priorly stated, the RTC affirmed the MeTC judgment and the Court of
Appeals denied petitioner’s appeal.
Hence, the present petition for review.
Petitioner argues that the appellate court erred in finding that the first
element of violation of B.P. Blg. 22—the making, drawing, and issuance of any
check “to apply on account or for value”—was present, as the obligation to pay
interest is void, the same not being in writing and the 10% monthly interest is
unconscionable; in holding him civilly liable in the amount of P160,000 to private
complainant, notwithstanding the inva-
_______________
9 MeTC Records, p. 2.
10 Rollo, pp. 110-111.
664lidity of the interest stipulation; and in violating his right to due process
when it convicted him, notwithstanding the absence of proof of receipt by him of a
written notice of dishonor.
The petition is impressed with merit.
Section 1 of B.P. Blg. 22 or the Bouncing Checks Law reads:
1. “SECTIONChecks 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
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.”
Page 2 of 5
For petitioner to be validly convicted of the crime under B.P. Blg. 22, the
following requisites must thus concur: (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
the665drawer, without any valid cause, ordered the bank to stop payment.11
Petitioner admits having issued the postdated check to Cristina. The check,
however, was dishonored when deposited for payment in Banco de Oro due to
DAIF. Hence, the first and the third elements obtain in the case.
As for the second element, Section 2 of B.P. Blg. 22 provides that
“[t]he 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 Rico v. People of the Philippines,12 this Court held:
“x x x [I]f x x x notice of non-payment by the drawee bank is not sent to the
maker or drawer of the bum check, or if there is no proof as to when such notice
was received by the drawer, then the presumption of knowledge as provided in
Section 2 of B.P. 22 cannot arise, since there would simply be no way of reckoning
the crucial five-day period.
x x x In recent cases, we had the occasion to emphasize that not only must
there be a written notice of dishonor or demand letters actually received by the
drawer of a dishonored check, but there must also be proof of
receipt thereof that is properly authenticated, and not mere registered receipt
and/or return receipt.
_______________
11 Arceo, Jr. v. People, G.R. No. 142641, July 17, 2006, 495 SCRA 204,
211; Josef v. People, G.R. No. 146424, November 18, 2005, 475 SCRA 417,
420; Domagsang v. Court of Appeals, 400 Phil. 847, 853; 347 SCRA 75, 80-81
(2000); Lim v. People, 394 Phil. 844, 851-852; 340 SCRA 497, 502 (2000).
12 440 Phil. 540; 392 SCRA 61 (2002).
666Thus, as held in Domagsang vs. Court of Appeals, while Section 2 of B.P.
22 indeed does not state that the notice of dishonor be in writing, this must be
taken in conjunction 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. In our
view, both the spirit and letter of the Bouncing Checks Law require for the act to be
punished thereunder not only that the accused issued a check that is dishonored,
but also that the accused has actually been notified in writing of the fact of
dishonor. This is consistent with the rule that penal statues must be construed
strictly against the state and liberally in favor of the accused. x x x
In fine, the failure of the prosecution to prove the existence and receipt by
petitioner of the requisite written notice of dishonor and that he was given at
least five banking days within which to settle his account constitutes sufficient
ground for his acquittal.”13(Italics in the original; emphasis and italics supplied)
The evidence for the prosecution failed to prove the second element. While the
registry receipt,14 which is said to cover the letter-notice of dishonor and of
demand sent to petitioner, was presented, there is no proof that he or a duly
authorized agent received the same. Receipts for registered letters including
return receipts do not themselves prove receipt; they must be properly
authenticated to serve as proof of receipt of the letters. 15Thus in Ting v. Court of
Appeals,16 this Court observed:
“x x x 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
_______________
13 Id., at pp. 554-555; pp. 73-74.
14 MeTC Records, p. 49.
15 Supra note 12 at pp. 540-555.
16 398 Phil. 481; 344 SCRA 551 (2000).
667receive the demand letter. Possibilities, however, cannot replace proof beyond
reasonable doubt.”17
For failure then to prove all the elements of violation of B.P. Blg. 22,
petitioner’s acquittal is in order.
Petitioner is civilly liable, however. For in a criminal case, the social injury is
sought to be repaired through the imposition of the corresponding penalty,
whereas with respect to the personal injury of the victim, it is sought to be
compensated through indemnity, which is civil in nature.18
The decision of the MeTC, which was affirmed on appeal by the RTC and the
appellate court, ordering petitioner “to pay private complainant Cristina C. Reyes
civil indemnity in the total amount of ONE HUNDRED SIXTY THOUSAND
PESOS (P160,000) representing his civil obligation covered by subject check,”
deserves circumspect examination, however, given that the obligation of
petitioner to pay 10% interest per month on the loan is unconscionable and
against public policy.
The P160,000 check petitioner issued to Cristina admittedly represented
unpaid interest. By Cristina’s information, the interest was computed at a fixed
rate of 10% per month.19
While the Usury Law ceiling on interest rates was lifted by Central Bank
Circular No. 905, nothing therein grants lenders carte blanche to raise interest
rates to levels which will either enslave their borrowers or lead to a hemorrhaging
Page 3 of 5
of their assets.20 Stipulations authorizing such interest are contra bonos mores, if
not against the law. They are, under Arti-
_______________
17 Id., at p. 494; p. 562.
18 1 Reyes, The Revised Penal Code, 15th ed., 2001, p. 875; vide also Ramos v.
Gonong, 164 Phil. 557, 563; 72 SCRA 559, 566 (1976).
19 TSN, October 11, 1999, p. 20.
20 Solangon v. Salazar, 412 Phil. 816, 822; 360 SCRA 379, 384 (2001); Ruiz v.
Court of Appeals, G.R. No. 146942, April 22, 2002, 401 SCRA 410, 421.
668cle 140921 of the New Civil Code, inexistent and void from the beginning.22
The interest rate of 10% per month agreed upon by the parties in this case
being clearly excessive, iniquitous and unconscionable cannot thus be sustained.
In Macalalag v. People,23 Diño v. Jardines,24 and in Cuaton v. Salud,25 this Court,
finding the 10% per month interest rate to be unconscionable, reduced it to
12% per annum. And in other cases26 where the
_______________
21The following contracts are inexistent and void from the beginning: 1409.
ART.
Those whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy; (1)
Those which are absolutely simulated or fictitious; (2)
Those whose cause or object did not exist at the time of the
transaction; (3)
Those whose object is outside the commerce of men; (4)
Those which contemplate an impossible service; (5)
Those where the intention of the parties relative to the principal object
of the contract cannot be ascertained; (6)
Those expressly prohibited or declared void by law. (7)
These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.
22 Cuaton v. Salud, 465 Phil. 999, 1005; 421 SCRA 278, 282-283 (2004).
23 G.R. No. 164358, December 20, 2006, 511 SCRA 400.
24 G.R. No. 145871, January 31, 2006, 481 SCRA 226.
25 G.R. No. 158382, January 27, 2004, 421 SCRA 278.
26 In Arrofo v. Quiño (G.R. No. 145794, January 26, 2005, 449 SCRA 284),
this Court reduced the 7% interest per month to 18% per annum. In Medel v.
Court of Appeals (359 Phil. 820; 299 SCRA 481 [1998]), the interest stipulated at
5.5% per month was found unconscionable and was reduced to 12% per annum.
In Ruiz v. Court of Appeals (G.R. No. 146942, April 22, 2003, 401 SCRA 410), the
interest rate of 3% per month was reduced to 1% per month. In Solangon v.
Salazar (412 Phil. 816; 360 SCRA 379 [2001]), the stipulated interest rate of 6%
per month was reduced to 12% per annum.
668interest rates stipulated were even less than that involved herein, the Court
equitably reduced them.
This Court deems it fair and reasonable then, consistent with existing
jurisprudence, to adjust the civil indemnity to P16,000, the equivalent of
petitioner’s unpaid interest on the P200,000 loan at 12% percent per annum as of
February 2, 1999, the date of the check, plus 12% per annum interest to be
computed from April 29, 1999, the date of judicial demand (date of the filing of
the Information) up to the finality of this judgment. After the judgment becomes
final and executory until the obligation is satisfied, the total amount due shall
bear interest at 12% per annum.27
Respecting petitioner’s claim that since the promissory note incorporating the
stipulated 10% interest per month was not presented, there is no written proof
thereof, hence, his obligation to pay the same must be void, the same fails. As
reflected above, Cristina admitted such stipulation.
In any event, the presentation of the promissory note may be dispensed with
in a prosecution for violation of B.P. Blg. 22 as the purpose for the issuance of
such check is irrelevant in the determination of the accused’s criminal liability. It
is for the purpose of determining his civil liability that the document bears
significance. Notably, however, Section 24 of the Negotiable Instruments Law
provides that “Every negotiable instrument is deemed prima facie to have been
issued for a valuable consideration, and every person whose signature appears
thereon to have become a party thereto for value.” It was incumbent then on
petitioner to prove that the check was not for a valuable consideration. This he
failed to discharge.
WHEREFORE, the Court of Appeals Decision of November 16, 2006 is
REVERSED and SET ASIDE.
_______________
27 Cuaton v. Salud, 465 Phil. 999, 1006-1007; 421 SCRA 278, 284 (2004)
citing Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 13,
1994, 234 SCRA 78, 95-97.
670
Petitioner, James Svendsen, is acquitted of the crime charged for failure of
the prosecution to prove his guilt beyond reasonable doubt.
He is, however, ordered to pay private complainant, Cristina C. Reyes, the
amount of SIXTEEN THOUSAND PESOS (P16,000) representing civil indemnity,
plus 12% interest per annum computed from April 29, 1999 up to the finality of
this judgment. After the judgment becomes final and executory until the
obligation is satisfied, the total amount due shall earn interest at 12% per annum.
SO ORDERED.
Quisumbing (Chairperson), Carpio, Tinga and Velasco, Jr., JJ., concur.
Judgment reversed and set aside.
Notes.—The gravamen of the offense punished by B.P. 22 is the act of making
and issuing a worthless check or a check that is dishonored upon its presentation
for payment—it is not the nonpayment of an obligation which the law punishes.
(Recuerdo vs. People, 395 SCRA 638 [2003])
Page 4 of 5
 The act of a court employee in issuing a bouncing check constitutes
misconduct which is a ground for disciplinary action. (Mamaclay vs. Francisco,
399 SCRA 251 [2003])
——o0o——

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