Checks are negotiable instruments that are designed to pass as money with as few encumbrances as possible. In other words, it is a contract designed to be a substitute for money. A check is a bill of exchange drawn on a bank and payable on demand. It is a written order on a bank, purporting to be drawn against a deposit of funds for the payment of all events, of a sum of money to a certain person therein named or to his order or to cash and payable on demand. Although not legal tender, checks have come to be perceived as convenient substitutes for currency in commercial and financial transactions. [1]
The issuance of worthless checks without sufficient funds is currently punishable via Batas Pambansa Bilang 22.
The law enumerates the elements of B.P. 22 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.[2]
BP 22 punishes the issuance of a bouncing check not the purpose for which it was issued nor the terms and conditions relating to its issuance. The mere act of issuing a worthless check is malum prohibitum and punishable thereto.[3]
The law was passed to make checks a viable and credible means of conducting commercial transactions. The proliferation of bad checks had negatively affected the economy during martial law as many Filipinos refused to accept checks in commercial transactions.[4]
There had been many calls calling for the repeal of BP 22 culminating in the passage of Senate Bill 1525. The reasons are many, but those that ring a more resonant note are as follows;
1. The reason for the Passage of B.P. 22 is unconstitutional as it against the prohibition enshrined in the bill of rights against imprisonment for debt
2. The courts are swamped with B.P. 22 cases and repealing it would unclog the court dockets and hasten the administration of justice[5]
3. The current financial crisis and worldwide recession had rendered B.P. 22 constitutionally infirm as it penalizes merchants and professionals who are burdened thereto
BP 22 is constitutional and does not violate the constitutional prohibition against imprisonment
The High Court had held that the issuance of worthless checks constitutes gross misconduct, as the effect “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” since the circulation of valueless commercial papers “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. Thus, paraphrasing Black's definition, a drawer who issues an unfunded check deliberately reneges on his private duties he owes his fellow men or society in a manner contrary to accepted and customary rule of right and duty, justice, honesty or good morals.[6]
The Supreme Court had stated;
The basis or foundation of such perception is confidence. If such confidence is shakes the usefulness of checks as currency substitutes would be greatly diminished or may become nil. Any practice therefore tending to destroy that confidence should be deterred for the proliferation of worthless checks can only create havoc in trade circles and the banking community.[7]
The basis for criminal liability is therefore not the debt or the obligation itself, but the act of issuing a worthless check is detrimental to financial growth, banking and our economy itself. What the law punishes is the issuance of a bouncing check not the purpose for which it was issued nor the terms and conditions relating to its issuance.[8] The mere act of issuing a worthless check is malum prohibitum. In sum, the law punishes the act not as an offense against property but an offense against public order.[9]
The High Court ruled that;
It must be emphasized that the gravamen of the offense charge is the issuance of a bad check. The purpose for which the check was issued, the terms and conditions relating to its issuance, or any agreement surrounding such issuance are irrelevant to the prosecution and conviction of petitioner. [10]
In addition, the High Court stated that;
The law is not concerned with the purpose for which the check is issued nor the terms or conditions relating its issuance. The mere act of issuing a worthless check, whether as a deposit, as a guarantee or even as an evidence of a pre-existing obligation is covered by the law. [11]
Decriminalizing BP 22 is not the answer to unclog court dockets and easing the merchants burdened by the financial crisis
Decriminalizing BP 22 for the pure and simple reason of declogging the dockets of the court is a cure that is far worse than the disease. It will greatly erode the faith the public reposes in the stability and commercial value of checks as currency substitutes, and bring havoc in trade and in banking communities.[12]
The High Court ruled that;
The practice is prohibited by law because of its deleterious effects on public interest. The effects of the increase of worthless checks transcend the private interest of the parties directly involved in the transaction and touches the interest 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 thousand-fold 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. The law punishes the act not as an offense against property but an offense against public order.[13]
As the High Court itself found when it ruled on the constitutionality of BP 22 in 1986 it stated that recent statistics of the Central Bank show that one-third of the entire money supply of the country, roughly totalling P32.3 billion, consists of peso demand deposits. They are deposits in the banks constitute the funds against which among others, commercial papers like checks, are drawn.
We go fast forward to twenty years later in 2006. The entire monetary supply had ballooned to roughly P 637.7 billion pesos. Demand deposits which were only a third of the monetary supply in 1986 had drastically risen to more than half of the total amount of almost P 394.5 billion pesos.[14]
Considering the aforementioned premise, the hallowed words of the High Court in 1986 ring true now more than ever;
The magnitude of the amount involved amply justifies the legitimate concern of the state in preserving the integrity of the banking system. Flooding the system with worthless checks is like pouring garbage into the bloodstream of the nation's economy. 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 thousand fold, 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. [15]
This is the same problem found in other jurisdictions such as the United States. Though some sectors predicted the decline in the use of checks due to the onset of electronic banking and fund transfers, merchants took in more than $13 billion in bad checks in 1996, an 18 percent increase over the year before.[16] Merchants received more than $28 billion in bad checks in 2002. The report also projected the number of bad checks written annually to rise 2 to 4 percent by the year 2020.[17]
Thus under Florida law worthless checks (usually referred to by the acronym PWBC - Passing Worthless Bank Checks) are either 1st degree Misdemeanors or 3rd degree Felonies. A 1st degree Misdemeanor can mean up to one year in a County Jail and a $1,000.00 fine, while a 3rd degree Felony can mean up to five years in a State Prison and a $5,000.00 fine.
As seen in the attached annex[18] issued by the Commercial Law League of America, PWBC is punished either as a misdemeanor or a felony in the United States of America . Decriminalizing PWBC is not the answer to the ever growing threat of PWBC there, and it should also be so here.
It may be true that decriminalizing BP 22 may declog the court dockets, but the deleterious effect and havoc this maelstrom will cause in banking institutions is a steep price to pay. This is the very same reason why the current financial crisis is not sufficient reason to repeal the law.
The High Court ruled that;
Even the thesis of petitioner Dy that the present economic and financial crisis should be a basis to declare the Bouncing Checks Law constitutionally infirm deserves but scant consideration. As we stressed in Lozano, it is precisely during trying times that there exists a most compelling reason to strengthen faith and confidence in the financial system and any practice tending to destroy confidence in checks as currency substitutes should be deterred, to prevent havoc in the trading and financial communities. Further, while indeed the metropolitan trial courts may be burdened immensely by bouncing checks cases now, that fact is immaterial to the alleged invalidity of the law being assailed. The solution to the clogging of dockets in lower courts lies elsewhere.[19]
It is important to stress that the most practical and usual practice in the payment of huge sums of money for the satisfaction of obligations in commercial transactions is through the issuance of checks corresponding to the amount to be paid. They have been widely and fittingly known as the substitute of money and have effectively facilitated the smooth flow of commercial transactions. Thus, the pernicious effects and repercussions of circulating worthless checks are simply unimaginable.[20]
BP 22 should remain in the statute books and should even be made stronger as recent trends in jurisprudence passed by the High Court had watered down the law almost to the point of impotence, which brings us to the next part of this discussion.
The repercussions of Betty King vs Court of Appeals
The Promulgation of the High Court in December 2, 1999 of the Betty King vs People of the Philippine had a chilling effect in the prosecution of BP 22 cases. [21]
The High Court ruled that the prosecution must prove not only that the accused issued a check that was subsequently dishonored. The fact 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 of dishonor, to pay the holder of the check the amount due or make arrangement for its payment must also be proven beyond reasonable doubt.
The accused issued 11 postdated checks in the total amount of P1,070,000 in exchange for cash amounting to P1 million. When the checks were deposited as they fell due, the bank refused payment since the current account of the accused had been closed. In short, the checks she issued had no funds to make them good. The high tribunal said that despite this, the accused could not be convicted because there was no showing that she was actually notified of the dishonor by the bank.
In this case, the accused was sent a demand letter for the payment of the checks that bounced but it was sent by registered mail. And because the mail that was sent to her returned to her creditor (the complainant in the case) for being “unclaimed,” the court said she cannot be presumed to know the insufficiency of funds in the checks she issued. This in spite of the fact that the accused had closed her checking account before the complainant even deposited the checks she issued in payment of the amount she obtained.
Arguably, it is the accused herself that had closed her account. By doing so, it may be safely presumed that she knew that her checks would all bounce. Thus, it is patently clear that the requirement of serving a notice of dishonor to the issuer or the accused could be dispensed with.
Still, the Supreme Court acquitted the accused and ordered her only to pay her civil obligations with interests.
With this ruling, the High Court acquitted accused after accused for failing to prove receipt of the notice of dishonor beyond reasonable doubt.
The trend continued in another case decided by the High Court. In People vs Ojeda[22], the accused herself closed the account and yet the High Court acquitted her still for failure to prove the essential element of receipt of the notice of dishonor.
The Solicitor General argued that there was a simultaneous exchange of textile materials and checks between complainant and appellant. Complainant Chua would not have parted with her telas had she known that appellant’s checks would not clear. Appellant obtained something in exchange for her worthless checks. When she issued them, she knew she had no funds to back up those checks because her account had already been closed. Like in the earlier Betty King case, she very well knew that the checks would bounce when she closed the account before she received the commodities from the Private Complainant.
Despite this, the High Court ruled that;
With the evident lack of notice of dishonor of the checks, appellant cannot be held guilty of violation of BP 22. The lack of such notice violated appellant’s right to procedural due process. "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." The burden of proving receipt of notice rests upon the party asserting it and the quantum of proof required for conviction in this criminal case is proof beyond reasonable doubt. [23]
It is not enough that the Notice of Dishonor be sent by registered mail, it must also be proven beyond reasonable doubt that the accused actually received the same.
Those were the glory days for the issuers of worthless checks. They can easily evade prosecution by refusing receipt of registered mail for notices of dishonor. Personal service of the said notice of dishonor became the standard norm and became a game of “hide and seek” between the issuers and the payees.
However, the halcyon days of “check flashers” may be over with the promulgation of Yulo vs People,[24] which somewhat reversed the downward spiral begun by the case of the Betty King case.
The High Court ruled that;
The purpose for which the check was issued and the terms and conditions relating to its issuance are immaterial. What is primordial is that the issued checks were worthless and the fact of worthlessness was known to the petitioner at the time of their issuance, as in this case. This is because under Batas Pambansa Blg. 22, the mere act of issuing a worthless check is malum prohibitum.[25]
Our recommendation to strengthen the law and it is hopeful that with the issuance of the said ruling, those who had closed their accounts by the time they issued the checks would therefore be presumed to know that the checks they issued would be worthless and the notice of dishonor can be sent through registered mail or otherwise be dispensed with.
The Passage of Administrative Circular 12-2000 and the ostensible removal of imprisonment as a penalty for BP 22
The Supreme Court came out with Administrative Circular 12-2000 which, ostensibly, removed the penalty of imprisonment against those who are found guilty of violating B.P. 22 (The Bouncing Checks Law). At the time the same was issued, there was a clamor in Banking Circles as it seemed to put in jeopardy the acceptance of checks as a means of commercial payment as it seemed to remove imprisonment as a penalty and is tantamount to judicial legislation.
However, the High Court explained that;
SC-AC No. 12-2000, as clarified by SC-AC No. 13-2001, established a rule of preference in imposing the above penalties. When the circumstances of the case clearly indicate good faith or a clear mistake of fact without taint of negligence, the imposition of a fine alone may be considered as the preferred penalty. The determination of the circumstances that warrant the imposition of a fine rests upon the trial judge only. Should the judge deem that imprisonment is appropriate, such penalty may be imposed.[26]
The High Court explained that it is up to the Judges concerned, may in the exercise of sound discretion, and taking into consideration the peculiar circumstances of each case, determine whether the imposition of a fine alone would best serve the interests of justice, or whether forbearing to impose imprisonment would depreciate the seriousness of the offense, work violence on the social order, or otherwise be contrary to the imperatives of justice.
There was a collective sigh of relief as the Court ruled that SC-AC No. 12-2000 did not delete the alternative penalty of imprisonment. The competence to amend the law belongs to the legislature, not to this Court.[27]
Our recommendation is that the law should be strengthened to remove this “discretion” given to the Judge to impose the alternative penalty of “fine.” The penalty of imprisonment should be imposed or at least given preference to thwart would be “check flashers” and stem the ever growing trend of the issuance worthless checks. This is to bring back to life the very essence and spirit why the issuance of bouncing checks are penalized criminally.
In sum, decriminalizing BP 22 would be a bane to the banking industry. The law should even be strengthened to facilitate the use of checks in mainstream commercial transactions. Repealing BP 22 is not the answer, and the solution lies elsewhere.
[1] Lozano vs Martinez G.R. No. L-63419 December 18, 1986
[2] Alberto Lim vs. People of the Philippines, G.R. No. 143231, October 26, 2001, p. 4, citing Rosa Lim vs. People of the Philippines, G.R. No. 130038, 340 SCRA 497, 502. (2000)
[3] Cruz vs. Court of Appeals, 233 SCRA 301
[4] UNCLOGGING THE COURT DOCKETS, A paper presented by ALFREDO F. TADIAR (Former Dean UP College of Law) in the Symposium on Economic Policy Agenda for the Estrada Administration, June 1, 1999
[5] UNCLOGGING THE COURT DOCKETS (ibid)
[6] Moreno vs Araneta [A.C. No. 1109, April 27, 2005]
[7] Lozano vs Martinez (ibid)
[8] Cruz vs. Court of Appeals, 233 SCRA 301
[9] Lozano vs Martinez (ibid)
[10] MEJIA VS PEOPLE G.R. No. 149937 June 21, 2007
[11] People versus Hon. David Nitafan, 215 SCRA 79
[12] MEJIA VS PEOPLE (ibid)
[13] Lozano vs Martinez (ibid)
[14] Philippine Institute for Development Studies, Economic and Social Database 2006
[15] Lozano vs Martinez (ibid)
[16] Nilson Report, June 1997.
[17] Businesswire, citing the June 2003 Nilson Report, August 24, 2004
[18] ANNEX A
[19] Arceta vs Mangrobang (G.R. No. 152895 June 15, 2004)
[20] TAN VS MENDEZ G.R. No. 138669 June 6, 2002
[21] (319 SCRA 654, Dec. 2, 1999)
[22] G.R. Nos. 104238-58 June 3, 2004
[23] PP vs Ojeda (ibid)
[24] [G.R. No. 142762. March 04, 2005]
[25] ibid
[26] Go vs Dimagiba [G.R. No. 151876, June 21, 2005]
[27] ibid
No comments:
Post a Comment