BP 22 after 17 years

Seventeen years ago, I published one of my earlier newspaper articles, a piece entitled “BP 22 defanged.” Although years have passed, very little has changed in the law, rules, and decided cases, such that I am republishing the article, with minor updates.

Batas Pambansa Blg. 22, also known as the Bouncing Checks Law (BP 22), became effective on June 29, 1979. The law punishes the act of issuance of a check to apply on account or for value, when the account against which the check was drawn has insufficient funds, or when a stop payment order is issued without any valid reason.

Because BP 22 imposes imprisonment among its penalties, it is common practice among creditors to require their debtors to issue post-dated checks to cover amortization of their loans and payment for goods and services.

The essential elements of the crime of BP 22 are:

a. the accused is the issuer who signed the dishonored check and the check is issued for account or for value;

b. the accused has knowledge at the time he issued the check that the bank account against which the check is issued has insufficient funds in or credit with the bank for the payment of the check when presented for payment; and

c. the drawee bank dishonors the check because of insufficiency of funds, or it would have dishonored the check for the same reason if the issuer did not order the bank to stop payment for no valid reason.

The law presumes that the issuer knew of the insufficiency of his funds if the check is dishonored within 90 days from the date of the check. This presumption is overcome only if the issuer pays or makes arrangements for payment of the full amount of the check within five banking days after receiving a notice of its dishonor.

When I wrote my original article in 2007, I noted that there have been two important developments regarding BP 22. The first is the shift in policy as announced by the Supreme Court in its Administrative Circular Nos. 12-2000 and 13-01  on the imposition of a fine only, and not imprisonment, for violations of BP 22. The second, decisions of the courts holding that the prosecution in BP 22 must establish that a written notice of dishonor was actually received by the person who issued the dishonored check.

Fine as penalty

The Supreme Court in its Administrative Circular No. 12-2000 declared that, in imposing the penalty for violations of BP 22, courts should follow the policy of “redeeming valuable human material and preventing unnecessary deprivation of personal liberty and economic usefulness with due regard to the protection of the social order.”

In that regard, in lieu of imprisonment, a fine equal to double the amount of the check involved has been deemed an appropriate penalty for a violation of BP 22.

Subsequently, through Administrative Circular No. 13-01, the Supreme Court clarified that it did not intend to remove the penalty of imprisonment, but that courts should reserve the imposition of imprisonment as a penalty for serious cases when the violation of BP 22 was committed in such a way it would negatively affect the social order.

The Supreme Court explained that Administrative Circular 12-2000 and 13-2001, merely establish rules of preference in imposing penalties for violations of BP 22. When the circumstances of both the offense and the offender indicate good faith or a clear mistake of fact without taint of negligence, the imposition of a fine alone – instead of imprisonment – is the preferred penalty.

The Supreme Court pointed out that the alternative penalties which are imposable under BP 22 are: (1) imprisonment of not less than 30 days, but not more than one year; (2) a fine of not less or more than double the amount of the check, but not to exceed P200,000; or (3) both fine and imprisonment, at the discretion of the court.

The court explained that it merely laid down a rule of preference in the application of the penalties and did not amend the law nor defeat the legislative intent behind the law. (Go and Pp v. Dimagiba, G.R. No. 151876, June 21, 2005)

Notice of dishonor

With regard to the second development, this is the failure of the prosecution to establish that a written notice of dishonor that is actually received by the issuer of the check and which is a ground for an acquittal (Rico v. Pp, G.R. No. 137191, 18 November 2002).

The high court declared that while a notice of dishonor is not an indispensable requirement in a prosecution for violation of BP 22, as it is not an element of the offense, evidence that a notice of dishonor has been sent to and received by the accused is actually sought as a means to prove the second element – that the accused has knowledge at the time he issued the check that the bank account against which the check is issued has insufficient funds in or credit with the bank for the payment of the check when presented for payment.

It explained that since the second element involved a state of mind which is difficult to establish, Section 2 of BP 22 created a prima facie presumption of such knowledge, as follows:

SEC. 2. Evidence of knowledge of insufficient funds:  The 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.

Based on this section, 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 five days from receipt thereof, it failed to pay the amount of the check or to make arrangement for its payment.

The Court declared that the presumption or prima facie evidence as provided in BP 22 cannot arise, if the notice of non-payment by the drawee bank is not sent to the maker or drawer, or if there is no proof as to when such notice was received by the drawer, since there would simply be no way of reckoning the crucial 5-day period. (Dela Cruz v. Pp, G.R. No. 163494, Aug 3, 2016)

In practice, it is very difficult for the prosecution to prove receipt of the notice of dishonor by the accused issuer of the dishonored check.

In the cited case of Dela Cruz, a demand letter was received by a certain Rolando Villanueva. However, the prosecution failed to prove the actual receipt by the accused Tan and that there was no proof that Mr. Villanueva was authorized to receive the demand.

In another case, it was declared that a corporation or an officer of a corporation that receives a notice of dishonor addressed to one of its employees has no obligation to forward the notice to the employee concerned. Thus, the receipt is not the receipt contemplated by BP 22 (Lao v. CA, G.R. No. 119178, June 20, 1997)

Notably, in the Dela Cruz case, while the accused was acquitted due to failure of the prosecution to prove receipt of the notice of dishonor, the court declared that the accused remains liable for the payment of civil damages, as it was not established that the accused had paid the amounts covered by the checks, equivalent to the face value of the 23 subject checks, totaling ₱6,226,390.29. The court emphasized that acquittal from a crime does not necessarily mean absolution from civil liability. (Dela Cruz v. People of the Philippines, G.R. No. 163494, August 3, 2016)

Considering the aforementioned points, it is apparent that obtaining a criminal conviction for violation of BP 22, especially one that carries with it the penalty of imprisonment, is not an easy feat to this day. Despite the passage of time, very little has changed in the application and interpretation of the BP 22 law.

(The author, Atty. John Philip C. Siao, is a practicing lawyer and founding Partner of Tiongco Siao Bello & Associates Law Offices, an Arbitrator of the Construction Industry Arbitration Commission of the Philippines, and teaches law at the De La Salle University Tañada-Diokno School of Law. He may be contacted at [email protected]. The views expressed in this article belong to the author alone.)