Wong vs. Court of Appeals [GR 117857, 2 February 2001] Second Division, Quisumbing (J): 4 concur
Facts:
Luis S. Wong was an agent of Limtong Press Inc. (LPI), a manufacturer of calendars. LPI would print sample calendars, then give them to agents to present to customers. The agents would get the purchase orders of customers and forward them to LPI. After printing the calendars, LPI would ship the calendars directly to the customers. Thereafter, the agents would come around to collect the payments. Wong, however, had a history of unremitted collections, which he duly acknowledged in a confirmation receipt he co-signed with his wife. Hence, Wong's customers were required to issue postdated checks before LPI would accept their purchase orders. In early December 1985, Wong issued 6 postdated checks totaling P18,025.00, all dated 30 December 1985 and drawn payable to the order of LPI. 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 Wong's unremitted collections for 1984 amounting to P18,077.07. LPI waived the P52.07 difference. Before the maturity of the checks, Wong prevailed upon LPI not to deposit the checks and promised to replace them within 30 days. However, Wong reneged on his promise. Hence, on 5 June 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 20 June 1986, LPI through counsel notified Wong of the dishonor. Wong failed to make arrangements for payment within 5 banking days. On 6 November 1987, Wong was charged with 3 counts of violation of BP 22 under three separate Informations for the three checks amounting to P5,500.00, P3,375.00, and P6,410.00 (Criminal Case CBU12055, 12057, and 12058. Upon arraignment, Wong pleaded not guilty. Trial ensued. On 30 August 1990, the trial court issued its decision, finding Wong guilty beyond reasonable doubt of the offense of Violations of Section 1 of BP 22 in 3 Counts and sentencing Wong to serve an imprisonment of 4 months for each count; to pay Limtong the sums of P5,500.00, P6,410.00 and P3,375.00 corresponding to the amounts indicated in Allied Banking Checks 660143451, 66[0]143464 and 660143463 all issued on 30 December 1985 together with the legal rate of interest from the time of the filing of the criminal charges in Court and pay the costs. Wong appealed his conviction to the Court of Appeals. On 28 October 1994, it affirmed the trial court's decision in toto. Wong filed the petition for review on certiorari.
Issue:
Whether the presumption of knowledge of lack of funds under Section 2 of BP 22 should not apply to Wong, as he avers that LPI deposited the checks 157 days after the 30 December 1985 maturity date, and that he should not be expected to keep his bank account active and funded beyond the 90-day period.
Held:
Section 2 (Evidence of knowledge of insufficient funds) of BP 22 provides that "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." An essential element of the offense is "knowledge" on the part of the maker or drawer of the check of the insufficiency of his funds in or credit with the bank to cover the check upon its presentment. Since this involves a state of mind difficult to establish, the statute itself creates a prima facie presumption of such knowledge where payment of the check "is refused by the drawee because of insufficient funds in or credit with such bank when presented within 90 days from the date of the check." To mitigate the harshness of the law in its application, the statute provides that such presumption shall not arise if within 5 banking days from receipt of the notice of dishonor, the maker or drawer makes arrangements for payment of the check by the bank or pays the holder the amount of the check. Contrary to Wong's assertions, nowhere in said provision does the law require a maker to maintain funds in his bank account for only 90 days. Rather, the clear import of the law is to establish a prima facie presumption of knowledge of such insufficiency of funds under the following conditions (1) presentment within 90 days from date of the check, and (2) the dishonor of the check and failure of the maker to make arrangements for payment in full within 5 banking days after notice thereof. That the check must be deposited within 90 days is simply one of the conditions for the prima facie presumption of knowledge of lack of funds to arise. It is not an element of the offense. Neither does it discharge Wong from his duty to maintain sufficient funds in the account within a reasonable time thereof. Under Section 186 of the Negotiable Instruments Law, "a check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay." By current banking practice, a check becomes stale after more than 6 months, or 180 days. LPI deposited the checks 157 days after the date of the check. Hence said checks cannot be considered stale. Only the presumption of knowledge of insufficiency of funds was lost, but such knowledge could still be proven by direct or circumstantial evidence. LPI did not deposit the checks because of the reassurance of Wong that he would issue new checks. Upon his failure to do so, LPI was constrained to deposit the said checks. After the checks were dishonored, Wong was duly notified of such fact but failed to make arrangements for full payment within 5 banking days thereof. There is sufficient evidence that Wong had knowledge of the insufficiency of his funds in or credit with the drawee bank at the time of issuance of the checks.
Asia Banking Corporation vs. Javier [GR 19051, 4 April 1923] First Division, Avancena (J): 4 concur, 1 voted for reversal, 1 took no part
Facts:
On 10 May 1920, Salvador B. Chaves drew a check on the Philippine National Bank (PNB) for P11,000 in favor of La Insular, a concern doing business in this city. This check was endorsed by the limited partners of La Insular, and then deposited by Salvador B. Chaves in his current account with Asia Banking Corporation. The deposit was made on 14 July 1920. On 25 June 1920, Salvador B. Chaves drew another check for P18,785.30 on PNB, in favor of La Insular. This check was also endorsed by the limited partners of La Insular, and was likewise deposited by Chaves in his current account with Asia Banking, on 6 July 1920. The amount represented by both checks was used by Chaves after they were deposited in Asia Banking, by drawing checks on the latter. Subsequently these checks were presented by Asia Banking to PNB for payment, but the latter refused to pay on the ground that the drawer, Chaves, had no funds therein. Asia Banking brought the action against Juan Javier, as endorser, for the payment of the value of both checks. The lower court sentenced Javier to pay Asia Banking P11,000, upon the check of 10 May 1920, with interest thereon at 9% per annum from 10 July 1920, and P18,778.34 on the check of 25 June 1920, with interest thereon at 9% per annum from 5 August 1920. From this judgment the defendant appealed.
Issue:
Whether Javier’s liability as endorsed of the checks in question was extinguished.
Held:
Section 89 of the Negotiable Instruments Law (Act No. 2031) provides that, when a negotiable instrument is dishonored for non-acceptance or non-payment, notice thereof must be given to the drawer and of each of the endorsers, and those who are not notified that the document was dishonored. Then, under the general principle of the law of procedure, it will be incumbent upon Asia Banking, who seeks to enforce Javiwe's liability upon these checks as endorser, to establish said liability by proving that notice was given to Javier within the time, and in the manner, required by the law that the checks in question had been dishonored. If these facts are not proven, Asia Banking has not sufficiently established Javier's liability. There is no proof in the record tending to show that plaintiff gave any notice whatsoever to the defendant that the checks in question had been dishonored, and therefore it has not established its cause of action. The Supreme Court reversed the judgment appealed from and absolved Javier from the complaint without special pronouncement as to costs.
State Investment House Inc. vs. Court of Appeals [GR 101163, 11 January 1993] First Division, Bellosillo (J): 2 concur, 1 took no part
Facts:
Nora B. Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold on commission, 2 post-dated Equitable Banking Corporation checks in the amount of P50,000 each, one dated 30 August 1979 and the other, 30 September 1979. Thereafter, the payee negotiated the checks to the State Investment House Inc. (SIHI). Moulic failed to sell the pieces of jewelry, so she returned them to the payee before maturity of the checks. The checks, however, could no longer be retrieved as they had already been negotiated. Consequently, before their maturity dates, Moulic withdrew her funds from the drawee bank.Upon presentment for payment, the checks were dishonored for insufficiency of funds. On 20 December 1979, SIHI allegedly notified Moulic of the dishonor of the checks and requested that it be paid in cash instead, although Moulic avers that no such notice was given her. On 6 October 1983, SIHI sued to recover the value of the checks plus attorney's fees and expenses of litigation. In her Answer, Moulic contends that she incurred no obligation on the checks because the jewelry was never sold and the checks were negotiated without her knowledge and consent. She also instituted a Third-Party Complaint against Corazon Victoriano, who later assumed full responsibility for the checks. On 26 May 1988, the trial court dismissed the Complaint as well as the Third-Party Complaint, and ordered SIHI to pay Moulic P3,000.00 for attorney's fees. SIHI elevated the order of dismissal to the Court of Appeals, but the appellate court affirmed the trial court on the ground that the Notice of Dishonor to Moulic was made beyond the period prescribed by the Negotiable Instruments Law and that even if SIHI did serve such notice on Moulic within the reglementary period it would be of no consequence as the checks should never have been presented for payment. SIHI filed the petition for review.
Issue :
Whether the alleged issuance of the post-dated checks as security is a ground for the discharge of the instrument as against a holder in due course.
Held :
Section 119 of the Negotiable Instrument Law outlined the grounds in which an instrument is discharged. The provision states that "A negotiable instrument is discharged: (a) By payment in due course by or on behalf of the princiWhether the post-dated checks, issued as security, is a ground for the discharge of the instrument as against a holder in due course. pal debtor; (b) By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation; (c) By the intentional cancellation thereof by the holder; (d) By any other act which will discharge a simple contract for the payment of money; (e) When the principal debtor becomes the holder of the instrument at or after maturity in his own right." Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the discharge of the instrument. But, the intentional cancellation contemplated under paragraph (c) is that cancellation effected by destroying the instrument either by tearing it up, burning it, or writing the word "cancelled" on the instrument. The act of destroying the instrument must also be made by the holder of the instrument intentionally. Since MOULIC failed to get back possession of the post-dated checks, the intentional cancellation of the said checks is altogether impossible. On the other hand, the acts which will