Republic of the PhilippinesSupreme Court

Manila

THIRD DIVISION MARLOU L. VELASQUEZ, G.R. No. 157309 Petitioner, Present: AUSTRIA-MARTINEZ,* J.,

Acting Chairperson, TINGA,**

- versus - CHICO-NAZARIO, NACHURA, and REYES, JJ.

Promulgated:SOLIDBANK CORPORATION,

Respondent. March 28, 2008 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N REYES, R.T., J.: PARTIES may not impugn the effectivity of a contract, after much benefit has been gained to the prejudice of another. They are bound by the obligations they expressly set out to do.

Before Us is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) which affirmed with modification that of the Regional Trial Court (RTC) in Cebu City,[2] holding petitioner Marlou Velasquez liable under his letter of undertaking to respondent Solidbank Corporation.

The Facts Petitioner is engaged in the export business operating under the name Wilderness Trading. Respondent is a domestic banking corporation organized under Philippine laws.

The case arose out of a business transaction for the sale of dried sea cucumber for export to South Koreabetween Wilderness Trading, as seller, and Goldwell Trading of Pusan, South Korea, as buyer. To facilitate payment of the products, Goldwell Trading opened a letter of credit in favor of Wilderness Trading in the amount of US$87,500.00[3]

with the Bank of Seoul, Pusan, Korea. On November 12, 1992, petitioner applied for credit accommodation with respondent bank for pre-shipment financing. The credit accommodation was granted. Petitioner was successful in his first two export transactions both drawn on the letter of credit. The third export shipment, however, yielded a different result.

On February 22, 1993, petitioner submitted to respondent the necessary documents for his third shipment. Wanting to be paid the value of the shipment in advance, petitioner negotiated for a documentary sight draft to be drawn on the letter of credit, chargeable to the account of Bank of Seoul. The sight draft represented the value of the shipment in the amount of US$59,640.00.[4]

As a condition for the issuance of the sight draft, petitioner executed a letter of

undertaking in favor of respondent. Under the terms of the letter of undertaking, petitioner promised that the draft will be accepted and paid by Bank of Seoul according to its tenor. Petitioner also held himself liable if the sight draft was not accepted. The letter of undertaking provided:

SOLIDBANK CORPORATION Feb. 22, 199332 Borromeo Street

Cebu City Gentlemen: Re: PURCHASE OF ONE DOC. SIGHT DRAFT

DRAWN UNDER LC#M2073210NS00040 FOR US$59,640.00 UNDER OUR CEBP93/102.

In consideration of your negotiating the above described draft(s), we hereby warrant that the above referred to draft(s) and accompanying documents are genuine and accurately represent the facts stated therein and that the draft(s) will be accepted and paid in accordance with its/their tenor. We further undertake and agree, jointly and severally, to hold you free and harmless from and to defend all actions, claims and demands whatsoever, and to pay on demand all damages, actual or compensatory, including attorney’s fees, in case of suit, at least equal to __% of the amount due, which you may suffer arising by reason of or on account of your negotiating the above draft(s) because of the following discrepancies or reasons or any other discrepancy or reason whatever:

1) B/L MARKED “SAID TO CONTAIN” & “SHIPPER’S LOAD, STOWAGE & COUNT.”

2) LATE SHIPMENT.3) QUANTITY SHIPPED @ US$14.00 OVERDRAWN

BY 0.06 TON.4) NO INSPECTION CERTIFICATE PRESENTED.

We hereby undertake to pay on demand the full amount of the draft(s) or any unpaid balance of the draft(s), with interest at the prevailing rate of today from the date of negotiation, plus all charges and expenses whatsoever incurred in connection therewith. You shall neither be obligated to contest or dispute any refusal to accept or to pay the whole or any part of the above draft(s) nor to proceed in anyway against the drawee thereof, the issuing bank, or against any indorser thereof before making a demand on us for the payment of the whole or any unpaid balance of the draft(s).[5] (Emphasis added)

By virtue of the letter of undertaking, respondent advanced the value of the

shipment which, at the current rate of exchange at that time was P1,495,115.16, less bank charges, to petitioner. Respondent then sent all the documents pertinent to the export transaction to the Bank of Seoul.

Respondent failed to collect on the sight draft as it was dishonored by non-acceptance by the Bank of Seoul. The reasons given for the dishonor were late shipment, forged inspection certificate, and absence of countersignature of the negotiating bank on the inspection certificate.[6] Goldwell Trading likewise issued a stop payment order on the sight draft because most of the bags of dried sea cucumber exported by petitioner contained soil.

Due to the dishonor of the sight draft and the stop payment order, respondent demanded restitution of the sum advanced.[7] Petitioner failed to heed the demand.

On June 3, 1993, respondent filed a complaint for recovery of sum of money [8]

with the RTC in Cebu City. In his answer, petitioner alleged that his liability under the sight draft was extinguished when respondent failed to protest its non-acceptance, as required under the Negotiable Instruments Law (NIL). He also alleged that the letter of undertaking is not binding because it is a superfluous document, and that he did not violate any of the provisions of the letter of credit.[9]

RTC and CA Dispositions

On September 25, 1996, the RTC rendered judgment[10] in favor of respondent with the following fallo:

IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering the defendant:

(1) to pay the plaintiff the principal sum of P1,495, 115.16 plus interest at 20% per annum counted fromFebruary 22, 1993 up to the time the entire amount shall have been fully paid;

(2) to pay attorney’s fees equivalent to 10% of the total

amount due the plaintiff; and

(3) to pay the costs.

SO ORDERED.[11]

The RTC ratiocinated:

This court is not convinced with the defendant’s argument that because of plaintiff’s failure to protest the dishonor of the sight draft, his liability is extinguished because his liability remains under the letter of undertaking which he signed and without which plaintiff would not have advanced or credited to him the amount.

Section 152 of the Negotiable Instruments Law under which

defendant claims extinguishment of his liability to plaintiff is not a bar to the filing of other appropriate remedies which the aggrieved party may pursue to vindicate his rights and in this instant case, plaintiff wants his right vindicated by virtue of the letter of undertaking which defendant signed. By the letter of undertaking, defendant bound himself to pay on demand all damages including attorney’s fees which plaintiff may suffer arising by reason of or on account of negotiating the above draft because of the following discrepancies or any other discrepancy or reasons whatsoever and further to pay on demand full amount of any unpaid balance with interest at the prevailing rate. He should be bound to the fulfillment of what he expressly obligated himself to do and perform in the letter of undertaking without which, plaintiff would not have advance (sic) and credited to him the amount in the draft. He should not enrich himself at the expense of plaintiff.[12] (Emphasis added)

Disagreeing, petitioner elevated the matter to the CA.

On June 27, 2002, the CA affirmed with modification the RTC decision, disposing

as follows:

WHEREFORE, premises considered, the assailed Decision is hereby AFFIRMED with MODIFICATION. Defendant-appellant Marlou

L. Velasquez is hereby ordered to pay plaintiff-appellee Solidbank Corporation, the following: (1) the principal amount of One Million Four Hundred Ninety-Five Thousand One Hundred Fifteen and Sixteen Centavos (P1,495,115.16) plus interest at twelve percent (12%) per annum from February 22, 1993 until fully paid, (2) attorney’s fees equivalent to five percent (5%) of the total amount due, and (3) costs of the suit.

SO ORDERED.[13]

In ruling against petitioner, the CA opined:

The fact that said draft was dishonored and not paid by the Bank of Seoul-Korea, (sic) it is incumbent upon defendant-appellant Velasquez to comply with his obligation under the Letter of Undertaking. He cannot be allowed to impugn the contract of undertaking he entered into by saying that it was a superfluous document, and therefore, not binding on him. The contract of undertaking is the law between them, and must be enforced accordingly. This is in accord with Article 1159 of the New Civil Code, which provides that “obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.” And parties to a contract are bound to the fulfillment of what has expressly been stipulated therein, regardless of the fact that it turn (sic) out to be financially disadvantageous.[14]

x x x x

The fact that Defendant-appellant benefited from the advance payment made by Plaintiff appellee, (sic) it is incumbent upon him to return what he received because the purpose of the advance payment was not attained and/or realized, as the sight draft was not paid accordingly, otherwise, it will result to unjust enrichment on the part of Defendant-appellant at the expense of Plaintiff-appellee, in violation of Articles 19 and 22 of the New Civil Code. The doctrine of unjust enrichment and restitution simply means that “the exercise of a right ends when the right disappears, and it disappears when it is abused, especially to the prejudice of others.”[15] (Emphasis added)

Petitioner moved for reconsideration[16] but his motion was denied.[17] Hence, the present recourse.

Issues Petitioner raises twin issues for Our consideration, to wit:

THE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE, NOT HERETOFORE DETERMINED BY THIS

HONORABLE COURT, OR HAS DECIDED IT IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THIS HONORABLE COURT, IN THAT:

I.THE COURT OF APPEALS RULED THAT PETITIONER IS LIABLE ON THE ACCESSORY CONTRACT, THE LETTER OF UNDERTAKING, DESPITE THE FACT THAT PETITIONER WAS ALREADY RELEASED FROM LIABILITY UNDER THE SIGHT DRAFT, THE PRINCIPAL CONTRACT, UNDER THE PROVISIONS OF THE NEGOTIABLE INSTRUMENTS LAW AND THE CIVIL CODE.

II.THE COURT OF APPEALS HELD PETITIONER LIABLE UNDER THE ACCESSORY CONTRACT, THE LETTER OF UNDERTAKING, DESPITE THE FACT THAT THERE WAS NO PROOF WHATSOEVER THAT PETITIONER VIOLATED EITHER THE PRINCIPAL CONTRACT, THE SIGHT DRAFT, OR EVEN THE LETTER OF UNDERTAKING.[18] (Underscoring supplied)

The main issue is whether or not petitioner should be held liable to respondent under the sight draft or the letter of undertaking. There is no dispute that petitioner duly signed and executed these documents. It is likewise admitted that the sight draft was dishonored by non acceptance by the Bank of Seoul.

Our Ruling

The petition is without merit. Petitioner is not liable under the sight draft but he is liable under his letter of undertaking; liability under the letter of undertaking was not extinguished by non-protest of the dishonor of the sight draft.

Petitioner argues that he cannot be held liable under either the sight draft or the letter of undertaking. He claims that the failure of respondent to protest the dishonor of the sight draft under Section 152 of the NIL discharged him from liability under the negotiable instrument. It is also contended that his liability under the letter of undertaking is that of a mere guarantor; that the letter of undertaking is only an accessory contract to the sight draft. Since he was discharged from liability under the sight draft, he cannot be held liable under the letter of undertaking.

For its part, respondent counters that petitioner’s liability springs from the letter of undertaking, independently of the sight draft. It would not have advanced the amount without the letter of undertaking. According to respondent, the letter of undertaking is an independent agreement and not merely an accessory contract. To permit petitioner to escape liability under the letter of undertaking would result in unjust enrichment.

Petitioner’s liability under the letter of undertaking is independent from his liability under the sight draft. He may be held liable under either the sight draft or the letter of undertaking or both.

Admittedly, petitioner was discharged from liability under the sight draft when respondent failed to protest it for non-acceptance by the Bank of Seoul. A sight draft made payable outside the Philippines is a foreign bill of exchange.[19] When a foreign bill is dishonored by non-acceptance or non-payment, protest is necessary to hold the drawer and indorsers liable. Verily, respondent’s failure to protest the non-acceptance of the sight draft resulted in the discharge of petitioner from liability under the instrument.

Section 152 of the NIL is explicit:

Section 152. In what cases protest necessary. – Where a foreign bill appearing on its face to be such is dishonored by non-acceptance, it must be duly protested for non-acceptance, and where such a bill which has not been previously dishonored by non-acceptance, is dishonored by non-payment, it must be duly protested for non-payment. If it is not so protested, the drawer and indorsers are discharged. Where a bill does not appear on its face to be a foreign bill, protest thereof in case of dishonor is unnecessary. (Emphasis added)

Petitioner, however, can still be made liable under the letter of undertaking. It

bears stressing that it is a separate contract from the sight draft. The liability of petitioner under the letter of undertaking is direct and primary. It is independent from his liability under the sight draft. Liability subsists on it even if the sight draft was dishonored for non-acceptance or non-payment.

Respondent agreed to purchase the draft and credit petitioner its value upon the undertaking that he will reimburse the amount in case the sight draft is dishonored. The bank would certainly not have agreed to grant petitioner an advance export payment were it not for the letter of undertaking. The consideration for the letter of undertaking was petitioner’s promise to pay respondent the value of the sight draft if it was dishonored for any reason by the Bank of Seoul.

We cannot accept petitioner’s thesis that he is only a mere guarantor under the letter of credit. Petitioner cannot be both the primary debtor and the guarantor of his own debt. This is inconsistent with the very purpose of a guarantee which is for the creditor to proceed against a third person if the debtor defaults in his obligation. Certainly, to accept such an argument would make a mockery of commercial transactions.

Petitioner bound himself liable to respondent under the letter of undertaking if the

sight draft is not accepted. He also warranted that the sight draft is genuine; will be paid by the issuing bank in accordance with its tenor; and that he will be held liable for the full amount of the draft upon demand, without necessity of proceeding against the drawee bank.[20] Petitioner breached his undertaking when the Bank of Seoul dishonored the sight draft and Goldwell Trading ordered a stop payment order on it for discrepancies in the export documents. Petitioner is liable without need for respondent to establish collateral facts such as violations of the letter of credit.

It is also argued that petitioner cannot be held liable under the letter of undertaking because respondent failed to prove that he violated any of the provisions in the letter of credit or that sixty (60) of the seventy-one (71) bags shipped to Goldwell Trading contained soil instead of dried sea cucumber.

We cannot agree. Respondent need not prove that petitioner violated the provisions of the letter of credit in order to be held liable under the letter of undertaking. Parties are bound to fulfill what has been expressly stipulated in the contract.[21]

Petitioner’s liability under the letter of undertaking is clear. He is liable to respondent if the sight draft is not accepted by the Bank of Seoul. Mere non-acceptance of the sight draft is sufficient for liability to attach. Here, the sight draft was dishonored for non-acceptance. The non-acceptance of the sight draft triggered petitioner’s liability under the letter of undertaking.

Records also show that the Bank of Seoul found discrepancies in the documents submitted by petitioner. Goldwell Trading issued a stop payment order because the products shipped were defective. It found that most of the bags shipped contained soil instead of dried sea cucumber. If petitioner disputes the finding of Goldwell Trading, he can file a case against said company but he cannot dispute his liability under either the sight draft or the letter of undertaking.

As We see it, this is a straightforward case of collection of sum of money on the basis of a letter of undertaking. Respondent advanced the export payment to petitioner on the understanding that the draft will be honored and paid. The draft was dishonored. Justice and equity dictate that petitioner be held liable to respondent bank.

WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of Appeals dated June 27, 2002 is hereby AFFIRMED. SO ORDERED.

FIRST DIVISION

[G.R. No. 112392. February 29, 2000]BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF APPEALS and BENJAMIN C. NAPIZA,respondents.

D E C I S I O NYNARES-SANTIAGO, J.:This is a petition for review on certiorari of the Decision[1] of the Court of Appeals in CA-G.R. CV No. 37392 affirming in totothat of the Regional Trial Court of Makati, Branch 139,[2] which dismissed the complaint filed by petitioner Bank of the Philippine Islands against private respondent Benjamin C. Napiza for sum of money. SdaadOn September 3, 1987, private respondent deposited in Foreign Currency Deposit Unit (FCDU) Savings Account No. 028-187[3] which he maintained in petitioner bank’s Buendia Avenue Extension Branch, Continental Bank Manager’s Check No. 00014757[4] dated August 17, 1984, payable to "cash" in the amount of Two Thousand Five Hundred Dollars ($2,500.00) and duly endorsed by private respondent on its dorsal side.[5] It appears that the check belonged to a certain Henry Chan who went to the office of private respondent and requested him to deposit the check in his dollar account by way of accommodation and for the purpose of clearing the same. Private respondent acceded, and agreed to deliver to Chan a signed blank withdrawal slip, with the understanding that as soon as the check is cleared, both of them would go to the bank to withdraw the amount of the check upon private respondent’s presentation to the bank of his passbook.Using the blank withdrawal slip given by private respondent to Chan, on October 23, 1984, one Ruben Gayon, Jr. was able to withdraw the amount of $2,541.67 from FCDU Savings Account No. 028-187. Notably, the withdrawal slip shows that the amount was payable to Ramon A. de Guzman and Agnes C. de Guzman and was duly initialed by the branch assistant manager, Teresita Lindo.[6]

On November 20, 1984, petitioner received communication from the Wells Fargo Bank International of New York that the said check deposited by private respondent was a counterfeit check[7] because it was "not of the type or style of checks issued by Continental Bank International."[8] Consequently, Mr. Ariel Reyes, the manager of petitioner’s Buendia Avenue Extension Branch, instructed one of its employees, Benjamin D. Napiza IV, who is private respondent’s son, to inform his father that the check bounced.[9] Reyes himself sent a telegram to private respondent regarding the dishonor of the check. In turn, private respondent’s son wrote to Reyes stating that the check had been assigned "for encashment" to Ramon A. de Guzman and/or Agnes C. de Guzman after it shall have been cleared upon instruction of Chan. He also said that upon learning of the dishonor of the check, his father immediately tried to contact Chan but the latter was out of town.[10]

Private respondent’s son undertook to return the amount of $2,500.00 to petitioner bank. On December 18, 1984, Reyes reminded private respondent of his son’s promise and warned that should he fail to return that amount within seven (7) days, the matter would be referred to the bank’s lawyers for appropriate action to protect the bank’s interest.[11] This was followed by a letter of the bank’s lawyer dated April 8, 1985 demanding the return of the $2,500.00.[12]

In reply, private respondent wrote petitioner’s counsel on April 20, 1985[13] stating that he deposited the check "for clearing purposes" only to accommodate Chan. He added:

"Further, please take notice that said check was deposited on September 3,

1984 and withdrawn on October 23, 1984, or a total period of fifty (50) days had elapsed at the time of withdrawal. Also, it may not be amiss to mention here that I merely signed an authority to withdraw said deposit subject to its clearing, the reason why the transaction is not reflected in the passbook of the account. Besides, I did not receive its proceeds as may be gleaned from the withdrawal slip under the captioned signature of recipient.If at all, my obligation on the transaction is moral in nature, which (sic) I have been and is (sic) still exerting utmost and maximum efforts to collect from Mr. Henry Chan who is directly liable under the circumstances.Scsdaad

xxx......xxx......xxx."On August 12, 1986, petitioner filed a complaint against private respondent, praying for the return of the amount of $2,500.00 or the prevailing peso equivalent plus legal interest from date of demand to date of full payment, a sum equivalent to 20% of the total amount due as attorney's fees, and litigation and/or costs of suit.Private respondent filed his answer, admitting that he indeed signed a "blank" withdrawal slip with the understanding that the amount deposited would be withdrawn only after the check in question has been cleared. He likewise alleged that he instructed the party to whom he issued the signed blank withdrawal slip to return it to him after the bank draft’s clearance so that he could lend that party his passbook for the purpose of withdrawing the amount of $2,500.00. However, without his knowledge, said party was able to withdraw the amount of $2,541.67 from his dollar savings account through collusion with one of petitioner’s employees. Private respondent added that he had "given the Plaintiff fifty one (51) days with which to clear the bank draft in question." Petitioner should have disallowed the withdrawal because his passbook was not presented. He claimed that petitioner had no one to blame except itself "for being grossly negligent;" in fact, it had allegedly admitted having paid the amount in the check "by mistake" x x x "if not altogether due to collusion and/or bad faith on the part of (its) employees." Charging petitioner with "apparent ignorance of routine bank procedures," by way of counterclaim, private respondent prayed for moral damages of P100,000.00, exemplary damages of P50,000.00 and attorney’s fees of 30% of whatever amount that would be awarded to him plus an honorarium of P500.00 per appearance in court.Private respondent also filed a motion for admission of a third party complaint against Chan. He alleged that "thru strategem and/or manipulation," Chan was able to withdraw the amount of $2,500.00 even without private respondent’s passbook. Thus, private respondent prayed that third party defendant Chan be made to refund to him the amount withdrawn and to pay attorney’s fees of P5,000.00 plus P300.00 honorarium per appearance.Petitioner filed a comment on the motion for leave of court to admit the third party complaint, wherein it asserted that per paragraph 2 of the Rules and Regulations governing BPI savings accounts, private respondent alone was liable "for the value of the credit given on account of the draft or check deposited." It contended that private respondent was estopped from disclaiming liability because he himself authorized the withdrawal of the amount by signing the withdrawal slip. Petitioner prayed for the denial of the said motion so as not to unduly delay the disposition of the main case asserting that

private respondent’s claim could be ventilated in another case.Private respondent replied that for the parties to obtain complete relief and to avoid multiplicity of suits, the motion to admit third party complaint should be granted. Meanwhile, the trial court issued orders on August 25, 1987 and October 28, 1987 directing private respondent to actively participate in locating Chan. After private respondent failed to comply, the trial court, on May 18, 1988, dismissed the third party complaint without prejudice.On November 4, 1991, a decision was rendered dismissing the complaint. The lower court held that petitioner could not hold private respondent liable based on the check’s face value alone. To so hold him liable "would render inutile the requirement of ‘clearance’ from the drawee bank before the value of a particular foreign check or draft can be credited to the account of a depositor making such deposit." The lower court further held that "it was incumbent upon the petitioner to credit the value of the check in question to the account of the private respondent only upon receipt of the notice of final payment and should nothave authorized the withdrawal from the latter’s account of the value or proceeds of the check." Having admitted that it committed a "mistake" in not waiting for the clearance of the check before authorizing the withdrawal of its value or proceeds, petitioner should suffer the resultant loss. On appeal, the Court of Appeals affirmed the lower court’s decision. The appellate court held that petitioner committed "clear gross negligence" in allowing Ruben Gayon, Jr. to withdraw the money without presenting private respondent’s passbook and, before the check was cleared and in crediting the amount indicated therein in private respondent’s account. It stressed that the mere deposit of a check in private respondent’s account did not mean that the check was already private respondent’s property. The check still had to be cleared and its proceeds can only be withdrawn upon presentation of a passbook in accordance with the bank’s rules and regulations. Furthermore, petitioner’s contention that private respondent warranted the check’s genuineness by endorsing it is untenable for it would render useless the clearance requirement. Likewise, the requirement of presentation of a passbook to ascertain the propriety of the accounting reflected would be a meaningless exercise. After all, these requirements are designed to protect the bank from deception or fraud.The Court of Appeals cited the case of Roman Catholic Bishop of Malolos, Inc. v. IAC,[14] where this Court stated that a personal check is not legal tender or money, and held that the check deposited in this case must be cleared before its value could be properly transferred to private respondent's account.Without filing a motion for the reconsideration of the Court of Appeals’ Decision, petitioner filed this petition for review on certiorari, raising the following issues:

1.......WHETHER OR NOT RESPONDENT NAPIZA IS LIABLE UNDER HIS WARRANTIES AS A GENERAL INDORSER.2.......WHETHER OR NOT A CONTRACT OF AGENCY WAS CREATED BETWEEN RESPONDENT NAPIZA AND RUBEN GAYON.3.......WHETHER OR NOT PETITIONER WAS GROSSLY NEGLIGENT IN ALLOWING THE WITHDRAWAL.

Petitioner claims that private respondent, having affixed his signature at the dorsal side of the check, should be liable for the amount stated therein in accordance with the following

provision of the Negotiable Instruments Law (Act No. 2031):"SEC. 66. Liability of general indorser. – Every indorser who indorses without qualification, warrants to all subsequent holders in due course –(a)......The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section; and(b)......That the instrument is at the time of his indorsement, valid and subsisting.And, in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it."

Section 65, on the other hand, provides for the following warranties of a person negotiating an instrument by delivery or by qualified indorsement: (a) that the instrument is genuine and in all respects what it purports to be; (b) that he has a good title to it, and (c) that all prior parties had capacity to contract.[15] In People v. Maniego,[16] this Court described the liabilities of an indorser as follows: Juris

"Appellant’s contention that as mere indorser, she may not be liable on account of the dishonor of the checks indorsed by her, is likewise untenable. Under the law, the holder or last indorsee of a negotiable instrument has the right ‘to enforce payment of the instrument for the full amount thereof against all parties liable thereon.’ Among the ‘parties liable thereon’ is an indorser of the instrument, i.e., ‘a person placing his signature upon an instrument otherwise than as a maker, drawer or acceptor * * unless he clearly indicated by appropriate words his intention to be bound in some other capacity.’ Such an indorser ‘who indorses without qualification,’ inter alia ‘engages that on due presentment, * * (the instrument) shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or any subsequent indorser who may be compelled to pay it.’ Maniego may also be deemed an ‘accommodation party’ in the light of the facts, i.e., a person ‘who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person.’ As such, she is under the law ‘liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew * * (her) to be only an accommodation party,’ although she has the right, after paying the holder, to obtain reimbursement from the party accommodated, ‘since the relation between them is in effect that of principal and surety, the accommodation party being the surety."

It is thus clear that ordinarily private respondent may be held liable as an indorser of the check or even as an accommodation party.[17] However, to hold private respondent liable for the amount of the check he deposited by the strict application of the law and without considering the attending circumstances in the case would result in an injustice and in the erosion of the public trust in the banking system. The interest of justice thus demands

looking into the events that led to the encashment of the check.Petitioner asserts that by signing the withdrawal slip, private respondent "presented the opportunity for the withdrawal of the amount in question." Petitioner relied "on the genuine signature on the withdrawal slip, the personality of private respondent’s son and the lapse of more than fifty (50) days from date of deposit of the Continental Bank draft, without the same being returned yet."[18] We hold, however, that the propriety of the withdrawal should be gauged by compliance with the rules thereon that both petitioner bank and its depositors are duty-bound to observe.In the passbook that petitioner issued to private respondent, the following rules on withdrawal of deposits appear:

"4.......Withdrawals must be made by the depositor personally but in some exceptional circumstances, the Bank may allow withdrawal by another upon the depositor’s written authority duly authenticated; and neither a deposit nor a withdrawal will be permitted except upon the presentation of the depositor’s savings passbook, in which the amount deposited withdrawn shall be entered only by the Bank.5.......Withdrawals may be made by draft, mail or telegraphic transfer in currency of the account at the request of the depositor in writing on the withdrawal slip or by authenticated cable. Such request must indicate the name of the payee/s, amount and the place where the funds are to be paid. Any stamp, transmission and other charges related to such withdrawals shall be for the account of the depositor and shall be paid by him/her upon demand. Withdrawals may also be made in the form of travellers checks and in pesos. Withdrawals in the form of notes/bills are allowed subject however, to their (availability).6.......Deposits shall not be subject to withdrawal by check, and may be withdrawn only in the manner above provided, upon presentation of the depositor’s savings passbook and with the withdrawal form supplied by the Bank at the counter."[19] Scjuris

Under these rules, to be able to withdraw from the savings account deposit under the Philippine foreign currency deposit system, two requisites must be presented to petitioner bank by the person withdrawing an amount: (a) a duly filled-up withdrawal slip, and (b) the depositor’s passbook. Private respondent admits that he signed a blank withdrawal slip ostensibly in violation of Rule No. 6 requiring that the request for withdrawal must name the payee, the amount to be withdrawn and the place where such withdrawal should be made. That the withdrawal slip was in fact a blank one with only private respondent’s two signatures affixed on the proper spaces is buttressed by petitioner’s allegation in the instant petition that had private respondent indicated therein the person authorized to receive the money, then Ruben Gayon, Jr. could not have withdrawn any amount. Petitioner contends that "(i)n failing to do so (i.e., naming his authorized agent), he practically authorized any possessor thereof to write any amount and to collect the same."[20]

Such contention would have been valid if not for the fact that the withdrawal slip itself indicates a special instruction that the amount is payable to "Ramon A. de Guzman &/or Agnes C. de Guzman." Such being the case, petitioner’s personnel should have been duly warned that Gayon, who was also employed in petitioner’s Buendia Ave. Extension

branch,[21] was not the proper payee of the proceeds of the check. Otherwise, either Ramon or Agnes de Guzman should have issued another authority to Gayon for such withdrawal. Of course, at the dorsal side of the withdrawal slip is an "authority to withdraw" naming Gayon the person who can withdraw the amount indicated in the check. Private respondent does not deny having signed such authority. However, considering petitioner’s clear admission that the withdrawal slip was a blank one except for private respondent’s signature, the unavoidable conclusion is that the typewritten name of "Ruben C. Gayon, Jr." was intercalated and thereafter it was signed by Gayon or whoever was allowed by petitioner to withdraw the amount. Under these facts, there could not have been a principal-agent relationship between private respondent and Gayon so as to render the former liable for the amount withdrawn.Moreover, the withdrawal slip contains a boxed warning that states: "This receipt must be signed and presented with the corresponding foreign currency savings passbook by the depositor in person. For withdrawals thru a representative, depositor should accomplish the authority at the back." The requirement of presentation of the passbook when withdrawing an amount cannot be given mere lip service even though the person making the withdrawal is authorized by the depositor to do so. This is clear from Rule No. 6 set out by petitioner so that, for the protection of the bank’s interest and as a reminder to the depositor, the withdrawal shall be entered in the depositor’s passbook. The fact that private respondent’s passbook was not presented during the withdrawal is evidenced by the entries therein showing that the last transaction that he made with the bank was on September 3, 1984, the date he deposited the controversial check in the amount of $2,500.00.[22]

In allowing the withdrawal, petitioner likewise overlooked another rule that is printed in the passbook. Thus:

"2.......All deposits will be received as current funds and will be repaid in the same manner; provided, however, that deposits of drafts, checks, money orders, etc. will be accepted as subject to collection only and credited to the account only upon receipt of the notice of final payment. Collection charges by the Bank’s foreign correspondent in effecting such collection shall be for the account of the depositor. If the account has sufficient balance, the collection shall be debited by the Bank against the account. If, for any reason, the proceeds of the deposited checks, drafts, money orders, etc., cannot be collected or if the Bank is required to return such proceeds, the provisional entry therefor made by the Bank in the savings passbook and its records shall be deemed automatically cancelled regardless of the time that has elapsed, and whether or not the defective items can be returned to the depositor; and the Bank is hereby authorized to execute immediately the necessary corrections, amendments or changes in its record, as well as on the savings passbook at the first opportunity to reflect such cancellation." (Italics and underlining supplied.) Jurissc

As correctly held by the Court of Appeals, in depositing the check in his name, private respondent did not become the outright owner of the amount stated therein. Under the above rule, by depositing the check with petitioner, private respondent was, in a way, merely designating petitioner as the collecting bank. This is in consonance with the rule that a negotiable instrument, such as a check, whether a manager’s check or ordinary

check, is not legal tender.[23] As such, after receiving the deposit, under its own rules, petitioner shall credit the amount in private respondent’s account or infuse value thereon only after the drawee bank shall have paid the amount of the check or the check has been cleared for deposit. Again, this is in accordance with ordinary banking practices and with this Court’s pronouncement that "the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements."[24] The rule finds more meaning in this case where the check involved is drawn on a foreign bank and therefore collection is more difficult than when the drawee bank is a local one even though the check in question is a manager’s check.[25] In Banco Atlantico v. Auditor General,[26] Banco Atlantico, a commercial bank in Madrid, Spain, paid the amounts represented in three (3) checks to Virginia Boncan, the finance officer of the Philippine Embassy in Madrid. The bank did so without previously clearing the checks with the drawee bank, the Philippine National Bank in New York, on account of the "special treatment" that Boncan received from the personnel of Banco Atlantico’s foreign department. The Court held that the encashment of the checks without prior clearance is "contrary to normal or ordinary banking practice specially so where the drawee bank is a foreign bank and the amounts involved were large." Accordingly, the Court approved the Auditor General’s denial of Banco Atlantico’s claim for payment of the value of the checks that was withdrawn by Boncan.Said ruling brings to light the fact that the banking business is affected with public interest. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors "with meticulous care, always having in mind the fiduciary nature of their relationship."[27] As such, in dealing with its depositors, a bank should exercise its functions not only with the diligence of a good father of a family but it should do so with the highest degree of care.[28]

In the case at bar, petitioner, in allowing the withdrawal of private respondent’s deposit, failed to exercise the diligence of a good father of a family. In total disregard of its own rules, petitioner’s personnel negligently handled private respondent’s account to petitioner’s detriment. As this Court once said on this matter:

"Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would do. The seventy-eight (78)-year-old, yet still relevant, case of Picart v. Smith, provides the test by which to determine the existence of negligence in a particular case which may be stated as follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet pater-familias of the Roman law. The existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and determines liability by that."[29]

Petitioner violated its own rules by allowing the withdrawal of an amount that is definitely over and above the aggregate amount of private respondent’s dollar deposits that had yet to be cleared. The bank’s ledger on private respondent’s account shows that before he deposited $2,500.00, private respondent had a balance of only $750.00.[30] Upon private respondent’s deposit of $2,500.00 on September 3, 1984, that amount was credited in his ledger as a deposit resulting in the corresponding total balance of $3,250.00.[31] On September 10, 1984, the amount of $600.00 and the additional charges of $10.00 were indicated therein as withdrawn thereby leaving a balance of $2,640.00. On September 30, 1984, an interest of $11.59 was reflected in the ledger and on October 23, 1984, the amount of $2,541.67 was entered as withdrawn with a balance of $109.92.[32] On November 19, 1984 the word "hold" was written beside the balance of $109.92.[33] That must have been the time when Reyes, petitioner’s branch manager, was informed unofficially of the fact that the check deposited was a counterfeit, but petitioner’s Buendia Ave. Extension Branch received a copy of the communication thereon from Wells Fargo Bank International in New York the following day, November 20, 1984.[34] According to Reyes, Wells Fargo Bank International handled the clearing of checks drawn against U.S. banks that were deposited with petitioner.[35] JjlexFrom these facts on record, it is at once apparent that petitioner’s personnel allowed the withdrawal of an amount bigger than the original deposit of $750.00 and the value of the check deposited in the amount of $2,500.00 although they had not yet received notice from the clearing bank in the United States on whether or not the check was funded. Reyes’ contention that after the lapse of the 35-day period the amount of a deposited check could be withdrawn even in the absence of a clearance thereon, otherwise it could take a long time before a depositor could make a withdrawal,[36] is untenable. Said practice amounts to a disregard of the clearance requirement of the banking system.While it is true that private respondent’s having signed a blank withdrawal slip set in motion the events that resulted in the withdrawal and encashment of the counterfeit check, the negligence of petitioner’s personnel was the proximate cause of the loss that petitioner sustained. Proximate cause, which is determined by a mixed consideration of logic, common sense, policy and precedent, is "that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred."[37] The proximate cause of the withdrawal and eventual loss of the amount of $2,500.00 on petitioner’s part was its personnel’s negligence in allowing such withdrawal in disregard of its own rules and the clearing requirement in the banking system. In so doing, petitioner assumed the risk of incurring a loss on account of a forged or counterfeit foreign check and hence, it should suffer the resulting damage.WHEREFORE, the petition for review on certiorari is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 37392 is AFFIRMED.SO ORDERED. NewmisoDavide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.

SECOND DIVISION

[G.R. No. 117857. February 2, 2001]

LUIS S. WONG, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

D E C I S I O N

QUISUMBING, J.:

For review on certiorari is the decision dated October 28, 1994 of the Court of Appeals in C.A. G.R. CR 11856[1] which affirmed the decision of the Regional Trial Court of Cebu City, Branch 17, convicting petitioner on three (3) counts of Batas Pambansa Blg. 22 (the Bouncing Checks Law) violations, and sentencing him to imprisonment of four (4) months for each count, and to pay private respondent the amounts of P5,500.00, P6,410.00 and P3,375.00, respectively, corresponding to the value of the checks involved, with the legal rate of interest from the time of filing of the criminal charges, as well as to pay the costs.

The factual antecedents of the case are as follows:

Petitioner 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. Petitioner, however, had a history of unremitted collections, which he duly acknowledged in a confirmation receipt he co-signed with his wife.[2] Hence, petitioner’s customers were required to issue postdated checks before LPI would accept their purchase orders.

In early December 1985, Wong issued six (6) postdated checks totaling P18,025.00, all dated December 30, 1985 and drawn payable to the order of LPI, as follows:

(1) Allied Banking Corporation (ABC) Check No. 660143464-C for P6,410.00 (Exh. “B”);(2) ABC Check No. 660143460-C for P 540.00 (Exh. “C”);(3) ABC Check No. PA660143451-C for P5,500.00 (Exh. “D”);(4) ABC Check No. PA660143465-C for P1,100.00 (Exh. “E”);(5) ABC Check No. PA660143463-C for P3,375.00 (Exh. “F”);(6) ABC Check No. PA660143452-C for P1,100.00 (Exh. “G”).

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 petitioner’s unremitted collections for 1984 amounting to P18,077.07.[3] 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.

On November 6, 1987, petitioner was charged with three (3) counts of violation of B.P. Blg. 22[4] under three separate Informations for the three checks amounting to P5,500.00, P3,375.00, and P6,410.00.[5]

The Information in Criminal Case No. CBU-12055 reads as follows:[6]

That on or about the 30th day of December, 1985 and for sometime subsequent thereto, in the City of Cebu, Philippines, and within the jurisdiction of this Honorable Court, the said accused, knowing at the time of issue of the check she/he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, with deliberate intent, with intent of gain and of causing damage, did then and there issue, make or draw Allied Banking Corporation Check No. 660143451 dated 12-30-85 in the amount of P5,500.00 payable to Manuel T. Limtong which check was issued in payment of an obligation of said accused, but when the said check was presented with said bank, the same was dishonored for reason ‘ACCOUNT CLOSED’ and despite notice and demands made to redeem or make good said check, said accused failed and refused, and up to the present time still fails and refuses to do so, to the damage and prejudice of said Manuel T. Limtong in the amount of P5,500.00 Philippine Currency.Contrary to law.

Petitioner was similarly charged in Criminal Case No. 12057 for ABC Check No. 660143463 in the amount of P3,375.00, and in Criminal Case No. 12058 for ABC Check No. 660143464 for P6,410.00. Both cases were raffled to the same trial court.

Upon arraignment, Wong pleaded not guilty. Trial ensued.

Manuel T. Limtong, general manager of LPI, testified on behalf of the company. Limtong averred that he refused to accept the personal checks of petitioner since it was against company policy to accept personal checks from agents. Hence, he and petitioner simply agreed to use the checks to pay petitioner’s unremitted collections to LPI. According to Limtong, a few days before maturity of the checks, Wong requested him to defer the deposit of said checks for lack of funds. Wong promised to replace them within thirty days, but failed to do so. Hence, upon advice of counsel, he deposited the checks which were subsequently returned on the ground of “account closed.”

The version of the defense is that petitioner issued the six (6) checks to guarantee the 1985 calendar bookings of his customers. According to petitioner, he issued the checks not as payment for any obligation, but to guarantee the orders of his customers. In

fact, the face value of the six (6) postdated checks tallied with the total amount of the calendar orders of the six (6) customers of the accused, namely, Golden Friendship Supermarket, Inc. (P6,410.00), New Society Rice and Corn Mill (P5,500.00), Cuesta Enterprises (P540.00), Pelrico Marketing (P1,100.00), New Asia Restaurant (P3,375.00), and New China Restaurant (P1,100.00). Although these customers had already paid their respective orders, petitioner claimed LPI did not return the said checks to him.

On August 30, 1990, the trial court issued its decision, disposing as follows:[7]

“Wherefore, premises considered, this Court finds the accused Luis S. Wong GUILTY beyond reasonable doubt of the offense of Violations of Section 1 of Batas Pambansa Bilang 22 in THREE (3) Counts and is hereby sentenced to serve an imprisonment of FOUR (4) MONTHS for each count; to pay Private Complainant Manuel T. Limtong the sums of Five Thousand Five Hundred (P5,500.00) Pesos, Six Thousand Four Hundred Ten (P6,410.00) Pesos and Three Thousand Three Hundred Seventy-Five (P3,375.00) Pesos corresponding to the amounts indicated in Allied Banking Checks Nos. 660143451, 66[0]143464 and 660143463 all issued on December 30, 1985 together with the legal rate of interest from the time of the filing of the criminal charges in Court and pay the costs.”[8]

Petitioner appealed his conviction to the Court of Appeals. On October 28, 1994, it affirmed the trial court’s decision in toto.[9]

Hence, the present petition.[10] Petitioner raises the following questions of law -[11]

May a complainant successfully prosecute a case under BP 22 --- if there is no more consideration or price or value -- ever the binding tie that it is in contracts in general and in negotiable instruments in particular -- behind the checks? -- if even before he deposits the checks, he has ceased to be a holder for value because the purchase orders (PO's) guaranteed by the checks were already paid?Given the fact that the checks lost their reason for being, as above stated, is it not then the duty of complainant -- knowing he is no longer a holder for value -- to return the checks and not to deposit them ever? Upon what legal basis then may such a holder deposit them and get paid twice?Is petitioner, as the drawer of the guarantee checks which lost their reason for being, still bound under BP 22 to maintain his account long after 90 days from maturity of the checks?May the prosecution apply the prima facie presumption of “knowledge of lack of funds” against the drawer if the checks were belatedly deposited by the complainant 157 days after maturity, or will it be then necessary for the prosecution to show actual proofof “lack of funds” during the 90-day term?

Petitioner insists that the checks were issued as guarantees for the 1985 purchase orders (PO’s) of his customers. He contends that private respondent is not a “holder for value” considering that the checks were deposited by private respondent after the customers already paid their orders. Instead of depositing the checks, private respondent should have returned the checks to him. Petitioner further assails the credibility of complainant considering that his answers to cross-examination questions included: “I cannot recall, anymore” and “We have no more record.”

In his Comment,[12] the Solicitor General concedes that the checks might have been initially intended by petitioner to guarantee payments due from customers, but upon the refusal of LPI to accept said personal checks per company policy, the parties had agreed that the checks would be used to pay off petitioner’s unremitted collections. Petitioner’s contention that he did not demand the return of the checks because he trusted LPI’s good faith is contrary to human nature and sound business practice, according to the Solicitor General.

The issue as to whether the checks were issued merely as guarantee or for payment of petitioner’s unremitted collections is a factual issue involving as it does the credibility of witnesses. Said factual issue has been settled by the trial court and Court of Appeals. 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. Although Manuel Limtong was the sole witness for the prosecution, his testimony was found sufficient to prove all the elements of the offense charged.[13] We find no cogent reason to depart from findings of both the trial and appellate courts. In cases elevated from the Court of Appeals, our review is confined to alleged errors of law. Its findings of fact are generally conclusive. Absent any showing that the findings by the respondent court are entirely devoid of any substantiation on record, the same must stand.[14] The lack of accounting between the parties is not the issue in this case. As repeatedly held, this Court is not a trier of facts.[15] Moreover, in Llamado v. Court of Appeals,[16] we held that “[t]o determine the reason for which checks are issued, or the terms and conditions for their issuance, will greatly erode the faith the public reposes in the stability and commercial value of checks as currency substitutes, and bring about havoc in trade and in banking communities. So what the law punishes is the issuance of a bouncing check and 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.” Nothing herein persuades us to hold otherwise.

The only issue for our resolution now is whether or not the prosecution was able to establish beyond reasonable doubt all the elements of the offense penalized under B.P. Blg. 22.

There are two (2) ways of violating B.P. Blg. 22: (1) by making or drawing and issuing a check to apply on account or for value knowing at the time of issue that the check is not sufficiently funded; and (2) by having sufficient funds in or credit with the drawee bank at the time of issue but failing to keep sufficient funds therein or credit with said bank to cover the full amount of the check when presented to the drawee bank within a period of ninety (90) days.[17]

The elements of B.P. Blg. 22 under the first situation, pertinent to the present case, are:[18]

“(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 such 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.”

Petitioner contends that the first element does not exist because the checks were not issued to apply for account or for value. He attempts to distinguish his situation from the usual “cut-and-dried” B.P. 22 case by claiming that the checks were issued as guarantee and the obligations they were supposed to guarantee were already paid. This flawed argument has no factual basis, the RTC and CA having both ruled that the checks were in payment for unremitted collections, and not as guarantee. Likewise, the argument has no legal basis, for what B.P. Blg. 22 punishes is the issuance of a bouncing check and not the purpose for which it was issued nor the terms and conditions relating to its issuance.[19]

As to the second element, B.P. Blg. 22 creates a presumption juris tantum that the second element prima facie exists when the first and third elements of the offense are present.[20] Thus, the maker’s knowledge is presumed from the dishonor of the check for insufficiency of funds.[21]

Petitioner avers that since the complainant deposited the checks on June 5, 1986, or 157 days after the December 30, 1985 maturity date, the presumption of knowledge of lack of funds under Section 2 of B.P. Blg. 22 should not apply to him. He further claims that he should not be expected to keep his bank account active and funded beyond the ninety-day period.

Section 2 of B.P. Blg. 22 provides:

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 beprima 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 ninety (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 five (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.[22]

Contrary to petitioner’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 ninety (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 petitioner 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 six (6) months,[23] or 180 days. Private respondent herein 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. As found by the trial court, private respondent did not deposit the checks because of the reassurance of petitioner 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, petitioner was duly notified of such fact but failed to make arrangements for full payment within five (5) banking days thereof. There is, on record, sufficient evidence that petitioner had knowledge of the insufficiency of his funds in or credit with the drawee bank at the time of issuance of the checks. And despite petitioner’s insistent plea of innocence, we find no error in the respondent court’s affirmance of his conviction by the trial court for violations of the Bouncing Checks Law.

However, pursuant to the policy guidelines in Administrative Circular No. 12-2000, which took effect on November 21, 2000, the penalty imposed on petitioner should now be modified to a fine of not less than but not more than double the amount of the checks that were dishonored.

WHEREFORE, the petition is DENIED. Petitioner Luis S. Wong is found liable for violation of Batas Pambansa Blg. 22 but the penalty imposed on him is hereby MODIFIED so that the sentence of imprisonment is deleted. Petitioner is ORDERED to pay a FINE of (1) P6,750.00, equivalent to double the amount of the check involved in Criminal Case No. CBU-12057, (2) P12,820.00, equivalent to double the amount of the check involved in Criminal Case No. CBU-12058, and (3) P11,000.00, equivalent to double the amount of the check involved in Criminal Case No. CBU-12055, with subsidiary imprisonment[24] in case of insolvency to pay the aforesaid fines. Finally, as civil indemnity, petitioner is also ordered to pay to LPI the face value of said checks totaling P18,025.00 with legal interest thereon from the time of filing the criminal charges in court, as well as to pay the costs.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.