Primer on Bouncing Checks (BP 22)

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Category: Money and Finance

Checks will always be an integral part of business, which is why we have a number of discussions regarding checks. This time let’s have a more extensive discussion on bouncing checks.

What is the law that punishes bounced checks? The Bouncing Checks Law, or Batas Pambansa (BP) Blg. 22, is a law that governs the criminal liability arising from the issuance of bounced checks. The full title of BP 22: “An Act Penalizing the Making or Drawing and Issuance of a Check Without Sufficient Funds or Credit and for Other Purposes”. In certain instances, the same acts may also give rise to another criminal liability for estafa under the Revised Penal Code.

[Read Full Text of Batas Pambansa Blg. 22]

What’s the reason or rationale for BP 22?

BP 22 is intended to prohibit the making of worthless checks and putting them in circulation. Even years ago, the approximate value of bouncing checks was about 200 million pesos per day. The issuance of bouncing checks is a crime not only against property. The magnitude of the crime has an adverse effect on the greater public interest. The stability and commercial value of checks as currency substitutes will be seriously affected. This, of course, has serious repercussions in trade and in banking communities.

[Read Basic Reminders to Prevent Check Fraud]

Does BP 22 violate the Constitutional mandate that no person shall be imprisoned for debt?

It has been argued that BP 22 in reality punishes the non-payment of debt. However, while it is true that no person can be imprisoned for debt, what BP 22 punishes is the act of issuing bad checks, and not the failure to pay a debt. It’s not a “bad debt law”; it’s rather a “bad check law.” It’s not designed to coerce a debtor to pay his debt.

[Read You Can Go to Prison for your Debts]

Does BP 22 impairs the freedom of people to enter into contracts?

The Constitution also guarantees the right to enter into contract. Each one should be responsible for the contracts entered into. If you get into a bad bargain, if you get a bad check, then it’s your fault for not making sure that the other person is trustworthy. Checks, however, are not simple contracts between two persons. “It is a commercial instrument which, in this modem day and age, has become a convenient substitute for money.” It is an integral part of the banking system. Besides, what the law protects are “lawful” contracts.

What are the acts punished under BP 22?

Section 1 of the Bouncing Checks Law penalizes two distinct acts:

1. Making or drawing and issuing any check to apply on account or for value, knowing at the time of issue that the drawer does not have sufficient funds in or credit with the drawee bank.

2. Having sufficient funds in or credit with the drawee bank shall fail to keep sufficient funds or to maintain a credit to cover the full amount of the check if presented within a period of 90 days from the date appearing thereon, for which reason it is dishonored by the drawee bank.

What are the differences between the two?

* In the first paragraph, the drawer knows that he does not have sufficient funds to cover the check at the time of its issuance, while in the second paragraph, the drawer has sufficient funds at the time of issuance but fails to keep sufficient funds or maintain credit within ninety (90) days from the date appearing on the check. In both instances, the offense is consummated by the dishonor of the check for insufficiency of funds or credit.

* The check involved in the first offense is worthless at the time of issuance since the drawer had neither sufficient funds in nor credit with the drawee bank at the time, while that involved in the second offense is good when issued as drawer had sufficient funds in or credit with the drawee bank when issued.

* Under the first offense, the 90-day presentment period is not expressly provided, while such period is an express element of the second offense.

What are the general elements of Bouncing Checks?

The elements of the offense (further discussed in the next pages) under Section 1 of B.P. 22 are:

1. drawing and issuance of any check to apply on account or for value;

2. knowledge by the maker, drawer, or issuer that at the time of issue he did not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon presentment; and

3. said check is subsequently dishonored by the drawee bank for insufficiency of funds or credit, or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment.

[Read Basic Reminders to Prevent Check Fraud]

What are the applicable penalties?

Courts have a discretion of imposing the following: (1) imprisonment only; (2) fine only; or (3) fine and imprisonment. See: No imprisonment in BP 22 or Bouncing Checks cases?.

What is the second element of the offense, i.e., knowledge of insufficiency of fund?

It’s presumed that the issuer knew that about the insufficiency of funds if, after 5 days from notice of dishonor, he fails to pay or make arrangement for the payment of the check. It must be proved that the accused was actually notified that the check was dishonored, and that he or she failed, within 5 banking days from receipt of the notice, to pay the holder of the check the amount due thereon or to make arrangement for its payment.

What is the 5-day grace period and why is this provided?

The debtor-accused has 5 days to make good the check or pay its value. The debtor may also make arrangements for the payment of the check (e.g., bank transfers) within the same period. The law gives the accused an opportunity to satisfy the amount indicated in the check to avoid a potential criminal case.

When does the 5-day period start to run?

The period starts to run from receipt of the notice of dishonor. This is why many debtors hide so that they won’t be served with a notice of dishonor.

What is the form of the notice of dishonor?

The notice of dishonor must be in writing. A mere oral notice to the drawer or maker of the dishonor of his check is not enough. Without a written notice of dishonor of the checks, there is no way of determining when the 5-day grace period would start and end.

Is the rule on written notice absolute?

A verbal and indirect notice, however, was found to be sufficient in a subsequent case. Myrna [the complainant] did not know the address of the accused. Myrna immediately informed Josefina [the "best friend of the accused] about the dishonored checks. Josefina told Myrna not to worry and repeated her assurance that the accused is her best friend and a good payer. Myrna tried to get the address from Josefina, but the latter refused and instead made the assurance that she will inform petitioner that the checks were dishonored.

It is clear that there was no written notice given to the accused. It is also clear that no notice, even a verbal notice, was given directly to the accused. Still, the court found that the verbal notice was sufficient.

What is the third element, i.e., fact of dishonor?

The introduction in evidence of any “unpaid and dishonored check, having the drawee’s refusal to pay stamped or written thereon, or attached thereto, with the reason therefor as aforesaid, shall be prima facie evidence of the making or issuance of said check, and the due presentment to the drawee for payment and the dishonor thereof, and that the same was properly dishonored for the reason written, stamped, or attached by the drawee on such dishonored check.”

For instance, the prosecution presented the checks which were stamped with the words “ACCOUNT CLOSED,” supported by the returned check tickets issued by the depository bank stating that the checks had been dishonored. The documents constitute prima facie evidence that the drawee bank dishonored the checks, and no evidence was presented to rebut the claim.

Could the same check give rise to a separate charge for estafa?

Yes. Estafa by means of bouncing checks is separately punished under under Article 315 of the Revised Penal Code. An issuer of one worthless check could be separately charged with two offenses.

What are the elements of this kind of estafa?

For a person to be convicted with estafa by issuing a worthless check, the following must be present: (1) postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; (2) insufficiency of funds to cover the check; and (3) damage to the payee.

How is this estafa different from BP 22?

The mere issuance of a worthless check is core of BP 22. It doesn’t require deceit or fraud. In estafa, the issuance of the worthless check must be the very reason for the release of the goods or performance of a service (or some other obligation). Deceit must be present, which is why there could be no estafa if the bounced check was issued as payment of a pre-existing obligation (for instance, payment of a past debt or past delivery).

(Sources: Bautista vs. Court of Appeals, Lozano vs. Martinez, Caras vs. Court of Appeals, Bax vs. People, King vs. People, Yulo vs. People)

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