This case clarifies that a person can still be liable for issuing a bouncing check even if they claim to have severed ties with the business using the check. The Supreme Court emphasizes that unless the bank is properly notified and the prima facie evidence of knowledge of insufficient funds is convincingly rebutted, the issuer remains responsible under Batas Pambansa Blg. 22 (B.P. 22), also known as the Bouncing Checks Law. Even if the check was signed in blank and given to a third party, the signatory is still held liable if the check bounces due to insufficient funds. This highlights the importance of formally closing bank accounts and informing relevant parties when terminating business arrangements to avoid potential legal repercussions.

Blank Checks and Bouncing Liability: Can Severed Ties Nullify Responsibility?

In Benjamin Lee v. Court of Appeals and People of the Philippines, the central issue revolves around whether Benjamin Lee could be held liable under B.P. 22 for a check issued by his former business associate, Cesar Bautista, after Lee claimed to have severed their business relationship. Rogelio Bergado, the private complainant, loaned money to Unlad Commercial Enterprises through its agent. When the initial checks bounced, Bautista replaced them with a UCPB check co-signed by Lee. This replacement check, however, was dishonored due to “account closed.” Lee argued he had severed his association with Bautista years prior, and therefore, had no knowledge of the insufficiency of funds.

The legal framework rests on B.P. 22, which penalizes the making or issuing of a check with knowledge that the issuer does not have sufficient funds in the bank to cover the check. Section 2 of B.P. 22 establishes a prima facie presumption that the drawer had knowledge of the insufficiency of funds if the check is dishonored and the drawer fails to cover the amount within five banking days after receiving notice of dishonor.

Section 2. Evidence of knowledge of insufficient funds. – The making, drawing and issuance of a check payment of which is refused by the drawee bank 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.

Lee attempted to rebut this presumption by presenting affidavits from Bautista stating that Lee was no longer connected with Unlad and should not be held liable for its transactions after July 1989. However, the Court found these affidavits inadmissible as hearsay, since Bautista did not testify in court to affirm their contents. Moreover, the Court noted that Lee admitted to continuing investments in Unlad until April 1994, undermining his claim of complete severance.

The Court addressed Lee’s argument that the private complainant was aware that the account was closed. The court cited established jurisprudence on B.P. 22. They stated that the knowledge of the payee that the drawer did not have sufficient funds with the drawee bank at the time the check was issued is immaterial. The crux of the offense is issuing a bad check, rendering malice and intent in the issuance thereof inconsequential.

The Supreme Court upheld Lee’s conviction but modified the penalty. While affirming the finding of guilt, the Court, citing Supreme Court Administrative Circular No. 12-2000, deleted the penalty of imprisonment and instead imposed a fine of P200,000.00, along with the order to pay the private complainant the amount of P980,000.00, plus 12% legal interest per annum from the date of finality of the judgment. This modification reflects a preference for fines over imprisonment in B.P. 22 cases, especially when the accused is not a habitual delinquent or recidivist.

FAQs

What was the key issue in this case?	The key issue was whether Benjamin Lee could be held liable under B.P. 22 for a bouncing check co-signed with a former business associate, even after claiming to have severed their business relationship.
What is B.P. 22?	B.P. 22, also known as the Bouncing Checks Law, penalizes the making or issuing of a check with knowledge that the issuer does not have sufficient funds in the bank to cover the check.
What is the prima facie presumption under B.P. 22?	B.P. 22 establishes a prima facie presumption that the drawer had knowledge of the insufficiency of funds if the check is dishonored and the drawer fails to cover the amount within five banking days after receiving notice of dishonor.
What evidence did Lee present to rebut the presumption?	Lee presented affidavits from his former business associate, Cesar Bautista, stating that Lee was no longer connected with Unlad and should not be held liable for its transactions after July 1989.
Why were Bautista’s affidavits not considered valid evidence?	The Court found these affidavits inadmissible as hearsay, since Bautista did not testify in court to affirm their contents.
Did the Court find that Lee had severed his relationship with Bautista?	No, the Court noted that Lee admitted to continuing investments in Unlad until April 1994, undermining his claim of complete severance.
What was the final penalty imposed on Lee?	The Supreme Court deleted the penalty of imprisonment and instead imposed a fine of P200,000.00, along with the order to pay the private complainant the amount of P980,000.00, plus 12% legal interest per annum from the date of finality of the judgment.
What does the case suggest about signing blank checks?	Signing blank checks carries significant risk, as the signatory remains liable for any checks issued, even if they are filled out by someone else or used after a business relationship has ended.
What should individuals do when severing business relationships involving joint bank accounts?	Individuals should formally close joint bank accounts and notify the bank and all relevant parties in writing to avoid potential liability for future transactions.

This case serves as a cautionary tale about the importance of diligently managing financial arrangements and properly severing business ties. Failure to do so can lead to unforeseen legal consequences, particularly under the Bouncing Checks Law. This decision reinforces the need for individuals to be proactive in protecting their interests by ensuring all formal relationships are properly terminated and documented.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Benjamin Lee v. Court of Appeals and People of the Philippines, G.R. No. 145498, January 17, 2005