G.R. No. 129764 - Griffith vs. Court of Appeals

Case Summary (G.R. No. 129764)

Factual Background

Geoffrey F. Griffith, as president of Lincoln Gerard, Inc., signed two corporate checks to Phelps Dodge Phils., Inc. for arrears in rent: one for P100,000 dated April 15, 1986 and another for P115,442.65 dated May 1, 1986. Each check was accompanied by a voucher bearing written instructions that the checks were not to be presented without prior approval from Lincoln Gerard to be given not later than May 30, 1986, and a note, written by a Phelps Dodge officer, stating that if no written approval was given before May 30, 1986, Phelps Dodge would present the checks for payment and that this was final and irrevocable. Lincoln Gerard experienced a four-week labor strike and informed Phelps Dodge on May 29, 1986 that it could not fund the checks. Phelps Dodge nevertheless presented the checks on June 2, 1986, and the bank dishonored them for insufficiency of funds.

Ancillary Civil Proceedings and Collection by Foreclosure

Prior to the filing of criminal informations, Phelps Dodge Phils., Inc. had impounded Lincoln Gerard's warehouse contents and, on May 20, 1986, notified Lincoln Gerard that it was transferring the contents to its compound. On June 20, 1986, Phelps Dodge conducted a notarial foreclosure and auction sale and realized P1,120,540 in cash. Lincoln Gerard later filed Civil Case No. 55276 in RTC Branch 69, Pasig, alleging the foreclosure and auction were invalid. On July 19, 1991, the trial court declared the foreclosure and auction invalid, applied proceeds against rentals in arrears, and ordered Phelps Dodge to return P1,072,586.88 as excess. The RTC decision was affirmed on appeal and became final.

Criminal Prosecution and Convictions Below

Two informations for violation of Batas Pambansa Blg. 22 were filed against petitioner on May 10, 1988. After procedural steps including dismissal of motions to quash, remand, and trial, the Metropolitan Trial Court convicted petitioner on two counts on July 25, 1995 and sentenced him to six months imprisonment on each count, to be served consecutively. The Regional Trial Court affirmed the MTC, and the Court of Appeals denied petitioner’s petition for review in a consolidated decision dated March 14, 1997 and denied reconsideration in a resolution dated July 8, 1997.

Issues Presented

The principal issue was whether petitioner was erroneously convicted and sentenced for violation of Batas Pambansa Blg. 22, in light of the fact that Phelps Dodge Phils., Inc. had collected, through notarial foreclosure and auction sale two years before the filing of the criminal informations, an amount exceeding the face value of the two checks. Secondary arguments raised by petitioner included lack of knowledge as to insufficiency of funds, the special status of a postdated check, alleged unconstitutionality in effect criminalizing failure to pay a debt, and that civil remedies or payment abated criminal liability.

Parties’ Contentions

Petitioner argued that the vouchers and his communications notified Phelps Dodge Phils., Inc. that the checks were unfunded at issuance and that he lacked the requisite knowledge to commit a B.P. 22 offense, particularly as to the postdated check; he also argued that collection through foreclosure extinguished criminal liability and that his conviction would offend the constitutional proscription against imprisonment for failure to pay a debt. Phelps Dodge Phils., Inc. maintained that all elements of Batas Pambansa Blg. 22 were present and that payment by foreclosure occurred beyond the statutory five-day period following notice of dishonor and therefore did not bar criminal prosecution. The Solicitor General argued that the voucher contained an assurance final and irrevocable that funds would be made available by May 30, 1986, that B.P. 22 does not distinguish postdated checks where knowledge of insufficiency exists, and that damage or prejudice to the payee is immaterial to criminal liability.

Rulings of the Courts Below

The MTC found petitioner guilty under Section 1 of Batas Pambansa Blg. 22 and imposed consecutive six-month terms. The RTC affirmed the conviction. The Court of Appeals denied petitioner’s petition for review for lack of prima facie merit in a decision dated March 14, 1997, and denied reconsideration in a resolution dated July 8, 1997.

Supreme Court’s Disposition

The Supreme Court granted the petition, reversed and set aside the Court of Appeals decision dated March 14, 1997 and its resolution dated July 8, 1997, and acquitted Geoffrey F. Griffith of the charges of violation of Batas Pambansa Blg. 22 in Criminal Cases Nos. 41678 and 41679. Costs were ordered de officio.

Legal Basis and Reasoning

The Court recognized that the gravamen of Batas Pambansa Blg. 22 is the issuance of worthless checks dishonored upon presentment, but it cautioned against mechanical application of penal law. The Court observed that the policy of this Court, expressed in Administrative Circular No. 12-2000, favors fine over imprisonment in B.P. 22 cases. The Court emphasized that the checks in question were corporate checks issued for rental arrearages, and that Phelps Dodge Phils., Inc. had, by notarial foreclosure and auction, collected cash amounting to P1,120,540 well in excess of Lincoln Gerard’s rental indebtedness of P301,953.12 and far exceeding the face value of the two checks totaling P215,442.65. The Court noted that the civil judgment of RTC Branch 69, Pasig, which became fin

Case Syllabus (G.R. No. 129764)

Parties and Procedural Posture

Geoffrey F. Griffith was the petitioner and signatory of the two checks at issue in the criminal prosecutions under Batas Pambansa Blg. 22.
Phelps Dodge Phils., Inc. was the payee and the private respondent that foreclosed, auctioned Lincoln Gerard's property, and later pursued criminal prosecution.
The informations for violation of B.P. 22 were filed in RTC Criminal Cases Nos. 73260 and 73261 and subsequently remanded to the Metropolitan Trial Court as Criminal Cases Nos. 41678 and 41679.
The MeTC convicted Griffith and sentenced him to two consecutive six-month imprisonments, and the RTC affirmed that conviction.
The Court of Appeals denied Griffith's petition for review in CA-G.R. SP No. 19621 by decision dated March 14, 1997 and denied reconsideration by resolution dated July 8, 1997.
The Supreme Court granted review and resolved the petition by reversing the Court of Appeals decision and acquitting Griffith.

Key Factual Allegations

Phelps Dodge Phils., Inc. leased premises in 1985 to Lincoln Gerard, Inc. for P75,000 monthly and Lincoln Gerard incurred rental arrearages.
As president of Lincoln Gerard, Geoffrey F. Griffith issued Far East Bank Checks No. 06B-C-075065 dated April 15, 1986 for P100,000.00 and No. 06B-C-075066 dated May 1, 1986 for P115,442.65, both payable to Phelps Dodge Phils., Inc..
The vouchers for the checks bore an instruction that the checks were not to be presented without prior approval from Lincoln Gerard by May 30, 1986, and a note by an officer of Phelps Dodge stating that absent such approval the checks would be presented and that such instruction was "final and irrevocable."
On May 29, 1986, Griffith informed Phelps Dodge not to present the checks because Lincoln Gerard could not fund them due to a four-week labor strike.
Phelps Dodge had earlier removed Lincoln Gerard's stored property on May 20, 1986 and placed those items under its custody.
Phelps Dodge presented the checks on June 2, 1986, and the drawee bank dishonored them for insufficiency of funds.
Phelps Dodge then foreclosed and conducted a notarial auction sale on June 20, 1986, notwithstanding Lincoln Gerard's protest.
Phelps Dodge realized P1,120,540.00 from the auction sale, which exceeded the rental arrearages of P301,953.12 and the face value of the two subject checks.
Lincoln Gerard filed Civil Case No. 55276 against Phelps Dodge and on July 19, 1991 the RTC of Pasig declared the foreclosure and auction invalid and ordered Phelps Dodge to return P1,072,586.88 as excess, a decision that the Court of Appeals later affirmed.

Issues Presented

Whether Geoffrey F. Griffith was erroneously convicted and sentenced for violation of B.P. 22 where the money value of the checks had been collected by the payee prior to filing of the criminal informations.
Whether the application of B.P. 22 in this case raised a constitutional prohibition against imprisonment for failure to pay a debt, as alleged by petitioner.
Whether postdating of a check and assurances on the voucher negate the knowledge element required under B.P. 22.
Whether collection of the check amounts through notarial foreclosure and auction sale prior to criminal prosecution extinguished or otherwise abated criminal liability under B.P. 22.

Contentions

Petitioner contended that his notation on the voucher and the postdating showed good faith and negated any knowledge that the checks were worthless when issued.
Petitioner further contended that his prosecution amounted to punishment for failure to pay a debt and that the proceeds of