G.R. No. 131903 - Badillo vs. Court of Appeals

Case Summary (G.R. No. 131903)

Procedural History

GARDS filed a criminal complaint on April 14, 1988; an information followed in RTC Branch 97 but the prosecution later moved to dismiss the information on May 11, 1989 on the ground that Ervine had paid the amount, and the court dismissed the information. GARDS filed a second complaint on September 18, 1989 which resulted in an information in RTC Branch 100. After trial, RTC Branch 100 convicted the petitioners of violating B.P. Blg. 22, sentencing each to one year imprisonment and a P10,000.00 fine. The Court of Appeals affirmed the conviction and denied reconsideration. Petitioners sought review in the Supreme Court.

Issues Raised by Petitioners

Petitioners argued (1) the prosecution failed to prove guilt beyond reasonable doubt; (2) the courts improperly relied on weaknesses in the defense rather than on the prosecution’s evidence; and (3) petitioners should be acquitted because of “mistake of fact” and lack of knowledge of insufficient funds. They alternatively sought deletion of imprisonment in favor of an increased fine. Petitioners also later submitted an affidavit of desistance from the GARDS president and invoked Lao v. Court of Appeals (1997) to argue lack of knowledge.

Elements of the Offense Under B.P. Blg. 22

The Court reiterated the statutory elements: (1) making, drawing, or issuance of a check to apply to account or for value; (2) knowledge by the maker/drawer at the time of issuance that there were insufficient funds or credit to pay the check in full upon presentment; and (3) subsequent dishonor of the check for insufficiency of funds or credit or dishonor would have occurred absent a stop payment order. The Court noted the statutory presumption: dishonor of a check presented within 90 days is prima facie evidence of the maker’s knowledge of insufficient funds or credit, subject to the safe harbor in Section 2 (payment to holder or making arrangements for full payment within five banking days after notice).

Application of Section 2 Presumption and the Five‑Day Rule

The Court applied Section 2 and held that the presumption of knowledge arises from the dishonor of the March 10 check. Section 2 requires that, to overcome that presumption, the maker must pay the holder or make arrangements for full payment within five banking days after receiving notice of dishonor. Here, petitioners were notified on March 29, 1988 but did not provide any replacement or arrangement within five banking days; the replacement check was issued on April 13, 1988—fifteen days after notice—so petitioners failed to meet the Section 2 requirement. The Court therefore upheld the presumption of knowledge and found prima facie evidence of the requisite scienter.

Petitioners’ Claim of Ignorance and Distinguishing Lao

Petitioners relied on Lao v. Court of Appeals (1997), where the Court acquitted an accused who merely countersigned checks in blank and had no knowledge of payees or lack of funds, and had not been given notice of dishonor as required by Section 2. The Supreme Court distinguished Lao: unlike the accused in Lao who was a mere employee with no role in issuing checks and who lacked notice, petitioners here were owners and officers of the corporation, the statute makes signatories on corporate checks liable, and evidence showed active involvement in company finances. Petitioner Nieto testified that after the first check was dishonored he instructed the company accountant to prepare a replacement check, undermining the claim that they were purely passive signatories. Consequently, the Court found the Lao rationale inapplicable.

Affidavit of Desistance and Its Weight

The Court gave little weight to the affidavit of desistance executed by GARDS’ president after conviction. It observed that complainant had earlier prosecuted the matter vigorously (including refiling after dismissal) and that an after‑conviction affidavit retracting prosecution was suspect. The Court reaffirmed that damage to the payee is not an essential element of the offense under B.P. Blg. 22 and emphasized the statutory and public interest rationale in penalizing issuance of checks without sufficient funds, namely protection of the integrity of the banking system.

Sentencing Considerations and Modification

Although affirming guilt, the Court exercised its discretion in sentencing. Recognizi

Case Syllabus (G.R. No. 131903)

Case Caption, Report and Panel

G.R. No. 131714; decision rendered November 16, 1998; Second Division.
Reported at 359 Phil. 187.
Decision authored by Justice Mendoza.
Concurrence by Melo (Acting Chairman) and Puno, JJ.; Martinez, J., on official leave.
The petition is a review of the Court of Appeals' decision dated October 25, 1996, and the Court of Appeals' resolution dated December 2, 1997, which affirmed petitioners' conviction by the Regional Trial Court of Quezon City (Branch 100) for violation of B.P. Blg. 22 ("Bouncing Checks Law").

Relevant Parties and Corporate Roles

Petitioners: Eduardo R. Vaca and Fernando Nieto.
- Eduardo R. Vaca: President and owner of Ervine International, Inc. (Ervine), engaged in manufacture and sale of refrigeration equipment.
- Fernando Nieto: Ervine's purchasing manager and son-in-law of Eduardo R. Vaca.
Complainant / Payee: General Agency for Reconnaissance, Detection, and Security, Inc. (GARDS).
- Officers mentioned: Jovito C. Cabusara (Operations Manager who filed first criminal complaint), Eduardo B. Alindaya (Acting Operations Manager who filed subsequent complaint), Dominador R. Santiago (GARDS president who later executed an affidavit of desistance).
Respondents: Court of Appeals and the People of the Philippines.

Chronology of Events and Transactional Facts

March 10, 1988: Petitioners issued a check for P10,000.00 to GARDS in partial payment for security services rendered to Ervine; the check was drawn on China Banking Corporation (CBC).
Deposit and dishonor: When deposited at Philippine Commercial International Bank (PCIBank) branch at Shaw Boulevard, Mandaluyong, the March 10, 1988 check was dishonored for insufficiency of funds.
March 29, 1988: GARDS wrote Ervine a letter demanding payment in cash of the amount of the check within seven days from notice; the letter was received by Ervine on the same day; petitioners did not pay within the time given.
April 13, 1988: Petitioners issued a check for P19,860.16 to GARDS, drawn on Associated Bank; the accompanying voucher stated the check was to replace the dishonored check and that P9,860.16 balance was partial payment for Ervine's outstanding account.
April 15, 1988: The April 13 check and voucher were received by a GARDS messenger, Nolan C. Pena; GARDS did not return the dishonored March 10 check.
April 14, 1988: GARDS Operations Manager Jovito C. Cabusara filed a criminal complaint against petitioners for violation of B.P. Blg. 22 (first complaint leading to preliminary investigation and information filed in RTC Branch 97).
May 11, 1989: The case under Branch 97 was dismissed upon motion of the prosecution on the ground that Ervine had already paid the amount of the check.
September 18, 1989: GARDS, through Acting Operations Manager Eduardo B. Alindaya, filed another complaint for violation of B.P. Blg. 22 against petitioners; this resulted in an information filed in RTC Branch 100.
Trial result in RTC Branch 100: Petitioners were found guilty; each was sentenced to suffer one (1) year imprisonment and to pay a fine of P10,000.00 and the costs.
Court of Appeals: Affirmed the RTC decision dated October 25, 1996; denied petitioners' motion for reconsideration by resolution dated December 2, 1997.
Supplemental petitions to the Supreme Court:
- January 29, 1998: Petitioners submitted an affidavit of desistance executed by GARDS president Dominador R. Santiago claiming the case arose from an "accounting difference" and that GARDS was no longer interested in prosecuting.
- May 28, 1998: Petitioners filed another supplemental petition invoking Lao v. Court of Appeals (274 SCRA 572, 1997) to show lack of knowledge of insufficiency of funds.

Procedural Posture and Relief Sought

Petitioners seek review of the Court of Appeals' affirmance of conviction under B.P. Blg. 22.
Petitioners' prayers:
- Primary: Dismissal of the case for failure of the prosecution to prove guilt beyond reasonable doubt.
- Alternative: Modify trial court decision by imposing an increased fine but deleting imprisonment.
Solicitor General opposes the appeal, arguing factual distinctions from Lao and that the affidavit of desistance is made after conviction and is of no moment.

Petitioners' Contentions and Defenses

A. The prosecution failed to prove petitioners' guilt beyond reasonable doubt.
B. The conviction was based on the alleged weakness of the defense evidence rather than the strength of the prosecution's evidence.
C. Petitioners should be acquitted on grounds of "mistake of fact" and "lack of knowledge."
Claim of reliance on company accountant: Petitioners contend, invoking Lao, that preparation of checks was the responsibility of the company accountant and that petitioners merely signed checks relying on the accountant's word that there were sufficient funds.
Supplemental submission: Affidavit of desistance by GARDS president Dominador R. Santiago asserting an "accounting difference," no real damage to GARDS, and lack of interest in prosecution.

Statutory Provision and Elements of the Offense (B.P. Blg. 22)

The elements of the offense under B.P. Blg. 22 are:
- (1) Making, drawing and issuance of any check to apply to account or for value;
- (2) 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 the check in full upon its presentment; and
- (3) Subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit, or dishonor for the same reason had the drawer, without any valid cause, ordered the bank to stop payment.
Presumption of knowledge: The maker's knowledge is presumed from the dishonor of the check for insufficiency of funds.
Section 2 (A2) of B.P. Blg. 22 as expressly provided in the record:
- "SECTION 2. 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 be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays