Bouncing Checks as Guarantees in the Philippines: BP 22 and Criminal Liability

The Supreme Court has long held that issuing a bouncing check—whether as payment or merely as a guarantee—can lead to criminal liability under Batas Pambansa Bilang 22 (BP 22), the law that penalizes the issuance of unfunded checks. In Dico v. Court of Appeals (G.R. Nos. 116566 and 120149, April 14, 1999), the Court reaffirmed this principle, emphasizing that the law makes no distinction between checks issued to pay an obligation and those issued merely as security.

The Case: A Business Dispute Over Dishonored Checks

Domingo Dico, Jr., owner of Paulo Bake Shop, purchased baking materials from Margie Lim Chao in 1986. For each delivery, Dico issued postdated checks as payment. When the checks neared maturity, Dico asked Chao to defer depositing them because he lacked funds. They agreed to redate the checks to a common date of August 3, 1987, with Dico signing beside each new date.

When Chao deposited the checks about a month after the new maturity date, all were dishonored for the reason "Account Closed." Chao filed criminal complaints for violations of BP 22, leading to Dico's conviction in two separate cases before the Regional Trial Court of Cebu.

The Defense: Checks as Mere Guarantees

Dico argued that the checks were not issued "to apply on account or for value" but as mere warranty deposits. He claimed that after issuing the checks, he and Chao entered into a joint business venture involving the supply of automotive parts to the National Irrigation Administration. Under their alleged agreement, his share of profits would be set off against his obligations for the baking materials.

The Supreme Court rejected this defense. The Court found no evidence supporting Dico's claim of set-off or compensation. The straightforward testimony of Chao—that she agreed to redate the checks after Dico pleaded for an extension—was deemed credible. Had the debt been paid, Dico would have redeemed the checks in the ordinary course of business.

The Rule: BP 22 Applies to Guarantee Checks

The Court cited its earlier ruling in Que v. People (154 SCRA 160), which held that BP 22 applies even when dishonored checks are issued merely as a deposit or guarantee. The law does not distinguish between checks issued in payment of an obligation and those issued to guarantee an obligation. As the Court explained, the legislative intent behind BP 22 was to make the prohibition all-embracing.

Similarly, in People v. Nitafan (215 SCRA 84), the Court noted that private arrangements—such as an understanding that a check is not to be presented at the bank—cannot exempt a drawer from penal sanction. Requiring courts to first examine the surrounding agreement would frustrate the law's purpose: to stem the proliferation of unfunded checks.

Why This Matters

The Court emphasized that circulating unfunded checks harms not only the payee but society in general. The practice "can very well pollute the channels of trade and commerce, injure the banking system and eventually hurt the welfare of society and the public interest."

The Court also distinguished Magno v. Court of Appeals (210 SCRA 471), a case Dico relied upon. In Magno, the accused issued checks to collateralize a warranty deposit he never actually received. In contrast, Dico issued checks to cover an actual account or value—the flour and baking materials he purchased.

Practical Takeaways

• Check issuance triggers liability. Under BP 22, the mere act of issuing an unfunded check is a malum prohibitum (prohibited act). Intent to defraud is not required.
• No distinction between payment and guarantee. Whether a check is issued to pay a debt or as a warranty deposit, BP 22 applies if the check bounces.
• Private arrangements won't excuse liability. An understanding that a check is "for security only" or a "memorandum check" does not exempt the drawer from criminal liability.
• Keep records of payments. A drawer who claims the underlying obligation was paid must present clear evidence. Failure to redeem or retrieve issued checks undermines such a defense.
• Redating checks doesn't reset obligations. Agreeing to extend the maturity date of a check does not extinguish criminal liability if the check later bounces.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.