Prior Payment of Check Value as Defense in Bouncing Checks Cases

The Bouncing Checks Law (Batas Pambansa Blg. 22) penalizes the act of issuing a check that is dishonored for insufficiency of funds. But what happens when the creditor already collects the value of the checks—through foreclosure and auction—before filing criminal charges? In Griffith v. Court of Appeals (G.R. No. 129764, March 12, 2002), the Supreme Court ruled that prior effective payment of the check value can bar a criminal conviction, even if the payment was made through a remedy later declared invalid.

The Facts of the Case

In 1985, Phelps Dodge Philippines, Inc. leased its property to Lincoln Gerard, Inc. When rental arrearages accumulated, Geoffrey Griffith, as president of Lincoln Gerard, issued two checks totaling P215,442.65. The checks were accompanied by a voucher stating they should not be presented without prior approval from Lincoln Gerard, to be given not later than May 30, 1986. A note added that if no written approval came by that date, Phelps Dodge could present the checks—a note the Court noted was actually written by a Phelps Dodge officer.

A labor strike paralyzed Lincoln Gerard's operations, and Griffith wrote Phelps Dodge not to present the checks. Despite this, Phelps Dodge deposited the checks on June 2, 1986, and they were dishonored for insufficient funds. A demand letter followed, but Lincoln Gerard could not fund the checks.

The Foreclosure and the Criminal Charges

Phelps Dodge foreclosed on Lincoln Gerard's properties, which it had already taken into custody, and sold them at auction for P1,120,540. The proceeds far exceeded Lincoln Gerard's actual rental arrears of P301,953.12. Nearly two years later, in May 1988, Phelps Dodge filed criminal charges against Griffith for violation of B.P. 22.

Meanwhile, a civil case filed by Lincoln Gerard resulted in a ruling that the foreclosure and auction were invalid. The court ordered Phelps Dodge to return over P1 million to Lincoln Gerard as excess proceeds.

The Issue Before the Supreme Court

The central question was whether Griffith could still be convicted under B.P. 22 when the value of the checks had already been collected—through a foreclosure later declared invalid—two years before the criminal informations were filed.

The Ruling: Payment Before Prosecution Bars Conviction

The Supreme Court granted the petition and acquitted Griffith. While the Court acknowledged that the gravamen of a B.P. 22 violation is the issuance of a worthless check that is dishonored upon presentment, it refused to apply the penal law mechanically.

The Court emphasized that the Bouncing Checks Law was designed to protect the banking system and legitimate checking account users—not to enrich creditors who manipulate the law's purpose. Here, Phelps Dodge had already collected more than the value of the checks through the auction sale. By the time the criminal charges were filed, Lincoln Gerard's obligation was no longer subsisting.

The Court invoked the principle ratione cessat lex, et cessat lex—when the reason for the law ceases, the law ceases. Holding Griffith criminally liable two years after the creditor had already exacted its "pound of flesh" would not serve the ends of justice but would subvert it.

Practical Takeaways

• Prior payment can be a defense. If the full value of the check is effectively paid or collected before the criminal information is filed, a conviction under B.P. 22 may no longer be justified.
• The defense applies even to involuntary payment. The Court did not require voluntary payment by the debtor; collection through foreclosure, even one later declared invalid, sufficed.
• Courts will not apply B.P. 22 mechanically. The law's purpose matters. Where criminalizing the debtor would subvert justice, courts may acquit despite the technical elements being present.
• The five-day payment window is not absolute. While B.P. 22 provides a period to fund a dishonored check after notice, the Court's ruling shows that circumstances of prior collection can override this technicality.
• Creditors who over-collect risk losing criminal remedies. A creditor who seizes assets far exceeding the debt may find that doing so extinguishes the basis for criminal prosecution.

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