Bank Liquidation and Bounced Checks: When Receivership Suspends Criminal Liability

When a bank is placed under receivership, its officers may no longer be criminally liable for bounced checks issued before closure. In Cu v. Small Business Guarantee and Finance Corporation (G.R. No. 218381, July 14, 2021), the Supreme Court ruled that bank closure suspends the obligation to fund checks, making it legally impossible for officers to comply with Batas Pambansa Bilang 22 (B.P. 22).

The Case at a Glance

Golden 7 Bank (G7 Bank) obtained a credit line from the Small Business Guarantee and Finance Corporation (SBGFC). In payment, G7 Bank's officers—Allan S. Cu, Norma B. Cueto, and others—issued postdated checks drawn against their Land Bank account. When SBGFC deposited the checks, they were dishonored for "Account Closed."

Meanwhile, on July 31, 2008, the Bangko Sentral ng Pilipinas (BSP) ordered G7 Bank closed and placed it under the receivership of the Philippine Deposit Insurance Corporation (PDIC). SBGFC filed criminal complaints for violation of B.P. 22 against the officers. The Metropolitan Trial Court dismissed the cases, ruling that it was impossible for the officers to fund checks maturing after the bank's closure. The Court of Appeals reversed, but the Supreme Court reinstated the dismissal.

The Legal Issue

The central question: Can bank officers be held criminally liable under B.P. 22 for checks that were dishonored after their bank had been placed under receivership?

The Supreme Court's Ruling

The Court answered no, applying the doctrine of stare decisis—stand by settled decisions. It relied on its earlier ruling in Cu v. Small Business Guarantee and Finance Corp. (G.R. No. 211222, 2017), which involved the same parties and nearly identical facts.

Suspension of the Obligation to Pay

Under Section 30 of Republic Act No. 7653 (the New Central Bank Act), once a bank is placed under receivership, all claims against it must be filed with the liquidation court. The receiver takes charge of all assets and liabilities. The Court held that the closure of G7 Bank suspended the demandability of its loan obligations.

When the BSP ordered the closure, the officers ceased to have authority to act for the bank. The PDIC closed all of G7 Bank's accounts, including the checking account against which the checks were drawn. It was therefore legally impossible for the officers to fund those checks.

No Criminal Liability Without a Demandable Obligation

B.P. 22 punishes the issuance of a check that is dishonored for insufficient funds or a closed account. But the Court clarified that criminal liability requires a valid, demandable obligation at the time of presentment. Since G7 Bank's obligations were suspended and subject to the liquidation process, the exact amount due was uncertain. The officers could not be expected to pay within five banking days of notice of dishonor when the amount was not yet determined.

Distinguishing Prior Cases

The Court contrasted this with Rosario v. Co, where the checks were presented and dishonored before the debtor filed for suspension of payments. In that case, the obligation was already due, so criminal liability attached. Here, the checks were deposited after the closure, when the obligation was already suspended.

Practical Takeaways

• Receivership suspends, not extinguishes, obligations. Creditors must file their claims with the liquidation court, not pursue criminal cases for bounced checks.
• Timing matters. If checks are dishonored before bank closure, officers may still face B.P. 22 liability. If dishonored after closure, liability may be suspended.
• Creditors are not without remedy. The civil claim against the closed bank remains valid and must be pursued before the liquidation court.
• The rule applies to officers, not just the bank. Directors and officers cannot be criminally liable for failing to fund checks when the bank's closure made payment impossible.
• Legal impossibility is a defense. Where a supervening event beyond the accused's control prevents compliance, criminal liability under B.P. 22 may not attach.

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