When is a Corporate Officer Liable for a Bouncing Check Under BP 22?

G.R. No. 99032, March 26, 1997

Imagine a business owner, confident in their company’s finances, issuing a check only to find it bouncing due to insufficient funds. This situation, unfortunately, is not uncommon, and the legal ramifications can be severe, especially when corporate officers are involved. The Bouncing Checks Law, or Batas Pambansa Blg. 22 (BP 22), aims to prevent this by penalizing the issuance of checks without sufficient funds. But who exactly is liable when a corporate check bounces? This case, Ricardo A. Llamado vs. Court of Appeals and People of the Philippines, sheds light on the extent of a corporate treasurer’s liability under BP 22.

This case dives into the complexities of corporate officer liability when a company check bounces. The Supreme Court clarifies the responsibilities of individuals signing checks on behalf of a corporation, providing crucial guidance for businesses and their officers.

Understanding the Bouncing Checks Law (BP 22)

The Bouncing Checks Law, formally known as Batas Pambansa Blg. 22, is a Philippine law that penalizes the issuance of checks without sufficient funds or credit. Its primary goal is to maintain confidence in the banking system and promote financial stability. The law makes the act of issuing a bouncing check a criminal offense, regardless of the intent or purpose behind it.

The key provision of BP 22 that is relevant to this case states:

“Where the check is drawn by a corporation, company or entity, the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act.”

This provision clearly establishes that individuals who sign checks on behalf of a corporation can be held personally liable if the check bounces. This is a significant point, as it pierces the corporate veil and holds individuals accountable for their actions.

To fully understand BP 22, it’s important to define some key terms:

• Drawer: The person or entity who issues the check.
• Drawee: The bank on which the check is drawn.
• Payee: The person or entity to whom the check is payable.
• Insufficient Funds: When the drawer’s account lacks enough money to cover the check amount.

For example, imagine a small business owner, Maria, who issues a check to pay for office supplies. If Maria’s business account doesn’t have enough funds to cover the check, and the check bounces, Maria could be held liable under BP 22.

The Case of Ricardo Llamado: A Corporate Treasurer’s Predicament

The story begins with Ricardo Llamado, the treasurer of Pan Asia Finance Corporation, and Leon Gaw, a private complainant who invested P180,000 in the corporation. Gaw was assured by Aida Tan, the secretary, that the amount would be repaid with interest. As evidence of the debt, Llamado and Jacinto Pascual, the president, signed a postdated check for P186,500.00.

When Gaw deposited the check, it bounced. The bank informed him that payment was stopped and the account had insufficient funds. Gaw sought recourse, but the check was not honored. This led to the filing of a criminal case against Llamado for violating BP 22.

Here’s a breakdown of the case’s journey through the courts:

1. Regional Trial Court (RTC): The RTC found Llamado guilty of violating BP 22. He was sentenced to imprisonment, a fine, and ordered to reimburse Gaw.
2. Court of Appeals (CA): Llamado appealed, but the CA affirmed the RTC’s decision, upholding his conviction.
3. Supreme Court (SC): Llamado then elevated the case to the Supreme Court, arguing that the check was only a contingent payment and that he shouldn’t be held personally liable.

The Supreme Court highlighted the following key points in its decision:

“Petitioner denies knowledge of the issuance of the check without sufficient funds and involvement in the transaction with private complainant. However, knowledge involves a state of mind difficult to establish. Thus, the statute itself creates a prima facie presumption, i.e., that the drawer had knowledge of the insufficiency of his funds in or credit with the bank at the time of the issuance and on the check’s presentment for payment.”

The Court also emphasized the importance of maintaining public trust in checks as currency substitutes:

“But to determine the reason for which checks are issued, or the terms and conditions for their issuance, will greatly erode the faith the public reposes in the stability and commercial value of checks as currency substitutes, and bring about havoc in trade and in banking communities.”

Ultimately, the Supreme Court denied Llamado’s petition and affirmed the Court of Appeals’ decision, solidifying his conviction.

Practical Implications of the Llamado Ruling

This case serves as a stern reminder to corporate officers about their responsibilities when signing checks on behalf of the company. The ruling reinforces the principle that individuals cannot hide behind the corporate veil to evade liability under BP 22.

Here are some practical implications for businesses and their officers:

• Due Diligence: Corporate officers must exercise due diligence in managing the company’s finances and ensuring that there are sufficient funds to cover issued checks.
• Transparency: Maintain transparent communication with all parties involved in financial transactions.
• Compliance: Understand and comply with the provisions of BP 22 to avoid potential criminal liability.

Key Lessons

• Corporate officers who sign checks can be held personally liable for violations of BP 22.
• Lack of direct involvement in the negotiation is not a valid defense.
• The law presumes the drawer knows of the insufficiency of funds.

For instance, a treasurer should always verify the availability of funds before signing a check, even if instructed by a superior. Failure to do so could result in personal liability if the check bounces.

Frequently Asked Questions (FAQs)

Here are some frequently asked questions about the Bouncing Checks Law and corporate officer liability:

Q: What is the penalty for violating BP 22?

A: The penalty can include imprisonment, a fine, or both, depending on the circumstances of the case.

Q: Can I be held liable if I didn’t know the check would bounce?

A: The law presumes that the drawer knows of the insufficiency of funds. It’s your responsibility to ensure sufficient funds are available.

Q: What if the check was postdated?

A: Issuing a postdated check that subsequently bounces can still be a violation of BP 22.

Q: Can a corporation be held liable for a bouncing check?

A: While the corporation itself may face civil liability, BP 22 specifically targets the individuals who signed the check on behalf of the corporation.

Q: What should I do if I receive a bouncing check?

A: Notify the drawer immediately and demand payment. If payment is not made, consult with a lawyer about your legal options.

ASG Law specializes in criminal defense and corporate law in the Philippines. Contact us or email hello@asglawpartners.com to schedule a consultation.