Ang Tek Lian vs. The Court of Appeals

Estafa under Article 315, paragraph (d), subsection 2 of the Revised Penal Code is committed by issuing an ordinary check, as well as a postdated check, in payment of an obligation when the drawer knows at the time that he has no funds or insufficient funds in the bank and does not inform the payee; and a check payable to the order of “cash” is a bearer instrument under Section 9(d) of the Negotiable Instruments Law, payable without the drawer’s indorsement, so the lack of indorsement does not negate the offense where dishonor was due to insufficient funds.

Ang Tek Lian maintained a deposit account with China Banking Corporation. He and Lee Hua Hong had a pre-war practice of borrowing money from each other, and Ang owned a hotel and restaurant known as the North Bay Hotel. The controversy implicated Article 315, paragraph (d), subsection 2 of the Revised Penal Code, which punishes swindling by issuing checks against insufficient funds, and Section 9(d) of the Negotiable Instruments Law, which governs checks payable to bearer.

Ang Tek Lian drew a check on China Banking Corporation for P4,000, payable to the order of “cash,” on Saturday, November 16, 1946, knowing that he had no funds therefor. He delivered it to Lee Hua Hong in exchange for money that Lee handed to him. The balance of Ang’s deposit on both November 16 and November 18, 1946 was P335 only.

According to Lee Hua Hong, whose version the Court of Appeals believed, Ang went to Lee’s office at 1217 Herran, Paco, Manila, on November 16, 1946, and asked Lee to exchange Exhibit A, which Ang brought with him, for cash. Ang said that he badly needed the P4,000 represented by the check but could not withdraw it from the bank because the bank was already closed. Relying on Ang’s assurance that he had sufficient funds in the bank to meet the check, and because they used to borrow money from each other even before the war and Ang owned the North Bay Hotel, Lee delivered P4,000 in cash to Ang on the same date.

On November 18, 1946, the next business day, Lee presented the check to the drawee bank for payment, but it was dishonored for insufficiency of funds. Despite repeated efforts to notify Ang that the check had been dishonored, he could not be located anywhere until he was summoned in the City Fiscal’s Office in view of the complaint for estafa filed in connection therewith. Ang has not paid the amount of the check or any part thereof.

The Court of Appeals found that the check was returned unsatisfied because the drawer had insufficient funds, not because the drawer’s indorsement was lacking. Its findings of fact were final, leaving only the question of law whether estafa had been accomplished.

• Lack of Indorsement and Absence of Fraud: Petitioner argued that because the check was made payable to “cash” and had not been indorsed by him, he was not guilty of estafa. He maintained that, by the uniform practice of all banks in the Philippines, a check so drawn is invariably dishonored; therefore, Lee Hua Hong accepted it with full knowledge that it would be dishonored and could not have been deceived, so Ang could not have acted fraudulently.

• Estafa by Issuing a Check: Whether, under the facts found, estafa under Article 315, paragraph (d), subsection 2 of the Revised Penal Code was accomplished by Ang Tek Lian’s issuance of the check.
• Check Payable to “Cash” and Lack of Indorsement: Whether the fact that the check was made payable to “cash” and was not indorsed by the drawer negates estafa.

• Estafa by Issuing a Check: Yes. Article 315(d)(2) punishes swindling by issuing a check in payment of an obligation knowing that there are no funds or insufficient funds and without informing the payee; People vs. Fernandez explains that estafa is committed by issuing either a postdated check or an ordinary check to accomplish deceit.
• Check Payable to “Cash” and Lack of Indorsement: No. A check payable to the order of “cash” is a bearer instrument under Section 9(d) of the Negotiable Instruments Law and may be paid without the drawer’s indorsement; the check was dishonored for insufficient funds, not for lack of indorsement.

• Estafa by Issuing a Check: Article 315, paragraph (d), subsection 2 of the Revised Penal Code punishes swindling committed “By post dating a check, or issuing such check in payment of an obligation the offender knowing that at the time he had no funds in the bank, or the funds deposited by him in the bank were not sufficient to cover the amount of the check, and without informing the payee of such circumstances.” The facts found by the Court of Appeals established that Ang knew he had no funds; he drew the check for P4,000 payable to cash; he delivered it to Lee in exchange for P4,000 in cash; and the check was dishonored for insufficiency of funds, with Ang’s deposit balance on both dates being only P335. Under the provision, Ang was properly held liable. People vs. Fernandez (59 Phil. 615) explained that estafa is committed by issuing either a postdated check or an ordinary check to accomplish the deceit. Thus, the fact that the check was an ordinary check, rather than a postdated one, did not remove it from the coverage of the statute.

• Check Payable to “Cash” and Lack of Indorsement: Petitioner argued that because the check was payable to “cash” and was not indorsed by him, he could not be guilty of estafa. He relied on the proposition that, by uniform practice of all banks in the Philippines, a check so drawn is invariably dishonored, so Lee accepted it with full knowledge that it would be dishonored and could not have been deceived. The Court was not aware of the uniformity of such practice. Instances had occurred wherein the bank required the indorsement of the drawer before honoring a check payable to “cash,” but there were also cases where no such requirement had been made; it depended upon the circumstances of each transaction. Under the Negotiable Instruments Law, Section 9(d), a check drawn payable to the order of “cash” is a check payable to bearer, and the bank may pay it to the person presenting it for payment without the drawer’s indorsement. The Court cited Bacal vs. National City Bank of New York, Cleary vs. De Beck Plate Glass Co., Massachusetts Bonding & Insurance Co. vs. Pittsburgh Pipe & Supply Co., and H. Cook & Son vs. Moody, as well as Zollmann, Michie, Morse, and Paton’s Digest, for the rule that a check payable to bearer is authority for payment to the holder and that the drawee bank need not necessarily have the holder identified and ordinarily may not be charged with negligence in failing to do so. If the bank is not sure of the bearer’s identity or financial solvency, it has the right to demand identification and/or assurance against possible complications, such as forgery of the drawer’s signature, loss of the check by the rightful owner, or raising of the amount payable. But where the bank is satisfied of the identity and/or economic standing of the bearer who tenders the check for collection, it will pay the instrument without further question and would incur no liability to the drawer in thus acting. If the bank has no reasonable cause for suspecting any irregularity, it will be protected in paying a bearer check, no matter what facts unknown to it may have occurred prior to presentment. Although a bank is entitled to pay the amount of a bearer check without further inquiry, it is entirely reasonable for the bank to insist that the holder give satisfactory proof of his identity. In any event, it was significant and conclusive that the form of the check Exhibit A was totally unconnected with its dishonor. The Court of Appeals declared that it was returned unsatisfied because the drawer had insufficient funds — not because the drawer’s indorsement was lacking. The lack-of-indorsement argument therefore did not negate estafa.

• Estafa by Issuing a Check under Article 315(d)(2), Revised Penal Code — The provision punishes swindling by postdating a check or issuing such check in payment of an obligation, knowing at the time that there are no funds or insufficient funds in the bank, without informing the payee. The Court applied it to an ordinary check, not merely a postdated one, because People vs. Fernandez explained that estafa is committed by issuing either a postdated check or an ordinary check to accomplish deceit.

• Check Payable to “Cash” as a Bearer Instrument — Under Section 9(d) of the Negotiable Instruments Law, a check drawn payable to the order of “cash” is payable to bearer; the drawee bank may pay it to the person presenting it without the drawer’s indorsement. The bank may require identification or assurance for its protection if it is not satisfied of the bearer’s identity or solvency, but if satisfied it may pay without further question and without liability to the drawer. The Court applied this to hold that the check’s form and lack of indorsement did not negate estafa.

• Dishonor for Insufficient Funds, Not Form of Check — The decisive fact was that the check was returned unsatisfied because the drawer had insufficient funds, not because the drawer’s indorsement was lacking; the form of the check was therefore unconnected with its dishonor.

• Finality of Court of Appeals Findings of Fact — The findings of fact of the Court of Appeals are final; where the facts are settled, the only question for the Supreme Court is one of law. The Court applied this in limiting review to whether estafa had been accomplished.

• "Article 315, paragraph (d), subsection 2 of the Revised Penal Code, punishes swindling committed \"By post dating a check, or issuing such check in payment of an obligation the offender knowing that at the time he had no funds in the bank, or the funds deposited by him in the bank were not sufficient to cover the amount of the check, and without informing the payee of such circumstances\"." — This states the statutory basis and elements of the offense applied to Ang Tek Lian.

• "In this connection, it must be stated that, as explained in People vs. Fernandez (59 Phil., 615), estafa is committed by issuing either a postdated check or an ordinary check to accomplish the deceit." — This extends Article 315(d)(2) to ordinary checks, not only postdated checks.

• "Under the Negotiable Instruments Law (sec. 9 [d], a check drawn payable to the order of \"cash\" is a check payable to bearer, and the bank may pay it to the person presenting it for payment without the drawer's indorsement." — This defines the bearer character of a check payable to “cash” and is the basis for rejecting the lack-of-indorsement defense.

• "Anyway, it is significant, and conclusive, that the form of the check Exhibit A was totally unconnected with its dishonor. The Court of Appeals declared that it was returned unsatisfied because the drawer had insufficient funds — not because the drawer's indorsement was lacking." — This is the decisive ratio: the dishonor resulted from insufficient funds, not from the check’s form or absence of indorsement.

• People vs. Fernandez, 59 Phil. 615 — Explained that estafa is committed by issuing either a postdated check or an ordinary check to accomplish deceit; relied upon to affirm liability under Article 315(d)(2).
• Bacal vs. National City Bank of New York, 146 Misc. 732; 262 N.Y.S. 839 (1933) — Cited for the rule that a check payable to the order of cash is a bearer instrument.
• Cleary vs. De Beck Plate Glass Co., 54 Misc. 537; 104 N.Y.S. 831 (1907) — Cited to support the bearer-character rule.
• Massachusetts Bonding & Insurance Co. vs. Pittsburgh Pipe & Supply Co., 135 S.W.2d 818 (Tex. Civ. App. 1939) — Cited to support the bearer-character rule.
• H. Cook & Son vs. Moody, 17 Ga. App. 465; 87 S.E. 713 (1916) — Cited to support the bearer-character rule.

• Article 315, paragraph (d), subsection 2, Revised Penal Code — Punishes swindling by postdating a check or issuing such check in payment of an obligation, knowing at the time that there are no funds or insufficient funds in the bank, without informing the payee. Applied to Ang’s ordinary check issued for cash and dishonored for insufficiency.
• Section 9(d), Negotiable Instruments Law — A check payable to the order of “cash” is payable to bearer; the bank may pay it to the person presenting it without the drawer’s indorsement. Applied to reject the argument that lack of indorsement negated estafa.

Moran, C.J.; Ozaeta, J.; Paras, J.; Pablo, J.; Tuason, J.; and Reyes, J., concurred.