LINA LIM LAO, PETITIONER, VS. COURT OF APPEALS AND PEOPLE OF THE PHILIPPINES, RESPONDENTS.

Lina Lim Lao versus Court of Appeals and People of the Philippines

The Case

This is a petition for review brought by Lina Lim Lao against the Court of Appeals and the People of the Philippines, challenging her conviction for violation of the Bouncing Checks Law, Batas Pambansa Bilang Dalawampu't Dalawa, commonly called B.P. 22. Lao was a junior officer of a financing corporation who co-signed corporate checks in blank as part of her regular duties, and those checks were later dishonored for insufficiency of funds. The case matters because it fixes the precise reach of the knowledge element in B.P. 22 and settles whether a corporate officer who signs without actual knowledge of the state of the corporate account, and who never personally receives a notice of dishonor, may be convicted. It is the leading authority on the strict construction of the Bouncing Checks Law against the State and in favor of the accused.

Procedural History

Private complainant Father Artelijo Palijo filed an affidavit-complaint against Lina Lim Lao and Teodulo Asprec. After preliminary investigation, three Informations for violation of the first paragraph of Section 1 of B.P. 22 were filed before the Regional Trial Court of Manila, Branch 33. At arraignment, Lao, assisted by counsel, pleaded not guilty. Asprec was never arrested and remained at large.

After trial, the Regional Trial Court convicted Lao in two of the cases and acquitted her in the third, where the prosecution presented no evidence. She was sentenced in each of the two cases to one year of imprisonment and to pay a fine of 150,000 pesos, without subsidiary imprisonment in case of insolvency, plus the costs of suit. She appealed to the Court of Appeals, which affirmed the trial court's decision in full. She then came to the Supreme Court by petition for review, assailing the appellate decision.

Facts

In 1983, Lina Lim Lao was a junior officer of Premiere Financing Corporation, assigned not to the main office in Cubao, Quezon City, but to its extension office in Binondo, Manila. Her duties lay in the marketing department. As a matter of company practice, corporate checks required two signatures, hers and that of Teodulo Asprec, the head of operations. Because she was often out in the field, she would sign the checks in blank, without the name of the payee, the amount, or the date of maturity. It was Asprec who alone filled in those particulars and decided to whom the checks would be delivered.

Father Palijo had invested the funds of the Society of the Divine Word with Premiere through a trader, Rosemarie Lachenal, and he never dealt with Lao at any time. In payment of interest, he was issued three Traders Royal Bank checks, two for 150,000 pesos each and one for 26,010.73 pesos, all payable to him and all signed by Lao and Asprec. When he presented them for encashment, they were dishonored for the reason drawn against insufficient funds. He demanded payment from Premiere, first at the Binondo branch and then at the Cubao main office, where he was paid 5,000 pesos, but no further payments followed.

Father Palijo sent a formal letter of demand, and later a notice of dishonor, to the corporation at its main office in Cubao. No notice of dishonor was ever sent to Lao, and the main office never informed her or anyone in the Binondo office that the checks had bounced. The corporation's Treasury Department, headed by Treasurer Veronilyn Ocampo, alone monitored account balances and funded the checks, and all bank statements went to the main office. The dishonor came in the wake of the assassination of Senator Benigno Aquino, when clients pre-terminated their investments and the corporation was placed under receivership by the Securities and Exchange Commission. Father Palijo then filed the criminal complaint.

Issues

• Whether or not an employee who signs blank corporate checks as part of her regular duties, without actual knowledge of whether those checks are funded, may be held criminally liable under B.P. 22 when the checks are dishonored for insufficiency of funds.
• Whether or not a notice of dishonor sent to the corporation's main office constitutes valid notice to a signatory who holds office in a separate branch and had no actual knowledge of it.

Applicable Provisions

Section 1 of Batas Pambansa Bilang Dalawampu't Dalawa provides:

SECTION 1. Checks without sufficient funds. -- Any person who makes or draws and issues any check to apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment, shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two hundred thousand pesos, or both such fine and imprisonment at the discretion of the court.

This is the offense charged, and its first element of knowledge is the very matter Lao put in issue.

The same penalty shall be imposed upon any person who having sufficient funds in or credit with the drawee bank when he makes or draws and issues a check, shall fail to keep sufficient funds or to maintain a credit or to cover the full amount of the check if presented within a period of ninety (90) days from the date appearing thereon, for which reason it is dishonored by the drawee bank.

This second paragraph defines the separate act of failing to maintain funds, which is not the charge against Lao.

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 third paragraph identifies Lao as a possible drawer, yet it does not dispense with the knowledge required by the first paragraph.

Section 2 of the same law provides:

SECTION 2. Evidence of knowledge of insufficient funds. -- The making, drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank, when presented within ninety (90) days from the date of the check, shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon, or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice that such check has not been paid by the drawee.

This creates only a prima facie presumption of knowledge, which the accused may rebut, and it ties the five-day period to the drawer's receipt of notice of dishonor.

Ruling

On the first issue, the Court ruled in favor of Lao. Penal statutes are strictly construed against the State and liberally in favor of the accused, so the scope of a penal statute cannot be extended by good intention, implication, or even equity. For her acts to be penalized, they must come clearly within both the spirit and the letter of the statute. Knowledge of insufficiency of funds is an essential element of the offense. The fact that she was a signatory to the checks merely raised the prima facie presumption of knowledge; it did not render her automatically guilty. The prosecution remained bound to prove all the elements beyond reasonable doubt, and the accused had the right to rebut the presumption. Although the offense is a malum prohibitum, that character does not excuse the prosecution from proving every element.

The Court found that Lao had no actual knowledge of the insufficiency of funds when she signed, when the checks were issued, and even when they were dishonored. Her duties were confined to the marketing department of the Binondo branch; funding was the sole responsibility of the Treasury Department at the main office. The trial court itself found that she signed the checks in blank and without knowledge of the transactions for which they were issued. The Court held that if knowledge is proven to be actually absent, the accused should not be held liable under the first paragraph of Section 1.

On the second issue, the Court likewise ruled for Lao. The notice of dishonor went to the main office in Cubao, not to her in Binondo, and the main office never informed her. The constructive knowledge of the corporation is not the actual knowledge of the signatory. Without personal notice, the prima facie presumption under Section 2 cannot arise against her, and the failure to pay within five banking days cannot be charged to her.

Doctrine

Knowledge of insufficiency of funds is an essential element of the offense under the first paragraph of Section 1 of B.P. 22, and the prima facie presumption of that knowledge arising from the dishonor of the check is rebuttable, never conclusive. A signatory to a corporate check is not automatically liable; the prosecution must still prove knowledge beyond reasonable doubt, and proof of its actual absence is a defense even though the offense is a malum prohibitum. Penal statutes are strictly construed against the State and liberally in favor of the accused. Finally, notice of dishonor sent to the corporation's main office does not bind a signatory holding office elsewhere who had no actual knowledge of it, for the constructive knowledge of the corporation is not the actual knowledge of the signatory.

Disposition

The Court granted the petition, reversed the decision of the Court of Appeals, and acquitted Lina Lim Lao of the charges.

Remember This

Memorize the line that knowledge of insufficiency of funds is an essential element of B.P. 22, and the presumption of knowledge from dishonor is only prima facie and rebuttable. Examiners use this case to test strict construction of penal statutes, the elements of B.P. 22, and whether corporate notice of dishonor can supply the actual knowledge required of a signatory.