Letter to an Attorney
Dear Attorney,
I hope this message finds you well. I am writing to seek your legal guidance on a matter that has been causing me significant concern. Several months ago, I issued checks from a personal bank account as payment for a house purchase. Unfortunately, due to unforeseen financial struggles, I had to close that account, but I did so after issuing the checks and notifying the company in advance.
I communicated my situation to the company via email, phone, and in person, notifying them that I was facing financial difficulties and that the checks would not clear. I even sent them a formal letter upon their request, explaining that the account was being closed and asking them to stop presenting the checks for payment. Despite my efforts, they have informed me that they are unable to withdraw the checks and have attempted to process them.
Given these circumstances, I would like to understand what legal consequences I may face. I would also appreciate your advice on how I should handle this situation moving forward, especially considering that the closure of my bank account and my financial hardships were communicated well in advance.
Thank you for your time, and I look forward to your legal counsel on this matter.
Sincerely,
A Concerned Client
Legal Framework on Issuing Bounced Checks Under Philippine Law
The issuance of checks, particularly those that are dishonored due to insufficient funds or the closure of the account from which the checks are drawn, is a serious matter under Philippine law. This concern primarily involves two critical legal frameworks: (1) the civil and criminal liabilities under the "Bouncing Checks Law" (Batas Pambansa Blg. 22 or BP 22), and (2) any applicable civil liabilities arising from a breach of contractual obligations. Both of these must be thoroughly examined to understand the implications of your situation.
I. Bouncing Checks Law (Batas Pambansa Blg. 22 or BP 22)
A. Purpose and Scope of BP 22
The Bouncing Checks Law is intended to prevent the issuance of checks without sufficient funds or from accounts that have already been closed. The law protects the integrity of checks as a means of commercial transaction, and penalizes those who attempt to use them fraudulently. Under BP 22, the following acts are criminalized:
Issuance of a Check with Insufficient Funds – When a person issues a check knowing that their account does not have sufficient funds to cover the amount.
Issuance of a Check from a Closed Account – When a check is issued from a bank account that has already been closed, rendering it impossible for the check to be honored by the bank.
Both situations carry penalties, including imprisonment and/or fines, with the exact punishment depending on the court's determination.
B. Elements of the Crime under BP 22
For the issuance of a bounced check to be considered a violation of BP 22, the following elements must be established:
- The person must have made, drawn, or issued any check to apply on account or for value.
- The check was subsequently dishonored by the bank due to insufficient funds, or because the account was closed.
- The issuer, despite receiving notice of the dishonor, failed to settle the amount within five banking days from the notice of dishonor.
In your case, the checks were drawn from a closed account. If the company attempted to encash or deposit those checks and they were dishonored, the essential elements of BP 22 may already be present.
C. Notification and the Five-Day Period to Cure
One of the critical components of BP 22 is the notification requirement. After the check is dishonored, the law requires that the issuer be informed of the dishonor and given a five-banking-day period to make good on the obligation by paying the amount of the check.
From your letter, it appears that you had communicated your financial struggles and account closure in advance. However, BP 22’s notice provision relates to formal notification of dishonor, which occurs after the company attempts to deposit the check and it bounces. The advance notice you provided, while helpful in terms of civil obligations, does not necessarily absolve you from liability under BP 22 unless you remedy the dishonor within the five-day period after the check bounces.
D. Defenses under BP 22
Although BP 22 is a strict liability law, there are several defenses that may be raised:
Lack of Intent to Defraud – While the law does not require fraudulent intent for a violation, courts may consider the issuer’s intent in mitigation. If you can prove that you did not intend to defraud the company, and that you notified them in advance about your financial situation, this may help in reducing penalties or fines.
Payment Made after Dishonor – If you settle the obligation within five banking days after receiving the formal notice of dishonor, you may avoid criminal prosecution altogether.
No Proper Notice of Dishonor – If the company failed to send proper notice of dishonor (either to the wrong address or not at all), there may be grounds to dismiss the case under BP 22.
Banking Issues Beyond Your Control – If there were errors in the bank’s handling of the account closure or processing of the checks, this may serve as a mitigating circumstance.
II. Civil Liabilities
In addition to potential criminal liabilities under BP 22, you may also face civil liabilities for breach of contract. The issuance of checks is typically tied to an underlying obligation – in your case, the purchase of a house. The dishonor of the checks may be considered a breach of the terms of your agreement with the seller, potentially exposing you to:
Demand for Payment – The seller can demand that you make good on the bounced checks or provide an alternative method of payment.
Cancellation of the Sale Agreement – Depending on the terms of your contract, the seller may be able to cancel the sale altogether if payment is not made in full and on time.
Damages – The seller could potentially sue for damages arising from the delay in payment or from the costs incurred due to the issuance of bounced checks.
III. The Role of Good Faith in Mitigating Civil and Criminal Liability
While your actions in notifying the company of your financial struggles do not necessarily negate liability under BP 22, they may help mitigate the consequences in both criminal and civil proceedings.
In Criminal Cases: Courts have, in some instances, shown leniency to individuals who can prove that they acted in good faith and made efforts to settle their obligations. The fact that you informed the company in advance may be a significant mitigating factor.
In Civil Cases: Demonstrating good faith, such as by providing notice of your financial difficulties and attempting to communicate openly with the seller, may reduce the amount of damages you are liable for. Courts often consider whether a party acted in good faith when determining the scope of civil liability.
IV. Steps You Can Take Moving Forward
To best protect yourself, consider taking the following steps:
Consult with a Lawyer: Given the potential for both civil and criminal liabilities, it is crucial to seek legal counsel who can provide specific advice based on the facts of your case.
Attempt to Settle the Debt: If possible, attempt to negotiate with the company and arrange an alternative payment plan. By settling the debt, you may avoid criminal prosecution and limit your civil liability.
Check for Proper Notice: If the checks have already been dishonored, make sure that you receive proper notice. The five-day period to cure begins only after formal notification, not after the checks are submitted.
Document Everything: Keep a record of all your communications with the seller and the bank, as these may be helpful in proving your good faith efforts to resolve the situation.
V. Conclusion
The issuance of checks from a closed account can lead to serious legal consequences under BP 22, as well as civil liabilities for breach of contract. While your advance notice to the company may not absolve you from criminal liability, it could serve as a mitigating factor in reducing penalties or fines. The best course of action at this stage is to seek legal representation, attempt to settle the debt, and carefully review the notices you receive regarding the dishonored checks.
In any case, by acting quickly and seeking professional advice, you can work toward minimizing your exposure to both criminal and civil liabilities.
This legal inquiry highlights the complexity of handling bounced checks under Philippine law and the importance of proper legal counsel to navigate such situations effectively.