15. Svendsen v People ceiling on interest rates was lifted by Central Bank Circular No.

905, nothing
February 26, 2008. G.R. No. 175381.* therein grants lenders carte blanche to raise interest rates to levels which will
JAMES SVENDSEN, petitioner, vs. PEOPLE OF THE PHILIPPINES, either enslave their borrowers or lead to a hemorrhaging of their assets.
respondent. Stipulations authorizing such interest are contra bonos mores, if not against the
Criminal Law; Bouncing Checks Law (B.P. Blg. 22); Elements.—For law. They are, under Article 1409 of the New Civil Code, inexistent and void from
petitioner to be validly convicted of the crime under B.P. Blg. 22, the following the beginning.
requisites must thus concur: (1) the making, drawing and issuance of any check to Same; Same; Same; Evidence; The presentation of the promissory note may
apply for account or for value; (2) the knowledge of the maker, drawer, or issuer be dispensed with in a prosecution for violation of B.P. Blg. 22 as the purpose for
that at the time of issue he does not have sufficient funds in or credit with the the issuance of such check is irrelevant in the determination of the accused’s
drawee bank for the payment of the check in full upon its presentment; and (3) criminal liability.—Respecting petitioner’s claim that since the promissory note
the subsequent dishonor of the check by the drawee bank for insufficiency of incorporating the stipulated 10% interest per month was not presented, there is
funds or credit or dishonor for the same reason had not the drawer, without any no written proof thereof, hence, his obligation to pay the same must be void, the
valid cause, ordered the bank to stop payment. same fails. As reflected above, Cristina admitted such stipulation. In any event,
Same; Same; Postal Service; Registry Receipts; Receipts for registered letters the presentation of the promissory note may be dispensed with in a prosecution
including return receipts do not themselves prove receipt—they must be properly for violation of B.P. Blg. 22 as the purpose for the issuance of such check is
authenticated to serve as proof of receipt of the letters.—The evidence for the irrelevant in the determination of the accused’s criminal liability. It is for the
prosecution failed to prove the second element. While the registry receipt, which purpose of determining his civil liability that the document bears significance.
is said to cover the letter-notice of dishonor and of demand sent to petitioner, was Notably, however, Section 24 of the Negotiable Instruments Law provides that
presented, there is no proof that he or a duly authorized agent received the same. “Every negotiable instrument is deemed prima facie to have been issued for a
Receipts for registered letters including return receipts do not themselves prove valuable consideration, and every person whose signature appears thereon to
receipt; they must be properly authenticated to serve as proof of receipt of the have become a party thereto for value.” It was incumbent then on petitioner to
letters. Thus in Ting v. Court of Appeals, 344 SCRA 551 (2000), this Court prove that661the check was not for a valuable consideration. This he failed to
observed: x x x All that we have on record is an illegible signature on the registry discharge.
receipt as evidence that someone received the letter. As to whether this signature PETITION for review on certiorari of a decision of the Court of Appeals.
is that of one of the petitioners or of their authorized agent remains a mystery. The facts are stated in the opinion of the Court.
From the registry receipt alone, it is possible that petitioners or their authorized Florosco P. Fronda for petitioner.
agent did receive the demand letter. Possibilities, however, cannot replace proof The Solicitor General for respondent.
beyond reasonable doubt. CARPIO-MORALES,J.:
Same; Same; Loans; Interests; Usury; An obligation to pay 10% interest per Assailed via Petition for Review on Certiorari is the Court of Appeals
month on the loan is unconscionable and against public Decision1 of November 16, 2006 denying petitioner’s appeal from the December
22, 2005 Decision2 of the Regional Trial Court (RTC) of Manila, Branch 14 which
_______________ affirmed the December 17, 2003 Judgment3 of the Metropolitan Trial Court
(MeTC) of Manila, Branch 5, finding James Svendsen (petitioner) guilty of
* SECOND DIVISION. violation of Batas Pambansa Blg. (B.P. Blg.) 22 or the Bouncing Checks Law.
660policy—while the Usury Law ceiling on interest rates was lifted by In October 1997, Cristina Reyes (Cristina) extended a loan to petitioner in the
Central Bank Circular No. 905, nothing therein grants lenders carte blanche to amount of P200,000, to bear interest at 10% a month. After petitioner had
raise interest rates to levels which will either enslave their borrowers or lead to a partially paid his obligation, he failed to settle the balance thereof which had
hemorrhaging of their assets, and stipulations authorizing such interest are contra reached P380,000 inclusive of interest.4
bonos mores, if not against the law.—The decision of the MeTC, which was Cristina thus filed a collection suit against petitioner, which was eventually
affirmed on appeal by the RTC and the appellate court, ordering petitioner “to settled when petitioner paid her P200,0005 and issued in her favor an
pay private complainant Cristina C. Reyes civil indemnity in the total amount of International Exchange
ONE HUNDRED SIXTY THOUSAND PESOS (P160,000) representing his civil
obligation covered by subject check,” deserves circumspect examination, however, _______________
given that the obligation of petitioner to pay 10% interest per month on the loan
is unconscionable and against public policy. The P160,000 check petitioner issued 1 Rollo, pp. 108-116. Penned by Associate Justice Estela Perlas-Bernabe and
to Cristina admittedly represented unpaid interest. By Cristina’s information, the concurred in by Associate Justices Renato Dacudao and Rosmari Carandang.
interest was computed at a fixed rate of 10% per month. While the Usury Law 2 Id., at pp. 45-50. Penned by Judge Cesar M. Solis.
Page 1 of 5
 3 Id., at pp. 21-30. Penned by Acting Presiding Judge Ma. Theresa Dolores SIXTY THOUSAND PESOS (P160,000.00), with subsidiary imprisonment in
Gomez-Estoesta. case of insolvency.
4 Id., at p. 109. Accused is also made liable to pay private complainant Cristina C. Reyes civil
5 Ibid. indemnity in the total amount of ONE HUNDRED SIXTY THOUSAND
662Bank check postdated February 2, 1999 (the check) in the amount of PESOS (P160,000.00) representing his civil obligation covered by subject check.
P160,000 representing interest.6 The check was co-signed by one Wilhelm Bolton. Meantime, considering that other accused Wilhelm Bolton remains at large,
When the check was presented for payment on February 9, 1999, it was let a warrant of arrest against him ISSUE. Pending his apprehension, let the
dishonored for having been Drawn Against Insufficient Funds (DAIF).7 case against him be sent to the ARCHIVES.” (Emphasis in the original; italics
Cristina, through counsel, thus sent a letter to petitioner by registered mail supplied)
informing him that the check was dishonored by the drawee bank, and As priorly stated, the RTC affirmed the MeTC judgment and the Court of
demanding that he make it good within five (5) days from receipt thereof. 8 Appeals denied petitioner’s appeal.
No settlement having been made by petitioner, Cristina filed a complaint Hence, the present petition for review.
dated March 1, 1999 against him and his co-signatory to the check, Bolton, for Petitioner argues that the appellate court erred in finding that the first
violation of B.P. Blg. 22 before the City Prosecutor’s Office of Manila. No counter- element of violation of B.P. Blg. 22—the making, drawing, and issuance of any
affidavit was submitted by petitioner and his co-respondent. An Information check “to apply on account or for value”—was present, as the obligation to pay
dated April 13, 1999 for violation of B.P. Blg. No. 22 was thus filed on April 29, interest is void, the same not being in writing and the 10% monthly interest is
1999 before the MeTC of Manila against the two, the accusatory portion of which unconscionable; in holding him civilly liable in the amount of P160,000 to private
reads: complainant, notwithstanding the inva-
“That sometime in December 1998 the said accused did then and there
willfully, unlawfully, and feloniously and jointly make or draw and issue to _______________
CRISTINA C. REYES to apply on account or for value INTERNATIONAL
EXCHANGE BANK check no. 0000009118 dated February 2, 1999 payable to 9 MeTC Records, p. 2.
CRISTINA REYES in the amount of P160,000.00 said accused well knowing that 10 Rollo, pp. 110-111.
at the time of issue she/he/they did not have sufficient funds and/or credit with 664lidity of the interest stipulation; and in violating his right to due process
the drawee bank for payment of such check in full upon its presentment, which when it convicted him, notwithstanding the absence of proof of receipt by him of a
check after having been deposited in the City of Manila, Philippines, and upon written notice of dishonor.
being presented for payment within ninety (90) days from the date thereof was The petition is impressed with merit.
subsequently dishonored by the drawee bank for INSUFFICIENCY OF FUNDS Section 1 of B.P. Blg. 22 or the Bouncing Checks Law reads:
and despite receipt of notice of such dishonor, said accused failed to pay said 1. “SECTIONChecks without sufficient funds.—Any person who makes or
CRISTINA C. REYES the amount of the check or to make arrangement for full 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
6 TSN, October 11, 1999, p. 23. would have been dishonored for the same reason had not the drawer, without any
7 Rollo, p. 109. valid reason, ordered the bank to stop payment, shall be punished by
8 Id., at pp. 109-110. imprisonment of not less than thirty days but not more than one (1) year or by
fine of not less than but not more than double the amount of the check which fine
663payment of the same within five (5) banking days after receiving said notice. shall in no case exceed Two Hundred Thousand pesos, or both such fine and
CONTRARY TO LAW.”9 imprisonment at the discretion of the court.
Bolton having remained at large, the trial court never acquired jurisdiction The same penalty shall be imposed upon any person who, having sufficient
over his person.10 funds in or credit with the drawee bank when he makes or draws and issues a
By Judgment of December 17, 2003, Branch 5 of the Manila MeTC found check, shall fail to keep sufficient funds or to maintain a credit to cover the full
petitioner guilty as charged, disposing as follows: amount of the check if presented within a period of ninety (90) days from the date
“WHEREFORE, this Court finds accused James Robert Svendson appearing thereon, for which reason it is dishonored by the drawee bank. Where
[sic] GUILTY beyond reasonable doubt of a violation of Batas Pambansa Blg. 22 the check is drawn by a corporation, company or entity, the person or persons who
(Bouncing Checks Law) and imposes upon him to pay a fine of ONE HUNDRED actually signed the check in behalf of such drawer shall be liable under this Act.”

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For petitioner to be validly convicted of the crime under B.P. Blg. 22, the but also that the accused has actually been notified in writing of the fact of
following requisites must thus concur: (1) the making, drawing and issuance of dishonor. This is consistent with the rule that penal statues must be construed
any check to apply for account or for value; (2) the knowledge of the maker, strictly against the state and liberally in favor of the accused. x x x
drawer, or issuer that at the time of issue he does not have sufficient funds in or In fine, the failure of the prosecution to prove the existence and receipt by
credit with the drawee bank for the payment of the check in full upon its petitioner of the requisite written notice of dishonor and that he was given at
presentment; and (3) the subsequent dishonor of the check by the drawee bank for least five banking days within which to settle his account constitutes sufficient
insufficiency of funds or credit or dishonor for the same reason had not ground for his acquittal.”13(Italics in the original; emphasis and italics supplied)
the665drawer, without any valid cause, ordered the bank to stop payment.11 The evidence for the prosecution failed to prove the second element. While the
Petitioner admits having issued the postdated check to Cristina. The check, registry receipt,14 which is said to cover the letter-notice of dishonor and of
however, was dishonored when deposited for payment in Banco de Oro due to demand sent to petitioner, was presented, there is no proof that he or a duly
DAIF. Hence, the first and the third elements obtain in the case. authorized agent received the same. Receipts for registered letters including
As for the second element, Section 2 of B.P. Blg. 22 provides that return receipts do not themselves prove receipt; they must be properly
“[t]he making, drawing and issuance of a check payment of which is refused by authenticated to serve as proof of receipt of the letters. 15Thus in Ting v. Court of
the drawee because of insufficient funds in or credit with such bank, when Appeals,16 this Court observed:
presented within ninety (90) days from the date of the check, shall be prima “x x x All that we have on record is an illegible signature on the registry
facie evidence of knowledge of such insufficiency of funds or credit unless such receipt as evidence that someone received the letter. As to whether this signature
maker or drawer pays the holder thereof the amount due thereon, or makes is that of one of the petitioners or of their authorized agent remains a mystery.
arrangements for payment in full by the drawee of such check within five (5) From the registry receipt alone, it is possible that petitioners or their authorized
banking days after receiving notice that such check has not been paid by the agent did
drawee.”
In Rico v. People of the Philippines,12 this Court held: _______________
“x x x [I]f x x x notice of non-payment by the drawee bank is not sent to the
maker or drawer of the bum check, or if there is no proof as to when such notice 13 Id., at pp. 554-555; pp. 73-74.
was received by the drawer, then the presumption of knowledge as provided in 14 MeTC Records, p. 49.
Section 2 of B.P. 22 cannot arise, since there would simply be no way of reckoning 15 Supra note 12 at pp. 540-555.
the crucial five-day period. 16 398 Phil. 481; 344 SCRA 551 (2000).
x x x In recent cases, we had the occasion to emphasize that not only must 667receive the demand letter. Possibilities, however, cannot replace proof beyond
there be a written notice of dishonor or demand letters actually received by the reasonable doubt.”17
drawer of a dishonored check, but there must also be proof of For failure then to prove all the elements of violation of B.P. Blg. 22,
receipt thereof that is properly authenticated, and not mere registered receipt petitioner’s acquittal is in order.
and/or return receipt. Petitioner is civilly liable, however. For in a criminal case, the social injury is
sought to be repaired through the imposition of the corresponding penalty,
_______________ whereas with respect to the personal injury of the victim, it is sought to be
compensated through indemnity, which is civil in nature.18
11 Arceo, Jr. v. People, G.R. No. 142641, July 17, 2006, 495 SCRA 204, The decision of the MeTC, which was affirmed on appeal by the RTC and the
211; Josef v. People, G.R. No. 146424, November 18, 2005, 475 SCRA 417, appellate court, ordering petitioner “to pay private complainant Cristina C. Reyes
420; Domagsang v. Court of Appeals, 400 Phil. 847, 853; 347 SCRA 75, 80-81 civil indemnity in the total amount of ONE HUNDRED SIXTY THOUSAND
(2000); Lim v. People, 394 Phil. 844, 851-852; 340 SCRA 497, 502 (2000). PESOS (P160,000) representing his civil obligation covered by subject check,”
12 440 Phil. 540; 392 SCRA 61 (2002). deserves circumspect examination, however, given that the obligation of
666Thus, as held in Domagsang vs. Court of Appeals, while Section 2 of B.P. petitioner to pay 10% interest per month on the loan is unconscionable and
22 indeed does not state that the notice of dishonor be in writing, this must be against public policy.
taken in conjunction with Section 3 of the law, i.e., “that where there are no The P160,000 check petitioner issued to Cristina admittedly represented
sufficient funds in or credit with such drawee bank, such fact shall always be unpaid interest. By Cristina’s information, the interest was computed at a fixed
explicitly stated in the notice of dishonor or refusal.” A mere oral notice or demand rate of 10% per month.19
to pay would appear to be insufficient for conviction under the law. In our While the Usury Law ceiling on interest rates was lifted by Central Bank
view, both the spirit and letter of the Bouncing Checks Law require for the act to be Circular No. 905, nothing therein grants lenders carte blanche to raise interest
punished thereunder not only that the accused issued a check that is dishonored, rates to levels which will either enslave their borrowers or lead to a hemorrhaging
Page 3 of 5
of their assets.20 Stipulations authorizing such interest are contra bonos mores, if 668interest rates stipulated were even less than that involved herein, the Court
not against the law. They are, under Arti- equitably reduced them.
This Court deems it fair and reasonable then, consistent with existing
_______________ jurisprudence, to adjust the civil indemnity to P16,000, the equivalent of
petitioner’s unpaid interest on the P200,000 loan at 12% percent per annum as of
17 Id., at p. 494; p. 562. February 2, 1999, the date of the check, plus 12% per annum interest to be
18 1 Reyes, The Revised Penal Code, 15th ed., 2001, p. 875; vide also Ramos v. computed from April 29, 1999, the date of judicial demand (date of the filing of
Gonong, 164 Phil. 557, 563; 72 SCRA 559, 566 (1976). the Information) up to the finality of this judgment. After the judgment becomes
19 TSN, October 11, 1999, p. 20. final and executory until the obligation is satisfied, the total amount due shall
20 Solangon v. Salazar, 412 Phil. 816, 822; 360 SCRA 379, 384 (2001); Ruiz v. bear interest at 12% per annum.27
Court of Appeals, G.R. No. 146942, April 22, 2002, 401 SCRA 410, 421. Respecting petitioner’s claim that since the promissory note incorporating the
668cle 140921 of the New Civil Code, inexistent and void from the beginning.22 stipulated 10% interest per month was not presented, there is no written proof
The interest rate of 10% per month agreed upon by the parties in this case thereof, hence, his obligation to pay the same must be void, the same fails. As
being clearly excessive, iniquitous and unconscionable cannot thus be sustained. reflected above, Cristina admitted such stipulation.
In Macalalag v. People,23 Diño v. Jardines,24 and in Cuaton v. Salud,25 this Court, In any event, the presentation of the promissory note may be dispensed with
finding the 10% per month interest rate to be unconscionable, reduced it to in a prosecution for violation of B.P. Blg. 22 as the purpose for the issuance of
12% per annum. And in other cases26 where the such check is irrelevant in the determination of the accused’s criminal liability. It
is for the purpose of determining his civil liability that the document bears
_______________ significance. Notably, however, Section 24 of the Negotiable Instruments Law
provides that “Every negotiable instrument is deemed prima facie to have been
issued for a valuable consideration, and every person whose signature appears
21The following contracts are inexistent and void from the beginning: 1409.
thereon to have become a party thereto for value.” It was incumbent then on
ART.
petitioner to prove that the check was not for a valuable consideration. This he
Those whose cause, object or purpose is contrary to law, morals, good
failed to discharge.
customs, public order or public policy; (1)
WHEREFORE, the Court of Appeals Decision of November 16, 2006 is
Those which are absolutely simulated or fictitious; (2)
REVERSED and SET ASIDE.
Those whose cause or object did not exist at the time of the
transaction; (3)
Those whose object is outside the commerce of men; (4) _______________
Those which contemplate an impossible service; (5)
Those where the intention of the parties relative to the principal object 27 Cuaton v. Salud, 465 Phil. 999, 1006-1007; 421 SCRA 278, 284 (2004)
of the contract cannot be ascertained; (6) citing Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 13,
Those expressly prohibited or declared void by law. (7) 1994, 234 SCRA 78, 95-97.
These contracts cannot be ratified. Neither can the right to set up the 670
defense of illegality be waived. Petitioner, James Svendsen, is acquitted of the crime charged for failure of
22 Cuaton v. Salud, 465 Phil. 999, 1005; 421 SCRA 278, 282-283 (2004). the prosecution to prove his guilt beyond reasonable doubt.
23 G.R. No. 164358, December 20, 2006, 511 SCRA 400. He is, however, ordered to pay private complainant, Cristina C. Reyes, the
24 G.R. No. 145871, January 31, 2006, 481 SCRA 226. amount of SIXTEEN THOUSAND PESOS (P16,000) representing civil indemnity,
25 G.R. No. 158382, January 27, 2004, 421 SCRA 278. plus 12% interest per annum computed from April 29, 1999 up to the finality of
26 In Arrofo v. Quiño (G.R. No. 145794, January 26, 2005, 449 SCRA 284), this judgment. After the judgment becomes final and executory until the
this Court reduced the 7% interest per month to 18% per annum. In Medel v. obligation is satisfied, the total amount due shall earn interest at 12% per annum.
Court of Appeals (359 Phil. 820; 299 SCRA 481 [1998]), the interest stipulated at SO ORDERED.
5.5% per month was found unconscionable and was reduced to 12% per annum. Quisumbing (Chairperson), Carpio, Tinga and Velasco, Jr., JJ., concur.
In Ruiz v. Court of Appeals (G.R. No. 146942, April 22, 2003, 401 SCRA 410), the Judgment reversed and set aside.
interest rate of 3% per month was reduced to 1% per month. In Solangon v. Notes.—The gravamen of the offense punished by B.P. 22 is the act of making
Salazar (412 Phil. 816; 360 SCRA 379 [2001]), the stipulated interest rate of 6% and issuing a worthless check or a check that is dishonored upon its presentation
per month was reduced to 12% per annum. for payment—it is not the nonpayment of an obligation which the law punishes.
(Recuerdo vs. People, 395 SCRA 638 [2003])
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 The act of a court employee in issuing a bouncing check constitutes
misconduct which is a ground for disciplinary action. (Mamaclay vs. Francisco,
399 SCRA 251 [2003])
——o0o——

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