Sec. 185. Check defined.
—A check is a bill of exchange drawn (4) Aside from serving as an instrument of credit in the
on a bank payable on demand. Except as herein otherwise
provided, the provisions of this Act applicable to a bill of
exchange payable on demand apply to a check.
Check defined.
The above provision gives the definition of a check. It has also
been defined as a written order addressed to a bank or persons
carrying on the business of banking by a party having money in
their hands requesting them to pay on presentment to a person
named therein or to his order or to bearer, a named/stated sum
of money, (see Hawley v. Jete, 10 Ore. 31,45, Am. Rep. 129.)
Distinctive characteristics of checks.
The two essential distinctive characteristics of checks are that
they are drawn on a bank and payable instantly on demand.
(1) A check is customarily made out on the printed form supplied
by the bank but the use of such form is not required by law. In
actual practice, there is no acceptor to a check. The bank simply
honors the check if it gives credit, and pays the money. In such
case, the bank stands in the position of the acceptor.
(2) A check has been defined in terms requiring the drawer to be
a person other than a bank, a check drawn by a bank being
defined as a draft, (see Sec. 126.) But such an instrument is
generally subject to the rules applicable to checks. (11 Am. Jur.
2d 45-46.)
An instrument not drawn on a bank is not a check although it
may be so styled on its face. (Amsinck vs. Rogers, 82 N.E. 134.)
(3) A check need not state that it is payable on demand.
Presentment for acceptance is unnecessary. By issuing a check,
the drawer, in effect, represents that there are funds in the
bank for its payment. (Firestone Tire & Rubber Co. of the
Philippines vs. Ines Chavez & Co., Ltd., 18 SCRA 356 [1966].)
Issue: Is R liable to A?
settlement of an obligation, a check also serves as a receipt
Held: Yes. R may not unilaterally discharge herself from her
after it has been paid and cancelled by the bank. (Moran vs.
liability by the mere expediency of withdrawing her funds from
Court of Appeals, 230 SCRA 799 [1994].)
the drawee-bank. She is thus liable as she has no legal basis to
Checks are generally governed by the same rules applicable to excuse herself from liability on her checks to a holder in due
bills of exchange payable on demand. course.
Checks not mere contracts. The drawing and negotiation of a check have a certain effect
aside from the tranfer of tide or the incurring of liability in
(1) A representation of funds on deposit. — Checks can not be
regard to the instrument by the transferor. The holder who takes
categorized as mere contracts. A check is an order addressed to
the negotiated paper makes a contract with the parties on the
a bank and partakes of a representation that the drawer has
face of the instrument. There is an implied representation that
funds on deposit against which the check is drawn, sufficient to
funds or credit are available for the payment of the instrument
ensure payment upon its presentation to the bank. It is not a
in the bank upon which it is drawn. Consequently, the
mere undertaking to pay an amount of money. There is,
withdrawal of the money from the drawee-bank to avoid liability
therefore, an element of certainty or assurance that the
on the checks cannot prejudice the rights of holders in due
instrument will be paid upon presentation.
course. (State Investment House, Inc. vs. Court of Appeals, 217
SCRA 32 [1993].)
For this reason, checks have become widely accepted as a
medium of payment in trade and commerce, as a convenient
(2) A representation of credit stated in monetary value. —: (see
substitute for money; they form part of the banking system and,
Catholic Bishop of Malolos, Inc. vs. Intermediate Appellate
therefore, not entirely free from the regulatory power of the
Court, 191 SCRA 411 [1990].)
state. (Lozano vs. Martinez, 146 SCRA 323 [1986]; Tan vs. Court
of Appeals, 239 SCRA 310 [1994].) (3) A substitute for cash. —A check while not regarded as legal
tender is normally, under commercial usage, a substitute for
ILLUSTRATIVE CASE:
cash. The credit represented by it in stated monetary value is
Drawer of postdated checks issued merely for security withdrew properly capable of appropriation. The conversion or
her funds from drawee-bank after checks were negotiated to a misappropriation of the amount of the check by depositing the
holder in due course. check payable to another in one's personal account when he has
no right thereto constitutes estafa penalized under Article 315
Facts: R issued to P, as security for pieces of jewelry to be sold (par. 3.) of the Revised Penal Code. (Sy vs. People, 172 SCRA 685
on commission, two (2) postdated checks. Thereafter, P [1989].)
negotiated the checks without the knowledge and consent of R,
A check which has been cleared and credited to the account of
to A, a holder in due course. R failed to sell the pieces of jewelry,
the creditor shall be equivalent to a delivery to the creditor of
so she returned them to A before maturity of the checks which,
cash in an amount equal to the amount credited to his account.
however, could no longer be retrieved as they had already been
(Equitable PCI Bank vs. Ong, 502 SCRA 119 [2007].) A check duly-
negotiated. Consequently, R withdrew her funds from the
drawee-bank before the maturity date of the checks. stamped "paid" gives rise to the presumption that it was already
paid to the intended payee. (Citibank, N.A. vs. Sembrano, 504
SCRA 378 [2006].)
(4) As payment for an obligation. —A check is not a legal tender,
and an offer of a check in payment of a debt is not a valid tender
of payment. (Roman Catholic Bishop vs. Intermediate Appellate
Court, 191 SCRA 411 [1990].) Since a check is only a substitute
for money and not money, the delivery of such an instrument
does not, by itself, operate as payment, and this is especially
true in the case of a postdated check. (BPI Express Card Corp. vs.
Court of Appeals, 296 SCRA 260 [1998].) The obligation is not
extinguished and remains suspended until the payment by the
commercial document is actually realized, (par. 3, Art. 1249, Civil
Code.) A creditor may validly refuse payment by check, whether
it be a manager's, cashier's, or personal check. (Tibaja, Jr. vs.
Court of Appeals, 223 SCRA 163 [1993].) Acceptance of a check
implies an undertaking of due diligence on the part of the
holder presenting it for payment, (see Pio Barretto Realty Dev.
Corp. vs. Court of Appeals, 360 SCRA 127 [2001].)
Under Article 1249 of the Civil Code, a check produces the effect
of payment only when it has been cashed, or when through the
fault of the creditor it has been impaired. Thus, if the check
delivered by the drawer for the redemption of the property was
dishonored by the bank upon presentment by the sheriff for
insufficient funds, the redemption is null and void. On the other
hand, if the check had only become stale and was consequently
dishonored by the bank, without fault of the drawer then it
would be unfair to deprive him of the rights he, had acquired as
a redemptioner, particularly, if, after all the value of the check
has otherwise been received or realized by the party concerned.
(ibid.)
Check and ordinary bill of exchange distinguished.
A check differs from an ordinary or regular bill of exchange in
these particulars:
(1) A check is always drawn on a bank or banker, while an
ordinary bill may or may not be drawn on a bank;
(2)A check is always payable on demand, while an ordinary bill
is either payable on demand or at a fixed or determinable future
time (Sec. 4.)
A post-dated check (see Sec. 12.) delivered before its date is
technically not a check, rather it is a time draft. It becomes
legally a check on or after the day of its date because it is
already payable on demand.
(3) A check is supposed to be drawn against a previous deposit
of funds, while an ordinary bill need not be drawn against a
deposit;
(4) A check need not be presented for acceptance (see Sec.
185.), while an ordinary bill is required to be presented for
acceptance in certain cases (Sec. 143.);
(5) A check is ordinarily intended for immediate payment,
while an ordinary bill is for circulation as an instrument of credit;
(6) The death of the drawer of a check with the knowledge of
the bank revokes the authority of the bank to pay (Glennan v.
Rochester Trust Co., etc., 102 N.E. 537.), while the death of the
drawer of an ordinary bill does not revoke the authority of the
drawee to pay;
(7) A check must be presented for payment within a
reasonable time after its issue (Sec. 186.), while an ordinary bill
must be presented for payment within a reasonable time after
its last negotiation (Sec. 171.);
(8) The drawer of a check not presented within a reasonable
time after its issue is discharged from liability thereon to the
extent of the loss caused by the delay (Sec. 186.), while the
drawer of an ordinary bill is totally discharged (Sec. 70.); and
(9) When a check is accepted or certified, the drawer and
indorsers are discharged from liability thereon (Sec. 188.),
while in an ordinary bill, they remain liable in spite of the
acceptance, (see Sec. 84.)
Bills payable in the future.
Bills payable in the future are of two kinds:
(1) Those bearing the date of their issuance but directing
payment on a specified date in the future; and
(2) Postdated checks or those bearing a date subsequent to their
delivery and specifying no time for payment.
Specifying a date of payment is a characteristic of an ordinary
bill of exchange rather than a check which must be payable on
demand. Accordingly, it is held that a written order to a bank to
pay a sum of money at a day subsequent to its date, and
subsequent to the date of its issue, is a bill of exchange and not
a check. (Bull v. First Nat. Bank, 123 US 105.)
Nature of post-dated check.
A postdated check (see Sec. 12.) is nonetheless a check because
postdated. It is payable on demand on or at any time after the
day of its date. Its effect is the same if it had not been issued
until that date. (11 Am. Jur. 2d 48-49.) A postdated check is in
effect only a representation by the drawer that he expects to
have funds in the bank with which to pay the check on die date
named therein.
In this respect, there is no essential difference between a
postdated check and a promissory note. (State v. Nelson, 237
NW 766.)
Special types of check.
Checks are usually three-party instruments but on certain types
of checks (Nos. 2 and 3), the bank can serve as both the drawer
and the drawee. The most common type of check is the
personal check or check drawn by a depositor of a bank on the
bank.
The other types are enumerated below.
(1) Memorandum check. — It is like an ordinary check except
that die word "memorandum/' "mem" or "memo" is written
upon the face of the check, signifying that the drawer engages
to pay the bona fide holder absolutely, and not upon a condition
to pay upon presentment at maturity and if due notice of the
presentment and non-payment should be given. (Turnball v.
Osborne, 12 Abbot Prac. [N.S.] 200; Franklin Bank v. Freeman, 33
Mass. [16 Pick] 539.)
(a) In other words, the drawer may be sued the same as a maker
upon a promissory note although it is to be distinguished from
the latter which is but a mere promise to pay. Such a check is
evidence of debt against the drawer, and although may not be
intended to be presented, has the same effect as an ordinary
check. If the check is presented for payment and the drawer has
sufficient funds in the bank to meet it, the bank must honor the
same, and if passed to a third person, will be valid in his hands
like any other check.
(b) A memorandum check comes within the meaning of Section
185 and, therefore, falls within the ambit of B.P. Big. 22, the
Bouncing Checks Law (infra.), which does not distinguish
between the kinds of check. It is a common practice in
commercial transactions to require debtors to issue checks on
which creditors must rely as guarantee of payment, or as
evidence of indebtedness, if not as mode of payment. (People
vs. Nitafan, 215 SCRA 79 [1992].)
(2) Cashier's check. — It is a check of the bank's cashier on the
bank itself payable on demand to a payee.
(a) It is, in effect, a bill of exchange drawn by the cashier of a
bank upon the bank itself, committing its total resources,
integrity and honor behind the check. A cashier's check is a
primary obligation of the issuing bank and accepted in advance
by the act of its issuance. (10
C.J.S. 409; Tan vs. Court of Appeals, 239 SCRA 310 [1994];
International Corporate Bank vs. Gueco, 351 SCRA 516 [2001].)
Hence, it is not subject to countermand by the payee after
indorsement and has the same legal effect as a certificate of
deposit or a certified check. (Walker v. Sellers, 21 Ala. 189.) It is
really the bank's own check and may be treated as a promissory
note with the bank as the maker (see Sec. 130.) and, therefore,
the holder need not prove presentment for payment or present
the bill to the drawee for acceptance. It operates as an
assignment of funds represented by die check to the credit of
the payee or holder. (Sec. 189.)
(b) A cashier's check issued on request of a depositor is the
substantial equivalent of a certified check (infra.) and the
deposit represented by the check passes to the credit of the
check holder who is, therefore, a depositor to that amount.
(Lummus Cotton Gin Co. v. Walker, 195 Ala. 552; Republic vs.
Phil. National Bank, 3 SCRA 851 [1961].) It is payable either to
the person who purchases the check from the bank, or to the
person who is to cash it. It is a well-known and accepted
practice in the business sector that a cashier's check is deemed
as cash (New Pacific Timber & Supply Co., Ins. vs. Seneris, 101
SCRA 680 [1980].) or "regarded substantially to be as good as
the money which it represents/' (Tan vs. Court of Appeals,
supra.) In transactions involving sale of property, the seller may
require the purchaser (or bidder) to submit cashier's (or
manager's) checks if he wants to have guaranteed payment of
the price.
If the check is drawn by a bank upon another bank in which it
has funds on deposit, in favor of a third party, it is called bank
draft.
(3) Manager's check. — It is one drawn by the bank's manager
upon the bank itself.
(a) It is like a cashier's check and certified check (infra.) both as
to effect and use, which, in the commercial world, is regarded
substantially to be as good as the money it represents. (Bank of
the Phil. Islands vs. Court of Appeals, 326 SCRA 641 [2000]; Rizal
Commercial Banking Corp. vs. Security Bank & Trust Co., 577
SCRA407 [2009].) The mere fact that a manager's check does
not bear the payee's signature at the back does not negate
deposit thereof in payee's account. (Citibank vs. Sabeniano, 504
SCRA 378 [2006].)
(b) A demand draft is very different from a cashier's or
manager's check. The former is an order upon a third party
purporting to be drawn upon a deposit of funds. The latter is a
primary obligation of the bank which issues it and constitutes its
written promise to pay upon demand. (Republic vs. Phil.
National Bank, supra.)
(4) Traveler's check. — It is one upon which the holder's
signature must appear twice; one, to be affixed by him at the
time it is issued and the second, for counter-signature, to be
affixed by him in the presence of the payee before it is paid,
otherwise, it is incomplete.
(a) Its purpose is to provide the traveler safe and convenient
method by which to supply himself with funds in almost all parts
of the civilized world without the hazard of carrying the money
on his person. Anyone finding or stealing traveler's checks
cannot use them, for only the purchaser may negotiate them.
The bank or company issuing the instrument has the right to
refuse to pay it when it does not bear the countersign agreed
upon and the owner of the check also has the right to insist that
it shall not be paid when not countersigned. (Samberg Express
Co., 99 N.W. 879.)
(b) Traveler's checks differ from ordinary checks in that they are
sold by banks and express companies and require both signature
and counter-signature by the purchaser. They constitute a
complete purchase and sale of credit, have the characteristics of
a cashier's check when issued by a bank, and are foreign bills of
exchange. (11 Am. Jur. 2d 47.) Technically, most traveller's
checks are not checks but drafts (see Sec. 126.) because the
drawee (e.g., American Express) is ordinarily not a bank.
(5) Certified check. — It is one which bears upon its face an
agreement by the drawee-bank that the check will be paid on
presentation. The usual practice is by stamping or writing the
word "certified" upon the check. In some respects it is similar to
a certificate of deposit, (see Sec. 184.)
(6) Crossed check. — It is one which bears across its face two
parallel lines diagonally, usually on the upper left corner
between which are either the name of a bank or the words "and
company" in full or abbreviated. The Negotiable Instruments
Law does not contain any provision on the subject of crossed
checks although the practice has been given judicial cognizance.
(a) A check may be crossed either specially or generally.3
(1) If crossed specially, the name of a particular bank or
company is written or appears between the parallel lines in
which case the drawee-bank must pay the check only upon
presentment by such bank or company (Chan Wan vs. Tan Kim,
109 Phil. 706 [I960].) on penalty of being made to pay again by
the rightful owner should the first
■ The Negotiable Instruments Law does not mention
"crossed checks" although Article 541 of the Code of Commerce
refers to such instruments. It provides: 'The maker or any legal
holder of a check shall be entitled to indicate therein that it be
paid to a certain payment prove to have been erroneous. In the
absence of proper presentment by the bank or company to
which the check has been crossed specially, liability will not
attach to the drawer, (ibid.; see Sec. 61.) Consequently, no right
of recourse is available against the drawer of the check to the
indorsee who presented the same for payment since the latter is
not the proper party authorized to make the presentment.
(State Investment House vs. Intermediate Appellate Court, 175
SCRA 310 [1989].)
(2) If crossed generally, only the words "and Co." are written
between the parallel lines or when none at all is written at all
between said lines. In such case, the drawee- bank must pay the
check through the intervention of some bank or banker. Issuing
a crossed check imposes no legal obligation on the drawee not
to honor such a check. It is more of a warning to the holder that
the check cannot be presented to the drawee-bank for payment
in cash. Instead, the check can only be deposited with the
payee's bank which in turn must present it for payment against
the drawee-bank in the course of normal banking transactions
between banks. The crossed check cannot be presented for
payment but it can only be deposited and the drawee-bank may
only pay to another bank in the payee's or indorser's account.
(Gempesaw vs. Court of Appeals, 218 SCRA 682 [1993]; Citibank,
NA vs. Sabeniano, 504 SCRA 378 [2006].)
In actual practice, the check crossed generally is deposited with
a bank by the holder where he keeps an account and the bank
takes charge of the collection. If the check is crossed specially,
he deposits it with the bank indicated between the diagonal
lines.
(b) The purpose of crossing a check is to insure payment to the
rightful person, the payee, particularly when it is forwarded by
mail or when it is entrusted to an agent. A crossed check can
only be deposited but may not be converted into cash by the
drawee. Crossing a check, either generally or specially, does not
destroy its negotiability but the check may be negotiated only
once — to one who has an account with a bank; the check may
not be encashed but only deposited in the bank; and the act of
crossing the check serves as warning to the holder that the
check has been issued for a definite purpose so that he must
inquire if he has received the check pursuant to that purpose;
otherwise, he is not a holder in due course. Failing in this
respect, the payee is guilty of gross negligence amounting to
legal absence of good faith. (De Ocampo vs. Gatchalian, 3 SCRA
596 [1961].)
(c) One who exchanges for cash crossed checks, notwithstanding
that they are bearer checks, payable to a corporation, which can
act only by agents, from an individual without making any
inquiry, as to his authority, is negligent, and must abide by the
consequences if the individual who indorses the same is without
authority. (Jai-Alai Corp. of the Phil. vs. Bank of P.I., 66 SCRA 29
[1975]; State Investment House vs. Intermediate Appellate
Court, supra.)
(d) The crossing of a check with the phrase "Payee's Account
Only" is a warning that the check should be deposited in the
account of the payee. Thus, it is the duty of the collecting bank
to ascertain that the check be deposited in payee's account only.
It is bound to scrutinize the check and to know its depositors
before it can make the clearing indorsement "all prior
indorsements and/or lack of indorsement guaranteed."
(Philippine Commercial International Bank vs. Court of Appeals,
350 SCRA 446 [2001].)
(e) The effects, therefore, of crossing a check relate to the mode
of its presentment for payment. Under Section 72, presentment
for payment, to be sufficient, must be made by the holder or by
some person authorized to receive payment on his behalf. Who
the holder or authorized person is depends on the instruction
stated on the face of the check. The payee has a cause of action
against a bank for encashing and paying a crossed check to
another person, and liability attaches whether or not the bank
was aware of the unauthorized indorsement to the encasher, for
it is the duty of the bank, by reason of the nature of the check,
to verify the indorser's authority. (Associated Bank vs. Court of
Appeals, 208 SCRA 465 [1992].)
EXAMPLE:
(1) Check crossed specially.
A 92 —10230 December 4,2010
PAY TO THEORDER OF Jaime de La Rosa P10,000.00/xx PESOS
One thousand only Francisco Adriano, Jr. The Metropolitan
Commercial and Coconut Bank
(2) Check crossed generally.
Face of check same as above or Face of check same as above
Stale check.
It is one which has not been presented for payment within a
reasonable time after its issue. It is valueless and, therefore,
should not be paid, (see Sees. 71,186.)
(1) In a case, a check, payable on demand, Which was long
overdue by about 21/ 2 years, was considered a stale check, (see
Montinola vs. Phil. National Bank, 88 Phil. 178 [1951].) Current
banking practice presently regards as stale, checks outstanding
for more than six (6) months or 180 days. Banks will normally
not pay such a check without consulting the depositor (drawer).
However, the drawer is not discharged by the mere delay in the
presentation of the check for payment if he does not suffer any
loss from the delay, (see Sec. 186.) For a check to be dishonored
upon presentment, on the one hand, and to be stale for not
being presented at all in time, on the other, are incompatible
developments that naturally have variant legal consequences.
(Crystal vs. Court of Appeals, 71 SCRA 443 [1976]; see Wong vs.
Court of Appeals, 351 SCRA 100 [2001].)
(2) A bank has no obligation to a customer having a checking
account to pay a check, other than a certified check, which is
presented more than six (6) months after its date. Under the
(U.S.) Uniform Commercial Code, a bank may charge its
customer's account for a payment made thereafter in good
faith. (Sec. 4-404 thereof.) Thus, a depositor should give
instructions to his bank regarding uncashed checks.
Check payable to bearer.
(1) Indorsement of drawer not necessary.—By uniform
practice, banks require the indorsement of the drawer before
honoring a check payable to bearer (e.g., to "cash"). But there
are cases too where no such requirement had been made. It
depends upon the circumstances of each transaction. Under
Section 9 (d), a check drawn payable to the order of "cash" is a
check payable to bearer, and a bank may pay it to the person
presenting it for payment without the drawer's indorsement.
(Ang Tek Lian vs. Court of Appeals, 87 Phil. 383 [1950].)
(2) Identification of bearer not required. — A check payable to
bearer is authority for payment to the holder. Where a check is
in the ordinary form and is payable to bearer, so that no
indorsement is required, a drawee-bank to which it is presented
for payment, need not have the holder identified and ordinarily
may not be charged with negligence in failing to do so. If the
bank has no reasonable cause for suspecting any irregularity, it
will be protected in paying a bearer instrument no matter what
facts unknown to it may have occurred prior to presentment.
(ibid., citing Mitchie on Banks and Banking, 3rd Ed., Vol. 5, p.
343, and 1 Morse, Bank and Banking, Sec. 393.)
(3) Satisfactory proof of identity may be required. — 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, (ibid.,
citing Paton's Digest, Vol. 1, p. 1089.) As a standard practice, a
bank may require for its protection, the indorsement of the
drawer or the person presenting the check for payment or some
other person known to it to assure itself against possible
complications, for instance, forgery of drawer's signature, loss of
the check by the rightful owner, raising of the amount payable,
etc. (ibid.)
Duty of depositor to reconcile bank's statement with his own
records.
When a person opens a checking account with a bank, he is
given blank checks which he may fill out arid use whenever he
wishes. Each time he issues a check, he should also fill out the
record slip provided in the checkbook. The slips, if properly kept,
will contain the numbers of the checks, the dates of their issue,
the names of the payees, the amounts of deposits or
withdrawal, and the account balance. The drawer would,
therefore, have a complete record of the checks he issues.
(1) Duty of diligence of depositor to depository bank. — It is
the accepted banking procedure for a depository bank to furnish
its depositors a monthly statement of the status of their
accounts, together with all the cancelled checks which have
been cashed by their respective holders. If the depositor has
filled out his record slips properly, a comparison between them
and cancelled checks will reveal any forged check not taken from
his checkbook.
It is the duty of a depositor to carefully examine the bank's
monthly statement of account, his cancelled checks, his record
slips and other pertinent records within a reasonable time, and
to report any errors without unreasonable delay. If this
negligence should cause the bank to honor a forged check or
prevent it from recovering the amount it may already have paid
on such check, he cannot later complain should the bank refuse
to recredit his account with the amount of such check, (see
Metropolitan Waterworks and Sewerage System vs. Court of
Appeals, 143 SCRA 20 [1986].)
(2) No duty of diligence by drawer to collecting bank. —
The negligence of the drawer constitutes no defense to the
collecting bank. The reasons are that there is no privity between
the drawer and the collecting bank and the former owes no duty
of diligence to the latter (except of seasonably examining his
passbooks and returned checks as a protection against the
payment by the depository bank against forged checks). While
the drawer generally owes no duty of diligence to the collecting
bank, the law imposes a duty of diligence on the collecting bank
to scrutinize checks, deposited with it for the purpose of
determining their genuineness.4
The collecting bank being primarily engaged in banking holds
itself out to the public as the expert and the law holds it to a
high standard of conduct. (Banco de Oro Savings & Mortgage
Bank vs. Equitable Banking Corp., 157 SCRA 188 [1988].