Sec. 185. Check defined. —A check is a bill of exchange drawn 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 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 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].)
(4) Aside from serving as an instrument of credit in the settlement of an obligation, a check also
serves as a receipt after it has been paid and cancelled by the bank. (Moran vs. Court of Appeals, 230 SCRA
799 [1994].) Checks are generally governed by the same rules applicable to bills of exchange payable on
demand.
Checks not mere contracts.
(1) A representation of funds on deposit. — Checks cannot be categorized as mere contracts. A
check is an order addressed to a bank and partakes of a representation that the drawer has funds
on deposit against which the check is drawn, sufficient to ensure payment upon its presentation
to the bank. It is not a mere undertaking to pay an amount of money. There is, therefore, an
element of certainty or assurance that the instrument will be paid upon presentation.
For this reason, checks have become widely accepted as a medium of payment in trade and
commerce, as a convenient substitute for money; they form part of the banking system and,
therefore, not entirely free from the regulatory power of the state. (Lozano vs. Martinez, 146
SCRA 323[1986]; Tan vs. Court of Appeals, 239 SCRA 310 [1994].)
ILLUSTRATIVE CASE:
Drawer of postdated checks issued merely for security withdrew her funds from drawee-bank after
checks were negotiated to a holder in due course.
Facts: R issued to P, as security for pieces of jewelry to be sold on commission, two (2) postdated
checks. Thereafter, P negotiated the checks without the knowledge and consent of R, to A, a holder in due
course. R failed to sell the pieces of jewelry, so she returned them to A before maturity of the checks which,
however, could no longer be retrieved as they had already been negotiated. Consequently, R withdrew her
funds from the drawee-bank before the maturity date of the checks.
Issue: Is R liable to A?
Held: Yes. R may not unilaterally discharge herself from her liability by the mere expediency of
withdrawing her funds from the drawee-bank. She is thus liable as she has no legal basis to excuse herself
from liability on her checks to a holder in due course.
The drawing and negotiation of a check have a certain effect aside from the tranfer of tide or the
incurring of liability in regard to the instrument by the transferor. The holder who takes the negotiated paper
makes a contract with the parties on the face of the instrument. There is an implied representation that funds
or credit are available for the payment of the instrument in the bank upon which it is drawn. Consequently,
the withdrawal of the money from the drawee-bank to avoid liability on the checks cannot prejudice the
rights of holders in due course. (State Investment House, Inc. vs. Court of Appeals, 217 SCRA 32 [1993].)
(2) A representation of credit stated in monetary value. — The delivery of a check, however, does
not in itself constitute. payment of a debt (Art. 1249, Civil Code.) and may be refused by the
creditor, (see Catholic Bishop of Malolos, Inc. vs. Intermediate Appellate Court, 191 SCRA
411 [1990].)
(3) A substitute far cash. —A check while not regarded as legal tender is normally, under
commercial usage, a substitute for cash. The credit represented by it in stated monetary value
is properly capable of appropriation. The conversion or misappropriation of the amount of the
check by depositing the check payable to another in one's personal account when he has no
right thereto constitutes estafa penalized under Article 315 (par. 3.) of the Revised Penal Code.
(Sy vs. People, 172 SCRA 685 [1989].)
A check which has been cleared and credited to the account of the creditor shall be
equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his
account. (Equitable PCI Bank vs. Ong, 502 SCRA 119 [2007].) A check duly- 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 far 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 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 as he, had acquired as
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.);
(3) A check is supposed to be drawn against a previous deposit of funds, while an ordinary bill need
hot 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 an
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 checkholder 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.
(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 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 draweebank 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].)
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.
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].)