J.A.B. Bulao & Associates

LEGAL NOTE 0075: WHEN IS CHECK CONSIDERED AS PAYMENT?

SOURCE: DONNINA C. HALLEY VS. PRINTWELL, INC. (G.R. No. 157549, 30 MAY 2011, BERSAMIN, J) SUBJECTS: TRUST FUND DOCTRINE, JUDGE COPYING MEMORANDUM OF PARTY. (BRIEF TITLE: HALLEY VS. PRINTWELL).

DOES DELIVERY OF CHECK CONSTITUTE PAYMENT?

NO. THE DELIVERY OF A CHECK DOES NOT OPERATE AS PAYMENT AND DOES NOT DISCHARGE THE OBLIGATION UNDER A JUDGMENT.^[1][46] THE DELIVERY OF A BILL OF EXCHANGE ONLY PRODUCES THE FACT OF PAYMENT WHEN THE BILL HAS BEEN ENCASHED.

The petitioner’s OR No. 227,presentedto prove the payment of the balance of her subscription, indicated that her supposed payment had beenmade by means of a check. Thus, to discharge the burden to prove payment of her subscription, she had to adduce evidence satisfactorily proving that her payment by check wasregardedas payment under the law.

Payment is defined as the delivery of money.^[2][45]Yet, because a check is not money and only substitutes for money, the delivery of a check does not operate as payment and does not discharge the obligation under a judgment.^[3][46] The delivery of a bill of exchange only produces the fact of payment when the bill has been encashed.^[4][47]The following passage from Bank of Philippine Islands v. Royeca^[5][48]is enlightening:

Settled is the rule that payment must be made in legal tender. A check is not legal tender and, therefore, cannot constitute a valid tender of payment. Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized.

To establish their defense, the respondents therefore had to present proof, not only that they delivered the checks to the petitioner, but also that the checks were encashed. The respondents failed to do so. Had the checks been actually encashed, the respondents could have easily produced the cancelled checks as evidence to prove the same. Instead, they merely averred that they believed in good faith that the checks were encashed because they were not notified of the dishonor of the checks and three years had already lapsed since they issued the checks.

Because of this failure of the respondents to present sufficient proof of payment, it was no longer necessary for the petitioner to prove non-payment, particularly proof that the checks were dishonored. The burden of evidence is shifted only if the party upon whom it is lodged was able to adduce preponderant evidence to prove its claim.

Ostensibly, therefore, the petitioner’s mere submission of the receipt issued in exchange of the check did not satisfactorily establish her allegation of full payment of her subscription. Indeed, she could not even inform the trial court about the identity of her drawee bank,^[6][49]and about whether the check was cleared and its amount paid to BMPI.^[7][50]In fact, she did not present the check itself.