Francisco v.

CA (1999)

G.R. No. 116320 November 29, 1999

Lessons Applicable: Forgery (Negotiable Instruments Law)

FACTS:

June 23, 1977: Adalia Francisco (Francisco) president of A. Francisco Realty & Development Corporation (AFRDC)
and Jaime C. Ong (Ong) President and General Manager of Herby Commercial & Construction Corporation (HCCC), entered
into a contract where HCCC agreed to undertake the construction of 35 housing units and the development of 35 hectares
of land.
o HCCC was to be paid on turn-key basis (basis of the completed houses and developed lands delivered to and
accepted by AFRDC and the GSIS)
o To facilitate payment, AFRDC executed a Deed of Assignment in favor of HCCC to enable the it to collect payments
directly from the GSIS.
o Furthermore, the GSIS and AFRDC put up an Executive Committee Account with the Insular Bank of Asia & America
(IBAA) of P4M from which checks would be issued and co-signed by petitioner Francisco and the GSIS Vice-
President Armando Diaz (Diaz).
February 10, 1978: HCCC filed a complaint w/ the RTC against Francisco, AFRDC and the GSIS for the collection of the
unpaid balance under the Land Development and Construction Contract in the amount of P515,493.89 for completed and
delivered housing units and land development.
Sometime in 1979: Ong discovered that Diaz and Francisco had executed and signed 7 checks drawn against the IBAA and
payable to HCCC but were never delivered to HCCC
o GSIS gave Francisco custody of the checks since she promised that she would deliver the same to HCCC.
Francisco forged the signature of Ong, without his knowledge or consent, at the dorsal portion of the said
checks to make it appear that HCCC had indorsed the checks; Francisco then indorsed the checks for a
second time by signing her name at the back of the checks and deposited the checks in her IBAA savings
account
June 7, 1979: Ong filed complaints charging Francisco with estafa thru falsification of commercial documents - dismmised
by the Assistant City Fiscal
o According to Francisco, she agreed to grant HCCC the loans in the total amount of P585K and covered by 18
promissory notes in order to obviate the risk of the non-completion of the project.
As a means of repayment, Ong allegedly issued a Certification authorizing Francisco to collect HCCCs
receivables from the GSIS
RTC: favored Ong and against IBAA and Francisco
November 21, 1989: IBAA and HCCC entered into a Compromise Agreement which was approved by the trial court, wherein
HCCC acknowledged receipt of the amount of P370,475.00 in full satisfaction of its claims against IBAA, without prejudice
to the right of IBAA to pursue its claims against Francisco.
CA affirmed RTC
Francisco claims that she was, in any event, authorized to sign Ongs name on the checks by virtue of the Certification
executed by Ong in her favor giving her the authority to collect all the receivables of HCCC from the GSIS, including the
questioned checks.

ISSUE: W/N Francisco can sign Ongs name on the checks and it was not forgery

HELD: NO.

Francisco had custody of the checks, as proven by the check vouchers bearing her uncontested signature
Francisco forged the signature of Ong on the checks to make it appear as if Ong had indorsed said checks
The Negotiable Instruments Law provides that where any person is under obligation to indorse in a representative capacity,
he may indorse in such terms as to negative personal liability
o An agent, when so signing, should indicate that he is merely signing in behalf of the principal and must disclose the
name of his principal; otherwise he shall be held personally liable
Instead of signing Ongs name, Francisco should have signed her own name and expressly indicated that
she was signing as an agent of HCCC

Bank of Commerce v. Jose M. Aruego (1961)

G.R. Nos. L-25836-37 January 31, 1981

Lessons Applicable: Liabilities of the Parties (Negotiable Instruments Law)
FACTS:
 December 1, 1959: Philippine Bank of Commerce (PBC) instituted against Jose M. Aruego for the recovery of the total sum
of about P 35K with interest from November 17, 1959 and commission of 3/8% for every thirty 30 days plus attorney's fees
of 10% of the total amount due and costs
o represents the cost of the printing the periodical published by the Aruego "World Current Events"
o To facilitate the payment of the printing, Aruego obtained a credit accommodation from the PBC
o the printer, Encal Press and Photo Engraving, collected the cost of every printing by drawing a draft against the
PBC, which PBC later accepts
As an added security for the payment of the amounts advanced to Encal Press and Photo-Engraving, PBC
required Aruego to execute a trust receipt (PBC hold in trust for Aruego the periodicals and to sell the same
with the promise to turn over to the Aruego the proceeds for the payment of all obligations arising from the
draft)
trial court: Aruego to pay to the PBC
o Aruego:
signed the supposed bills of exchange as an agent of the Philippine Education Foundation Company where
he is president
Section 20 of the Negotiable Instruments Law

"Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal or in a
representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as
an agent or as filing a representative character, without disclosing his principal, does not exempt him from personal liability."

signed the drafts only as an accommodation party and as such, should be made liable only after a showing
that the drawer is incapable of paying
not really bills of exchange but mere pieces of evidence of indebtedness because payments were made
before acceptance

ISSUE: W/N Aruego should be personally liable

HELD: YES. CFI AFFIRMED.

nowhere has he disclosed that he was signing as a representative of the Philippine Education Foundation Company
o For failure to disclose his principal, Aruego is personally liable for the drafts he accepted
An accommodation party is one who has signed the instrument as maker, drawer, indorser, without receiving value therefor
and for the purpose of lending his name to some other person. Such person is liable on the instrument to a holder for value,
notwithstanding such holder, at the time of the taking of the instrument knew him to be only an accommodation party
o he signed as a drawee/acceptor
Under the Negotiable Instrument Law, a drawee is primarily liable
As long as a commercial paper conforms with the definition of a bill of exchange, that paper is considered a bill of exchange
o The nature of acceptance is important only in the determination of the kind of liabilities of the parties involved, but
not in the determination of whether a commercial paper is a bill of exchange or not