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ADALIA FRANCISCO v. CA

FACTS:

The case involves a Land Development and Construction Contract between A. Francisco Realty & Development Corporation (AFRDC), represented by petitioner Adalia Francisco, and Herby Commercial & Construction Corporation (HCCC), represented by private respondent Jaime Ong. The contract was for a housing project in San Jose del Monte, Bulacan, financed by the Government Service Insurance System (GSIS). HCCC agreed to construct 35 housing units and develop 35 hectares of land. The payment to HCCC was on a turn-key basis, with a Deed of Assignment executed by AFRDC to enable HCCC to collect payments directly from GSIS. Additionally, an Executive Committee Account was established with Insular Bank of Asia & America (IBAA) for payment issuance.

After a dispute between the parties, they entered into a Memorandum Agreement on July 21, 1978, stating that HCCC had turned over 83 housing units accepted and paid for by GSIS, and that GSIS acknowledged owing HCCC P520,177.50 for incomplete construction and development. HCCC also owed AFRDC P180,234.91, which was to be paid from the proceeds of the remaining 40 housing units or from HCCC's amount due from GSIS. The case was later dismissed upon joint motion to dismiss.

In 1979, Ong discovered that Francisco had allegedly forged Ong's signature on several checks payable to HCCC. Francisco claimed that Ong had indorsed the checks on behalf of HCCC and delivered them to her as payment for loans extended by Francisco. Ong filed estafa charges, but the complaints were dismissed by the city fiscal and affirmed by the Minister of Justice.

Private respondents then filed a case against Francisco and IBAA for recovery of the value of the forged checks. The trial court ruled in favor of private respondents, holding Francisco liable for forgery and IBAA liable for honoring the checks despite irregularities. Francisco was ordered to reimburse IBAA for any sums it would have to pay to private respondents. Both Francisco and IBAA appealed, but IBAA's appeal was dismissed due to failure to file its brief on time. A Compromise Agreement between IBAA and HCCC was later approved by the trial court.

ISSUES:

  1. Whether or not Francisco forged the signature of Ong on the checks.

  2. Whether or not Francisco was authorized to sign Ong's name on the checks.

  3. Whether the award of compensatory damages is justified.

  4. Whether the award of exemplary damages, attorney's fees, and litigation expenses is warranted.

  5. Whether the award of moral damages is warranted.

RULING:

  1. The court upheld the lower courts' finding that Francisco forged the signature of Ong on the checks. The forgery was satisfactorily established in the trial court upon the strength of the findings of the NBI handwriting expert. The court also noted that Francisco had custody of the checks and that she deposited the checks in her savings account after indorsing them for a second time. The court affirmed the lower courts' finding of forgery.

  2. The court ruled that even if Francisco was authorized by HCCC to sign Ong's name, she did not indorse the checks in accordance with the law. She should have signed her own name and expressly indicated that she was signing as an agent of HCCC. Therefore, Francisco cannot use the Certification to validate her act of forgery.

  3. The Supreme Court affirms the award of compensatory damages in favor of the respondent. However, the interest rate is modified to be six percent (6%) per annum, to be computed from the date of the filing of the complaint. The interest rate shall be twelve percent (12%) per annum from the time the judgment becomes final and executory until its satisfaction.

  4. The award of exemplary damages in the amount of P50,000.00 is sustained. Consequently, the grant of attorney's fees in the same amount and litigation expenses in the amount of P5,000.00 is justified.

  5. The appellate court's award of P50,000.00 in moral damages is warranted based on the proof of physical suffering, mental anguish, humiliation, and anxiety experienced by the respondent.

PRINCIPLES:

  • Findings of trial courts which are factual in nature and affirmed by the Court of Appeals deserve to be respected and affirmed by the Supreme Court if supported by substantial evidence on record.

  • Forgery can be established through the testimony of a handwriting expert and other supporting evidence.

  • An agent signing a negotiable instrument in a representative capacity should indicate that he is signing on behalf of the principal and disclose the name of the principal to avoid personal liability.

  • Interest on a breached obligation consisting of the payment of a sum of money shall be that which may have been stipulated in writing. In the absence of stipulation, the rate of interest shall be 12% per annum from the time of default or judicial or extrajudicial demand.

  • Interest on an obligation not constituting a loan or forbearance of money may be imposed at the discretion of the court at the rate of 6% per annum, calculated from the time the claim is made judicially or extrajudicially. If the demand cannot be reasonably established at the time of demand, the interest shall begin to run from the date the judgment is made.

  • Once the judgment awarding a sum of money becomes final and executory, the rate of legal interest shall be 12% per annum until its satisfaction.

  • Exemplary damages are imposed by way of example or correction for the public good, in addition to the moral, temperate, liquidated, or compensatory damages.

  • Moral damages may be granted upon proof of physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury.