LIABILITY OF PERSONS SIGNING AS AGENT (SECTION 20)

Republic of the Philippines

SUPREME COURT
Manila
G.R. Nos. L-25836-37 January 31, 1981
THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee,
vs.
JOSE M. ARUEGO, defendant-appellant.

FERNANDEZ, J .:
The defendant, Jose M. Aruego, appealed to the Court of Appeals from the order of the Court of First
Instance of Manila, Branch XIII, in Civil Case No. 42066 denying his motion to set aside the order
declaring him in default,
1
and from the order of said court in the same case denying his motion to set
aside the judgment rendered after he was declared in default.
2
These two appeals of the defendant were
docketed as CA-G.R. NO. 27734-R and CA-G.R. NO. 27940-R, respectively.
Upon motion of the defendant on July 25, 1960,
3
he was allowed by the Court of Appeals to file one
consolidated record on appeal of CA-G.R. NO. 27734-R and CA-G.R. NO. 27940-R.
4

In a resolution promulgated on March 1, 1966, the Court of Appeals, First Division, certified the
consolidated appeal to the Supreme Court on the ground that only questions of law are involved.
5

On December 1, 1959, the Philippine Bank of Commerce instituted against Jose M. Aruego Civil Case
No. 42066 for the recovery of the total sum of about P35,000.00 with daily interest thereon from
November 17, 1959 until fully paid and commission equivalent to 3/8% for every thirty (30) days or
fraction thereof plus attorney's fees equivalent to 10% of the total amount due and costs.
6
The complaint
filed by the Philippine Bank of Commerce contains twenty-two (22) causes of action referring to
twenty-two (22) transactions entered into by the said Bank and Aruego on different dates covering the
period from August 28, 1950 to March 14, 1951.
7
The sum sought to be recovered represents the cost of
the printing of "World Current Events," a periodical published by the defendant. To facilitate the
payment of the printing the defendant obtained a credit accommodation from the plaintiff. Thus, for
every printing of the "World Current Events," the printer, Encal Press and Photo Engraving, collected
the cost of printing by drawing a draft against the plaintiff, said draft being sent later to the defendant for
acceptance. As an added security for the payment of the amounts advanced to Encal Press and Photo-
Engraving, the plaintiff bank also required defendant Aruego to execute a trust receipt in favor of said
bank wherein said defendant undertook to hold in trust for plaintiff the periodicals and to sell the same
with the promise to turn over to the plaintiff the proceeds of the sale of said publication to answer for the
payment of all obligations arising from the draft.
8

Aruego received a copy of the complaint together with the summons on December 2, 1959.
9
On
December 14, 1959 defendant filed an urgent motion for extension of time to plead, and set the hearing
on December 16, 1959.
10
At the hearing, the court denied defendant's motion for extension. Whereupon,
the defendant filed a motion to dismiss the complaint on December 17, 1959 on the ground that the
complaint states no cause of action because:
a) When the various bills of exchange were presented to the defendant as drawee for acceptance, the
amounts thereof had already been paid by the plaintiff to the drawer (Encal Press and Photo Engraving),
without knowledge or consent of the defendant drawee.
b) In the case of a bill of exchange, like those involved in the case at bar, the defendant drawee is an
accommodating party only for the drawer (Encal Press and Photo-Engraving) and win be liable in the
event that the accommodating party (drawer) fails to pay its obligation to the plaintiff.
11

The complaint was dismissed in an order dated December 22, 1959, copy of which was received by the
defendant on December 24, 1959.
12

On January 13, 1960, the plaintiff filed a motion for reconsideration.
13
On March 7, 1960, acting upon
the motion for reconsideration filed by the plaintiff, the trial court set aside its order dismissing the
complaint and set the case for hearing on March 15, 1960 at 8:00 in the morning.
14
A copy of the order
setting aside the order of dismissal was received by the defendant on March 11, 1960 at 5:00 o'clock in
the afternoon according to the affidavit of the deputy sheriff of Manila, Mamerto de la Cruz. On the
following day, March 12, 1960, the defendant filed a motion to postpone the trial of the case on the
ground that there having been no answer as yet, the issues had not yet been joined.
15
On the same date,
the defendant filed his answer to the complaint interposing the following defenses: That he signed the
document upon which the plaintiff sues in his capacity as President of the Philippine Education
Foundation; that his liability is only secondary; and that he believed that he was signing only as an
accommodation party.
16

On March 15, 1960, the plaintiff filed an ex parte motion to declare the defendant in default on the
ground that the defendant should have filed his answer on March 11, 1960. He contends that by filing
his answer on March 12, 1960, defendant was one day late.
17
On March 19, 1960 the trial court declared
the defendant in default.
18
The defendant learned of the order declaring him in default on March 21,
1960. On March 22, 1960 the defendant filed a motion to set aside the order of default alleging that
although the order of the court dated March 7, 1960 was received on March 11, 1960 at 5:00 in the
afternoon, it could not have been reasonably expected of the defendant to file his answer on the last day
of the reglementary period, March 11, 1960, within office hours, especially because the order of the
court dated March 7, 1960 was brought to the attention of counsel only in the early hours of March 12,
1960. The defendant also alleged that he has a good and substantial defense. Attached to the motion are
the affidavits of deputy sheriff Mamerto de la Cruz that he served the order of the court dated March 7,
1960 on March 11, 1960, at 5:00 o'clock in the afternoon and the affidavit of the defendant Aruego that
he has a good and substantial defense.
19
The trial court denied the defendant's motion on March 25,
1960.
20
On May 6, 1960, the trial court rendered judgment sentencing the defendant to pay to the
LIABILITY OF PERSONS SIGNING AS AGENT (SECTION 20)

plaintiff the sum of P35,444.35 representing the total amount of his obligation to the said plaintiff under
the twenty-two (22) causes of action alleged in the complaint as of November 15, 1957 and the sum of
P10,000.00 as attorney's fees.
21

On May 9, 1960 the defendant filed a notice of appeal from the order dated March 25, 1961 denying his
motion to set aside the order declaring him in default, an appeal bond in the amount of P60.00, and his
record on appeal. The plaintiff filed his opposition to the approval of defendant's record on appeal on
May 13, 1960. The following day, May 14, 1960, the lower court dismissed defendant's appeal from the
order dated March 25, 1960 denying his motion to set aside the order of default.
22
On May 19, 1960, the
defendant filed a motion for reconsideration of the trial court's order dismissing his appeal.
23
The
plaintiff, on May 20, 1960, opposed the defendant's motion for reconsideration of the order dismissing
appeal.
24
On May 21, 1960, the trial court reconsidered its previous order dismissing the appeal and
approved the defendant's record on appeal.
25
On May 30, 1960, the defendant received a copy of a
notice from the Clerk of Court dated May 26, 1960, informing the defendant that the record on appeal
filed ed by the defendant was forwarded to the Clerk of Court of Appeals.
26

On June 1, 1960 Aruego filed a motion to set aside the judgment rendered after he was declared in
default reiterating the same ground previously advanced by him in his motion for relief from the order of
default.
27
Upon opposition of the plaintiff filed on June 3, 1960,
28
the trial court denied the defendant's
motion to set aside the judgment by default in an order of June 11, 1960.
29
On June 20, 1960, the
defendant filed his notice of appeal from the order of the court denying his motion to set aside the
judgment by default, his appeal bond, and his record on appeal. The defendant's record on appeal was
approved by the trial court on June 25, 1960.
30
Thus, the defendant had two appeals with the Court of
Appeals: (1) Appeal from the order of the lower court denying his motion to set aside the order of
default docketed as CA-G.R. NO. 27734-R; (2) Appeal from the order denying his motion to set aside
the judgment by default docketed as CA-G.R. NO. 27940-R.
In his brief, the defendant-appellant assigned the following errors:
I
THE LOWER COURT ERRED IN HOLDING THAT THE DEFENDANT WAS
IN DEFAULT.
II
THE LOWER COURT ERRED IN ENTERTAINING THE MOTION TO
DECLARE DEFENDANT IN DEFAULT ALTHOUGH AT THE TIME THERE
WAS ALREADY ON FILE AN ANSWER BY HIM WITHOUT FIRST
DISPOSING OF SAID ANSWER IN AN APPROPRIATE ACTION.
III
THE LOWER COURT ERRED IN DENYING DEFENDANT'S PETITION FOR
RELIEF OF ORDER OF DEFAULT AND FROM JUDGMENT BY DEFAULT
AGAINST DEFENDANT.
31

It has been held that to entitle a party to relief from a judgment taken against him through his mistake,
inadvertence, surprise or excusable neglect, he must show to the court that he has a meritorious
defense.
32
In other words, in order to set aside the order of default, the defendant must not only show
that his failure to answer was due to fraud, accident, mistake or excusable negligence but also that he has
a meritorious defense.
The record discloses that Aruego received a copy of the complaint together with the summons on
December 2, 1960; that on December 17, 1960, the last day for filing his answer, Aruego filed a motion
to dismiss; that on December 22, 1960 the lower court dismissed the complaint; that on January 23,
1960, the plaintiff filed a motion for reconsideration and on March 7, 1960, acting upon the motion for
reconsideration, the trial court issued an order setting aside the order of dismissal; that a copy of the
order was received by the defendant on March 11, 1960 at 5:00 o'clock in the afternoon as shown in the
affidavit of the deputy sheriff; and that on the following day, March 12, 1960, the defendant filed his
answer to the complaint.
The failure then of the defendant to file his answer on the last day for pleading is excusable. The order
setting aside the dismissal of the complaint was received at 5:00 o'clock in the afternoon. It was
therefore impossible for him to have filed his answer on that same day because the courts then held
office only up to 5:00 o'clock in the afternoon. Moreover, the defendant immediately filed his answer on
the following day.
However, while the defendant successfully proved that his failure to answer was due to excusable
negligence, he has failed to show that he has a meritorious defense. The defendant does not have a good
and substantial defense.
Defendant Aruego's defenses consist of the following:
a) The defendant signed the bills of exchange referred to in the plaintiff's complaint in a representative
capacity, as the then President of the Philippine Education Foundation Company, publisher of "World
Current Events and Decision Law Journal," printed by Encal Press and Photo-Engraving, drawer of the
said bills of exchange in favor of the plaintiff bank;
b) The defendant signed these bills of exchange not as principal obligor, but as accommodation or
additional party obligor, to add to the security of said plaintiff bank. The reason for this statement is that
unlike real bills of exchange, where payment of the face value is advanced to the drawer only upon
acceptance of the same by the drawee, in the case in question, payment for the supposed bills of
exchange were made before acceptance; so that in effect, although these documents are labelled bills of
exchange, legally they are not bills of exchange but mere instruments evidencing indebtedness of the
LIABILITY OF PERSONS SIGNING AS AGENT (SECTION 20)

drawee who received the face value thereof, with the defendant as only additional security of the
same.
33

The first defense of the defendant is that he 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 provides that "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."
An inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that he was
signing as a representative of the Philippine Education Foundation Company.
34
He merely signed as
follows: "JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO For failure to disclose his principal,
Aruego is personally liable for the drafts he accepted.
The defendant also contends that he 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. This contention is
also without merit.
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.
35
In lending his name to the
accommodated party, the accommodation party is in effect a surety for the latter. He lends his name to
enable the accommodated party to obtain credit or to raise money. He receives no part of the
consideration for the instrument but assumes liability to the other parties thereto because he wants to
accommodate another. In the instant case, the defendant signed as a drawee/acceptor. Under the
Negotiable Instrument Law, a drawee is primarily liable. Thus, if the defendant who is a lawyer, he
should not have signed as an acceptor/drawee. In doing so, he became primarily and personally liable for
the drafts.
The defendant also contends that the drafts signed by him were not really bills of exchange but mere
pieces of evidence of indebtedness because payments were made before acceptance. This is also without
merit. Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in writting
addressed by one person to another, signed by the person giving it, requiring the person to whom it is
addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or
to bearer.
36
As long as a commercial paper conforms with the definition of a bill of exchange, that paper
is considered a bill of exchange. 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.
It is evident then that the defendant's appeal can not prosper. To grant the defendant's prayer will result
in a new trial which will serve no purpose and will just waste the time of the courts as well as of the
parties because the defense is nil or ineffective.
37

WHEREFORE, the order appealed from in Civil Case No. 42066 of the Court of First Instance of
Manila denying the petition for relief from the judgment rendered in said case is hereby affirmed,
without pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Guerrero and Melencio-Herrera JJ., concur.


LIABILITY OF PERSONS SIGNING AS AGENT (SECTION 20)

THIRD DIVISION
[G. R. No. 116320. November 29, 1999]
ADALIA FRANCISCO, petitioner, vs. COURT OF APPEALS , HERBY COMMERCIAL &
CONSTRUCTION CORPORATION AND JAIME C. ONG, respondents.
D E C I S I O N
GONZAGA
_
REYES, J .:
Assailed in this petition for review on certiorari is the decision
[1]
of the Court of Appeals
affirming the decision
[2]
rendered by Branch 168 of the Regional Trial Court of Pasig in Civil Case No.
35231 in favor of private respondents.
The controversy before this Court finds its origins in a Land Development and Construction
Contract which was entered into on June 23, 1977 by A. Francisco Realty & Development Corporation
(AFRDC), of which petitioner Adalia Francisco (Francisco) is the president, and private respondent
Herby Commercial & Construction Corporation (HCCC), represented by its President and General
Manager private respondent Jaime C. Ong (Ong), pursuant to a housing project of AFRDC at San Jose
del Monte, Bulacan, financed by the Government Service Insurance System (GSIS). Under the contract,
HCCC agreed to undertake the construction of 35 housing units and the development of 35 hectares of
land. The payment of HCCC for its services was on a turn-key basis, that is, HCCC was to be paid on
the basis of the completed houses and developed lands delivered to and accepted by AFRDC and the
GSIS. To facilitate payment, AFRDC executed a Deed of Assignment in favor of HCCC to enable the
latter to collect payments directly from the GSIS. Furthermore, the GSIS and AFRDC put up an
Executive Committee Account with the Insular Bank of Asia & America (IBAA) in the amount of
P4,000,000.00 from which checks would be issued and co-signed by petitioner Francisco and the GSIS
Vice-President Armando Diaz (Diaz).
On February 10, 1978, HCCC filed a complaint
[3]
with the Regional Trial Court of Quezon City
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. However, the parties eventually arrived at an amicable settlement
of their differences, which was embodied in a Memorandum Agreement executed by HCCC and
AFRDC on July 21, 1978. Under the agreement, the parties stipulated that HCCC had turned over 83
housing units which have been accepted and paid for by the GSIS. The GSIS acknowledged that it still
owed HCCC P520,177.50 representing incomplete construction of housing units, incomplete land
development and 5% retention, which amount will be discharged when the defects and deficiencies are
finally completed by HCCC. It was also provided that HCCC was indebted to AFRDC in the amount of
P180,234.91 which the former agreed would be paid out of the proceeds from the 40 housing units still
to be turned over by HCCC or from any amount due to HCCC from the GSIS. Consequently, the trial
court dismissed the case upon the filing by the parties of a joint motion to dismiss.
Sometime in 1979, after an examination of the records of the GSIS, Ong discovered that Diaz and
Francisco had executed and signed seven checks
[4]
, of various dates and amounts, drawn against the
IBAA and payable to HCCC for completed and delivered work under the contract. Ong, however,
claims that these checks were never delivered to HCCC. Upon inquiry with Diaz, Ong learned that the
GSIS gave Francisco custody of the checks since she promised that she would deliver the same to
HCCC. Instead, 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. IBAA credited Franciscos account with the amount of the checks
and the latter withdrew the amount so credited.
On June 7, 1979, Ong filed complaints with the office of the city fiscal of Quezon City, charging
Francisco with estafa thru falsification of commercial documents. Francisco denied having forged Ongs
signature on the checks, claiming that Ong himself indorsed the seven checks in behalf of HCCC and
delivered the same to Francisco in payment of the loans extended by Francisco to HCCC. According to
Francisco, she agreed to grant HCCC the loans in the total amount of P585,000.00 and covered by
eighteen 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. Assistant City Fiscal Ramon M. Gerona gave credence to Franciscos claims and
accordingly, dismissed the complaints, which dismissal was affirmed by the Minister of Justice in a
resolution issued on June 5, 1981.
The present case was brought by private respondents on November 19, 1979 against Francisco and
IBAA for the recovery of P370,475.00, representing the total value of the seven checks, and for
damages, attorneys fees, expenses of litigation and costs. After trial on the merits, the trial court
rendered its decision in favor of private respondents, the dispositive portion of which provides -
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against
the defendants INSULAR BANK OF ASIA & AMERICA and ATTY. ADALIA FRANCISCO, to
jointly and severally pay the plaintiffs the amount of P370.475.00 plus interest thereon at the rate of
12% per annum from the date of the filing of the complaint until the full amount is paid; moral damages
to plaintiff Jaime Ong in the sum of P50,000.00; exemplary damages of P50,000.00; litigation expenses
of P5,000.00; and attorneys fees of P50,000.00.
With respect to the cross-claim of the defendant IBAA against its co-defendant Atty. Adalia Francisco,
the latter is ordered to reimburse the former for the sums that the Bank shall pay to the plaintiff on the
forged checks including the interests paid thereon.
Further, the defendants are ordered to pay the costs.
LIABILITY OF PERSONS SIGNING AS AGENT (SECTION 20)

Based upon the findings of handwriting experts from the National Bureau of Investigation (NBI),
the trial court held that Francisco had indeed forged the signature of Ong to make it appear that he had
indorsed the checks. Also, the court ruled that there were no loans extended, reasoning that it was
unbelievable that HCCC was experiencing financial difficulties so as to compel it to obtain the loans
from AFRDC in view of the fact that the GSIS had issued checks in favor of HCCC at about the same
time that the alleged advances were made. The trial court stated that it was plausible that Francisco
concealed the fact of issuance of the checks from private respondents in order to make it appear as if she
were accommodating private respondents, when in truth she was lending HCCC its own money.
With regards to the Memorandum Agreement entered into between AFRDC and HCCC in Civil
Case No. Q-24628, the trial court held that the same did not make any mention of the forged checks
since private respondents were as of yet unaware of their existence, that fact having been effectively
concealed by Francisco, until private respondents acquired knowledge of Franciscos misdeeds in 1979.
IBAA was held liable to private respondents for having honored the checks despite such obvious
irregularities as the lack of initials to validate the alterations made on the check, the absence of the
signature of a co-signatory in the corporate checks of HCCC and the deposit of the checks on a second
indorsement in the savings account of Francisco. However, the trial court allowed IBAA recourse
against Francisco, who was ordered to reimburse the IBAA for any sums it shall have to pay to private
respondents.
[5]

Both Francisco and IBAA appealed the trial courts decision, but the Court of Appeals dismissed
IBAAs appeal for its failure to file its brief within the 45-day extension granted by the appellate court.
IBAAs motion for reconsideration and petition for review on certiorari filed with this Court were also
similarly denied. On 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 the latter to
pursue its claims against Francisco.
On June 29, 1992, the Court of Appeals affirmed the trial courts ruling, hence this petition for
review on certiorari filed by petitioner, assigning the following errors to the appealed decision
1. The respondent Court of Appeals erred in concluding that private respondents did not owe Petitioner
the sum covered by the Promissory Notes Exh.2-2-A-2-P (FRANCISCO). Such conclusion was based
mainly on conjectures, surmises and speculation contrary to the unrebutted pleadings and evidence
presented by petitioner.
2. The respondent Court of Appeals erred in holding that Petitioner falsified the signature of private
respondent ONG on the checks in question without any authority therefor which is patently
contradictory to the unrebutted pleading and evidence that petitioner was expressly authorized by
respondent HERBY thru ONG to collect all receivables of HERBY from GSIS to pay the loans extended
to them. (Exhibit 3).
3. That respondent Court of Appeals erred in holding that the seven checks in question were not taken
up in the liquidation and reconciliation of all outstanding account between AFRDC and HERBY as
acknowledged by the parties in Memorandum Agreement (Exh. 5) is a pure conjecture, surmise and
speculation contrary to the unrebutted evidence presented by petitioners. It is an inference made which is
manifestly mistaken.
4. The respondent Court of Appeals erred in affirming the decision of the lower court and dismissing
the appeal.
[6]

The pivotal issue in this case is whether or not Francisco forged the signature of Ong on the seven
checks. In this connection, we uphold the lower courts finding that the subject matter of the present
case, specifically the seven checks, drawn by GSIS and AFRDC, dated between October to November
1977, in the total amount of P370,475.00 and payable to HCCC, was not included in the Memorandum
Agreement executed by HCCC and AFRDC in Civil Case No. Q-24628. As observed by the trial court,
aside from there being absolutely no mention of the checks in the said agreement, the amounts
represented by said checks could not have been included in the Memorandum Agreement executed in
1978 because private respondents only discovered Franciscos acts of forgery in 1979. The lower courts
found that Francisco was able to easily conceal from private respondents even the fact of the issuance of
the checks since she was a co-signatory thereof.
[7]
We also note that Francisco had custody of the
checks, as proven by the check vouchers bearing her uncontested signature,
[8]
by which she, in effect,
acknowledged having received the checks intended for HCCC. This contradicts Franciscos claims that
the checks were issued to Ong who delivered them to Francisco already indorsed.
[9]

As regards the forgery, we concur with the lower courts finding that Francisco forged the
signature of Ong on the checks to make it appear as if Ong had indorsed said checks and that, after
indorsing the checks for a second time by signing her name at the back of the checks, Francisco
deposited said checks in her savings account with IBAA. The forgery was satisfactorily established in
the trial court upon the strength of the findings of the NBI handwriting expert.
[10]
Other than petitioners
self-serving denials, there is nothing in the records to rebut the NBIs findings. Well-entrenched is the
rule that findings of trial courts which are factual in nature, especially when affirmed by the Court of
Appeals, deserve to be respected and affirmed by the Supreme Court, provided it is supported by
substantial evidence on record,
[11]
as it is in the case at bench.
Petitioner 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.
[12]
Petitioners alternative defense must
similarly fail. 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.
[13]
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.
[14]
Even assuming that
Francisco was authorized by HCCC to sign Ongs name, still, Francisco did not indorse the instrument
in accordance with law. Instead of signing Ongs name, Francisco should have signed her own name
and expressly indicated that she was signing as an agent of HCCC. Thus, the Certification cannot be
used by Francisco to validate her act of forgery.
Every person who, contrary to law, wilfully or negligently causes damage to another, shall
indemnify the latter for the same.
[15]
Due to her forgery of Ongs signature which enabled her to deposit
LIABILITY OF PERSONS SIGNING AS AGENT (SECTION 20)

the checks in her own account, Francisco deprived HCCC of the money due it from the GSIS pursuant
to the Land Development and Construction Contract. Thus, we affirm respondent courts award of
compensatory damages in the amount of P370,475.00, but with a modification as to the interest rate
which shall be six percent (6%) per annum, to be computed from the date of the filing of the complaint
since the amount of damages was alleged in the complaint;
[16]
however, the rate of interest shall be
twelve percent (12%) per annum from the time the judgment in this case becomes final and executory
until its satisfaction and the basis for the computation of this twelve percent (12%) rate of interest shall
be the amount of P370,475.00. This is in accordance with the doctrine enunciated in Eastern Shipping
Lines, Inc. vs. Court of Appeals, et al.,
[17]
which was reiterated in Philippine National Bank vs. Court of
Appeals,
[18]
Philippine Airlines, Inc. vs. Court of Appeals
[19]
and in Keng Hua Paper Products Co., Inc.
vs. Court of Appeals,
[20]
which provides that -
1. When an obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed
from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article
1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of six percent
(6%) per annum. No interest, however, shall be adjudged on unliquidated claims or damages except
when or until the demand can be established with reasonable certainty. Accordingly, where the demand
is established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be twelve
percent (12%) per annum from such finality until its satisfaction, this interim period being deemed to be
by then an equivalent to a forbearance of credit.
We also sustain the award of exemplary damages in the amount of P50,000.00. Under Article
2229 of the Civil Code, exemplary damages are imposed by way of example or correction for the public
good, in addition to the moral, temperate, liquidated or compensatory damages. Considering petitioners
fraudulent act, we hold that an award of P50,000.00 would be adequate, fair and reasonable. The grant
of exemplary damages justifies the award of attorneys fees in the amount of P50,000.00, and the award
of P5,000.00 for litigation expenses.
[21]

The appellate courts award of P50,000.00 in moral damages is warranted. Under Article 2217 of
the Civil Code, 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.
[22]
Ong testitified that he suffered sleepless nights, embarrassment, humiliation and anxiety upon
discovering that the checks due his company were forged by petitioner and that petitioner had filed
baseless criminal complaints against him before the fiscals office of Quezon City which disrupted
HCCCs business operations.
[23]

WHEREFORE, we AFFIRM the respondent courts decision promulgated on June 29, 1992,
upholding the February 16, 1988 decision of the trial court in favor of private respondents, with the
modification that the interest upon the actual damages awarded shall be at six percent (6%) per annum,
which interest rate shall be computed from the time of the filing of the complaint on November 19,
1979. However, the interest rate shall be twelve percent (12%) per annum from the time the judgment in
this case becomes final and executory and until such amount is fully paid. The basis for computation of
the six percent and twelve percent rates of interest shall be the amount of P370,475.00. No
pronouncement as to costs.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur.