GR L 11926; (June, 1961) (Digest)
G.R. No. L-11926; June 30, 1961
NATIONAL RICE & CORN CORPORATION (NARIC), plaintiff-appellant, vs. JUAN ANTONIO, defendant-appellee and THE CAPITAL INSURANCE & SURETY CO., INC., defendant-appellant.
FACTS
NARIC approved an application in the name of Juan Antonio to purchase empty sacks, requiring a surety bond. The Capital Insurance & Surety Co., Inc. (Surety) issued the bond on December 29, 1951, but it was notarized and filed only on January 8, 1952. The sacks were delivered on January 2, 1952. Upon Antonio’s default, NARIC sued both Antonio and the Surety. The trial court initially rendered judgment against the Surety, which it satisfied in 1956. Antonio, who had been declared in default, later petitioned for relief, claiming lack of valid summons and that his signatures on the purchase application and indemnity agreement were forgeries.
The trial court granted Antonio’s petition, set aside the original decision as to him, and after a new trial, dismissed the case against Antonio. It also ordered the Surety to pay NARIC anew and awarded Antonio substantial damages against both NARIC and the Surety. Both NARIC and the Surety appealed this subsequent decision.
ISSUE
The primary issues were: (1) the propriety of setting aside the original judgment; (2) the liability of Juan Antonio; and (3) the validity of the award of damages against NARIC and the Surety.
RULING
The Supreme Court modified the appealed decision. It held that the trial court correctly set aside the original judgment as to Juan Antonio because it lacked jurisdiction over his person due to improper service of summons, and he presented a meritorious defense of forgery. On the merits, the Court affirmed the dismissal against Antonio, finding the preponderance of evidence established that he was impersonated and did not participate in the transaction.
However, the Court reversed the trial court’s order for the Surety to pay NARIC again. The original judgment against the Surety had already been satisfied; the Surety never moved for relief from it, and NARIC had accepted payment. Thus, that part of the original decision was final and could not be disturbed. The Court also affirmed the order for Carmen Loriaga (who did not appeal) to indemnify the Surety.
Crucially, the Supreme Court reversed the award of damages against NARIC and the Surety. While Antonio suffered from the litigation, NARIC and the Surety were also victims of the impersonator’s fraud. They filed their claims in the legitimate exercise of a right, without evidence of bad faith, as they initially had no knowledge of the forgery. Therefore, they could not be held liable for damages.