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Malicious Prosecution Jurisprudence

[G.R. No. 185559. August 2, 2017.]

JOSE G. TAN and ORENCIO C. LUZURIAGA,petitioners, vs.ROMEO H.

VALERIANO,respondent.

MARTIRES, J : p

For resolution is the Petition for Review on Certiorari,1 docketed as G.R. No.
185559, assailing the 25 September 2008 Decision 2 and the 5 December 2008
Resolution 3 of the Court of Appeals (CA) in CA-G.R. CV No. 88795.
THE FACTS
The present case arose from a damages suit for malicious prosecution filed by
respondent Romeo H. Valeriano (Valeriano) against petitioners Jose G. Tan, and Orencio
C. Luzuriaga (petitioners), as well as Toby Gonzales (Gonzales) and Antonio G.
Gilana (Gilana). 4
It is undisputed that on 4 January 2001, the Holy Name Society of Bulan,
Sorsogon (Holy Name Society), held a multi-sectoral consultative conference at the Bulan
Parish Compound. Valeriano, the president of the religious organization, delivered a
welcome address during the conference. In his address, Valeriano allegedly lambasted
certain local officials of Bulan, Sorsogon, specifically Municipal Councilors petitioners,
Gilana and Vice-Mayor Gonzales.
The following day, or on 5 January 2001, petitioners, together with Gilana and
Gonzales, filed before the Civil Service Commission (CSC) an administrative complaint
against Valeriano who was an incumbent resident auditor of the Commission on
Audit (COA). Believing that the real purpose of the conference was to choose the
candidates who will be endorsed by the Holy Name Society for the 2001 elections,
petitioners, Gilana and Gonzales, charged Valeriano with acts of electioneering and
engaging in partisan politics. They were convinced that, through his opening remarks,
Valeriano had set the political tone of the conference. They also claimed that Valeriano did
not advise or prevent the other speakers from criticizing the local administration with which
they are politically aligned or identified. 5
aScITE

The COA was furnished with a copy of the administrative complaint against
Valeriano. The COA, however, did not take any action on the complaint in view of the
pendency of the case before the CSC. 6
On 30 January 2001, the CSC dismissed the complaint due to a procedural defect,
but without prejudice to its re-filing. 7 The CSC noted that the complaint-affidavit was not
filed under oath.
The petitioners subsequently re-filed a Complaint-Affidavit 8 dated 23 March 2001
before the CSC. On motion of their counsel, however, the petitioners withdrew their
complaint on 15 June 2001. 9
In the meantime, the petitioners and Gilana filed on 22 March 2001 another
administrative complaint 10 dated 13 March 2001 before the Office of the Ombudsman, this
time for violation of Republic Act No. 6713, 11 in relation to Section 55 of the Revised
Administrative Code of 1987. This complaint was dismissed by the Ombudsman on 21
June 2001 for want of evidence. 12
Aggrieved by the turn of events, Valeriano filed before Branch 65, Regional Trial
Court (RTC), Sorsogon City, a complaint for damages against the petitioners.
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The Ruling of the Regional Trial Court

After weighing the evidence, the RTC ruled that the act of filing of numerous cases
against Valeriano by petitioners, Gilana, and Gonzales was attended by malice,
vindictiveness, and bad faith. 13 The RTC observed that Valeriano earned the ire of
petitioners, Gilana, and Gonzales because he was the one who organized and led the
sponsorship of the Multi-Sectoral Consultative Conference which was attended by some
opposition leaders who were allowed to air their views freely relative to the theme: "Facing
Socio-Economic Challenges in the 3rd Millennium, Its Alternative for Good Governance," a
theme which is not totally apolitical considering that it pertains to alternative good
governance. 14 The RTC noted that the fact that Valeriano was singled out by petitioners,
Gilana, and Gonzales, although his participation was only to deliver the Welcome Address,
is indicative of malice. Also, the RTC held that the act of filing numerous cases before the
CSC, COA, and the Ombudsman, which cases were subsequently found to be
unsubstantiated, is reflective of ill will or the desire for revenge. 15
HEITAD

Due to the unfounded complaints initiated by the petitioners, the RTC decided in
favor of Valeriano. By reason of his physical suffering, mental anguish, and social
humiliation, the RTC awarded Valeriano P300,000.00 as moral damages; P200,000.00 as
exemplary damages; and P30,000.00 as attorney's fees and litigation expenses. 16
The Ruling of the Court of Appeals
In the assailed decision, the CA reversed the trial court's ruling insofar as Gonzales
and Gilana were concerned, 17 but affirmed that petitioners should be held liable for
damages. 18 It held that Gonzales and Gilana did not act with malice to vex or humiliate
Valeriano by the mere act of initiating an administrative case against him with the CSC and
the Ombudsman. 19 On the other hand, the CA held that petitioners' act of re-filing their
complaint with the CSC in April 2001, notwithstanding the pendency of the administrative
case with the Ombudsman, shows bad faith. 20 The CA further held that petitioners' intent
to prejudice and injure Valeriano was revealed when they did not inform their lawyer of the
pending case with the Ombudsman. 21
The Issue
The pivotal issue in this case is whether petitioners acted with malice or bad faith in
filing the administrative complaints against Valeriano.
The Court's Ruling
We rule in the negative.
At the onset, we must remember that our scope of review in a Rule 45 petition is
limited to questions of law. 22 This limitation exists because the Supreme Court is not a
trier of facts that undertakes the re-examination and re-assessment of the evidence
presented by the contending parties during the trial. 23 The appreciation and resolution of
factual issues are the functions of the lower courts, whose resulting findings are then
received with respect and are binding on the Supreme Court subject to certain
exceptions. 24
These exceptional circumstances when we have entertained questions of fact
are: (1) when the findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on
a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in
making its findings the Court of Appeals went beyond the issues of the case, or its findings
are contrary to the admissions of both the appellant and the appellee; (7) when the
findings are contrary to the trial court; (8) when the findings are conclusions without
citation of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioner's main and reply briefs are not disputed by the
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respondent; (10) when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record; and (11) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion. 25 ATICcS

The issue raised in the present petition is clearly not a question of law as it requires
a re-examination of the weight and probative value of the evidence presented by the
litigants and, thus, asking us to make a different factual conclusion. In other words, what is
being asked of us now is to review the factual circumstances that led to the filing of
numerous administrative complaints against Valeriano, and to determine the presence of ill
motive, malice or bad faith to justify the award for damages.
After reviewing the records and the conclusions arrived at by the lower courts,
however, we find that they had misappreciated the factual circumstances in this case
thereby qualifying this case as an exception to the rule that a petition for review
on certiorari is limited to questions of law.
Article 19 of the Civil Code contains what is commonly referred to as the principle of
abuse of rights which requires that everyone must act with justice, give everyone his due,
and observe honesty and good faith. The law recognizes a primordial limitation on all
rights; that in their exercise, the norms of human conduct must be observed. A right,
though by itself legal because it is recognized or granted by law as such, may
nevertheless become the source of some illegality. When a right is exercised in a manner
which does not conform with the norms enshrined in Article 19 and results in damage to
another, a legal wrong is thereby committed for which the wrongdoer must be held
responsible. 26
The elements of abuse of rights are the following: (a) the existence of a legal right or
duty; (b) which is exercised in bad faith; and (c) with the sole intent of prejudicing or
injuring another. 27
The existence of malice or bad faith is the fundamental element in abuse of right. In
an action to recover damages based on malicious prosecution, it must be established that
the prosecution was impelled by legal malice. 28 There is necessity of proof that the suit
was patently malicious as to warrant the award of damages under Articles 19 to 21 of
the Civil Code or that the suit was grounded on malice or bad faith. 29 There is malice
when the prosecution was prompted by a sinister design to vex and humiliate a person,
and that it was initiated deliberately by the defendant knowing that his charges were false
and groundless. 30 The award of damages arising from malicious prosecution is justified if
and only if it is proved that there was a misuse or abuse of judicial
processes. 31 Concededly, the mere act of submitting a case to the authorities
for prosecution does not make one liable for malicious prosecution. 32
In this case, what prompted petitioners to initiate the complaint against Valeriano
was his vital participation in the multi-sectoral conference that was held wherein certain
local officials were the subject of criticisms. TIADCc

No less than the Constitution prohibits such officers and employees in the civil
service in engaging in partisan political activity, to wit:
Section 2. (4) No officer or employee in the civil service shall engage, directly
or indirectly, in any electioneering or partisan political campaign.
Correspondingly, the Revised Administrative Code of 1987, in its provisions on the
Civil Service, provides:
SEC. 55. Political Activity.— No officer or employee in the Civil Service including
members of the Armed Forces, shall engage directly or indirectly in any partisan
political activity or take part in any election except to vote nor shall he use his official
authority or influence to coerce the political activity of any other person or body.
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Nothing herein provided shall be understood to prevent any officer or employee from
expressing his views on current political problems or issues, or from mentioning the
names of candidates for public office whom he supports: Provided, That public
officers and employees holding political offices may take part in political and
electoral activities but it shall be unlawful for them to solicit contributions from their
subordinates or subject them to any of the acts involving subordinates prohibited in
the Election Code. 33
During the consultative conference held by the Holy Name Society, speakers were
allowed to criticize certain incumbent local officials. The conference was held at a time so
close to the holding of the 2001 elections. Valeriano, an employee of the COA, was,
incidentally, the president of said religious organization. Given the law's prohibition on
public officers and employees, such as Valeriano, from engaging in certain forms of
political activities, it could reasonably be said that those who had filed the complaints
against Valeriano before the CSC and the Office of the Ombudsman had done so as they
had reason to believe that Valeriano was violating the prohibition. Given the circumstances
of the conference, it can reasonably be said that the complaints were filed out of a belief in
a viable cause of action against Valeriano. Put in another way, it cannot be said, for
certain, that the complaints against Valeriano were filed simply out of malice.
Indeed, the CA, in absolving Gonzales and Gilana, found no malice or bad faith in
the first complaint with the CSC, to wit:
Defendants-appellants miserably failed to show that plaintiff-appellee
Valeriano probably engaged in partisan political activity when the latter urged the
participants in his welcome address "to join hands together to build and offer our
constituents a good governance as alternative of which, I will leave it to your noble
hands." Witness for defendants-appellants Asotes did not even see and hear
plaintiff-appellee Valeriano deliver his welcome address. AIDSTE

However, there is no showing that defendants-appellants Gonzales and

Gilana acted with malice or sinister design to vex or humiliate plaintiff-
appellee Valeriano by the mere act of initiating an administrative case for
electioneering against the latter with the CSC and with the Office of the Ombudsman
after the dismissal without prejudice of the complaint by the CSC. 34 (emphasis
supplied)
This Court, however, disagrees with the CA that the mere re-filing of the complaint
with the CSC is reason to hold petitioners liable for damages. It must be remembered that
the same complaint had earlier been dismissed on a technicality, 35 and that the CSC
directed that the dismissal was without prejudice, i.e.,the complaint may be re-filed after
compliance with the technical rules. Following the discussion of the CA as quoted above,
we can say that this same complaint was likewise not filed out of malice. It was borne out
of a reasonable belief on the illegality of Valeriano's acts. Parenthetically, whether
Valeriano's acts do amount to illegalities is another question altogether, one that is not
within the purview of the present review.
It is a doctrine well-entrenched in jurisprudence that the mere act of submitting a
case to the authorities for prosecution, of and by itself, does not make one liable
for malicious prosecution, for the law could not have meant to impose a penalty on the
right to litigate. 36
Valeriano failed to prove that the subject complaints against him were motivated
purely by a sinister design. It is an elementary rule that good faith is presumed and that the
burden of proving bad faith rests upon a party alleging the same. Absent such, petitioners
cannot be held liable for damages.
WHEREFORE, the foregoing premises considered, the Decision dated 25
September 2008, and the Resolution dated 5 December 2008, of the Court of Appeals in
CA-G.R. CV No. 88795 are hereby REVERSED and SET ASIDE. A new judgment is
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rendered DISMISSING the complaint in Civil Case No. 01-176 filed by Romeo H.
Valeriano before the Regional Trial Court, Branch 65, Bulan, Sorsogon, for lack of merit.
SO ORDERED. AaCTcI

||| (Tan v. Valeriano, G.R. No. 185559, [August 2, 2017])

[G.R. No. 184440. July 3, 2017.]

G.R. No. 184440, RAFAEL B. DE PERALTA and WILFREDO

CABINTE, petitioners, vs. PHILIPPINE COMMERCIAL INTERNATIONAL
BANK, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Second Division, issued a Resolution dated 03
July 2017 which reads as follows:
"G.R. No. 184440, RAFAEL B. DE PERALTA and WILFREDO CABINTE v.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK
A claim for damages will prosper if there is proof that the injury resulted from a
breach of a legal duty. If no legal duty is breached, no damages will be awarded and the
injury is suffered by the claimant.
This resolves the Petition for Review on Certiorari 1 filed by Rafael B. De Peralta (De
Peralta) and Wilfredo Cabinte (Cabinte) assailing the Court of Appeals Decision 2 dated
April 24, 2008 and Resolution 3 dated August 20, 2008. The assailed Court of Appeals
Decision modified the Regional Trial Court Decision 4 dated June 7, 2005 by deleting the
counterclaim consisting of moral damages, attorney's fees, and litigation expenses
awarded to De Peralta and Cabinte.
On October 9, 1992, Philippine Commercial International Bank submitted a
complaint for damages against its former client, Victor Tan Go (Tan Go), and his
representative, Raul Flores (Flores). Philippine Commercial International Bank's former
Acting Accounting Supervisor Reynaldo Poyaoan (Poyaoan), former Branch Manager De
Peralta, and former Operations Officer Cabinte of the Session Road Branch in Baguio City
were impleaded in the case. 5
Philippine Commercial International Bank alleged that Tan Go and Flores colluded
with De Peralta, Cabinte, and Poyaoan to "sell to the [b]ank various second-endorsed US
treasury warrants and US postal money orders with a total peso value of
[P]12,632,108.50." 6 Philippine Commercial International Bank reported that some of the
treasury warrants and money orders were returned or dishonored. The transactions, which
were allegedly done in contravention of bank rules and regulations, resulted in a loss of
P2,646,621.13. 7 The bank presented as evidence an Audit Memorandum that detailed the
negligent acts of petitioners. 8 AIDSTE

In their Joint Answer, 9 De Peralta and Cabinte averred that the transactions with
Tan Go were done in the ordinary course of banking business. These transactions were
duly approved by the Branch Credit Committee, as well as by the bank's Vice President
and Area Manager for Northern Luzon, Alegria Valenciano (Valenciano), 10 De Peralta and
Cabinte claimed that while Tan Go was abroad, his checks "started returning unpaid."

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Upon learning this, Tan Go's brother, Johnson Tan (Johnson) negotiated a settlement with
the Philippine Commercial International Bank, on his behalf. 11
Philippine Commercial International Bank and Johnson allegedly agreed to treat the
value of the dishonored checks as loans which would be paid in "installment with interest
at bank loan rates." 12 Johnson then gave Philippine Commercial International Bank post-
dated personal checks that covered the value of the returned checks plus the agreed
interest. 13 However, this settlement failed when Valenciano filed a complaint for estafa
against Tan Go. 14 De Peralta and Cabinte alleged that if Valenciano had not filed the
estafa case, Philippine Commercial International Bank would have been paid the full value
of the dishonored checks with interest. 15 Because they were maliciously impleaded in the
bank's complaint, De Peralta and Cabinte filed a counterclaim asking for moral damages,
exemplary damages, attorney's fees, and litigation expenses. 16
During, the trial, Cabinte testified that aside from losing his job, his savings, and his
good reputation, his friends and colleagues stopped talking to him because of this
case. 17 Similarly, De Peralta testified that he was wrongfully included in the
complaint. 18 He maintained that the other banks refused to hire him because he could not
obtain a clearance from the Philippine Commercial International Bank while this case was
still pending. 19 According to him, his reputation was tarnished and he was unable to work
for almost seven (7) years. He said he had to beg his friends for a job and had they not
intervened, he would not have been able to work. 20
The Regional Trial Court found Tan Go liable to Philippine Commercial International
Bank for the value of the dishonored US treasury warrants and postal money orders.
However, it dismissed the complaint against Flores, Poyaoan, De Peralta, and Cabinte.
The trial court also granted De Peralta and Cabinte's counterclaim "for the mental anguish
and besmirched reputation they suffered as a result of the filing of [the] complaint." 21 The
dispositive portion of the Decision22 dated June 7, 2005 read:
WHEREFORE, judgment is hereby rendered (a) dismissing the complaint as
against defendants RAUL C. FLORES, REYNALDO R. POYAOAN, RAFAEL B. DE
PERALTA and WILFREDO CABINTE; (b) ordering defendant VICTORINO TAN GO
a.k.a. "VICTOR TAN GO" & "VICTOR TAN" to pay the plaintiff, PHILIPPINE
COMMERCIAL INTERNATIONAL BANK, the sum of P2,592,245.51 with interest
thereon at the rate of 12% per annum from 9 October 1992 until fully paid; and (c)
ordering plaintiff bank to pay defendants/counterclaimants RAFAEL B. DE
PERALTA and WILFREDO CABINTE the sums of P1,000,000.00 as moral damages
and P400,000.00 for attorney's fees and litigation expenses.AaCTcI

Considering that defendant VICTORINO TAN GO a.k.a. "VICTOR TAN GO" &
"VICTOR TAN," who was summoned by publication, has failed to appear in this
action, let a copy of this decision be served upon him also by publication in a
newspaper of general circulation at plaintiff's expense.
SO ORDERED. 23 (Emphasis in the original)
On July 7, 2005, Philippine Commercial International Bank moved for partial
reconsideration, which the Regional Trial Court denied. 24 Aggrieved, Philippine
Commercial International Bank filed a Notice of Appeal on October 14, 2005. 25
On April 24, 2008, the Court of Appeals affirmed the dismissal of the complaint
against De Peralta and Cabinte. However, it deleted the award of damages that the
Regional Trial Court granted to De Peralta and Cabinte. 26 The dispositive portion of the
Decision 27 read:
WHEREFORE, the decision appealed from
is AFFIRMED with MODIFICATION in that the award to Rafael B. De Peralta and
Wilfredo Cabinte of their counterclaim consisting of moral damages in the sum of
P500,000.00 each, and attorney's fees and litigation expenses in the sum of
P200,000.00 each is DELETED.
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SO ORDERED. 28 (Emphasis in the original)

The Court of Appeals declared Tan Go to be "solely liable for the value of the
dishonored [checks]" since there was no evidence that De Peralta and Cabinte colluded
with him. The Court of Appeals further stated that the clear cause of Philippine
Commercial International Bank's loss was Tan Go's failure to return the money he
received for the dishonored treasury warrants and money orders. It ruled that there was no
proof that the procedural infractions done by De Peralta and Cabinte were "the proximate
cause of the loss"; their negligent acts, at most, only contributed to it. As a result, De
Peralta and Cabinte were not held liable for the damage that Philippine Commercial
International Bank suffered. 29
Despite exonerating them from liability, the Court of Appeals deleted the award of
damages granted to De Peralta and Cabinte. In reversing the grant of moral damages and
attorney's fees, the Court of Appeals declared that it was unemployment that caused De
Peralta and Cabinte's moral suffering, "not the filing of the instant case." According to the
Court of Appeals, Philippine Commercial International Bank was justified in terminating the
petitioners' employment and could not be blamed if other banks refused to hire them. 30 EcTCAD

Hence, De Peralta and Cabinte filed this Petition 31 with the sole issue of whether
respondent Philippine Commercial International Bank should be held liable for moral
damages, attorney's fees, and litigation expenses.
According to the petitioners, the Court of Appeals erred when it deleted the award of
damages granted by the Regional Trial Court. They argue that the trial court was correct in
ruling that respondent's malicious act of including them in the complaint caused their
suffering, which they claim is separate from and in addition only to the anguish of their
employment termination. 32
On the other hand, respondent Philippine Commercial International Bank contends
that the deletion of the award of damages is proper. As the Court of Appeals correctly
ruled, petitioners' negligence clearly contributed to the bank's loss; thus, the respondent
had a valid reason to terminate their employment. 33Moreover, to hold a party liable
for malicious prosecution, "there must be proof that the prosecution was prompted by a
sinister design to vex and humiliate a person and that the prosecution was initiated with
the deliberate knowledge that the charge was false and baseless." 34 Given that the
petitioners' acts contributed to the damage suffered by the bank, the respondent cannot be
held liable for malicious prosecution. 35 According to the respondent, "moral damages
cannot be recovered" if the complaint was filed without malice and if the damage "results
from the filing of the complaint, it is damnum absque injuria." 36
This Court rules for the respondent. Philippine Commercial International Bank
should not be held liable for the damages claimed by the petitioners.
Spouses Custodio v. Court of Appeals 37 held that mere presence of an injury is not
enough for damages to be awarded. For the claim to prosper, there must be proof that the
injury resulted from a breach of a legal duty:
However, the mere fact that the plaintiff suffered losses does not give rise to a
right to recover damages. To warrant the recovery of damages, there must be both a
right of action for a legal wrong inflicted by the defendant, and damage resulting to
the plaintiff therefrom. Wrong without damage, or damage without wrong, does not
constitute a cause of action, since damages are merely part of the remedy allowed
for the injury caused by a breach or wrong.
There is a material distinction between damages and injury. Injury is the
illegal invasion of a legal right; damage is the loss, hurt, or harm which results from
the injury, and damages are the recompense or compensation awarded for the
damage suffered. Thus, there can be damage without injury in those instances in

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which the loss or harm was not the result of a violation of a legal duty. These
situations are often called damnum absque injuria. HSAcaE

In order that a plaintiff may maintain an action for the injuries of which he
complains, he must establish that such injuries resulted from a breach of duty which
the defendant owed to the plaintiff — a concurrence of injury to the plaintiff and legal
responsibility by the person causing it. The underlying basis for the award of tort
damages is the premise that an individual was injured in contemplation of law. Thus,
there must first be the breach of some duty and the imposition of liability for that
breach before damages may be awarded; it is not sufficient to state that there should
be tort liability merely because the plaintiff suffered some pain and suffering.
Many accidents occur and many injuries are inflicted by acts or omissions
which cause damage or loss to another but which violate no legal duty to such other
person, and consequently create no cause of action in his favor. In such cases, the
consequences must be borne by the injured person alone. The law affords no
remedy for damages resulting from an act which does not amount to a legal injury or
wrong.
In other words, in order that the law will give redress for an act causing
damage, that act must be not only hurtful, but wrongful. There must be damnum et
injuria. If, as may happen in many cases, a person sustains actual damage, that is,
harm or loss to his person or property, without sustaining any legal injury, that is, an
act or omission which the law does not deem an injury, the damage is regarded
as damnum absque injuria. 38 (Citations omitted)
Spouses Custodio 39 distinguished injury, damage, and damages. "Injury is the
illegal invasion of a legal right; damage is the loss, hurt, or harm which results from the
injury; and damages are the recompense or compensation awarded for the damage
suffered." 40
Damages are recoverable in cases where the plaintiff suffers loss due to a breach of
duty committed by the defendant. The plaintiff must prove two (2) things: first, that he or
she suffered a loss; and second, that the defendant caused the loss by breaching a legal
duty he or she owed to the plaintiff. Absent one (1) of theseelements, the plaintiff is not
considered to have been injured in contemplation of the law.
On the other hand, no damages can be recovered when the harm done is not the
result of a violation of a legal duty. Even if the plaintiff is hurt, if no legal duty owed to him
is violated, no cause of action accrues in his favor. In such cases, the plaintiff bears the
loss.
It is well-settled that findings of fact by the Court of Appeals are final and binding
upon this Court. 41 After careful examination, this Court finds that although petitioners
suffered, their losses were not the result of a breach of any legal duty. Respondent had no
legal duty to continue engaging their services. Moreover, it acted in good faith and for the
protection of its interest when it included the petitioners in the case. Accordingly, the
respondent should not be held liable for damages. HESIcT

Petitioners were found negligent in their duties although the Regional Trial Court
and the Court of Appeals found them not liable for the loss suffered by Philippine
Commercial International Bank. The Audit Memorandum submitted by the respondent
enumerated the procedural infractions committed by the petitioners:
Findings.
1. Acceptance of second-endorsed [US Treasury Warrants/US Postal
Money Orders] was not covered by secured Foreign Bills
Purchased Line as required by policy. From 11/12/90 to 3/26/91, a
total of 3,200 second-endorsed [US Treasury Warrants] and [US Postal
Money Orders] with an aggregate peso value of P12.632M were
purchased from Victorino Tan Go. Acceptance was through encashment,
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deposit to the current account and placements under Trust Indentures.

The Trust Indenture placements were subsequently used as security to
the Credit-On-Hand line extended to Victorino Tan Go and were
withdrawn in guise of COH releases.
a) The Branch Manager, together with the other officers
of the branch caused the consummation of these transactions
despite the absence of a secured Foreign Bills Purchased Line
and credit checking as to the character and moral and business
reputation of the client.
2. The checks purchased were outside the branch's trading area.
3. There was complete breakdown of controls at the unit and area level.
a) The transaction documents and records were
processed and signed by all the branch's officers as required in
this type of transaction. Nobody appeared to have questioned
the soundness of these transactions considering their volume
and the relative newness of the seller or identified the
irregularity in connection with these. There could only have
been either mass ignorance or mass collusion for this to have
happened as the working area of all the officers except the
Accountant are in one small place.
4. Transactions were not properly booked; not properly documented. As
noted, the transactions were not consistently recorded in the required
transaction records and/or not properly documented. A number of
transactions were not booked to the proper account as required by the
policy. 42(Emphasis in the original) caITAC

These were negligent acts which were, however, not enough to hold petitioners
liable. The petitioners nevertheless contributed to Philippine Commercial International
Bank's loss. "[B]anks are expected to exercise the highest degree of diligence in the
selection and supervision of their employees." 43 Hence, Philippine Commercial
International Bank could not be faulted for dismissing its negligent employees.
In Bank of the Philippine Islands v. Court of Appeals: 44
Banks handle daily transactions involving millions of pesos. By the very
nature of their work the degree of responsibility, care and trustworthiness expected
of their employees and officials is far greater than those of ordinary clerks and
employees. For obvious reasons, the banks are expected to exercise the highest
degree of diligence in the selection and supervision of their employees. 45
Article 2219 of the Civil Code, which allows moral damages to be recovered,
enumerates the instances when such award is proper:
Article 2219. Moral damages may be recovered in the following and
analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;

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(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and
35.
The parents of the female seduced, abducted, raped, or abused, referred to in
No. 3 of this article, may also recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may bring
the action mentioned in No. 9 of this article, in the order named. ICHDca

The award of attorney's fees and litigation expenses is found under Article 2208 of
the Civil Code:
Article 2208. In the absence of stipulation, attorney's fees and expenses of
litigation, other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate
with third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiff's plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and
skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's
liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that
attorney's fees and expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be
reasonable.
The respondent cannot be held liable for damages. It breached no legal duty when it
terminated the services of its erring employees. Moreover, none of the circumstances
enumerated under the law, which allow for the award of moral damages or attorney's fees
and litigation expenses to be recovered, is attendant in this case. TCAScE

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed

Decision dated April 24, 2008 and the assailed Resolution dated August 20, 2008 of the
Court of Appeals in CA-G.R. CV No. 86806 are AFFIRMED.
SO ORDERED. (Carpio, J., on official leave. Peralta, J., designated Acting
Chairperson per S.O. No. 2445 dated June 16, 2017.)."
(De Peralta v. Philippine Commercial International Bank, G.R. No. 184440 (Notice), [July 3,
|||

2017])

1.) DENNIS L. LAO, petitioner, vs. HON. COURT OF APPEALS, JUDGE

FLORENTINO FLOR, Regional Trial Court, Branch 89 of Morong, Rizal
BENJAMIN L. ESPIRITU, MANUEL QUERUBIN and CHAN
TONG, respondents.

(Lao v. Court of Appeals, G.R. No. 82808, [July 11, 1991], 276 PHIL 63-70)
|||

GRIÑO-AQUINO, J : p

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For being a witness in an unsuccessful estafa case which his employer filed against a debtor
who had defaulted in paying his just obligation, the petitioner was sued, together with his
employer, for damages for malicious prosecution. The issue in this case is whether the
damages awarded to the defaulting debtor may be satisfied by execution against the
employee's property since his employer's business has already folded up.

Petitioner Dennis Lao was an employee of the New St. Joseph Lumber & Hardware Supply,
hereinafter called St. Joseph Lumber, owned by the private respondent, Chan Tong. In
January 1981, St. Joseph Lumber filed a collection suit against a customer, the private
respondent, Benjamin Espiritu, for unpaid purchases of construction materials from St.
Joseph Lumber.

In November 1981, upon the advice of its lawyer, St. Joseph Lumber filed a criminal
complaint for estafa against Espiritu, based on the same transaction. Since the petitioner was
the employee who transacted business with Espiritu, he was directed by his employer, the
firm's owner, Chan Tong, to sign the affidavit or complaint prepared by the firm's lawyer,
Attorney Manuel Querubin.

Finding probable cause after conducting a preliminary investigation of the charge, the
investigating fiscal filed an information for estafa in the Court of First Instance of Quezon City
against Espiritu. The case was however later dismissed because the court believed that
Espiritu's liability was only civil, not criminal.

On April 12, 1984, Espiritu filed a complaint for malicious prosecution against the petitioner
and St. Joseph Lumber, praying that the defendants be ordered to pay him P500,000 as
moral damages, P10,000 as actual damages, and P100,000 as attorney's fees.
In his answer to the complaint, the petitioner alleged that he acted only as agent or employee
of St. Joseph Lumber when he executed the affidavit which his employer submitted to the
investigating fiscal who conducted the preliminary investigation of his employer's estafa
charge against Espiritu.
The pre-trial of the case was set on October 30, 1984. Since the defendants and their counsel
failed to appear in court, they were declared in default.
On November 11, 1984, the defendants filed a motion for reconsideration of the order of
default.

On November 13, 1984, the motion was granted, and the order of default was set aside.
On January 16, 1985, the defendants, including herein petitioner Lao, and their counsel,
again failed to attend the pre-trial despite due notice to the latter who, however, failed to notify
Lao. They were once more declared in default. The private respondent was allowed to
present his evidence ex parte.

On January 22, 1985, a decision was rendered by the trial court in favor of Espiritu ordering
the defendants Lao and St. Joseph Lumber to pay jointly and severally to Espiritu the sums of
P100,000 as moral damages, P5,000 as attorney's fees, and costs.
Petitioner's motion for reconsideration of the decision was denied by the trial court.
On February 25, 1985, Lao filed a motion for new trial on the ground of accident and
insufficiency of evidence, but it was denied by the trial court.

He appealed to the Court of Appeals (CA-G.R. CV No. 06796, "Benjamin L. Espiritu, plaintiff-
appellee vs. Dennis Lao and New St. Joseph Lumber and Hardware Supply, defendants-
appellant"). The appellate court dismissed his appeal on May 21, 1987. He filed this special
civil action of certiorari and prohibition to partially annul the appellate court's decision and to

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enjoin the execution of said decision against him. The petitioner avers that the Court of
Appeals erred:
1. in not holding that he (petitioner Lao) has a valid defense to the action
for malicious prosecution in Civil Case No. 84-M;
2. in not holding that he was deprived of a day in court due to the gross ignorance,
negligence and dereliction of duty of the lawyer whom his employer hired as his and
the company's counsel, but who failed to protect his interest and even acted in a
manner inimical to him; and
3. in not partially annulling the decision of the trial court dated January 22, 1985
insofar as he is concerned.

The petition is meritorious.

Lao had a valid defense to the action for malicious prosecution (Civil Case No. 84-M)
because it was his employer, St. Joseph Lumber, not himself, that was the complainant in the
estafa case against Espiritu. It was Chan Tong, the owner of the St. Joseph Lumber, who,
upon advice of his counsel, filed the criminal complaint against Espiritu. Lao was only a
witness in the case. He had no personal interest in the prosecution of Espiritu for he was not
the party defrauded by Espiritu. He executed the affidavit which was used as basis of the
criminal charge against Espiritu because he was the salesman who sold the construction
materials to Espiritu. He was only an agent of St. Joseph Lumber, hence, not personally liable
to the party with whom he contracted (Art. 1897, Civil Code; Philippine Products Co. vs.
Primateria Societe Anonyme, 122 Phil. 698).

"To maintain an action for damages based on malicious prosecution,

three elements must be present: First, the fact of the prosecution and the further fact
that the defendant was himself the prosecutor, and that the action was finally
terminated with an acquittal; second, that in bringing the action, the prosecutor acted
without probable cause; and third, the prosecutor was actuated or impelled by legal
malice" (Ferrer vs. Vergara, 52 O.G. 291).

Lao was only a witness, not the prosecutor in the estafa case. The prosecutor was his
employer, Chan Tong or the St. Joseph Lumber.
There was probable cause for the charge of estafa against Espiritu, as found and certified by
the investigating fiscal himself.

Lao was not motivated by malice in making the affidavit upon which the fiscal based the filing
of the information against Espiritu. He executed it as an employee, a salesman of the St.
Joseph Lumber from whom Espiritu made his purchases of construction materials and who,
therefore, had personal knowledge of the transaction. Although the prosecution of Espiritu for
estafa did not prosper, the unsuccessful prosecution may not be labelled as malicious.
"Sound principles of justice and public policy dictate that persons shall have free
resort to the courts for redress of wrongs and vindication of their rights without later
having to stand trial for instituting prosecutions in good faith" (Buenaventura vs. Sto.
Domingo, 103 Phil. 239).

There is merit in petitioner's contention that he was deprived of his day in court in the damage
suit filed by Espiritu, due to the gross ignorance, negligence, and dereliction of duty of
Attorney Manuel Querubin whom his employer had hired to act as counsel for him and the St.
Joseph Lumber. However, Attorney Querubin neglected to defend Lao. He concentrated on
the defense of the company and completely forgot his duty to defend Lao as well. He never
informed Lao about the pre-trial conferences. In fact, he (Attorney Querubin) neglected to
attend other pre-trial conferences set by the court.

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When adverse judgment was entered by the court against Lao and the lumber company,
Attorney Querubin did not file a motion for reconsideration of the decision. He allowed it to
become final, because anyway Espiritu would not be able to satisfy his judgment against
Chan Tong who had informed his lawyer that the St. Joseph Lumber was insolvent, had gone
out of business, and did not have any leviable assets. As a result Espiritu levied on the
petitioner's car to satisfy the judgment in his favor since the company itself had no more
assets that he could seize.
Cdphil

In view of the foregoing circumstances, the judgment against Lao was a nullity and should be
set aside. Its execution against the petitioner cannot be allowed to proceed.
WHEREFORE, judgment is hereby rendered partially setting aside the decision of the Court
of Appeals dated May 21, 1987, insofar as it declared the petitioner, Dennis Lao, solidarily
liable with St. Joseph Lumber to pay the damages awarded to the private respondent
Benjamin Espiritu. Said petitioner is hereby absolved from any liability to the private
respondent arising from the unsuccessful prosecution of Criminal Case No. Q-20086 for
estafa against said private respondent. Costs against the private respondent.
SO ORDERED.

2.) FRANCISCO P. MARTINEZ, plaintiff-appellant, vs. UNITED FINANCE

CORPORATION and/or IFC SERVICE LEASING AND ACCEPTANCE
CORPORATION, defendant-appellee. |||

(Martinez v. United Finance Corp., G.R. No. L-24017, [August 31, 1970], 145 PHIL
496-501)

MAKALINTAL, J : p

Appeal from the order of August 1, 1964 of the Court of First Instance of Rizal
dismissing the appellant's complaint 1 for malicious prosecution on the ground of failure to
state a sufficient cause of action.
The complaint, filed on October 15, 1963, alleges the following facts: The plaintiff
was a general merchant engaged in buying and selling textiles and ready made clothes
and an operator of a number of department stores. In 1959 he sold postdated checks at a
discount to the defendant. The plaintiff's unpaid balance, as of November 29, 1960,
amounted to P58,381.13. To secure payment thereof he executed in the defendant's favor
a chattel mortgage, copy of which was attached to the complaint, covering the
merchandise inventory of a department store owned by him in Pasay. On or about May 17,
1961 the defendant extrajudicially foreclosed the mortgage and had the sheriff of Pasay
City seize and sell the merchandise, which fetched only the sum of P6,140.81. In July
1961 the defendant lodged a criminal complaint with the office of the City Fiscal of Manila,
charging the plaintiff with estafa under sub-section (a), paragraph 2, Article 315 of the
Revised Penal Code. A preliminary investigation was conducted, after which, on
November 15, 1962, the Fiscal filed the corresponding information in the Court of First
Instance of Manila. The case went to trial, and the plaintiff was acquitted on September 9,
1963.

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 14

In the same complaint the plaintiff averred that the defendant "knew all the time that
the plaintiff . . . ha(d) not committed the offense of estafa, but with malice and in gross
evident bad faith defendant filed the said criminal case . . . merely for the purpose of
embarrassing and harassing the plaintiff among his friends and relatives and destroying
(his) good business standing and commercial credit among his business associates and
creditors." By way of relief, the plaintiff claimed different items of damages aggregating
over P140,000.00.
On October 25, 1963 the defendant moved to dismiss on the ground that the
complaint failed to state a sufficient cause of action, to which motion the plaintiff filed an
opposition on October 31, 1963.
On August 1, 1964, the lower court granted the motion and dismissed the case. The
plaintiff moved to reconsider, but was turned down; hence the present appeal.
Appellant now submits that the dismissal was erroneous, since his complaint made
out a cause of action in the light of Article 21 of the Civil Code, 2 taken in connection with
Article 2219 (8), which mentions malicious prosecution as one of the instances in which
moral damages may be recovered.
A motion to dismiss based on failure to state a cause of action presents to the court
only the question of whether or not the complaint alleges facts which, if true, would justify
the relief demanded. The veracity of such allegations is not in issue; they are deemed
hypothetically admitted for purposes of the motion. Stated otherwise, the test of sufficiency
of the cause of action is whether admitting the facts alleged to be true, the court could
render a valid judgment in accordance with the prayer in the complaint. 3
Malicious prosecution, to be the basis of a suit, requires the elements of
malice and want of probable cause in the prosecution of an action against the
plaintiff. A third element is that the defendant must himself be the prosecutor or the
investigator of the prosecution, which ended in acquittal. These elements are
discussed in the case of Buchanan vs. Vda. de Esteban, 4 thus:
"To support an action for malicious prosecution under American law the
plaintiff must prove, in the first place, the fact of the prosecution and the fact that the
defendant was himself the prosecutor, or that he instigated its commencement, and
that it finally terminated in his acquittal, that, in bringing it, the prosecutor had acted
without probable cause, and that he was actuated by legal malice, i.e., by improper
or sinister motives. These three elements must concur; and there is no distinction
between actions for criminal prosecution and civil suits. Both classes require substantially
the same essentials. Malice is essential to the maintenance of an action for
malicious prosecution and not merely to the recovery of exemplary damages. But malice
alone does not make one liable for malicious prosecution, where probable cause is shown,
even where it appears that the suit was brought for the mere purpose of vexing, harassing
and injuring his adversary. In other words, malice and want of probable cause must
both exist in order to justify the action." 5
The appellant's complaint fails to satisfy the test of sufficiency. It is true that it
alleges that the appellee knew "that the plaintiff ha(d) not committed the crime (charged)
"and that he acted "with malice and in gross and evident bad faith . . . for the purpose of
embarrassing and harassing the plaintiff . . ." But the complaint also contains other
allegations which, objectively considered, belie this conclusion with respect to both
the elements of malice and want of probable cause. These allegations are: (1) that a
preliminary investigation of the charge of estafa was conducted by the City Fiscal; (2) that
after the said investigation the plaintiff filed a motion to quash, which the defendant
opposed; (3) that more than a year thereafter, or on November 15, 1962, the Fiscal
nevertheless filed an information in court, with his certification that he had conducted the
requisite preliminary investigation and that "there is reasonable ground to believe that the
offense charged has been committed; and that the accused is guilty thereof;" 6 and (4) "that
14
 15

after a protracted trial, the plaintiff was acquitted of the offense as charged . . . in a
decision dated September 9, 1963 . . . and promulgated on September 13, 1963." A copy
of said decision, acquitting the plaintiff on the ground of reasonable doubt, was also
attached to the complaint as Annex "D" and hence formed part of its allegations.
The findings of fact made by the Court in its decision of acquittal bear materially on
the question of malice and want of probable cause. The evidence, said the court, showed
that when the plaintiff executed the chattel mortgage on the stock inventory in his store on
November 29, 1960 he was the owner thereof, and therefore made no false representation
when he executed said mortgage to secure the loan of P58,381.13 he obtained from the
defendant; but that "some weeks or months after November 29, 1960, with intent to
defraud the complainant United Finance Corporation, the accused succeeded in disposing
of the whole or a part of said store and stock merchandise in favor of a third party, to the
complainant's prejudice . . ." The basis of the acquittal, according to the court, was that
"deceit, to constitute estafa, should be the efficient cause of the defraudation and as such
should either be prior to, or simultaneous with the act of fraud," citing People vs. Fortune,
73 Phil. 407.
The foregoing facts, alleged in the complaint for malicious prosecution either directly
or by reference to its annexes, show that in filing the criminal charge the defendant was
not actuated by malice, nor was there want of probable cause. It had been the victim of
deceit committed by the plaintiff, and whether or not such deceit constituted estafa was a
legal question properly submitted first to the City Fiscal and then to the court after the
necessary preliminary investigation was conducted. The very fact that the plaintiff's
acquittal was based on reasonable doubt as to his guilt demonstrates that the defendant
was justified in submitting its grievances to the said authorities for ruling and possible
redress.WHEREFORE, the order appealed from is affirmed, with costs.

3.) LUIS TAN and ESPERANZA ANG, in the LATTER'S CAPACITY AS OWNER AND
SOLE PROPRIETOR OF THE UNITED BAZAAR, petitioners, vs. THE HONORABLE
COURT OF APPEALS and HORACIO YAPTINCHAY, respondents.|||

(Tan v. Court of Appeals, G.R. No. L-62408, [August 24, 1984], 216 PHIL 367-376)
Petition for review of the Decision of the then Court of Appeals 1 in CA-G.R. No.
52783-R, entitled "Horacio Yaptinchay vs. Luis Tan, et al." which modified the judgment of
the former Court of First Instance of Rizal in Pasig, Branch XXV, in a damage suit for
malicious prosecution by reducing the award of moral damages from P100,000.00 to
P20,000.00, but affirming the appealed judgment in all other respects.
Sometime between 8 and 10 December 1969, petitioner Luis TAN, the General
Manager of the United Bazaar, a business enterprise in Baguio City, owned by and under
the sole proprietorship of his co-petitioner, Esperanza ANG, purchased goods in Manila
worth P2,712.00. The merchandise was delivered to Highway Express, Inc., a common
carrier, for transport to Baguio City. The President of Highway Express is private
respondent Horacio YAPTINCHAY.
On December 1969, the expected date of arrival of the goods, TAN inquired from
the Highway Express Branch Office in Baguio City about the goods, but he was informed

15
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that the truck loading the merchandise had not yet arrived. The following day, TAN left for
Manila and inquired from the traders from whom he bought the goods whether they had
made shipment. The reply was in the affirmative, as shown by bills of lading (Exhibits "5",
"6", "7" & "8"). Upon further inquiry from Highway Express, a receiving clerk told him that
the goods had already been shipped to Baguio City. Verification in Baguio City, however,
revealed that the goods had not arrived. After shuttling back and forth between Baguio
and Manila, and failing to see respondent YAPTINCHAY and to obtain definite information
regarding the fate of the merchandise, TAN sought the assistance of the Filipino-Chinese
Chamber of Commerce in Baguio City, which addressed a letter, dated 21 December 1969,
to the Highway Express Manager (Exhibit "A") demanding the recovery or refund of the
cost of the undelivered cargo or their substitution with the same or identical articles. No
reply having been received, petitioners wrote a demand letter dated 5 January 1970
(Exhibit "B"). On 14 January 1970, Highway Express replied asking for sufficient time to
investigate the cause of the alleged loss of the goods (Exhibit "1 0").
On 26 February 1970, TAN filed a criminal complaint for Estafa before the City
Fiscal's Office in Baguio City (I.S. No. 9711) against YAPTINCHAY. After preliminary
investigation, the complaint was amended to include Juan Estacio (Assistant Manager),
Primo Visperas (Dispatcher) and Manuel Labayne (Receiving Clerk) all of Highway
Express. LexLib
On 16 November 1970, the criminal accusation was dismissed as against
YAPTINCHAY and Juan Estacio for lack of probable cause, but an Information for
Estafa was filed against the dispatcher, Visperas, and the receiving clerk, Labayne. They
were eventually acquitted by the City Court of Baguio, which found the element of
misappropriation or conversion wanting, it appearing that the goods were robbed or
hijacked while in transit.
About a year after the dismissal of the criminal case, or on 20 February 1971,
YAPTINCHAY commenced a damage suit (Civil Case No. 14430) in the then Court of
First Instance of Rizal, Branch VIII (later transferred to Branch XXV) against petitioners,
Luis TAN and Esperanza ANG, for having lodged an allegedly malicious criminal
charge.
Petitioners, as defendants below, traversed the Complaint alleging, in essence, that
YAPTINCHAY's imputation of malicious prosecution was without basis considering that
petitioners had no personal knowledge of the facts and circumstances surrounding the
loss of the goods while in transit prior to the filing of their complaint for estafa because
neither YAPTINCHAY nor his representative bothered to apprise them of the true cause of
the loss of the goods while in transit. They then counterclaimed for actual, moral, and
exemplary damages, as well as attorney's fees and costs of litigation.
In a Decision rendered on 5 July 1972, the Trial Court awarded damages to
YAPTINCHAY, as follows:
"WHEREFORE, judgment is hereby rendered ordering defendants to pay
plaintiff the sum of:
"1. P100,000.00 as and by way of moral damages;
"2. P10,000.00 as and by way of attorney's fees; and
"3. Costs of suit.
SO ORDERED." 2
On appeal, respondent Appellate Court, in a Decision promulgated on 11 August
1982, modified the appealed judgment by reducing the award of moral damages to

16
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P20,000.00 but affirmed it in all other respects. Reconsideration of the judgment sought
by petitioners was denied by that Court.
Hence, petitioners' availment of this Petition to which we gave due course.
The issues raised by the petitioners may be compressed into the primary question of
whether or not petitioners had imputed the estafa against YAPTINCHAY before
the prosecuting officer maliciously, and without probable cause, thereby
rendering them liable for damages. cdll
We find in the negative.
In a damage suit based on malicious prosecution, there are essential elements that
must be proven:
"To support an action for malicious prosecution under American
law the plaintiff must prove, in the first place, the fact of the
prosecution and the fact that the defendant was himself the
prosecutor, or that he instigated its commencement, and that it
finally terminated in his acquittal; that, in bringing it, the prosecutor
had acted without probable cause, and that he was actuated by
legal malice, i.e., by improper or sinister motives. These three
elements must concur; and there is no distinction between actions for
criminal prosecution and civil suits. Both classes require substantially the
same essentials. Malice is essential to the maintenance of an action for
malicious prosecution and not merely to the recovery of exemplary damages.
But malice alone does not make one liable for malicious prosecution, where
probable cause is shown, even where it appears that the suit was brought for
the mere purpose of vexing, harassing and injuring his adversary. In other
words, malice and want of probable cause must both exist in order to
justify the action." 3
In pronouncing the petitioners liable for damages, respondent Appellate Court
sustained the lower Court's finding that petitioner-defendant TAN had instituted the estafa
charge against YAPTINCHAY without probable cause as evidenced by its dismissal by the
Fiscal, and with malice, as TAN had prior knowledge of the loss of his goods while in
transit by robbery-hijacking before he filed the estafa charge.
The existence of malice is negated by the facts. Clear and preponderant
evidence is wanting to prove that petitioners had knowledge that the criminal charge was
false, that they had acted in bad faith, and that they were actuated by improper and
sinister motives. The evidence discloses, contrary to the Trial Court's deductions, that
TAN had not been informed of the cause of the loss of his merchandise while he was
making repeated inquiries regarding the same. In its reply letter to petitioners' demand to
make good the loss, Highway Express merely asked for time to investigate without
advancing any cause for the disappearance of the goods. TAN learned for the first time
about the robbery-hijacking at the preliminary investigation of the complaint for estafa at
the Fiscal's Office when the police report on the robbery-hijacking was presented by the
accused. The inclusion of YAPTINCHAY in the criminal complaint must have been
prompted by TAN's reasonable belief that, as President of the company in whose custody
the goods were lost, he was responsible for such loss. Moreover, the evidence shows that
TAN had, in fact, sought the advice of his friend Fiscal Salvador Valdes, Jr., after narrating
to the latter the facts and circumstances surrounding the loss of his goods. Relying upon
said advice TAN signed the Affidavit prepared by the said prosecuting officer. Such advice
of counsel negates malice and is a complete defense to an action for malicious
prosecution.
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"It is the general rule, in the absence of any statutory provision to the
contrary, that advice of counsel is a complete defense to an action for
malicious prosecution where it appears that the prosecution was
instituted in reliance in good faith on such advice, given after a full and
fair statement of all the facts to the attorney. This is true whether the advice
was sought in respect of a civil action or a criminal prosecution. Moreover, it is
immaterial that the attorney's advice was unsound or erroneous; if the defense
is worth anything to a party it must be available when through error of law, as
well as of fact, his action has failed; the lawyer's error will not deprive his client
of the defense." 6
The dismissal by the Fiscal of the complaint for estafa as against YAPTINCHAY
neither rules out probable cause in so far as TAN was concerned. The circumstances
surrounding the loss of the merchandise, as they appeared to TAN, were such as to excite
reasonable belief in his mind that YAPTINCHAY was guilty of the crime for which he (TAN)
had charged him (YAPTINCHAY). This is the essence of probable cause which further
eliminates herein the element of malice essential in making out a case of malicious
prosecution. Moreover, the action of the Fiscal in filing the Information for estafa against
the other employees of Highway Express shows that he believed in the existence of
probable cause for TAN's charge notwithstanding the defense of robbery-hijacking.
Overall, paramount is the consideration that free resort to Courts for redress of
wrongs is a matter of public policy. The law recognizes the right of everyone to sue for
that which he honestly believes to be his right without fear of standing trial for
damages. Cdpr
"While Courts must look upon the plight of hapless victims of unfounded
and malicious prosecution with tolerance and sympathy, sound principles of
justice and public policy dictate that persons shall have free resort to the courts
for redress of wrongs and vindication of their rights without fear of later on
standing trial for damages where by lack of sufficient evidence, legal
technicalities or a different interpretation of the laws on the matter, the case
would lose ground and therein defendants are acquitted. Proof and motive that
the prosecution or institution of the action was prompted by a sinister design to
vex and humiliate a person and to cast dishonor and disgrace must be clearly
and preponderantly established to entitle the victims to damages and other
rights granted by law; otherwise, there would always be a civil action for
damages after every prosecution's failure to prove its cause resulting in the
consequent acquittal of the accused therein."
WHEREFORE, respondent Appellate Court's judgment is hereby REVERSED and SET
ASIDE, and the suit for damages (Civil Case No. 14430) is hereby ordered DISMISSED.
Petitioners' counterclaims are likewise DISMISSED for insufficiency of evidence. No costs.
SO ORDERED.

4.) INHELDER CORPORATION, petitioner, vs. COURT OF APPEALS, DANIEL

PANGANIBAN and PAULA RAMIREZ PANGANIBAN, respondents.

(Inhelder Corp. v. Court of Appeals, G.R. No. L-52358, [May 30, 1983], 207 PHIL 507-515)
|||

MELENCIO-HERRERA, J : p

What commenced the instant proceedings is a case (hereinafter referred to as the

DAMAGE CASE) instituted by private respondents (hereinafter referred to as the
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 19

PANGANIBANS), residents of Calapan, Oriental Mindoro, against petitioner (hereinafter

referred to as INHELDER), domiciled in Mandaluyong, Rizal, before the Court of First
Instance of Oriental Mindoro (hereinafter referred to as the MINDORO COURT). The
Complaint alleged that INHELDER had filed a case (hereinafter referred to as the
COLLECTION CASE) against the PANGANIBANS before the Municipal Court of
Mandaluyong, Rizal (hereinafter referred to as MANDALUYONG COURT), which was
subsequently dismissed; that the COLLECTION CASE (Civil Case No. 5582), was clearly
unfounded; and that the PANGANIBANS were entitled, as against INHELDER, to
quantified damages totalling P169,550.00. The prayer in the complaint was: llcd

"WHEREFORE, it is most respectfully prayed:

1. That defendant be ordered to pay plaintiffs the amount of FOUR
THOUSAND FIVE HUNDRED FIFTY PESOS (P4,550.00), as actual damages spent
by plaintiffs in Civil Case No. 5582 of the Municipal Court of Mandaluyong, Rizal;
2. That defendant be ordered to pay plaintiffs the amount of FIVE THOUSAND
PESOS (P5,000.00) as attorney's fees in Civil Case No. 5582;
3. That defendant be ordered to pay plaintiffs the amount of FIFTY THOUSAND
PESOS (P50,000.00) as compensatory damages for injury to plaintiffs' business
standing or commercial credit pursuant to Art. 2205, par. 2 of the New Civil Code in
relation to Art. 2201 and 2202 of the same Code;
4. That defendant be ordered to pay plaintiffs the amount of FIFTY THOUSAND
PESOS (P50,000.00) as moral and/or compensatory damages due to the nervous
breakdown suffered by plaintiff Dra. Paula R. Panganiban, pursuant to Arts. 2201,
2202 and 2217 of the New Civil Code;
5. That defendant be ordered to pay plaintiffs the amount of FIFTY THOUSAND
PESOS (P50,000.00) as moral damages suffered by plaintiffs due to the mental
anguish, social humiliation, besmirched reputation and similar injury;
6. That defendant be ordered to pay plaintiffs the amount of TEN THOUSAND
PESOS (P10,000.00) as attorney's fees in prosecuting this claim;
7. That defendant be ordered to pay plaintiffs any amount that may be
determined by this Honorable Court as exemplary or corrective damages pursuant to
Art. 2229 of the New Civil Code;
8. And for such other relief as may be deemed just and equitable in the
premises."
As will be seen, the complaint of the PANGANIBANS was essentially for actual and
compensatory damages, moral damages and exemplary damages, based on the
alleged clearly unfounded COLLECTION CASE.
After declaring INHELDER in default in the DAMAGE CASE, the MINDORO COURT
rendered judgment in favor of the PANGANIBANS as follows:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendant Inhelder Corporation, as follows:
1. Ordering defendant to pay plaintiffs the sum of P4,550.00 as actual damages
spent by plaintiffs in Civil Case No. 5582 of the Municipal Court of Mandaluyong,
Rizal, as well as the sum of P3,000.00 as attorney's fees in said Civil Case No. 5582;
2. Ordering defendant to pay plaintiffs the sum of P50,000.00 as compensatory
damages for injury to plaintiffs business standing;
3. Ordering defendant to pay plaintiff the sum of P50,000.00 as compensatory
damages due to the nervous breakdown suffered by plaintiff Paula R. Panganiban and
the additional amount of P50,000.00 for moral damages plaintiffs sublined due to
mental anguish, social humiliation, besmirched reputation and other similar injuries;
4. Ordering defendant to pay plaintiffs the sum of P50,000.00 as exemplary
damages;
5. Ordering defendant to pay plaintiffs the sum of P5,000.00 in the form of
attorney's fees.
With costs against defendant corporation."
It will be noted that the P5,000.00 claim for attorney's fees corresponding to the
COLLECTION CASE was reduced from P5,000.00 to P3,000.00, and attorney's fees
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corresponding to the DAMAGE CASE was reduced from P10,000.00 to P5,000.00. But the
prayed-for P50,000.00 "as moral and/or compensatory demanded due to the nervous
break-down suffered by plaintiff Dra. Paula R. Panganiban" was increased to
P100,000.00, that is, P50,000.00 compensatory and P50,000.00 moral. Thus, the total
damages granted to the PANGANIBANS by the MINDORO COURT amounted to
P169,550.00 minus P7,000.00 plus P50,000.00, or P212,550.00. cdll

On appeal by INHELDER, the Appellate Court * reduced the total damages awarded
to the PANGANIBANS from P212,550.00 to P41,550.00 by modifying the judgment of the
MINDORO COURT as follows:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the defendant Inhelder Corporation as follows:.
1. Ordering defendant to pay plaintiffs the sum of P4,550.00 as actual damages
spent by plaintiffs in Civil Case No. 5582 of the Municipal Court of Mandaluyong, Rizal
as well as the sum of P2,000.00 as attorney's fees in Civil Case No. 5582;
2. Ordering defendant to pay plaintiffs the sum of P10,000.00 as compensatory
damages for injury to plaintiffs' business standing;
3. Ordering defendant to pay plaintiffs the sum of P10,000.00 as compensatory
damages due to the nervous breakdown suffered by plaintiff Paula R. Panganiban;
4. Ordering defendant to pay plaintiffs the sum of P10,000.00 as exemplary
damages:
5. Ordering defendant to pay plaintiffs the sum of P5,000.00 in the form of
attorney's fees for the prosecution of this case."
The background facts and circumstances of the COLLECTION CASE can be stated
as follows:
1. (a) INHELDER is engaged in the manufacture and sale of medicines and drug. Its
principal office is at No. 41 Pioneer Street, Mandaluyong, Rizal (now Metro Manila).
(b) McGaw Baxter Laboratories, Inc. appears to be another Company also having its
principal office at No. 41 Pioneer Street.
(c) INHELDER's lawyer, both in the COLLECTION CASE and in the DAMAGE
CASE is Atty. Maximo M. Fajardo, Jr. He appears to have offices both at INHELDER
(Annex "C", Petition for Review) and at McGaw Baxter Laboratories, Inc. 1
2. The PANGANIBANS, physicians, are the owners of the DOCTOR's CLINIC in
Calapan.
3. On December 29, 1972, DOCTOR's CLINIC purchased medicines and drugs from
INHELDER in the amount of P1,385.10, payable in installments. The PANGANIBANS
were able to pay the amount of P824.10 for that purchase, leaving a balance of P561.00
which had remained unpaid for approximately two years.
4. On December 2, 1974, Atty. Fajardo sent a letter to the PANGANIBANS
requesting settlement of the said amount of P561.00. In their reply, the PANGANIBANS
requested a statement of account which was sent to them on January 17, 1975 with a
follow-up letter, again, requesting remittance of the outstanding balance of P561.00.
5. (a) On January 28, 1975, the PANGANIBANS, as stated by them, "sent PNB
Check No. 32058 to (INHELDER) in the amount of P561.00, dated January 28, 1975, and
said check was received by (INHELDER) on or before February 5, 1975". 2

(b) The check must have been sent by mail. If it was personally delivered, the
PANGANIBANS would know the specific date when the check was received, which then
would not be "on or before February 5, 1975".
(c) It can be presumed that the PNB Check was drawn on the PNB Branch in
Calapan.
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6. On February 8, 1975, Atty. Fajardo prepared the complaint in the COLLECTION

CASE, which was filed with the MANDALUYONG COURT on February 12, 1975.
7. (a) On February 19, 1975, INHELDER sent a letter to the PANGANIBANS
"acknowledging the receipt of the PNB Check No. 32058 in the amount of P561.00
representing full payment of the (`PANGANIBANS') account with INHELDER". 3
(b) For the payment made by the PANGANIBANS to be effective, the PNB Check
must first be cleared with the PNB Branch in Calapan, which could have been completed
only on February 19, 1975.
8. The records do not disclose the written Answer to the complaint in the
COLLECTION CASE. In regards to the hearing thereof on May 14, 1975, the
PANGANIBANS have alleged:
"22. That during the hearing of the instant case before the Municipal Court of
Mandaluyong, undersigned counsel showed to the Court plaintiffs' receipts to the
effect that several days before the malicious and unfounded complaint was filed
before said Court Dr. and Mrs. Panganiban had already paid their accounts and as a
matter of fact the Inhelder Corporation has acknowledged receipt of payment, thus,
upon motion of the undersigned counsel, Civil Case No. 5582 was dismissed without
the objection of Atty. Maximo M. Fajardo, Jr., counsel for the Inhelder Corporation;
23. That the ORDER of dismissal by the Municipal Judge of Mandaluyong,
Rizal dated May 14, 1975, was given in open court and the written order we sent to
the undersigned counsel later at Calapan, Oriental Mindoro thru the mails, hence, it is
very clear that said ORDER of dismissal, with the conformity of defendant Inhelder
Corporation, has already become final; insofar as plaintiffs and defendant and
concerned;" 4
On the above facts and circumstances, it should be difficult to conclude that the
COLLECTION CASE was a clearly unfounded civil action. It is not clear that the account of
the PANGANIBANS had already been paid as of February 12, 1975. Under Article 1249 of
the Civil Code, payment should be held effective only when PNB Check No. 32058 was
actually cashed by, or credited to the account of, INHELDER. If that did not eventuate on
or before February 12, 1975, and there is no proof that it did, the account would still be
unpaid, and the complaint in the COLLECTION CASE, technically, could not be
considered as substantially unfounded.
It is true that when the check of the PANGANIBANS was received on February 5,
1975, the better procedure would have been to withhold a complaint pending
determination of whether or not the check was good. If dishonored, that would be the time
to file the complaint. That procedure was not followed because of the failure of the
corresponding advice which could have been given to Atty. Fajardo by the INHELDER
Credit and Collection Manager. But the lack of that advice should not justify qualifying the
COLLECTION CASE as clearly unfounded. If the check had bounced, the COLLECTION
CASE would have been tried and acted upon by the MANDALUYONG COURT on the
merits.
Neither may it be said that the COLLECTION CASE
was malicious. Malicious prosecution, to be the basis of a suit, requires
the elements of malice and want of probable cause. 5 There must be proof that
the prosecution was prompted by a sinister design to vex and humiliate a person,
and that it was initiated deliberately knowing that the charge was false and
groundless. 6
In the present case, there is no evidence on record, clearly establishing these
two elements. Although there may be want of probable cause, there is no proof that
petitioner deliberately initiated the COLLECTION CASE knowing that the same was false
and groundless.

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And the rule is the same for criminal prosecution and civil suits.
"To support an action for malicious prosecution under American law the
plaintiff must prove, in the first place, the fact of the prosecution and the fact
that the defendant was himself the prosecutor, or that he instigated its
commencement, and that it finally terminated in his acquittal, that, in bringing it,
the prosecutor had acted without probable cause, and that he was actuated by
legal malice, i.e., by improper or sinister motives. These three elements must
concur; and there is no distinction between actions for criminal prosecutions
and civil suits. Both classes require substantially the same essentials. Malice is
essential to the maintenance of an action for malicious prosecution and not
merely to the recovery of exemplary damages. But malice alone does not make
one liable for malicious prosecution where probable cause is shown, even
where it appears that the suit was brought, for the mere purpose of vexing,
harassing and injuring his adversary. In other words, malice and want of
probable cause must both exist in order to justify the action.' (Buchanan vs.
Vda. de Esteban, 32 Phil. 363)." 7 (Emphasis ours)
Nor can malice be inferred from want of probable cause.
"It would be a harsh rule to hold that, where the evidence was merely
sufficient to make a prima facie showing of want of probable cause, malice must
necessarily be inferred therefrom." 8
It should also be stressed that the mere filing of a suit does not render person
liable for malicious prosecution should he be unsuccessful. The law could not have
meant to impose a penalty on the right to litigate. 9 Sound principles of justice and public
policy demand that persons shall have free resort to Courts of law for redress of wrongs
and vindication of their rights without fear of later on standing trial for damages should their
actions lose ground. 10 As expressed by Chief Justice Enrique M. Fernando from a
broader perspective: LLphil

". . . Well-worth paraphrasing is the thought expressed in a United States

Supreme Court decision as to the existence of an abiding and fundamental principle
that the expenses and annoyance of litigation form part of the social burden of living in
a society which seeks to attain social control through law." 11
At this juncture, it may not be amiss to remind Trial Courts to guard against the
award of exhorbitant damages that are way out of proportion to the environmental
circumstances of a case and which, time and again, this Court has reduced or eliminated.
Judicial discretion granted to the Courts in the assessment of damages must always be
exercised with balanced restraint and measured objectivity.
WHEREFORE, the appealed judgment of the erstwhile Court of Appeals is hereby
reversed, and the decision of the Court of First Instance of Oriental Mindoro in its Civil
Case No. R-2525 is set aside.

5.) REHABILITATION FINANCE CORPORATION, plaintiff-appellant, vs. FRANCISCO

T. KOH, SANTOS LLORCA, JOSE UY VILLANUEVA, ET AL., defendants-appellees.

(Rehabilitation Finance Corp. v. Koh, G.R. No. L-15512, [February 28, 1962], 114 PHIL 456-
|||

465)

SYLLABUS

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 23

1. ACTIONS; MALICIOUS PROSECUTION; ELEMENTS NECESSARY FOR

ACTION TO PROPER. — "To support an action for malicious prosecution under
American law the plaintiff must prove in the first place, the fact of
the prosecution and the fact that the defendant was himself the prosecutor, or that
he instigated its commencement and that it finally terminated in his acquittal; that,
in bringing it, the prosecutor had acted without probable cause, and that he was
actuated by legal malice, i.e., by improper or sinister motives. These
three elements must concur; and there is no distinction between action for
criminal prosecution and civil suits. Both classes require substantially the same
essentials. Malice is essential to the maintenance of an action
for malicious prosecution and not merely to the recovery of exemplary damages.
But malice alone does not make one liable for malicious prosecution, where
probable cause is shown, even where it appears that the suit was brought for the
mere purpose of vexing, harassing and injuring his adversary. In other words,
malice and want of probable cause must both exist in order to justify the action."
(Buchanan vs. Vda. de Esteban, 32 Phil. 363.)
2. ID.; ID.; WHEN ADVICE OF COUNSEL A COMPLETE DEFENSE TO ACTION.
— "It is the general rule, in the absence of any statutory provision to the contrary, that
advice of counsel is a complete defense to an action for malicious prosecution where it
appears that the prosecution was instituted in reliance in good faith on such advice, given
after a full and fair statement of all the facts to the attorney. This is true whether the advice
was sought in respect of a civil action or a criminal prosecution. Morever, it is immaterial
that the attorney's advice was sound or erroneous: if the defense is worth anything to a
party it must be available when through error of law, as well as of fact, his action has
failed; the lawyer's error will not deprive his client of the defense." (34 Am. Jur. pp. 747-
748).

6.) WILLIAM R. BAYANI, petitioner, vs. PANAY ELECTRIC CO., INC., respondent

(Bayani v. Panay Electric Co., G.R. No. 139680 (Resolution), [April 12, 2000], 386 PHIL
980-987)

SYNOPSIS

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 24

In March 1996, private respondent, Panay Electric Company, Inc. (PECO),

discontinued supplying electrical services to two pension houses, the Bayani Drive Inn
at Calumpang, Molo, Iloilo City and the William Bayani Hotel in Mandurriao, Iloilo City,
both owned by petitioner. Alleging that it had discovered theft of electricity in
petitioner's business establishments, PECO filed two complaints for violation of R.A.
No. 7832 against petitioner with the City Prosecutor of Iloilo City, but the same were
dismissed. PECO appealed the dismissal to the Secretary of Justice. Aggrieved by the
actuation of the private respondent, petitioner filed with the Regional Trial Court, Iloilo
City on October 10, 1996, a civil case for injunction and damages arising
from malicious prosecution. PECO moved to dismiss the petition. After trial on the
merits, the trial court granted petitioner's request for the issuance of a writ of
preliminary mandatory injunction and ordered PECO to immediately restore the electric
services to the Bayani Drive Inn, Calumpang, Molo, Iloilo City and the William Bayani
Hotel at Mandurriao, Iloilo City. Finding the decision unjust, PECO filed a petition on
September 15, 1997 for certiorari and prohibition with the Court of Appeals, praying
that the appellate court declare the orders of the trial court dated March 20, 1997,
August 27, 1997, September 2, 1997 and September 10, 1997 null and void. PECO
likewise sought the dismissal of herein petitioner's complaint in the lower court. On
October 26, 1998, respondent appellate court reversed and set aside the orders of the
trial court and the complaint for injunction and damages filed by petitioner against
private respondent was ordered dismissed for lack of merit. Petitioner moved for
reconsideration, but the appellate court denied the same. Hence, this petition.

The Supreme Court found the petition devoid of merit. The Court agreed with the
appellate court that one of the elements for an action based on malicious prosecution,
the element of final termination of the action resulting in an acquittal, was absent at the
time petitioner filed the civil case for malicious prosecution. The records showed that
petitioner's action for injunction and damages was filed on October 10, 1996, whereas
the Secretary of Justice dismissed with finality PECO's criminal complaints against
herein petitioner only on March 4, 1998. Hence, the civil case
for malicious prosecution was prematurely filed. Accordingly, the Court denied the
petition and the assailed decision of the Court of Appeals was affirmed without
prejudice for the re-filing of the civil case within the reglementary period.

SYLLABUS

CIVIL LAW; DAMAGES; MALICIOUS PROSECUTION; DEFINITION; REQUISITES;

ELEMENT OF FINAL TERMINATION OF THE ACTION RESULTING IN AN ACQUITTAL
ABSENT IN CASE AT BAR. — There is a malicious prosecution when a person directly
insinuates or imputes to an innocent person the commission of a crime and the maliciously
accused is compelled to defend himself in court. While generally associated with unfounded
criminal actions "the term has been expanded to include unfounded civil suits instituted just to
vex and humiliate the defendant despite the absence of a cause of action or probable cause."
The basis for a civil action for damages arising from malicious prosecution is found in Articles
19, 21, 29, 35, of the Civil Code. The requisites for an action for damages based
on malicious prosecution are: (1) the fact of the prosecution and the further fact that
the defendant was himself the prosecutor, and that the action was finally terminated
with an acquittal; (2) that in bringing the action, the prosecutor acted without probable
cause; and (3) the prosecutor was actuated or impelled by legal malice. Considering the

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facts in this case, we agree with the respondent appellate court that one of the elements for
an action based on malicious prosecution, the element of final termination of the action
resulting in an acquittal, was absent at the time petitioner filed Civil Case No. 23276. The
records show that petitioner's action for injunction and damages was filed on October 10,
1996, whereas the Secretary of Justice dismissed with finality PECO's criminal complaints
against herein petitioner only on March 4, 1998. Hence, Civil Case No. 23276 was
prematurely filed.

7.) MS. VIOLETA YASOÑA, personally and as heir of deceased sister defendant
PELAGIA YASOÑA and as attorney–in–fact of her brothers ALEJANDRO and
EUSTAQUIO, both YASOÑA and sisters: TERESITA YASOÑA BALLESTERO and
ERLINDA YASOÑA TUGADI, and mother AUREA VDA. DE YASOÑA,petitioners, vs.
RODENCIO and JOVENCIO, both surnamed DE RAMOS, respondents.

(Yasoña v. De Ramos , G.R. No. 156339, [October 6, 2004], 483 PHIL 162-170)

CORONA, J : p

Before this Court is a petition for review on certiorari seeking the reversal of the
decision 1 of the Court of Appeals dated June 14, 2002 and its resolution dated December 12,
2002 in CA-G.R. SP No. 69300.
The records disclose that in November 1971, Aurea Yasoña and her son, Saturnino,
went to the house of Jovencio de Ramos to ask for financial assistance in paying their loans
to Philippine National Bank (PNB), otherwise their residential house and lot, covered by TCT
No. T-32810, would be foreclosed. Inasmuch as Aurea was his aunt, Jovencio acceded to the
request. They agreed that, upon payment by Jovencio of the loan to PNB, half of Yasoñas'
subject property would be sold to him.
On December 29, 1971, Jovencio paid Aurea's bank loan. As agreed upon, Aurea
executed a deed of absolute sale in favor of Jovencio over half of the lot consisting of 123
square meters. Thereafter, the lot was surveyed and separate titles were issued by the
Register of Deeds of Sta. Cruz, Laguna in the names of Aurea (TCT No. 73252) and Jovencio
(TCT No. 73251). TIcAaH

Twenty-two years later, in August 1993, Aurea filed an estafa complaint against
brothers Jovencio and Rodencio de Ramos on the ground that she was deceived by them
when she asked for their assistance in 1971 concerning her mortgaged property. In her
complaint, Aurea alleged that Rodencio asked her to sign a blank paper on the pretext that it
would be used in the redemption of the mortgaged property. Aurea signed the blank paper
without further inquiry because she trusted her nephew, Rodencio. Thereafter, they heard
nothing from Rodencio and this prompted Nimpha Yasoña Bondoc to confront Rodencio but
she was told that the title was still with the Register of Deeds. However, when Nimpha
inquired from the Register of Deeds, she was shocked to find out that the lot had been divided
into two, pursuant to a deed of sale apparently executed by Aurea in favor of Jovencio. Aurea
averred that she never sold any portion of her property to Jovencio and never executed a

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deed of sale. Aurea was thus forced to seek the advice of Judge Enrique Almario, another
relative, who suggested filing a complaint for estafa.
On February 21, 1994, Assistant Provincial Prosecutor Rodrigo B. Zayenis dismissed
the criminal complaint for estafa for lack of evidence. On account of this dismissal, Jovencio
and Rodencio filed a complaint for damages on the ground of malicious prosecution with the
Regional Trial Court of Sta. Cruz, Laguna, Branch 91, 2which was docketed as Civil Case No.
SC-3230. They alleged that the filing of the estafa complaint against them was done with
malice and it caused irreparable injury to their reputation, as Aurea knew fully well that she
had already sold half of the property to Jovencio.
On October 5, 2000, the trial court rendered a decision in favor of Jovencio and
Rodencio. The dispositive portion stated:
WHEREFORE, premises considered, finding that plaintiffs have established
their case by preponderance of evidence, judgment is hereby rendered in their favor
and against the defendants ordering the latter to pay the former as follows:DCSETa

A) P150,000.00 by way of moral damages;

B) P30,000.00 as exemplary damages;
C) P10,000.00 as attorney’s fees incurred in defending themselves from the
criminal complaint for estafa;
D) P10,000.00 as attorney’s fees and cost of litigation, and to pay the costs.
There being no sufficient evidence established to prove the claim for actual
damages the same is hereby dismissed.
SO ORDERED. 3
Petitioner Violeta Yasoña, personally and on behalf of her brothers and sisters and
mother Aurea, filed a petition for certiorari under Rule 65 with the Court of Appeals which
dismissed the same on June 14, 2002 on the ground that petitioners availed of the wrong
remedy. Their subsequent motion for reconsideration was likewise denied on December 12,
2000.
Hence, the instant petition.
We agree with the appellate court that the remedy availed of by petitioners was
inappropriate as Rule 65 of the Rules of Court cannot be a substitute for a lost appeal, 4 and
that, in any event, petitioners are liable for malicious prosecution.
The principal question to be resolved is whether the filing of the criminal complaint for
estafa by petitioners against respondents constituted malicious prosecution. DAaIHT

In this jurisdiction, the term "malicious prosecution" has been defined as "an action for
damages brought by one against whom a criminal prosecution, civil suit, or other legal
proceeding has been instituted maliciously and without probable cause, after the termination
of such prosecution, suit, or other proceeding in favor of the defendant therein." To constitute
"malicious prosecution," there must be proof that the prosecution was prompted by a sinister
design to vex or humiliate a person, and that it was initiated deliberately by the defendant
knowing that his charges were false and groundless. 5 Concededly, the mere act of submitting
a case to the authorities for prosecution does not make one liable for malicious prosecution. 6
In this case, however, there is reason to believe that a malicious intent was behind the
filing of the complaint for estafa against respondents. The records show that the sale of the
property was evidenced by a deed of sale duly notarized and registered with the local
Register of Deeds. After the execution of the deed of sale, the property was surveyed and
divided into two portions. Separate titles were then issued in the names of Aurea Yasoña
(TCT No. 73252) and Jovencio de Ramos (TCT No. 73251). Since 1973, Jovencio had been
26
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paying the realty taxes of the portion registered in his name. In 1974, Aurea even requested
Jovencio to use his portion as bond for the temporary release of her son who was charged
with malicious mischief. Also, when Aurea borrowed money from the Rural Bank of Lumban in
1973 and the PNB in 1979, only her portion covered by TCT No. 73252 was mortgaged.
All these pieces of evidence indicate that Aurea had long acknowledged Jovencio’s
ownership of half of the property. Furthermore, it was only in 1993 when petitioners decided
to file the estafa complaint against respondents. If petitioners had honestly believed that they
still owned the entire property, it would not have taken them 22 years to question Jovencio's
ownership of half of the property. The only conclusion that can be drawn from the
circumstances is that Aurea knew all along that she was no longer the owner of Jovencio’s
portion after having sold it to him way back in 1971. Likewise, other than petitioners’ bare
allegations, no other evidence was presented by them to substantiate their claim.
Malicious prosecution, both in criminal and civil cases, requires the elements of
(1) malice and (2) absence of probable cause. 7 These two elements are present in the
present controversy. Petitioners were completely aware that Jovencio was the rightful owner
of the lot covered by TCT No. 73251, clearly signifying that they were impelled by malice and
avarice in bringing the unfounded action. That there was no probable cause at all for the filing
of the estafa case against respondents led to the dismissal of the charges filed by petitioners
with the Provincial Prosecutor’s Office in Siniloan, Laguna.
Petitioners' reliance on Drilon vs. Court of Appeals 8 is misplaced. It must be noted that
in Drilon, the investigating panel found that there was probable cause to hold private
respondent Homobono Adaza for trial for the crime of rebellion with murder and frustrated
murder. Thus, petitioner (now Senate President) Franklin Drilon could not be held liable
for malicious prosecution as there existed probable cause for the criminal case. Here, the
complaint for estafa was dismissed outright as the prosecutor did not find any probable cause
against respondents. A suit for malicious prosecution will prosper where legal prosecution is
carried out without probable cause.
In sum, we find no reversible error on the part of the appellate court in dismissing the
petition and in effect affirming the trial court’s decision holding petitioners liable for damages
for the malicious prosecution of respondents.
WHEREFORE, the decision declaring petitioners liable for malicious prosecution is
hereby AFFIRMED in toto.
SO ORDERED. DACIHc

7.) HECTOR C. VILLANUEVA, petitioner, vs. UNITED COCONUT PLANTERS BANK

(UCPB), Dumaguete Branch, respondent. |||

(Villanueva v. United Coconut Planters Bank, G.R. No. 138291, [March 7, 2000], 384 PHIL
130-145)

SYNOPSIS
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 28

Sometime in December 1978, Hermenegildo Villanueva, father of herein

petitioner, applied for and was granted a loan by United Coconut Planters Bank,
Dumaguete City Branch, which at that time was managed by Bobby Cafe. In the course
of a bank audit, certain fraud, anomalies and irregularities were discovered in the
application, processing and granting of said loan, and after investigation, concluded
that petitioner, together with his father, Bobby Cafe, and a certain Reynaldo Ramos,
confederated and conspired with each other in perpetrating the fraud, anomalies and
irregularities to the detriment of the bank. Thereafter, UCPB filed six criminal
complaints against said persons. After preliminary investigation, the City Fiscal found
probable cause and resolved to file three informations in the Regional Trial Court of
Dumaguete City. After trial, the trial court rendered a decision acquitting all the
accused except Bobby Cafe. In view of his acquittal in the criminal case, herein
petitioner filed a complaint for damages on the ground of the
alleged malicious prosecution against UCPB with the RTC of Dumaguete City. On
November 6, 1995, the lower court rendered its decision in favor of petitioner. On
appeal, the Court of Appeals reversed the trial court. Aggrieved by the decision,
petitioner filed the instant appeal from the decision of the appellate court. CIDcHA

The Supreme Court found the petition to be devoid of merit. The Court ruled that
respondent bank filed the criminal complaints for violations of the General Banking
Act in its honest belief that the charges were meritorious. There was no credible
evidence to show that it was impelled by a desire to unjustly vex, annoy and inflict
injury on the petitioner. Before these cases were referred to the City Fiscal, it had even
conducted its own investigation with the assistance of the
NBI. Maliciousprosecution requires proof that the prosecution was prompted by a
sinister design to vex and humiliate the plaintiff. The respondent bank had neither a
bone to pick with the petitioner nor a previous dealing with petitioner that could have
prompted the respondent bank to turn the tables on him. Where the action is filed in
good faith, no penalty should be imposed thereon. Accordingly, the petition was
denied and the assailed decision and resolution were affirmed.
SYLLABUS
1. CIVIL LAW; DAMAGES; MALICIOUS PROSECUTION; MEANING
AND ELEMENTS. — For a malicious prosecution suit to prosper, the plaintiff must
prove the following: (1) the prosecution did occur, and the defendant was himself the
prosecutor or that he instigated its commencement; (2) the criminal action finally
ended with an acquittal; (3) in bringing the action, the prosecutor acted without
probable cause; and (4) the prosecution was impelled by legal malice — an improper or
a sinister motive. Stripped of legal jargon, malicious prosecution means persecution
through the misuse or abuse of judicial processes; or the institution and pursuit of
legal proceedings for the purpose of harassing, annoying, vexing or injuring an
innocent person.
2. REMEDIAL LAW; CRIMINAL PROCEDURE; PRELIMINARY INVESTIGATION;
PROBABLE CAUSE; DEFINED; PRESENT IN CASE AT BAR. — Probable cause is the
existence of such facts and circumstances as would excite the belief in a reasonable mind
that the person who is charged and prosecuted in a criminal case is probably guilty of the
crime or wrongdoing. The term does not connote absolute certainty. Neither does it require an
inquiry into the sufficiency of the evidence to obtain a conviction. In this case, the above-
quoted facts taken together constitute prima facie evidence to engender a reasonable belief
that petitioner was part of a conspiracy to defraud the respondent bank. Thus, there was
probable cause for the filing of the Complaints, which were not products of the whim or
caprice of the respondent bank.

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3. CIVIL LAW; DAMAGES; MALICIOUS PROSECUTION; THE GRAVAMEN

OF MALICIOUS PROSECUTION IS NOT THE FILING OF A COMPLAINT BASED ON THE
WRONG PROVISION OF LAW, BUT THE DELIBERATE INITIATION OF AN ACTION WITH
THE KNOWLEDGE THAT THE CHARGES WERE FALSE AND GROUNDLESS. — In
malicious prosecution, even if the act complained of does not constitute a crime, there
can still be probable cause behind the commission of a civil wrong. The gravamen
of malicious prosecution is not the filing of a complaint based on the wrong provision
of law, but the deliberate initiation of an action with the knowledge that the charges
were false and groundless. In the case at bar, even if Secs. 87-A-1, 87-A-1(d), 87-A-2, and
87-A-2(b) of the General Banking Act punish only bank officers, employees, borrowers or
banking institutions, the respondent bank nonetheless filed these Complaints based on a
theory of a conspiracy to defraud it.
4. ID.; ID.; ID.; A CRIMINAL COMPLAINT DESIGNED TO ANNOY OR HARASS MAY
BE THE BASIS OF A SUIT FOR MALICIOUS PROSECUTION. — As held in Lagman v.
Intermediate Appellate Court, the second requisite of malicious prosecution is "that the
defendant was himself the prosecutor or that he instigated its commencement. Indeed, the
right to institute a criminal action cannot be exercised maliciously and in bad faith, as when a
criminal complaint is used "as a weapon to force an alleged debtor to pay an indebtedness."
Such complaint designed to annoy or harass may be the basis of a suit
for malicious prosecution. Clearly, the mere fact that the fiscal took full control of a litigation
does not grant immunity to persons who misuse their rights to instigate criminal actions.
5. ID.; ID.; ID.; MERE ACT OF FILING A CRIMINAL COMPLAINT DOES NOT MAKE
THE COMPLAINANT LIABLE FOR MALICIOUS PROSECUTION. — Malicious
prosecution requires proof that the prosecution was prompted by a sinister design to vex and
humiliate the plaintiff. The respondent bank had neither a "bone to pick" with the petitioner nor
a "previous dealing with petitioner that could have prompted the respondent bank to turn the
tables on him." Resort to judicial processes, by itself, is not an evidence of ill will, as the
mere act of filing a criminal complaint does not make the complainant liable
for malicious prosecution. There must be proof that the suit was prompted by legal
malice — an inexcusable intent to injure, oppress, vex, annoy or humiliate. A contrary
rule would discourage peaceful recourse to the courts and unjustly penalize the
exercise of a citizen's right to litigate. Where the action is filed in good faith, no penalty
should be imposed thereon.

8.) PRO LINE SPORTS CENTER, INC., and QUESTOR

CORPORATION, petitioners, vs. COURT OF APPEALS, UNIVERSAL ATHLETICS
INDUSTRIAL PRODUCTS, INC., and MONICO SEHWANI, respondents.
(Pro Line Sports Center, Inc. v. Court of Appeals, G.R. No. 118192, [October 23, 1997], 346
|||

PHIL 143-158)

BELLOSILLO, J : p

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This case calls for a revisit of the demesne of malicious prosecution and its
implications.
This petition stemmed from a criminal case for unfair competition filed by Pro Line
Sports Center, Inc. (PRO LINE) and Questor Corporation (QUESTOR) against Monico
Sehwani, president of Universal Athletics and Industrial Products, Inc. (UNIVERSAL). In that
case Sehwani was exonerated. As a retaliatory move, Sehwani and UNIVERSAL filed a civil
case for damages against PRO LINE and QUESTOR for what they perceived as the wrongful
and malicious filing of the criminal action for unfair competition against them.
But first, the dramatis personae. By virtue of its merger with A.G. Spalding Bros., Inc.,
on 31 December 1971, 1 petitioner QUESTOR, a US-based corporation, became the owner of
the trademark "Spalding" appearing in sporting goods, implements and apparatuses. Co-
petitioner PRO LINE, a domestic corporation, is the exclusive distributor of "Spalding" sports
products in the Philippines. 2 Respondent UNIVERSAL, on the other hand, is a domestic
corporation engaged in the sale and manufacture of sporting goods while co-respondent
Monico Sehwani is impleaded in his capacity as president of the corporation.
On 11 February 1981, or sixteen years ago, Edwin Dy Buncio, General Manager of
PRO LINE, sent a letter-complaint to the National Bureau of Investigation (NBI) regarding the
alleged manufacture of fake "Spalding" balls by UNIVERSAL. On 23 February 1981 the NBI
applied for a search warrant with the then Court of First Instance, Br. 23, Pasig, Rizal, then
presided over by Judge Rizalina Bonifacio Vera. On that same day Judge Vera issued Search
Warrant No. 2-81 authorizing the search of the premises of UNIVERSAL in Pasig. In the
course of the search, some 1,200 basketballs and volleyballs marked "Spalding" were seized
and confiscated by the NBI. Three (3) days later, on motion of the NBI, Judge Vera issued
another order, this time to seal and padlock the molds, rubber mixer, boiler and other
instruments at UNIVERSAL's factory. All these were used to manufacture the fake "Spalding"
products, but were simply too heavy to be removed from the premises and brought under the
actual physical custody of the court. However, on 28 April 1981, on motion of UNIVERSAL,
Judge Vera ordered the lifting of the seal and padlock on the machineries, prompting the
People of the Philippines, the NBI, together with PRO LINE and QUESTOR, to file with the
Court of Appeals a joint petition for certiorari and prohibition with preliminary injunction (CA
G.R. No. 12413) seeking the annulment of the order of 28 April 1981. On 18 May 1981, the
appellate court issued a temporary restraining order enjoining Judge Vera from implementing
her latest order.
cdasia

Meanwhile, on 26 February 1981, PRO LINE and QUESTOR filed a criminal complaint
for unfair competition against respondent Monico Sehwani together with Robert, Kisnu, Arjan
and Sawtri, all surnamed Sehwani, and Arcadio del los Reyes before the Provincial Fiscal of
Rizal (I. S. No. 81-2040). The complaint was dropped on 24 June 1981 for the reason that it
was doubtful whether QUESTOR had indeed acquired the registration rights over the mark
"Spalding" from A. G. Spalding Bros., Inc., and complainants failed to adduce an actual
receipt for the sale of "Spalding" balls by UNIVERSAL. 3
On 9 July 1981 a petition for review seeking reversal of the dismissal of the complaint
was filed with the Ministry of Justice. While this was pending, the Court of Appeals rendered
judgment on 4 August 1981 in CA G.R. No. 12413 affirming the order of Judge Vera which
lifted the seal and padlock on the machineries of UNIVERSAL. The People, NBI, PRO LINE
and QUESTOR challenged the decision of the appellate court before this Court in G.R. No.
57814. On 31 August 1981 we issued a temporary restraining order against the Court of
Appeals vis-a-vis the aforesaid decision.
In connection with the criminal complaint for unfair competition, the Minister of Justice
issued on 10 September 1981 a Resolution overturning the earlier dismissal of the complaint
and ordered the Provincial Fiscal of Rizal to file an Information for unfair competition against
Monico Sehwani. The Information was accordingly filed on 29 December 1981 with then
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Court of First Instance of Rizal, docketed as Crim. Case No. 45284, and raffled to Br. 21
presided over by Judge Gregorio Pineda.
Sehwani pleaded not guilty to the charge. But, while he admitted to having
manufactured "Spalding" basketballs and volleyballs, he nevertheless stressed that this was
only for the purpose of complying with the requirement of trademark registration with the
Philippine Patent Office. He cited Chapter 1, Rule 43, of the Rules of Practice on Trademark
Cases, which requires that the mark applied for be used on applicant's goods for at least sixty
(60) days prior to the filing of the trademark application and that the applicant must show
substantial investment in the use of the mark. He also disclosed that UNIVERSAL applied for
registration with the Patent Office on 20 February 1981.
After the prosecution rested its case, Sehwani filed a demurrer to evidence arguing that
the act of selling the manufactured goods was an essential and constitutive element of the
crime of unfair competition under Art. 189 of the Revised Penal Code, and
the prosecution was not able to prove that he sold the products. In its Order of 12 January
1981 the trial court granted the demurrer and dismissed the charge against Sehwani.
PRO LINE and QUESTOR impugned before us in G.R. No. 63055 the dismissal of the
criminal case. In our Resolution of 2 March 1983 we consolidated G.R. No. 63055 with G.R.
No. 57814 earlier filed. On 20 April 1983 we dismissed the petition in G.R. No. 63055 finding
that the dismissal by the trial court of Crim. Case No. 45284 was based on the merits of the
case which amounted to an acquittal of Sehwani. Considering that the issue raised in G.R.
No. 58714 had already been rendered moot and academic by the dismissal of Crim. Case No.
45284 and the fact that the petition in G.R. No. 63055 seeking a review of such dismissal had
also been denied, the Court likewise dismissed the petition in G.R. No. 58714. The dismissal
became final and executory with the entry of judgment made on 10 August 1983.
Thereafter, UNIVERSAL and Sehwani filed a civil case for damages with the Regional
Trial Court of Pasig 4 charging that PRO LINE and QUESTOR maliciously and without legal
basis committed the following acts to their damage and prejudice: (a) procuring the issuance
by the Pasig trial court of Search Warrant No. 2-81 authorizing the NBI to raid the premises of
UNIVERSAL; (b) procuring an order from the same court authorizing the sealing and
padlocking of UNIVERSAL's machineries and equipment resulting in the paralyzation and
virtual closure of its operations; (c) securing a temporary restraining order from the Court of
Appeals to prevent the implementation of the trial court's order of 28 April 1981 which
authorized the lifting of the seal and padlock on the subject machineries and equipment to
allow UNIVERSAL to resume operations; (d) securing a temporary restraining order from the
High Tribunal against the Court of Appeals and charging the latter with grave abuse of
discretion for holding that the order of 28 April 1981 was judiciously issued, thus prolonging
the continued closure of UNIVERSAL's business; (e) initiating the criminal prosecution of
Monica Sehwani for unfair competition under Art. 189 of the Penal Code; and, (g) appealing
the order of acquittal in Crim. Case No. 45284 directly to the Supreme Court with no other
purpose than to delay the proceedings of the case and prolong the wrongful invasion of
UNIVERSAL's rights and interests.
Defendants PRO LINE and QUESTOR denied all the allegations in the complaint and
filed a counterclaim for damages based mainly on the unauthorized and illegal manufacture
by UNIVERSAL of athletic balls bearing the trademark "Spalding."
The trial court granted the claim of UNIVERSAL declaring that the series of acts
complained of were "instituted with improper, malicious, capricious motives and without
sufficient justification." It ordered PRO LINE and QUESTOR jointly and severally to pay
UNIVERSAL and Sehwani P676,000.00 as actual and compensatory damages, P250,000.00
as moral damages, P250,000.00 as exemplary damages 5 and P50,000.00 as attorney's fees.
The trial court at the same time dismissed the counterclaim of PRO LINE and QUESTOR.

31
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The Court of Appeals affirmed the decision of the lower court but reduced the amount
of moral damages to P150,000.00 and exemplary damages to P100,000.00.
Two (2) issues are raised before us: (a) whether private respondents Sehwani and
UNIVERSAL are entitled to recover damages for the alleged wrongful recourse to court
proceedings by petitioners PRO LINE and QUESTOR; and, (b) whether petitioners'
counterclaim should be sustained.
PRO LINE and QUESTOR cannot be adjudged liable for damages for the alleged
unfounded suit. The complainants were unable to prove two (2) essential elements of the
crime of malicious prosecution, namely, absence of probable cause and legal malice on the
part of petitioners.
UNIVERSAL failed to show that the filing of Crim. Case No. 45284 was bereft of
probable cause. Probable cause is the existence of such facts and circumstances as would
excite the belief in a reasonable mind, acting on the facts within the knowledge of the
prosecutor, that the person charged was guilty of the crime for which he was prosecuted. 6 In
the case before us, then Minister of Justice Ricardo C. Puno found probable cause when he
reversed the Provincial Fiscal who initially dismissed the complaint and directed him instead
to file the corresponding Information for unfair competition against private respondents
herein. 7 The relevant portions of the directive are quoted hereunder:
The intent on the part of Universal Sports to deceive the public and to defraud a
competitor by the use of the trademark "Spalding" on basketballs and volleyballs
seems apparent. As President of Universal and as Vice President of the Association of
Sporting Goods Manufacturers, Monico Sehwani should have known of the prior
registration of the trademark "Spalding" on basketballs and volleyballs when he filed
the application for registration of the same trademark on February 20, 1981, in behalf
of Universal, with the Philippine Patent Office. He was even notified by the Patent
Office through counsel on March 9, 1981, that "Spalding" was duly registered with said
office in connection with sporting goods, implements and apparatus by A.G. Spalding
& Bros., Inc. of the U.S.A.
That Universal has been selling these allegedly misbranded "Spalding" balls
has been controverted by the firms allegedly selling the goods. However, there is
sufficient proof that Universal manufactured balls with the trademark "Spalding" as
admitted by Monico himself and as shown by the goods confiscated by virtue of the
search warrant.
Jurisprudence abounds to the effect that either a seller or a manufacturer of
imitation goods may be liable for violation of Section 29 of Rep. Act No. 166(Alexander
v. Sy Bok, 97 Phil. 57). This is substantially the same rule obtaining in statutes and
judicial construction since 1903 when Act No. 666 was approved (Finlay Fleming
vs. Ong Tan Chuan, 26 Phil. 579) . . . 8
The existence of probable cause for unfair competition by UNIVERSAL is derivable
from the facts and circumstances of the case. The affidavit of Graciano Lacanaria, a former
employee of UNIVERSAL, attesting to the illegal sale and manufacture of "Spalding" balls and
seized "Spalding" products and instruments from UNIVERSAL's factory was sufficient prima
facie evidence to warrant the prosecution of private respondents. That a corporation other
than the certified owner of the trademark is engaged in the unauthorized manufacture of
products bearing the same trademark engenders a reasonable belief that a criminal offense
for unfair competition is being committed.
Petitioners PRO LINE and QUESTOR could not have been moved by legal malice in
instituting the criminal complaint for unfair competition which led to the filing of the Information
against Sehwani. Malice is an inexcusable intent to injure, oppress, vex, annoy or humiliate.
We cannot conclude that petitioners were impelled solely by a desire to inflict needless and
unjustified vexation and injury on UNIVERSAL's business interests. A resort to judicial
32
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processes is not per se evidence of ill will upon which a claim for damages may be based. A
contrary rule would discourage peaceful recourse to the courts of justice and induce resort to
methods less than legal, and perhaps even violent. 9
We are more disposed, under the circumstances, to hold that PRO LINE as the
authorized agent of QUESTOR exercised sound judgment in taking the necessary legal steps
to safeguard the interest of its principal with respect to the trademark in question. If the
process resulted in the closure and padlocking of UNIVERSAL's factory and the cessation of
its business operations, these were unavoidable consequences of petitioners' valid and lawful
exercise of their right. One who makes use of his own legal right does no injury. Qui jure suo
utitur nullum damnum facit. If damage results from a person's exercising his legal rights, it
is damnum absque injuria.10
Admittedly, UNIVERSAL incurred expenses and other costs in defending itself from the
accusation. But, as Chief Justice Fernando would put it, "the expenses and annoyance of
litigation form part of the social burden of living in a society which seeks to attain social
control through law." 11 Thus we see no cogent reason for the award of damages, exorbitant
as it may seem, in favor of UNIVERSAL. To do so would be to arbitrarily impose a penalty on
petitioners' right to litigate.
The criminal complaint for unfair competition, including all other legal remedies
incidental thereto, was initiated by petitioners in their honest belief that the charge was
meritorious. For indeed it was. The law brands business practices which are unfair, unjust or
deceitful not only as contrary to public policy but also as inimical to private interests. In the
instant case, we find quite aberrant Sehwani's reason for the manufacture of 1,200 "Spalding"
balls, i.e., the pending application for trademark registration of UNIVERSAL with the Patent
Office, when viewed in the light of his admission that the application for registration with the
Patent Office was filed on 20 February 1981, a good nine (9) days after the goods were
confiscated by the NBI. This apparently was an afterthought but nonetheless too late a
remedy. Be that as it may, what is essential for registrability is proof of actual use in
commerce for at least sixty (60) days and not the capability to manufacture and distribute
samples of the product to clients.
Arguably, respondents' act may constitute unfair competition even if the element of
selling has not been proved. To hold that the act of selling is an indispensable element of the
crime of unfair competition is illogical because if the law punishes the seller of imitation
goods, then with more reason should the law penalize the manufacturer. In U. S. v.
Manuel, 12 the Court ruled that the test of unfair competition is whether certain goods have
been intentionally clothed with an appearance which is likely to deceive the ordinary
purchasers exercising ordinary care. In this case, it was observed by the Minister of Justice
that the manufacture of the "Spalding" balls was obviously done to deceive would-be buyers.
The projected sale would have pushed through were it not for the timely seizure of the goods
made by the NBI. That there was intent to sell or distribute the product to the public cannot
also be disputed given the number of goods manufactured and the nature of the machinery
and other equipment installed in the factory.
We nonetheless affirm the dismissal of petitioners' counterclaim for damages. A
counterclaim partakes of the nature of a complaint and/or a cause of action against the
plaintiffs. 13 It is in itself a distinct and independent cause of action, so that when properly
stated as such, the defendant becomes, in respect to the matter stated by him, an actor, and
there are two simultaneous actions pending between the same parties, where each is at the
same time both a plaintiff and defendant. 14 A counterclaim stands on the same footing and is
to be tested by the same rules, as if it were an independent action. 15
Petitioners' counterclaim for damages based on the illegal and unauthorized
manufacture of "Spalding" balls certainly constitutes an independent cause of action which
can be the subject of a separate complaint for damages against UNIVERSAL. However, this
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separate civil action cannot anymore be pursued as it is already barred by res judicata, the
judgment in the criminal case (against Sehwani) involving both the criminal and civil aspects
of the case for unfair competition. 16 To recall, petitioners PRO LINE and QUESTOR, upon
whose initiative the criminal action for unfair competition against respondent UNIVERSAL was
filed, did not institute a separate civil action for damages nor reserve their right to do so. Thus
the civil aspect for damages was deemed instituted in the criminal case. No better
manifestation of the intent of petitioners to recover damages in the criminal case can be
expressed than their active participation in the prosecution of the civil aspect of the criminal
case through the intervention of their private prosecutor. Obviously, such intervention could
only be for the purpose of recovering damages or indemnity because the offended party is not
entitled to represent the People of the Philippines in the prosecution of a public
offense. 17 Section 16, Rule 110, of the Rules of Court requires that the intervention of the
offended party in the criminal action can be made only if he has not waived the civil action nor
expressly reserved his right to institute it separately. 18 In an acquittal on the ground that an
essential element of the crime was not proved, it is fundamental that the accused cannot be
held criminally nor civilly liable for the offense. Although Art. 28 of the New Civil
Code 19 authorizes the filing of a civil action separate and distinct from the criminal
proceedings, the right of petitioners to institute the same is not unfettered. Civil liability arising
from the crime is deemed instituted and determined in the criminal proceedings where the
offended party did not waive nor reserve his right to institute it separately. 20 This is why we
now hold that the final judgment rendered therein constitutes a bar to the present
counterclaim for damages based upon the same cause. 21 cdpr

WHEREFORE, the petition is partly GRANTED. The decision of respondent Court of

Appeals is MODIFIED by deleting the award in favor of private respondents UNIVERSAL and
Monico Sehwani of actual, moral and exemplary damages as well as attorney's fees.
The dismissal of petitioners' counterclaim is AFFIRMED. No pronouncement as to
costs.
SO ORDERED.
|

9.) MACARIO LAGMAN and MICHAEL LAGMAN, petitioners, vs. HONORABLE

INTERMEDIATE APPELLATE COURT and ANTONIO FERNANDEZ, respondents. |||

(Lagman v. Intermediate Appellate Court, G.R. No. 72281, [October 28, 1988], 248 PHIL
962-969)

This is a petition for review on certiorari of the Resolution promulgated by respondent

appellate court 1 on September 18, 1985 granting the motion for reconsideration filed by
herein private respondent Antonio Fernandez and setting aside its decision dated October 15,
1984 in AC-G.R. CV No. 69233. By virtue of the aforesaid resolution, private respondent was
exonerated from liability for normal, actual and compensatory damages, attorney's fees and
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costs originally awarded in favor of herein petitioners by the ten Court of First Instance (now
Regional Trial Court) of Quezon City Case No. Q-20591 and affirmed by respondent appellate
court in the abovementioned decision of October 15, 1984. LexLib

Records show that petitioner Michael Lagman was employed as janitor of Puzon Building
where private respondent Antonio Fernandez was a tenant.
On April 19, 1975, at about 10:00 in the morning, Michael Lagman went down from the Puzon
Building to the parking lot behind it where he met Eduardo Liputan, driver of private
respondent. The latter offered for a valuable consideration to teach him how to drive using
private respondent's car.
In the course of the instructions, Michael Lagman bumped two cars parked on the parking lot
causing damages thereto. Eduardo Liputan thereafter went up the building and reported the
incident to his employer. Antonio Fernandez in turn reported the matter to the Quezon City
Police Department Traffic Bureau which dispatched an investigator to the scene of the
accident.
Michael Lagman was requested by the investigator to go with him to the Traffic Bureau for
investigation where his written statements were taken. The matter was
subsequently referred by the Quezon City Police Department Investigation Division to the
Metrocom Staff Judge Advocate, Camp Crame, in a referral letter which denominated the
offense committed as "Qualified Theft" or "Carnapping." On the basis of such referral, Camp
Crame authorities caused the detention of Michael Lagman. He was later transferred to
Sampaguita Station, Muntinlupa where he languished in jail for more than four months his
whereabouts initially unknown to his father and co-petitioner, Macario Lagman who had to
look for him at different places until he was finally located at said place of confinement.LLphil

Upon referral of the case to the Fiscal's Office of Quezon City for preliminary investigation,
the qualified or carnapping aspect of the case was dismissed on the ground that Michael
Lagman could not commit carnapping because he cannot even drive and that it was actually
while trying to learn how to drive that he caused damage to the two cars in the parking lot of
the Puzon Building, using a car which belongs to a person who knew him well, he being the
janitor of the Puzon Building. A case for damage to property through reckless imprudence
was instead filed against Michael Lagman by the Fiscal's office.
Because of Michael's detention for four months in jail, the anxiety suffered by his father and
the expenses incurred in trying to locate and have him released from detention, petitioners
filed Civil Case No. Q-20591 before the then Court of First Instance of Quezon City against
private respondent for damages suffered by them as a consequence of the
alleged malicious prosecution instituted against Michael Lagman by private respondent
Antonio Fernandez. prLL

In the course of the Trial, it was revealed that Atty. Pablito Roxas was instrumental in the
preparation of the affidavits as well as the referral of the case to the Quezon City Police
Department where a charge for carnapping was recommended against Michael Lagman.
Consequently, Atty. Pablito Roxas was impleaded as defendant in the damage suit.
On September 24, 1979, the lower court rendered judgment exonerating Atty. Pablito Roxas
but finding private respondent liable for damages. The dispositive portion of said decision
reads:
WHEREFORE, in view of the foregoing discussions, the Court renders judgment
requiring the defendant Antonio Fernandez to pay both the plaintiffs Macario Lagman
and Michael Lagman the amount of P40,000.00 as moral damages, to pay the plaintiff
Macario Lagman the sum of P1,600.00 as compensatory damages in looking for his
son, unaware that he was under detention; to pay the plaintiff Michael Lagman the
sum of P960.00 as actual damages plus three (3) years salary at the rate of P240.00 a
month and the sum of P200.00 representing the loss of articles belonging to said
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plaintiff Michael Lagman while he was under detention plus attorney's fees amounting
to P5,000.00 and costs of this suit.
SO ORDERED." 2
Private respondent Antonio Fernandez appealed to respondent appellate court alleging as
errors the finding of (a) malice on his part when he initiated the criminal proceedings against
Michael Lagman; (b) the absence of probable cause for initiating the criminal proceedings
against Michael Lagman, at least for the crime of damages to property thru reckless
imprudence; and (c) liability for damages arising from malicious prosecution.
On October 15, 1984, the Fourth Civil Cases Division of the Intermediate Appellate Court
(now Court of Appeals) rendered a decision affirming in toto the decision of the trial court.
Private respondent moved for a reconsideration of the said decision and on September 18,
1985, a resolution was promulgated granting the motion for reconsideration. The decision of
October 15, 1984 was set aside and another one entered dismissing the complaint with costs
against herein petitioners.
Petitioners come to Us by way of petition for review on certiorari assigning as error on the part
of respondent appellate court its conclusion that not all the elements of
malicious prosecution are present in the instant case and its ruling that the private respondent
is not liable for damages to petitioners.
Based on the foregoing assignment of errors, We narrow down the issue to a determination of
whether or not all the elements of malicious prosecution are present so as the entitle herein
petitioners to an award of damages consequential to the filing by private respondent of a
criminal case for qualified theft or carnapping against petitioner Michael Lagman.
Statutory recognition of an action for damages based on malicious prosecution (false
accusation or denuncia falsa) is found in article 2219(8) of the Civil Code which allows
recovery of moral damages for malicious prosecution. Articles 21 and 2176 of the same Code
may also be invoked to justify the action. 3
To support such action, the plaintiff must prove the fact of prosecution, that the
defendant was himself the prosecutor or that he instigated its commencement; that it
finally terminated in his acquittal; that in bringing it the prosecutor acted without
probable cause, and that he was actuated by legal malice, that is, by improper and
sinister motives. 4
Petitioners contend that the conclusion of respondent appellate court is contrary to the fact of
the case as the findings of the trial court is that there was actual institution of a criminal
proceeding against Michael Lagman at the instance of private respondent which resulted in
the temporary incarceration of the former at Camp Crame and later in Muntinlupa for more
than four months. Further, petitioners contend that there was improper motive on the part of
private respondent in instituting the criminal proceedings against Michael Lagman, the charge
being grossly disproportionate to the actual fault of the latter.
LLphil

We find petitioners' contentions untenable.

We agree with respondent appellate court's finding that not all the elements of
a malicious prosecution are present in this case. In its assailed resolution, the appellate court
correctly found that while it is not disputed that it was private respondent who complained to
the authorities, such action was apparently for purposes of investigation only. It was the
investigating officer and not private respondent who charged petitioner Michael Lagman with
qualified theft.
LexLib

The mere act of submitting a case to the authorities for prosecution does not make one
liable for malicious prosecution for generally, it is the Government or representative of
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the State that takes charge of the prosecution of the offense. There must be proof that
the prosecution was prompted by a sinister design to vex and humiliate a person for if
the rule were otherwise, every acquitted person can turn against the complainant in a
civil action for damages. 5
The acquittal of petitioner Michael Lagman did not discount the presence of probable cause
nor would it be a ground to impute malice upon private respondent in filing charges against
Michael because such acquittal was not based on his innocence of any wrongdoing but on
the erroneous charging of the offense of carnapping or qualified theft. As earlier stated, the
fiscal dismissed the complaint for carnapping or qualified theft and instead filed a case for
damage to property thru reckless imprudence. This goes to show that there was probable
cause for private respondent to file charges against Michael for the use of his car without his
knowledge and permission resulting in damage not only to his car but also to two more cars
parked in the premises of the Puzon Building.
The foregoing facts show that in filing the criminal charge against petitioner Michael Lagman,
private respondent was not actuated by malice. He had been the victim of a wrong committed
by Michael Lagman and whether such wrong constituted qualified theft or carnapping was a
legal question properly submitted to the police authorities and subsequently referred to the
fiscal for preliminary investigation. The very fact that a charge for damage to property thru
reckless imprudence was filed in place of the carnapping charge demonstrates that private
respondent was justified in submitting his grievance to the said authorities for ruling and
possible redress.
The detention of petitioner Michael Lagman for more than four months is indeed lamentable.
For this sad experience, however, private respondent cannot be held accountable since his
act an in instituting a complaint against petitioner Michael Lagman was done in the exercise
of a right to seek redress for a wrong without any ill-motive on his part.
When an action is filed in good faith, there should be no penalty on the right to litigate. One
may have erred but error alone is not a ground for moral damages. 6
WHEREFORE, in view of the foregoing, the resolution appealed from is hereby AFFIRMED.
Costs against petitioners.
SO ORDERED.

10.) LIMANCH-O HOTEL AND LEASING CORPORATION and CONRADO

TIU, petitioners, vs. CITY OF OLONGAPO, ATTY. MA. ELLEN AGUILAR, ENGR.
RAMON ZAVALLA, ENGR. ANDREW DAYOT, and ENGR. REYNALDO
EDRAISA, respondents.

(Limanch-O Hotel and Leasing Corp. v. City of Olongapo, G.R. No. 185121, [January 18,
|||

2010], 624 PHIL 268-275)

ABAD, J :p

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This case is about a claim for damages based on malicious prosecution.

The Facts and the Case
Sometime in 1993, the respondent City of Olongapo assessed, through its Public
Utilities Department (PUD), petitioner Conrado Tiu (the owner, president, and general
manager of petitioner Limanch-O Hotel and Leasing Corporation) his unregistered
electricity consumption from November 1988 to February 1993 in the amount of
P9,364,276.50. The City threatened to cut off his electric supply if he did not immediately
settle the amount.
Petitioner Tiu filed an action against the City before the Regional Trial Court (RTC)
of Olongapo for injunction with damages, which he won. The RTC enjoined the City from
collecting the deficiency amount and from cutting off Tiu’s power supply. 1
Pending the RTC’s resolution of its motion for reconsideration, the City filed criminal
complaints against petitioner Tiu for: (a) theft of electrical current punished
under Presidential Decree (P.D.) 401; and (b) disengaging and tampering with his electric
meter’s potential link, thereby resulting to a zero-zero power consumption in violation of
City Ordinance 23, series of 1989, and P.D. 401. ECaITc

After the preliminary investigation, the state prosecutor issued a resolution,

dismissing the complaints for insufficiency of evidence. 2 On appeal, however, the Acting
Secretary of Justice modified the State Prosecutor's resolution and directed the filing of the
corresponding information for theft of electricity against petitioner Tiu. 3 Subsequently,
however, the Secretary of Justice reconsidered and ordered instead the withdrawal of any
information that might in the meantime have been filed in court. 4 When the matter was
elevated to the Court of Appeals (CA) and, ultimately, to this Court, both courts affirmed
the dismissal of the City's complaints against Tiu. 5
Claiming that petitioner Tiu suffered mental anguish, serious anxiety, besmirched
reputation, wounded feelings, moral shock and social humiliation and that petitioner
Limanch-O Hotel suffered loss of business goodwill, financial reverses, and injured
reputation, both filed an action for damages against the City for having filed
a malicious and unfounded charge of theft of electricity against them. 6
In its answer, the City denied any ill motive in filing the criminal complaint. It
explained that it filed the criminal action following an examination of the electric meter
installed at petitioner Tiu's building and registered in his name. The examination showed
reverse polarity markings on the electric meter, causing it not to register Tiu's correct
power consumption. Since this brought tremendous losses to the PUD and to the City, the
latter argued that it should not be faulted for doing its job of going after those who pilfer
electricity and tamper with metering devices.
After petitioners Tiu and Limanch-O Hotel rested their case, the City filed a demurrer
to the evidence. The RTC granted the same and dismissed the complaint. On appeal, 7 the
CA affirmed the RTC decision, having found no reversible error in the same. Tiu and
Limanch-O Hotel, said the appellate court, were unable to prove the elements that will
support an action for malicious prosecution, namely: (a) absence of probable cause in the
filing of the criminal case and (b) a showing of legal malice. 8 Their motion for
reconsideration having been denied, 9 Tiu and Limanch-O Hotel are now before this Court
on a petition for review. 10
Issue Presented
The issue in this case is whether or not the CA erred in its finding that petitioners Tiu
and Limanch-O Hotel failed to present sufficient evidence showing that respondent City
instituted the criminal complaint for theft of electricity against them maliciously and without
probable cause.

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The Court’s Ruling

To entitle petitioners Tiu and Limanch-O Hotel to damages
for malicious prosecution, they needed to prove the following elements: (1) that the
respondent City had caused their prosecution; (2) that the criminal action ended in their
acquittal; (3) that, in bringing the action, the City had no probable cause; and (4) that it was
impelled by legal malice — an improper or a sinister motive. 11 Both parties concede that
the first two elements were present in this case. What needs to be determined is whether
or not petitioners Tiu and Limanch-O Hotel have proved the last two elements. DcHSEa

Here, petitioners claim that this Court itself found in Public Utilities Department v.
Hon. Guingona, Jr. 12 that no probable cause existed to support the charge of theft of
electricity against Tiu. This finding establishes, they said, the third element of filing of the
action without probable cause. Further, they point to the City Mayor's call for the boycott of
Tiu's business after he was branded an electricity theft; * the procurement of a search
warrant to gather evidence against him; the eventual dismissal of the complaint for theft of
electricity; and the respondent City's dogged persistence in pursuing the case all the way
to the Supreme Court as clear proofs of legal malice.
But the burden in suits for malicious prosecution is being able to prove the
complainant's deliberate initiation of a criminal action knowing the charge to be false and
groundless. 13 Here, the respondent City did not concoct out of thin air the criminal charge
for theft of electricity against petitioners Tiu and Limanch-O Hotel. It filed the case based
on the result of an investigation carried out at Tiu's premises which indicated a tampering
of the electric meter. Indeed, petitioners never claimed that the inspection of Tiu's
premises was just a farce. The City did not merely conjure the charge with the intention of
vexing Tiu and Limanch-O Hotel. It acted within its right to bring up the result of that
investigation to the authorities for evaluation and resolution.
It is not enough to say that, since the Supreme Court sustained the Secretary of
Justice's finding that no probable cause for electricity theft existed against petitioners Tiu
and Limanch-O Hotel, a case for malicious prosecution already exists against the
complainant. When the Supreme Court reviewed the resolution of the Secretary of Justice,
it merely determined if he gravely abused his discretion in the matter. The Court's finding
does not amount to a judicial determination that the evidence established probable
cause. 14
The test should be whether sufficient facts exist which show that, in bringing the
criminal action, complainant acted without probable cause, 15 defined as the existence of
such facts and circumstances as would excite the belief in a reasonable mind that the
person charged and prosecuted in a criminal case is probably guilty of the crime or
wrongdoing. 16 Here, the fact that the filing of the complaint was prompted by the result of
an investigation shows that the City had a reasonable ground to believe that a crime had
probably been committed. Additionally, the fact that the Department of Justice at first found
basis for filing the charge of theft of electricity indicates that the existence of probable
cause is not clearly settled, only that its final determination had to succumb to the sound
discretion of the Secretary of Justice under his power to review, revise, or overturn the
findings of his subordinates. SHIETa

Finally, no evidence was shown that there had been bad blood between respondent
City and petitioners Tiu and Limanch-O Hotel prior to the filing of the criminal charge,
which circumstance if present could justify a malicious motive in filing the charge. Resort to
judicial processes, by itself, is not an evidence of ill will which would automatically make
the complainant liable for malicious prosecution. Otherwise, peaceful recourse to the
courts will be greatly discouraged and the exercise of one’s right to litigate would become
meaningless and empty. 17

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Even if the Court were to concede that the City branded petitioners Tiu and
Limanch-O Hotel as thieves, asked the people not to patronize their business, and had
been overly zealous in pursuing the criminal complaint that it filed, these are not the legal
malice contemplated in suits for malicious prosecution as the determining factor is evil
motive in bringing the action, not the acts exhibited by the complainant after the case had
been filed.
WHEREFORE, the Court DENIES the petition and AFFIRMSthe Decision dated July
8, 2008 and Resolution dated October 22, 2008 of the Court of Appeals in CA-G.R. CV
88619.
SO ORDERED

11.) EQUITABLE BANKING CORPORATION, petitioner, vs. INTERMEDIATE APPELLATE

COURT, ZENIA VILLARIZA, ARMANDO VILLARIZA and FERNANDO N.
CONTRERAS,respondents. |||

(Equitable Banking Corp. v. Intermediate Appellate Court, G.R. No. 66070, [October 31,
1984], 218 PHIL 135-142)

AQUINO, J : p

This case is about the recovery of moral and exemplary damages allegedly because
of a collection suit for P250 which was paid one day after the suit was filed.
The theory of lawyer Fernando N. Contreras is that it was
a malicious prosecution against him. On the other hand, the bank's theory is that the claim
of P80,000 for moral damages is bereft of rhyme or reason (Exh. 3).
The Villariza spouses, with Contreras as co-maker, borrowed from the Davao City
branch of the Equitable Banking Corporation P1,000. The amount was due in ninety days
or on December 7, 1976. Only P250 was paid on that date. Another P250 was paid on
March 7, 1977.
The payment of the balance of P500 was extended. On July 27, 1977, the sum of
P250 was paid. The remaining balance of P250 was due on or before September 6, 1977.
As it was not paid, its collection was indorsed to the bank's lawyers on October 25, 1977.
The suit was delayed because Zenia Villariza, the principal obligor, was a city court
employee known to the bank's lawyers while Contreras was the bank's retained counsel
up to July, 1976, according to the trial court; or up to August, 1977, according to its
lawyers.
On December 21, 1977, lawyer Oscar G. Tirol phoned Contreras about the unpaid
balance. He was reluctant to bring the matter to the court. Contreras told Tirol to do his job
and file the complaint or that since Tirol was paid to file the case, he should file it (138, tsn;
Exh. 5). Contreras denied that there was such a phone call.
The next day, December 22, Tirol filed a collection case in Branch 3 of the city court
against Contreras and the Villariza spouses. It was prayed therein that the defendants be
ordered to pay the bank P250 plus 14% interest a year and 10% of the amount due as
attorney's fees.

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It is a question whether Contreras was aware of the filing of that suit, since Zenia
Villariza was an employee of Branch 4 of the court. The fact is that on the following
day Contreras paid the bank P250 but he did not pay the accrued interest and costs.
Apparently unaware of the collection suit, the bank informed Tirol of that payment
only about a week later. Contreras did not apprise Tirol of his payment. Summons was
served on the Villariza spouses on February 10, 1978 but, contrary to Contreras'
pretension, summons was never served upon him because the sheriff could not contact
him (Exh. 1-B). Nevertheless, Contreras' law firm filed an answer to the complaint dated
February 11, 1978.
On that same date, February 10, or before the trial on February 14, Tirol, having
become aware of Contreras' payment filed a notice of dismissal. The city judge dismissed
the complaint and counterclaim in his order of February 14, 1978 (Exh. 1-D). Cdpr

On the following day, February 15, Contreras and the Villariza spouses filed against
the bank the instant case wherein they prayed for moral damages of P80,000, attorney's
fees of P10,000, reimbursement of litigation expenses and exemplary damages of not less
than P10,000. They claimed that the collection suit greatly disturbed them and caused
them mental anguish, besmirched reputation, wounded feelings, social humiliation and
sleepless nights.
The bank answered the complaint. The record does not show whether there was a
pre-trial. The trial court rendered judgment for the "plaintiff", meaning Contreras only and
excluding the Villarizas, ordering the bank to pay him P40,000 as moral and exemplary
damages and P6,000 as attorney's fees and litigation expenses. The Appellate Court
affirmed in toto that judgment.
Inexplicably, Velona P. Durante of the Davao Court of First Instance did not
elevate the bank's Exhibits 1-A and 1-B, the expediente of the city court case and the
promissory note, respectively. Such an omission, whether deliberate or inadvertent, is
highly censurable. Felicia C. Julaton of Branch 3 of the city court had to forward to this
Court carbon copies of the record.
In this appeal, the bank's contentions may be reduced to the issue of whether there
was malicious prosecution of Contreras. He did not file any brief.
We hold that the trial court and the Appellate Court erred in holding that there
was malicious prosecution within the meaning of articles 2217 and 2219(8) of the Civil
Code. The action to collect the P250 was filed with uberrima fides. It was not an act of
malevolence designed to harass or embarrass Contreras. The amount was overdue. The
complaint was dismissed before summons was served on Contreras (See Bagumbayan
Corporation vs. Intermediate Appellate Court, G. R. No. 66274, September 30, 1984).
Generally, denuncia falsa or malicious prosecution refers to unfounded
criminal actions (Madera vs. Lopez, L-37105, February 10, 1981, 102 SCRA 700).
The term has been expanded to include unfounded civil suits instituted just to
vex and humiliate the defendant despite the absence of a cause of action or
probable cause (Buchanan vs. Vda. de Esteban, 32 Phil. 363, 365).
Thus, defendant's counterclaim for damages against what he considers a vexatious
and baseless complaint is based on the theory of malicious prosecution(See RFC vs. Koh,
114 Phil. 456, 561).llcd

In this case, Contreras filed in the municipal court a counterclaim for P80,000 which
he announced would be the object of a separate complaint in the proper forum. His answer
was a voluntary appearance because, as already noted, he was not served with summons.
The controlling precedent is found in Inhelder Corporation vs. Court of Appeals, G.
R. No. 52358, May 30, 1983, 122 SCRA 576. It was held therein that the erroneous filing
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of a collection suit for P561 did not entitle the defendants to an award of P41,550 as actual
and exemplary damages, the amount adjudged by the Appellate Court. The elements of
malice and lack of probable cause were absent.
In the Inhelder case, it appears that on January 28, 1975 Doctor Daniel Panganiban
and his wife mailed a check from Calapan, Oriental Mindoro to Inhelder Corporation in
Mandaluyong, Metro Manila in payment of his debt of P561. Inhelder acknowledged
receipt of the check in its letter of February 19, 1975. LLphil

Ignorant of such payment, Inhelder's lawyer filed in the municipal court of

Mandaluyong on February 12, 1975 an action for the collection of P561. Panganiban's
defense was payment. The municipal court in its order of May 14, 1975 dismissed the
action.
Then, the Panganibans in turn sued Inhelder in the Court of First Instance of
Calapan for malicious prosecution. The Mindoro court awarded them gargantuan damages
of P212,550 which, as already noted, was reduced by the Appellate Court to P41,550. This
Court dismissed the complaint. The award of damages was reversed and set aside.
As observed by Chief Justice Fernando, the expenses and annoyance of litigation
form part of the social burden of living in a society which seeks to attain social control
through law (Dioquino vs. Laureano, L-25906, May 28, 1970, 33 SCRA 65, 72 citing
Petroleum Exploration vs. Public Service Commission, 304 US 209).
A long catena of cases supports the proposition that moral damages are not
recoverable for unsuccessful suits filed in good faith (R & B Surety & Insurance Co.,
Inc. vs. Intermediate Appellate Court, G. R. No. 64515, June 22, 1984; Panay Electric Co.,
Inc. vs. Court of Appeals, G. R. No. 59647, December 27, 1982, 119 SCRA 456; San
Miguel Brewery vs. Magno, 128 Phil. 328; Luna vs. Santos, 115 Phil. 50; Salao vs. Salao,
L-26699, March 16, 1976, 70 SCRA 65, 86; Ramos vs. Ramos, L-19872, December 3,
1974, 61 SCRA 284; Solis & Yarisantos vs. Salvador, 122 Phil. 223; Sison vs. David, 110
Phil. 662; Grapilon vs. Municipal Council of Carigara, 112 Phil. 24; NARIC vs. Antonio and
Capital Ins. & Surety Co., 112 Phil. 536; Laurel-Manila vs. Galvan, 126 Phil. 525; De los
Santos vs. Palanca, 118 Phil. 765; Cachuela vs. Castillo, 116 Phil. 302).
With respect to the award for exemplary or corrective damages, the same is likewise
devoid of any legal and factual basis. We have found that Contreras' claim
of malicious prosecution is more imaginary than real.
The bank's last contention is that Contreras was the one motivate by malevolence or
ill-will in bringing this action. Therefore, the bank's counterclaim for moral damages of
P25,000 and litigation expenses of P10,000 should be allowed.
The dictates of justice do not sanction that contention. As a rule, there should be no
penalty on the right to litigate. The bank's counterclaim is dismissed.
LLjur

WHEREFORE, the decisions of the Appellate Court and the trial court are reversed
and set aside. The complaint is dismissed. No costs.
SO ORDERED.
12.) EDITHA M. MIJARES and GLICERIO T. MIJARES, petitioners, vs. COURT OF
APPEALS and METRO DRUG, INC., respondents. |||

(Mijares v. Court of Appeals, G.R. No. 113558, [April 18, 1997], 338 PHIL 274-290)

KAPUNAN, J : p

XXX (I omitted several facts)

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In its Complaint dated May 2, 1988 filed before the Manila Regional Trial Court, herein
private respondent, Metro Drug, Inc., alleged that herein petitioners, spouses Editha Mijares
and Glicerio T. Mijares, while doing business under the style "Aklan Drug," purchased and
received from Metro Drug various products the total value of which amounted to
P32,034.42. 3 Despite Metro Drug's repeated demands however, petitioners have failed and
have refused to pay said amount. 4 Metro Drug thus prayed that the
XXX
In their "Answer With Compulsory Counterclaim," petitioners qualified Metro Drug's
allegation that they were doing business under the style "Aklan Drug," claiming that the same
"is a sole proprietorship in the name of defendant Editha M. Mijares." 6 The petitioners denied
the rest of Metro Drug's allegations. They likewise interposed a counterclaim
for malicious prosecution and prayed that judgment be rendered:
XXX
. . . Malicious prosecution, both in criminal and civil cases, requires the
presence of two elements, to wit: a) malice; and b) absence of probable cause.
Moreover, there must be proof that the prosecution was prompted by a sinister design
to vex and humiliate a person, and that it was initiated deliberately knowing that the
charge was false and baseless (Manila Gas Corporation v. Court of Appeals, 100
SCRA 602 [1980]). Hence, mere filing of a suit does not render a person liable for
malicious prosecution should he be unsuccessful, for the law could not have meant to
impose a penalty on the right to litigate (Ponce v. Legaspi, 208 SCRA 377 [1992];
Saba v. Court of Appeals, 189 SCRA 50 [1990]); Rubio v. Court of Appeals, 141
SCRA 488 [1986]). Settled in our jurisprudence is the rule that moral damages cannot
be recovered from a person who has filed a complaint against another in good faith, or
without malice or bad faith (Philippine National Bank v. Court of Appeals, 159 SCRA
433 [1988]; R & B Surety and Insurance v. Intermediate Appellate Court, 129 SCRA
736 [1984]). If damage results from the filing of the complaint, it is damnum absque
injuria (Ilocos Norte Electrical Company v. Court of Appeals, 179 SCRA 5 [1989]).
For the same reasons, the award for attorney's fees and expenses of litigation must
likewise be deleted. 25
WHEREFORE, the petition is hereby GRANTED, and the Decision of August 31, 1992
and the Resolution of January 10, 1994 of the Court of Appeals are REVERSED and SET
ASIDE. The Decision of the Regional Trial Court of Manila dated March 8, 1991 is hereby
REINSTATED but only insofar as it dismisses Metro Drug's complaint. cdta

SO ORDERED.

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