[G.R. No. 138822.

January 23, 2001]

EVANGELINE ALDAY, petitioner, vs. FGU INSURANCE

CORPORATION, respondent.
A compulsory counterclaim is one which, being cognizable by the regular courts of
justice, arises out of or is connected with the transaction or occurrence constituting the
subject matter of the opposing partys claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction. [19]

In Valencia v. Court of Appeals,[20] this Court capsulized the criteria or tests that may
be used in determining whether a counterclaim is compulsory or permissive,
summarized as follows:

1. Are the issues of fact and law raised by the claim and counterclaim largely the same?

2. Would res judicata bar a subsequent suit on defendants claim absent the compulsory
counterclaim rule?

3. Will substantially the same evidence support or refute plaintiffs claim as well as
defendants counterclaim?

4. Is there any logical relation between the claim and the counterclaim?

Another test, applied in the more recent case of Quintanilla v. Court of Appeals,[21] is the
compelling test of compulsoriness which requires a logical relationship between the
claim and counterclaim, that is, where conducting separate trials of the respective
claims of the parties would entail a substantial duplication of effort and time by the
parties and the court.

(22) That as a result of the filing of this patently baseless, malicious and unjustified
Complaint, and FGUs unlawful, illegal and vindictive termination of their Special Agents
Contract, defendant was unnecessarily dragged into this litigation and to defense [sic]
her side and assert her rights and claims against FGU, she was compelled to hire the
services of counsel with whom she agreed to pay the amount of P30,000.00 as and for
attorneys fees and stands to incur litigation expenses in the amount estimated to at
least P20,000.00 and for which FGU should be assessed and made liable to pay
defendant.

(23) That considering further the malicious and unwarranted action of defendant in filing
this grossly unfounded action, defendant has suffered and continues to suffer from
serious anxiety, mental anguish, fright and humiliation. In addition to this, defendants
name, good reputation and business standing in the insurance business as well as in
the community have been besmirched and for which FGU should be adjudged and
made liable to pay moral damages to defendant in the amount of P300,000.00 as
minimum.

(24) That in order to discourage the filing of groundless and malicious suits like FGUs
Complaint, and by way of serving [as] an example for the public good, FGU should be
penalized and assessed exemplary damages in the sum of P100,000.00 or such
amount as the Honorable Court may deem warranted under the circumstances. [22]

However, petitioners claims for damages, allegedly suffered as a result of the filing by
respondent of its complaint, are compulsory.[24] Meanwhile, the compulsory counterclaim
of petitioner for damages based on the filing by respondent of an allegedly unfounded
and malicious suit need not be answered since it is inseparable from the claims of
respondent. If respondent were to answer the compulsory counterclaim of petitioner, it
would merely result in the former pleading the same facts raised in its complaint. [32]

CONRADO MAGBANUA and ROSEMARIE MAGBANUA-TABORADA, the latter

assisted by her husband ARTEMIO TABORADA,
VS. PILAR S. JUNSAY, asssisted by her husband VICENTE JUNSAY, IBARRA
LOPEZ, and JUANITO JACELA, February 12, 2007, G.R. No. 132659

REFERENCE SA WORDINGS It is petitioners submission that the prosecution of

petitioner Rosemarie was founded upon baseless accusations. [34] Petitioners posit that
the charges were based on false affidavits and false police reports, without which the
criminal case against petitioner Rosemarie would not have been filed. [35] Petitioners
further decry the maltreatment which petitioner Rosemarie allegedly suffered from the
hands of respondents. According to petitioners, Rosemarie was maltreated to extract a
confession from her, and to make her admit to a crime she did not commit. They
reasoned that petitioner Rosemarie, who was then a minor, an uneducated farm girl,
and a stranger in Bacolod City, was subjected to torture and inhumane treatment.
[36]
Petitioners contend further that respondent Pilar employed her privileged status in
the society as a medical doctor; and her co-respondents Ibarra and Juanito utilized their
positions as members of the Bacolod City Police to secure an admission from petitioner
Rosemarie.[37]
RULINGS

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.[38]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. [39]

This Court, in Drilon v. Court of Appeals,[40] elucidated, viz:

The term malicious prosecution has been defined in various

ways. In American jurisdiction, it is defined as:
One begun in malice without probable cause to believe the charges
can be sustained (Eustace v. Dechter, 28 Cal. App. 2d. 706, 83 P. 2d.
525). Instituted with intention of injuring defendant and without probable
cause, and which terminates in favor of the person prosecuted. For this
injury an action on the case lies, called the action of malicious
prosecution (Hicks v. Brantley, 29 S.E. 459, 102 Ga. 264; Eggett v. Allen,
96 N.W. 803, 119 Wis. 625).
In Philippine jurisdiction, it 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. The gist of the action is the putting of legal process in force,
regularly, for the mere purpose of vexation or injury (Cabasaan v. Anota,
14169-R, November 19, 1956).
The statutory basis for a civil action for damages for malicious
prosecution are found in the provisions of the New Civil Code on Human
Relations and on damages particularly Articles 19, 20, 21, 26, 29, 32, 33,
35, 2217 and 2219 (8). To constitute malicious prosecution, however,
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
by the defendant knowing that his charges were false and
groundless. Concededly, the mere act of submitting a case to the
 authorities forprosecution does not make one liable for malicious
prosecution.

G.R. No. 137680 February 6, 2004

CONCEPT PLACEMENT RESOURCES, INC., petitioner,

vs.
RICHARD V. FUNK, respondent.

The antecedent facts giving rise to the controversy at bar are as follows:

Significantly, in German Marine Agencies, Inc. vs. NLRC,8 we held that there must
always be a factual basis for the award of attorneys fees. Here, since petitioner agreed
to be represented by respondent as counsel in the labor case and to pay him his
attorneys fees, it must abide with its agreement which has the force of law between
them.9

G.R. No. 155173 November 23, 2004

LAFARGE CEMENT PHILIPPINES, INC., (formerly Lafarge Philippines, Inc.),

LUZON CONTINENTAL LAND CORPORATION, CONTINENTAL OPERATING
CORPORATION and PHILIP ROSEBERG, petitioners,
vs.
CONTINENTAL CEMENT CORPORATION, GREGORY T. LIM and ANTHONY A.
MARIANO, respondents.

Briefly, the origins of the present controversy can be traced to the Letter of Intent (LOI)
executed by both parties.

Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil Procedure as "any
claim which a defending party may have against an opposing party." They are generally
allowed in order to avoid a multiplicity of suits and to facilitate the disposition of the
whole controversy in a single action, such that the defendant's demand may be
adjudged by a counterclaim rather than by an independent suit. The only limitations to
this principle are (1) that the court should have jurisdiction over the subject matter of the
counterclaim, and (2) that it could acquire jurisdiction over third parties whose presence
is essential for its adjudication.10

A counterclaim may either be permissive or compulsory. It is permissive "if it does not

arise out of or is not necessarily connected with the subject matter of the opposing
party's claim."11 A permissive counterclaim is essentially an independent claim that may
be filed separately in another case.

A counterclaim is compulsory when its object "arises out of or is necessarily connected

with the transaction or occurrence constituting the subject matter of the opposing party's
claim and does not require for its adjudication the presence of third parties of whom the
court cannot acquire jurisdiction."12

Unlike permissive counterclaims, compulsory counterclaims should be set up in the

same action; otherwise, they would be barred forever. NAMARCO v. Federation of
United Namarco Distributors13 laid down the following criteria to determine whether a
counterclaim is compulsory or permissive: 1) Are issues of fact and law raised by the
claim and by the counterclaim largely the same? 2) Would res judicata bar a
subsequent suit on defendant's claim, absent the compulsory counterclaim rule? 3) Will
substantially the same evidence support or refute plaintiff's claim as well as defendant's
counterclaim? 4) Is there any logical relation between the claim and the counterclaim? A
positive answer to all four questions would indicate that the counterclaim is compulsory.

Adopted in Quintanilla v. CA14 and reiterated in Alday v. FGU Insurance

Corporation,15 the "compelling test of compulsoriness" characterizes a counterclaim as
compulsory if there should exist a "logical relationship" between the main claim and the
counterclaim. There exists such a relationship when conducting separate trials of the
respective claims of the parties would entail substantial duplication of time and effort by
the parties and the court; when the multiple claims involve the same factual and legal
issues; or when the claims are offshoots of the same basic controversy between the
parties.

The above allegations show that petitioners' counterclaims for damages were the result
of respondents' (Lim and Mariano) act of filing the Complaint and securing the Writ of
Attachment in bad faith. Tiu Po v. Bautista17 involved the issue of whether the
counterclaim that sought moral, actual and exemplary damages and attorney's fees
against respondents on account of their "malicious and unfounded" complaint was
compulsory. In that case, we held as follows:

"Petitioners' counterclaim for damages fulfills the necessary requisites of a

compulsory counterclaim. They are damages claimed to have been suffered by
petitioners as a consequence of the action filed against them. They have to be
pleaded in the same action; otherwise, petitioners would be precluded by the
judgment from invoking the same in an independent action. The pronouncement
in Papa vs. Banaag (17 SCRA 1081) (1966) is in point:

"Compensatory, moral and exemplary damages, allegedly suffered by the

creditor in consequence of the debtor's action, are also compulsory counterclaim
barred by the dismissal of the debtor's action. They cannot be claimed in a
subsequent action by the creditor against the debtor."
 "Aside from the fact that petitioners' counterclaim for damages cannot be the
subject of an independent action, it is the same evidence that sustains
petitioners' counterclaim that will refute private respondent's own claim for
damages. This is an additional factor that characterizes petitioners' counterclaim
as compulsory."18

Moreover, using the "compelling test of compulsoriness," we find that, clearly, the
recovery of petitioners' counterclaims is contingent upon the case filed by respondents;
thus, conducting separate trials thereon will result in a substantial duplication of the time
and effort of the court and the parties.

Since the counterclaim for damages is compulsory, it must be set up in the same action;
otherwise, it would be barred forever. If it is filed concurrently with the main action but in
a different proceeding, it would be abated on the ground of litis pendentia; if filed
subsequently, it would meet the same fate on the ground of res judicata. 19

G.R. No. 159746 July 18, 2012

SPOUSES RAMON MENDIOLA and ARACELI N. MENDIOLA, Petitioners,

vs.
THE HON. COURT OF APPEALS, PILIPINAS SHELL PETROLEUM CORPORATION,
and TABANGAO REALTY, INC., Respondents.

Rule 6 of the 1997 Rules of Civil Procedure defines a compulsory counterclaim as

follows:

Section 7. Compulsory counterclaim. A compulsory counterclaim is one which, being

cognizable by the regular courts of justice, arises out of or is connected with the
transaction or occurrence constituting the subject matter of the opposing partys claim
and does not require for its adjudication the presence of third parties of whom the court
cannot acquire jurisdiction. Such a counterclaim must be within the jurisdiction of the
court both as to the amount and the nature thereof, except that in an original action
before the Regional Trial Court, the counterclaim may be considered compulsory
regardless of the amount. (n)

Accordingly, a counterclaim is compulsory if: (a) it arises out of or is necessarily

connected with the transaction or occurrence which is the subject matter of the
opposing partys claim; (b) it does not require for its adjudication the presence of third
parties of whom the court cannot acquire jurisdiction; and (c) the court has jurisdiction to
entertain the claim both as to its amount and nature, except that in an original action
before the RTC, the counterclaim may be considered compulsory regardless of the
amount.
A compulsory counterclaim that a defending party has at the time he files his answer
shall be contained therein.37Pursuant to Section 2, Rule 9 of the 1997 Rules of Civil
Procedure, a compulsory counterclaim not set up shall be barred.

The four tests to determine whether a counterclaim is compulsory or not are the
following, to wit: (a) Are the issues of fact or law raised by the claim and the
counterclaim largely the same? (b) Would res judicata bar a subsequent suit on
defendants claims, absent the compulsory counterclaim rule? (c) Will substantially the
same evidence support or refute plaintiffs claim as well as the defendants
counterclaim? and (d) Is there any logical relation between the claim and the
counterclaim, such that the conduct of separate trials of the respective claims of the
parties would entail a substantial duplication of effort and time by the parties and the
court?38 Of the four, the one compelling test of compulsoriness is the logical relation
between the claim alleged in the complaint and that in the counterclaim. Such
relationship exists when conducting separate trials of the respective claims of the
parties would entail substantial duplication of time and effort by the parties and the
court; when the multiple claims involve the same factual and legal issues; or when the
claims are offshoots of the same basic controversy between the parties. 39 If these tests
result in affirmative answers, the counterclaim is compulsory.

The four tests are affirmatively met as far as the Makati case was concerned. The
Makati case had the logical relation to the Manila case because both arose out of the
extrajudicial foreclosure of the real estate mortgage constituted to secure the payment
of petitioners credit purchases under the distributorship agreement with Shell.
Specifically, the right of Shell to demand the deficiency was predicated on the validity of
the extrajudicial foreclosure, such that there would not have been a deficiency to be
claimed in the Manila case had Shell not validly foreclosed the mortgage. As earlier
shown, Ramons cause of action for annulment of the extrajudicial foreclosure was a
true compulsory counterclaim in the Manila case. Thus, the Makati RTC could not have
missed the logical relation between the two actions.

We hold, therefore, that the Makati case was already barred by res judicata. Hence, its
immediate dismissal is warranted.

The CA likewise erred in awarding Meralco attorneys fees and expenses of litigation
without explaining its basis.1wphi1 In Buan v. Camaganacan,62 we held that the text of
the decision should state the reason why attorney's fees are being awarded; otherwise,
the award should be disallowed. Besides, no bad faith has been imputed to Josefa that
would warrant the award of attorneys fees under Article 2208 (5) of the Civil Code. It is
a settled rule that attorney'sfees shall not be recovered as cost where the partys
persistence in litigation is based on his mistaken belief in he righteousness of his
cause.63 There is also no factual, legal, or equitable justification that would justify the
Court's award of attorney's fees under Article 2208 (11) of the Civil Code.

[G.R. No. 128690. January 21, 1999]

ABS-CBN BROADCASTING CORPORATION, petitioners, vs. HONORABLE COURT

OF APPEALS, REPUBLIC BROADCASTING CORP., VIVA PRODUCTIONS,
INC., and VICENTE DEL ROSARIO, respondents.
ABS-CBN further contends that there was no other clear basis for the awards of moral and
exemplary damages. The controversy involving ABS-CBN and RBS did not in any way originate
from business transaction between them. The claims for such damages did not arise from any
contractual dealings or from specific acts committed by ABS-CBN against RBS that may be
characterized as wanton, fraudulent, or reckless; they arose by virtue only of the filing of the
complaint. An award of moral and exemplary damages is not warranted where the record is
bereft of any proof that a party acted maliciously or in bad faith in filing an action.[27] In any case,
free resort to courts for redress of wrongs is a matter of public policy. The law recognizes the
right of every one to sue for that which he honestly believes to be his right without fear of
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. [28]One who, makes use of his
own legal right does no injury. [29] If damage results from filing of the complaint, it is damnum
absque injuria.[30] Besides, moral damages are generally not awarded in favor of a juridical
person, unless it enjoys a good reputation that was debased by the offending party resulting in
social humiliation.[31]
As regards the award of attorneys fees, ABS-CBN maintains that the same had no factual,
legal, or equitable justification. In sustaining the trial courts award, the Court of Appeals acted in
clear disregard of the doctrine laid down in Buan v. Camaganacan[32] that the text of the decision
should state the reason why attorneys fees are being awarded; otherwise, the award should be
disallowed. Besides, no bad faith has been imputed on, much less proved as having been
committed by, ABS-CBN. It has been held that where no sufficient showing of bad faith would
be reflected in a partys persistence in a case other than an erroneous conviction of the
righteousness of his cause, attorneys fees shall not be recovered as cost.[33]

EXEMPLARY DAMAGES

The basic law on exemplary damages is Section 5 Chapter 3, Title XVIII, Book IV of the
Civil Code. These are imposed by way of example or correction for the public good, in addition
to moral, temperate, liquidated, or compensatory damages. [68] They are recoverable in criminal
cases as part of the civil liability when the crime was committed with one or more aggravating
circumstances;[69] in quasi-delicts, if the defendant acted with gross negligence; [70] and in
contracts and quasi-contracts, if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner.[71]
 It may be reiterated that the claim of RBS against ABS-CBN is not based on contract, quasi-
contract, delict, or quasi-delict. Hence, the claims for moral and exemplary damages can only be
based on Articles 19, 20, and 21 of the Civil Code.
The elements of abuse of right under Article 19 are the following: (1) the existence of a legal
right or duty, (2) which is exercised in bad faith, and (3) for the sole intent of prejudicing or
injuring another.Article 20 speaks of the general sanction for all provisions of law which do not
especially provide for their own sanction; while Article 21 deals with acts contra bonus mores,
and has the following elements: (1) there is an act which is legal, (2) but which is contrary to
morals, good custom, public order, or public policy, and (3) and it is done with intent to injure.[72]
Verily then, malice or bad faith is at the core of Articles 19, 20, and 21. Malice or bad faith
implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral
obliquity.[73]Such must be substantiated by evidence.[74]
There is no adequate proof that ABS-CBN was inspired by malice or bad faith. It was
honestly convinced of the merits of its cause after it had undergone serious negotiations
culminating in its formal submission of a draft contract. Settled is the rule that the adverse result
of an action does not per se make the action wrongful and subject the actor to damages, for the
law could not have meant impose a penalty on the right to litigate. If damages result from a
persons exercise of a right, it is damnum absque injuria.[75]

G.R. No. 190957 June 5, 2013

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner,

vs.
APAC MARKETING CORPORATION, represented by CESAR M. ONG,
JR., Respondents.

ATTYS FEES

Article 2208 of the New Civil Code of the Philippines states the policy that should guide
the courts when awarding attorneys fees to a litigant. As a general rule, the parties may
stipulate the recovery of attorneys fees. In the absence on such stipulation, this article
restrictively enumerates the instances when these fees may be recovered, to wit:

Art. 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.

In ABS-CBN Broadcasting Corp. v. CA,7 this Court had the occasion to expound on the
policy behind the grant of attorneys fees as actual or compensatory damages:

(T)he law is clear that in the absence of stipulation, attorneys fees may be recovered as
actual or compensatory damages under any of the circumstances provided for in Article
2208 of the Civil Code.

The general rule is that attorneys fees cannot be recovered as part of damages
because of the policy that no premium should be placed on the right to litigate. They are
not to be awarded every time a party wins a suit. The power of the court to award
attorneys fees under Article 2208 demands factual, legal, and equitable justification.
Even when a claimant is compelled to litigate with third persons or to incur expenses to
protect his rights, still attorneys fees may not be awarded where no sufficient showing
of bad faith could be reflected in a partys persistence in a case other than an erroneous
conviction of the righteousness of his cause.

In Benedicto v. Villaflores,8 we explained the reason behind the need for the courts to
arrive upon an actual finding to serve as basis for a grant of attorneys fees, considering
the dual concept of these fees as ordinary and extraordinary:

It is settled that the award of attorney's fees is the exception rather than the general
rule; counsel's fees are not awarded every time a party prevails in a suit because of the
policy that no premium should be placed on the right to litigate. Attorney's fees, as part
of damages, are not necessarily equated to the amount paid by a litigant to a lawyer. In
the ordinary sense, attorney's fees represent the reasonable compensation paid to a
lawyer by his client for the legal services he has rendered to the latter; while in its
extraordinary concept, they may be awarded by the court as indemnity for damages to
be paid by the losing party to the prevailing party. Attorney's fees as part of damages
are awarded only in the instances specified in Article 2208 of the Civil Code. As such, it
is necessary for the court to make findings of fact and law that would bring the case
within the ambit of these enumerated instances to justify the grant of such award, and in
all cases it must be reasonable.

We can glean from the above ruling that attorneys fees are not awarded as a matter of
course every time a party wins. We do not put a premium on the right to litigate. On
occasions that those fees are awarded, the basis for the grant must be clearly
expressed in the decision of the court.1wphi1

We have consistently held that an award of attorneys fees under Article 2208 demands
factual, legal, and equitable justification to avoid speculation and conjecture surrounding
the grant thereof.10 Due to the special nature of the award of attorneys fees, a rigid
standard is imposed on the courts before these fees could be granted. Hence, it is
imperative that they clearly and distinctly set forth in their decisions the basis for the
award thereof. It is not enough that they merely state the amount of the grant in the
dispositive portion of their decisions.11 It bears reiteration that the award of attorneys
fees is an exception rather than the general rule; thus, there must be compelling legal
reason to bring the case within the exceptions provided under Article 2208 of the Civil
Code to justify the award.12

We have perused the assailed CAs Decision, but cannot find any factual, legal, or
equitable justification for the award of attorneys fees in favor of respondent. The
appellate court simply quoted the portion of the RTC Decision that granted the award as
basis for the affirmation thereof. There was no elaboration on the basis. There is
therefore an absence of an independent CA finding of the factual circumstances and
legal or equitable basis to justify the grant of attorneys fees. The CA merely adopted the
RTCs rational for the award, which in this case we find to be sorely inadequate.

he RTC found as follows:

x x x since it is clear that plaintiff was compelled to hire the services of a counsel, to
litigate and to protect his interest by reason of an unjustified act of the other party,
plaintiff is entitled to recover attorneys fees in the amount of 50,000.00 which it paid
as acceptance fee and 3,000.00 as appearance fee. 13

The only discernible reason proffered by the trial court in granting the award was that
respondent, as complainant in the civil case, was forced to litigate to protect the latters
interest. Thus, we find that there is an obvious lack of a compelling legal reason to
consider the present case as one that falls within the exception provided under Article
2208 of the Civil Code. Absent such finding, we hold that the award of attorneys fees by
the court a quo, as sustained by the appellate court, was improper and must be deleted.
G.R. No. 200759

FAJ CONSTRUCTION & DEVELOPMENT CORPORATION, Petitioner,

vs.
SUSAN M. SAULOG, Respondent.

BRIEF FACTS dire kay na dismiss ang case kay sige ug ka delay. There was also an
entry of judgment as to the decision of the dismissal of the case for failure to prosecute,
tpos gi affirm ng CA.So the RTC allowed the respondent to submit its evidences for its
counterclaim

REFERENCE FOR EVIDENCE SA COUNTERCLAIM

In Civil Case No. Q-02-45865, respondent was allowed to present her evidence on the
counterclaim. As found by the CA, respondents evidence is as follows:

x x x. She presented the testimony of Rhodora Calinawan, the architect who conducted
a complete inspection of the project first in September 2000, and, second, in November
2000, after typhoon Seniang. Rhodora Calinawan narrated her findings and identified
the photographs submitted as proofs of appellants 29 substandard work. Among the
defects she pointed out were the sloppily done flooring, the unaligned electrical outlet
and switch, dried cement and paint stained flooring, incorrect colored cement used to fill
the gap between the tiles, need to repair door jamb, sloppily done grouting of tiles,
incorrect luggage compartment doors, bubbles in the varnishing works, unaligned
sanding of parquet flooring, poor termination of shower and enclosure and bull nose
wood moulding, dirty window sill, lack of screws and rubber on the window, damaged
roof panels, need for plashing and installation of drift edges, and improper installation of
asphalt shingles on the roof. After the typhoon, appellee 30 also requested her to make a
second inspection. She prepared another report which listed the following additional
defects: the second floor parquet flooring was wet due to the typhoon because the
windows were not properly sealed, lacked sealant and rubber protector.

Susan Saulog took the stand on February 15, 2005. She testified on appellants
defective work and the damage caused by typhoon "Seniang" to the unfinished work,
notwithstanding the fact that she had already paid a total of P10,592,194.80. She
refused to pay appellant the amount of P851,601.58 because the latter already
collected advance payment but had a lot of unfinished work before it abandoned the
project. She made a counter-demand for P4,600,000.00 that excluded the lost revenue
for unearned rentals, exemplary and moral damages. She was supposed to earn
P160,000.00 per month from rentals starting July 2000. After appellant abandoned the
project, she still spent P3,820,796.21 to rectify and complete the same. The accounts
chargeable to appellant were listed in Exhibit 21, to wit:

ITEM NO. PARTICULARS AMOUNT

A Bestbuilt Steel Builders 785,299.12
B Sub-Contractor: Fizcon Enterprises 375,166.17
 C Labor Contracts & Quotations 243,461.40
D Cash Advances for Materials by FAJ 186,236.62
E Professional Fees 631,666.46
F Rectification of Major Defective Works 422,563.77
G Other Charges 647,629.71
H Other Additional Construction Expenses for
528,772.96
Rectification & Repair Works
GRAND TOTAL AMOUNT 3,820,796.21

The penalty for delay is P12,500.00 per day. From July 30, 2000 up to November 17,
2000, the total penalty amounted to P1,387,500.00. She suffered sleepless nights
because she started to experience frozen shoulder and trigger finger that necessitated
the services of Dr. Alberto Lu, an acupuncturist. Exhibits 30-34 comprised five receipts
issued by Alberto M. Lou, evidencing payment of P400 for services rendered. She
claimed reimbursement for the amounts she paid to her counsel: P20,000.00 as
acceptance fees; P4,000.00 per appearance and cost of suit which totaled
P100,000.00. She spent P60,000.00 and P7,000.00, respectively, for the services of
Architect Calinauan and an accountant to put the records in order. She claimed moral
damages of P5,000,000.00.31

On January 30, 2006, the trial court rendered its Decision on respondents counterclaim,
declaring as follows:

After carefully studying all the above evidence, this court resolves that defendant 32 has
proven her following allegations and counterclaims, to wit:

(1)That, in fact, the construction work of plaintiff 33 was not only delayed, but defective;
and that plaintiff abandoned the construction work, incomplete and with many defects.
The evidence on record is overwhelming and in addition to the testimonies of Arch.
Rhodora Calinawan and the defendant herself; the same is proven by Exhs. 1 1-B-4;
2 2-A; 3; 4 4-H-2; 5 5-G-2; 6 6-G-2; 7 7-E-2; 8 8-C; 9 9-M; 9-N 9-EE; 15
15-A2; 15-B 15-B-5; 15-B2 15-Z.

(2)That defendant paid plaintiff the total amount of P10,592,194.80 before plaintiff
abandoned the work (Exhs. 16 16-Q).

(3)That defendant had to finish the work abandoned by plaintiff, incurring substantial
additional expenses therefor. This is also supported not only by her testimony, but by
documentary evidence presented by her (Exhs. 21; 20 20-A; 21 21-F; 22 22-CCC;
23 23-M; 24 24-JJJ; 25 25-S; 26 26-QQ; 28 28-AAAA-130; 29 29-JJJ).

(4)As to the claim of defendant for moral damages, the Court finds that she is entitled to
moral damages, but not for the amount she is claiming. The testimony given by
defendant on how the problems created by plaintiff affected her personally is believable;
and furthermore, it is supported by official receipts of an Acupuncture Consultant (Exhs.
30-34). This is one of the cases wherein moral damages are allowed by Article 2220 of
the New Civil Code. Breach of Contract where the defendant acted fraudulently or in
bad faith.

(5)With respect to exemplary damages, the Court perceives that same should be
granted, but moderates the same. Plaintiff being in the construction business to the
public, should be deterred from doing to others, what it did to defendant. This is one of
the situations envisioned by Article 2229 of the New Civil Code, for exemplary damages.

(6)The Court is convinced that attorneys fees should also be adjudicated, considering
the work that counsel for defendant undertook. Attorneys fees should be adjudicated, in
accordance with Article 2208 of the New Civil Code.

(7)The Court is also persuaded to grant penalties for delay, as provided for in the
agreement between the parties (Exhs. 11-B-1 and 11-B-2).

(8)The Court, however, is not inclined to grant additional consequential damages of

P1,600,000.00, because this court finds that this claim has not been properly supported.

(9)Finally, the Court is inclined to grant defendants claim, for lost rentals, which is
properly supported by the testimony of defendant and very plausible under the
circumstances, because one of the duplex apartments was constructed for rental
income purposes and its completion and rental was very much delayed, because of the
fault of plaintiff.

IN VIEW OF ALL THE FOREGOING, plaintiff FAJ Construction & Development

Corporation is hereby ordered to pay defendant Susan Saulog, the following amounts:

(1)P3,213,575.91 as actual damages;

(2)Lost rentals of P5,391,456.00;

(3)Moral damages of P500,000.00;

(4)Exemplary damages of P500,000.00;

(5)Penalties for delay amounting to P1,387,500.00;

(6)Attorneys fees of P20,000.00, plus appearance fee of P4,000.00 per

appearance, payable to Atty. Alberto B. Guevara, Jr.;

(7)This court also grants 6% interest, on all the above amounts,

commencing from the date of the filing of the complaint, January 2, 2002.

This Court, however, dismisses the claim of Susan Saulog for additional consequential
damages amounting to P1,600,000.00, which has not been proven.
SO ORDERED.34

RULING:

Petitioners claim that res judicata cannot apply has no merit. This Court, in G.R. No.
166336, found nothing wrong in the judgment of the CA in CA-G.R. SP No. 82239
affirming the dismissal of petitioners Complaint in Civil Case No. Q-02-45865 for failure
to prosecute. In fact, the Court found that the appellate court had not committed any
reversible error. This finding of lack of any reversible error is now final with the entry of
judgment in G.R. No. 166336. Thus, petitioner could no longer prove its case, other
than to present controverting evidence on respondents counterclaim.

The Court has repeatedly said that minute resolutions dismissing the actions filed
before it constitute actual adjudications on the merits.1wphi1 They are the result of
thorough deliberation among the members of the Court. When the Court does not find
any reversible error in the decision of the CA and denies the petition, there is no need
for the Court to fully explain its denial, since it already means that it agrees with and
adopts the findings and conclusions of the CA. The decision sought to be reviewed and
set aside is correct. It would be an exercise in redundancy for the Court to reproduce or
restate in the minute resolution denying the petition the conclusions that the CA
reached.43

SPS. DAN T. PAGUIRIGAN G.R. No. 169177

and MARY JANE PAGUIRIGAN, vs PILHINO SALES CORPORATION,
June 30, 2006

DIRE KAY KAISA LANG WALA NI APPEAR SO PLAINTIFFS ABSENCE WAS JUSTIFIED
Anent the second issue, it must be emphasized that a pre-trial is mandatory and plaintiffs
absence therein can result to the dismissal of the case. Section 5, Rule 18 of the Rules of Court
provides:

Sec. 5. Effect of failure to appear. The failure of the plaintiff to appear

when so required pursuant to the next preceding section shall be cause for
dismissal of the action. The dismissal shall be with prejudice, unless otherwise
ordered by the court. x x x.

However, the rule is not absolute; it admits of certain exceptions. We agree with the
observation of the Court of Appeals that

In this case, We find that the dismissal of the cased (sic) based on the
failure of petitioners counsel to appear during the 16 December 2003 was done in
erroneous haste, to the extreme prejudice of the petitioner.
 For one, there is nothing in the record to demonstrate that petitioner had
manifested lack of interest to prosecute. It neither abandoned the suit nor
needlessly delayed the proceedings.Rather, what is self-evident is that in all the
six (6) previously scheduled pre-trial conference, petitioners counsel was in
attendance and had demonstrated his vigorous resolve to prosecute the case with
reasonable promptitude. In fact, the cancellation of all the previously scheduled
pre-trial was the result of either the courts inability to conduct the pre-trial or
respondents motion to the same effect. It was only in the seventh (7th) scheduled
pre-trial conference when petitioners counsel was absent, and for good reasons,
i.e. petitioner counsels medical condition (allergic dermatitis with infection of left
scrotum) that even necessitated his confinement on the day immediately following
the scheduled pre-trial conference.

If such absence had upset the court a quos schedule or its intention to
promptly prosecute the case, a mere admonition for petitioners counsel, instead of
outright dismissal, would have been sufficient for the parties to be informed of the
public respondent judges intolerance of any display of tardiness and laxity in the
observance of his orders from the part of the contending parties.

The pronouncement of the Supreme Court in the case of Calalang vs.

Court of Appeals, applies strongly in this case, viz:

x x x though it is within the discretion of the trial court to

declare a party non-suited for non appearance in the pre-trial
conference, such discretion must not be abused.The precipitate
haste of the lower court in declaring the respondent bank non-
suited was uncalled for and deserved a second look.
Unless a partys conduct is so negligent, irresponsible,
contumacious, or dilatory as to provide substantial grounds for
dismissal for non-appearance, the courts should consider lesser
sanctions which would still amount into achieving the desired
end. Inconsiderate dismissals, even if without prejudice, do not
constitute a panacea nor a solution to the congestion of court
dockets, while they lend a deceptive aura of efficiency to records
of the individual judges, they merely postpone the ultimate
reckoning between the parties. In the absence of clear lack of merit
or intention to delay, justice is better served by a brief continuance,
trial on the merits, and final disposition of the cases before the
court. (Ruiz vs. Estenzo, 186 SCRA 8 [1990] citing Macasa vs.
Herrera, 101 Phil. 44 [1957]). And there is authority that an order
dismissing a plaintiffs complaint without prejudice for failure of
his counsel to appear at a pre-trial conference must be reversed as
too severe a sanction to visit on a litigant where the record is
devoid of evidence reflecting the litigants willful or flagrant
disregard for the Courts authority.
 In this case, the dismissal was based solely on respondents absence during the pre-trial
conference on December 16, 2003. A single instance of non-appearance at the pre-trial due to
medical reasons does not amount to willful disregard of the orders of the lower court and will not
justify the dismissal of the complaint. That respondent vigorously prosecuted the case before
Branch 210 was not contested by petitioners. Likewise, the Court of Appeals noted that
respondent had not manifested a lack of interest to prosecute.In fact, respondents counsel was
present at all the previously scheduled pre-trial conferences. Moreover, the cancellations, re-
settings and delays were not caused by respondents inordinate refusal or laxity in prosecuting the
case. In Marahay v. Melicor,[18] we ruled that:

While a court can dismiss a case on the ground of non prosequitur, the real
test for the exercise of such power is whether, under the circumstances, plaintiff is
chargeable with want of due diligence in failing to proceed with reasonable
promptitude. In the absence of a pattern or scheme to delay the disposition of the
case or a wanton failure to observe the mandatory requirement of the rules on the
part of the plaintiff, as in the case at bar, courts should decide to dispense with
rather than wield their authority to dismiss.

So it is with the case at bar. Respondent has not shown culpable negligence warranting the
dismissal of its complaint. The ends of justice and fairness would best be served if the issues
involved in the case are threshed out in a full-blown trial.

G.R. No. L-11268 January 28, 1961

CARLOS M. SISON, plaintiff-appellee,

vs.
GONZALO D. DAVID, defendant-appellant.

So is the third cause of action under defendant's counterclaim. The dismissal, by the
office of the City Fiscal of Manila, of the complaint for estafa therein filed by the plaintiff
is insufficient to warrant a judgment for damages in defendant's favor, there being no
competent evidence that, in filing said complaint, plaintiff had acted in bad faith,
knowing that the charge was groundless.

As regards the fourth cause of action in said counter-claim, it should be noted that
plaintiff is a member of the bar. As such, he must have known that the petition for bond
in question is an absolutely privileged communication, and that the allegations therein
made were pertinent and relevant to the remedy sought in said petition. More important
still, he knew that the basic facts therein stated were true. Aside from this, some of the
inferences drawn by him therefrom are purely his, not necessarily deducible from said
facts, and although he allegedly suffered injury to his reputation in consequence thereof,
there has been not even an attempt to prove that it had adversely affected either his
credit, or any of his business transactions, or his social or domestic relations. In other
words, aside from the fact that plaintiff's complaint is clearly unfounded, the record
strongly indicates that it was filed with a harassing purpose. In view of the
circumstances surrounding this case, plaintiff should pay the defendant a reasonable
amount for attorney's fees and expenses of litigation (Article 2208 [4], Civil Code of the
Philippines).

WHEREFORE, the decision appealed from is hereby reversed, and another one shall
be entered dismissing plaintiff's amended complaint, as well as the first three causes of
action in defendant's counterclaim, and sentencing plaintiff to pay to the defendant, by
way of attorney's fees and expenses of litigation, the sum of P3,000, with interest
thereon it the legal rate, from the date on which this decision shall become final, aside
from the costs. It is so ordered.

G.R. No. L-32552 July 31, 1978

PEDRO MIRASOL, petitioner,

vs.
HON. RAFAEL DE LA CRUZ (Judge of the Court of First Instance, Camarines Sur)
and DOMINADOR MENDOZA, respondents.

Ramon Imperial for petitione

ATTORNEYS FEES

From the very opening sentence of Art. 2208, it is clearly intended to retain the award of
attorney's fees as the exception in our law, as the general rule remains that attorney's
fees are not recoverable in the absence of a stipulation thereto, the reason being that it
is not sound policy to self a premium on the right to litigate. In the case at bar, the Court
is faced with the question of whether or not the award of attorney's fees made by the
respondent judge in favor of respondent Mendoza falls under the exceptions
enumerated in Art. 2208, considering the established fact of the absence of any
stipulation regarding attorney's fees.

We are not persuaded by the private respondent's contentions. Even if it were conceded
that under the New Civil Code, attorney's fees became a part of recoverable
damages, 1 private respondent fails to note that attorney's fees are recoverable only in
the concept of actual damages 2 and not as moral damages as he contends. We are
also mindful of the allegation of private respondent that the complaint filed by petitioner
(plaintiff below) was clearly unfounded and was filed purely for the purpose of
harassment. But the records of the case at bar do not disclose any proof presented by
private respondent to substantiate such allegation; neither did the respondent judge
make any findings to that effect in his appealed decision. True, Art. 2208 (4) allows
attorney's fees in cases of clearly unfounded civil actions, but it must be understood to
mean those where the cause or causes of action are so untenable as to amount to
gross and evident bad faith.3 Clearly then, proof must be presented to the court as to
the facts and circumstances constituting the alleged bad faith. Otherwise, the award of
attorney's fees is not justified where there is no proof, other than. the bare statement of
harassment that a party to be so adjudged had acted in bad faith. 4

The matter of attorney's fees cannot be touched once and only in the dispositive portion
of the decision. The text itself must expressly state the reason why attorney's fees are
being awarded. 6 The Court, after reading through the text of the appealed decision,
finds the same bereft of any findings of fact and law to justify the award of attorney's
fees. The matter of such fees was touched but once and appears only in the dispositive
portion of the decision. Simply put, the text of the decision did not state the reason why
attorney's fees are being awarded, and for this reason, the Court finds it necessary to
disallow the same for being conjectural.

G.R. No. 156339 October 6, 2004

MS. VIOLETA YASOA, personally and as heir of deceased sister defendant PELAGIA
YASOA and as attorneyinfact of her brothers ALEJANDRO and EUSTAQUIO, both
YASOA and sisters: TERESITA YASOA BALLESTERO and ERLINDA YASOA TUGADI, and
mother AUREA VDA. DE YASOA, petitioners,
vs.
RODENCIO and JOVENCIO, both surnamed DE RAMOS, respondents.

DECISION

MEANING OF 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.

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 Yasoa (TCT No. 73252)
and Jovencio de Ramos (TCT No. 73251). Since 1973, Jovencio had been
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.

REFERENCE SA PAGHIMO UG DECISION

The plaintiff has presented indubitable evidence consisting of manager's checks as well as the
corresponding debit tickets, Exhibits F, F-l to DDD-l inclusive showing that the total amount
defalcated by defendant Napoleon C. Navarro was in the amount of P 28,683.77 evidenced by fifty-
one [511 manager's checks all fraudulently encashed by the said defendant. In view of the foregoing,
the lower court erred when it held that defendant Napoleon Navarro was liable to the plaintiff only in
the amount of P13,906.81.

There is no complete evidence to show that the sale of the real property and dwelling house dated
February 22, 1965 executed by defendants Napoleon Navarro and Patricia Cruz in favor of the
defendants Vicente B. Medina, and Leticia Lopez was undertaken in fraud of creditors. There is
evidence that the plaintiff was aware of the negotiations between defendant Napoleon C. Navarro
and defendants Vicente B. Medina and Leticia Lopez. It seems that the purpose of the sale was to
enable defendant Napoleon C. Navarro to pay the plaintiff the amount that said Navarro defalcated

There is no showing that the plaintiff acted maliciously and in a wanton manner in filing Civil Case
No. 4507 against the spouses Vicente B. Medina and Leticia Lopez. There is no doubt that the Id
spouses suffered mental anguish for having been made defendants in Civil Case No. 4507.
However, under the established facts and circumstances the amount of P100,000.00 awarded to
said spouses as moral damages is excessive. The moral and exemplary damages awarded to
spouses Vicente Medina and Leticia Lopez should be reduced to P10,000.00.

The defendants Vicente B. Medina and Leticia Lopez had to engage counsel to resist the action
instituted against them by the Philippine National Bank. Hence, the trial court did not err in awarding
to said spouses the amount of P 5,000.00 as attorney's fees.

WHEREFORE, the decision appealed from is hereby modified in that in Civil Case No. 4506, the
defendant Napoleon C. Navarro is ordered to pay the plaintiff the amount of P28,683.77 with legal
interest from February 25, 1965, the date of the filing of the complaint and in Civil Case No. 4507,
the complaint is dismissed and the plaintiff Philippine National Bank is ordered to pay defendants
Vicente Medina and Leticia Lopez the amount of P10,000.00 as moral and exemplary damages with
legal interest from the date of the filing of the counterclaim and the amount of P5,000.00 as
attorney's fees, without pronouncement as to costs.

SO ORDERED. 3