Facts:

The case involves Ayala Integrated Steel Manufacturing Co., Inc. (hereafter "Ayala" or "petitioner") as the petitioner, and Severino Go, doing business under the name Goning Construction Supply (hereafter "Go" or "respondent"), as the respondent. The dispute arose from a series of transactions that took place between October 1979 and 1982. On October 8, 1979, Go made purchases from Ayala totaling PhP 32,755. Following these transactions, Go issued four postdated checks on December 29, 1979, to cover his obligations. Two of the checks were honored by the bank, reducing his debt to PhP 20,000. Additionally, Go made a separate purchase on December 17, 1979, costing PhP 22,000, which remained unpaid.

A significant event occurred on February 13, 1980, when a fire destroyed Go's store, affecting his ability to pay his debts. Following the incident, on February 14, 1980, Go instructed his bank to stop payment on the remaining two postdated ch

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Facts:

Parties and Transactions

• Petitioner: Ayala Integrated Steel Manufacturing Co., Inc.
• Respondent: Severino Go, doing business as Goning Construction Supply

Purchases and Payment Arrangements

• On October 8, 1979, Go made two purchases from Ayala amounting to a net total of ₱32,755 after adjustments.
• On December 17, 1979, Go made an additional purchase valued at ₱22,000 under Invoice No. 6746.
• For the first two purchases, Go issued four postdated checks on December 29, 1979 totaling ₱32,755:
• ABC Check No. 12214 – Postdated January 15, 1980, for ₱2,755.00
• ABC Check No. 00012211 – Postdated February 2, 1980, for ₱10,000.00
• ABC Check No. 00012212 – Postdated February 23, 1980, for ₱10,000.00
• ABC Check No. 00012221 – Postdated February 29, 1980, for ₱10,000.00
• The bank honored the first two checks, reducing Go’s obligation, but the ₱22,000 purchase remained unpaid.

The Fire Incident and Consequent Events

• On February 13, 1980, a fire gutted Go’s store, resulting in the loss of his ledgers, accounting books, and records.
• The day after the fire, Go instructed Allied Banking Corporation to stop payment on the 3rd and 4th checks due to insufficient funds caused by the fire losses.

Criminal and Civil Complaints Initiated

• Ayala, in August 1980, filed a criminal complaint for estafa and violation of Batas Pambansa Blg. 22 against Go with the Manila City Fiscal.
• Negotiations led to an amicable settlement where Go agreed to pay his balance of ₱20,000 in installments and his outstanding ₱22,000 account.
• Ayala's president and general manager requested provisional dismissal of the case after the agreement, with the promise that the checks would be returned upon full payment.
• Payment installments made by Go included:
• November 29, 1980 – ₱3,000 (ABC Check No. 510076437)
• December 29, 1980 – ₱3,000 (ABC Check No. 510076449)
• February 28, 1981 – ₱4,000 (ABC Check No. 060820424)
• February 28, 1981 – ₱2,000 (ABC Check No. 060820455)
• March 31, 1981 – ₱3,000 (ABC Check No. 060820480)
• April 30, 1981 – ₱3,000 (ABC Check No. 510771260)
• These payments liquidated the ₱10,000 sum in full and partially liquidated another ₱8,000, leaving a residual balance of ₱2,000 which Go retained due to Ayala’s failure to return the two postdated checks.
• By December 1, 1981, Go fully settled his account; however, he was still required to appear before the City Fiscal of Caloocan City on January 26, 1982, to answer the criminal complaint filed by Ayala.
• Parallel to the criminal proceedings, Ayala filed a civil complaint (Civil Case No. Q-35558) in the Court of First Instance of Quezon City for the recovery of ₱29,640 plus interest.
• Subsequent dismissals and filings:
• The criminal complaint filed in Caloocan was dismissed on January 28, 1982, citing the amicable settlement.
• Around August 6, 1981, Go filed a complaint for consignation and damages (Civil Case No. R-20796) in Cebu, alleging oppressive acts by Ayala.
• A decision in Civil Case No. R-20796 ordered Ayala to:
• Recognize the tender of ₱24,000.00.

ii. Return the contested ABC checks. iii. Pay damages for moral, actual, and attorney’s fees.

Allegations and Grounds of Appeal

• Ayala contended that the awarding of moral and actual damages for alleged malicious prosecution was erroneous, asserting that it was merely exercising its right to collect an unpaid debt.
• Go argued that Ayala’s filing of baseless criminal cases constituted malicious and oppressive conduct meant to harass and intimidate him into settling his outstanding obligation, thereby entitling him to damages.

Issue:

• Whether the filing of criminal complaints by Ayala, after an amicable settlement and with an existing debt arrangement, constituted an act done in bad faith and amounted to malicious prosecution.
• Whether Ayala’s initiation of criminal charges for estafa and violation of B.P. Blg. 22 against Go, despite the absence of dishonor on the checks and the settlement negotiations, justified the imposition of moral and actual damages.
• Whether the trial court and the appellate court committed reversible error in awarding increased moral and actual damages against Ayala.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)