G.R. No. 247490 - Torres vs. Republic

The case arose from what was termed the “DAMAGE CASE” instituted by the private respondents, the PANGANIBANS, against petitioner INHELDER CORPORATION.
The PANGANIBANS, owners of a medical clinic in Calapan, Oriental Mindoro, alleged that INHELDER had earlier initiated a “COLLECTION CASE” against them before the Municipal Court of Mandaluyong, Rizal, which was later dismissed.
The complaint in the DAMAGE CASE asserted that the COLLECTION CASE was clearly unfounded, and prayed for various forms of damages including actual, compensatory, moral, and exemplary damages as well as attorney’s fees.

Payment of actual damages (P4,550.00) corresponding to expenses incurred in the COLLECTION CASE.
Attorney’s fees for both the COLLECTION CASE (initially P5,000.00) and the DAMAGE CASE (initially P10,000.00).
Compensatory damages for injury to the business standing (P50,000.00).
Damages attributed to the alleged nervous breakdown of plaintiff Dra. Paula R. Panganiban along with moral damages, which originally was prayed at P50,000.00 but later increased to a total of P100,000.00 (P50,000.00 compensatory and P50,000.00 moral).
Exemplary damages and any additional relief deemed just and equitable.

The MINDORO COURT, after declaring INHELDER in default, rendered judgment awarding damages with specific modifications:

Actual damages of P4,550.00.
Attorney’s fees for the COLLECTION CASE reduced from P5,000.00 to P3,000.00.
Attorney’s fees for the DAMAGE CASE reduced from P10,000.00 to P5,000.00.
Compensatory and moral damages aggregated to yield a total award amounting to P212,550.00.

INHELDER petitioned an appeal against the MINDORO COURT’s judgment.
The Appellate Court subsequently reduced the overall award substantially to P41,550.00 with the following breakdown:

Actual damages of P4,550.00.
Attorney’s fees for the COLLECTION CASE further reduced to P2,000.00.
Compensatory damages for business injury reduced to P10,000.00.
Compensatory damages for the nervous breakdown of Paula R. Panganiban set at P10,000.00.
Exemplary damages fixed at P10,000.00.
Attorney’s fees for the DAMAGE CASE remained at P5,000.00.

INHELDER CORPORATION is engaged in the manufacture and sale of medicines and drugs, with its principal office at No. 41 Pioneer Street, Mandaluyong, Rizal.
The same address was also associated with McGaw Baxter Laboratories, Inc.
Both in the COLLECTION and the DAMAGE CASES, INHELDER was represented by Atty. Maximo M. Fajardo, Jr., who maintained offices at both INHELDER and McGaw Baxter Laboratories.
The financial transaction underlying the controversy:

On December 29, 1972, the DOCTOR’S CLINIC (owned by the PANGANIBANS) purchased medicines and drugs from INHELDER for P1,385.10, paying P824.10 and leaving a balance of P561.00, which remained unpaid for about two years.
On December 2, 1974, Atty. Fajardo sent a demand for settlement of the outstanding P561.00.
The PANGANIBANS, in response, requested a statement of account, which was furnished on January 17, 1975, along with a follow-up reminder.
On January 28, 1975, the PANGANIBANS sent PNB Check No. 32058 amounting to P561.00 purportedly as full payment, which was received on or before February 5, 1975.

On February 8, 1975, Atty. Fajardo prepared the complaint for the COLLECTION CASE.
The complaint was filed on February 12, 1975 in the Municipal Court of Mandaluyong, Rizal.
On February 19, 1975, INHELDER acknowledged receipt of the check in a letter, stating that it represented full payment of the account.
The effectiveness of the payment was subject to the clearance of the check; under Article 1249 of the Civil Code, payment is only effective when the check is cashed or credited.

No written answer to the complaint is on record.
During the May 14, 1975 hearing, the PANGANIBANS presented receipts to prove that payment had allegedly been made prior to the filing of the COLLECTION CASE.
The Municipal Court subsequently dismissed the COLLECTION CASE based on the facts, with the dismissal becoming final as both parties acquiesced.

Determination on the Nature of the COLLECTION CASE and Allegations of Malice

The Court noted that it is difficult to assert that the COLLECTION CASE was “clearly unfounded” due to uncertainties regarding whether the check had been cashed or credited by the effective date of the filing (February 12, 1975).
Although the proper procedure should have been to await confirmation of the check’s clearance before filing a complaint, this error did not automatically render the action unfounded.
On allegations of malicious prosecution:

The court emphasized that malicious prosecution requires both malice and want of probable cause.
There was no evidence of a deliberate and sinister motive by INHELDER in the commencement of the COLLECTION CASE.
The mere absence of probable cause does not automatically infer malice, and the right to litigate must not be penalized if the suit ultimately fails.

Whether the COLLECTION CASE could be characterized as clearly unfounded given that the effectiveness of the PNB check as payment was subject to clearance and was not conclusively proven to be completed on or before the filing date.
Whether INHELDER Corporation’s initiation of the COLLECTION CASE, even with a procedural error regarding the wait for check clearance, should be deemed malicious prosecution.
Whether the substantial reduction in the award by the Appellate Court was justified, particularly in light of the evidence concerning the payment and procedure followed by the parties.
The sufficiency of evidence to establish the requisite elements of malice and want of probable cause necessary to support an action for malicious prosecution in a civil context.