G.R. No. L-19884 - Zambales Academy, Inc. vs. Villanueva

Plaintiff Zambales Academy, Inc. initiated Civil Case No. 1760 against defendant Ciriaco Villanueva for actual, compensatory, moral, and exemplary damages, alleging fraudulent abuse of trust in his capacity as director and board trustee.
Defendant filed an answer containing a counterclaim with three distinct causes of action for moral, exemplary, and attorney’s fees damages, grounded on allegations including malicious prosecution and abuse of process.
Plaintiff moved to dismiss the counterclaim, but the Court of First Instance denied the motion on August 31, 1956.
Failure of the plaintiff to answer the counterclaim later resulted in its declaration of default on March 20, 1957, by the trial court.

After evidence was presented, the trial court, in its decision dated June 24, 1958, ruled in favor of the defendant.

Dismissed the plaintiff’s complaint.
Ordered the plaintiff to pay moral damages and attorney’s fees for the first cause, moral damages and attorney’s fees for the second cause, and moral damages and exemplary damages for the third cause of the counterclaim.

Plaintiff appealed the judgment concerning the counterclaim (docketed as Case CA-G.R. No. 25007-R), while defendant also initiated an appeal from the dismissal of his counterclaim which was later dismissed for failure to file his brief.

Before the perfection of the appeal in Civil Case No. 1760, the trial court ordered execution of part of its decision favoring the defendant on August 15, 1958.
Plaintiff then instituted an original action for certiorari and prohibition (Civil Case No. 2386) with the objective of setting aside and annulling the judgment rendered against it.
The Court of Appeals dismissed the petition on June 8, 1959, holding that once the plaintiff was declared in default, its right to appeal was forfeited.
The Supreme Court later reviewed the Court of Appeals’ decision, docketed as Case G.R. No. L-16371, during which the following were noted:

The trial court’s findings regarding the criminal charges, dismissal of said charges for lack of evidence, and testimonial evidence showing absence of deceit by Villanueva.
Specific scrutiny of the third cause of action, which involved the undue execution of the arrest warrant causing public embarrassment to defendant.
The court’s position that review of these factual findings would effectively substitute a petition for certiorari for an appeal, which it refused to entertain.

Plaintiff further argued that the counterclaim’s second cause of action merely restated issues already raised in its complaint. Although the Supreme Court acknowledged that this portion should not have resulted in a default finding, it held that default was proper for the first and third causes.
Later petitions by the plaintiff, including a motion for reconsideration (July 18, 1961) and a second petition (filed after the lower court’s February 14, 1962 dismissal), sought to annul or restrain the execution of the defendant-favored judgment.
Additionally, an urgent petition for a writ of preliminary injunction was filed on November 23, 1962 but was summarily dismissed by the Court.
In the subsequent appeal, the plaintiff persisted with the contention that the trial court lacked authority to award damages on the counterclaims due to absent supporting evidence, specifically arguing against findings of malice in the prosecution of criminal charges.

Whether the trial court properly exercised its discretion in evaluating the evidence and, consequently, in declaring the plaintiff in default for failing to respond to new issues raised in the counterclaim.
Whether the trial court’s decision to award damages on the counterclaims was supported by evidence, particularly regarding the finding of malice in the institution of criminal charges.

Whether a party declared in default retains the right to appeal the issues raised by its counterclaims.
Whether the alleged default should bar the plaintiff from questioning the trial court's authority to award damages despite claims of lack of supporting evidence.

Whether the repeated litigation by the plaintiff over the same issues—particularly the validity of the judgment awarding damages—violates the principle of res judicata.
Whether the attempt to re-litigate the issues, despite previous adjudications in both the Supreme Court and Court of Appeals, is permissible under the rules of law.