Case Summary (G.R. No. 112660)
Factual Background
On 27 September 1984, Rufino Co complained to the Industrial Safety Division that petitioners’ building installations at the ground floor were causing heat and noise and obstructing the leased second-floor area where he manufactured garments. The City Engineer directed petitioners to stop installing air-conditioning units until the required permit would be issued by the office.
When petitioners allegedly failed to comply, the Secretary to the Mayor, based on the City Engineer’s recommendation, ordered the immediate closure of petitioners’ business. Petitioners then made representations that corrective measures had been taken. Consequently, the Secretary to the Mayor issued a Temporary Lifting Order effective for thirty (30) days, allowing petitioners to resume operations. The order required verification by the Bureau of Permits regarding the corrective measures.
Feeling aggrieved, Rufino Co filed an original action for mandamus and prohibition with prayer for preliminary injunction in the Regional Trial Court of Manila. He alleged that the Secretary to the Mayor acted with grave abuse of discretion in issuing the temporary lifting order. Petitioners contended that both the public official and petitioners should be liable for damages due to tortious acts, as alleged by Rufino Co.
Trial Court Proceedings and Initial Outcome
The Regional Trial Court issued a temporary restraining order enjoining implementation of the thirty-day lifting order. After an ocular inspection, the trial court lifted the restraining order, finding that petitioner Co was not disturbed because the leased premises were not physically occupied except for one overseer managing the stocks.
In the Regional Trial Court, petitioners denied that Rufino Co operated his garments factory on the second floor and denied that their installations generated heat and noise. Petitioners also filed a counterclaim for damages and raised an affirmative defense that Rufino Co had no cause of action because petitioners had already undertaken corrective measures at the time the complaint was filed, as shown by permits issued by the City Engineer’s Office.
The public respondents filed an answer alleging that Rufino Co’s complaint stated no cause of action against them because the permits had been issued after the government verified petitioners’ compliance with building requirements.
After hearing, the Regional Trial Court, Branch 26, Manila issued a decision dated 18 April 1991 dismissing Rufino Co’s complaint. It also ordered Rufino Co to pay petitioners actual, moral and exemplary damages, and attorney’s fees. The trial court ruled that there was no cause of action against the public respondents because they had verified compliance and issued permits. It further held that there was no cause of action against petitioners because the permits were already issued prior to the filing of Rufino Co’s complaint.
Appeal in the Court of Appeals: Dismissal Affirmed, Damages Deleted
Rufino Co appealed. The Court of Appeals upheld the dismissal of the complaint but deleted the award of damages to petitioners. Thus, the petition before the Court sought a reversal of the Court of Appeals’ deletion of damages.
Petitioners assigned errors contending, first, that the Court of Appeals erred in not sustaining the trial court’s award of actual, moral and exemplary damages, and second, that even assuming damages were warranted, damages could not be limited only to recovery against a bond. Petitioners argued that Rufino Co had no cause of action because he was not using the second-floor premises for his business when he filed the complaint. They further argued that alleged defects had already been corrected and the required permits had already been issued at the time the complaint was filed. Petitioners maintained that ill-motive or bad faith could be inferred from these circumstances and justified an award of damages.
The Supreme Court’s Core Issue
The Court framed the only issue as whether Rufino Co acted with bad faith or ill-motive in filing his complaint that would entitle petitioners to damages. The Court stressed that the law presumes good faith, and that the party seeking damages must prove the other acted in bad faith or with ill-motive.
The Court treated petitioners’ counterclaim as one essentially for damages on the footing of malicious prosecution, even though the complaint in the case was civil in nature. The Court reiterated the doctrine that malicious prosecution generally refers to unfounded criminal prosecutions, but the term has been expanded to include baseless civil suits filed without a cause of action or probable cause, and intended to harass or humiliate a defendant.
Legal Basis and Reasoning on Bad Faith / Malice
The Court relied on the rule articulated in Ponce v. Legaspi, holding that malice and lack of probable cause must both be clearly shown to justify damages based on malicious prosecution. Applying that requirement, the Court adopted the Court of Appeals’ findings that rejected damages for lack of the necessary malice.
The Court of Appeals had found that the awards for damages allegedly occasioned by the issuance of a restraining order had no basis. It reasoned that the trial court had lifted the restraining order on December 14, 1984, after an ocular inspection showed that the premises were not physically occupied except by the overseer, and that the restraint had been lifted to avoid further damage to Rufino Co’s business. The Court of Appeals observed that the counterclaim for actual damages was premised on allegations that Rufino Co’s representations had led to the closure of petitioners’ business for six days. However, it held that the allegations in Rufino Co’s verified petition, including those relied upon for issuance of the restraining order, were not shown to be malicious.
The Court of Appeals described the sequence of government action that formed Rufino Co’s theory. It explained that the petition attacked the closure lifting order based on the claim that the closure lifting order was issued despite a directive to petitioners to correct and legalize their installation, which petitioners allegedly had violated under the City ordinances and the National Building Code. It further noted that Rufino Co’s letter-complaint was investigated by Safety Engineers, who reported that the complaint was substantially correct and that no mechanical installation permit had been issued at that time. It was only after petitioners represented that deficiencies had been corrected that the closure order was temporarily lifted, and the lifting order indicated that the corrective measures were still subject to further verification as of October 22, 1984, when the lifting order was issued.
The Court of Appeals concluded that when the petition was filed on November 22, 1984, questioning the issuance of the temporary lifting order and praying for enforcement of the
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Case Syllabus (G.R. No. 112660)
- The petitioners were the Spouses Antonio Chua and Virginia Chua, who sought review under Rule 45 of the Rules of Court of a Court of Appeals decision in CA-G.R. SP No. 29391 dated 30 June 1993.
- The respondents were the Court of Appeals and Rufino Co.
- The controversy arose from a mandamus and prohibition action with prayer for preliminary injunction filed by Rufino Co in the Regional Trial Court of Manila, after the issuance of a “Temporary Lifting Order” by the Secretary to the Mayor.
- The Regional Trial Court, Branch 26, Manila dismissed Rufino Co’s complaint and awarded actual, moral and exemplary damages plus attorney’s fees to the spouses Chua.
- On appeal, the Court of Appeals upheld the dismissal of the complaint but deleted the award of damages to the spouses Chua.
- The present petition focused solely on whether Rufino Co acted with bad faith or ill-motive in filing his complaint, thereby entitling the spouses Chua to damages.
Parties and Procedural Posture
- Rufino Co operated a garments manufacturing business as lessee of the second floor of a building at No. 804 Ilaya St., Binondo, Manila.
- The spouses Chua operated a “Jollibee Yumburger” establishment on the ground floor of the same building.
- On 27 September 1984, Rufino Co filed a complaint with the Industrial Safety Division of the Manila City Engineer’s Office.
- The City Engineer directed the spouses Chua to stop installing air-conditioning units, a water tank, and exhaust fans, absent the required permit.
- After non-compliance, the Secretary to the Mayor, upon the City Engineer’s recommendation, issued an order to immediately close the spouses Chua’s business.
- The spouses Chua secured a “Temporary Lifting Order” effective for thirty (30) days, subject to later verification of alleged corrective measures.
- Discontented with the temporary lifting, Rufino Co filed an original action for mandamus and prohibition in the Regional Trial Court of Manila with a prayer for preliminary injunction.
- The trial court issued a temporary restraining order enjoining implementation of the lifting order, but later lifted it after an ocular inspection.
- The trial court ultimately dismissed the complaint, finding no cause of action against the public respondents and no cause of action against the spouses Chua due to the prior issuance of necessary permits.
- The Court of Appeals affirmed the dismissal but struck the damages award.
- The spouses Chua then elevated the matter to the Supreme Court, challenging only the denial of damages based on malicious prosecution-type liability.
Key Factual Allegations
- Rufino Co alleged that the spouses Chua’s installation of air-conditioning units, a water tank, and exhaust fans obstructed the second floor and caused heat and noise.
- The City Engineer initially treated the installation as unauthorized and directed the spouses to stop until a permit was issued.
- The City authorities closed the spouses Chua’s establishment but later granted temporary relief after representations of corrective measures.
- The Temporary Lifting Order was expressly made subject to verification by the Bureau of Permits of the corrective measures.
- Rufino Co claimed that the Secretary to the Mayor committed grave abuse of discretion by issuing the temporary lifting order.
- The trial court’s ocular inspection found that Rufino Co was not disturbed because the leased premises were not physically occupied except for an overseer tending to the stocks.
- The spouses Chua denied that Rufino Co operated a garments factory on the second floor and disputed the alleged heat and noise.
- The spouses Chua asserted as a special and affirmative defense that, by the time the petition (complaint) was filed, they had already taken corrective measures and had obtained the relevant permits.
- The spouses Chua also sought damages by counterclaim, imputing ill-motive/bad faith to Rufino Co.
- The public respondents denied liability by asserting that permits had been issued only after verification of compliance with building requirements.
Issues Raised on Appeal
- The spouses Chua assigned errors limited to the non-award of actual, moral and exemplary damages, and to the proposition that an award for damages could only be claimed against a bond.
- The Supreme Court distilled the controversy to a single issue: whether there was bad faith or ill-motive on the part of Rufino Co i