G.R. No.

124062 January 21, 1999

REYNALDO T. COMETA and STATE INVESTMENT TRUST,

INC., petitioners,
vs.
COURT OF APPEALS, HON. GEORGE MACLI-ING, in his capacity as
Presiding Judge, Regional Trial Court, Quezon City, Branch 100,
REYNALDO S. GUEVARA and HONEYCOMB BUILDERS,
INC., respondents.

MENDOZA, J.:

This is a petition for review of the decision 1 of the Court of Appeals, dated,
July 28, 1995, affirming the trial courts order denying petitioners' Motion to
Dismiss Civil Case No. Q-93-15691 for alleged failure of private respondents
to state in their complaint a cause of action against petitioners and the
appellate court's resolution, dated March 1, 1996, denying reconsideration of
the same.

Petitioner State Investment Trust, Inc. (SITI), formerly State Investment

House, Inc. (SIHI), is an investment house engaged in quasi-banking
activities. Petitioner Reynaldo Cometa is its president. Private correspondent
Honeycomb Builders, Inc. (HBI), on the other hand, is a corporation
engaged in the business of developing, constructing, and selling townhouses
and condominium units, private respondent Reynaldo Guevara is president
of HBI and chairman of the board of directors of Guevent Industrial
Development Corp., (GIDC).

Sometime in 1979, petitioner SITI extended loans in various amounts to

GIDC which the latter failed to pay on the dates they became due. For this
reason, a rehabilitation plan was agreed upon for GIDC under which it
mortgaged several parcels of land to petitioner SITI. Among those
mortgaged was a Mandaluyong lot covered by TCT No. 462855 (20510).
However, GIDC again defaulted. Hence, petitioner SITI foreclosed the
mortgages and, in the foreclosure sale, acquired the properties as highest
bidder. 2

Alleging irregularities in the foreclosure of the mortgages and the sale of

properties to petitioner SITI, GIDC filed a case entitled "Guevent Industrial
Development Corp., et. al., plaintiffs v. State Investment House Inc. et. al.,
defendants," in the Regional Trial Court of Pasig. The case was eventually
settled through a compromise agreement which became the basis of the trial
court's Judgment. A dispute later arose concerning the interpretation of the
compromise agreement, as respondent HBI offered to purchase from GIDC
the lot covered by TCT No. 462855 (20510) and the latter agreed but
petitioner SITI (the mortgagee) refused to give its consent to the sale and
release its lien on the property. 3 For this reason, GIDC asked the trial court
for a clarification of its decision. 4

Subsequently, the trial court directed petitioner SITI to accept the offer of
respondent HBI to purchase the property covered by TCT No. 462855
(20510). Petitioner SITI appealed the order to the Court of Appeals which
affirmed the same. On appeal to this Court, the decision of the Court of
Appeals was affirmed. 5

Meanwhile, respondent HBI applied to the Housing and Land Use Regulatory
Board for a permit to develop the property in question. Its application was
granted, on account of which respondent HBI built a condominium on the
property called "RSG Condominium Gueventville II." When respondent HBI
applied for a license to sell the condominium units it was required by the
HLURB to submit an Affidavit of Undertaking which in effect stated that the
mortgagee (SITI) of the said property to be developed agrees to release the
mortgage on the said property as soon as the full purchase price of the same
is paid by the buyer. Respondent HBI submitted the required affidavit
purportedly executed by petitioner Cometa as president of SITI
(mortgagee).

Petitioner Cometa denied, however, that he ever executed the affidavit. He

asked the National Bureau of Investigation for assistance to determine the
authenticity of the signature on the affidavit. The NBI found Cometa's
signature on the Affidavit of Undertaking to be forgery on the basis of which
a complaint for falsification of public document was filed against HBI
president Guevara. 6 However, the Rizal Provincial Prosecutor's Office found
no probable cause against private respondent Guevara and accordingly
dismissed the complaint in its resolution of September 25, 1989. 7

Petitioners appealed the matter to then Secretary of Justice Franklin Drilon

who reversed the Provincial Prosecutor's Office and ordered it to file an
information against private respondent Guevara for falsification of public
document. 8Private respondent Guevara moved for a reconsideration of the
aforesaid resolution, but his motion was denied. 9

An information for Falsification of Public Document was thus filed against

private respondent Guevara in the Regional Trial Court of Makati where it
was docketed as Criminal Case No. 90-3018.10 After the prosecution
presented its evidence. Guevara filed a demurrer to evidence which the trial
court, presided over by Judge Fernando V. Gorospe, Jr., granted. 11

Following the dismissal of the criminal case against him, private respondents
Reynaldo S. Guevara and HBI filed a complaint for malicious prosecution
against petitioners Cometa and SITI in the Regional Trial Court of
Quezon City. 12

Petitioners SITI and Cometa filed their respective answers. After the pre-trial
of the case, they filed a joint motion to dismiss with alternative motion to
drop respondent HBI as a party plaintiff, upon the following grounds:13

1. The complaint states no cause of action.

2. Secretary Drilon, Undersecretary Bello and the prosecutor, not

impleaded herein, are the real parties in-interest-defendants,
which again makes the complaint lack a cause of action. At the
least, the above public official are indispensable parties, and
their non-inclusion renders this court with jurisdiction over the
case.

3. The action seeks to impose a penalty on the right to litigate

and for that reason is unconstitutional and against settled public
policy.

On May 30, 1994, the trial court, through Judge George Macli-ing, denied
petitioners' joint motion for the following reasons:

Acting on the MOTION TO DISMISS With Alternative Motion to

Drop Honeycomb Builders, Inc. as Party Plaintiff filed by
Defendants Reynaldo T. Cometa and State Investment House,
Inc. (SIHI) thru counsel, together with the OPPOSITION filed by
Plaintiffs thru counsel, after a thorough perusal of the contents
embodied in said pleadings, the Court in the exercise of its
sound judicial discretion finds that there are sufficient allegations
of cause of action in the Complaint, and in the interest of justice,
the Plaintiff thru counsel should be given an opportunity to
introduce proof in support of his allegations, which could at best
be attained thru a full blown hearing on the merits of the
case. The defense of lack of cause of action, and that defendants
are not the real parties in interest, in the considered opinion of
this Court, are matters of defense, which will be considered,
after the contending parties thru counsel shall have rested their
cases, and the case submitted for Decision.
 As regards the Alternative Motion to Drop Honeycomb Builders,
Inc. as Party Plaintiff, the Complaint shows that Reynaldo
Guevara, is the President, Chairman of the Board and Majority
Stockholder of HBI, the same will likewise be taken into
consideration when proofs will be introduced for or against this
particular matter. At this point in time, let Honeycomb Builders,
Inc. remain as party plaintiff.

Petitioners, in separate motions, asked for a reconsideration but their

motions were denied on August 12, 1994. 15They then filed a petition
for certiorari and prohibition. The Court of Appeals immediately issued a
temporary restraining order on September 22, 1994 and, on October 28,
1994, upon petitioners' posting of a P1,000.00 bond, issued a writ of
preliminary injunction enjoining the trial court from conducting further
proceedings in the case. On July 28, 1995, the Court of Appeals rendered its
decision 16 denying the petition for certiorari and prohibition of petitioners.
Petitioners filed a motion for reconsideration but the appellate court denied
their motion
in a resolution, 17 dated March 1, 1996.

Hence, this petition. The principal question for decision is whether the
complaint filed by private respondents against petitioners in the Regional
Trial Court states a cause of action. First, petitioners maintain it does not as
the allegations in the complaint are insufficient and indispensable parties
were not impleaded in the case. Secondly, they contend that private
respondent HBI should have been dropped as a party plaintiff upon
petitioners' motion therefor.

Both contentions are without merit.

First. A complaint for malicious prosecution sates a cause of action if it

alleges —

1. that the defendant was himself the prosecutor or that at leas he

instigated the prosecution;

2. that the prosecution finally terminated in the plaintiff's acquittal;

3. that in bringing the action the prosecutor acted without probable cause;
and

4. that the prosecutor was actuated by malice, i.e., by improper and sinister
motives. 18
Thus, the question is; whether the facts pleaded and the substantive law
entilte plaintiff to a judgment. 19 Otherwise stated, can a judgment be
rendered upon the facts alleged and deemed admitted, in accordance with
the prayer in the complaint? 20 To resolve this, the allegations of the
complaint must be examined.

Paragraph 12 to 13 21 of the complaint allege that SITI and Cometa

(petitioners herein) filed a complaint against respondent Guevara which led
to the filing by the provincial prosecutor of an information for falsification of
public documents against him (Guevara) in the RTC. It is thus alleged that
petitioners instigated the prosecution of private respondents. 22

Paragraph 17 23 of the complaint alleges that the trial court granted

respondent Guevara's demurrer to the evidence and ordered the dismissal of
the criminal case against him as shown in the order of the trial court
acquitting respondent Guevara, a copy of which is made part of the
complaint. 24 The second requisite, namely, that the criminal case
terminated in the plaintiff's (private respondent Guevara) acquittal is thus
alleged.

With regard to the requirement of malice, paragraphs 7 to 12 and paragraph

1825 of the complaint allege:

1) that a compromise agreement was entered into between GIDC and SITI
in connection with contracts of loan;

2) that in the course of implementing the agreement, HBI offered to

purchase from GIDC one of the mortgaged properties.

3) that GIDC accepted the offer but despite tender of the purchase price,
SITI refused to approve the sale and the release of its mortgage lien on the
property;

4) that a dispute arose between the parties regarding the interpretation and
implementation of the compromise agreement;

5) that GIDC filed a "Motion for Clarification and to Suspend Sales" in the
Regional Trial Court (which had approved the Compromise Agreement),
while SITI filed a "Motion for Execution" praying for consolidation in its favor
of the titles over GIDC's remaining properties;

6) that the trial court granted GIDC's motion and ordered SITI to accept
HBI's offer to purchase one of the mortgaged properties;
7) that SITI's appealed the order to the Court of Appeals and, when it lost,
appealed the matter to the Supreme Court which sustained both the
appellate court and the lower court;

8) that while SITI's appeal was still pending, SITI and its president, Cometa,
filed a criminal case, against Guevara; and

9) that petitioners filed the aforesaid case with the sole intent of harassing
and pressuring (Guevara, in his capacity as chairman of GIDC, to give in to
their illicit and malicious desire to appropriate the remaining unsold
properties of GIDC.

The foregoing statements sufficiently allege malice. These allegations are

averments of malice in accordance with Rule 6, §5 of the Rules of Civil
Procedure which provides:

Sec. 5. Fraud, mistake, condition of mind. — In all averments of

fraud or mistake, the circumstances constituting fraud or
mistake must be stated with particularity. Malice, intent,
knowledge or other condition of the mind of a person may be
averred generally (emphasis added).

Contrary to petitioners' contention, they are not mere conclusions.

As regards the requirement of lack of probable cause,

paragraph 18 26 of the complaint alleges that the criminal case filed had
absolutely no basis in the fact and in law in light of the factual allegations
mentioned earlier and that a reading of the order 27 of the trial court in the
criminal case, a copy of which is annexed to the complaint and made an
integral part thereof, will show that the prosecution failed to establish even
a prima facie case against Guevara. Clearly, the complaint alleges that there
was no probable cause for respondent Guevara's prosecution.

As held in Far East Marble (Phils.), Inc. v. Court of Appeals, 28 a complaint is

sufficient if it contains sufficient notice of the cause of action even though
the allegations may be vague or indefinite, for, in such case, the recourse of
the defendant is to file a motion for a bill of particulars. Pleadings should be
liberally construed so that litigants can have ample opportunity to prove
their claims and thus prevent a denial of justice due to legal technicalities.

It is nonetheless pointed out that the complaint itself alleges that a

preliminary investigation was conducted, that the Secretary of Justice
ordered the filing of the information, and that the trial court issued a warrant
of arrest against private respondent Guevara. Such allegations in the
complaint, petitioners claim, negate the existence of probable cause.
Petitioners cite the case of Martinez v. UFC 29 in which this Court sustained
the dismissal of a complaint for malicious prosecution for failure to state a
cause of action on the basis of similar allegations in the complaint and the
findings of the criminal court in acquitting the plaintiff, which this Court ruled
belied the allegations of malice and want of probable cause in the complaint.

The mere allegation in a complaint for malicious prosecution that an

information was filed after preliminary investigation and that a warrant of
arrest was there after issued does not by itself negate allegations in the
same complaint that the prosecution was malicious. All criminal prosecutions
are by direction and control of the public prosecutor. 30 To sustain
petitionners' stand that an allegation in a complaint for malicious prosecution
that the information in the criminal case was filed after appropriate
preliminary investigation negates a contrary allegation that the filing of the
case was malicious would result in the dismissal of every action for malicious
prosecution.

What was decisive in Martinez was the finding in the criminal case that
complainant had acted in good faith in bringing the charge against accused.
For the fact in that case was that accused was acquitted because, although it
was true he had disposed of properties, he did not do so prior to or
simultaneously with the fraud. There was deceit, but it was not the "efficient
cause" of the defraudation. On this basis, this Court found that in bringing
the case the complainant in that case acted in good faith.

Said this Court: 31

The findings of fact made by the Court in its decision of acquittal

bear materially on the question of malice and want of probable
cause. The evidence, said the court, showed that when the
plaintiff executed the chattel mortgage on the stock inventory in
his store on November 29, 1960 he was the owner the thereof,
and therefore made no false representation when he executed
said mortgage to secure the loan of P58,381.13 he obtained
from the defendant; but that "some weeks or months after
November 29, 1960, with intent to defraud the complainant
United Finance Corporation, the accused succeeded in disposing
of the whole or a part of said store and stock merchandise in
favor of a third part, to the complainant's
prejudice. . ." The basis of the acquittal according to the court,
was that "deceit, to constitute estafa, should be the efficient
cause of the defraudation and as such should either be prior to
 or simultaneous with the act of fraud," citing People vs. Fortune,
73 Phil. 407.

The foregoing facts, alleged in the complaint for malicious

prosecution either directly or by reference to its annexes, show
that in filing the criminal charge the defendant was not actuated
by malice, nor was there want of probable cause. It had been
the victim or deceit committed by the plaintiff, and whether or
not such deceit constituted estafa was a legal question properly
submitted first to the City Fiscal and then to the court after the
necessary preliminary investigation was conducted. The very fact
that the plaintiff's acquittal was based on reasonable doubt as to
his guilt demonstrates that the defendant was justified in
submitting its grievances to the said authorities for ruling and
possible redress.

In contrast, the decision of the criminal court in the present case indicates
that there was not even prima facie evidence to prove the alleged guilt of
the accused. Consequently, a trial was in fact unnecessary and the criminal
court dismissed the case against private respondent Guevara on the basis of
a demurrer to evidence.

A court, dealing with a motion to dismiss an action for malicious prosecution,

has only to determine whether the allegation of the complaint, assuming to
be true, entitle the plaintiff to a judgment. The trial court is not to inquire
into the truth of the allegations. Indeed, it cannot do so without depriving
the plaintiff an opportunity to be heard on his allegations. 32

The case of Martinez is exceptional. This is not the first time we are
clarifying its scope. In Ventura v. Bernabe, 33 we stated:

It is true that in that case of Martinez, this Court sustained the

order of dismissal of the complaint for malicious prosecution
partly because a preliminary investigation had been conducted
by the fiscal who had found probable cause for the filing of an
estafa case against Martinez, but the main consideration for such
action of this Court was the fact that from the recitals in the
judgment acquitting the plainliff, it appeared that although the
court found that said plaintiff had been guilty of deceit, the issue
resolved by the court was that in law such deceit did not
constitute estafa, a matter which had been passed upon by the
fiscal in a different way, naturally, without any fault on the part
of the defendant. In other words, in Martinez case, the findings
of the criminal court in the decision of acquittal negatved the
 imputation of malice on the part of the defendant in charging
plaintiff with estafa before the fiscal.

xxx xxx xxx

For the rest, it might just as well be clarified here, lest some
statements in Martinez and Buenaventura relative to the
materiality of the fiscal's having filed an information on the
question of malice of the accuser may be misunderstood, that
such participation of the fiscal is not decisive and that malice
may still be shown, the holding of a preliminary investigation
and the finding of probable cause by the fiscal notwithstanding.
The same may be said of cases where preliminary investigations
are conducted by judges. The determination of the issue of
malice must always be made to rest on all the attendant
circumstances, including the possibility of the fiscal or judge
being somehow misled by the accuser's evidence. No doubt the
very purpose of preliminary investigations is to avoid baseless
and malicious prosecutions, still, whether or not in a particular
case such an objective has been dully pursued is a matter of
proof . . . .

It is hardly necessary to say that to allow the present action to proceed is

not to impose a penalty on the right to litigate. For trial is still to be
conducted and liability is not automatic. It is only to acknowledge the truism
that —

Just as it is bad to encourage the indiscriminate filing of actions

for damages by accused persons after they have been acquitted,
whether correctly or incorrectly, a blanket clearance of all who
may be minded to charge others with offenses, fancied or
otherwise, without any chance of the aggrieved parties in the
appropriate cases of false accusation to obtain relief, is in Our
Opinion short of being good law. 34

Second. Petitioners contend that the Secretary and the Undersecretary of

the Department of Justice and the Assistant Provincial Prosecutor should
have been included in the case for malicious prosecution because it was they
who found probable cause against private respondents and under the law
the prosecution of criminal actions is vested in the public prosecutor.
According to petitioners, they did not conduct the preliminary investigation
or order the filing of an information and their participation was limited to
initiating the investigation in the NBI and testifying. 35In support of their
contention, they cite the ruling in Lagman v. Intermiediate Appellate
Court 36 which expounded on the ruling in Buenaventura v. Sto. Domingo: 37

The mere act of submitting a case to the authorities for

prosecution does not make one liable for malicious prosecution
for generally, it is the Government or representative of the State
that takes charge of the prosecution of the offense. There must
be proof that the prosecution was prompted by a sinister design
to vex and humiliate a person for if the rule were otherwise,
every acquitted person can turn against the complainant in a
civil action for damages.

There is no merit in this contention. The issue in those cases was not
whether the complaint stated a cause of action against defendants who were
complainants in the criminal cases which led to the filing of civil cases for
damages but whether they were liable to the plaintifs. The Court merely
ruled in those cases that the complainant in the criminal case is not
necessarily liable simply because he initiated the criminal case which
eventually was dismissed. It is noteworthy that, in the case at bar, private
respondents do not allege that petitioners initiated the filing of the criminal
case against them but that because of the evidence they (petitioners)
presented, the Department of Justice could have been induced to order the
filing of a criminal case in court. 38

Third. It is contended that HBI is not a real-party-interest, whatever interest

it may have being purely speculative. 39On this point, we think the Court of
Appeals correctly ruled: 40

Sec. 11 of Rule 3 of the Rules of Court provides:

Misjoinder and non-joinder of parties. Misjoinder of parties is not

a ground for dismissal of an action. Parties may be dropped or
added by order of the court or on motion of any party or on its
own initiative at any stage of the action and on such terms as
are just.

xxx xxx xxx

Given (1) the foregoing rule, (2), the fact that Guevara, in his
capacity as president of of HBI, filed HBI's application to sell at
the HLURB and it was in the same capacity and in connection
with the application that he was criminally charged, and (3) the
allegations in the complaint including that stating that by the
filing of the criminal case against Guevara, "the application of
 HBI with the HLURB for a regular license to sell the condominium
units . . . had been delayed," resulting in the corresponding
delay in the sale thereof on account of which "plaintiffs incurred
over runs in development, marketing and financial costs and
charges, resulting in actual damages," the deferral by public
respondent of petitioners' motion to drop HBI as party plaintiff
cannot be said to have been attended with grave abuse of
discretion. It bears emphasis that the phraseology of Section 11
of Rule 3 is that "parties may be dropped . . . at any stage of the
action.

It is true that a criminal case can only be filed against the officers of a
corporation and not against the corporation itself. 41 It does not follow from
this, however, that the corporation cannot be a real-party-in-interest for the
purpose of bringing a civil action for malicious prosecution.

Lastly, the statement of the judge in the assailed order of May 30, 1994 that
"[t]he defense of lack of cause of action and that the defendants are not the
real parties in interest . . . . are matters of defense" was correctly held by
the appellate court as mere dictum, said judge having earlier stated in the
same order that "there are sufficient allegations of causes of action in the
Complaint."

WHEREFORE, the dedcision of the Court of Appeals is AFFIRMED.1âwphi1.nêt

SO ORDERED.