Cometa v. CA

G.R. No. 124062 (January 21, 1999)

SC upheld the CA's ruling allowing a malicious prosecution complaint against Cometa and State Investment.

Facts:

Petitioner State Investment Trust, Inc. (SITI), formerly known as State Investment House, Inc. (SIHI), is an investment house engaged in quasi-banking activities, with Reynaldo Cometa as its president. Private respondent Honeycomb Builders, Inc. (HBI) is a corporation involved in developing, constructing, and selling townhouses and condominium units, with Reynaldo Guevara as its president and chairman of the board of directors of Guevent Industrial Development Corp. (GIDC).

In 1979, SITI extended loans to GIDC, which subsequently defaulted. A rehabilitation plan was established, wherein GIDC mortgaged several parcels of land to SITI, including a lot in Mandaluyong covered by TCT No. 462855. After GIDC defaulted again, SITI foreclosed on the mortgages and acquired the properties as the highest bidder.

GIDC later filed a case against SITI alleging irregularities in the foreclosure and sale of properties, which was settled through a compromise agreement. A dispute arose when HBI offered to purchase the Mandaluyong lot from GIDC, but SITI refused to consent to the sale and release its lien. GIDC sought clarification from the trial court, which directed SITI to accept HBI's offer. SITI's appeal to the Court of Appeals and subsequently to the Supreme Court affirmed the trial court's order.

While the appeal was pending, HBI applied for a permit to develop the property, which was granted. HBI built a condominium on the property and submitted an Affidavit of Undertaking to the Housing and Land Use Regulatory Board (HLURB), stating that SITI would release the mortgage upon full payment. Cometa denied executing the affidavit, leading to an investigation by the National Bureau of Investigation (NBI), which found the signature to be a forgery. A complaint for falsification of public documents was filed against Guevara, but the Rizal Provincial Prosecutor's Office dismissed it for lack of probable cause. The Secretary of Justice later reversed this decision, leading to the filing of an information against Guevara.

After the trial court dismissed the criminal case against Guevara, he and HBI filed a complaint for malicious prosecution against Cometa and SITI in the Regional Trial Court of Quezon City. Petitioners filed a motion to dismiss, arguing that the complaint failed to state a cause of action and that indispensable parties were not included. The trial court denied the motion, leading to a petition for certiorari and prohibition before the Court of Appeals, which also denied the petition.

Legal Issues:

  1. Does the complaint for malicious prosecution filed by private respondents state a cause of action against petitioners?
  2. Were the allegations in the complaint sufficient to establish the elements of malicious prosecution?
  3. Should HBI be dropped as a party plaintiff in the case?

Arguments:

Petitioners' Arguments:

  • The complaint does not state a cause of action as it lacks sufficient allegations and indispensable parties were not impleaded.
  • The prosecution was initiated by the Secretary of Justice and the Undersecretary, who are the real parties in interest.
  • HBI's interest in the case is speculative, and thus it should be dropped as a party plaintiff.

Respondents' Arguments:

  • The complaint sufficiently alleges the elements of malicious prosecution, including instigation of the prosecution, termination in acquittal, lack of probable cause, and malice.
  • The inclusion of HBI as a party plaintiff is justified as it was directly affected by the criminal case against Guevara.

Court's Decision and Legal Reasoning:

The Court affirmed the decision of the Court of Appeals, holding that the complaint for malicious prosecution states a cause of action. The Court outlined the elements required for such a complaint, which include:

  1. The defendant was the prosecutor or instigated the prosecution.
  2. The prosecution terminated in the plaintiff's acquittal.
  3. The prosecution was initiated without probable cause.
  4. The prosecutor acted with malice.

The Court found that the allegations in the complaint met these requirements. Specifically, it noted that the complaint detailed how petitioners instigated the prosecution against Guevara, how the criminal case was dismissed, and how the prosecution lacked a basis in fact and law. The Court emphasized that the trial court's role in a motion to dismiss is to determine whether the allegations, if true, entitle the plaintiff to a judgment, without delving into the truth of the allegations.

Regarding the inclusion of HBI as a party plaintiff, the Court ruled that misjoinder or non-joinder of parties is not a ground for dismissal of an action, and the trial court has discretion to allow parties to be added or dropped as necessary.

Significant Legal Principles Established:

  • A complaint for malicious prosecution must allege specific elements, including instigation of prosecution, acquittal, lack of probable cause, and malice.
  • The trial court's role in assessing a motion to dismiss is limited to determining whether the allegations in the complaint, if true, would entitle the plaintiff to relief.
  • Misjoinder of parties does not warrant dismissal of a case; courts have discretion to manage parties in litigation.