Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
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.

DECISION
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 courts 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 courts
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 Cometas 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 Prosecutors 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 Prosecutors Office and ordered it to file an information against private respondent
Guevara for falsification of public document. 8 Private 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 officials 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. 15 They 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 least he instigated the prosecution;
2. that the prosecution finally terminated in the plaintiffs 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 entitle plaintiff to a
judgment. 19Otherwise 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 Guevaras
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 plaintiffs
(private respondent Guevara) acquittal is thus alleged.
With regard to the requirement of malice, paragraphs 7 to 12 and paragraph 18 25 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 GIDCs remaining properties;
6) that the trial court granted GIDCs motion and ordered SITI to accept HBIs offer to purchase
one of the mortgaged properties;
7) that SITI 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 SITIs 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 Guevaras 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 petitioners 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 complainants 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 plaintiffs 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, 33we 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 negated 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 fiscals 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 accusers 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. 35 In
support of their contention, they cite the ruling in Lagman v. Intermediate 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 plaintiffs. 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.39 On 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 HBI, filed
HBIs 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 decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Bellosillo, Puno, Quisumbing and Buena, JJ., concur.

CASE DIGEST

301 SCRA 459 Business Organization Corporation Law Instance Where a Corporation is a
Real Party Interest
Reynaldo Cometa is the president of State Investment Trust, Inc. (SITI), a lending firm. Reynaldo
Guevara is the president of Honeycomb Builders, Inc. (HBI), a real estate developer. Guevara is
also the chairman of the board of Guevent Industrial Development Corp., (GIDC).
GIDC took out a loan from SITI and secured the loan by mortgaging some of its properties to SITI.
GIDC defaulted in paying and so SITI foreclosed the mortgaged assets. GIDC later sued SITI as it
alleged that the foreclosure was irregular. While the case was pending, the parties entered into a
compromise agreement where GIDC accepted HBIs offer to purchase the mortgaged assets. But
SITI did not approve of said proposal.
GIDC then filed a request for clarification with the trial court and the latter directed SITI to accept
the proposal. Meanwhile, HBI filed a request with the HLURB asking the latter to grant them the
right to develop the mortgaged assets. HBI submitted an affidavit allegedly signed by Cometa.
The affidavit purported that Cometa and SITI is not opposing HBIs petition with the HLURB.
Cometa assailed the affidavit as it was apparently forged as proven by an NBI investigation.
Subsequently, Cometa filed a criminal action for falsification of public document against Guevara.
The prosecutor initially did not file the information as he finds no cause of action but the then DOJ
Secretary (Drilon) directed the fiscal to file an information against Guevara.
The case was dismissed. In turn, Guevara filed a civil case for malicious prosecution against
Cometa. Guevara, in his complaint, included HBI as a co-plaintiff.
ISSUE: Whether or not HBI is appropriately added as a co-plaintiff.
HELD: Yes. It is true that a criminal case can only be filed against the officers of a corporation and
not against the corporation itself. But it does not follow that the corporation cannot be a real-
party-in-interest for the purpose of bringing a civil action for malicious prosecution. As pointed out
by the trial judge, and as affirmed by the Court of Appeals, the allegation by Cometa that Guevara
has no cause of action with HBI not being a real party in interest is a matter of defense which can
only be decisively determined in a full blown trial.