**Facts:**
1. Isidro M. Ongsip, a businessman in Manila, applied for a gas service connection with Manila Gas Corporation (MGC) on May 20, 1964.
2. MGC installed a 1 x 4 burner gas appliance in Ongsip’s home at Park Avenue, Pasay City.
3. On July 27, 1965, Ongsip requested additional gas appliances and connections for his 46-door Reyno Apartment located in the same compound.
4. MGC installed two water storage heaters, heavy-duty gas burners, and replaced the original gas meter with a larger one.
5. In May and June 1966, MGC noticed no gas consumption registered on the meter, prompting a meter change order.
6. On August 17, 1966, MGC employees, led by Mariano Coronel, replaced the gas meter and provided new tube connections without notifying Ongsip.
7. Later that day, Ongsip was informed by Coronel about a “jumper” and was extorted for P3,000 with the threat of deportation.
8. Ongsip denied the allegations and refused to pay, asserting he was a Filipino citizen.
9. MGC filed a complaint for qualified theft against Ongsip in October 1966, which was later dismissed by the fiscal due to lack of evidence.
10. In February 1967, MGC disconnected Ongsip’s services for alleged non-payment. Ongsip, claiming damage, filed a lawsuit against MGC for moral and exemplary damages in July 1967.
11. The Court of First Instance ruled in favor of Ongsip, awarding moral and exemplary damages, which led MGC to appeal to the Court of Appeals.
12. The Court of Appeals upheld the lower court’s decision, affirming the award, prompting Manila Gas Corporation to seek review in the Supreme Court.
**Issues:**
1. Was the filing of the criminal complaint against Ongsip motivated by malice, constituting malicious prosecution?
2. Was the disconnection of Ongsip’s gas service arbitrary and in breach of contract, thus warranting damages?
3. Are the moral and exemplary damages awarded by the trial court excessive and should they be reduced?
**Court’s Decision:**
– The Supreme Court found the criminal complaint against Ongsip was maliciously prosecuted as it lacked basis and sought to humiliate him. Evidence suggested that MGC’s actions were not substantiated by probable cause but a presumption of guilt.
– The disconnection of Ongsip’s gas service was determined to be arbitrary, as no prior notice of disconnection was given despite the contractual obligation to do so. This constituted a breach of contract.
– The Supreme Court reduced the awards for moral and exemplary damages considering both Ongsip’s status and MGC’s financial standing, reaffirming the rulings while adjusting compensation amounts to P25,000 for moral and P5,000 for exemplary damages (first cause); P15,000 for moral and P5,000 for exemplary damages (second cause); and sustaining P10,000 for attorney’s fees.
**Doctrine:**
– Malicious prosecution requires a showing of malicious intent without probable cause. The mere initiation of judicial proceedings does not constitute it if presumed honest and warranted.
– A utility service’s failure to provide proper notice before a service disconnection may result in damages due to a breach of contract.
– Moral and exemplary damages are judged based on both injury to the aggrieved party and the capacity of the offending party for corrective purposes.
**Class Notes:**
– **Malicious Prosecution**: Requires malice and lack of probable cause (Article 2219, Civil Code).
– **Breach of Contract**: Violating contract terms without notice (Article 21, Civil Code).
– **Moral Damages**: Emotional and reputational injury (Article 2217, Civil Code).
– **Exemplary Damages**: Imposed for corrective purposes (Article 2229, Civil Code).
– **Procedural Requirement**: Proper notice imperative for service termination.
**Historical Background:**
The case takes place in the context of 1960s Philippines, a period of significant industrial expansion and urbanization, which saw increased utility usage amid regulatory strengthening. The case illustrates challenges faced by burgeoning public utilities balancing operational integrity while ensuring customer rights and due process within a contractual framework.
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