CARLOS M. SISON, PLAINTIFF AND APPELLEE VS. GONZALO D. DAVID, DEFENDANT AND APPELLANT.

In his amended complaint, herein plaintiff, Carlos Moran Sison, seeks
to recover P50,000 by way of damages, and P5,000.00 as attorneys fees,
in addition to costs. Defendant Gonzalo D. David answered admitting
some allegations if the amended complaint, denying other allegations
thereof, alleging some special and affirmative defenses, and setting up
a counterclaim. In due course, on December 10, 1954, the Court of First
Instance of Manila gave judgment for the plaintiff in the sums of
P5,000, as moral damages, and P1,000 as attorney’s fees, besides the
costs. Subsequently, the court motu proprio rendered an amended
decision, dated December 29, 1954, finding no merit in defendant’s
counterclaim and increasing the award in plaintiff’s favor to P15,000
as moral damages, and P3,000.00 as attorney’s fees, aside from costs.
Defendant appealed from this amended decision to the Court of Appeals,
which, considering that the sum awarded in said decision plus the
amount claimed in the first three (3) causes of action set forth in
defendant’s counter claim aggregated P173,000.00, forwarded the records
to this Court, pursuant to section 17 of Republic Act No. 296. Although
this Act was subsequently amended by Republic Act No. 2613 to increase
the exclusive appellate jurisdiction of the Court of Appeals, insofar
as civil cases decided by courts of first instance are concerned, to
those in which the value in controversy does not exceed P200,000.00, we
retain such appellate jurisdiction over this appeal, for the pertinent
facts are not disputed, and the issues raised in the appeal hinge on
the conclusions deducible from said facts and the law applicable
thereto (Section 17, subparagraph [6], of Republic Act No. 296.)

It appears that on December 20, 1938, Margarita David executed a will
constituting several legacies in favor of specified persons and naming
her grand nieces Narcisa de la Fuente de Teodoro and her sister
Priscilla de la Fuente de Sison—hereafter referred to as Mrs. Teodoro
and Mrs. Sison, respectively—as heirs of the residue of her estate,
subject, however, to the condition that, if Mrs. Teodoro and Mrs. Sison
should die leaving no descendants, the properties inherited by these
sisters shall pass one-half to the heirs of the father of the testatrix
and the other half to the heirs of her mother. Herein defendant Gonzalo
D. David is one of such heirs of the parents of Margarita David. On
October 21, 1939, Mrs. Teodoro and Mrs. Sison were legally adopted by
Margarita David as her children. Soon later, or on September 6, 1940,
Margarita David, donated to said sisters practically the same
properties bequeathed to them in her aforementioned will. Upon the
demise of Margarita David, in Manila, on February 24, 1941, Special
Proceeding No. 58881 of the Court of First Instance of Manila was
instituted for the settlement of her estate, and Jose Teodoro, Sr., was
originally appointed executor of the aforementioned will, whereas
Gonzalo D. David, who is a member of the Bar, acted as his counsel.
Subsequently, Mrs. Teodoro and Mrs. Sison extra-judicially partitioned
among themselves the properties bequeathed and donated to them by
Margarita David. Plaintiff herein, Carlos Moran Sison, is the husband
of Mrs. Sison.

On or about May 9, 1950, defendant herein
caused to be annotated on the titles of several lands acquired by Mrs.
Sison as above stated a notice of adverse claim, for the fees of Jose
Teodoro, Sr., as executor of the will of Margarita David, and his
(defendant’s) fees as counsel for said executor. It turned, however,
that on or about February 28, 1949, said properties were assigned by
Mrs. Sison to Priscila Estate, Inc.—a corporation organized on that
date by her and plaintiff herein, aside from some nominal parties—in
exchange for shares of stock thereof. Hence, on September 8, 1951, said
corporation filed with the Court of First Instance of Manila, in
G.L.R.O. Cadastral Record No. 99, an “Urgent Petition Ex-Parte” to lift
defendant’s adverse claim, insofar as one of the above-mentioned
properties—that covered by Transfer Certificate of Title No. 20338 of
the office of the Register of Deeds of Manila and located at the
intersection of Sto. Cristo and M. de Santos streets, San Nicolas,
Manila—upon the ground that said property belonged already to the
corporation which wanted to sell it, and that there were other
properties of the estate of Margarita David which sufficed to answer
for said adverse claim. The motion was granted by an order of the same
date, “provided that should any objection be interposed later on”, the
movant “obligates itself to file the corresponding bond to satisfy”
what may be due to the adverse claimants.

On September 26,
1951, defendant herein filed in said cadastral proceedings, on his
behalf and that of Jose Teodoro, Sr., a “Petition for Bond”, praying
that the sale of the property at Sto. Cristo street be disapproved
“and/or a bond of P12,000 be forthwith furnished” by the Priscila
Estate, Inc. In support of this petition, which led to the institution
of the case at bar, defendant alleged, in paragraphs 2 to 7 thereof:

“2.
That the movants herein object to the urgent petition ex-parte on the
ground that the property to be sold herein is one of the few properties
inherited from Da. Margarita David; which is not encumbered, because
practically all of the properties of the heiress Priscila F. de Sison
are mortgaged, and the Priscila Estate, Inc., is operating on an
overdraft, which is the reason why these properties are to be sold;

“3. That
the reason there is an overdraft is that new buildings or improvements
have been made as conjugal properties of Carlos Sison and Priscila de
la Fuente, and now, the paraphernal properties inherited from Da.
Margarita David is being sold to pay for the obligations of these
conjugal properties;

“4. That if the movants were
informed or served copy of this petition to sell the property, they
would have objected because it is in contravention of the
provisions of the Last Will and Testament of the late Da. Margarita
David to the effect that if Priscila de la Fuente dies without
descendants, then the inheritance will go to Narcisa de la Fuente, and
vice versa, and if both of them die, then all the properties of the
late Da. Margarita David will be divided as follows: One-half of all
the properties would go to the legatees on her father’s side and other
half of all the properties would go to the legatees on her mother’s side;

“5. That of course, the incidental remedy would be to show where the
said properties or the proceeds thereof went in case the above
conditions should occur, and what properties were acquired in lieu of
the same, considering the earning of the properties and the expenses
therein;

“6. That answering the statement of petitioner
that there are other valuable properties of the estate, still annotated
with the adverse claim, it is respectfully offered that the said
properties are mortgaged and in case of foreclosure, the adverse claim
is relegated to a subsequent position as posterior to the mortgages
Inscribed on the back of the aforesaid titles;

“7. That the
properties mentioned in par. 4 of the ex-parte petition, namely,
One-half pro-in-diviso interest of the lands in TCT Nos. 21063,
Pampanga, composed of 3 lots, are assessed at P3,748.31, and 12861,
Pampanga, composed of 2 lots, are assessed at P1,614.39, and TCT No.
12829, Pampanga, composed of 2 parcels, are assessed at P12,677.58, and
the Manila property (land only) in TCT No. 60851, composed of 2 lots in
Tondo, are assessed at P846.00, so that all in all the said properties
actually are assessed at P9,020.14 plus P846.00 for Manila or
P9,866.14, and are insufficient to meet the P17,000.00 claim of the
Estate of Sideco, the Executor’s fee of P4,000.00 with interest, and
the attorney’s fees of P5,000.00, which may still be increased on
appeal.”

Soon later, or on October 6, 1951,
plaintiff commenced the present action. In his amended complaint
therein, he alleged that the averment in the above-quoted paragraph 2
was made with malice and evident intent to put him in ridicule, for
defendant knew him (plaintiff) to be the president of Priscila Estate,
Inc. and, by the statements contained in said paragraph, the defendant,
“in effect, implied with clear malevolence and malignity that plaintiff
is incompetent and unfit to manage the affairs of the Priscila Estate,
Inc.”; that in paragraph 3 of defendant’s petition for bond, he alleged
that plaintiff “has been converting the paraphernal properties of his
wife into conjugal, thus clearly implying that he, the plaintiff, has
been and still is, scheming to enrich himself at the expense of his
spouse”, which allegation is “utterly false and completely irrelevant
and immaterial to the point at issue”; that the clear implication of
the above-quoted paragraph 4 is that the aforementioned urgent petition
ex-parte of Priscila Estate, Inc. “was inspired by the condemnable
desire of the plaintiff as president of Priscila Estate, Inc., to avoid
the supposed fideicommissary provision of the Last Will and Testament
of the late Margarita David so that he could enrich himself at the
expense of the relatives of Margarita David who might eventually
inherit the properties of Priscila de la Fuente de Sison”; that the
allegations in said paragraph 4 were “irrelevant to the point raised”
in defendant’s “Petition for Bond”; that as a lawyer, defendant knew
that said allegations were “unfounded in law”, the aforementioned
fideicomissary provision having been nullified and rendered inoperative
when Margarita David adopted Mrs. Teodoro and Mrs. Sison and,
thereafter, donated to them “practically all the properties” disposed
of in said will; that said allegations in defendant’s “Petition for
Bond” were “clearly uncalled for and unnecessary”; and that, on account
of the allegations made, in the three (3) paragraphs above mentioned,
plaintiff “suffered, and is still suffering, from mental anguish,
serious anxiety, wounded feeling, moral shock and social humiliation”,
for which he should be indemnified in the sums stated at the beginning
of this decision.

In his answer, defendant denied that his
aforementioned allegations were tainted with malice and the intent of
slandering the plaintiff and averred that they were proper and
necessary to protect his interests and those of his client Jose
Teodoro, Sr.; that the petition for bond, in which said allegations
were contained, is an absolutely privileged communication; and that
plaintiff has no cause of action against him, for the party in
interests in G.L.R.O. Cadastral Record No. 99 in which said petition
had been filed, was Priscila Estate, Inc., not plaintiff herein.

Defendant further set a counterclaim, with four (4) causes of action.
The first was based upon the fact that, in an “opposition” filed by the
plaintiff, through his counsel, in the aforementioned Special
Proceeding No. 58881, on March 31, 1951, the following allegedly
“impertinent”, “false” and “scandalous” statements were maliciously and
illegally made:

“Why, if we do not watch
out, some day we shall again be confronted with another petition for
additional counsel’s fees by Gonzalo David for filing his present
Supplemental Petition for Counsel’s Fees. And if this goes on, we might
hear the end of this Testate Estate but, surely, never the end of
David’s claim for attorney’s fees.”

*           *           *           *

“Merely
to read the foregoing relation of alleged legal services rendered by
Gonzalo David is to laugh. One gets the impression that David’s time is
more precious than gold and that for him to merely read or receive
anything pertaining to this Testate Estate must cost some money. What a
man!”

*           *           *            *

“This
claim for associate attorney’s fees is ridiculous. It betrays an
unpardonable ignorance of the law on the part of Attys. Gonzalo David
and Jesus Ocampo who claim to have ‘a well-established law office in
Escolta, Manila’.

“It might be purely coincidental, but the
amount of ten (10%) percent being asked for by Gonzalo David sounds
very familiar. Is it possible that ten percenters have arrived even in
the halls of justice? Some people, it would seem, need the reminder
that our courts have no similarity whatsoever with the Import Control
Administration.”

By way of second cause of
action, defendant asserted that, in a motion filed, on August 7, 1951,
in said special proceeding, plaintiff, through his counsel, made the
following “malicious, scurrilous, scandalous, false * * * and
irrelevant” allegation:

“Surely, there must
be a limit to judicial generosity, especially if such generosity would
inevitably jeopardize the interest of the heirs who are entitled to
protection by this Court from lawyers who already had been overpaid. If
this present tendency continues, Gonzalo David, the frustrated heir,
might yet blossom into a forced one.”

As
third cause of action, defendant alleged that on September 28, 1951,
plaintiff “without any basis or reason, whatsoever, maliciously and
illegally filed a criminal complaint for libel” against the defendant
in the office of the City Fiscal of Manila, who dismissed the charge
because it was “wanting in basis, reason and merit.”

In each
one of the aforementioned three (3) causes of action, defendant
alleged, also, that, in consequence of the plaintiff’s acts therein
described, he (defendant) has suffered and continues to suffer from
mental anguish, serious anxiety, besmirched reputation, wounded
feelings, moral shock and social humiliation, because of which he
prayed for judgment against the plaintiff in the sum of P50,000.00 for
each cause of action.

Defendant’s last cause of action is
premised upon the allegation that, owing to the unjustified and
unjustifiable complaint filed in this case, he (defendant) had to avail
himself of the services of counsel at an expense of P10,000.00, which
plaintiff should be made to pay.

The amendment motu proprio
made by the lower court on December 29, 1954, of its decision dated
December 10, 1954, is assailed by the defendant as a nullity, upon the
ground that none of the parties had filed any motion or petition
therefor, and that said amendment did not involve a correction of mere
clerical mistakes, but a substantial modification, not only of the
award for the plaintiff, but, also, of the findings of fact and the
reasons for said award. There is no merit in this pretense, for the
amended decision was rendered nineteen (19) days after the promulgation
of the original decision, or within the reglementary period to appeal
therefrom, and before any appeal had been taken by the parties herein,
so that the lower court still had jurisdiction and control over the
case. Moreover, said amendment is authorized by Rule 124, section 5, of
the Rules of Court, pursuant to which “every court shall have power * *
* to amend and control its processes and orders so as to make them
conformable to law and justice.”

Defendant has made several
assignments of error, contesting propriety of the conclusions made in
the decision appealed from on the merits of plaintiff’s amended
complaint and the demerits of defendant’s defenses. In this connection,
we note that the lower court sustained the former, and rejected the
latter, upon the ground that the allegations in defendant’s petition
for bond “are based on malicious and unfounded grounds”; that said
petition is a qualifiedly privileged communication, because the
privilege exists only if the allegations therein are pertinent or
relevant to the case; that said allegations “were impertinent and
irrelevant to the issue then under inquiry, for all he (defendant)
wanted in said petition was the filing of a, bond”; and that the
defendant went out of his way to harass and cause damage to the
plaintiff, for the former had caused his adverse claim to be annotated
on property worth much more than the amount of said claim, for which
reason said annotation is “presumed” to have been made “with malice.”

At the outset, it should be noted that the pertinency or relevancy
essential to the privilege enjoyed in judicial proceedings, does not
make it a “qualified privileged” within the legal connotation of the
term. Otherwise, all privilege communications in judicial proceedings
would be qualified, and no communications therein would be absolutely
privileged, for the exemption attached to the privilege in said
proceedings never extends to matters which are patently unrelated to
the subject of the inquiry. The terms “absolute privilege” and
“qualified privilege” have established technical meanings, in
connection with civil actions for libel and slander.

In the language of Corpus Juris Secundum:

“For
the sake of clearness of application privileged communications are
often divided into two classes: Absolute privilege; and conditional or
qualified privilege, the second sometimes being called ‘quasi
privilege.’ In cases of absolutely privileged communications, the
occasion is an absolute bar to the action; whereas, in cases of
conditionally or qualifiedly privilege communications, the law raises
only a prima facie presumption in favor of the occasion. In the former
class the freedom from liability is said to be absolute or without
condition, regardless of the existence of express malice, as contrasted with such freedom in the flatter class where it is said to be conditioned on the want or absence of express malice.” (53 C. J. S., 141-142.)

“An absolutely privileged communication is one for which, by reason of the occasion on which it is made, no remedy is provided for the damages in a civil action for slander or libel. It is well settled that the law recognizes this class of communications which is so absolutely privileged that even the existence of express malice does not destroy the privilege,
although there are some dicta denying the rule, and some eminent
judges, in dealing with particular applications of the rule, have
doubted or questioned the rationale or principle of absolutely
privileged communications. As to absolutely privileged communications, a civil action for libel or slander is absolutely barred.” (53 C. J. S., p. 142.)

“Qualified
privilege exists in a larger number of cases than does absolute
privilege. It relates more particularly to private interests; and
comprehends communications made in good faith, without actual malice,
with reasonable or probable grounds for believing them to be true, on a
subject matter in which the author of the communication has an
interest, or in respect to which he has a duty, public, personal, or
private, either legal, judicial, political, moral, or social, made to a
person having a corresponding interest or duty. Briefly stated, a
qualifiedly privileged communication is a defamatory communication made
on what is called an occasion of privilege without actual malice, and as to such communications there is no civil liability, regardless of whether or not the communication is libelous per se or libelous per quod.” (53 C. J. S., pp. 143-144.)

“In
the case of communications qualifiedly privileged, there must be both
an occasion of privileged and the use of that occasion in good faith.” (53 C. J. S., p. 145.)

To the same effect is the American Jurisprudence, from which we quote:

“On
the ground of public policy, the law recognizes certain communications
as privileged and, as such, not within the rules imposing liability for
defamation. A privileged communication or statement, in the law of
libel and slander, is one which, except for the occasion on which or
the circumstances under which it is made, would be defamatory and
actionable.

“Privileged communications are divided into two
general classes namely: (1) those which are absolutely privileged; and
(2) those which are qualifiedly or conditionally privileged, as defined
in subsequent sections.” (33 Am. Jr., p. 123).

“An
absolutely, privileged communication is one in respect of which, by
reason of the occasion on which, or the matter in reference to which,
it is made, no remedy can be had in a civil action, however hard it may
bear upon a person who claims to be injured thereby, and even though, it may have been made maliciously.” (33 Am. Jur. pp. 123-124.)

“A
publication is conditionally or qualifiedly privileged where
circumstances exist, or are reasonably believed by the defendant to
exist, which cast on him the duty of making a communication to a
certain other person to whom he makes such communication in the
performance of such duty, or where the person is so situated that it
becomes right in the interest of society that he should tell third
persons certain facts, which he in good faith proceeds to do. This general idea has been otherwise expressed as follows: A communication made in good faith
on any subject matter in which the person communicating has an
interest, or in reference to which he has a duty, is privileged if made
to a person having a corresponding interest or duty, even though it
contains matter which, without this privilege would be actionable, and
although the duty is not a legal one, but only a moral or social duty
of imperfect obligation. The essential elements of conditionally
privileged communication may accordingly be enumerated as a good faith,
an interest to be upheld, a statement limited in its scope to this
purpose, a proper occasion, and publication in a proper manner and to
proper parties only.” (33 Am. Jur., pp. 124-125.)

Newell, in his work on the The Law of Slander and Libel, 4th ed., uses the following language:

“Absolute
Privilege.—In this class of cases it is considered in the interest of
public welfare that all persons should be allowed to express their
sentiments and speak their minds fully and fearlessly upon all
questions and subjects; and all actions for words so spoken are
absolutely forbidden, even if it be alleged and proved that the words
were Spoken falsely, knowingly and with express malice.” (Section 350, pp. 387-388.)

“In
the less important matters, however, the interests and welfare of the
public do not demand that the speaker should be freed from all
responsibility, but merely require that he should be protected so far as he is speaking honestly
for the common good. In these cases the privilege is said not to be
absolute but qualified; and a party defamed may recover damages
notwithstanding the privilege if he prove that the words were not used in good faith,
but that the party availed himself of the occasion willfully and
knowingly for the purpose of defaming the plaintiff.” (Section 389, p.
415; italics supplied.)

Apart from the
occasion in which or the matter in reference to which it is made, what
distinguishes an absolutely privileged communication from one which is
only qualifiedly privileged is, therefore, that the latter is
actionable upon proof of “actual malice”, whereas its existence does
not affect the exemption attached to the former, provided that, in the
case of judicial proceedings, the derogatory statements in question are
pertinent, relevant or related to or connected with the subject matter
of the communication involved. Under peculiar situations, a few
decisions have required probable cause for the enjoyment of the
absolute privilege, but such” decisions not only do not reflect the view of the clear weight of authority, but, also, have acknowledged the wisdom
of such view, although its non-application was sought to be justified
by the special conditions obtaining in each case (See Harshaw vs. Harshaw, 136 ALR, 1411, 1413).

The reason underlying the general rule on absolutely privileged
communications is set forth in the American Jurisprudence as follows:

“The class of absolutely privileged communications is narrow and is practically limited to legislative and judicial
proceedings and other acts of state, including, it is said,
communications made in the discharge of a duty under express authority
of law, by or to heads of executive departments of the state, and
matters involving military affairs. The privilege is not intended so
much for the protection of those engaged in the public service and in
the enactment and administration of law, as for the promotion of the
public welfare, the purpose being that members of the legislature,
judges of courts, jurors, lawyers, and witnesses may speak
their minds freely and exercise their respective functions without
incurring the risk of a criminal prosecution or an action for the
recovery of damages.” (33 Am. Jur., 123-124.)

It is, thus, clear that utterances made in the course of judicial
proceedings, including all kinds of pleadings, petitions and motions,
belong to the class of communications that are already absolutely
privileged” (Newell on The Law of Slander and Libel, 4th ed., pp. 388,
391-392, 407; 53 C.J.S. 165, 167, 173; 33 Am. Jur., 142-143, 144-145,
147; Tupas vs. Parreño, L-12545 [April 30, 1950]). As the Supreme Court of Tennessee has put it:

“For reasons of public policy which looks to the free and unfettered administration of justice, it appears to be the prevailing rule in the United States that statements made in a pleading in a civil action are absolutely privileged and no action for libel may be founded thereon when pertinent and relevant to the subject under inquiry, however false and malicious
such statements may be. 33 Am. Jur., 144, 145, Libel and Slander S.
149; 16 ALE 746, supplemented in 42 ALR 878 and 134 ALR 483.” (Hayslip vs. Wellford, 195 Tenn. 621, 263, SW 2d 136, 42 ALR 2d 820.)

Hence, the “petition for bond” of defendant herein is absolutely
privileged, and no civil action for libel or slander may arise
therefrom, unless the contents of the petition are irrelevant to the
subject matter thereof.

In this connection, the lower court
appears to have labored under the impression that the only remedy
therein sought was “the filing of a bond”. However, defendant
specifically prayed in said petition that the sale intended to be made
by Priscila Estate, Inc. be disapproved “and/or the bond of P12,000 be
forthwith furnished by” said corporation. Moreover, the body of the
petition clearly indicates that said prayer for disapproval of the sale
was merely a subtle and tactful way of seeking a reconsideration of the
order of September 8, 1951 granting plaintiff’s urgent petition
ex-parte of the same day, copy of which was served on the defendant two
days after the filing of said urgent petition and the issuance of said
order. Indeed, it is alleged in the petition for bond of defendant
herein and Jose Teodoro, Sr. that they “object to the urgent
petition ex-parte on the ground that the property to be sold herein is
one of the few properties inherited from Da. Margarita David, which is
not encumbered.” In other words, they were opposed to said urgent
petition, which was granted by the order of September 8, 1951, and,
hence, they wanted this order reconsidered and set aside, and this
would be the result, if the lower court disapproved the sale
contemplated by Priscila Estate, Inc. The filing of a bond was
evidently intended to be pressed only if the first part of the prayer
was denied.

Now, the reasons adduced in support of the
petition for disapproval of the sale and implied reconsideration of the
order of September 8, 1951, or for the filing of a bond, were: (1) that
practically all of the properties of Mrs. Sison were mortgaged; (2)
that the Priscila Estate, Inc. (to whom said properties had been
assigned) is operating on an overdraft, and this is why said properties
are to be sold; (3) that said overdraft is due to “new buildings or
improvements * * made as conjugal properties” of plaintiff herein as
his wife; (4) that the paraphernal properties inherited by Mrs. Sison
from Margarita David are being sold to pay obligations of said conjugal
properties; and (5) that the sale contemplated to be made by Priscila
Estate, Inc., will defeat the fideicommissary provision in the last
will and testament of the late Margarita David, to the effect that the
properties transmitted by her to Mrs. Teodoro and Mrs. Sison should, in
the event of their death without any surviving descendant, pass to the
other persons indicated in said will.

Obviously, these
allegations are, not only pertinent, but material to the relief prayed
for by the defendant. They indicate clearly that, unless the annotation
of the adverse claim of Jose Teodoro, Sr. and defendant herein is
maintained or a bond is filed by the plaintiff, it will become harder
and still harder to trace the paraphernal properties of Mrs. Sison and
because, even if traced, there is a likelihood that said adverse claim
may be defeated, either by subsequent obligations contracted by the
conjugal partnership of Mr. & Mrs. Sison, or by Priscila Estate,
Inc., or by rights thereafter acquired by third parties acting in good
faith and for value. Whether or not the reasons given sufficed to
justify the granting of the relief sought by the defendant and Jose
Teodoro Sr. is of no moment. Nothing but relevancy to said relief was
necessary for defendant’s petition to have the benefits of the absolute
privilege conferred by judicial proceedings. Such privilege is
unaffected, either by actual malice or by factual or legal inaccuracies
in the utterances made in the course of said proceedings.^[1]

At
any rate, the allegations in question in defendant’s petition for bond
were neither malicious nor unfounded. Thus, it is a fact that most, or
at least, several of the most valuable properties transmitted by
Margarita David to Mrs. Sison were mortgaged. Those subsequently
assigned by Mrs. Sison to Priscila Estate, Inc. were encumbered
altogether for P397,717.00. In order to construct the Priscila Building
No. 3 on a paraphernal land of Mrs. Sison, it had been necessary to
borrow One Million Pesos (P1,000,000.00) from the RFC. The Priscila
Estate, Inc., of which plaintiff is the president, began its operations
with an overdraft line of P236,517.00. Most of the paraphernal
properties of Mrs. Sison were transferred to said corporation. In fact,
the same asked that the annotation, on the certificate of title of one
of those properties, of the adverse claims of the defendant and Jose
Teodoro Sr., be cancelled, upon the ground that said property now
belongs to the corporation, not to Mrs. Sison.

What is more, plaintiff and his wife organized a corporation, entitled CMS Estate, Inc., to
which some properties of Priscila Estate, Inc. (most of which had been
originally inherited by Mrs. Sison from Margarita David) were
transferred. The CMS Estate, Inc. had a capital stock of one
million pesos (P1,000,000.00), divided into 1,000 shares of the par
value of P1,000 each, of which 950 are non-voting preferred shares, and 50 are common voting shares. All
of these common voting shares, in addition to 50 non-voting preferred
shares, were subscribed by the plaintiff, whereas his wife had 96 non-voting preferred shares and no
common shares. Four (4) other persons had each a nominal holding of one
(1) non-voting preferred share. As the sole holder of all the
voting common shares, plaintiff had absolute, exclusive and permanent
control over the management of this new corporation. In fact, the
letters “CMS”, which are the initials of his name, Carlos Moran Sison,
appear in the corporate name “CMS Estate, Inc.,” for the seeming
purpose of representing to the public that plaintiff was, for all intents and purposes, the corporation itself.

Considering
that plaintiff is, also, president of the Priscila Estate, Inc., most
of the properties of which had come from Margarita David, and the
antagonism that had arisen between him and the defendant, in the course
of the proceedings for the settlement of the estate of Margarita
David—which antagonism was crystalized and sharpened in several
litigations and many acrid, if not virulent incidents between the same
parties—it is understandable, as well as natural and logical for
defendant to be apprehensive about the fate of his aforementioned
adverse claim and that of Jose Teodoro Sr., if the order directing the
cancellation of the annotation thereof were not reconsidered and set
aside, or plaintiff were not required to file a bond to guaranty the
payment of said adverse, claims.

The alleged gross disparity
between the amount thereof and the value of said properties is
immaterial to the case at bar. To begin with, the properties were
heavily encumbered. Besides, the transfer thereof to Priscila Estate,
Inc., the subsequent assignment of some to CMS Estate, Inc., and, then,
the sales that had been made and the one sought to be made in favor of
third persons, tended to place said properties beyond the reach of said
claimants. Then too, bad faith should not, and cannot be imputed to
creditors, much less “presumed”, merely because they seek the maximum
possible guaranties for the protection of their rights. At any rate,
the alleged bad faith in the annotation of the adverse claims does not warrant an inference of bad faith in the allegations of the petition for bond.

The lower court erred, therefore, in rendering judgment for the
plaintiff under his amended complaint and said judgment should be
reversed.

We will now consider defendant’s Counterclaim. The
first two (2) causes of action therein are based upon allegations, made
by counsel for the plaintiff, in pleadings filed in the course of
judicial proceedings, which, as such, are absolutely privileged.
Considering that said allegations—although sarcastic, to the point of
being, perhaps, unnecessarily pungent and harsh, as well as tending to
detract from the dignity that should characterize proceedings in courts
of justice—were relevant to the subject-matter of the aforementioned
pleadings, the causes of action predicated thereon are necessarily
untenable.

So is the third cause of action under defendant’s
counterclaim. The dismissal, by the office of the City Fiscal of
Manila, of the complaint for estafa therein filed by the
plaintiff is insufficient to warrant a judgment for damages in
defendant’s favor, there being no competent evidence that, in filing
said complaint, plaintiff had acted in bad faith, knowing that the
charge was groundless.

As regards the fourth cause of action
in said counterclaim, it should be noted that plaintiff is a member of
the bar. As such, he must have known that the petition for bond in
question is an absolutely privileged communication, and that the
allegations therein made were pertinent and relevant to the remedy
sought in said petition. More important still, he knew that the basic
facts therein stated were true. Aside from this, some of the inferences
drawn by him therefrom are purely his, not necessarily deducible from
said facts, and although he allegedly suffered injury to his reputation
in consequence thereof, there has been not even an attempt to prove
that it had adversely affected either his credit, or any of his
business transactions, or his social or domestic relations. In other
words, aside from the fact that plaintiff’s complaint is clearly
unfounded, the record strongly indicates that it was filed with a
harassing purpose. In view of the circumstances surrounding this case,
plaintiff should pay the defendant a reasonable amount for attorney’s
fees and expenses of litigation (Article 2208 [4], Civil Code of the
Philippines).

Wherefore, the decision appealed from is
hereby reversed, and another one shall be entered dismissing plain-
tiff’s amended complaint, as well as the first three causes of action
in defendant’s counterclaim, and sentencing plaintiff to pay to the
defendant, by way of attorney’s fees and expenses of litigation, the
sum of P3,000, with interest thereon at the legal rate, from the date
on which this decision shall become final, aside from the costs. It is
so ordered.

Padilla, Buatista Angelo, Labrador, Reyes, J.B.L., Barrera, and Gutierrez David, JJ., concur.

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^[1] 136 ALR, 1414; 33 Am Jur., 144-145; 53 C.J.S. 167; 16 ALR, 746; 42 ALR, 2d. 878; 134 ALR, 483.