FRANCISCO P. MARTINEZ, PLAINTIFF-APPELLANT, VS. UNITED FINANCE CORPORATION AND/OR IFC SERVICE LEASING AND ACCEPTANCE CORPORATION, DEFENDANT-APPELLEE.

Appeal from the order of August 1,
1964 of the Court
of First Instance of Rizal dismissing the appellant’s
complaint^[1]
for malicious prosecution on the ground of failure to state a sufficient cause of action.

The complaint, filed on October
15, 1963, alleges the following
facts:  The plaintiff was a general
merchant engaged in buying and selling textiles and ready made clothes and an
operator of a number of department stores. 
In 1959 he sold postdated checks at a discount to the defendant.  The plaintiff’s unpaid balance, as of November 29, 1960, amounted to
P58,381.13.  To secure payment thereof he
executed in the defendant’s favor a chattel mortgage, copy of which was
attached to the complaint, covering the merchandise inventory of a department
store owned by him in Pasay.  On or about May 17, 1961 the defendant extrajudicially foreclosed the mortgage and bad the sheriff
of Pasay City seize and sell the merchandise, which
fetched only the sum of P6,140.81.  In
July 1961 the defendant lodged a criminal complaint with the office of the City
Fiscal of Manila, charging the plaintiff with estafa
under sub-section (a), paragraph 2, Article 315 of the Revised Penal Code.  A preliminary
investigation was conducted, after which, on November 15, 1962, the Fiscal filed the corresponding information
in the Court of First Instance of Manila. 
The case went to trial, and the plaintiff was acquitted on September 9, 1963.

In the same complaint the plaintiff averred that the defendant
“knew all the time that the plaintiff…ha(d) not committed the offense of
estafa, but which malice and in gross evident bad
faith defendant filed the said criminal case…merely for the purpose of
embarrassing and harassing the plaintiff among his friends and relatives and
destroying (his) good business standing and commercial credit among his
business associates and creditors.” By way of relief, the plaintiff
claimed different items of damages aggregating over P140,000.00.

On October 25, 1963
the defendant moved to dismiss on the ground that the complaint failed to state
a sufficient cause of action, to which motion the plaintiff filed an opposition
on October 31, 1963.

On August 1, 1964,
the lower court granted the motion and dismissed the case.  The plaintiff moved to reconsider, but was turned
down; hence the present appeal.

Appellant now submits that the dismissal was erroneous, since his
complaint made out a cause of action in the light of Article 21 of the Civil
Code,^[2]
taken in connection with Article 2219 (8),
which mentions malicious prosecution as one of the instances in which
moral damages may be recovered.

A motion to dismiss based on failure to state a cause of action
presents to the court only the question of whether or not the complaint alleges
facts which, if true, would justify the relief demanded.  The veracity of such allegations is not in
issue; they are deemed hypothetically admitted for purposes of the motion.  Stated otherwise, the test of sufficiency of
the cause of action is whether, admitting the facts alleged to be true, the
court could render a valid judgment in accordance with the prayer
in the complaint.^[3]

Malicious prosecution, to be the basis of a suit, requires the
elements of malice and want of probable cause in the prosecution of an action
against the plaintiff.  A third element
is that the defendant must himself be the prosecutor or the instigator of the
prosecution, which ended in acquittal. 
These elements are discusse in the case of
Buchanan vs. Vda. de Esteban,^[4]
thus:

“To support an action for malicious prosecution under American law the plaintiff must prove, in the
first place, the fact of the prosecution and the fact that the defendant was
himself the prosecutor, or that be instigated its commencement, and that it
finally terminated in his acquittal, that, in bringing it, the prosecutor had acted without probable cause, and that he was actuated by
legal malice, i.e., by improper or sinister motives.  These three
elements must concur; and there is no distinction between actions for
criminal prosecution and civil suits. 
Both classes require substantially the same essentials.  Malice is essential to the maintenance of an
action for malicious prosecution and
not merely to the recovery of exemplary damages.  But malice alone does not make one liable
for malicious prosecution, where probable cause is shown, even where it
appears that the suit was brought for the mere purpose of vexing, harassing and
injuring his adversary.  In other words,
malice and want of probable cause must both exist in order to justify the action.”^[5]

The appellant’s complaint fails to satisfy the test of
sufficiency.  It is true that it alleges
that the appellee knew “that the plaintiff ha(d)
not committed the crime
(charged) “and that he acted “with malice and in gross and evident
bad faith…  for the purpose of
embarrassing and harassing the plaintiff…”But the complaint also
contains other allegations which, objectively considered, belie this conclusion
with respect to both the elements of malice and want of probable cause.  These allegations are:  (1) that a preliminary investigation of the
charge of estafa was conducted by the City Fiscal;
(2) that after the said investigation the plaintiff filed a motion to quash,
which the defendant opposed; (3) that more than a year thereafter, or on November
15, 1962, the Fiscal nevertheless filed an information in court, with his
certification that he had conducted the requisite preliminary investigation and
that “there is reasonable ground to believe that the offense charged has been
committed; and that the accused is guilty thereof;”^[6]
and (4) “that after a protracted trial, the plaintiff was acquitted of the
offense as charged…in a decision dated September 9, 1963… and promulgated
on September 13, 1963.”
A copy of said decision, acquitting the plaintiff on the ground of reasonable
doubt, was also attached to the complaint as Annex “D” and hence
formed part of its allegations.

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 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 party, 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 of 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.

Wherefore, the order appealed from is affirmed, with
costs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Zaldivar, Castro,
Fernando, Teehankee, Barredo,
Villamor, and Makasiar, JJ., concur.

^[1]
Civil Case No. 7872 for Damages entitled “Francisco P. Martinez,
plaintiff, versus United Finance Corporation and/or IFC Service Leasing and
Acceptance Corporation, defendant.”

^[2]
“ART. 21 Any person who willfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall compensate
the latter for the damage.”

^[3]
Garcon vs. Redemptorist Fathers, L-23510, May 30, 1966, 17 SCRA 341, 345; Almendras vs. Rivero,
L-19820, Sept. 20, 1965, 15
SCRA 62, 63.

^[4]
32 Phil. 363.

^[5]
Quoted in Rehabilitation Finance Corporation vs. Koh,
L-15512, February 28, 1962,
4 SCRA 535, 540.

^[6]
The information, together with the Fiscal’s
certification, was attached to the complaint as Annex “C” thereof.