SMITH, BELL & CO., LTD., PLAINTIFF AND APPELLANT, VS. DAVID E. ELLIS, DEFENDANT AND APPELLEE.

Plaintiff
alleges that it is a domestic corporation with its principal office and
place of business in the City of Manila. That the defendant claims to
be a British subject, domiciled in Hongkong, who is now temporarily
residing in the City of Manila. That the plaintiff was incorporated
under the laws of the Philippine Islands on the 21st of April, 1909,
and continuously from that date has been engaged in commercial
transactions on a large scale in the City of Manila, and through its
agencies in the Philippines, and enjoyed a good business reputation.
That it is the successor of the business and name of Smith, Bell &
Company, a partnership organized under the laws of Great Britain, which
was engaged in commercial transactions in the City of Manila and
throughout the Philippine Islands for more than fifty years prior to
April 21, 1909, and which at all times enjoyed a good business
reputation. That on May 4, 1925, the defendant signed and swore to a
“certain statement in writing, a copy of which is hereto attached,
marked Exhibit A, and made a part of the complaint, and caused the same
to be filed in the Court of First Instance of the City of Manila in a
civil action “then pending in the Court of First Instance of the City
of Manila entitled ‘Smith, Bell & Co., Ltd., plaintiff, vs.
The Malabon Sugar Company, S. C. Preston, E. H. Teal, Henry Chandler
and J. H. Marsman, defendants,’ the said civil action being civil cause
No. 27889 of the records of the said Court of First Instance of the
City of Manila;” that in Exhibit A, among others, the following
statement was made:

” ‘* * * That as a
result of his investigations affiant has definitely reached the
conclusion that Smith, Bell & Co., Ltd., irrespective of any
questions as to the legal validity of the contract under which they
claim to be operating the affairs of the defendant corporation, a copy
of which is attached to the affidavit of said H. T. Fox as Exhibit A,
have committed serious breaches of said contract and have been guilty
of gross mismanagement and irregularities.’ “

It is then alleged that the above statements “were, and are, wilfully
and maliciously false, and were made, filed, and published by the
defendant in bad faith and with intent to injure the plaintiff;” that
in the making of said affidavit the “defendant intended to charge and
assert, and to be understood as charging and asserting, and was, in
fact, understood as charging and asserting, that this plaintiff had
neglected and mismanaged the business and affairs of a certain
corporation known as ‘The Malabon Sugar Company,’ and had been guilty
of dishonesty and irregular conduct in connection with the management
by plaintiff of the business and affairs of said The Malabon Sugar
Company.”

That by reason thereof, plaintiff has been damaged
in the sum of P100,000, for which it prays judgment and costs, and for
such punitive and exemplary damages as the court may seem just and
equitable.

The defendant demurred to the complaint on the
ground that it does not state facts sufficient to constitute a cause of
action, assigning the following reasons:

“That
a copy of the affidavit of defendant referred to in plaintiff’s
complaint, which affidavit contains the alleged libelous matter
complained of, is attached to and made a part of plaintiff’s complaint,
and it appears from paragraph IV of said complaint that said affidavit
was filed in the Court of First Instance of the City of Manila in a
civil action then pending in said court, entitled Smith, Bell &
Co., Ltd. vs. The Malabon Sugar Company et al., said cause being numbered civil cause No. 27889.

“That
it appears on the face of said affidavit that its contents were
relevant and pertinent to the issue before the court in said civil
cause No. 27889.

“That by reason of being filed in the
course of a judicial proceeding the contents of said affidavit are
therefore privileged and not actionable under the Libel Law of the
Philippine Islands (Act No. 277 of the Philippine Commission) or under
any other laws of the Philippine Islands.”

The lower court sustained the demurrer, and plaintiff having declined
to plead further, judgment was rendered for the defendant, from which
the plaintiff appeals, contending that the lower court erred in
sustaining defendant’s demurrer to plaintiff’s complaint.

JOHNS, J.:

The
complaint alleges that Exhibit A was made and filed in the Court of
First Instance of the City of Manila in a civil action therein pending,
in which the plaintiff here was the plaintiff there,” and the
defendants were The Malabon Sugar Company, S. C. Preston, E. H. Teal,
Henry Chandler and J. H. Marsman, and known as civil cause No. 27889.
All of Exhibit A was attached to and made a part of the complaint, from
which it further appears “that affiant is a stockholder of the
defendant corporation.”

“That affiant was
at all such times acting as the representative of his brother, the said
F. Ellis and of other shareholders resident in Hongkong, who together
then held and now hold a majority of the shares of stock of the
defendant corporation. That shortly prior to his departure from
Hongkong to Manila on April 14, 1925, affiant’s brother, the said F.
Ellis, received a cabled communication direct from the said Smith, Bell
& Co., Ltd., which was upon the same subject matter and
supplementary to the cabled communications passing between the said F.
Ellis and the said Elliott.

“That about the time of the
departure of affiant from Hongkong on April 14, 1925, for the
Philippine Islands, the said F. Ellis advised the said Elliott of the
same by cable and upon the arrival of the affiant in Manila on the 16th
day of April, 1925, affiant was met at the steamer on which he arrived
by the said Elliott. A few hours later affiant was escorted to the
offices of Smith, Bell & Company by the said Elliott and there
introduced to H. T. Fox, the president of Smith, Bell & Co., Ltd.,
the plaintiff in the above-entitled action.

“That during
his stay in Manila since his arrival on April 16, 1925, affiant has
been in frequent communication with the said Fox and with the attorney
of the plaintiff corporation, not only by meetings in person, but
through the exchange of letters, and at all times affiant has been
recognized by the said Smith, Bell & Company, Ltd., its officers,
agents and attorneys, as the representative of shareholders of the
defendant corporation resident in Hongkong and owning and holding a
majority of the shares of said defendant corporation.

“That
affiant came to Manila upon the instruction and request of said
majority stockholders resident in Hongkong after cablegrams had been
sent to said F. Ellis in Hongkong both by Smith, Bell & Co., Ltd.,
and by the defendants, Preston and Marsman.

“That the
purpose of affiant in coming to Manila, and the instructions which he
received from his principals were to the effect that he should make a
careful investigation of and report on the differences existing between
Smith, Bell & Co., Ltd., and the directors of The Malabon Sugar
Company.

“That practically all of affiant’s working hours
since his arrival in Manila on April 16, 1925, have been devoted
exclusively to a careful, thorough and unbiased investigation of the
differences and the controversy between Smith, Bell & Co., Ltd.,
and the directors of The Malabon Sugar Company, which led up to and are
involved in the above entitled action. That in making said
investigation affiant has given the said Smith, Bell & Co., Ltd.,
full opportunity through its officers, agents, employees and attorneys
to furnish statements and memoranda regarding their views as to the
facts and the points of law involved in the said controversy. That
affiant’s investigations also extended to the workings of the factory
of the defendant corporation at Malabon where he had conversations with
the employees and also particularly with special representatives of
Smith, Bell & Co., Ltd., placed in charge of the operation of said
factory.” Then follows that portion of the affidavit set out in the
complaint, which then recites that affiant has so reported to his
principals at Hongkong, who are the majority of the stockholders of the
Sugar Company, and that he has recommended that the plaintiff be
removed from its management of the defendant corporation, and that,
following his report, he was instructed by the stockholders whom he
represented to “take all necessary action, or to assist in all
necessary action to uphold the board of directors in its controversy
with Smith, Bell & Co., Ltd., to secure a dissolution of the
injunction issued in the above entitled action and otherwise to protect
the interests of the shareholders.”

It
appears from the affidavit that the defendant came to Manila from
Hongkong as a representative of a majority of the stockholders of The
Malabon Sugar Company, with authority to make an investigation of its
business dealings with the plaintiff, and that while here, he undertook
and claimed to have made such an investigation, and that “as a result
of his investigation, affiant has reached the definite conclusion that
plaintiff has committed serious breaches of its contract with the Sugar
Company,” and “has been guilty of gross mismanagement and
irregularities.”

In its final analysis, his report is not a
statement of any fact. It is nothing more than his opinion based upon
the result of his investigation. The affidavit was also made and filed
in a civil action in which the plaintiff here was the plaintiff, and
The Malabon Sugar Company et al., defendants, and it appears upon its
face that at the time it was made, the affiant was a stockholder of the
Sugar Company, and that he was the local agent and representative of a
majority of the stockholders of the Sugar Company, whom he come here
from Hongkong to represent, in a dispute which was then pending between
the plaintiff and the Sugar Company. It is true that technically the
affiant was not a party defendant, but The Malabon Sugar Company was a
defendant and Ellis was here as the local representative of a majority
of the stockholders of the Sugar Company, and the affidavit in question
was made and used in an action in which the Sugar Company was the
defendant, and it was made of and concerning questions involved in the
dispute between the parties to that action.

The authorities
cited in plaintiff’s brief are good law, but upon the facts shown in
this record, they are not in point. First, the affiant says nothing
more than the fact that, as a result of his investigation, he had
reached the conclusion that the plaintiff had breached the contract and
“is guilty of gross mismanagement and irregularities.” As to such
matters, that was nothing more than his opinion. Although it may have
been wrong, yet, his affidavit was relevant and pertinent in the case
in which it was filed upon the question then pending before the court.

Ruling Case Law, volume 17, page 336, says:

“*
* * As to the degree of relevancy or pertinency necessary to make
alleged defamatory matter privileged the courts favor a liberal rule.
The matter to which the privilege does not extend must be so palpably
wanting in relation to the subject matter of the controversy that no
reasonable man can doubt its irrelevancy and impropriety. In order that
matter alleged in a pleading may be privileged, it need not be in every
case material to the issues presented by the pleadings. It must,
however, be legitimately related thereto, or so pertinent to the
subject of the controversy that it may become the subject of inquiry in
the course of the trial. * * *”

Corpus Juris, volume 36, page 1252, says:

“*
* * In determining the question the courts are liberal, and the
privilege embraces anything that may possibly be pertinent. All doubt
should be resolved in favor of its relevancy or pertinency.”

From the nature and contents of the affidavit, it is very apparent that
it was germane and pertained to the matters then in dispute. Construing
the affidavit as a whole, as we must, together with the fact that it
was filed in an action pending, in which the affiant was the local
agent and representative of a majority of the stockholders of the
defendant Sugar Company, we are clearly of the opinion that the
complaint does not state a cause of action. The plaintiff having
declined to amend in the lower court, it follows that the judgment must
be affirmed, with costs. So ordered.

Avanceña, C. J., Malcolm, Ostrand, Romualdez, and Villa-Real, JJ., concur.