RAMON A. GONZALES, PETITIONER, VS. NATIONAL HOUSING CORPORATION, BENJAMIN DEL ROSARIO, GREGORIO S. LICAROS, ROBERTO S. BENEDICTO, GILBERTO TEODORO, ESTEBAN BERNIDO, SOCIAL SECUR…

This is a taxpayer’s suit.

On June 26, 1968,
respondent National Housing Corporation (NHC) was formed, with an authorized
capital of P100,000.00, and with respondents Benjamin del Rosario, Gregorio S. Licaros, Roberto S. Benedicto,
Gilberto Teodoro and Esteban Bernido,
as respective heads of the GSIS, DBP, PNB, SSS and PHHC, as incorporators and
subscribers to shares of the capital stock of the firm.  The primary purpose of the corporation was to
assist in and coordinate the massive low-cost housing program of the
Government.

On July 15, 1968, its capitalization was increased to P100
million, with the Social Security System (SSS), the Government Service insurance System (GSIS), the Philippine National
Bank (PNB), and the Development Bank of the Philippines (DBP) subscribing to
P19,980,000.00 worth of shares.

On July 25, 1968,
Teodoro assigned his shares (or subscriptions) to the
SSS; Benedicto and Bernido
assigned theirs to the NIDC and PHHC on August
8, 1968, respectively; del Rosario assigned his rights to the GSIS
sometime in August, 1968; while Licaros assigned his
subscriptions to the DBP on an unspecified date.

On November 21, 1968,
NHC entered into a contract with respondent Hildebrand Maschinehandel,
GMDH (Hildebrand, for short), a German corporation, for the supply of machinery and equipment for an integrated plant for the
manufacture of low-cost homes and school buildings, at the total price of DM
64,000,000.00.

On March 1, 1969,
petitioner Ramon A. Gonzales filed a Complaint against respondents before the
Court of First Instance of Manila in Civil Case No. 7587 for annulment of the
Hildebrand contract.  He alleged that he
was suing as a taxpayer; that said contract was null and void on the ground
that NHC, being a government-controlled corporation, was illegally created
since it was organized under a general law, the Corporation Law, instead of a
special act of Congress as provided for by the Constitution; that the creation
of the NHC violates the Anti-Graft Law and is against public policy; that the DBP,
SSS, and the GSIS are without power to invest in NHC; that NHC, being a void
corporation, is without authority to enter into contracts, hence, the
Hildebrand contract is void and unenforceable; that respondents del Rosario, Licaros, Benedicto, Teodoro and Bernido are jointly
and severally liable in their personal capacities for the refund of payments
made under said contract; and that petitioner has been compelled to come to
Court to protect the interests of taxpayers and is entitled to attorney’s fees.

It appears that prior to the filing of the aforementioned
Complaint, or on January 24, 1969,
petitioner had already filed before this Court a Petition for Prohibition with
Preliminary Injunction (G. R. No. L-30080) wherein petitioner prayed that the
creation of the NHC be declared null and void ab
initio. 
The petition was dismissed in the Resolution of this Court dated
February 1, 1969, with the statement that the proper remedy, under the facts
alleged in the Petition, being quo warranto.

The record also discloses
that on February 24, 1969, upon instructions of the President, the Solicitor
General had filed a petition for quo warranto
with the Court of First Instance of Rizal, Pasig Branch (Civil Case No. 11583, entitled Republic of
the Philippines vs. Benedicto, et al.), directly
putting in issue the legality or illegality of the creation of the NHC.

Apparently not satisfied with the filing of the foregoing suits,
petitioner filed the present taxpayer’s action on March 1, 1969.

In their special and affirmative defenses, respondents alleged
that the NHC is a private corporation and that its funds are not public funds;
that the Hildebrand contract does not involve expenditure of public funds which
can be enjoined in a taxpayer’s suit; that what is purportedly a suit for
“annulment of a contract with preliminary injunction” is actually a
reiteration of the grounds alleged and arguments adduced in the Petition for
Prohibition with Preliminary Injunction filed in the above-mentioned G.R. No.
L-30080; and, finally, that the present suit is barred by the prior action for quo
warranto (Civil Case No. 11583, supra),
pending before the Court of First Instance of Pasig, Rizal, directly attacking the corporate existence of
NHC.  By way of counterclaim, respondents
asked for moral damages, attorney’s fees, and litigation expenses.

On June 23, 1970,
the trial Court rendered a Decision dismissing petitioner’s Complaint on the
principal grounds that the special civil action for Prohibition with
Preliminary Injunction (G.R. No. L-30080) constitutes res
judicata; and that the suit for quo warranto (Civil Case No. 11583) constitutes a
“prejudicial question” that must first be resolved before an action
for annulment of the Hildebrand contract
can be filed.

With respect to the counterclaim for damages, the trial Court
dismissed the same believing that the zeal of a citizen as a taxpayer,
howsoever irritating and vexatious it may be, should not be discouraged.

Respondents appealed the dismissal of their counterclaim to the
Court of Appeals and on “questions of both fact and law”.  Petitioner moved to dismiss on the ground
that since only questions of law are involved in the appeal, the same should
have been elevated to the Supreme Court. 
The Court of Appeals deferred ruling thereon until judgment on the
merits.

Before the appellate
tribunal, respondents attributed the following errors to the trial Court:

1.    x x x in ruling that the instant case is simply a representative
suit filed by a taxpayer against public officials and government entities;

2.    x x x in not finding that the instant case is clearly unfounded
civil action or proceeding against herein defendants-appellants;

3.    x x x in not awarding attorney’s fees and cost of litigation to
the herein defendants-appellants.

On August 2, 1978, the Court of Appeals handed down its Decision* modifying that of the trial Court by awarding
respondents attorney’s fees in the amount of P5,000.00 and litigation expenses
in the sum of P1,000.00 and costs, upon a finding that petitioner’s case is
“without any proper basis or foundation and therefore clearly
unfounded.” Petitioner’s Motion for Reconsideration of that Decision was
denied on February 14, 1979.

A Petition for Review before us was filed by petitioner on April 7, 1979 alleging that the Court
of Appeals had erred in assuming jurisdiction as only a question of law is
involved.  In an Amended Petition for
Review, he alleged additionally that the Court of Appeals had erred in granting
respondents’ claim for attorneys’ fees and expenses of litigation and reversing
the trial Court on the matter.

On November 21, 1979, after requiring respondents to submit their
Comment, with which they have complied, we resolved to give limited due course
only in so far as attorney’s fees and litigation expenses awarded by the Court
of Appeals are concerned, dispensed with the submittal of Briefs and Memoranda,
and declared the case submitted for decision on said issue.

Partial due course only was given as we were of the opinion that
the Court of Appeals had correctly assumed
jurisdiction inasmuch as mixed questions of fact and law were raised by
respondents in their appeal to the Court of Appeals as embodied in the
assignments of error which they had raised. 
The question of whether or not there was fraudulent or deceitful intent
or malice in the institution of the case so as to entitle respondents to
damages, is a question of fact.^[1] The reasonableness of attorney’s fees is
likewise a question of fact.^[2] These are questions of fact as they call for
an examination of the probative value of the evidence of parties litigants as
contrasted to questions of law, which do not call for such examination of probative
value of evidence but raise doubt or difference of opinion as to what the law
is on a certain state of facts.^[3]

We have held in various
cases that fraud cannot be presumed, and it must be established by clear and
sufficient evidence.^[4] We have also held that there is need of some
proof as to the amount of attorney’s fees^[5] to be granted by a Court.

On the foregoing
considerations, we find merit in petitioner’s contention that attorney’s fees
were erroneously awarded by the appellate Court.  As held in the case of Herrera vs. Luy Kim Guan,^[6] in the absence of stipulation, a winning
party may be awarded attorney’s fees only in case plaintiff’s action or
defendant’s stand is so untenable as to amount to gross and evident bad
faith.  Where the complaint was filed in
good faith, attorney’s fees cannot be granted to the defendants simply because
the judgment was favorable to them, for that may amount to imposing a premium
on the right to redress grievances in Court. 
In this case, we find no sufficient showing of bad faith in petitioner’s
having filed this taxpayer’s suit. 
Petitioner’s persistence could, perhaps, be attributed more to erroneous
conviction on his part in the righteousness of his cause rather than an act of
harassment or vexation against respondents.

WHEREFORE, the judgment of the Court of Appeals, in so far
as it upheld the decision of the trial Court dismissing respondents’ appeal, is
hereby affirmed; but in so far as it awarded attorney’s fees and expenses of
litigation to private respondents, it is hereby reversed and set aside.

Without pronouncement as to costs.

SO ORDERED.

Teehankee, (Chairman), Fernandez,
Guerrero, and De Castro, JJ., concur.

Makasiar, J., took no part as he was the Solicitor General at the time Civil Case No.
11583 for Quo Warranto was filed before the Court of
First Instance of Rizal, Pasig
Branch.

* Penned by Justice Serafin R. Cuevas, and concurred in by Justices Lourdes P.
San Diego and Hugo E. Gutierrez, Jr.

^[1]
III Francisco, Revised Rules of Court, 1968 edition, p. 158.

^[2]
Ibid., p. 159.

^[3]
Crisolo vs. CA, 68 SCRA 435, 1975.

^[4]
Carreon vs. Agcaoili,
1 SCRA 521 (1961); Gutierrez vs. Villegas,
8 SCRA 527 (1963); Santos vs. Buenaventura, 18 SCRA 207 (1966).

^[5]
Medenilla vs. Kayanan,
40 SCRA 154 (1971).

^[6]
1 SCRA 406 (1961).