ERLINDA L. PONCE, PETITIONER, VS. VALENTINO L. LEGASPI AND THE HON. COURT OF APPEALS, RESPONDENTS.

This controversy calls for the balancing of two conflicting
interests: the petitioner’s right to litigate versus the respondent’s right to
be protected from malicious prosecution.

The present case stemmed from the filing before the Supreme Court
on October 3, 1977 of a complaint for disbarment against respondent Atty.
Valentino Legaspi by petitioner Erlinda Ponce.

At the time of the filing of the disbarment proceedings,
petitioner Ponce, together with her husband Manuel, owned forty three percent
(43%) of the stockholdings of L’NOR Marine Services, Inc. (L’NOR). She was then Treasurer and director of the
Board of Directors of L’NOR while her husband was a director. Forty eight percent (48%)) of L’NOR’s stocks
was owned by the spouses Edward and Norma Porter who were then serving as President/General
Manager and Secretary respectively.

The pertinent portions of the complaint are reproduced below:

xxx                                        xxx                                           xxx

“10. During the
time or period while respondent is the legal counsel of the aforecited
corporation, there occurred certain fraudulent manipulations, anomalous management
and prejudicial operations by certain officers of said corporation,
namely: Edward J. Porter,
President/General Manager; Norma Y. Porter, Secretary; and Zenaida T. Manaloto,
Director, who caused great damage and prejudice which will be related hereunder;

xxx                                        xxx                                           xxx

“14. About
July, 1976, said spouses Edward J. Porter and Norma Y. Porter, together with
Zenaida T. Manaloto, facilitated, assisted and aided by herein respondent
Legaspi (Annexes “B” and “B-1” herewith), incorporated the
Yrasport Drydocks, Inc., hereinafter designated YRASPORT, which they control
with the following stockholdings:

Edward J. Porter                  180 shares

Norma Y. Porter       180 shares

Eriberto F.
Yrastorza           16 shares

Zenaida T. Manaloto            8 shares

Roman M. Maceda            8 shares

Andres A. Nombrado           8 shares

and whose line of business is in direct competition with L’NOR;

15. YRASPORT, like
Yrasport Enterprises was launched without the knowledge of the minority
stockholders owning 43% of L’NOR, and was really designed to compete, if not
eliminate, L’NOR as a competitor;

16. That as a matter
of fact attempts were made to secure one of L’NOR jobs in favor of YRASPORT,
which fraudulent scheme was however frustrated only by the timely opposition of
herein complainant;

17. YRASPORT
likewise availed of and used the office space, equipment, personnel, funds,
other physical facilities, and goodwill of L’NOR while competing at the same
time against and causing the latter great damage and irreparable injury;

xxx                                        xxx                                           xxx “

21. Edward J. Porter,
President-General Manager of L’NOR, purchased from ISECOR (Industrial Supply
Corporation) on November 3, 1974 one skaagit winch with its cables for
P10,000.00; that on November 18, 1974 said Edward J. Porter assigned the
purchase of said skaagit winch with its cables in favor of L’NOR at the price
of P10,000.00; and that the latter corporation then assumed the agreed
obligation covering the P10,000.00 purchase price in favor of ISECOR;

22. Subsequently, on
or about October 18, 1975, said President-General Manager Edward J. Porter
misrepresented facts regarding the acquisition cost of said skaagit winch with
its cables to the effect that the same was sold by ISECOR at the cost of
P20,000.00; that he collected the sum from L’NOR for direct payment to ISECOR
allegedly to liquidate in full the obligation of P20,000.00 in favor of ISECOR,
when, in truth and in fact, the obligation is only P10,000.00 and not more;

23. On account of
the aforecited flagrant fraud, a charge of Estafa was filed against Edward J.
Porter and the office of the City Fiscal handed down a resolution to prosecute
him in court, copy of pertinent exhibits herewith marked as Annexes
“C”, “C-1”, “C-2”, “C-3”, “C-4”
and “C-5”;

24. In view of the
aforesaid illegal manipulations, illicit schemes, palpable frauds and estafa
committed by said President?General Manager Edward J. Porter, in
confabulation and conspiracy with the other officers of the corporation,
namely: his wife Norma Y, Porter and
Zenaida T. Manaloto, herein complainant requested respondent Valentino Legaspi
to take and pursue appropriate legal steps and seasonable actions in order to
protect the paramount interest of L’NOR of which he is the legal counsel by
retainer, but the latter, without any valid excuse whatsoever, refused to do
so, although he is still collecting his monthly retainer;

25. On account of
the refusal of said corporate attorney of L’NOR, respondent Legaspi,
complainant was forced to retain the services of another counsel to prosecute
the appropriate derivative suit in the Court of First Instance of Cebu, copy
herewith marked Annex “D”; and that, in opposition to the same,
respondent Legaspi appeared as legal counsel and attorney of Edward J. Porter
and his confederates, copy of exhibits marked Annex “D-1” herewith;

26. In the Criminal
Case filed against Edward J. Porter for Estafa (Annex “C” supra),
respondent Legaspi likewise appeared as counsel for respondent Porter despite
the fact that he is the legal counsel of L’NOR which is the prejudiced party
and for whose benefit the criminal case was really being prosecuted, copy of
letter of respondent, marked as Annex “C-6” herewith;

27. Up to the
present time respondent is still collecting his monthly retainer, and for his
appearance for Edward J. Porter, et. als. in the derivative suit, he collected
the sum of P2,000.00 from L’NOR as payment for his illicit legal services in
defending the Porters and Manaloto against the very interest of the corporation
paying him monthly retainer;

28. Said Edward J.
Porter and his confederates, in their respective capacity as such officers of
L’NOR, continue and persist in perpetrating malicious acts, anomalous
management and fraudulent operations against the interest of L’NOR, and that
respondent Legaspi was duly adviced verbally and also in writing by complainant
to take the necessary action in his capacity as legal counsel, of L’NOR to
protect zealously the interest of the latter, but respondent Legaspi has done
absolutely nothing, and grossly neglected and flagrantly violated his duties as
legal counsel up to the present time, pertinent exhibits herewith marked as
Annexes “E”, “E-1”, “E-2”, “E-4”,
“E-5”, “E-6”;

29. That, on the
contrary, respondent Legaspi in his dual capacity as legal counsel of L’NOR and
YRASPORT, and at the same time acting in his capacity as corporate secretary of
YRASPORT, facilitated, assisted, aided or otherwise abetted the illegal
manipulations, illicit schemes, fraudulent operations and grave frauds
committed by said Edward J. Porter and his confederates who are officers of
L’NOR against the interest of the latter and to further the malicious
competitive sabotage of YRASPORT alleged heretofore; and

30. That, upon the
foregoing, we most respectfully prefer against respondent Valentino Legaspi the
following, charges:

First Specification:

That respondent Valentino Legaspi has committed gross misconduct in
office as a practicing lawyer and member of the Philippine Bar, because, as
legal counsel, he violated his duty to and the trust of his client, L’NOR
Marine Services, Inc., whom he is professionally duty bound to represent with
entire devotion faithfully as such attorney, and whose paramount interest he
should protect in all good faith with absolute fidelity, but that, in truth and
in fact, he did not do so.

Second Specification:

That respondent Valentino Legaspi, while acting as legal counsel of
L’NOR under continuing monthly retainer, has acted at the same time as lawyer
of Edward J. Porter, et. als., who have committed anomalous acts, prejudicial
manipulations and grave frauds against his client L’NOR Marine Services, Inc.,
that he therefore represented professionally conflicting interest; and that he
committed grave malpractice that is in flagrant violation of the recognized canons
of legal ethics.

Third Specification:

That respondent Valentino Legaspi committed grossly corrupt or
dishonest conduct while under retainer and acting as attorney of L’NOR Marine
Services, Inc., when he facilitated, assisted, aided or otherwise abetted the
organization, registration and operation of another competing entity, Yrasport
Drydocks, Inc., in which he is also the lawyer and corporate Secretary, at the
expense of and to which the business and transactions of L’NOR are being
diverted or otherwise appropriated, including the pirating of skilled personnel
and also facilities, and that respondent committed the same with evident bad
faith and absolute lack of fidelity to his client L’NOR, thereby degrading the
good esteem, integrity and honor of the profession.” (Records,
Administrative Case No. 1819, pp. 4-13)

In his comment, Atty. Legaspi denied the allegations in
paragraphs 10, 21, 22, 23, 24, 28, 29 and 30. He qualifiedly admitted the allegations in paragraphs 14 and 15, stating
that Yrasport was not organized to compete directly with L’NOR. He averred that L’NOR could not cope up with
the business and Yrasport was formed for the purpose of complementing L’NOR’s
business. He added that there is
nothing in the law nor contract which prohibits a stockholder from competing
with the business of the corporation.

Atty. Legaspi admitted the allegations in paragraphs 26 and 27
that he appeared for Edward Porter in the estafa case filed against the latter,
reasoning that his appearances were direct orders of management and that it was
not improper for counsel to represent both the corporate officers when they are
being sued at the same time.

As to the allegations in paragraphs 16 and 17, Atty. Legaspi
declared that he has no sufficient knowledge to form a belief as to the truth
or falsity of the statements contained therein.

On January 23, 1978, the Court issued a resolution dismissing the
disbarment complaint against Legaspi. The resolution is quoted hereunder:

“Administrative Case No. 1819 (Erlinda L. Ponce v. Valentino
L. Legaspi). – Considering the complaint for disbarment
against Atty. Valentino L. Legaspi as well as said respondent’s comment
thereon, the Court Resolved to DISMISS the complaint for lack of merit.”
(Records, Administrative Case No. 1819 p. 91)

The petitioner filed a motion for reconsideration which was
denied by the Court on March 31, 1978.

On February 10, 1978, Atty. Legaspi filed before the Court of
First Instance (now Regional Trial Court of Cebu) a complaint for damages
against the petitioner.

The petitioner filed a motion to dismiss which was denied by the
trial court.

On July 18, 1983, the lower court rendered judgment the
dispositive portion of which reads as follows:

“WHEREFORE, this court being satisfied that the material
allegations of the complaint have been proved and remained uncontradicted with
the testimonial and documentary evidence introduced and admitted by the court,
judgment is hereby rendered in favor of the plaintiff and against the defendant
Erlinda L. Ponce ordering the defendant to pay Valentino L. Legaspi, plaintiff
herein, the amount of P1,000.00 as actual damages, P50,000.00 as moral damages
and P25,000.00 as exemplary damages and to pay the costs.” (Rollo, p. 115)

The petitioner appealed to the Court of Appeals. On May 26, 1987, the Court of Appeals
affirmed the lower court’s judgment. In
affirming the appealed decision, the Court of Appeals reasoned:

“Defendant-appellant contends that plaintiff-appellee’s action
for damages is purely retaliatory in character and stems from an alleged
feeling of wounded pride or amor proprio; that granting without admitting that
the appellee has suffered certain adverse effects in his reputation because of
the disbarment case, it does not constitute malicious prosecution as would
otherwise perhaps render the appellant liable for damages; that the facts on
record indubitably show that the appellant was merely exercising her right of
access to courts for redress of legitimate grievances when she filed the
disbarment case believing then as she still does, that appellee committed a
breach of his professional duties as a lawyer. In refutation, appellee alleges that appellant belittles this action for
damages as ‘purely retaliatory in character and stems from an alleged feeling
of wounded pride or amor proprio’; that by such statement, appellant has
unmasked herself as to how little regard she has for the feelings of others and
how she clings to the law if only to secure her purpose; that what is being
sought by appellee is compensation for appellee’s malice, falsehoods and deceit
in trying to destroy the professional standing of a humble practitioner just
because he did better than the other.

While free access to the courts is guaranteed under Section 9,
Article IV of the 1973 Constitution (now Section 11, Article III of the 1986
Constitution), it does not give unbridled license to file any case, whatever
the motives are. Whoever files a case
shall be responsible for the consequences thereof whenever his act of filing
infringes upon the rights of others. In
the same way that although freedom of speech is guaranteed, one cannot claim to
be protected under such freedom when he is being held liable for the libel he
commits.

The case at bar cannot be considered as one for recovery of damages
arising from malicious prosecution, for a disbarment proceeding is not a
criminal action. (De Jesus-Paras v. Vailoces, 111 Phil. 569; 1 SCRA 954,
957). However, we should not lose sight
of the fact 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 absolutely privileged. (Sison v. David, 110 Phil. 662; 1 SCRA 60, 71 citing authorities) and no
civil action for libel or slander may arise therefrom unless the contents of
the petition are irrelevant to the subject matter thereof. (1 SCRA 71). It has also been held that a privileged
communication should not be subjected to microscopic examination to discover
grounds of malice or falsity. Such
excessive scrutiny would defeat the protection which the law throws over
privileged communications. The ultimate test is that of bona fides. (Deles v.
Aragona, Jr., 27 SCRA, 633, 642). The
privileged character of her complaint filed with the Supreme Court must have
been what defendant had in mind when she invokes her right to free access to
the courts. However, defendant’s
actuations before and after the filing of administrative complaint with the
Supreme Court disprove her bona fides. On this issue, the trial court found:

Yet, the uncontroverted evidence before the court belie these
allegations because there are antecedent incidents between plaintiff and
defendant that speak otherwise; that she filed this disbarment complaint
against plaintiff with malice aforethought. This conclusion is founded on the fact that defendant was embittered
against him for failing to obtain a compromise against Eduardo Coronel before
the military due to plaintiff’s defense of his client; that she wanted to
dissolve the L’Nor Corporation in order to repossess the premises leased to the
former upon the corporation’s dissolution and Porter’s ouster which was
thwarted by plaintiff’s advice as counsel for L’Nor; plaintiff’s letter
(Exhibit “H”) that she was not authorized to use the title of
Chairman of the Board; not counter-signing plaintiff’s check (Exhibits I, I-1,
and I-2); her insistence to have the surplus profits declared as cash dividend
which likewise failed due to plaintiff’s advice; her letter (Exh. J) asking
plaintiff to desist from defending the corporation and its officers;
plaintiff’s refusal to give her advice without authority from the Board of
Directors; numerous cases filed with the Security and Exchange Commission which
were all dismissed and with the Court of First Instance and Circuit Criminal
Court which plaintiff ably defended causing their eventual dismissal and other
acts against plaintiff which demonstrated palpably defendant’s hatred for the
plaintiff acts clearly evidencing malice contrary to her averments in the
Answer.

To top it all, notwithstanding her evident support and advice by
counsel, she cleverly hid the identity of said counsel prosecuting all her acts
of vilification and harassment in her own name. Furthermore, the testimony of plaintiff that she distributed
copies of her complaint for disbarment against plaintiff to his clients remain
uncontradicted. Finally, instead of
coming to court in good faith she instead moved from her residence at Seaview
Heights, Lawaan, Talisay, Cebu without informing the court nor her counsel and
has not been heard from. From the
foregoing, malice is evident.

Appellant claims that the finding of the lower court that appellant
disseminated information regarding the filing of her complaint for disbarment
and caused a copy of the same to be furnished appellee’s clients is totally
unsupported by any evidence on record. The contention is untenable. Plaintiff declared that he came to know of the complaint against him
even before the Supreme Court required him to comment because two or three of
his clients told him that they had a copy given to them. (p. 8, t.s.n., June 3, 1983).

The foregoing acts committed by the defendant violate the conduct
that she should have observed in her relation to plaintiff, as provided in the
following provisions of the Civil Code of the Philippines, to wit:

‘Art. 19. Every person must, in the exercise of his rights and in
the performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.

Art. 20. Every person who, contrary to law, willfully
or negligently causes damage to another, shall indemnify the latter for the
same.

Art. 26. Every person shall
respect the dignity, personality, privacy and peace of mind of his neighbors
and other persons. The following and similar acts, though they may not
constitute a criminal offense, shall produce a cause of action for damages,
prevention and other relief:

(1) Prying into the privacy of another’s residence;

(2) Meddling with or disturbing the private life or family
relations of another;

(3) Intriguing to cause another to be alienated from his friends;

(4) Vexing or
humiliating another on account of his religious beliefs, lowly station in life,
place of birth, physical defect, or other personal condition.’ ” (Rollo, pp. 45-48)

The petitioner’s motion for reconsideration was denied by the
respondent Court in its resolution dated July 7, 1987. Hence, this petition.

The petitioner assigns the following errors:

I

“THE RESPONDENT COURT OF APPEALS ERRED
IN AFFIRMING THE DECISION OF THE REGIONAL TRIAL COURT OF CEBU, BRANCH XXI,
WHICH FOUND THE HEREIN PETITIONER GUILTY OF BAD FAITH IN INSTITUTING A
COMPLAINT FOR DISBARMENT AGAINST THE PRIVATE RESPONDENT.

II

THE RESPONDENT COURT OF APPEALS ERRED IN
ORDERING THE PETITIONER TO PAY THE PRIVATE RESPONDENT ACTUAL, MORAL AND
EXEMPLARY DAMAGES TO PAY THE COSTS. (Rollo, p. 21)

Before proceeding with the merits of the case, the scope of an
action for damages arising from malicious prosecution needs to be
clarified. Both the Court of Appeals
and the petitioner are of the belief that the suit for damages filed by Atty.
Legaspi is not one arising from malicious prosecution because “a disbarment
proceeding is not a criminal action. (De Jesus-Paras v. Vailoces, 1 SCRA 954 [1961].” The obvious
inference is that only an unsuccessful criminal action may subsequently give
rise to a claim for damages based on malicious prosecution. This is not correct. While generally,
malicious prosecution refers to unfounded criminal actions and has been
expanded to include unfounded civil suits just to vex and humiliate the
defendant despite the absence of a cause of action or probable cause (Equitable
Banking Corporation v. Intermediate Appellate Court, 133 SCRA 138 [1984]) the
foundation of an action for malicious prosecution is an original proceeding,
judicial in character. (Lorber v.
Storrow, 70 P. 2d 513 [1937]; Shigeru Hayashida v. Tsunehachi Kakimoto, 23 P.
2d 311 [1933]; Graves v. Rudman, 257 N.Y.S. 212 [1932]) A disbarment proceeding
is, without doubt, judicial in character and therefore may be the basis for a
subsequent action for malicious prosecution.

A perusal of the allegations in Atty. Legaspi’s complaint for
damages, particularly paragraphs 10, 11, 12 and 15 thereof (Rollo, pp. 56-59)
shows that his main cause of action was predicated on injury resulting from the
institution of the disbarment case against him. This being the case, we find that the suit filed by the
respondent lawyer makes out a case of damages for malicious prosecution.

An action for damages arising from malicious prosecution is
anchored on the provisions of Article 21, 2217 and 2219 [8] of the New Civil
Code. Under these Articles:

“Article 21. Any person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good customs or public policy
shall compensate the latter for damages.

“Article 2217. Moral damages include physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation and similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate result of the
defendant’s wrongful act or omission.

“Article 2219. Moral damages may be recovered in the following
and analogous cases:

xxx                                                             xxx                                                    xxx

(8) Malicious prosecution.

In Order, however, for the malicious prosecution suit to prosper,
the plaintiff must prove: (1) the fact of the prosecution and the further fact
that the defendant was himself the prosecutor, and that the action finally
terminated with an acquittal; (2) that in bringing the action, the prosecutor
acted without probable cause; and (3) that the prosecutor was actuated or
impelled by legal malice, that is by improper or sinister motive. (Lao v. Court
of Appeals, 199 SCRA 58 [1991]; Rehabilitation Finance Corporation v. Koh, 4
SCRA 535 [1962]; Buchanan v. Viuda de Esteban, 32 Phil. 363 [1915]).

The foregoing requisites are necessary safeguards to preserve a
person’s right to litigate which may otherwise be emasculated by the undue
filing of malicious prosecution cases. Thus, as further held in the aforecited case of Buchanan v. Viuda. de
Esteban, supra: “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 suite was brought for the mere purpose of vexing, harrassing and
injuring his adversary. In other
words, malice and want of probable cause
must both exist in order to justify the action.” (Underlining supplied;
see also Rehabilitation Finance Corp. v. Koh, supra)

Probable cause is the existence of such facts and circumstances
as would excite the belief, in a reasonable mind, acting on the facts within
the knowledge of the prosecutor, that the person charged was guilty of the
crime (or in this case, the wrongdoing) for which he was prosecuted. (See
Buchanan v. Viuda de Esteban, supra)

The general rule is well settled that one cannot be held liable
in damages for maliciously instituting a prosecution where he acted with
probable cause. In other words, a suit
will lie only in cases where a legal prosecution has been carried on without
probable cause. (Id.; underlining supplied)

The petitioner, at the time of her filing of the administrative
complaint against the respondent, held substantial stockholdings in L’NOR. She believed that L’NOR was defrauded by its
President/General Manager, Edward Porter, and filed a complaint for estafa
against the latter. Porter was
convicted by the trial court but, upon appeal, was acquitted by the appellate
court.

Respondent did not deny that he represented Porter during the
preliminary investigation and trial of the criminal case. In his comment in the disbarment complaint
against him, he justified his action by saying that they were “direct
orders of management” and that there is “nothing improper for counsel
to represent both the corporation and corporate officers at the same time when
they are being sued.” (Records, Administrative Case No.1819, p. 64)

It is of no moment now that Porter was acquitted of the estafa
charge. Apparently, at that time,
petitioner Ponce saw a conflict of interest situation. To her mind, the act of the respondent in
appearing as counsel for Porter, who had allegedly swindled L’NOR, the interest
of which he was duty bound to protect by virtue of the retainer contract,
constituted grave misconduct and gross malpractice.

Atty. Legaspi did not deny that he aided the Porters in
facilitating the incorporation of YRASPORT and that he himself was its
corporate secretary. He emphasized,
though, that due to L’NOR’S limited capitalization, YRASPORT was organized to
complement L’NOR’S business and not to compete with the latter’s undertakings.

Since the petitioner, however, was of the honest perception that
YRASPORT was actually organized to appropriate for itself some of L’NOR’S
business, then we find that she had probable cause to file the disbarment suit.

We take exception to the respondent’s comment that, assuming the
petitioner’s accusation to be true, “there is nothing in Philippine law
which considers as unethical the formation of competitive corporations and
neither can it be considered with evident bad faith and absolute lack of
fidelity.” (Records, Administrative Case No. 1819, p. 69)

The circumstances of the case do not depict a simple case of
formation of competitive corporations. What the petitioner objects to is the fact that both the respondent
lawyer and Porter are fiduciaries of L’NOR and are at the same time fiduciaries
of YRASPORT, both of which are engaged in the same line of business.

True, at that time, the Corporation Law did not prohibit a
director or any other person occupying a fiduciary position in the corporate
hierarchy from engaging in a venture which competed with that of the
corporation. But as a lawyer, Atty.
Legaspi should have known that while some acts may appear to be permitted
through sheer lack of statutory prohibition, these acts are nevertheless
circumscribed upon ethical and moral considerations. And had Atty. Legaspi turned to American jurisprudence which
then, as now, wielded a persuasive influence on our law on corporations, he
would have known that it was unfair for him or for Porter, acting as fiduciary,
to take advantage of an opportunity when the interest of the corporation justly
calls for protection. (See Ballantine, Corporations, 204, Callaghan & Co.,
N. Y. [1946])

Parenthetically, this lapse in the old Corporation Law is now
cured by sections 31 and 34 of the Corporation Code which provide:

“SEC. 31 Liability of directors, trustees
or officers. Directors or
trustees who willfully and knowingly vote for or assent to patently unlawful
acts of the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or pecuniary
interest in conflict with their duty as such directors or trustees shall be
liable jointly and severally for all damages resulting therefrom suffered by
the corporation, its stockholders or members and other persons.

When a director, trustee or officer attempts to acquire or
acquires, in violation of his duty, any interest adverse to the corporation in
respect of any matter which has been reposed in him in confidence, as to which
equity imposes a disability upon him to deal in his own behalf, he shall be
liable as a trustee for the corporation and must account for the profits which
otherwise have accrued to the corporation.

“SEC. 34. Disloyalty of a director. ? Where a director, by virtue of his
office, acquires for himself a business opportunity which should belong to the
corporation, thereby obtaining profits to the prejudice of such corporation, he
must account to the latter for all such profits by refunding the same, unless
his act has been ratified by a vote of the stockholders owning or representing
at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable,
notwithstanding the fact that the director risked his own funds in the venture.”

The Court finds it unnecessary to discuss all the other charges
imputed to the respondent lawyer in the disbarment complaint. From the foregoing discussion, we have
sufficient basis to declare that the petitioner had probable cause in filing
the administrative case against Atty. Legaspi. Facts and circumstances existed
which excited belief in Mrs. Ponce’s mind that the respondent indeed committed
unethical acts which warranted the imposition of administrative sanctions. Whether or not the petitioner’s perception
of these facts and circumstances is actually correct is irrelevant to our
inquiry, the only issue being whether or not the petitioner had probable cause
in filing the complaint.

The above discussion should not be construed as a re-opening of
the disbarment proceeding against Atty. Legaspi. References to the complaint for disbarment and the respondent’s
comment thereto are made only for the purpose of determining the existence of
probable cause.

Since we adjudge that petitioner Ponce was moved by probable
cause, we need not anymore ascertain whether or not the petitioner acted with
malice in filing the complaint. The
existence of probable cause alone, regardless of considerations of malice, is
sufficient to defeat the charge of malicious prosecution.

The respondent court treated Atty. Legaspi’s complaint as one for
damages arising from libel and applied the test of bona fides, citing the case
of Deles v. Aragona (27 SCRA 633 [1969]). This is incorrect.

In the first place, allegations and averments in pleadings are
absolutely privileged as long as they are relevant or pertinent to the issues
(See Montenegro v. Medina, 73 Phil 602 [1942]). The test of good faith applies only to a qualified privileged
communication. Had the respondent court
studied the Deles case more closely, it would have traced the “bona
fides” test to the case of U.S. v. Bustos, (37 Phil.
731 [1918]). In the latter case, the
Court was referring to a qualified privileged communication when it formulated
the “bona fides” test.

Moreover, the test to break through the protective barrier of an
absolutely privileged communication is not “bona fides” but
relevance. In the present case, Atty.
Legaspi’s complaint nowhere alleged that the statements made by the petitioner
were irrelevant. Thus, we find that the
petitioner’s complaint for disbarment is still covered by the privilege and may
not be the basis of a damage suit arising from libel.

We disagree with the findings of the two lower courts that it was
the petitioner who distributed copies of the complaint for disbarment to Atty.
Legaspi’s clients. It should be noted
that Atty. Legaspi did not even present these alleged clients in court to
testify to the source of these copies. Considering that a complaint for disbarment becomes of public record
once it is filed with the Court, then the petitioner may not be pinpointed as
the sole and indisputable source of the copies received by the respondent’s
clients.

Atty. Legaspi may have suffered injury as a consequence of the
disbarment proceedings. But the adverse
result of an action does not per se make the action wrongful and subject
the actor to make payment of damages for the law could not have meant to impose
a penalty on the right to litigate (Saba v. Court of Appeals, 189 SCRA 50 [1990],
citing Rubio v. Court of Appeals, 141 SCRA 488 [1986]; see also Salao v. Salao,
70 SCRA 65 [1976] and Ramos v. Ramos, 61 SCRA 284 [1974], citing Barreto v.
Arevalo, 99 Phil. 771 [1956]). One who
exercises his rights does no injury. (Saba v. Court of Appeals, supra,
citing Auyong Hian v. Court of Tax Appeals, 59 SCRA 110 [1974]). If damage results from a person’s exercising
his legal rights, it is damnum absque injuria. [Id.]

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals is SET ASIDE and REVERSED.

SO ORDERED.

Feliciano, Bidin, and
Romero, JJ., concur.

Davide Jr., J., no part.