G.R. No. 127823 January 29, 1998
“J” MARKETING CORPORATION represented by HECTOR L. CALUDAC, petitioner, vs. FELICIDAD SIA, JR. and COURT OF APPEALS, respondents.

FACTS

Petitioner J. Marketing Corporation, an appliances and motorcycles business, received a brand new Kawasaki motorcycle on April 24, 1983. The motorcycle was placed in its bodega in Tacloban City. On April 20, 1987, petitioner discovered the motorcycle was missing and reported the loss to police authorities. Petitioner traced the lost motorcycle to private respondent Felicidad Sia, Jr., who had purchased a motorcycle from one Renato Pelande, Jr. on May 25, 1987. Petitioner’s representative examined the motorcycle in Sia’s possession and found its chassis and motor numbers had been tampered with to match the numbers of the motorcycle previously purchased by Pelande from petitioner. When confronted at the Constabulary Highway Patrol Group office, Sia refused to return the motorcycle and told petitioner to file a case in court. Consequently, on September 24, 1987, petitioner filed a complaint for replevin with damages against Sia before the Regional Trial Court. Sia filed a third-party complaint against Renato Pelante, Jr., who was declared in default. The trial court dismissed petitioner’s complaint but awarded moral damages, exemplary damages, and attorney’s fees to Sia. The Court of Appeals affirmed this decision.

ISSUE

Whether the award of attorney’s fees and damages (moral and exemplary) to private respondent Felicidad Sia, Jr. is proper.

RULING

No. The award of attorney’s fees and damages is not proper. A person’s right to litigate should not be penalized by holding him liable for damages, especially when filing a case to enforce a claim believed to be rightful, even if found erroneous. Petitioner instituted the replevin case based on Sia’s own challenge to file a case in court. The institution of the suit was not tainted with gross and evident bad faith or malice to harass. The mere dismissal of petitioner’s complaint does not make its act unlawful or subject it to moral damages; placing a premium on the right to litigate is not sound public policy. Exemplary damages have no factual basis as the act was not accompanied by bad faith, wantonness, fraud, or malevolence, and such damages cannot be awarded in the absence of compensatory damages. Attorney’s fees are not justified merely by an adverse decision; petitioner honestly believed it had a good cause of action, and Sia, as a necessary party defendant, cannot automatically recover attorney’s fees simply for winning. The special circumstances enumerated in Article 2208 of the New Civil Code for awarding attorney’s fees are absent, as there was no bad faith, only an erroneous conviction of the righteousness of its cause. The decision of the Court of Appeals is AFFIRMED WITH THE MODIFICATION that the award of damages, attorney’s fees, and cost to private respondent is deleted.