G.R. No. 136722; April 12, 2000
Industrial Insurance Company, Inc., petitioner, vs. Pablo Bondad and Ligorio Bondad, respondents.

FACTS

The case originated from a vehicular accident involving three vehicles: a car insured by petitioner Industrial Insurance Company, a passenger jeepney owned and operated by respondents Bondad, and a DM Transit bus. The Traffic Investigation Report by Pfc. Agapito Domingo established that the Bondads’ jeepney, with a flat tire, was stationary on the shoulder of the South Expressway when it was rear-ended by the DM Transit bus. The impact caused the bus to swerve and collide with the insured car. Petitioner, having paid its insured, filed a complaint for damages against the bus company, its driver, and the Bondads, alleging joint negligence.
The Bondads, in their Answer, denied liability, asserting their vehicle was at a full stop due to a flat tire when hit by the bus. They filed a counterclaim against petitioner, contending they were impleaded in bad faith despite the clear police report exonerating them. The trial court ruled in favor of the Bondads, exculpating them from negligence and, finding bad faith on petitioner’s part, awarded the Bondads moral and exemplary damages, attorney’s fees, and litigation expenses. The Court of Appeals affirmed with modifications, reducing the damages.

ISSUE

Whether the Court of Appeals erred in affirming the award of damages, attorney’s fees, and litigation expenses in favor of the Bondads, despite petitioner’s exercise of its right to litigate.

RULING

The Supreme Court denied the petition and affirmed the appellate court’s decision. The legal logic centers on the principle that while the right to litigate is constitutionally protected, it must be exercised in good faith. Good faith was absent here. The police report, which was available to petitioner before filing suit, clearly indicated the Bondads’ jeepney was stationary and was the initial victim struck by the negligent bus. Petitioner had no valid cause of action against the Bondads, as the proximate cause of the accident was solely the bus driver’s negligence.
By recklessly impleading the Bondads and persistently pursuing unmeritorious claims through appeal, petitioner acted in bad faith. This compelled the Bondads to incur unnecessary defense costs, travel from Laguna to Makati for hearings, and suffer anxiety from being baselessly sued. Such wanton litigation justifies awards for moral damages for the mental distress, and exemplary damages to deter similar conduct. Attorney’s fees and litigation expenses are also recoverable under the Civil Code when a party is compelled to litigate due to another’s clearly unfounded civil action. The Bondads, not having appealed the reduced damages, were deemed to have accepted the CA’s modification.