G.R. No. 83106 December 21, 1998
ADELAIDA KALUBIRAN, petitioner, vs. COURT OF APPEALS and J. RUBY CONSTRUCTION AND MAINTENANCE SERVICE CORPORATION, respondents.

FACTS

Private respondent J. Ruby Construction (JRCM) completed a restoration project for PLDT in Cebu City. The City Engineer’s acceptance letter obligated JRCM to undertake repair works on any failure within one year. Subsequently, PLDT sought a new permit, but the City Engineer denied it, citing failures in JRCM’s prior work and demanding immediate restoration. The restoration work was subsequently performed. Petitioner Adelaida Kalubiran, owner of Kalmar Construction, claimed she performed these repairs with JRCM’s authorization and was owed P28,000. When JRCM allegedly refused payment, Kalubiran’s counsel wrote directly to PLDT, demanding payment and stating JRCM was refusing to pay because PLDT had not paid them. This letter prompted PLDT to cease awarding major contracts to JRCM, allegedly due to a policy against unauthorized subcontracting.
JRCM filed a complaint for damages against Kalubiran, alleging the letter was unauthorized, malicious, and constituted unfair competition, damaging its business reputation and relationship with PLDT. Kalubiran defended the letter, claiming it was sent pursuant to an agreement reached at a conference involving PLDT and JRCM, and filed a counterclaim for payment for services rendered.

ISSUE

Whether petitioner Adelaida Kalubiran is liable for damages for the letter sent by her counsel to PLDT.

RULING

Yes, the Supreme Court affirmed the lower courts’ decision holding Kalubiran liable. The legal logic rests on the absence of authority for both the repair work and the subsequent letter, and the actionable nature of the communication. First, the trial court found that the person who allegedly authorized Kalubiran to perform the repairs was a mere laborer without any managerial capacity to bind JRCM. This finding, affirmed by the Court of Appeals and not overturned, established that Kalubiran acted without authority. Second, the letter itself contained an unsubstantiated and damaging claim that JRCM was refusing to pay Kalubiran because PLDT had not paid JRCM. The Court found no credible evidence, such as a written agreement or official minutes, to support Kalubiran’s claim of a conference where such a direct claim to PLDT was authorized. The letter’s implication of JRCM’s non-payment due to PLDT’s own non-payment was injurious to JRCM’s business standing. Third, the Court rejected the defense that the letter was the act of counsel alone, reiterating the doctrine that the mistake of counsel binds the client, except in cases of gross negligence, which was not present. Finally, the Court distinguished the case from privileged communication doctrines applicable to judicial pleadings, ruling that the letter was a private business communication, not made in a judicial proceeding, and was therefore not privileged. Consequently, the award of temperate damages, exemplary damages, and attorney’s fees was upheld as a proper remedy for the unjustified injury caused to JRCM’s business.