GR L 64515; (June, 1984) (Digest)
G.R. No. L-64515. June 22, 1984. R & B SURETY & INSURANCE CO., INC., petitioner, vs. THE INTERMEDIATE APPELLATE COURT and ANGELINA USON, respondents.
FACTS
Petitioner R & B Surety & Insurance Co., Inc. filed a complaint for sum of money against Maria Isabel Diaz, Eliseo Santos, and respondent Angelina Uson based on an indemnity agreement securing a surety bond. The trial court found Uson’s signatures on the indemnity agreement to be forgeries and dismissed the complaint against her. It also dismissed Uson’s counterclaim for damages. Uson appealed the dismissal of her counterclaim.
The Intermediate Appellate Court reversed the trial court on the counterclaim. It found petitioner acted in bad faith and negligently filed the action against Uson. The appellate court inferred bad faith because the forgery was possible only if petitioner entrusted blank indemnity forms to Diaz or allowed signing outside its representative’s presence. It also noted petitioner’s failure to require Uson’s residence certificate as required by law. Consequently, it awarded Uson moral damages, exemplary damages, and attorney’s fees totaling P135,000.00.
ISSUE
Whether the Intermediate Appellate Court correctly adjudged petitioner liable for moral and exemplary damages and attorney’s fees based on a finding of bad faith and negligence in filing the complaint against respondent Uson.
RULING
No. The Supreme Court reversed the appellate court’s decision and reinstated the trial court’s judgment in full. The legal logic is that an award of moral damages requires proof of a wrongful act, fraud, or bad faith. The Court held that the mere act of filing a judicial action, even if ultimately unsuccessful, does not automatically constitute bad faith. A party has a right to litigate and seek judicial redress for perceived claims without fear of a damages suit if the action fails, provided it is not manifestly baseless or filed with malice.
Here, the petitioner’s reliance on the indemnity agreement, which appeared regular on its face, and its presentation of a witness who testified to Uson’s signature, did not constitute clear evidence of bad faith. The inferences of negligence drawn by the appellate court—such as entrusting blank forms or failing to verify the residence certificate—were insufficient to establish the fraud, malice, or wanton conduct necessary for an award of moral and exemplary damages. The Court emphasized that damages must be proportionate and supported by clear evidence, which was absent. Since no bad faith was proven, the awards for moral and exemplary damages, including attorney’s fees, were untenable.