Orosa vs. Court of Appeals

Moral damages cannot be recovered absent a showing that the defendant's act or omission was wrongful and was the proximate cause of the plaintiff's injury. Where a party files a complaint in good faith, exercising a legal right and believing in the merit of the cause of action, moral damages for alleged malicious prosecution are not recoverable, and where moral and exemplary damages are eliminated, the award of attorney's fees must likewise be deleted.

Petitioner Jose S. Orosa purchased a 1983 Ford Laser 1.5 Sedan on installment from Fiesta Motor Sales Corporation, executing a promissory note for P133,824.00 payable in monthly installments and a chattel mortgage over the vehicle to secure payment. Fiesta Motor Sales assigned the promissory note and chattel mortgage to private respondent FCP Credit Corporation. The dispute concerned the propriety of the replevin suit filed by FCP Credit Corporation after alleged default on several installments, and the corresponding liability for damages arising from the filing of that suit.

On September 28, 1983, petitioner Jose S. Orosa purchased a 1983 Ford Laser 1.5 Sedan with Motor and Serial No. SUNKBT-14584 on installment from Fiesta Motor Sales Corporation. He executed and delivered a promissory note in the sum of P133,824.00 payable in monthly installments, and to secure payment, he executed a chattel mortgage over the vehicle in favor of Fiesta Motor Sales Corp. On the same date, Fiesta Motor Sales assigned the promissory note and chattel mortgage to private respondent FCP Credit Corporation.

On December 6, 1984, FCP Credit Corporation filed a complaint for replevin and damages in the Regional Trial Court of Manila against petitioner and one John Doe, alleging that petitioner failed to pay the installment that fell due on July 28, 1984, as well as three consecutive installments that fell due on August 28, September 28, and October 28, 1984. FCP demanded payment of the entire outstanding balance of P106,154.48 with accrued interest and the surrender of the vehicle, which petitioner was allegedly detaining.

After trial, the lower court dismissed the complaint, ruling that FCP had no reason to file the action since petitioner already paid the installments for the months of July to November 1984, which were the sole bases of the complaint. The trial court declared that FCP was not entitled to the writ of replevin and was liable for actual damages under the replevin bond, stating that the enforcement of the writ by the sheriff was "highly irregular, and unlawful, done, as it was, under shades of extortion, threats and force." The trial court ordered FCP to pay P400,000.00 as moral damages, P100,000.00 as exemplary damages, and P50,000.00 as attorney's fees, and to return the vehicle or its equivalent in cash.

On appeal, the Court of Appeals' Eighth Division partially affirmed the trial court's decision, deleting the awards of moral damages, exemplary damages, and attorney's fees, and deleting the order directing FCP to return the vehicle. Instead, the appellate court ordered FCP to pay petitioner the amount equivalent to the value of the fourteen monthly installments he had actually made, with interest from the time of filing of the complaint. The appellate court reasoned that the trial court erred in ordering the return of the car or its equivalent considering that petitioner had not yet fully paid the purchase price, and that to sustain the trial court's decision would amount to unjust enrichment.

• Lack of Jurisdiction: Petitioner alleged that the Eighth Division of the Court of Appeals had no jurisdiction to review the case since the First Division had already passed upon the law and the facts of the same, and that the present appeal involved the same causes of action, same parties, same facts, and same relief as the decision affirmed by the Supreme Court in G.R. No. 84979.
• Res Judicata: Petitioner argued that res judicata barred the determination of the present case because of the prior final decision in CA-G.R. SP No. 14938, as sustained by the Supreme Court in G.R. No. 84979.
• Issues Raised for the First Time on Appeal: Petitioner posited that the Court of Appeals committed grave abuse of discretion when it considered causes of action which were raised for the first time on appeal.
• Moral Damages: Petitioner insisted that he suffered untold embarrassment when the complaint was filed against him, as the car was being used by his daughter, married to Jose Concepcion III, a scion of a prominent family, and that he experienced anguish and humiliation when he had to face his daughter's wealthy in-laws to explain the case.
• Exemplary Damages and Attorney's Fees: Petitioner averred that he incurred expenses amounting to P50,000.00 to prosecute and defend the case, and as such, attorney's fees should be granted.

• Waiver of Prior Notice and Demand: Private respondent belatedly pointed out that petitioner had waived prior notice and demand in order to be rendered in default, as the Promissory Note expressly stipulated that the monthly installments shall be paid on the date they fall due without need of prior notice or demand.
• Late Payment Charges: Private respondent noted that the Promissory Note expressly stipulated that a late payment charge of 2% per month shall be added on each unpaid installment from maturity thereof until fully paid.
• Acceleration Clause: Private respondent argued that based on the Acceleration Clause in the Promissory Note, if default be made in the payment of any of the installments or late payment charges thereon when the same became due and payable, the total principal sum then remaining unpaid, together with the agreed late payment charges, shall at once become due and payable.
• Default Despite Payment: Private respondent argued that petitioner incurred in default since, even though there was actual payment of the installments which fell due on July 28, 1984, as well as the three installments on August 28 to October 28, 1984, the payments were all late and irregular.
• Violation of Chattel Mortgage: Private respondent also argued that petitioner assigned the subject car to his daughter without the written consent of the obligee, and hence, violated the terms of the chattel mortgage.

• Jurisdiction: Whether the Court of Appeals' Eighth Division acted without or in excess of jurisdiction in reviewing the case when a co-equal division had already passed upon the same causes of action, facts, parties, and relief.
• Res Judicata: Whether the prior decision in CA-G.R. SP No. 14938, as affirmed by the Supreme Court in G.R. No. 84979, barred the determination of the present case.
• Issues Raised for the First Time on Appeal: Whether the Court of Appeals committed grave abuse of discretion in considering causes of action not alleged in the complaint and raised for the first time on appeal.
• Moral Damages: Whether petitioner was entitled to moral damages for the filing of the replevin complaint against him.
• Exemplary Damages: Whether petitioner was entitled to exemplary damages.
• Attorney's Fees: Whether petitioner was entitled to attorney's fees.
• Return of the Vehicle: Whether the trial court erred in ordering private respondent to return the subject car or its equivalent when petitioner had not yet fully paid the purchase price.

• Jurisdiction: No. The appellate jurisdiction of the Court of Appeals to review decisions and orders of lower courts is conferred by Batas Pambansa Blg. 129, and petitioner cannot assail the Court of Appeals' jurisdiction after having actively participated in the appeal and after praying for affirmative relief.
• Res Judicata: No. The two cases involve different subject matters, parties, and seek different reliefs; the prior decisions did not pass on the merits of the case but merely ruled on whether the surety could be held jointly and solidarily liable and whether execution pending appeal was proper.
• Issues Raised for the First Time on Appeal: No. Basic is the rule that matters not raised in the complaint cannot be raised for the first time on appeal, and the Court of Appeals restricted the determination of the case to matters alleged in the complaint and raised during trial.
• Moral Damages: No. The law requires that moral damages be the proximate result of the other party's wrongful act or omission, and the act must be wrongful; here, private respondent filed the complaint in good faith, exercising a legal right and believing it had a meritorious cause of action.
• Exemplary Damages: No. Where a party is not entitled to actual or moral damages, an award of exemplary damages is likewise baseless.
• Attorney's Fees: No. No premium should be placed on the right to litigate, and not every winning party is entitled to an automatic grant of attorney's fees; the party must show that he falls under one of the instances enumerated in Article 2208 of the Civil Code.
• Return of the Vehicle: No. The trial court erred in ordering private respondent to return the subject car or its equivalent considering that petitioner had not yet fully paid the purchase price, as to sustain the trial court's decision would amount to unjust enrichment.

• Jurisdiction: Jurisdiction is simply the power or authority to hear a case. The appellate jurisdiction of the Court of Appeals to review decisions and orders of lower courts is conferred by Batas Pambansa Blg. 129. More importantly, petitioner cannot now assail the Court of Appeals' jurisdiction after having actively participated in the appeal and after praying for affirmative relief, citing Francisco Motors Corporation vs. Court of Appeals and Spouses Gregorio and Librada Manuel, G.R. No. 100812, June 25, 1999.

• Res Judicata: The petition docketed as CA-G.R. SP No. 14938 was for certiorari with injunction, brought by Stronghold Insurance Company, Inc., alleging grave abuse of discretion when the trial court adjudged it liable for damages without due process, in violation of Rule 60, Section 10 in relation to Rule 57, Section 20, of the Rules of Court. The surety also questioned the propriety of the writ of execution issued by the trial court pending appeal. On the other hand, CA-G.R. CV No. 25929 was filed by petitioner Orosa under Rule 45 of the Revised Rules of Court raising alleged errors of law on the part of the trial court. The subject of the appeal was the main decision, while the subject of the petition in CA-G.R. SP No. 14938 was the Supplemental Decision. The decisions of the Court of Appeals in CA-G.R. SP No. 14938 and the Supreme Court in G.R. No. 84979 did not pass on the merits of the case; they merely ruled on the issues of whether the surety can be held jointly and solidarily liable with plaintiff-appellant and whether execution pending appeal is proper under the facts and circumstances of the case. Consequently, the Court was not estopped from reviewing the conclusions reached by the court a quo.

• Issues Raised for the First Time on Appeal: Private respondent submitted issues to the Court of Appeals which were not raised in the original complaint, including the waiver of prior notice and demand, the late payment charge of 2% per month, and the Acceleration Clause. Meritorious as these arguments are, they come too late in the day. Basic is the rule that matters not raised in the complaint cannot be raised for the first time on appeal. Contrary to petitioner's accusation, the Court of Appeals restricted the determination of the case to matters alleged in the complaint and raised during trial. Citing Medida, et al. vs. Court of Appeals, et al., 208 SCRA 887 (1992) and Gevero, et al. vs. Intermediate Appellate Court, et al., 189 SCRA 201 (1990), the Court of Appeals held that "it would be offensive to the basic rule of fair play, justice and due process" if it considered issues raised for the first time on appeal. The Court of Appeals' statement that "under the terms and conditions of the chattel mortgage, defendant-appellee Jose S. Orosa was already in default," was made only to justify the deletion of the trial court's award of moral, exemplary damages and attorney's fees, in consonance with its finding that private respondent was motivated by a sincere belief that it had sufficient basis and acted in good faith when it filed the claim.

• Moral Damages: The law clearly states that one may only recover moral damages if they are the proximate result of the other party's wrongful act or omission, under Article 2217 of the Civil Code. Two elements are required: first, the act or omission must be the proximate result of the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury; second, the act must be wrongful. Petitioner maintains that embarrassment resulted when he had to explain the suit to his daughter's in-laws. However, that could have been avoided had he not assigned the car to his daughter and had he been faithful and prompt in paying the installments required. Petitioner brought the situation upon himself and cannot now complain that private respondent is liable for the mental anguish and humiliation he suffered. Furthermore, when private respondent brought the complaint, it did so only to exercise a legal right, believing that it had a meritorious cause of action clearly borne out by a mere perusal of the promissory note and chattel mortgage. To constitute malicious prosecution, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person, and that it was initiated deliberately, knowing that the charges were false and groundless, citing Drilon, et al. vs. Court of Appeals, et al., 270 SCRA 211 (1997). Such was not the case when the instant complaint was filed. The rule has always been that moral damages cannot be recovered from a person who has filed a complaint against another in good faith, citing Mijares, et al. vs. Court of Appeals, et al., 271 SCRA 558 (1997). The law always presumes good faith such that any person who seeks to be awarded damages due to acts of another has the burden of proving that the latter acted in bad faith or with ill motive, citing Ford Philippines, Inc., et al. vs. Court of Appeals, et al., 267 SCRA 320 (1997).

• Exemplary Damages: Jurisprudence provides that where a party is not entitled to actual or moral damages, an award of exemplary damages is likewise baseless, citing Bernardo vs. Court of Appeals (Special Sixth Division), et al., 275 SCRA 413 (1997).

• Attorney's Fees: No premium should be placed on the right to litigate and not every winning party is entitled to an automatic grant of attorney's fees, citing Philtranco Service Enterprises, Inc., et al. vs. Court of Appeals, et al., 273 SCRA 562 (1997). The party must show that he falls under one of the instances enumerated in Article 2208 of the Civil Code. This, petitioner failed to do. Furthermore, where the award of moral and exemplary damages is eliminated, so must the award for attorney's fees be deleted, citing Bernardo vs. Court of Appeals (Special Sixth Division), et al., supra.

• Return of the Vehicle: The trial court erred when it ordered private respondent to return the subject car or its equivalent considering that petitioner had not yet fully paid the purchase price. To sustain the trial court's decision would amount to unjust enrichment. The Court of Appeals was correct when it instead ordered private respondent to return, not the car itself, but only the amount equivalent to the fourteen installments actually paid with interest.

• Res Judicata — For res judicata to bar a subsequent action, there must be identity of parties, subject matter, and causes of action, and a final judgment on the merits. In this case, the prior decisions in CA-G.R. SP No. 14938 and G.R. No. 84979 did not pass on the merits of the replevin case; they merely ruled on the surety's liability and the propriety of execution pending appeal, so res judicata did not apply.

• Moral Damages for Malicious Prosecution — To constitute malicious prosecution, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person, and that it was initiated deliberately, knowing that the charges were false and groundless. Where a party files a complaint in good faith, exercising a legal right and believing in the merit of the cause of action, moral damages cannot be recovered.

• Issues Raised for the First Time on Appeal — Matters not raised in the complaint cannot be raised for the first time on appeal; it would be offensive to the basic rule of fair play, justice and due process to consider such issues.

• Attorney's Fees — No premium should be placed on the right to litigate, and not every winning party is entitled to an automatic grant of attorney's fees; the party must show that he falls under one of the instances enumerated in Article 2208 of the Civil Code.

• "The decisions of the Court of Appeals in CA-G.R. SP No. 14938 and the Supreme Court in G.R. No. 84979 did not pass on the merits of this case. It merely ruled on the issues of whether the surety, Stronghold Insurance, Co., Inc., can be held jointly and solidarily liable with plaintiff-appellant and whether execution pending appeal is proper under the facts and circumstances of this case. Consequently, this Court is not estopped from reviewing the conclusions reached by the court a quo." — This passage defines the scope of the prior rulings and establishes why res judicata did not bar the present appeal.

• "Basic is the rule that matters not raised in the complaint cannot be raised for the first time on appeal." — This states the controlling procedural rule applied to reject private respondent's belatedly raised arguments.

• "The law clearly states that one may only recover moral damages if they are the proximate result of the other party's wrongful act or omission." — This articulates the two-element test for moral damages under Article 2217 of the Civil Code.

• "The rule has always been that moral damages cannot be recovered from a person who has filed a complaint against another in good faith." — This states the controlling principle for denying moral damages where the complaint was filed in good faith.

• Francisco Motors Corporation vs. Court of Appeals and Spouses Gregorio and Librada Manuel, G.R. No. 100812, June 25, 1999 — Cited for the principle that a party cannot assail the Court of Appeals' jurisdiction after having actively participated in the appeal and after praying for affirmative relief.
• Medida, et al. vs. Court of Appeals, et al., 208 SCRA 887 (1992) — Cited for the rule that matters not raised in the complaint cannot be raised for the first time on appeal.
• Gevero, et al. vs. Intermediate Appellate Court, et al., 189 SCRA 201 (1990) — Cited for the same rule against raising new issues on appeal.
• Drilon, et al. vs. Court of Appeals, et al., 270 SCRA 211 (1997) — Cited for the definition of malicious prosecution, requiring proof of sinister design and knowledge that the charges were false and groundless.
• Mijares, et al. vs. Court of Appeals, et al., 271 SCRA 558 (1997) — Cited for the rule that moral damages cannot be recovered from a person who has filed a complaint against another in good faith.
• Ford Philippines, Inc., et al. vs. Court of Appeals, et al., 267 SCRA 320 (1997) — Cited for the presumption of good faith and the burden of proving bad faith or ill motive on the party seeking damages.
• Bernardo vs. Court of Appeals (Special Sixth Division), et al., 275 SCRA 413 (1997) — Cited for the rule that where a party is not entitled to actual or moral damages, an award of exemplary damages is likewise baseless, and that where moral and exemplary damages are eliminated, attorney's fees must also be deleted.
• Philtranco Service Enterprises, Inc., et al. vs. Court of Appeals, et al., 273 SCRA 562 (1997) — Cited for the rule that no premium should be placed on the right to litigate and not every winning party is entitled to an automatic grant of attorney's fees.

• Article 2217, Civil Code — Provides that moral damages may be recovered for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury, but only if they are the proximate result of the defendant's wrongful act or omission. The Court applied this provision to deny moral damages because private respondent's act of filing the complaint was not wrongful, having been done in good faith.
• Article 2208, Civil Code — Enumerates the instances when attorney's fees and expenses of litigation can be recovered in the absence of stipulation. The Court applied this provision to deny attorney's fees because petitioner failed to show that he fell under any of the enumerated instances.
• Batas Pambansa Blg. 129 — Confers appellate jurisdiction on the Court of Appeals to review decisions and orders of lower courts. The Court cited this to reject petitioner's challenge to the Eighth Division's jurisdiction.
• Rule 60, Section 10 and Rule 57, Section 20, Rules of Court — Cited in the prior certiorari petition by the surety company regarding liability for damages without due process and the propriety of the writ of execution pending appeal.

Davide, Jr., C.J., Kapunan, J., and Pardo, J., concurred. Puno, J., took no part.