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PRO LINE SPORTS CENTER v. CA

FACTS:

Pro Line Sports Center, Inc. (PRO LINE) and Questor Corporation (QUESTOR) filed a criminal case for unfair competition against Monico Sehwani, president of Universal Athletics and Industrial Products, Inc. (UNIVERSAL). However, Sehwani and UNIVERSAL were exonerated in that case. In retaliation, Sehwani and UNIVERSAL filed a civil case for damages against PRO LINE and QUESTOR for maliciously filing the criminal action against them.

PRO LINE, a domestic corporation, is the exclusive distributor of "Spalding" sports products in the Philippines. Pro Line acquired the trademark "Spalding" by virtue of its merger with A.G. Spalding Bros., Inc. UNIVERSAL, on the other hand, is a domestic corporation engaged in the sale and manufacture of sporting goods.

On February 11, 1981, Edwin Dy Buncio, General Manager of PRO LINE, filed a letter-complaint with the National Bureau of Investigation (NBI) regarding the alleged manufacture of fake "Spalding" balls by UNIVERSAL. On February 23, 1981, the NBI applied for a search warrant, which was issued by Judge Rizalina Bonifacio Vera of the Court of First Instance. The search resulted in the seizure and confiscation of basketballs and volleyballs marked "Spalding" from UNIVERSAL's premises. The court also ordered the seal and padlock of UNIVERSAL's machineries and instruments used to manufacture the fake "Spalding" products.

However, on April 28, 1981, the seal and padlock order was lifted. PRO LINE, QUESTOR, the People of the Philippines, and the NBI filed a joint petition for certiorari and prohibition with preliminary injunction seeking to annul the order to lift the seal and padlock. The Court of Appeals issued a temporary restraining order enjoining Judge Vera from implementing her order. Meanwhile, on February 26, 1981, PRO LINE and QUESTOR filed a criminal complaint for unfair competition against Sehwani and others. However, the complaint was later dropped.

A petition for review regarding the dismissal of the criminal complaint was filed, and the Court of Appeals affirmed the dismissal. Eventually, UNIVERSAL and Sehwani filed a civil case for damages against PRO LINE and QUESTOR, alleging malicious prosecution and other acts committed by the defendants. The trial court ruled in favor of UNIVERSAL and Sehwani, awarding them actual and compensatory damages, moral damages, exemplary damages, and attorney's fees. The Court of Appeals affirmed the decision but reduced the amount of moral damages.

ISSUES:

  1. Whether private respondents Sehwani and UNIVERSAL are entitled to recover damages for the alleged wrongful recourse to court proceedings by petitioners PRO LINE and QUESTOR.

  2. Whether petitioners' counterclaim should be sustained.

RULING:

  1. Sehwani and UNIVERSAL are not entitled to recover damages. They failed to prove the essential elements of malicious prosecution, specifically the absence of probable cause and legal malice on the part of petitioners.

  2. The petitioners' counterclaim for damages is dismissed. The judgment in the criminal case involving the criminal and civil aspects of the unfair competition case bars the separate civil action for damages based on res judicata.

PRINCIPLES:

  1. Probable cause in malicious prosecution - It is the existence of facts and circumstances that would lead a reasonable mind to believe that the person charged was guilty of the crime.

  2. Legal malice in malicious prosecution - Malice involves an inexcusable intent to injure, oppress, vex, annoy or humiliate.

  3. Damnum absque injuria - Exercising one's legal rights does not result in liability for damages, even if it causes harm to another.

  4. Res judicata - A matter already judged; prevents the same parties from litigating the same issue in another lawsuit.

  5. Rule on counterclaims - A counterclaim is treated as a separate cause of action, standing on the same footing and tested by the same rules as an independent action.

  6. Civil liability in criminal proceedings - Civil liability arising from the crime is deemed instituted and determined in the criminal proceedings unless waived or reserved to be instituted separately.