G.R. No. L-31931 August 31, 1988
Fortunato de Leon & Juana F. Gonzales-De Leon, petitioners-appellants, vs. Honorable Court of Appeals, Dr. Cornelio S. Tantoco and Juan Briones represented by Administratrix Magdalena Bernardo, respondents-appellees.

FACTS

The spouses Juan Briones and Magdalena Bernardo were the registered owners of a fishpond in Bulacan. They mortgaged this property twice: first, for P20,000 to Hermogenes Tantoco (later assigned to Dr. Cornelio S. Tantoco), and second, for P68,824 directly to Dr. Tantoco. While both mortgages were annotated on the title, the Briones spouses sold the fishpond to petitioners Fortunato and Juana de Leon for P120,000. The De Leons withheld P89,000 from the purchase price, assuming the responsibility to pay the Briones’ mortgage debts to the Tantocos. The De Leons paid off the first mortgage but failed to fully settle the second mortgage of P68,824 with interest.
Petitioner Fortunato de Leon, claiming to act as counsel for the Briones spouses, later tendered a payment of P29,382.50 to Dr. Tantoco, insisting it was in full discharge of the Briones’ obligation. Dr. Tantoco rejected this as full payment, clarifying the total due was much higher, and accepted the amount only as a partial payment. Juan Briones subsequently executed an affidavit denying he hired De Leon as counsel or authorized him to make such a payment. The De Leons then filed a complaint against Dr. Tantoco seeking the discharge of the mortgage.

ISSUE

The primary issue is whether the Court of Appeals erred in affirming the award of moral and exemplary damages to Dr. Cornelio S. Tantoco.

RULING

The Supreme Court affirmed the award of moral and exemplary damages but reduced the amount. The legal logic is anchored on the established factual findings that the petitioners acted in bad faith. By filing a baseless complaint accusing Dr. Tantoco of defrauding the Briones spouses and labeling him a money lender, the petitioners caused him humiliation, embarrassment, and maligning of his professional reputation as a respected surgeon and community figure. Such unwarranted and malicious litigation constitutes a legal basis for awarding moral damages under the Civil Code, as it caused mental anguish, serious anxiety, and besmirched reputation.
The entitlement to moral damages having been legitimately established, the award of exemplary damages is also proper, as its purpose is to serve as a deterrent against similar oppressive or malevolent conduct. However, the Court emphasized that moral damages are not intended to enrich the complainant but only to provide compensation for actual moral suffering. Following jurisprudence, the Court deemed the original aggregate award of P60,000 excessive. Using the guideline of reasonableness in proportion to the actual context—considering the outstanding loan balance and the depreciation of currency—the Supreme Court modified the award, reducing the aggregate moral and exemplary damages to P25,000. Thus, the appealed decision was affirmed with this modification.