RODOLFO B. SANTIAGO, ETC. PLAINTIFF AND APPELLEE, VS. AMADO DIMAYUGA, ETC., DEFENDANT AND APPELLANT.

This is an action for various sums of money upon six causes of action, plus
interests, attorney’s fees and costs. The first five causes of action are based
upon promissory notes executed on different dates for the payment on instalment
basis of the balance of the costs of automobiles purchased by defendant from
plaintiff, while the sixth cause of action is based on sales invoices covering
costs of materials and repairs made by plaintiff on defendant’s motor vehicles
on various occasions.

On March 19, 1959, after defendant’Is answer was filed, the parties and their
respective counsel filed a joint petition which is in the nature of a partial
amicable settlement. In that petition, defendant admitted his liability for the
principal amounts alleged in the first five causes of action (unpaid instalments
which, according to the notes, became due and payable upon defendant’s failure
to pay any of said instalments), aggregating P42,789.23, payment of which is
partially assumed by a third person. The other questions were left to the court
for decision. The aforesaid partial amicable settlement was approved by the
court, and the attached properties of defendant were released from the
attachment. On June 15, 1959, the parties and their stipulation of facts,
whereby defendant counsel submitted admitted his liability for the costs of
materials and repairs, without interest, alleged in the sixth cause of action,
as well as his liability for accrued interests upon the first five causes of
action. They submitted to the court’s discretion the determination of the amount
of attorney’s fees and costs of suit.

From the parties’ agreements, the court a quo rendered judgment
ordering defendant to pay plaintiff the sum of P208.39 as cost of repairs,
P886.84 as interests up to and including March 19, 1959, plus an additional
amount of 20% on the sum of P42,789.23 as attorney’s fees, and the costs of
suit. Regarding the award for attorney’s fees, the court below stated in its
decision:

“In the promissory notes executed by the defendant, the latter undertook to
pay to the plaintiff a sum equivalent to 33-1/3% by way of attorney’s fees, plus
expenses of collection and costs. Considering the facts and circumstances of
this case, the Court is of the opinion that an amount of 20% is reasonable as
attorney’s fees.”

Not satisfied, defendant appealed to the Court of Appeals, upon the following
assignment of errors:

1. That the trial court erred in not finding that the provision of the
   promissory notes on the award of attorney’s fees in the event of judicial
   proceedings to enforce collection is not applicable in this case; and,
2. That the trial court erred in determining as reasonable 20% of the amount
   involved in the complaint for attorney’s fees.

The Court of Appeals, by resolution, certified the case to this Court for
disposition, on the ground that the appeal involves purely questions of law.

The genuineness of the five promissory notes copied in their entirety in the
complaint is not controverted. The stipulations as to the payment of attorney’s
fees are the same in all the notes, and read:

“In the event of my (our) failure to pay any of the foregoing instalments,
the whole sum remaining then unpaid will immediately become due and payable, at
the option of the holder of this note, and in the event of judicial proceedings
to enforce collection, I (we, jointly and severally), further promise to pay to
the holder of this note an additional sum equivalent to 33-1/3% of the amount
due, for and as attorney’s fees and expenses of collection, in addition to the
costs of suit.”

A stipulation or agreement regarding the payment of attorney’s fees is
neither illegal nor immoral and is enforceable as the law between the parties
(Luneta Motor vs. Mora Limponco, 73 Phil. 80). Under the new Civil Code,
attorney’s fee is an element of recoverable damages, whether it be in writing
(Articles 11226, supra). or not stipulated at all in certain cases
(Article 2208, supra). Attorney’s fee is in the concept of actual
damages (Fores vs. Miranda, 105 Phil., 266; 57 Off. Gaz., [44] 7938,
except that when it is stipulated and therefore in the form of Liquidated
damages no proof of pecuniary loss is required (Article 2216,
supra).

Article 1229 of the new Civil Code provides:

“ART. 1229. The judge shall equitably reduce the penalty, when the principal
obligation has been partly or irregularly complied with by the debtor. Even if
there has been no performance, the penalty may also be reduced by the courts if
it is iniquitous or unconscionable.”

The above legal proviso fully justifies ;he action of the lower court in
reducing the attorney’s fee from an amount equivalent to 33-1/3% to 20% of the
principal obligation due and admitted in this case, it appearing that serveral
instalment payment had already been made by defendant-appellant on the five
promissory notes before the commencement of the action. Furthermore, it is the
opinion of this Court that where a contract does not expressly stipulate that a
fixed sum by way of attorney’s fees shall be paid by defendant in case of
collection even if same is subsequently settled by compromise, it is just and
fair to reduce the amount of counsel fee, in the court’s exercise of its
discretionary power, where the case is partially or fully settled out of
court.

Appellant, however, wants to remove this action of plaintiff from the purview
of their stipulation above-quoted, by claiming that this case is not a “judicial
proceeding to enforce collection” but for the purpose of settling the
disagreement as to the manner of application of the payments on the five
promissory notes. But it is clear that the complaint is for collection or
recovery of various sums of money. As repeatedly stated, the purpose of action
or suit and the law to govern it is to be determined by the complaint itself,
its allegations and the prayer for relief (Benares vs. Benares, G, R.
No. L-6438, June 30, 1955; Belandres vs. Lopez Sugar Central, 97 Phil.,
100; 51 Off. Gaz., [6] 2881). Needless to state, were it not for this suit,
accompanied by an attachment on defendant’s automobiles, it is not far-fetched
to surmise that defendant may probably, as before, neglect or refuse to pay the
instalments as they fall due.

Wherefore, the decision appealed from is affirmed, with costs against
defendant-appellant.

Bengzon, C.J., Bautista Angelo, Labrador,
Concepcion, Reyes, J.B.L., Barrera, Paredes and Dizon, JJ.
concur.