PURIFICACION BUÑING & ROMEO BUÑING, PETITIONERS, VS. CECILIO SANTOS, RESPONDENT.

Buñing versus Santos

The Case

This is a petition for review brought by spouses Purificacion and Romeo Buñing against Cecilio Santos, the creditor who sued them to collect an unpaid loan. The Buñings were declared in default in the trial court, which ordered them to pay the principal loan with interest and, on top of that, attorney's fees. The spouses appealed only the attorney's fees, and the Court of Appeals modified the award while adding legal interest that the trial court had omitted. The case matters because it teaches two enduring lessons: an appellate court may rule on matters not specifically assigned as errors when they are necessary to a just resolution, and attorney's fees, being the exception rather than the rule, must be justified in the text of the decision itself and not merely in the dispositive portion.

Procedural History

Cecilio Santos filed a complaint for a sum of money with a prayer for preliminary attachment before the Regional Trial Court of Malolos, Bulacan, Branch 18. Because the Buñings failed to file a responsive pleading, the trial court, on the respondent's motion, declared them in default and, after an ex parte hearing, rendered judgment ordering them to pay the principal loan with interest and attorney's fees.

The Buñings appealed to the Court of Appeals, raising as their lone error the award of attorney's fees. The appellate court affirmed the decision with modification: it retained the principal loan with interest, added interest in the concept of actual and compensatory damages, added a higher interest rate on any unpaid balance after finality, and reduced the attorney's fees to a percentage of the total award less interest. The Buñings then came to the Supreme Court by petition for review, assigning as sole error the appellate court's resolution of matters they say were never raised in their appeal, and the failure to delete the attorney's fees.

Facts

The facts are undisputed. Cecilio Santos extended a loan to the Buñing spouses, who failed to pay. Santos sued for a sum of money and asked for preliminary attachment.

The Buñings did not file a responsive pleading. On Santos's motion, the trial court declared them in default and, after an ex parte hearing, ordered them to pay the principal loan with interest under their loan agreement, plus attorney's fees.

The spouses appealed only the attorney's fees. The Court of Appeals modified the award, adding legal interest on the amount awarded and reducing the attorney's fees, reasoning that the amount awarded was open to evaluation once the fees based on it were put in issue. The spouses then elevated the matter to the Supreme Court.

Issues

• Whether or not the Court of Appeals may resolve matters not specifically assigned as errors on appeal, such as the imposition of legal interest.
• Whether or not the award of attorney's fees in favor of the respondent is proper.

Applicable Provisions

Section 8 of Rule 51 of the Rules of Court provides:

Section 8. Questions that may be decided. No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed from or the proceedings therein will be considered, unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors.

This provision is the procedural anchor of the first issue, because it defines when an appellate court may pass upon errors not assigned.

Article 2208 of the Civil Code provides:

Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: x x x x (2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; x x x x

This provision governs the second issue, because it is the exception under which attorney's fees may be awarded, and only upon a showing that brings the case within it.

Ruling

On the first issue, the Court held that the petition was partly meritorious, and that the appellate court was empowered to review the matter even if not specifically assigned. The Court noted that the petition actually suffered from a procedural defect, since an allegation of grave abuse of discretion should have been brought by certiorari, but it treated the petition as one for review and addressed the assigned error. The Court recognized the broad discretionary power of an appellate court to waive the lack of proper assignment of errors and to consider errors not assigned, and it listed the instances in which this may be done, including matters necessary to arrive at a just decision and complete resolution of the case, matters closely related to an error assigned, and matters upon which the determination of a properly assigned question is dependent. The Court found that the case fell squarely under these exceptions: since the spouses appealed the attorney's fees, which were based on the amount awarded, that amount was open to further evaluation, and the appellate court could not turn a blind eye to the omission of legal interest.

On the second issue, the Court held that the award of attorney's fees must be deleted. While Article 2208 allows attorney's fees when the claimant is compelled to litigate by reason of an unjustified act or omission of the party from whom it is sought, there must be a showing that the losing party acted willfully or in bad faith and practically compelled the claimant to litigate and incur expenses. The Court stressed that awards of attorney's fees are the exception rather than the rule, and that the trial court must make express findings of facts and law that would bring the case within the exception. The Court quoted its own doctrine:

It is an accepted doctrine that the award thereof as an item of damages is the exception rather than the rule, and counsel's fees are not to be awarded every time a party wins a suit. The power of the court to award attorney's fees under Article 2208 of the Civil Code demands factual, legal and equitable justification, without which the award is a conclusion without a premise, its basis being improperly left to speculation and conjecture. In all events, the court must explicitly state in the text of the decision, and not only in the decretal portion thereof, the legal reason for the award of attorney's fees.

Reviewing the records, the Court found no factual or legal justification for the award, since the trial court stated it only in the dispositive portion and did not justify it in the ratio decidendi. The award was therefore deleted for lack of sufficient basis in fact, law, or equity.

Doctrine

An appellate court may waive the lack of proper assignment of errors and consider errors not assigned, as Section 8 of Rule 51 allows, particularly where the matter is necessary to a just decision, closely related to an assigned error, or upon which the determination of a properly assigned question depends.

Attorney's fees are the exception rather than the rule. Under Article 2208, they may be awarded only upon a showing of factual, legal, and equitable justification, and the court must explicitly state in the text of the decision, not only in the dispositive portion, the legal reason for the award.

Disposition

The petition was partly granted: the Court of Appeals decision was affirmed, but the award of ten percent attorney's fees was deleted for lack of sufficient factual and legal basis.

Remember This

Memorize this line: attorney's fees are the exception rather than the rule, and the justification must appear in the text of the decision, not merely in the dispositive portion. Examiners use this case to test the exceptions to the assignment-of-errors rule and the strict requirements for awarding attorney's fees.