G.R. No. 152544 September 19, 2006
Purificacion Buñing & Romeo Buñing, petitioners, vs. Cecilio Santos, respondent.

FACTS

Respondent Cecilio Santos filed a complaint for a sum of money with a prayer for preliminary attachment against petitioners Purificacion and Romeo Buñing before the Regional Trial Court (RTC) of Malolos, Bulacan. The petitioners were declared in default for failure to file a responsive pleading. After an ex-parte hearing, the RTC rendered a decision ordering the petitioners to pay the principal loan of P557,000.00 with 18% interest per annum, plus P30,000.00 and 20% of the award as attorney’s fees.
The petitioners appealed to the Court of Appeals, contesting only the award of attorney’s fees. The appellate court modified the RTC decision. It affirmed the principal obligation and stipulated interest but added: (1) 6% interest per annum as actual and compensatory damages from the filing of the complaint until the judgment’s finality; (2) 12% interest per annum on the unpaid judgment amount from finality until full satisfaction; and (3) reduced the attorney’s fees to 10% of the total award less interest.

ISSUE

Whether the Court of Appeals erred in modifying the RTC decision by awarding interests and attorney’s fees on grounds not raised in the appeal.

RULING

The Supreme Court partly granted the petition. On procedural grounds, the Court clarified that while the petition incorrectly alleged grave abuse of discretion (which pertains to Rule 65), it was treated under Rule 45. On the substantive issue, the Court upheld the appellate court’s authority to rule on matters not specifically assigned as errors. Under Rule 51, Section 8 of the Rules of Court, an appellate court may consider unassigned errors if necessary for a complete resolution or to serve the interests of justice. The award of legal interest (6% and 12%) was deemed integral to a proper adjudication of the money claim, especially since the appeal on attorney’s fees opened the entire award for evaluation.
However, the Court deleted the award of attorney’s fees. Article 2208 of the Civil Code requires a factual, legal, and equitable justification for such an award, which must be explicitly stated in the body of the decision, not merely in the dispositive portion. The RTC’s decision failed to provide this requisite justification. The Supreme Court found no sufficient basis showing that the petitioners acted in bad faith or willfully compelled the respondent to litigate. Consequently, the award of attorney’s fees was deleted for lack of factual and legal foundation. The modified decision of the Court of Appeals was affirmed but without the attorney’s fees.