G.R. No.

201892

JULY 22, 2015

Respondent filed his answer, contending that petitioner has no cause of action
against him. He averred that he has fully settled Rafael's obligation and that he
committed a mistake in paying more than the amount due under the loan, i.e., the
amount of P229,200.00 as adjudged by the RTC-Imus in the judicial foreclosure case
which, thus, warranted the return of the excess payment. He therefore prayed for the
dismissal of the complaint, and interposed a compulsory counterclaim for the release
of the mortgage, the return of the excess payment, and the payment of moral and
exemplary damages, attorney's fees and litigation expenses.
15

NORLINDA S. MARILAG, Petitioner,

vs.
MARCELINO B. MARTINEZ, Respondent.
DECISION

16

PERLAS-BERNABE, J.:

The Court A Quo's Ruling

Assailed in this petition for review on certiorari are the Decision dated November 4,
2011 and the Resolution dated May 14, 2012 of the Court of Appeals (CA) in CAG.R. CV No. 81258 which recalled and set aside the Orders dated November 3,
2003 and January 14, 2004 of the Regional Trial Court (RTC) of Las Pias City,
Branch 202 (court a quo) in Civil Case No. 980156, and reinstated the
Decision dated August 28, 2003 directing petitioner Norlinda S. Marilag (petitioner)
to return to respondent Marcelino B. Martinez (respondent) the latter's excess
payment, plus interest, and to pay attorney's fees and the costs of suit.
1

The Facts

In a Decision dated August 28, 2003 (August 28, 2003 Decision), the court a quo
denied recovery on the subject PN. It found that the consideration for its execution
was Rafael's indebtedness to petitioner, the extinguishment of which necessarily
results in the consequent extinguishment of the cause therefore. Considering that the
RTC-Imus had adjudged Rafael liable to petitioner only for the amount
of P229,200.00, for which a total of P400,000.00 had already been paid, the court a
quo found no valid or compelling reason to allow petitioner to recover further on the
subject PN. There being an excess payment of Pl 71,000.00, it declared that a quasicontract (in the concept of solution indebiti) exists between the parties and,
accordingly, directed petitioner to return the said amount to respondent, plus 6%
interest p.a.18 reckoned from the date of judicial demand on August 6, 1998 until
fully paid, and to pay attorney's fees and the costs of suit.
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19

On July 30, 1992, Rafael Martinez (Rafael), respondent's father, obtained- from
petitioner a loan in the amount ofP160,000.00, with a stipulated monthly interest of
five percent ( 5% ), payable within a period of (6) months. The loan was secured by a
real estate mortgage over a parcel of land covered by Transfer Certificate of Title
(TCT) No. T-208400. Rafael failed'. to settle his obligation upon maturity and despite
repeated demands, prompting petitioner to file a Complaint for Judicial Foreclosure of
Real Estate Mortgage before the RTC of Imus, Cavite, Branch 90 (RTC-lmus) on
November 10, 1995, docketed as Civil Case No. 1208-95 (judicial foreclosure case).
7

Rafael failed to file his answer and, upon petitioner's motion, was declared in default.
After an ex parte presentation of petitioner's evidence, the RTC-lmus issued a
Decision dated January 30, 1998, (January 30, 1998 Decision) in the foreclosure
case, declaring the stipulated 5% monthly interest to be usurious and reducing the
same to 12% per annum (p.a.). Accordingly, it ordered Rafael to pay petitioner the
amount of P229,200.00, consisting of the principal of P160,000.00 and accrued
interest of P59,200.00 from July 30, 1992 to September 30, 1995. Records do not
show that this Decision had already attained finality.
9

10

20

In an Order dated November 3, 2003 (November 3, 2003 Order), however, the court
a quo granted petitioner's motion for reconsideration, and recalled and set aside its
August 28, 2003 Decision. It declared that the causes of action in the collection and
foreclosure cases are distinct, and respondent's failure to comply with his obligation
under the subject PN justifies petitioner to seek judicial relief. It further opined that the
stipulated 5% monthly interest is no longer usurious and is binding on respondent
considering the suspension of the Usury Law pursuant to Central Bank Circular 905,
series of 1982. Accordingly, it directed respondent to pay the amount of P289,000.00
due under the subject PN, plus interest at the legal rate reckoned from the last extra
judicial demand on May 15, 1998, until fully paid, as well as attorney's fees and the
costs of suit.
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22

Aggrieved, respondent filed a motion for reconsideration which was denied in an

Order dated January 14, 2004, prompting him to elevate the matter to the CA.
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The CA Ruling
Meanwhile, prior to Rafael's notice of the above decision, respondent agreed to pay
Rafael's obligation to petitioner which was pegged at P689,000.00. After making a
total payment of P400,000.00, he executed a promissory note dated February 20,
1998 (subject PN), binding himself to pay on or before March 31, 1998 the amount
ofP289,000.00, "representing the balance of the agreed financial obligation of [his]
father to [petitioner]." After learning of the January 30, 1998 Decision, respondent
refused to pay the amount covered by the subject PN despite demands, prompting
petitioner to file a complaint for sum of money and damages before the court a quo
on July 2, 1998, docketed as Civil Case No. 98-0156 (collection case).
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12

In a Decision dated November 4, 2011, the CA recalled and set aside the court a
quo 's November 3, 2003 and January 14, 2004 Orders, and reinstated the August
28, 2003 Decision. It held that the doctrine of res judicata finds application in the
instant case, considering that both the judicial foreclosure and collection cases were
filed as a consequence of the non-payment of Rafael's loan, which was the principal
obligation secured by the real estate mortgage and the primary consideration for the
execution of the subject PN. Since res judicata only requires substantial, not actual,
identity of causes of action and/or identity of issue, it ruled that the judgment in the
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28

judicial foreclosure case relating to Rafael's obligation to petitioner is final and

conclusive on the collection case.
Petitioner's motion for reconsideration was denied in a Resolution dated May 14,
2012; hence, this petition.
29

of the rights and status of persons, and also to avoid the costs and expenses incident
to numerous suits. Consequently, a party will not be permitted to split up a single
cause of action and make it a basis for several suits as the whole cause must be
determined in one action. To be sure, splitting a cause of action is a mode of
forum shopping by filing multiple cases based on the same cause of action, but
with different prayers, where the ~round of dismissal is litis pendentia (or res
judicata, as the case may be).
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The Issue before the Court

The essential issue for the Court's resolution is whether or not the CA committed
reversible error in upholding the dismissal of the collection case.
The Court's Ruling

35

The petition lacks merit.

A case is barred by prior judgment or res judicata when the following elements
concur: (a) the judgment sought to bar the new action must be final; ( b) the decision
must have been rendered by a court having jurisdiction over the subject matter and
the parties; (c) the disposition of the case must be a judgment on the merits; and ( d)
there must be as between the first and second action, identity of parties, subject
matter, and causes of action.
30

After a punctilious review of the records, the Court finds the principle of res judicata to
be inapplicable to the present case. This is because the records are bereft of any
indication that the August 28, 2003 Decision in the judicial foreclosure case had
already attained finality, evidenced, for instance, by a copy of the entry of judgment in
the said case. Accordingly, with the very first element of res judicata missing, said
principle cannot be made to obtain.
This notwithstanding, the Court holds that petitioner's prosecution of the collection
case was barred, instead, by the principle of litis pendentia in view of the substantial
identity of parties and singularity of the causes of action in the foreclosure and
collection cases, such that the prior foreclosure case barred petitioner's recourse to
the subsequent collection case.
To lay down the basics, litis pendentia, as a ground for the dismissal of a civil
action, refers to that situation where in another action is pending; between the
same parties for the same cause of action, such that the second action
becomes unnecessary and vexatious. For the bar of litis pendentia to be invoked,
the following requisites must concur: (a) identity of parties, or at least such parties as
represent the same interests in both actions; ( b) identity of rights asserted and relief
prayed for, the relief being founded on the same facts; and ( c) the identity of the two
preceding particulars is such that any judgment rendered in the pending case,
regardless of which party is successful would amount to res judicata in the
other. The underlying principle of litis pendentia is the theory that a party is not
allowed to vex another more than once regarding the same subject matter and for the
same cause of action. This theory is founded on the public policy that the same
subject matter should not be the subject of controversy in courts more than once, in
order that possible conflicting judgments may be avoided for the sake of the stability
31

In this relation, it must be noted that the question of whether a cause of action is
single and entire or separate is not always easy to determine and the same must
often be resolved, not by the general rules, but by reference to the facts and
circumstances of the particular case. The true rule, therefore, is whether the entire
amount arises from one and the same act or contract which must, thus, be sued for in
one action, or the several parts arise from distinct and different acts or contracts, for
which a party may maintain separate suits.
In loan contracts secured by a real estate mortgage, the rule is that the creditormortgagee has a single cause of action against the debtor-mortgagor, i.e., to recover
the debt, through the filing of a personal action for collection of sum of money or the
institution of a real action to foreclose on the mortgage security. The two remedies are
alternative, not cumulative or successive, and each remedy is complete by itself.
Thus, if the creditor-mortgagee opts to foreclose the real estate mortgage, he waives
the action for the collection of the unpaid debt, except only for the recovery of
whatever deficiency may remain in the outstanding obligation of the debtor-mortgagor
after deducting the bid price in the public auction sale of the mortgaged
properties. Accordingly, a deficiency judgment shall only issue after it is established
that the mortgaged property was sold at public auction for an amount less than the
outstanding obligation.
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In the present case, records show that petitioner, as creditor-mortgagee, instituted an

action for judicial foreclosure pursuant to the provisions of Rule 68 of the Rules of
Court in order to recover on Rafael's debt. In light of the foregoing discussion, the
availment of such remedy thus bars recourse to the subsequent filing of a personal
action for collection of the same debt, in this case, under the principle of litis
pendentia, considering that the foreclosure case only remains pending as it was not
shown to have attained finality.
While the ensuing collection case was anchored on the promissory note executed by
respondent who was not the original debtor, the same does not constitute a separate
and distinct contract of loan which would have given rise to a separate cause of action
upon breach. Notably, records are bereft of any indication that respondent's
agreement to pay Rafael's loan obligation and the execution of the subject PN
extinguished by novation the contract of loan between Rafael and petitioner, in the
absence of express agreement or any act of equal import. Well-settled is the rule that
novation is never presumed, but must be clearly and unequivocally shown. Thus, in
order for a new agreement to supersede the old one, the parties to a contract must
expressly agree that they are abrogating their old contract in favor of a new
one, which was not shown here.
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41

On the contrary, it is significant to point out that: (a) the consideration for the subject
PN was the same consideration that supported the original loan obligation of Rafael;
(b) respondent merely assumed to pay Rafael's remaining unpaid balance in the
latter's behalf, i.e., as Rafael's agent or representative; and (c) the subject PN was
executed after respondent had assumed to pay Rafael's obligation and made several
payments thereon. Case law states that the fact that the creditor accepts payments
from a third person, who has assumed the obligation, will result merely in the addition
of debtors, not novation, and the creditor may enforce the obligation against both
debtors. for ready reference, the subject PN reads in full:
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43

February 20, 1998

PROMISSORY NOTE
P289, 000.00
===========
I, MARCELINO B. MARTINEZ son of Mr. RAFAEL MARTINEZ, of legal age, Filipino,
married and a resident of No. 091 Anabu I-A, Imus, Cavite, by these presents do
hereby specifically and categorically PROMISE, UNDERTAKE and bind myself in
behalf of my father, to pay to Miss NORLINDA S. MARILAG, Mortgagee-Creditor of
my said father, the sum of TWO HUNDRED EIGHTY NINE THOUSAND PESOS
(P289,000.00), Philippine Currency, on or before MARCH 31, 1998, representing the
balance of the agreed financial obligation of my said father to her. (Emphases
supplied)
Executed at Pamplona I, Las Pias City, Metro Manila, this 20th day of February,
1998.
Sgd.
MARCELINO B. MARTINEZ
Promissory
44

Petitioner's contention that the judicial foreclosure and collection cases enforce
independent rights must, therefore, fail because the Deed of Real Estate
Mortgage and the subject PN both refer to one and the same obligation, i.e.,
Rafael's loan obligation. As such, there exists only one cause of action for a single
breach of that obligation. Petitioner cannot split her cause of action on Rafael's
unpaid loan obligation by filing a petition for the judicial foreclosure of the real estate
mortgage covering the said loan, and, thereafter, a personal action for the collection
of the unpaid balance of said obligation not comprising a deficiency arising from
foreclosure, without violating the proscription against splitting a single cause of action,
where the ground for dismissal is either res judicata or litis pendentia, as in this case.

credit with execution of the security. In other words, the creditor in his action may
make two demands, the payment of the debt and the foreclosure of his mortgage.
But both demands arise from the same cause, the nonpayment of the debt, and, for
that reason, they constitute a single cause of action. Though the debt and the
mortgage constitute separate agreements, the latter is subsidiary to the former, and
both refer to one and the same obligation. Consequently, there exists only one cause
of action for a single breach of that obligation. Plaintiff. then, by applying the rule
above stated, cannot split up his single cause of action by filing a complaint (or
payment of the debt, and thereafter another complaint (or foreclosure of the
mortgage. If he does so, the filing of the first complaint will bar the subsequent
complaint. By allowing the creditor to file two separate complaints simultaneously or
successively, one to recover his credit and another to foreclose his mortgage, we will,
in effect, be authorizing him plural redress for a single breach of contract at so much
cost to the courts and with so much vexation and oppression to the debtor.
(Emphases and underscoring supplied)
Further on the point, the fact that no foreclosure sale appears to have been
conducted is of no moment because the remedy of foreclosure of mortgage is
deemed chosen upon the filing of the complaint there for. In Suico Rattan & Buri
Interiors, Inc. v. CA, it was explained:
48

49

x x x x In sustaining the rule that prohibits mortgage creditors from pursuing both the
remedies of a personal action for debt or a real action to foreclose the mortgage, the
Court held in the case of Bachrach Motor Co., Inc. v. Esteban Icarangal, et al. that a
rule which would authorize the plaintiff to bring a personal action against the debtor
and simultaneously or successively another action against the mortgaged property,
would result not only in multiplicity of suits so offensive to justice and obnoxious to law
and equity, but also in subjecting the defendant to the vexation of being sued in the
place of his residence or of the residence of the plaintiff, and then again in the place
where the property lies. Hence, a remedy is deemed chosen upon the filing of the suit
for collection or upon the filing of the complaint in an action for foreclosure of
mortgage, pursuant to the provisions of Rule 68 of the Rules of Court. As to
extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor
upon filing of the petition not with any court of justice but with the office of the sheriff
of the province where the sale is to be made, in accordance with the provisions of Act
No. 3135, as amended by Act No. 4118. (Emphases supplied)

45

46

As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc. v.
lcaranga!.
47

As petitioner had already instituted judicial foreclosure proceedings over the

mortgaged property, she is now barred from availing herself of an ordinary
action for collection, regardless of whether or not the decision in the foreclosure
case had attained finality. In fine, the dismissal of the collection case is in order.
Considering, however, that respondent's claim for return of excess payment partakes
of the nature of a compulsory counterclaim and, thus, survives the dismissal of
petitioner's collection suit, the same should be resolved based on its own merits and
evidentiary support.
50

Records show that other than the matter of interest, the principal loan obligation and
the payments made were not disputed by the parties. Nonetheless, the Court finds
the stipulated 5% monthly interest to be excessive and unconscionable. In a plethora
of cases, the Court has affirmed that stipulated interest rates of three percent (3/o)
1wphi1

For non-payment of a note secured by mortgage, the creditor has a single cause of
action against the debtor. This single cause of action consists in the recovery of the

per month and higher are excessive, iniquitous, unconscionable, and

exorbitant, hence, illegal and void for being contrary to morals. In Agner v. BPI
Family Savings Bank, Inc., the Court had the occasion to rule:
51

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53

attorney's fees in the body of its decision, not merely in its dispositive portion, as the
appellate courts are precluded from supplementing the bases for such award.
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54

Settled is the principle which this Court has affirmed in a number of cases that
stipulated interest rates of three percent (3%) per month and higher are excessive,
iniquitous, unconscionable, and exorbitant. While Central Bank Circular No. 905-82,
which took effect on January 1, 1983, effectively removed the ceiling on interest rates
for both secured and unsecured loans, regardless of maturity, nothing in the said
circular could possibly be read as granting carte blanche authority to lenders to raise
interest rates to levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets. Since the stipulation on the interest rate is void for
being contrary to morals, if not against the law, it is as if there was no express
contract on said interest rate; thus, the interest rate may be reduced as reason and
equity demand. (Emphases supplied)
As such, the stipulated 5% monthly interest should be equitably reduced to l % per
month or 12% p.a. reckoned from the execution of the real estate mortgage on July
30, 1992. In order to determine whether there was any overpayment as claimed by
respondent, we first compute the interest until January 30, 1998 when he made a
payment in the amount of P300,000.00 on Rafael's loan obligation. Accordingly, the
amount due on the loan as of the latter date is hereby computed as follows:
55

Finally, in the absence of showing that the court a quo 's award of the costs of suit in
favor of respondent was patently capricious, the Court finds no reason to disturb the
same.
65

WHEREFORE, the petition is DENIED. The Decision dated November 4, 2011 and
the Resolution dated May 14, 2012 of the Court of Appeals in CA-G.R. CV No. 81258
reinstating the court a quo's Decision dated August 28, 2003 in Civil Case No. 980156 are hereby AFFIRMED with the MODIFICATIONS: (a) directing petitioner
Norlinda S. Marilag to return to respondent Marcelino B. Martinez the latter's excess
payments in the total amount ofP134,400.00, plus legal interest at the rate of 6% p.a.
from the filing of the Answer on August 6, 1998 until full satisfaction; and (b) deleting
the award of attorney's fees.
Footnotes
Designated Acting Member per Special Order No. 2103 dated July 13, 2015.
Per Special Order No. 2102 dated July 13, 2015.
Designated Acting Member per Special Order No. 2108 dated July 13, 2015.
Rollo, pp. 8-16.
Id. at 29-45. Penned by Associate Justice Leoncia R. Dimagiba with Associate
Justices Noel G. Tijam and Marlene Gonzales concurring.
Id. at 60-61.
Id. at 26-28. Penned by Judge Elizabeth Yu Garay.
Records, pp. 462-466.
Rollo, pp. 19-25.
Id. at 30.
Id. at 20.
Records, pp. 31-34.
Id. at 33-34.
Id. at 25 and 220-221.
Id. at 12.
Id.
Id. at 1-5.
Id. at 23-30.
Id. at 25 and 28.
Rollo, pp. 19-25.
Id. at 23-24.
Filing of the Answer with Compulsory Counterclaim for the Return of the
Overpayment; records, pp. 23 and 28.
Rollo, p. 25.
Id. at 26-28.
Id. at 27-28.
Dated December 1, 2003; records, pp. 445-450.
Id. at 462-466.
Rollo, p. 40.
Id. at 29-45.
Id. at 41.
*

**

***
1

Principal
P160, 000.00
Add: Interest from 07/30/1992 to 01/30/1998
(P160, 000.00 x 12% x 5.5 yrs.)

3
4

105,600.00

Amount due on the loan

Less: Payment made on 01/30/98

P265, 600.00
(300,000.00)

Overpayment as of 01/30/98

(P 34,400.00)

5
6
7

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8
9

10

Thus, as of January 30, 1998, only the amount of P265,600.00 was due under the
loan contract, and the receipt of an amount more than that renders petitioner liable for
the return of the excess. Respondent, however, made further payment in the amount
of Pl 00,000.00 on the belief that the subject loan obligation had not yet been
satisfied. Such payments were, therefore, clearly made by mistake, giving rise to the
quasi-contractual obligation of solutio indebiti under Article 2154 in relation to Article
2163 of the Civil Code. Not being a loan or forbearance of money, an interest of 6%
p.a. should be imposed on the amount to be refunded and on the damages and
attorney's fees awarded, if any, computed from the time of demand until its
satisfaction. Consequently, petitioner must return to respondent the excess
payments in the total amount of P134,400.00, with legal interest at the rate of 6% p.a.
from the filing of the Answer on August 6, 1998 interposing a counterclaim for such
overpayment, until fully settled.
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However, inasmuch as the court a quo failed to state in the body of its decision the
factual or legal basis for the award of attorney's fees to the respondent, as required
under Article 2208 of the New Civil Code, the Court resolves to delete the same.
The rule is well-settled that the trial court must clearly state the reasons for awarding
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Id. at 43-44.
Id. at 60-61.
Heirs of Miguel v. Heirs of Miguel, G.R. No. 158916, March 19, 2014, 719 SCRA
413, 427.
Brown-Araneta v. Araneta, G.R. No. 190814, October 9, 2013, 707 SCRA 222, 244;
Yap v. Chua, G.R. No. 186730, June 13, 2012, 672 SCRA 419, 428-429.
Film Development Council of the Philippines v. SM Prime Holdings, Inc., G.R. No.
197937, April 3, 2013, 695 SCRA 175, 187.
BPI Family Savings Bank, Inc. v. Vda. De Coscolluela, 526 Phil. 419, 436-437
(2006).
Chua v. Metropolitan Bank & Trust Company, 613 Phil. 143, 154 (2009).
BPI Family Savings Bank, Inc. v. Vda. De Coscolluela, supra note 33, at 437-438.
Flore v. Lindo, Jr., 664 Phil. 210, 216 (2011).
Allandale Sports line, Inc. v. The Good Dev 't. Corp., 595 Phil. 265, 280 (2008).
Flores v. Lindo, Jr., supra notes 36.
Spouses Tanchan v. Allied Banking Corporation, 592 Phil. 252, 273-274 (2008).
Article 1293 of the Civil Code defines novation as follows:
Art. 1293. Novation which consists in substituting a new debtor in the place
of the original one, may be made even without the knowledge or against the
will of the latter, but not without the consent of the creditor. Payment by the
new debtor gives him rights mentioned in articles 1236 and 1237.
S.C. Mega world Construction and Development Corporation v. Parada, G.R. No.
183804, September 11, 2013, 705 SCRA 584, 602.
in behalf of. (n.d.). Dictionary.com Unabridged.
<http://dictionary.reference.com/browse/in behalf of> (last visited July 15, 2015).
S.C. Mega world Construction and Development Corporation v. Parada, supra note
41.
Records, p. 12.
Rollo, p. 78.
Records, pp. 190 to 190-A.
68 Phil. 287, 293-294 (1939).
Suico Rattan & Buri Interiors, Inc. v. CA, 524 Phil. 92, 116 (2006).
Id.
Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corp., 556 Phil. 822, 851 (2007).
Agner v. BPI Family Savings Bank, Inc., G.R. No. 182963, June 3, 2013, 697 SCRA
89, 102.
RGM Industries, Inc. v. United Pacific Capital Corporation, 689 Phil. 660, 664-665
(2012).
Chua v. Timan, 584 Phil. 144, 148 (2008).
Agner v. BP IF amity Savings Bank, Inc., supra note 51.
Records, p. 220.
Id.
On February 20, 1998; id. at 221.
ART. 2154. If something is received when there is no right to demand it, and it was
unduly
delivered through mistake, the obligation to return it arises. ART. 2163. It is
presumed that there was a mistake in the payment if something which had never
been due or had already been paid was delivered; but he from whom the return is
claimed may prove that the delivery was made out of liberality or for any other just
cause.
Siga-an v. Villanueva, 596 Phil. 760, 776 (2009), citing the case of Eastern Shipping
Lines, Inc. v. Court of Appeals (G.R. No. 97412, July 12, 1994, 234 SCRA 78, 95-97),
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holding that when an obligation, not constituting a loan or forbearance of money is

breached, an interest on the amount of damages awarded may be imposed at the
rate of 6% per annum.
Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439, 458.
Records, p. 23-30.
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation,
other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(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;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the
plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiff's plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and
skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's
liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that
attorney's fees and expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be
reasonable.
In S.C. Mega world Construction and Development Corporation v. Parada, supra
note 41 at 611 612, the Court held:
The rule is settled that the trial court must state the factual, legal or equitable
justification for its award of attorney's fees. Indeed, the matter of attorney's
fees cannot be stated only in the dispositive portion, but the reasons must be
stated in the body of the court's decision. This failure or oversight of the trial
court cannot even be supplied by the CA. As concisely explained in Frias v.
San Diego Sison:
Article 2208 of the New Civil Code enumerates the instances where such
may be awarded and, in all cases, it must be reasonable, just and equitable
if the same were to be granted. Attorney's fees as part of damages are not
meant to enrich the winning party at the expense of the losing litigant. They
are not awarded every time a party prevails in a suit because of the policy
that no premium should be placed on the right to litigate. The award of
attorney's fees is the exception rather than the general rule. As such, it is
necessary for the trial court to make findings of facts and law that would
bring the case within the exception and justify the grant of such award. The
matter of attorney's fees cannot be mentioned only in the dispositive portion
of the decision. They must be clearly explained and justified by the trial court
in the body of its decision. On appeal, the CA is precluded from
supplementing the bases for awarding attorney's fees when the trial court
failed to discuss in its Decision the reasons for awarding the same.
Consequently, the award of attorney's fees should be deleted. (Emphases
supplied)
Villareal v. Ramirez, 453 Phil. 999, 1012 (2003).
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