FACTS:

The present case involves a simple purchase transaction between defendant-appellant PNCC and plaintiff-appellee APAC involving crushed basalt rock delivered by plaintiff-appellee to defendant-appellant PNCC.

Plaintiff-appellee filed with the trial court a complaint against defendants-appellees for collection of sum of money with damages.

Defendants-appellants filed a motion to dismiss, alleging that the complaint was premature considering that defendant-appellant PNCC had been faithfully paying its obligations to plaintiff-appellee.

The trial court denied the motion to dismiss. Thus, defendants-appellants filed their answer, alleging that the obligation of defendant-appellant PNCC was only with respect to the balance of the principal obligation that had not been fully paid.

After the submission of the respective pre-trial briefs of the parties, trial was held. However, only plaintiff-appellee presented its evidence. For their repeated failure to attend the hearings, defendants-appellants were deemed to have waived the presentation of their evidence.

On July 10, 2006, the trial court rendered a Decision in favor of the plaintiff, ordering defendants jointly and solidarily to pay:

1. ₱782,296.80 as actual damages;

2. ₱50,000.00 as attorney’s fees, plus ₱3,000.00 per court appearance;

3. Cost of suit.

The trial Court denied the motion for reconsideration filed by defendants-appellants.

On appeal, the CA affirmed the assailed Order.

Subsequently, herein petitioner filed a Motion for Reconsideration, which raised the lone issue of the propriety of the award of attorney’s fees in favor of respondent, which was denied by the CA.

Hence, the present appeal.

ISSUE:

Whether the CA court gravely erred in awarding attorney’s fees to respondent.

RULING:

The Petition is impressed with merit.

Article 2208 of the New Civil Code of the Philippines states the policy that should guide the courts when awarding attorney’s fees to a litigant. As a general rule, the parties may stipulate the recovery of attorney’s fees. In the absence on such stipulation, this article restrictively enumerates the instances when these fees may be recovered, to wit:

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.

The general rule is that attorney’s fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate. They 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 demands factual, legal, and equitable justification. Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still attorney’s fees may not be awarded where no sufficient showing of bad faith could be reflected in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause.

We have consistently held that an award of attorney’s fees under Article 2208 demands factual, legal, and equitable justification to avoid speculation and conjecture surrounding the grant thereof. 

Due to the special nature of the award of attorney’s fees, a rigid standard is imposed on the courts before these fees could be granted. Hence, it is imperative that they clearly and distinctly set forth in their decisions the basis for the award thereof. It is not enough that they merely state the amount of the grant in the dispositive portion of their decisions. 

It bears reiteration that the award of attorney’s fees is an exception rather than the general rule; thus, there must be compelling legal reason to bring the case within the exceptions provided under Article 2208 of the Civil Code to justify the award.

We have perused the assailed CA’s Decision, but cannot find any factual, legal, or equitable justification for the award of attorney’s fees in favor of respondent.