GR 169293; (October, 2011) (Digest)
G.R. No. 169293 ; October 5, 2011
DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, vs. TRAVERSE DEVELOPMENT CORPORATION and CENTRAL SURETY and INSURANCE COMPANY, Respondents.
FACTS
The Development Bank of the Philippines (DBP) granted a real estate loan to Traverse Development Corporation (Traverse). As a loan condition, Traverse obtained fire insurance, which was later transferred from FGU Insurance Corporation to Central Surety & Insurance Company (Central) under Fire Insurance Policy No. TAR 1056. During the policy’s effectivity, Traverse’s building was gutted by fire. Traverse filed a claim with Central, which offered a settlement amount Traverse deemed inequitable. Traverse then filed a complaint against Central and DBP before the Regional Trial Court (RTC). The RTC held Central liable to pay DBP the insurance proceeds and held both Central and DBP jointly and solidarily liable for attorney’s fees and costs. On motion for reconsideration, the RTC deleted its order for DBP to extinguish Traverse’s loan but maintained the solidary liability for attorney’s fees. The Court of Appeals affirmed the RTC decision as modified. DBP filed a petition for review, contesting only its solidary liability for attorney’s fees and litigation costs.
ISSUE
Whether the Court of Appeals erred in holding petitioner DBP solidarily liable with respondent Central Surety for attorney’s fees and costs of litigation.
RULING
The Supreme Court GRANTED the petition and MODIFIED the Court of Appeals’ decision. The Court held that DBP is not liable for the payment of attorney’s fees and costs of suit. The award of attorney’s fees under Article 2208 of the Civil Code requires that the defendant’s act or omission compelled the plaintiff to litigate or incur expenses to protect its interest. The records showed that DBP was not responsible for Central’s refusal to pay the insurance claim. DBP had, in fact, followed up on the claim and even requested Traverse to file a case against Central. There was no finding that DBP acted in bad faith or compelled Traverse to litigate. Therefore, there was no legal basis to hold DBP solidarily liable with Central for attorney’s fees and litigation costs. The Court’s prior resolution on DBP’s motion for a writ of partial execution was declared moot.