G.R. No. L-28478 August 23, 1974
MA-AO SUGAR CENTRAL CO., INC., petitioner, vs. FRANCISCO RODRIGUEZ, respondent.

FACTS

The case originated from the respondent sugar planter’s action to recover the value of his share of molasses and hauling allowances from the petitioner sugar central. The parties had a milling contract which expired in 1951 but continued under its terms. The contract required the planter to supply containers and remove his molasses share within a week, failing which it would be forfeited. For several crop years, the planter’s molasses were either sold by his association to the central itself or sent to the central’s distillery for conversion into alcohol. The central, however, failed to remit the proceeds or deliver the alcohol.
The central’s defense of forfeiture for non-removal was rejected by the lower courts. The courts found that the act of selling the molasses to the central and sending the remainder to its distillery made physical delivery by the planter unnecessary. The central’s officers had also repeatedly promised to release the shares but reneged. Regarding hauling allowances, the courts found the central obligated to pay them, as this condition was the inducement for the planter to resume milling despite the central’s damaged railway system.

ISSUE

The sole issue on appeal is whether the Court of Appeals correctly adjudged the petitioner to pay attorney’s fees and litigation expenses to the respondent.

RULING

The Supreme Court affirmed the award of attorney’s fees but reduced the amount from P10,000 to P5,000. The legal logic is grounded on the central’s unjustified refusal to satisfy a valid and demandable claim, which compelled the planter to litigate. The findings of the Court of Appeals, which are binding, established that after the molasses were sold to the central or sent to its distillery, the contractual stipulations on removal and containers became irrelevant. The only remaining obligation was for the central to pay the proceeds, which it refused without justification. This refusal constituted gross and evident bad faith.
The Court explicitly cited Article 2208(2), (5), and (11) of the Civil Code as legal bases. These provisions allow recovery of attorney’s fees when the defendant’s act compels litigation, when the defendant acts in gross and evident bad faith in refusing a plainly valid claim, and in any other case where the court deems it just and equitable. The central’s conduct clearly fell within these parameters. However, the Court exercised its discretion to modify the amount, considering the extent of legal work and the total monetary award of P31,237 to the planter, deeming P5,000 as reasonable. The decision was thus affirmed with this modification.