Award of attorney's fees (Article 2208)

Article 2208(2) of the Civil Code allows the award of attorney's fees "[w]hen the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest[.]" In Servicewide Specialists, Incorporated v. Court of Appeals,[1] the Supreme Court declared that:
Article 2208 of the Civil Code allows attorney's fees to be awarded by a court when its claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission on the part of the party from whom it is sought. To be sure, private respondents were forced to litigate to protect their rights but as we have previously held: "where no sufficient showing of bad faith would be reflected in a party's persistence in a case other than an erroneous conviction of the righteousness of his cause, attorney's fee shall not be recovered as cost." (Citation omitted)
Bad faith has been defined as "a breach of a known duty through some motive of interest or ill will. It must, however, be substantiated by evidence. Bad faith under the law cannot be presumed, it must be established by clear and convincing evidence."[2] In the case of CCC INSURANCE CORPORATION v. KAWASAKI STEEL CORPORATION, there was no evidence to show bad faith on the part of CCCIC. CCCIC, in refusing the claim of Kawasaki, was merely acting based on its belief in the righteousness of its defense. Hence, even though Kawasaki was compelled to litigate to enforce its claim against CCCIC, the award of attorney's fees is not proper.

Finally, the Supreme Court, in Nacar v. Gallery Frames,[3] modified the guidelines in imposing interests, taking into account Bangko Sentral ng Pilipinas-Monetary Board Resolution No. 796 dated May 16, 2013 and Circular No. 799, series of 2013, which fixed the legal rate at 6% per annum effective July 1, 2013. In the absence of stipulated interest, the courts impose upon the amounts covered the legal rate of 12% per annum from September 15, 1989, the date of demand, until June 30, 2013; and then the legal rate of 6% per annum from July 1, 2013 until full payment of the same.

[1] 326 Phil. 660, 669 (1996).
[2] GF Equity, Inc. v. Valenzona, 501 Phil. 153, 168 (2005).
[3] G.R. No. 189871, August 13, 2013.

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