G.R. No. 29660 ; January 23, 1929
F. M. YAP TICO & CO., LTD., plaintiff-appellee, vs. SEVERO ALEJANO, defendant-appellant.

FACTS

Plaintiff F.M. Yap Tico & Co., Ltd., a commercial corporation, and defendant Severo Alejano, a sugar planter, entered into a contract in March 1922. Under this contract, the plaintiff made monetary advances to the defendant on a current account in exchange for the defendant’s sugar crop. On December 9, 1926, the plaintiff filed an action to recover the balance of the current account, attorney’s fees, and other amounts. The defendant, in his answer, raised four special defenses, including the claim that three promissory notes for P10,000 each (totaling P30,000) executed in favor of Enrique Echauz were without consideration and that the plaintiff improperly charged a 1.5% commission on sugar sold directly to the plaintiff. The trial court ruled in favor of the plaintiff, ordering the defendant to pay the amounts due, including a reduced sum for attorney’s fees. The defendant appealed, contesting the validity of the promissory notes, the commission charges, and the award of attorney’s fees.

ISSUES:
1. Whether the three promissory notes executed in favor of Enrique Echauz are valid and supported by consideration.
2. Whether the plaintiff was entitled to charge the defendant a 1.5% commission on sugar sold directly to the plaintiff.
3. Whether the award of attorney’s fees was proper.

RULING

The Supreme Court AFFIRMED the trial court’s judgment.

1. On the validity of the promissory notes: The Court held that the notes were supported by consideration. The evidence showed that Enrique Echauz assisted in securing a transfer of credits to the Philippine National Bank, which substantially benefited the defendant by relieving his and the plaintiff’s financial difficulties. The defendant’s attorney-in-fact, a lawyer, executed the notes, indicating an acknowledgment of the benefit received. The plaintiff, as an endorsee of the notes, was a holder in due course for value and entitled to collect from the maker (defendant).

2. On the commission charges: The Court ruled that the charge was authorized by the contract between the parties. Although termed a “commission,” the provision was intended to cover losses such as deterioration or loss in polarization. The contract allowed this charge regardless of whether the sale was made directly to the plaintiff or to others.

3. On the attorney’s fees: The Court found the award proper. The contract stipulated attorney’s fees of 20% of the debt in case of judicial enforcement. The trial court had already reduced this to 5%, which the Supreme Court deemed fair and reasonable. The Court reiterated that contractual provisions for attorney’s fees are valid and enforceable if not unconscionable, and the defendant’s failure to meet his obligations necessitated the litigation.

DISPOSITIVE PORTION:
The appealed judgment is affirmed with costs against the appellant.