8. Sps.

Gaspar vs Disini The property subject of [the] litigation is a year

2000 model, white Mitsubishi Pajero with plate number
WVC-555. The subject vehicle, registered in the name of
FIRST DIVISION a certain Artemio Marquez (Marquez), was mortgaged
by the latter as security for a loan obtained from Legacy
[G.R. No. 239644. February 3, 2021.] Lending Investor (Legacy). Legacy is owned by x x x
Joseph Yu (Yu). Marquez failed to pay his loan, leading
SPOUSES MARIO and JULIA Legacy to seize the Pajero. To facilitate the disposal of
GASPAR, petitioners, vs. HERMINIO ANGEL E. the Pajero, Marquez executed and signed a Deed of
DISINI, JR., JOSEPH YU, doing business under the Sale in blank[,] that is, without the name and details of
name and style LEGACY LENDING INVESTOR and the buyer.
DIANA SALITA, respondents. [Spouses Gaspar] who are engaged in the
business of buying and selling second-band vehicles,
purchased the subject Pajero from Legacy for the price
DECISION of [P1,000,000.00], as shown by a manager's check for
said amount, and a receipt therefor signed by x x x Diana
Salita [(Salita), Yu's employee], dated [July 12, 2002.]
CAGUIOA, J p: x x x Rocky Gaspar (Rocky), son of the Spouses
The Case Gaspar, offered the Pajero for sale to [Disini], who
agreed to buy it for the total purchase price of
This is a Petition for Review on Certiorari 1 (Petition) filed
[P]1,160,000.00. On [July 22, 2002], Disini gave a
under Rule 45 of the Rules of Court against the Decision 2 dated January
downpayment of [P50,000.00] duly received by Rocky.
12, 2018 (assailed Decision) and Resolution 3 dated May 21, 2018
On [July 23, 2002], Disini filled in his details and signed
(assailed Resolution) in CA-G.R. CV No. 107441 rendered by the Court
the Deed of Sale previously executed by [Marquez]. On
of Appeals 4 (CA).
[July 30, 2002], Disini paid the balance of
The assailed Decision and Resolution affirmed with modification [P]1,110,000.00, after the Spouses Gaspar obtained
the Decision dated April 13, 2016 issued by the Regional Trial Court a Motor Vehicle Clearance Certificate, dated [July 26,
(RTC) of Manila, Branch 18 in Civil Case No. 06-115408 insofar as it 2002], and registered the subject Pajero in the name of
directed petitioners Spouses Mario and Julia Gaspar (Spouses Gaspar) to Disini on [August 6, 2002.]
pay respondent Herminia Angel E. Disini, Jr. (Disini) the amount of
About a year later, on [June 30, 2003], the
P760,000.00.
police apprehended the subject Pajero while it was
The Facts illegally parked in Makati. Further police
investigation revealed that the vehicle had been stolen
The CA narrated the facts, as follows:
Page 1 of 8
 from the Office of the President. It appears that the (ii) Yu to reimburse Spouses Gaspar the amount of P850,000.00 with
chassis number had been overlaid with another legal interest, and to pay the latter attorney's fees also in the amount of
number through welding in order to avoid P50,000.00. 6
identification.
The RTC dismissed the third-party complaint as against Salita. 7
Disini immediately informed the Spouses
Spouses Gaspar and Yu filed separate appeals that were later
Gaspar about the confiscation of the subject Pajero, and
consolidated by the CA.
the latter promised to return the full purchase price that
he had paid to them. In turn, the Spouses Gaspar sought For their part, Spouses Gaspar argued that the order directing
reimbursement from [Yu] and Legacy, and the latter them to pay Disini attorney's fees is baseless as there was no finding that
gave back [P150,000.00]. The Spouses Gaspar turned they acted in bad faith. Further, Spouses Gaspar assailed the dismissal of
over the [P150,000.00] to Disini on [July 22, 2003.] On the third-party complaint against Salita. 8
[August 5, 2003], the Spouses Gaspar paid further On the other hand, Yu and Salita argued that they should not be
[P200,000.00] to Disini, and finally [P50,000.00] on held liable to reimburse Spouses Gaspar considering that: (i) their
[December 3, 2003] for a total reimbursement of implied warranty as sellers does not extend to defects which are apparent
[P400,000.00] and leaving an unpaid balance of and can be ascertained by the buyers after examination; (ii) Spouses
[P760,000.00.] Gaspar are engaged in the business of buying and selling cars and must
Apart from the [P150,000.00] initially returned bear the risk involved in the purchase of the subject Pajero following the
by [Yu] to the Spouses Gaspar, [Yu] failed to reimburse principle of caveat emptor; and (iii) as sellers, Yu and Salita relied on the
the balance of the purchase price paid by the Spouses Certificate of Registration and clearances provided by their mortgagee,
Gaspar for the subject Pajero in the amount of Marquez, and should thus be deemed sellers in good faith. Yu and Salita
[P850,000.00.] also assailed the order directing them to pay attorney's fees in favor of
Spouses Gaspar. 9
When written demand failed, Disini filed [a
complaint for sum of money with prayer for preliminary CA proceedings
attachment (Complaint)] against Rocky and the Spouses On January 12, 2018, the CA issued the assailed Decision, the
Gaspar to collect the unpaid reimbursement of what he dispositive portion of which reads:
paid for the subject Pajero.
WHEREFORE, the x x x Decision dated [April
In turn, the [Spouses Gaspar] filed a third-party 13, 2016] of the [RTC], Branch 18, Manila, in Civil
complaint against [Yu] and his employee [Salita] for the Case No. 06-115408, for Sum of Money with Prayer for
unpaid reimbursement of [P850,000.00.] 5 (Emphasis Preliminary Attachment, (1) ordering original defendants
supplied; emphasis in the original omitted; italics in the [Spouses] Gaspar to refund the amount of [P760,000.00]
original) with legal interest to plaintiff Disini, as well as pay
After trial, the RTC rendered a Decision directing: (i) Spouses [P50,000.00] as attorney's fees; and (2) ordering third-
Gaspar to refund the amount of P760,000.00 with legal interest in favor party defendant [Yu] to reimburse defendants [Spouses]
of Disini, and pay the latter attorney's fees in the amount of P50,000.00; Gaspar the amount of [P850,000.00] with legal interest,

Page 2 of 8
 and to pay [P50,000.00] as attorney's fees In the assailed Resolution, the CA denied Spouses Gaspar's
is AFFIRMED with MODIFICATION in that the subsequent motion for partial reconsideration. 16 Spouses Gaspar
award of attorney's fees to Disini is DELETED. received a copy of the assailed Resolution on June 5, 2018. 17
Further, the third-party complaint against [Yu] and
On June 19, 2018, Spouses Gaspar filed a Motion for Extension
[Salita] is DISMISSED for having been filed out of
of Time to File Petition for Review on Certiorari. 18 There, Spouses
time. All orders not inconsistent with the foregoing
Gaspar prayed for an additional period of thirty (30) days from June 20,
are affirmed.
2018, or until July 20, 2018 within which to file their petition for
SO ORDERED. 10 (Additional emphasis review. 19
supplied; italics in the original)
This Petition was filed on July 20, 2018. 20
Foremost, the CA noted that during the course of trial, it was
Yu and Salita filed their Motion for Additional Time which
established that Spouses Gaspar promised to return Disini's money in
prayed for an additional period of fifteen (15) days from November 8,
case the title of the subject Pajero is found to be defective. Spouses
2018, or until November 23, 2018 to file their comment. Yu and Salita
Gaspar followed through with this promise when they partially returned
filed their Comment 21 on the last day of the period so requested. 22
Disini's payment. However, Spouses Gaspar failed to return the purchase
price in full due to lack of funds. 11 The CA found that these On the other hand, Disini filed a Motion for Extension of Time
circumstances show that Spouses Gaspar did not act in bad faith. 12 to File Comment. 23 There, Disini requested for an additional period of
thirty (30) days from November 4, 2018 or until December 4, 2018
However, the CA found that the RTC also erred in ordering Yu
within which to file his comment on the Petition. 24 However, Disini
to reimburse Spouses Gaspar the amount they returned to Disini, and to
failed to file his comment within the requested period.
pay them attorney's fees. 13
In its Resolution 25 dated August 28, 2019, the Court dispensed
According to the CA, the sale of the subject Pajero from Yu to
with the filing of Disini's comment and ordered Spouses Gaspar to file
Spouses Gaspar gave rise to an implied warranty of title and a
their Reply to Yu and Salita's Comment.
concomitant implied warranty against eviction. These implied warranties,
in turn, prescribe six (6) months from date of delivery of the thing sold Spouses Gaspar filed their Reply 26 on November 4, 2019. 27
pursuant to Article 1571 of the Civil Code.Here, Spouses Gaspar filed In this Petition, Spouses Gaspar argue that the CA misapplied the
the third-party complaint against Yu and Salita on October 9, 2006, or rule on implied warranties under Article 1561 of the Civil Code.They
nearly four (4) years after delivery of the subject Pajero on July 12, 2002. claim that the warranty against hidden defects pertains to defects in
Thus, said third-party complaint was filed out of time. 14 workmanship. Here, the subject Pajero is not defective but rather,
The CA added that in any event, Spouses Gaspar's line of stolen. 28 Thus, Spouses Gaspar assert that this case does not involve a
business made it incumbent upon them to thoroughly verify and examine breach of implied warranties, but rather, a fraudulent sale facilitated by
the subject Pajero's registration and documents as against the physical Yu and Salita. 29 On this score, they posit that the applicable prescriptive
body of the vehicle. Spouses Gaspar ought to have known that the period is ten (10) years, as set forth in Article 1144 of the Civil
subject Pajero was stolen as they were the ones who secured the Code which governs actions based on written contracts. 30
Philippine National Police clearances and Certificate of Registration on Further, Spouses Gaspar contend that the proximate cause of the
Disini's behalf. 15 dispute is Yu and Salita's wanton and careless disregard in the acceptance
Page 3 of 8
of the subject Pajero as collateral for Marquez's loan. 31 They stress that a party nor privy to the act or deed complained of by the
Yu and Salita run a lending company whose business is akin to that of plaintiff, may be brought into the case with leave of
banks and other financial institutions. Thus, they cannot be considered as court, by the defendant, who acts as third-party plaintiff
ordinary mortgagees, as the general rule that a mortgagee need not look to enforce against such third-party defendant a right for
beyond the title does not apply to banks and other financial institutions contribution, indemnity, subrogation or any other relief,
which are required to exercise extraordinary care and diligence in their in respect of the plaintiff's claim. The third-party
operations. 32 complaint is actually independent of and separate and
distinct from the plaintiff's complaint. Were it not for
The Issues
this provision of the Rules of Court, it would have to be
The issues presented for the Court's resolution are: filed independently and separately from the original
1. Whether the CA erred in dismissing the third-party complaint complaint by the defendant against the third-party. But
filed by Spouses Gaspar against Yu and Salita; and the Rules permit defendant to bring in a third-party
defendant or so to speak, to litigate his separate cause of
2. Whether the CA erred in holding that Yu and Salita are not action in respect of plaintiff's claim against a third party
liable to pay Spouses Gaspar attorney's fees. in the original and principal case with the object of
The Court's Ruling avoiding circuitry of action and unnecessary
proliferation of lawsuits and of disposing expeditiously
As a starting point, it must be emphasized that Spouses Gaspar
in one litigation the entire subject matter arising from
do not assail their liability to pay Disini the balance of the purchase price
one particular set of facts. x x x When leave to file the
of the subject Pajero. Instead, they insist on their right to be reimbursed
third-party complaint is properly granted, the Court
through the third-party complaint they filed against Yu and Salita.
renders in effect two judgments in the same case, one on
Section 11, Rule 6 of the Rules of Court details the nature of a the plaintiff's complaint and the other on the third-party
third-party complaint, thus: complaint. When he finds favorably on both
SEC. 11. Third (fourth, etc.)-party complaint. — complaints, as in this case, he renders judgment on
A third (fourth, etc.)-party complaint is a claim that a the principal complaint in favor of plaintiff against
defending party may, with leave of court, file against a defendant and renders another judgment on the
person not a party to the action, called the third (fourth, third-party complaint in favor of defendant as third-
etc.)-party defendant, for contribution, indemnity, party plaintiff, ordering the third-party defendant to
subrogation or any other relief, in respect of his reimburse the defendant whatever amount said
opponent's claim. defendant is ordered to pay plaintiff in the case x x
x. 34 (Emphasis supplied)
In Firestone Tire and Rubber Company of the Philippines v.
Tempongko, 33 the Court expounded on the nature of a third-party Here, Spouses Gaspar filed the third-party complaint to
complaint: ultimately pass on the liability arising from Disini's claim to Yu and
Salita by seeking reimbursement from the latter. Specifically, Spouses
The third-party complaint, is therefore, a Gaspar insist that Yu and Salita should be ordered to reimburse
procedural device whereby a "third party" who is neither
Page 4 of 8
P850,000.00 with legal interest, representing the balance of the price they The sole document evincing the sale between Spouses Gaspar
paid to the latter for the subject Pajero, as well as attorney's fees. and Yu is a handwritten document signed by the latter's employee Salita
which states:
The crux of the controversy thus centers on two main questions
— whether or not Yu and Salita are liable for reimbursement, and, if so, Received from Mrs. Julia Gaspar the amount of
what is the basis of such liability. Once these questions are resolved, the ([P]1,000,000.00) One Million Pesos only[;] [Check
timeliness of Spouses Gaspar's third-party complaint can be determined. No.] 000006319. [Manager's Check] BPI Family Bank x
x x, as full payment for 2000 [Mitsubishi] Pajero [with]
Here, Spouses Gaspar argue that the basis of Yu and Salita's
Motor No. MAA0821, Serial No.
liability is the written "Contract of Sale" (COS) which they entered
PAEV46WGNXB000326, Plate No. WVC-555. 38
into. 35 On the other hand, Yu denies liability and claims that as seller,
he is only liable for the subject Pajero's hidden defects which do not exist While this COS is more akin to a receipt and leaves much to be
in this case. 36 He adds that the conditions necessary for the application desired, it ostensibly reflects all the elements of a perfected contract of
of the implied warranty against eviction are not present. In any event, Yu sale, which are: (i) the consent of the contracting parties; (ii) object
further claims that any cause of action that Spouses Gaspar may have had certain which is the subject matter of the contract (that is, the subject
based on said implied warranties have long prescribed. 37 In this Pajero); and (iii) the cause of the obligation which is established (that is,
connection, the Court notes that while the Comment was filed in the the payment of the specified price of P1,000,000.00). 39
name of Yu and Salita, none of the allegations and defenses therein
By the contract of sale, one of the contracting parties obligates
specifically pertain to the latter.
himself or herself to transfer the ownership of and to deliver a
The Petition is granted, in part. determinate thing, and the other to pay therefor a price certain in money
or its equivalent. 40 In turn, the elements of a valid contract of sale are:
The Court finds Yu solely liable to reimburse Spouses Gaspar
(i) consent or meeting of the minds; (ii) determinate subject matter; and
the unpaid portion of the purchase price of the subject Pajero with legal
(iii) price certain in money or its equivalent. 41 With respect to the
interest. Yu's liability is anchored on the nullity of the COS he executed
second element, it is further required that the thing which is the subject
with Spouses Gaspar. In addition, Yu is liable to pay Spouses Gaspar
matter of the contract must be licit, and that the vendor must have a right
attorney's fees as he unjustifiably refused in bad faith to satisfy the
to transfer the ownership thereof at the time it is delivered. 42
latter's valid claim.
Here, the object of the COS turned out to be a vehicle stolen
Salita, being an employee who merely acted under the direction
from the Office of the President which was immediately confiscated
of Yu, is absolved from liability.
when Disini was cited for illegal parking. As a general rule, the
The third-party complaint against Yu possession of movable property acquired in good faith is equivalent to a
is based on the nullity of the COS title. This general rule, however, does not apply in cases where the owner
between him and Spouses Gaspar. of said movable property has been unlawfully deprived of the
The third-party complaint was thus same, 43 as in this case where the vehicle subject of the COS had been
timely filed. stolen.
Evidently, Yu had no right to transfer the ownership of the
subject Pajero at the time it was delivered to Spouses Gaspar, as the
Page 5 of 8
object of the COS is clearly illicit. The second element of a valid here, where the subject Pajero, albeit stolen, was in working condition,
contract of sale is consequently absent. The COS executed between Yu and was in fact being used by Disini for its intended purpose when it was
and Spouses Gaspar is therefore void ab initio, pursuant to Article 1409 confiscated by the authorities.
of the Civil Code, thus:
On the other hand, a breach of the warranty against eviction
ART. 1409. The following contracts are presupposes the concurrence of the following requisites: (i) the purchaser
inexistent and void from the beginning: has been deprived of the whole or part of the thing sold; (ii) this eviction
is by a final judgment; (iii) the basis thereof is by virtue of a right prior to
(1) Those whose cause, object or purpose is
the sale made by the vendor; and (iv) the vendor has been summoned and
contrary to law, morals, good customs, public order or
made co-defendant in the suit for eviction at the instance of the
public policy;
vendee. 47 Here, Disini was not deprived of possession on the basis of a
xxx xxx xxx final judgment. In fact, based on the records, it would appear that Disini
These contracts cannot be ratified. Neither can did not contest the confiscation of the subject Pajero when he was
the right to set up the defense of illegality be waived. informed that it had been stolen from the Office of the President.

By filing a third-party complaint against Yu for the purpose of Since none of the foregoing warranties apply, the six-month
seeking reimbursement of the purchase price they had paid for the prescriptive period under Article 1571 of the Civil Code is inapplicable.
subject Pajero, Spouses Gaspar effectively sought to declare the COS As the third-party complaint filed by Spouses Gaspar assumes the nature
null and void ab initio and recover what they had given on account of of an action to declare the inexistence of a contract due to its illicit
said void COS. The third-party complaint thus assumes the nature of object, said complaint is imprescriptible under Article 1409. The CA thus
an action to declare the inexistence of a contract which erred when it dismissed the third-party complaint on the ground of
does not prescribe. 44 prescription.

Contrary to the CA's findings, Yu's liability in this particular Salita cannot be held personally
case is not hinged on the implied warranties against hidden defects liable as she merely acted for and on
and/or eviction. That Spouses Gaspar's Memorandum before the RTC behalf of her employer Yu.
alleged that Yu can be considered in breach of an implied warranty While Spouses Gaspar are indeed entitled to reimbursement,
considering he "sold to [Spouses Gaspar] a vehicle allegedly clean [from] only Yu can be held liable for payment therefor. The records confirm that
any liens and encumbrances" 45 is of no moment. To be sure, the implied Salita's signature indeed appears on the COS. Nevertheless, Yu himself
warranties against hidden defects and eviction are legal concepts with acknowledges that Salita merely affixed her signature thereon on his
fixed definitions in law. behalf, and that only he stands as seller under the COS. This is clear from
The implied warranty against hidden defects pertains to defects Yu's allegations in his Comment, thus:
which render the thing sold unfit for the use for which it is intended, or 3. It bears emphasis that the seller is responsible
should diminish its fitness for such use to such an extent that, had the for warranty against the hidden defects which the thing
vendee been aware thereof, would not have acquired it or would have sold may have. A hidden defect is one which is unknown
given a lower price. 46 As its nomenclature suggests, hidden defects or could not have been known to the vendee. Verily, the
pertain to imperfections or defects of the object sold. Such is not the case vendee cannot be made answerable for obvious defects
Page 6 of 8
 or those which may be visible, or for those which are not (2) When the defendant's act or omission has
visible if the vendee is an expert who, by reason of his compelled the plaintiff to litigate with third persons or to
trade or profession, should have known them. incur expenses to protect his interest;
4. From the above discussion, it is clear that (3) In criminal cases of malicious prosecution
Respondent Joseph Yu ("Respondent Yu"), who against the plaintiff;
facilitated the sale of the subject vehicle can be held
(4) In case of a clearly unfounded civil action or
responsible only for hidden defects. Verily, Respondent
proceeding against the plaintiff;
Yu cannot be made answerable for obvious defects or
those which may be visible, or for those which are not (5) Where the defendant acted in gross and
visible if the vendee, such as Petitioner Spouses Mario evident bad faith in refusing to satisfy the plaintiff's
and Julia Gaspar ("Petitioners"), x x x who, by reason of plainly valid, just and demandable claim;
their trade or profession, should have known them. (6) In actions for legal support;
xxx xxx xxx (7) In actions for the recovery of wages of
13. x x x An immediate review of the pleadings household helpers, laborers and skilled workers;
filed by the Petitioners reveals that their cause of action (8) In actions for indemnity under workmen's
is anchored on the implied warranty found in their compensation and employer's liability laws;
contract of sale with [Respondent Yu].
(9) In a separate civil action to recover civil
xxx xxx xxx liability arising from a crime;
53. Respondent Yu is a seller in good faith. It (10) When at least double judicial costs are
must be remembered that good faith is always presumed awarded;
and upon him who alleges bad faith rests the burden of
proof. 48 (Emphasis supplied) (11) In any other case where the court deems it
just and equitable that attorney's fees and expenses of
Clearly, Salita transacted with Spouses Gaspar solely upon the litigation should be recovered.
direction and on behalf of Yu, her employer. Accordingly, Salita must be
absolved from liability in this case. In all cases, the attorney's fees and expenses of
litigation must be reasonable. (Emphasis supplied)
Yu is liable for attorney's fees.
To recall, Spouses Gaspar reimbursed Disini the total amount of
Article 2208 of the Civil Code specifies the instances when P400,000.00 upon the latter's demand. This amount consisted of the
attorney's fees may be awarded, thus: P150,000.00 which Yu reimbursed to Spouses Gaspar, and P250,000.00
ART. 2208. In the absence of stipulation, from the latter's own funds. 49
attorney's fees and expenses of litigation, other than Yu's initial payment of P150,000.00 clearly indicates that he
judicial costs, cannot be recovered, except: recognized the validity of Spouses Gaspar's claim for reimbursement.
(1) When exemplary damages are awarded; However, Yu decided to withhold further reimbursement for reasons
Page 7 of 8
unknown to the Court. Consequently, Spouses Gaspar were constrained the rate of six percent (6%) per annum from finality of
to pay Disini out of their own pocket, and were later exposed to litigation this Decision until full payment.
in view of their failure to satisfy the remaining balance of P760,000.00
The dismissal of the third-party complaint filed by petitioners
due to lack of funds.
Spouses Gaspar against respondent DIANA SALITA is AFFIRMED.
It bears stressing that the Pajero had been sourced from Marquez,
The award of attorney's fees in favor of respondent Disini
Yu's debtor. Good faith should have thus impelled Yu to reimburse
is DELETED.
Spouses Gaspar the full amount which they paid and seek redress from
Marquez, the subject Pajero's supposed original owner. Instead of doing SO ORDERED.
so, Yu withheld further reimbursement despite his earlier recognition of Peralta, C.J., Carandang, Zalameda and Gaerlan, JJ., concur.
Spouses Gaspar's valid claim. Such unjustified refusal to satisfy Spouses
Gaspar's valid claim demonstrates Yu's gross and evident bad faith. On ||| (Spouses Gaspar v. Disini, Jr., G.R. No. 239644, [February 3, 2021])
this basis, the Court finds the award of attorney's fees in favor of Spouses
Gaspar proper.
WHEREFORE, premises considered, the Petition
is GRANTED IN PART. The Decision dated January 12, 2018 and
Resolution dated May 21, 2018 issued by the Court of Appeals in CA-
G.R. CV No. 107441 are REVERSED and SET ASIDE.
The Decision dated April 13, 2016 of the Regional Trial Court of
Manila, Branch 18 in Civil Case No. 06-115408 is
hereby REINSTATED, insofar as it directs the following:
(i) Petitioners Spouses Mario and Julia Gaspar (Spouses Gaspar)
to pay respondent Herminio Angel E. Disini, Jr. (Disini)
the amount of P760,000.00 with legal interest at the rate
of six percent (6%) per annum, computed from the date
of filing of Disini's Complaint for Sum of
Money 50 until full payment;
(ii) Respondent Joseph Yu (Yu) to pay petitioners Spouses
Gaspar the amount of P850,000.00 with legal interest at
the rate of six percent (6%) per annum, computed from
the date of filing of the latter's third-party complaint on
October 9, 2006 until full payment; and
(iii) Respondent Yu to pay petitioners Spouses Gaspar attorney's
fees in the amount of P50,000.00 with legal interest at

Page 8 of 8