G.R. No. 239644 , February 03, 2021
SPOUSES MARIO AND JULIA GASPAR, PETITIONERS, VS. HERMINIO ANGEL E. DISINI, JR., JOSEPH YU, DOING BUSINESS UNDER THE NAME AND STYLE LEGACY LENDING INVESTOR AND DIANA SALITA, RESPONDENTS.

FACTS

The property subject of litigation is a year 2000 model, white Mitsubishi Pajero with plate number WVC-555, registered in the name of Artemio Marquez. Marquez mortgaged the vehicle as security for a loan from Legacy Lending Investor, owned by Joseph Yu. Upon Marquez’s failure to pay, Legacy seized the Pajero, and Marquez executed a Deed of Sale in blank to facilitate its disposal. Petitioners Spouses Mario and Julia Gaspar, engaged in buying and selling second-hand vehicles, purchased the Pajero from Legacy for P1,000,000.00 on July 12, 2002. Their son, Rocky Gaspar, later sold the vehicle to respondent Herminio Angel E. Disini, Jr. for P1,160,000.00. Disini made payments and signed the previously executed Deed of Sale, and the vehicle was registered in his name on August 6, 2002. On June 30, 2003, the police apprehended the Pajero in Makati, revealing it was stolen from the Office of the President, with its chassis number overlaid through welding. Disini informed the Spouses Gaspar, who promised to return the purchase price. They partially reimbursed Disini a total of P400,000.00, leaving a balance of P760,000.00. The Spouses Gaspar sought reimbursement from Yu and Legacy, who returned only P150,000.00, leaving a balance of P850,000.00. Disini filed a complaint for sum of money against Rocky and the Spouses Gaspar. The Spouses Gaspar filed a third-party complaint against Yu and his employee, Diana Salita, for the unpaid reimbursement. The Regional Trial Court (RTC) directed the Spouses Gaspar to refund Disini P760,000.00 with legal interest and attorney’s fees, and directed Yu to reimburse the Spouses Gaspar P850,000.00 with legal interest and attorney’s fees, dismissing the complaint against Salita. The Court of Appeals (CA) affirmed with modification, deleting the award of attorney’s fees to Disini and dismissing the third-party complaint against Yu and Salita for being filed out of time, applying the six-month prescriptive period for implied warranties. The Spouses Gaspar filed a Petition for Review on Certiorari.

ISSUE

1. Whether the CA erred in dismissing the third-party complaint filed by Spouses Gaspar against Yu and Salita.
2. Whether the CA erred in holding that Yu and Salita are not liable to pay Spouses Gaspar attorney’s fees.

RULING

1. Yes, the CA erred in dismissing the third-party complaint. The Supreme Court held that the CA incorrectly applied the six-month prescriptive period for implied warranties against hidden defects under Article 1571 of the Civil Code. The case involved a breach of the implied warranty of title or against eviction, not against hidden defects. The prescriptive period for an action based on breach of warranty of title is governed by Article 1144 of the Civil Code, which provides a ten-year prescriptive period for actions upon a written contract. The Deed of Sale executed by Marquez in favor of Legacy, and subsequently to the Spouses Gaspar, constituted a written contract. The third-party complaint was filed on October 9, 2006, within ten years from the delivery of the vehicle on July 12, 2002, hence, it was filed on time. Furthermore, the Spouses Gaspar, as buyers, had the right to rely on the warranty of title provided by Yu and Legacy. The principle of caveat emptor does not apply as the defect (the vehicle being stolen) was not apparent and could not have been discovered by mere examination. Yu, operating a lending company, failed to exercise the requisite diligence in ascertaining the legitimacy of the vehicle’s ownership before accepting it as collateral and subsequently selling it.
2. Yes, the CA erred in holding that Yu and Salita are not liable to pay attorney’s fees. The Supreme Court reinstated the RTC’s award of attorney’s fees in favor of the Spouses Gaspar against Yu. The grant of attorney’s fees was justified under Article 2208 of the Civil Code, as Yu’s refusal to fully reimburse the Spouses Gaspar compelled them to litigate to protect their interests. The dismissal of the third-party complaint against Salita was affirmed, as she acted within the scope of her employment as Yu’s employee.
The Supreme Court reinstated the RTC Decision dated April 13, 2016, directing: (i) Spouses Gaspar to pay Disini P760,000.00 with legal interest at 6% per annum from the date of filing of the complaint until full payment; (ii) Yu to pay Spouses Gaspar P850,000.00 with legal interest at 6% per annum from the date of filing of the third-party complaint until full payment; and (iii) Yu to pay Spouses Gaspar attorney’s fees of P50,000.00 with legal interest at 6% per annum from finality of the Decision until full payment. The award of attorney’s fees to Disini was deleted.