G.R. No. 191431 - Cruz vs. Gruspe

Case Summary (G.R. No. 191431)

Key Dates

Accident: October 24, 1999. Execution of Joint Affidavit of Undertaking: October 25, 1999. Stipulated deadline for compliance in the affidavit: November 15, 1999. Complaint filed with the RTC: November 19, 1999. RTC decision: September 27, 2004. CA decision: July 30, 2009; CA resolution: February 19, 2010. Supreme Court decision reviewed: March 13, 2013. Applicable constitution (given the decision date): 1987 Philippine Constitution.

Applicable Law and Authorities

Primary provisions considered: Article 1318 (essential requisites of a valid contract) and Article 1169 (on delay or default) of the Civil Code. Procedural vehicle: Rule 45, Rules of Court. The Court applied established principles that the denomination or title of a document is not conclusive of its nature and that the intention of the parties, as reflected in the instrument’s terms, governs its interpretation.

Factual Background

On October 24, 1999, the mini bus owned and operated by Cruz and driven by Arturo Davin collided with Gruspe’s Toyota Corolla, which became a total wreck. On October 25, 1999, Cruz and Leonardo Q. Ibias went to Gruspe’s office, apologized, and signed a “Joint Affidavit of Undertaking.” Paragraph 5 of that instrument promised that they would replace Gruspe’s damaged car within 20 days (until November 15, 1999) with the same model and at least the same quality, or, alternatively, would pay P350,000.00 with an interest rate of 12% per month for any delayed payment after November 15, 1999 until fully paid. Gruspe sold the wrecked car for P130,000.00. When petitioners did not comply, Gruspe filed a complaint for collection on November 19, 1999.

Procedural History Below

The RTC (Sept. 27, 2004) ruled for Gruspe and ordered Cruz and Leonardo to pay the net amount (P350,000.00 less P130,000.00) plus 15% per annum interest from November 15, 1999 and costs. On appeal the CA affirmed the RTC but modified interest to 12% per annum pursuant to the Joint Affidavit. The CA treated the “Joint Affidavit of Undertaking” as a contract, found no proof of vitiated consent, and held petitioners liable. Petitioners brought the matter to the Supreme Court by certiorari.

Petitioners’ Contentions Before the Supreme Court

(1) The Joint Affidavit of Undertaking is not a contract but an affidavit; an affidavit merely attests to facts and does not create contractual obligations requiring a meeting of the minds. (2) If the instrument is considered a contract, Cruz’s and Leonardo’s consent was vitiated because the instrument was prepared by Gruspe (a lawyer) and its contents were not explained; they were allegedly coerced into signing in order to secure release of the mini bus. (3) No demand was made prior to filing the complaint; therefore, under Article 1169 the debt was not in default as of November 15, 1999, and interest should not run from that date.

Supreme Court’s Analysis on the Nature of the Instrument

The Court emphasized that the form or label given to an instrument is not conclusive; courts must look to the substance and the intention of the parties. The Joint Affidavit contained stipulations characteristic of a contract: a clear promise to replace the car by a certain date or to pay a specified sum (P350,000.00), and an agreed interest provision. These elements satisfy the essential requisites of a contract under Article 1318 (consent, object certain, and cause or consideration). Accordingly, the Joint Affidavit was treated as a contract and its terms enforceable.

Supreme Court’s Analysis on Vitiated Consent

The Court required that allegations of vitiated consent be established by a preponderance of evidence. Petitioners admitted they signed the instrument to secure possession of their vehicle; they did not offer sufficient evidence that their consent was legally vitiated (e.g., by coercion or deceit rendering the contract voidable). The Court observed that an allegedly onerous or one-sided stipulation does not by itself prove vitiation. The conditioned release of the mini bus (signing the instrument to obtain release) did not, on the record, establish that consent was vitiated to the degree warranting annulment of the instrument.

Supreme Court’s Analysis on Demand and Computation of Interest

Article 1169 was pivotal in determining the proper date from which interest should run. For default to exist, the obligation must be demandable and the debtor must delay performance, and there must be a demand (judicial or extrajudicial) except in cases where demand is unnecessary under the Article’s e

Case Syllabus (G.R. No. 191431)

Procedural History

Petition for review on certiorari filed under Rule 45 of the Rules of Court assailing the Court of Appeals (CA) decision dated July 30, 2009 and resolution dated February 19, 2010 in CA-G.R. CV No. 86083.
The CA rulings affirmed with modification the September 27, 2004 decision of the Regional Trial Court (RTC) of Bacoor, Cavite, Branch 19, in Civil Case No. BCV-99-146, which granted respondent Atty. Delfin Gruspe’s claim for payment of a sum of money against petitioners Rodolfo G. Cruz and Leonardo Q. Ibias (substituted by his widow, Esperanza Ibias).
The Supreme Court (Second Division) rendered a decision on March 13, 2013, affirming the CA decision with modification as to the commencement date of interest and affirming the change of interest rate from 12% per month (as written in the Joint Affidavit) to 12% per annum.

Parties

Petitioners: Rodolfo G. Cruz and Esperanza Ibias (substituting deceased Leonardo Q. Ibias).
Respondent: Atty. Delfin Gruspe.
Lower court judges and appellate justices identified in the source: RTC of Bacoor, Cavite, Branch 19; CA decision penned by Associate Justice Amelita G. Tolentino, concurred in by Associate Justices Pampio A. Abarintos and Mario V. Lopez.
Supreme Court disposition concurred in by Justices Carpio (Chairperson), Del Castillo, Villarama, Jr., and Perlas-Bernabe; Acting Member designated in lieu of Associate Justice Jose P. Perez per Special Order No. 1426 dated March 8, 2013.

Factual Background

On October 24, 1999, a mini bus owned and operated by Rodolfo G. Cruz and driven by Arturo Davin collided with Atty. Delfin Gruspe’s Toyota Corolla; Gruspe’s car became a total wreck.
On October 25, 1999, Cruz, accompanied by Leonardo Q. Ibias, went to Gruspe’s office, apologized for the incident, and executed a document titled “Joint Affidavit of Undertaking.”
The Joint Affidavit of Undertaking contained a promise by Cruz and Leonardo to replace Gruspe’s damaged car within 20 days from October 25, 1999 (i.e., up to November 15, 1999), with a car of the same model and at least the same quality; alternatively, they would pay the cost of the car amounting to P350,000.00, with an agreed interest rate provision.
Paragraph 5 of the Joint Affidavit of Undertaking, as quoted in the record, provided: “If we cannot replace said car within the said period, we will be liable to pay the cost of the car (Toyota Corolla 1.6 GLI 1993 Model) in the total amount of Three Hundred Fifty Thousand Pesos (P350,000.00), Philippine currency, with interest rate of 12% per month of any delayed payment after November 15, 1999 until fully paid.”
Cruz and Leonardo later failed to comply with the undertaking.
Gruspe sold the wrecked car for P130,000.00 prior to or during the pendency of the dispute.

Trial Court (RTC) Disposition

By decision dated September 27, 2004, the RTC ruled in favor of Gruspe and ordered Cruz and Leonardo to pay P220,000.00 (the P350,000.00 claimed less P130,000.00 received from the sale of the wrecked car), plus 15% per annum from November 15, 1999 until fully paid, and costs of suit.
The RTC thus treated the claim as a money demand based on the undertaking and accounted for the sale proceeds in reducing the total award.

Court of Appeals Ruling

The CA, in its decision dated July 30, 2009, affirmed the RTC decision with modification: it changed the interest rate from 15% per annum to 12% per annum, pursuant to the Joint Affidavit of Undertaking.
The CA characterized the “Joint Affidavit of Undertaking” as a contract because it contained the essential elements of consent, object certain, and consideration required under Article 1318 of the Civil Code.
The CA found that Cruz and Leonardo failed to present evidence to substantiate their allegation of vitiated consent; by signing the Joint Affidavit they voluntarily assumed the obligation for damage to Gruspe’s car.
The CA held that Leonardo, though not a party to the incident, could have refused to sign but did not do so.
The dispositive portion of the CA decision read: “WHEREFORE, premises considered, the appeal is DISMISSED. The assailed decision dated September 27, 2004 of the Regional Trial Court of Bacoor, Cavite, Branch 19, is AFFIRMED with the MODIFICATION that the interest charged be changed from 15% to 12% per annum pursuant to the Joint Affidavit of Undertaking of the defendants-appellants.”

Petitioners’ Contentions in the Supreme Court

Petitioners argued that the Joint Affidavit of Undertaking is not a contract that can serve as the basis of an obligation to pay a sum of money in favor of Gruspe, emphasizing that an affidavit is different in purpose from a contract.
They asserted that an affidavit’s purpose is to attest to facts within one’s knowledge, whereas a contract requires a meeting of the minds between contracting parties.
Petitioners alternatively contended that if the Joint Affidavit of Undertaking were considered a contract, it was invalid because consent of Cruz and Leonardo was vitiated: the document was prepared by Gruspe (a lawyer), its contents were never explained to them, and they were forced to sign to secure release of the mini bus, which was Cruz’s only means of income.
Petitioners further argued that Gruspe did