Fortuitous events, force majeure, & acts of God
In a receipt dated Jan 30, 1961, Maria G. Abad acknowledged that she received a pendant with diamonds valued at P4,500.00 from Guillermo Austria. This pendant was meant to be sold on commission, or returned upon request.
However, on Feb 1, 1961, as Ms. Abad was walking home in Mandaluyong, she was accosted by two men. One of them struck her in the face, while the other snatched her purse containing jewelry and cash, before fleeing. Among the stolen items was Guillermo Austria’s consigned pendant.
Mr. Austria subsequently filed a case seeking the return of the pendant or payment of its value along with damages. Ms. Abad was no longer able to return the jewelry, nor could she afford to cover the cost. Her defense was that the pendant’s robbery had released her from their obligation.
The trial court ruled in favor of Mr. Austria, ordering Ms. Abad to pay the value of the pendant, interest, attorneys fees, and costs. The trial court further stated that the robbery was not proved, or, if indeed it was committed, that defendant Abad was guilty of negligence when she walked home without any companion even as it was already getting dark, all while carrying a substantial amount of cash and valuables.
Eventually, the case reached the Supreme Court, which decided that Ms. Abad is not responsible for the loss of the jewelry on account of a fortuitous event. Simply put, she need not repay or return the value of the jewelry to Ms. Austria. (Austria v. Court of Appeals, G.R. No. G.R. No. L-29640 June 10, 1971)
More than 30 yeas later, or in 2007, the Supreme Court decided on another case, where a party entrusted with valuable jewelry sought to be excused from having to return the item, due to loss or robbery.
On different dates of the year 1987, Lulu V. Jorge pawned several pieces of jewelry with Agencia de R. C. Sicam, a pawnshop, to secure a loan in the total amount of P59,500.
Later, the pawnshop was robbed by two armed men, and the jewelry pawned by Ms. Jorge was among the items taken in the robbery. Mr. Sicam, the owner of the pawnshop, sent Ms. Jorge a letter informing her of the loss of her jewelry due to the robbery, but she still insisted on the return of her items, leading her to file a case for indemnification and damages with the courts.
In this case, the Supreme Court found Mr. Sicam and the pawnshop liable to pay Ms. Jorge for the jewelry, declaring that a robbery, in itself, is not automatically considered a fortuitous event to exempt Mr. Sicam and the pawnshop from liability. (Sicam and Agencia de R.C. Sicam, Inc. G.R. No. G.R. NO. 159617, August 8, 2007)
Mr. Sicam cited the earlier case of Austria in seeking that the pawnshop be excused from the liability of returning the jewelry or its value, due to the happening of a fortuitous event, which is the robbery. However, the court explained that the two cases are different.
The court found that in the Austria case, the robbery took place in 1961, when the state of criminality in the City of Manila had not yet reached the level of incidence that would naturally have required a reasonably diligent person carrying jewelry of considerable value to take suitable precautions and protection when walking home at night.
On the other hand, in the Sicam case, the pawnshop robbery took place in 1987, when such crimes were more prevalent. Mr. Sicam had in fact foreseen the possibility of being robbed, as he request permission from the central bank to open a vault with a nearby bank. However, he was discouraged from doing so since pawned articles were required to be stored in a vault located inside the pawnshop. Despite that fact, the pawnshop did not have a trained security guard and the vault was open during the day when the robbery took place.
Article 1174 of the Civil Code of the Philippines defines fortuitous events as those which could not be foreseen, or which foreseen, were inevitable. The law further provides that no person shall be responsible for such fortuitous events and exempts from liability the person obliged to do or perform something.
It is important to note that the Supreme Court has ruled that an Act of God, also referred to as a Fortuitous Event, may exempt a party from liability and its obligations under contract, but only if it met specific criteria.
Accordingly, to exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of an obligation due to an “act of God,” the following must concur:
(a) the cause of the breach of the obligation must be independent of the will of the debtor
(b) the event must be either unforeseeable or unavoidable
(c) the event must be such as to render it impossible for the debtor to fulfill its obligation in a normal manner
(d) the debtor must be free from any participation in, or aggravation of the injury to the creditor including but not limited to acts of negligence
(Nakpil & Sons v. Court of Appeals, GR No. L- 47851, L-47863, L-47896, October 3, 1986)
While there are differences in meaning, the terms Act of God, Fortuitous Event, and Force Majeure, are used interchangeably in the practice of contract drafting.
A fortuitous event under Article 1174 may either be an “act of God,” or natural occurrences such as floods or typhoons, or an “act of man,” such as riots, strikes or wars.
Parties to a contract may also stipulate and define what these unforeseen and unavoidable events are such as any law, order, regulation, direction or request of the Philippine government; Strikes or other labor difficulties; insurrection; riots; national emergencies; war; acts of public enemies; fire, floods, typhoons or other catastrophe or acts of God, and other circumstances beyond the control of the parties.
The above enumeration are either unforeseeable or while foreseeable are beyond the control of the parties. The court has declared that while Article 1174 does not provide a list, there is nothing in the above enumeration that runs contrary to, or expands, the concept of a fortuitous event under Article 1174. (Philippine Communications Satellite Corporation v. Globe Telecom, Inc., G.R. No. 147324, May 25, 2004.
A party obliged to do or deliver something is not excused when (a) the parties stipulate that the other is not released from the obligation or remains liable despite the occurrence of a fortuitous event, (b) the law specifically provides that there shall still be liability despite the fortuitous event, and (c) the nature of the obligation requires the assumption of risk. Accordingly in such instances, the obligor shall continue to be responsible to do an act or deliver something or be liable for damages.
Fortuitous events, force majeure, or acts of God can have significant legal implications in cases involving liability for damages or losses. While these events are beyond human control, parties seeking exemption from liability must meet strict criteria, including the absence of negligence and the impossibility to fulfill obligations due to the event.
(The author, Atty. John Philip C. Siao, is a practicing lawyer and founding Partner of Tiongco Siao Bello & Associates Law Offices, an Arbitrator of the Construction Industry Arbitration Commission of the Philippines, and teaches law at the De La Salle University Tañada-Diokno School of Law. He may be contacted at [email protected]. The views expressed in this article belong to the author alone.)
