May 25, 2004
Topic: Article 1174 (Fortuitous Event)
FACTS: On 07 May 1991, Philcomsat and Globe entered into an Agreement whereby Philcomsat obligated itself to establish, operate and provide an IBS Standard B earth station (earth station) within Cubi Point for the exclusive use of the USDCA. The term of the contract was for 60 months, or five (5) years.In turn, Globe promised to pay Philcomsat monthly rentals for each leased circuit involved.
At the time of the execution of the Agreement, both parties knew that the Military Bases Agreement between the Republic of the Philippines and the US (RP-US Military Bases Agreement), which was the basis for the occupancy of the Clark Air Base and Subic Naval Base in Cubi Point, was to expire in 1991.
On 16 September 1991, the Senate passed and adopted Senate Resolution No. 141, expressing its decision not to concur in the ratification of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements that was supposed to extend the term of the use by the US of Subic Naval Base, among others.
After the US military forces left Subic Naval Base, Philcomsat sent Globe a letter dated 24 November 1993 demanding payment of its outstanding obligations under the Agreement amounting to US$4,910,136.00 plus interest and attorney’s fees. However, Globe refused to heed Philcomsat’s demand.
Philcomsat filed with the Regional Trial Court of Makati a Complaint against Globe, praying that the latter be ordered to pay liquidated damages under the Agreement, with legal interest, exemplary damages, attorney’s fees and costs of suit.Globe filed an Answer to the Complaint, insisting that it was constrained to end the Agreement due to the termination of the RP-US Military Bases Agreement and the non-ratification by the Senate of the Treaty of Friendship and Cooperation, which events constituted force majeure under the Agreement. Globe explained that the occurrence of said events exempted it from paying rentals for the remaining period of the Agreement.
90 ISSUES: whether or not (1) the non-ratification by the Senate of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements constitutes force majeurewhich exempts Globe from complying with its obligations under the Agreement
(2) Globe is not liable to pay the rentals for the remainder of the term of the Agreement
HELD: The Court agrees with the Court of Appeals and the trial court that the abovementioned requisites are present in the instant case. Philcomsat and Globe had no control over the non-renewal of the term of the RP-US Military Bases Agreement when the same expired in 1991, because the prerogative to ratify the treaty extending the life thereof belonged to the Senate.
Neither did the parties have control over the subsequent withdrawal of the US military forces and personnel from Cubi Point in December 1992.
The aforementioned events made impossible the continuation of the Agreement until the end of its five-year term without fault on the part of either party. The Court of Appeals was thus correct in ruling that the happening of such fortuitous events rendered Globe exempt from payment of rentals for the remainder of the term of the Agreement.
Moreover, it would be unjust to require Globe to continue paying rentals even though Philcomsat cannot be compelled to perform its corresponding obligation under the Agreement.
Notes:
Philcomsat and Globe agreed in Section 8 of the Agreement that the following events shall be deemed events constituting force majeure one of which is Any law, order, regulation, direction or request of the Philippine Government;
the foregoing are either unforeseeable, or foreseeable but beyond the control of the parties. There is nothing in the enumeration that runs contrary to, or expands, the concept of a fortuitous event under Article 1174.
Furthermore, under Article 130626 of the Civil Code, parties to a contract may establish such stipulations, clauses, terms and conditions as they may deem fit, as long as the same do not run counter to the law, morals, good customs, public order or public policy.
Article 1159 of the Civil Code also provides that "[o]bligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith."28 Courts cannot stipulate for the parties nor amend their agreement where the same does not contravene law, morals, good customs, public order or public policy, for to do so would be to
91 alter the real intent of the parties, and would run contrary to the function of the courts to give force and effect thereto.
Not being contrary to law, morals, good customs, public order, or public policy, Section 8 of the Agreement which Philcomsat and Globe freely agreed upon has the force of law between them.
92 FGU Insurance Corp vs CA
March 31, 2005
Topic: Article 1174 (Fortuitous Event)
FACTS:
Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping business operating two common carriers: M/T ANCO tugboat and D/B Lucio barge - no engine of its own, it could not maneuver by itself and had to be towed by a tugboat for it to move from one place to another.
September 23 1979: San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO: 25,000 cases Pale Pilsen and 350 cases Cerveza Negra - consignee SMC’s Beer Marketing Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo; 15,000 cases Pale Pilsen and 200 cases Cerveza Negra - consignee SMC’s BMD-San Jose Beer Sales Office, San Jose, Antique
September 30, 1979: D/B Lucio was towed by the M/T ANCO arrived and M/T ANCO left the barge immediately. The clouds were dark and the waves were big so SMC’s District Sales Supervisor, Fernando Macabuag, requested ANCO’s representative to transfer the barge to a safer place but it refused so around the midnight, the barge sunk along with 29,210 cases of Pale Pilsen and 500 cases of Cerveza Negra totalling to P1,346,197. When SMC claimed against ANCO it stated that they agreed that it would not be liable for any losses or damages resulting to the cargoes by reason of fortuitous event and it was agreed to be insured with FGU for 20,000 cases or P858,500
ANCO filed against FGU
FGU alleged that ANCO and SMC failed to exercise ordinary diligence or the diligence of a good father of the family in the care and supervision of the cargoes
RTC: ANCO liable to SMC and FGU liable for 53% of the lost cargoes CA affirmed
ISSUE: Whether or not FGU should be exempted from liability to ANCO for the lost cargoes because of a fortuitous event and negligence of ANCO
HELD: This Court does not find any reason to deviate from the conclusion drawn by the lower court, as sustained by the Court of Appeals, that ANCOs representatives had failed to exercise extraordinary diligence required of common carriers in the shipment of SMCs cargoes. Such blatant negligence being the proximate cause of the loss of the cargoes amounting to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00) This Court, taking into account the circumstances present in the instant case, concludes that the
93 blatant negligence of ANCOs employees is of such gross character that it amounts to a wrongful act which must exonerate FGU from liability under the insurance contract.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 24 February 1999 is hereby AFFIRMED with MODIFICATION dismissing the third-party complaint.SO ORDERED.
NOTE:
In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it unavoidable. In fact, the other vessels in the port of San Jose, Antique, managed to transfer to another place, a circumstance which prompted SMCs District Sales Supervisor to request that the D/B Lucio be likewise transferred, but to no avail. The D/B Lucio had no engine and could not maneuver by itself. Even if ANCOs representatives wanted to transfer it, they no longer had any means to do so as the tugboat M/T ANCO had already departed, leaving the barge to its own devices. The captain of the tugboat should have had the foresight not to leave the barge alone considering the pending storm.
While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster, ANCO could not escape liability to respondent SMC. The records clearly show the failure of petitioners representatives to exercise the extraordinary degree of diligence mandated by law. To be exempted from responsibility, the natural disaster should have been the proximate and only cause of the loss. There must have been no contributory negligence on the part of the common carrier.
94 SCHMITZ TRANSPORT & BROKERAGE CORPORATION VS. TRANSPORT