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Amicus Curiae

Can a debtor claim force majeure in view of the declaration of martial law in Mindanao?

Jennidy S. Tambor

July 21, 2017

We can agree that the present administration’s first year in office is nothing but eventful. From the internationally controversial Duterte’s war against drugs to the more recent declaration of martial law in Mindanao on May 23. But amidst all these, it’s business as usual. 
Business owners continue to strive for gain or profit. They continue to invest, and in the process incur liabilities. Thus, side by side with the human rights concerns, it is also important to discuss how this martial law declaration in Mindanao will affect business owners vis-à-vis their liabilities.
 
With the declaration of martial law in Mindanao, a valid question was raised by a concerned Mindanao businessman, “can I claim force majeure on a bank loan because of martial law?” Otherwise stated, can a debtor/obligor validly delay or altogether refuse compliance of his obligation because of martial law?
 
Fortuitous event, an unforeseen occurrence not caused by either of the parties to an obligation, is discussed under Article 1174 of the Civil Code. The said provision states that “except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.” Furthermore, Article 1154 of the Civil Code, which provides for the effect of a fortuitous event, states “the period during which the obligee was prevented by a fortuitous event from enforcing his right is not reckoned against him.”
 
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, wars. These events exempt an obligor from liability, except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk.
 
The issue of whether or not the declaration of martial law can be claimed as a fortuitous event for one to be exempted from liability is not a novel issue. This has been raised before in view of the martial law during the Marcos administration.
 
In Tan v. Court of Appeals, G.R. No. 90365, March 18, 1991, 195 SCRA 355, which dealt with the issue of whether or not martial law during the Marcos administration interrupted the running of the prescriptive periods, the Supreme Court ruled that it cannot accept the contention of petitioners Vicente Tan, et al. that the period during which authoritarian rule was in force had interrupted prescription and that the same began to run only on February 25, 1986, when the Aquino government took power.
 
In holding that the detention of Vicente Tan, or authoritarian rule for that matter, cannot be declared as a fortuitous event insofar as Mr. Tan was concerned, that interrupted prescription, the Court there said: “xxx It is true that under Article 1154 xxx fortuitous events have the effect of tolling the period of prescription. However, we cannot say, as a universal rule, that the period from September 21, 1972 through February 25, 1986 involves a force majeure. Plainly, we cannot box in the “dictatorial” period within the term without distinction, and without, by necessity, suspending all liabilities, however demandable, incurred during that period, including perhaps those ordered by this Court to be paid. While this Court is cognizant of acts of the last regime, especially political acts, that might have indeed precluded the enforcement of liability against that regime and/or its minions, the Court is not inclined to make quite a sweeping pronouncement, considering especially the unsettling effects such a pronouncement is likely to bring about. It is our opinion that claims should be taken on a case-to-case basis. This selective rule is compelled, among others, by the fact that not all those imprisoned or detained by the past dictatorship were true political oppositionists, or, for that matter, innocent of any crime or wrongdoing. Indeed, not a few of them were manipulators and scoundrels.”
 
While the case of Tan vs. Court of Appeals dealt with the issue of prescription of an action for reconveyance, the Court there squarely pointed out that it cannot say, as a rule, that the “dictatorial” period covered within the Marcos administration involves a force majeure or fortuitous event as to suspend liabilities.
 
The Court En Banc, in Lasam vs. Smith, G.R. No. L-19495, Feb. 2, 1924, laid down the following essential elements of a fortuitous event or force majeure that would exempt a person from liability: “(1) The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of the human will. (2) It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid. (3) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner. And (4) the obligor (debtor) must be free from any participation in the aggravation of the injury resulting to the creditor.”
 
From the Supreme Court’s pronouncements, it is clear that one cannot claim force majeure based on the declaration of martial law per se to support his delay in payment or other breach of a bank loan, or altogether refuse compliance of his obligation thereon. It is only when all the foregoing elements of a force majeure concur can one claim the declaration of martial law as basis for exemption from liability.