G.R. No.

L-13505 February 4, 1919 Endencia agreed to sell her land to the plaintiff as well as of the later important developments
GEO. W. DAYWALT, plaintiff-appellant, connected with the history of that contract and the contract substituted successively for it; and
vs. in particular Father Sanz, as well as other members of the defendant corporation, knew of the
LA CORPORACION DE LOS PADRES AGUSTINOS RECOLETOS, ET AL., existence of the contract of October 3, 1908, which, as we have already seen finally fixed the
defendants-appellees. rights of the parties to the property in question. When the Torrens certificate was finally issued
C. C. Cohn and Thos. D. Aitken for appellant.
 Crossfield & O'Brien for appellee. in 1909 in favor of Teodorica Endencia, she delivered it for safekeeping to the defendant
corporation, and it was then taken to Manila where it remained in the custody and under the
STREET, J.:
control of P. Juan Labarga the procurador and chief official of the defendant corporation, until
In the year 1902, Teodorica Endencia, an unmarried woman, resident in the Province of
the deliver thereof to the plaintiff was made compulsory by reason of the decree of the Supreme
Mindoro, executed a contract whereby she obligated herself to convey to Geo. W. Daywalt, a
Court in 1914.
tract of land situated in the barrio of Mangarin, municipality of Bulalacao, now San Jose, in said
When the defendant corporation sold the San Jose Estate, it was necessary to bring the cattle off
province. It was agreed that a deed should be executed as soon as the title to the land should be
of that property; and, in the first half of 1909, some 2,368 head were removed to the estate of
perfected by proceedings in the Court of Land Registration and a Torrens certificate should be
the corporation immediately adjacent to the property which the plaintiff had purchased from
produced therefore in the name of Teodorica Endencia. A decree recognizing the right of
Teodorica Endencia. As Teodorica still retained possession of said property Father Sanz entered
Teodorica as owner was entered in said court in August 1906, but the Torrens certificate was
into an arrangement with her whereby large numbers of cattle belonging to the defendant
not issued until later. The parties, however, met immediately upon the entering of this decree
corporation were pastured upon said land during a period extending from June 1, 1909, to May
and made a new contract with a view to carrying their original agreement into effect. This new
1, 1914.
contract was executed in the form of a deed of conveyance and bears date of August 16, 1906.
Under the first cause stated in the complaint in the present action the plaintiff seeks to recover
The stipulated price was fixed at P4,000, and the area of the land enclosed in the boundaries
from the defendant corporation the sum of P24,000, as damages for the use and occupation of
defined in the contract was stated to be 452 hectares and a fraction.
the land in question by reason of the pasturing of cattle thereon during the period stated. The
The second contract was not immediately carried into effect for the reason that the Torrens
trial court came to the conclusion that the defendant corporation was liable for damages by
certificate was not yet obtainable and in fact said certificate was not issued until the period of
reason of the use and occupation of the premises in the manner stated; and fixed the amount to
performance contemplated in the contract had expired. Accordingly, upon October 3, 1908, the
be recovered at P2,497. The plaintiff appealed and has assigned error to this part of the judgment
parties entered into still another agreement, superseding the old, by which Teodorica Endencia
of the court below, insisting that damages should have been awarded in a much larger sum and
agreed upon receiving the Torrens title to the land in question, to deliver the same to the
at least to the full extent of P24,000, the amount claimed in the complaint.
Hongkong and Shanghai Bank in Manila, to be forwarded to the Crocker National Bank in San
As the defendant did not appeal, the property of allowing damages for the use and occupation
Francisco, where it was to be delivered to the plaintiff upon payment of a balance of P3,100.
of the land to the extent o P2,497, the amount awarded, is not now in question an the only thing
The Torrens certificate was in time issued to Teodorica Endencia, but in the course of the
here to be considered, in connection with this branch of the case, is whether the damages allowed
proceedings relative to the registration of the land, it was found by official survey that the area
under this head should be increased. The trial court rightly ignored the fact that the defendant
of the tract inclosed in the boundaries stated in the contract was about 1.248 hectares of 452
corporation had paid Teodorica Endencia of ruse and occupation of the same land during the
hectares as stated in the contract. In view of this development Teodorica Endencia became
period in question at the rate of P425 per annum, inasmuch as the final decree of this court in
reluctant to transfer the whole tract to the purchaser, asserting that she never intended to sell so
the action for specific performance is conclusive against her right, and as the defendant
large an amount of land and that she had been misinformed as to its area.
corporation had notice of the rights of the plaintiff under this contract of purchase, it can not be
This attitude of hers led to litigation in which Daywalt finally succeeded, upon appeal to the
permitted that the corporation should escape liability in this action by proving payment of rent
Supreme Court, in obtaining a decree for specific performance; and Teodorica Endencia was
to a person other than the true owner.
ordered to convey the entire tract of land to Daywalt pursuant to the contract of October 3, 1908,
With reference to the rate of which compensation should be estimated the trial court came to the
which contract was declared to be in full force and effect. This decree appears to have become
following conclusion:
finally effective in the early part of the year 1914.1
As to the rate of the compensation, the plaintiff contends that the defendant corporation
The defendant, La Corporacion de los Padres Recoletos, is a religious corporation, with its
maintained at leas one thousand head of cattle on the land and that the pasturage was of the
domicile in the city of Manila. Said corporation was formerly the owner of a large tract of land,
value of forty centavos per head monthly, or P4,800 annually, for the whole tract. The court can
known as the San Jose Estate, on the island of Mindoro, which was sold to the Government of
not accept this view. It is rather improbable that 1,248 hectares of wild Mindoro land would
the Philippine Islands in the year 1909. The same corporation was at this time also the owner of
furnish sufficient pasturage for one thousand head of cattle during the entire year, and,
another estate on the same island immediately adjacent to the land which Teodorica Endencia
considering the locality, the rate of forty centavos per head monthly seems too high. The
had sold to Geo. W. Daywalt; and for many years the Recoletos Fathers had maintained large
evidence shows that after having recovered possession of the land the plaintiff rented it to the
herds of cattle on the farms referred to. Their representative, charged with management of these
defendant corporation for fifty centavos per hectares annually, the tenant to pay the taxes on the
farms, was father Isidoro Sanz, himself a members of the order. Father Sanz had long been well
land, and this appears to be a reasonable rent. There is no reason to suppose that the land was
acquainted with Teodorica Endencia and exerted over her an influence and ascendency due to
worth more for grazing purposes during the period from 1909 to 1913, than it was at the later
his religious character as well as to the personal friendship which existed between them.
period. Upon this basis the plaintiff is entitled to damages in the sum of p2,497, and is under no
Teodorica appears to be a woman of little personal force, easily subject to influence, and upon
obligation to reimburse the defendants for the land taxes paid by either of them during the period
all the important matters of business was accustomed to seek, and was given, the advice of father
the land was occupied by the defendant corporation. It may be mentioned in this connection that
Sanz and other members of his order with whom she came in contact.
the Lontok tract adjoining the land in question and containing over three thousand hectares
Father Sanz was fully aware of the existence of the contract of 1902 by which Teodorica
appears to have been leased for only P1,000 a year, plus the taxes.
From this it will be seen that the trial court estimated the rental value of the land for grazing
purposes at 50 centavos per hectare per annum, and roughly adopted the period of four years as
the time for which compensation at that rate should be made. As the court had already found
that the defendant was liable for these damages from June, 1, 1909, to May 1, 1914, or a period
of four years and eleven months, there seems some ground for the contention made in the
appellant's first assignment of error that the court's computation was erroneous, even accepting
the rule upon which the damages were assessed, as it is manifest that at the rate of 50 centavos
per hectare per annum, the damages for four years and eleven months would be P3,090.
Notwithstanding this circumstance, we are of the opinion that the damages assessed are
sufficient to compensate the plaintiff for the use and occupation of the land during the whole
time it was used. There is evidence in the record strongly tending to show that the wrongful use
of the land by the defendant was not continuous throughout the year but was confined mostly to
the reason when the forage obtainable on the land of the defendant corporation was not sufficient
to maintain its cattle, for which reason it became necessary to allow them to go over to pasture
on the land in question; and it is not clear that the whole of the land was used for pasturage at
any time. Considerations of this character probably led the trial court to adopt four years as
roughly being the period during which compensation should be allowed. But whether this was
advertently done or not, we see no sufficient reason, in the uncertainty of the record with
reference to the number of the cattle grazed and the period when the land was used, for
substituting our guess for the estimate made by the trial court.
In the second cause of action stated in the complaint the plaintiff seeks to recover from the
defendant corporation the sum of P500,000, as damages, on the ground that said corporation,
for its own selfish purposes, unlawfully induced Teodorica Endencia to refrain from the
performance of her contract for the sale of the land in question and to withhold delivery to the
plaintiff of the Torrens title, and further, maliciously and without reasonable cause, maintained
her in her defense to the action of specific performance which was finally decided in favor of
the plaintiff in this court. The cause of action here stated is based on liability derived from the
wrongful interference of the defendant in the performance of the contract between the plaintiff
and Teodorica Endencia; and the large damages laid in the complaint were, according to the
proof submitted by the plaintiff, incurred as a result of a combination of circumstances of the
following nature: In 1911, it appears, the plaintiff, as the owner of the land which he had bought
from Teodorica Endencia entered into a contract (Exhibit C) with S. B. Wakefield, of San
Francisco, for the sale and disposal of said lands to a sugar growing and milling enterprise, the
successful launching of which depended on the ability of Daywalt to get possession of the land
and the Torrens certificate of title. In order to accomplish this end, the plaintiff returned to the
Philippine Islands, communicated his arrangement to the defendant,, and made repeated efforts
to secure the registered title for delivery in compliance with said agreement with Wakefield.
Teodorica Endencia seems to have yielded her consent to the consummation of her contract, but
the Torrens title was then in the possession of Padre Juan Labarga in Manila, who refused to
deliver the document. Teodorica also was in the end contract with the plaintiff, with the result
that the plaintiff was kept out of possession until the Wakefield project for the establishment of
a large sugar growing and milling enterprise fell through. In the light of what has happened in
recent years in the sugar industry, we feel justified in saying that the project above referred to,
if carried into effect, must inevitably have proved a great success.
The determination of the issue presented in this second cause of action requires a consideration
of two points. The first is whether a person who is not a party to a contract for the sale of land
makes himself liable for damages to the vendee, beyond the value of the use and occupation, by
colluding with the vendor and maintaining him in the effort to resist an action for specific
performance. The second is whether the damages which the plaintiff seeks to recover under this
head are too remote and speculative to be the subject of recovery.
As preliminary to a consideration of the first of these questions, we deem it well it dispose of
the contention that the members of the defendants corporation, in advising and prompting
Teodorica Endencia not to comply with the contract of sale, were actuated by improper and
malicious motives. The trial court found that this contention was not sustained, observing that
while it was true that the circumstances pointed to an entire sympathy on the part of the
defendant corporation with the efforts of Teodorica Endencia to defeat the plaintiff's claim to
the land, the fact that its officials may have advised her not to carry the contract into effect would
not constitute actionable interference with such contract. It may be added that when one
considers the hardship that the ultimate performance of that contract entailed on the vendor, and
the doubt in which the issue was involved — to the extent that the decision of the Court of the
First Instance was unfavorable to the plaintiff and the Supreme Court itself was divided — the
attitude of the defendant corporation, as exhibited in the conduct of its procurador, Juan
Labarga, and other members of the order of the Recollect Fathers, is not difficult to understand.
To our mind a fair conclusion on this feature of the case is that father Juan Labarga and his
associates believed in good faith that the contract cold not be enforced and that Teodorica would
be wronged if it should be carried into effect. Any advice or assistance which they may have
given was, therefore, prompted by no mean or improper motive. It is not, in our opinion, to be
denied that Teodorica would have surrendered the documents of title and given possession of
the land but for the influence and promptings of members of the defendants corporation. But we
do not credit the idea that they were in any degree influenced to the giving of such advice by the
desire to secure to themselves the paltry privilege of grazing their cattle upon the land in question
to the prejudice of the just rights of the plaintiff.
The attorney for the plaintiff maintains that, by interfering in the performance of the contract in
question and obstructing the plaintiff in his efforts to secure the certificate of tittle to the land,
the defendant corporation made itself a co-participant with Teodorica Endencia in the breach of
said contract; and inasmuch as father Juan Labarga, at the time of said unlawful intervention
between the contracting parties, was fully aware of the existence of the contract (Exhibit C)
which the plaintiff had made with S. B. Wakefield, of San Francisco, it is insisted that the
defendant corporation is liable for the loss consequent upon the failure of the project outlined in
said contract.
In this connection reliance is placed by the plaintiff upon certain American and English
decisions in which it is held that a person who is a stranger to contract may, by an unjustifiable
interference in the performance thereof, render himself liable for the damages consequent upon
non-performance. It is said that the doctrine of these cases was recognized by this court in
Gilchrist vs. Cuddy (29 Phil. Rep., 542); and we have been earnestly pressed to extend the rule
there enunciated to the situation here presente.
Somewhat more than half a century ago the English Court of the Queen's Bench saw its way
clear to permit an action for damages to be maintained against a stranger to a contract wrongfully
interfering in its performance. The leading case on this subject is Lumley vs. Gye ([1853], 2 El.
& Bl., 216). It there appeared that the plaintiff, as manager of a theatre, had entered into a
contract with Miss Johanna Wagner, an opera singer,, whereby she bound herself for a period
to sing in the plaintiff's theatre and nowhere else. The defendant, knowing of the existence of
this contract, and, as the declaration alleged, "maliciously intending to injure the plaintiff,"
enticed and produced Miss Wagner to leave the plaintiff's employment. It was held that the
plaintiff was entitled to recover damages. The right which was here recognized had its origin in
a rule, long familiar to the courts of the common law, to the effect that any person who entices
a servant from his employment is liable in damages to the master. The master's interest in the
service rendered by his employee is here considered as a distinct subject of juridical right. It
being thus accepted that it is a legal wrong to break up a relation of personal service, the question
now arose whether it is illegal for one person to interfere with any contract relation subsisting
between others. Prior to the decision of Lumley vs. Gye [supra] it had been supposed that the
liability here under consideration was limited to the cases of the enticement of menial servants,
apprentices, and others to whom the English Statutes of Laborers were applicable. But in the
case cited the majority of the judges concurred in the opinion that the principle extended to all
cases of hiring. This doctrine was followed by the Court of Appeal in Bowen vs. Hall ([1881],
6 Q. B., Div., 333); and in Temperton vs. Russell ([1893], Q. B., 715), it was held that the right
of action for maliciously procuring a breach of contract is not confined to contracts for personal
services, but extends to contracts in general. In that case the contract which the defendant had
procured to be breached was a contract for the supply of building material.
Malice in some form is generally supposed to be an essential ingredient in cases of interference
with contract relations. But upon the authorities it is enough if the wrong-doer, having
knowledge of the existence of the contract relations, in bad faith sets about to break it up.
Whether his motive is to benefit himself or gratify his spite by working mischief to the employer
is immaterial. Malice in the sense of ill-will or spite is not essential.
Upon the question as to what constitutes legal justification, a good illustration was put in the
leading case. If a party enters into contract to go for another upon a journey to a remote and
unhealthful climate, and a third person, with a bona fide purpose of benefiting the one who is
under contract to go, dissuades him from the step, no action will lie. But if the advice is not
disinterested and the persuasion is used for "the indirect purpose of benefiting the defendant at
the expense of the plaintiff," the intermedler is liable if his advice is taken and the contract
broken.
The doctrine embodied in the cases just cited has sometimes been found useful, in the
complicated relations of modern industry, as a means of restraining the activities of labor unions
and industrial societies when improperly engaged in the promotion of strikes. An illustration of
the application of the doctrine in question in a case of this kind is found in South Wales Miners
Federation vs. Glamorgan Coal Co. ([1905]), A. C., 239). It there appeared that certain miners
employed in the plaintiff's collieries, acting under the order of the executive council of the
defendant federation, violated their contract with the plaintiff by abstaining from work on certain
days. The federation and council acted without any actual malice or ill-will towards the plaintiff,
and the only object of the order in question was that the price of coal might thereby be kept up,
a factor which affected the miner's wage scale. It was held that no sufficient justification was
shown and that the federation was liable.
In the United States, the rule established in England by Lumley vs. Gye [supra] and subsequent
cases is commonly accepted, though in a few of the States the broad idea that a stranger to a
contract can be held liable upon its is rejected, and in these jurisdictions the doctrine, if accepted
at all, is limited to the situation where the contract is strictly for personal service. (Boyson vs.
Thorn, 98 Cal., 578; Chambers & Marshall vs. Baldwin 91 Ky., 121; Bourlier vs. Macauley, 91
Ky., 135; Glencoe Land & Gravel Co. vs. Hudson Bros. Com. Co., 138 Mo., 439.)
It should be observed in this connection that, according to the English and American authorities,
no question can be made as to the liability to one who interferes with a contract existing between
others by means which, under known legal cannons, can be denominated an unlawful means.
Thus, if performance is prevented by force, intimidation, coercion, or threats, or by false or
defamatory statements, or by nuisance or riot, the person using such unlawful means is, under
all the authorities, liable for the damage which ensues. And in jurisdictions where the doctrine
of Lumley vs. Gye [supra] is rejected, no liability can arise from a meddlesome and malicious
interference with a contract relation unless some such unlawful means as those just indicated
are used. (See cases last above cited.)
This brings us to the decision made by this court in Gilchrist vs. Cuddy (29 Phil. Rep., 542). It
there appeared that one Cuddy, the owner of a cinematographic film, let it under a rental contract
to the plaintiff Gilchrist for a specified period of time. In violation of the terms of this agreement,
Cuddy proceeded to turn over the film also under a rental contract, to the defendants Espejo and
Zaldarriaga. Gilchrist thereupon restored to the Court of First Instance and produced an
injunction restraining the defendants from exhibiting the film in question in their theater during
the period specified in the contract of Cuddy with Gilchrist. Upon appeal to this court it was in
effect held that the injunction was not improperly granted, although the defendants did not, at
the time their contract was made, know the identity of the plaintiff as the person holding the
prior contract but did know of the existence of a contract in favor of someone. It was also said
arguendo, that the defendants would have been liable in damages under article 1902 of the Civil
Code, if the action had been brought by the plaintiff to recover damages. The force of the opinion
is, we think, somewhat weakened by the criticism contain in the concurring opinion, where it is
said that the question of breach of contract by inducement was not really involved in the case.
Taking the decision upon the point which was rally decided, it is authority for the proposition
that one who buys something which he knows has been sold to some other person can be
restrained from using that thing to the prejudice of the person having the prior and better right.
Translated into terms applicable to the case at bar, the decision in Gilchrist vs. Cuddy (29 Phil.
Rep., 542), indicates that the defendant corporation, having notice of the sale of the land in
question to Daywalt, might have been enjoined by the latter from using the property for grazing
its cattle thereon. That the defendant corporation is also liable in this action for the damage
resulting to the plaintiff from the wrongful use and occupation of the property has also been
already determined. But it will be observed that in order to sustain this liability it is not necessary
to resort to any subtle exegesis relative to the liability of a stranger to a contract for unlawful
interference in the performance thereof. It is enough that defendant use the property with notice
that the plaintiff had a prior and better right.
Article 1902 of the Civil Code declares that any person who by an act or omission, characterized
by fault or negligence, causes damage to another shall be liable for the damage so done. Ignoring
so much of this article as relates to liability for negligence, we take the rule to be that a person
is liable for damage done to another by any culpable act; and by "culpable act" we mean any act
which is blameworthy when judged by accepted legal standards. The idea thus expressed is
undoubtedly broad enough to include any rational conception of liability for the tortious acts
likely to be developed in any society. Thus considered, it cannot be said that the doctrine of
Lumley vs. Gye [supra] and related cases is repugnant to the principles of the civil law.
Nevertheless, it must be admitted that the codes and jurisprudence of the civil law furnish a
somewhat uncongenial field in which to propagate the idea that a stranger to a contract may
sued for the breach thereof. Article 1257 of the Civil Code declares that contracts are binding
only between the parties and their privies. In conformity with this it has been held that a stranger
to a contract has no right of action for the nonfulfillment of the contract except in the case
especially contemplated in the second paragraph of the same article. (Uy Tam and Uy Yet vs.
Leonard, 30 Phil. Rep., 471.) As observed by this court in Manila Railroad Co. vs. Compañia
Transatlantica, R. G. No. 11318 (38 Phil. Rep., 875), a contract, when effectually entered into
between certain parties, determines not only the character and extent of the liability of the
contracting parties but also the person or entity by whom the obligation is exigible. The same
idea should apparently be applicable with respect to the person against whom the obligation of
the contract may be enforced; for it is evident that there must be a certain mutuality in the
obligation, and if the stranger to a contract is not permitted to sue to enforce it, he cannot
consistently be held liable upon it.
If the two antagonistic ideas which we have just brought into juxtaposition are capable of
reconciliation, the process must be accomplished by distinguishing clearly between the right of
action arising from the improper interference with the contract by a stranger thereto, considered
as an independent act generate of civil liability, and the right of action ex contractu against a
party to the contract resulting from the breach thereof. However, we do not propose here to
pursue the matter further, inasmuch as, for reasons presently to be stated, we are of the opinion
that neither the doctrine of Lumley vs. Gye [supra] nor the application made of it by this court
in Gilchrist vs. Cuddy (29 Phil. Rep., 542), affords any basis for the recovery of the damages
which the plaintiff is supposed to have suffered by reason of his inability to comply with the
terms of the Wakefield contract.
Whatever may be the character of the liability which a stranger to a contract may incur by
advising or assisting one of the parties to evade performance, there is one proposition upon
which all must agree. This is, that the stranger cannot become more extensively liable in
damages for the nonperformance of the contract than the party in whose behalf he intermeddles.
To hold the stranger liable for damages in excess of those that could be recovered against the
immediate party to the contract would lead to results at once grotesque and unjust. In the case
at bar, as Teodorica Endencia was the party directly bound by the contract, it is obvious that the
liability of the defendant corporation, even admitting that it has made itself coparticipant in the
breach of the contract, can in no even exceed hers. This leads us to consider at this point the
extent of the liability of Teodorica Endencia to the plaintiff by reason of her failure to surrender
the certificate of title and to place the plaintiff in possession.
It should in the first place be noted that the liability of Teodorica Endencia for damages resulting
from the breach of her contract with Daywalt was a proper subject for adjudication in the action
for specific performance which Daywalt instituted against her in 1909 and which was litigated
by him to a successful conclusion in this court, but without obtaining any special adjudication
with reference to damages. Indemnification for damages resulting from the breach of a contract
is a right inseparably annexed to every action for the fulfillment of the obligation (art. 1124,
Civil Code); and its is clear that if damages are not sought or recovered in the action to enforce
performance they cannot be recovered in an independent action. As to Teodorica Endencia,
therefore, it should be considered that the right of action to recover damages for the breach of
the contract in question was exhausted in the prior suit. However, her attorneys have not seen
fit to interpose the defense of res judicata in her behalf; and as the defendant corporation was
not a party to that action, and such defense could not in any event be of any avail to it, we
proceed to consider the question of the liability of Teodorica Endencia for damages without
refernce to this point.
The most that can be said with refernce to the conduct of Teodorica Endencia is that she refused
to carry out a contract for the sale of certain land and resisted to the last an action for specific
performance in court. The result was that the plaintiff was prevented during a period of several
years from exerting that control over the property which he was entitled to exert and was
meanwhile unable to dispose of the property advantageously. Now, what is the measure of
damages for the wrongful detention of real property by the vender after the time has come for
him to place the purchaser in possession?
The damages ordinarily and normally recoverable against a vendor for failure to deliver land
which he has contracted to deliver is the value of the use and occupation of the land for the time
during which it is wrongfully withheld. And of course where the purchaser has not paid the
purchaser money, a deduction may be made in respect to the interest on the money which
constitutes the purchase price. Substantially the same rule holds with respect to the liability of a
landlord who fails to put his tenant in possession pursuant to contract of lease. The measure of
damages is the value of the leasehold interest, or use and occupation, less the stipulated rent,
where this has not been paid. The rule that the measure of damages for the wrongful detention
of land is normally to be found in the value of use and occupation is, we believe, one of the
things that may be considered certain in the law (39 cyc., 1630; 24 Cyc., 1052 Sedgewick on
Damages, Ninth ed., sec. 185.) — almost as wellsettled, indeed, as the rule that the measure of
damages for the wrongful detention of money is to be found in the interest.
We recognize the possibility that more extensive damages may be recovered where, at the time
of the creation of the contractual obligation, the vendor, or lessor, is aware of the use to which
the purchaser or lessee desires to put the property which is the subject of the contract, and the
contract is made with the eyes of the vendor or lessor open to the possibility of the damage
which may result to the other party from his own failure to give possession. The case before us
is not this character, inasmuch as at the time when the rights of the parties under the contract
were determined, nothing was known to any to them about the San Francisco capitalist who
would be willing to back the project portrayed in Exhibit C.
The extent of the liability for the breach of a contract must be determined in the light of the
situation in existence at the time the contract is made; and the damages ordinarily recoverable
are in all events limited to such as might be reasonable are in all events limited to such as might
be reasonably foreseen in the light of the facts then known to the contracting parties. Where the
purchaser desires to protect himself, in the contingency of the failure of the vendor promptly to
give possession, from the possibility of incurring other damages than such as the incident to the
normal value of the use and occupation, he should cause to be inserted in the contract a clause
providing for stipulated amount to the paid upon failure of the vendor to give possession; and
not case has been called to our attention where, in the absence of such a stipulation, damages
have been held to be recoverable by the purchaser in excess of the normal value of use and
occupation. On the contrary, the most fundamental conceptions of the law relative to the
assessment of damages are inconsistent with such idea.
The principles governing this branch of the law were profoundly considered in the case Hadley
vs. Baxendale (9 Exch., 341), decided in the English Court of Exchequer in 1854; and a few
words relative to the principles governing will here be found instructive. The decision in that
case is considered a leading authority in the jurisprudence of the common law. The plaintiffs in
that case were proprietors of a mill in Gloucester, which was propelled by steam, and which was
engaged in grinding and supplying meal and flour to customers. The shaft of the engine got
broken, and it became necessarily that the broken shaft be sent to an engineer or foundry man
at Greenwich, to serve as a model for casting or manufacturing another that would fit into the
machinery. The broken shaft could be delivered at Greenwich on the second day after its receipts
by the carrier it. It was delivered to the defendants, who were common carriers engaged in that
business between these points, and who had told plaintiffs it would be delivered at Greenwich
on the second day after its delivery to them, if delivered at a given hour. The carriers were
informed that the mill was stopped, but were not informed of the special purpose for which the
broken shaft was desired to forwarded, They were not told the mill would remain idle until the
new shaft would be returned, or that the new shaft could not be manufactured at Greenwich until
the broken one arrived to serve as a model. There was delay beyond the two days in delivering
the broken shaft at Greenwich, and a corresponding delay in starting the mill. No explanation of
the delay was offered by the carriers. The suit was brought to recover damages for the lost profits
of the mill, cause by the delay in delivering the broken shaft. It was held that the plaintiff could
not recover.
The discussion contained in the opinion of the court in that case leads to the conclusion that the
damages recoverable in case of the breach of a contract are two sorts, namely, (1) the ordinary,
natural, and in a sense necessary damage; and (2) special damages.
Ordinary damages is found in all breaches of contract where the are no special circumstances to
distinguish the case specially from other contracts. The consideration paid for an unperformed
promise is an instance of this sort of damage. In all such cases the damages recoverable are such
as naturally and generally would result from such a breach, "according to the usual course of
things." In case involving only ordinary damage no discussion is ever indulged as to whether
that damage was contemplated or not. This is conclusively presumed from the immediateness
and inevitableness of the damage, and the recovery of such damage follows as a necessary legal
consequence of the breach. Ordinary damage is assumed as a matter of law to be within the
contemplation of the parties.
Special damage, on the other hand, is such as follows less directly from the breach than ordinary
damage. It is only found in case where some external condition, apart from the actual terms to
the contract exists or intervenes, as it were, to give a turn to affairs and to increase damage in a
way that the promisor, without actual notice of that external condition, could not reasonably be
expected to foresee. Concerning this sort of damage, Hadley vs. Baxendale (1854) [supra] lays
down the definite and just rule that before such damage can be recovered the plaintiff must show
that the particular condition which made the damage a possible and likely consequence of the
breach was known to the defendant at the time the contract was made.
The statement that special damages may be recovered where the likelihood of such damages
flowing from the breach of the contract is contemplated and foreseen by the parties needs to be
supplemented by a proposition which, though not enunciated in Hadley vs. Baxendale, is yet
clearly to be drawn from subsequent cases. This is that where the damage which a plaintiff seeks
to recover as special damage is so far speculative as to be in contemplation of law remote,
notification of the special conditions which make that damage possible cannot render the
defendant liable therefor. To bring damages which would ordinarily be treated as remote within
the category of recoverable special damages, it is necessary that the condition should be made
the subject of contract in such sense as to become an express or implied term of the engagement.
Horne vs. Midland R. Co. (L. R., 8 C. P., 131) is a case where the damage which was sought to
be recovered as special damage was really remote, and some of the judges rightly places the
disallowance of the damage on the ground that to make such damage recoverable, it must so far
have been within the contemplation of the parties as to form at least an implied term of the
contract. But others proceeded on the idea that the notice given to the defendant was not
sufficiently full and definite. The result was the same in either view. The facts in that case were
as follows: The plaintiffs, shoe manufacturers at K, were under contract to supply by a certain
day shoes to a firm in London for the French government. They delivered the shoes to a carrier
in sufficient time for the goods to reach London at the time stipulated in the contract and
informed the railroad agent that the shoes would be thrown back upon their hands if they did
not reach the destination in time. The defendants negligently failed to forward the good in due
season. The sale was therefore lost, and the market having fallen, the plaintiffs had to sell at a
loss.
In the preceding discussion we have considered the plaintiff's right chiefly against Teodorica
Endencia; and what has been said suffices in our opinion to demonstrate that the damages laid
under the second cause of action in the complaint could not be recovered from her, first, because
the damages laid under the second cause of action in the complaint could not be recovered from
her, first, because the damages in question are special damages which were not within
contemplation of the parties when the contract was made, and secondly, because said damages
are too remote to be the subject of recovery. This conclusion is also necessarily fatal to the right
of the plaintiff to recover such damages from the defendant corporation, for, as already
suggested, by advising Teodorica not to perform the contract, said corporation could in no event
render itself more extensively liable than the principle in the contract.
Our conclusion is that the judgment of the trial court should be affirmed, and it is so ordered,
with costs against the appellant.
Arellano, C.J., Torres, Carson, Araullo, Malcolm, Avanceña and Moir, JJ., concur.