Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-13505

February 4, 1919

GEO. W. DAYWALT, plaintiff-appellant,

vs.
LA CORPORACION DE LOS PADRES AGUSTINOS RECOLETOS, ET AL., defendantsappellees.
C. C. Cohn and Thos. D. Aitken for appellant.
Crossfield & O'Brien for appellee.
STREET, J.:
In the year 1902, Teodorica Endencia, an unmarried woman, resident in the Province of Mindoro,
executed a contract whereby she obligated herself to convey to Geo. W. Daywalt, a tract of land
situated in the barrio of Mangarin, municipality of Bulalacao, now San Jose, in said province. It
was agreed that a deed should be executed as soon as the title to the land should be perfected
by proceedings in the Court of Land Registration and a Torrens certificate should be produced
therefore in the name of Teodorica Endencia. A decree recognizing the right of Teodorica as
owner was entered in said court in August 1906, but the Torrens certificate was not issued until
later. The parties, however, met immediately upon the entering of this decree and made a new
contract with a view to carrying their original agreement into effect. This new contract was
executed in the form of a deed of conveyance and bears date of August 16, 1906. The stipulated
price was fixed at P4,000, and the area of the land enclosed in the boundaries defined in the
contract was stated to be 452 hectares and a fraction.
The second contract was not immediately carried into effect for the reason that the Torrens
certificate was not yet obtainable and in fact said certificate was not issued until the period of
performance contemplated in the contract had expired. Accordingly, upon October 3, 1908, the
parties entered into still another agreement, superseding the old, by which Teodorica Endencia
agreed upon receiving the Torrens title to the land in question, to deliver the same to the
Hongkong and Shanghai Bank in Manila, to be forwarded to the Crocker National Bank in San
Francisco, where it was to be delivered to the plaintiff upon payment of a balance of P3,100.
The Torrens certificate was in time issued to Teodorica Endencia, but in the course of the
proceedings relative to the registration of the land, it was found by official survey that the area of
the tract inclosed in the boundaries stated in the contract was about 1.248 hectares of 452
hectares as stated in the contract. In view of this development Teodorica Endencia became
reluctant to transfer the whole tract to the purchaser, asserting that she never intended to sell so
large an amount of land and that she had been misinformed as to its area.
This attitude of hers led to litigation in which Daywalt finally succeeded, upon appeal to the
Supreme Court, in obtaining a decree for specific performance; and Teodorica Endencia was
ordered to convey the entire tract of land to Daywalt pursuant to the contract of October 3, 1908,
which contract was declared to be in full force and effect. This decree appears to have become
finally effective in the early part of the year 1914.1
The defendant, La Corporacion de los Padres Recoletos, is a religious corporation, with its
domicile in the city of Manila. Said corporation was formerly the owner of a large tract of land,
known as the San Jose Estate, on the island of Mindoro, which was sold to the Government of
the Philippine Islands in the year 1909. The same corporation was at this time also the owner of

another estate on the same island immediately adjacent to the land which Teodorica Endencia
had sold to Geo. W. Daywalt; and for many years the Recoletos Fathers had maintained large
herds of cattle on the farms referred to. Their representative, charged with management of these
farms, was father Isidoro Sanz, himself a members of the order. Father Sanz had long been well
acquainted with Teodorica Endencia and exerted over her an influence and ascendency due to
his religious character as well as to the personal friendship which existed between them.
Teodorica appears to be a woman of little personal force, easily subject to influence, and upon all
the important matters of business was accustomed to seek, and was given, the advice of father
Sanz and other members of his order with whom she came in contact.
Father Sanz was fully aware of the existence of the contract of 1902 by which Teodorica
Endencia agreed to sell her land to the plaintiff as well as of the later important developments
connected with the history of that contract and the contract substituted successively for it; and in
particular Father Sanz, as well as other members of the defendant corporation, knew of the
existence of the contract of October 3, 1908, which, as we have already seen finally fixed the
rights of the parties to the property in question. When the Torrens certificate was finally issued 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
control of P. Juan Labarga the procurador and chief official of the defendant corporation, until the
deliver thereof to the plaintiff was made compulsory by reason of the decree of the Supreme
Court in 1914.
When the defendant corporation sold the San Jose Estate, it was necessary to bring the cattle off
of that property; and, in the first half of 1909, some 2,368 head were removed to the estate of the
corporation immediately adjacent to the property which the plaintiff had purchased from Teodorica
Endencia. As Teodorica still retained possession of said property Father Sanz entered into an
arrangement with her whereby large numbers of cattle belonging to the defendant corporation
were pastured upon said land during a period extending from June 1, 1909, to May 1, 1914.
Under the first cause stated in the complaint in the present action the plaintiff seeks to recover
from the defendant corporation the sum of P24,000, as damages for the use and occupation of
the land in question by reason of the pasturing of cattle thereon during the period stated. The trial
court came to the conclusion that the defendant corporation was liable for damages by reason of
the use and occupation of the premises in the manner stated; and fixed the amount to be
recovered at P2,497. The plaintiff appealed and has assigned error to this part of the judgment of
the court below, insisting that damages should have been awarded in a much larger sum and at
least to the full extent of P24,000, the amount claimed in the complaint.
As the defendant did not appeal, the property of allowing damages for the use and occupation of
the land to the extent o P2,497, the amount awarded, is not now in question an the only thing
here to be considered, in connection with this branch of the case, is whether the damages
allowed under this head should be increased. The trial court rightly ignored the fact that the
defendant corporation had paid Teodorica Endencia of ruse and occupation of the same land
during the period in question at the rate of P425 per annum, inasmuch as the final decree of this
court in the action for specific performance is conclusive against her right, and as the defendant
corporation had notice of the rights of the plaintiff under this contract of purchase, it can not be
permitted that the corporation should escape liability in this action by proving payment of rent to a
person other than the true owner.
With reference to the rate of which compensation should be estimated the trial court came to the
following conclusion:
As to the rate of the compensation, the plaintiff contends that the defendant corporation
maintained at leas one thousand head of cattle on the land and that the pasturage was of the
value of forty centavos per head monthly, or P4,800 annually, for the whole tract. The court can
not accept this view. It is rather improbable that 1,248 hectares of wild Mindoro land would furnish

sufficient pasturage for one thousand head of cattle during the entire year, and, considering the
locality, the rate of forty centavos per head monthly seems too high. The evidence shows that
after having recovered possession of the land the plaintiff rented it to the defendant corporation
for fifty centavos per hectares annually, the tenant to pay the taxes on the land, and this appears
to be a reasonable rent. There is no reason to suppose that the land was worth more for grazing
purposes during the period from 1909 to 1913, than it was at the later period. Upon this basis the
plaintiff is entitled to damages in the sum of p2,497, and is under no obligation to reimburse the
defendants for the land taxes paid by either of them during the period the land was occupied by
the defendant corporation. It may be mentioned in this connection that the Lontok tract adjoining
the land in question and containing over three thousand hectares 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 nonperformance. 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. Compaia 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, Avancea and Moir, JJ., concur.

Footnotes
1 Daywalt vs. Endencia, R. G. No. 7331, decided November 16, 1912, not published.