G.R. No.

L-13505 February 4, 1919

GEO. W. DAYWALT, plaintiff-appellant,

vs.
LA CORPORACION DE LOS PADRES AGUSTINOS RECOLETOS, ET AL., defendants-appellees.

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 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.