DAYWALT vs.

LA CORPORACION
Geo W. Daywalt, plaintiff-appellant, vs. La Corporacion de los Padres Agustinos Recoletos, et.al., defendants-appellees
February 14, 1919
Street, J.

FACTS

1902 Teodorica Endencia executed a contract whereby she obligated herself to convey to Geo Daywalt, a tract of land
situated in the barrio of Mangarin, municipality of Bulalacao, now San Jose in the Province of Mindoro. 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 procured therefor in the name of Teodorica Endencia.

August 1906 Decree recognizing the right of Endencia as owner, but the Torrens certificate was not issued until later

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. The new contract was executed in the form of a deed of conveyance. The stipulated price
was fixed at P4000 for the land with an area of 452 hectares and a fraction.

Second contract was not immediately carried into effect because the Torrens certificate was not yet obtainable and was not
issued until the period of performance contemplated in the contract had expired.

October 3, 1908 Parties entered into another agreement, superseding the old, by which Endencia agreed, upon receiving
the Torrens title to the land in question, to deliver the same to the Hong Kong and Shanghai Bank in Manila, to be
forwarded to the Crocker National Bank in San Francisco, where it was to be delivered to Daywalt upon payment of a
balance of P3,100.

Torrens certificate was issued to Endencia. But it was found by official survey that the area of the tract enclosed in the
boundaries stated in the contract was about 1,248 hectares instead of the 452 hectares stated in the contract.

In view of this, Endencia became reluctant to transfer the whole tract to the purchaser.

Daywalt obtained a decree for specific performance from the Supreme Court; and Endencia was ordered to convey the
entire tract of land to Daywalt.

La Corporacion de los Padres Recoletos is a religious corporation with domicile in Manila. La Corporacion was formerly
the owner of a large tract of land, known as the San Jose Estate in Mindoro which was sold to the Philippine Government
in 1909.

La Corporacion was also the owner of another estate immediately adjacent to the land which Endencia had sold to Daywalt;
and for many years the Recoletos Fathers had maintained large herds of cattle on the farms referred to.

Father Isidoro Sanz, charged with the management of the farms, had long been acquainted with Endencia and exerted
over her an influence and ascendancy due to his religious character as well as to the personal friendship which existed
between them. Endencia appeared to be a woman of little personal force, easily subject to influence and was accustomed
to seek and was given the advice of Father Sanz and other members of his order in all important matters of business.

Father Sanz was fully aware of the existence of the contract between Endencia and Daywalt. When the Torrens title was
finally issued in 1901, she delivered it for safekeeping to La Corporacion and under the control of Juan Labarga, the
procurador and chief official of La Corporacion.

When La Corporacion sold the San Jose Estate, it was necessary to bring the cattle off of that property. In the first half of
1909, some 2,368 heads were moved to the property which Daywalt had purchased from Endencia.

As Endencia still retained possession of the property, Father Sanz entered into an agreement with her whereby large
numbers of cattle were pastured upon said land from June 1, 1909 to May 1, 1914.

1
st
cause of action: Daywalt seeks to recover from La Corporacion the sum of P24,000 as damages for the use and
occupation of the land in question by pasturing of cattle thereon. TC held La Corporacion liable for damages and fixed the
amount to be recovered at P2,497. Daywalt appealed. CA did not change the TC estimate of the just compensation
(P2,497). CA observed that TC ignored the fact that La Corporacion paid Endencia for use and occupation of the land
during period in question at P425 per annum. CA held that La Corporacion cannot be permitted to escape liability in this
action by paying rent to a person other than the true owner.

2
nd
Cause of Action( ito talaga ang focus ng case):

Daywalt seeks to recover from La Corporacion the sum of P500,000, as damages, on the ground that La Corporacion, for
its own selfish purposes, unlawfully induced Endencia to refrain from the performance of her contract for the sale of the
land in question and to withhold delivery to Daywalt of the Torrens title.

The cause of action here is based on a liability derived from the wrongful interference of La Corporacion in the
performance of the contract between the plaintiff and Endencia. The large damages asked for in the complaint were
incurred as a result of the following circumstances:

1911 Daywalt, as owner of the land, entered into a contract with SB Wakefield 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 title. Endencia seemed to have yielded her consent to the consummation of her
contract, but the Torrens title wasthen in possession of Padre Juan Labarga who refused to deliver it.

ISSUES (with regard to the 2
nd
cause of action)
1. WON La Corporacion, who is not a party to the contract for the sale of land, makes himself liable for damages to
Daywalt, beyond the value of the use and occupation, by colluding with Endencia to resist an action for specific
performance (NO)
2. WON the damages which Daywalt seeks to recover are too remote and speculative to be the subject of recovery
(YES)

RATIO DECIDENDI
CONTRACTS; DAMAGES FOR BREACH; LIABILITY OF THIRD PARTY. Whatever may be the character of the
liability, if any, which a stranger to a contract may incur by advising or assisting one of the parties to evade
performance, he cannot become more extensively liable in damages for the nonperformance of the contract than the
party in whose behalf he inter meddles.
MEASURE OF DAMAGES FOR BREACH OF CONTRACT. The damages recoverable upon breach of contract are,
primarily, the ordinary, natural and in a sense the necessary damage resulting from the breach. Other damages,
known as special damages, are recoverable where it appears that the particular conditions which made such damages
a probable consequence of the breach were known to the delinquent party at the time the contract was made. This
proposition must be understood with the qualification that, if the damages are in the legal sells remote or speculative,
knowledge of the special conditions which render such damages possible will not make them recoverable. Special
damages of this character cannot be recovered unless made the subject of special stipulation.
DAMAGES FOR BREACH OF CONTRACT FOR SALE OF LAND. The damages ordinarily 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 tune during which it is wrongfully withheld.
REASONING
1. Somewhat more than half a century ago, the English Court of the Queens 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.

Leading case on this subject is Lumley vs. Gye.

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 plaintiffs theatre and nowhere else. The defendant,
knowing of the existence of this contract, maliciously intending to injure the plaintiff enticed and procured Miss Wagner
to leave plaintiffs employment. It was held that the plaintiff was entitled to recover damages. The right which was here
recognized had its origin in a common law rule that any person who entices a servant from his employment is liable in
damages to the master. The masters interest in the service rendered by his employee is here considered as a distinct
subject of a judicial right. It is a legal wrong to break up a relation of personal service.

Bowen vs. Hall & Temperton vs. Russell: 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.

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 wrongdoer, having knowledge of the existence of the contract relation, in bad
faith sets about to break it up.

La Corporacion, in advising and prompting Endencia not to comply with the contract of sale, were not actuated by
improper and malicious motives.

What constitutes legal justification to interfere?

Illustration in Lumley vs. Gye: 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 intermeddler is liable if his advice is taken and the contract
broken.

South Wales Miners Federation vs. Glamorgan Coal Co.: Certain miners employed in the plaintiffs 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 miners
wage scale. It was held that no sufficient justification was shown and that the federation was liable.

No question can be made as to the liability of one who interferes with a contract existing between others by means which,
under known legal canons, 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 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.

In the present case, La Corporacion, 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 La Corporacion is also liable in this action for the
damage resulting to Daywalt from the wrongful use and occupation of the property has also been already determined. To
sustain this liability, it is enough that La Corporacion used the property with notice that Daywalt had a prior and better
right.

Article 1902 CC: 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. 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.

Article 1257 CC: Contracts are binding only between the parties and their privies. It has been held that a stranger to a
contract has no right of action for the non-fulfillment of the contract except in the case especially contemplated in the
second paragraph of the same article (on pour autrui).

Manila Railroad Co. vs. Compania Transatlantica: 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 oibligation,
and if the stranger to a contract is not permitted to sue to enforce it, he cannot consistently be held liable upon it.

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 non-performance 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.

Endencia was the party directly bound by the contract. The liability of La Corporacion can in no event
exceed hers.

Endencia refused to carry out a contract for sale of certain land and resisted to the last an action for specific performance
in court. The result was that Daywalt 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.

What is the measure of damages for the wrongful detention of real property by the vendor 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.

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 failure to give possession.

This is not the present case. At the time when the rights of the parties under the contract were determined, nothing was
known to any of them about the San Francisco capitalist who would be willing to back the sugar mill project.

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 reasonably foreseen in the light of the facts then known to the contracting
parties.

Endencia cannot be held liable for something that was not foreseeable at the time of the execution of the contract. If
Endencia cannot be held liable, neither could La Corporacion.
2. 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 there 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."
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)
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.
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.


DISPOSITIVE
TC judgment affirmed.