Plaintiff was riding a pony on a bridge, saw the automobile coming and heard the warning signals.

Perturbed by the novelty of the apparition or the rapidity of the approach, he improperly pulled the pony closely up against the railing on the right side of the bridge instead of going to the left.

G.R. No. L-12219

March 15, 1918

AMADO PICART, plaintiff-appellant, vs. FRANK SMITH, JR., defendant-appellee. Alejo Mabanag for appellant. G. E. Campbell for appellee. STR T, J.!

In this action the plaintiff, Amado Picart, seeks to recover of the defendant, Frank Smith, r., the sum of P!",###, as damages alleged to have been caused by an automobile driven by the defendant. From a udgment of the $ourt of First Instance of the Province of %a &nion absolving the defendant from liability the plaintiff has appealed. ". plaintiff was riding on his pony in a wrong road side of the bridge. 'efore he had gotten half way across, the defendant approached from the opposite direction in an automobile.Plaintiff was driving his pony in a wrong road of the bridge., going at the rate of about ten or twelve miles per hour. As the defendant neared the bridge he saw a horseman on it and blew his horn to give warning of his approach. (e continued his course and after he had taken the bridge he gave two more successive blasts, as it appeared to him that the man on horseback before him was not observing the rule of the road. )he plaintiff, it appears, saw the automobile coming and heard the warning signals. (owever, being perturbed by the novelty of the apparition or the rapidity of the approach, he pulled the pony closely up against the railing on the right side of the bridge instead of going to the left. (e says that the reason he did this was that he thought he did not have sufficient time to get over to the other side. )he bridge is shown to have a length of about *+ meters and a width of ,.-# meters. As the automobile approached, the defendant guided it toward his left, that being the proper side of the road for the machine. In so doing the defendant assumed that the horseman would move to the other side. )he pony had not as yet e.hibited fright, and the rider had made no sign for the automobile to stop. Seeing that the pony was apparently /uiet, the defendant, instead of veering to the right while yet some distance away or slowing down, continued to approach directly toward the horse without diminution of speed. 0hen he had gotten /uite near, there being then no possibility of the horse getting across to the other side, the defendant /uickly turned his car sufficiently to the right to escape hitting the horse

alongside of the railing where it as then standing1 but in so doing the automobile passed in such close pro.imity to the animal that it became frightened and turned its body across the bridge with its head toward the railing. In so doing, it as struck on the hock of the left hind leg by the flange of the car and the limb was broken. )he horse fell and its rider was thrown off with some violence. From the evidence adduced in the case we believe that when the accident occurred the free space where the pony stood between the automobile and the railing of the bridge was probably less than one and one half meters. As a result of its in uries the horse died. )he plaintiff received contusions which caused temporary unconsciousness and re/uired medical attention for several days. )he /uestion presented for decision is whether or not the defendant in maneuvering his car in the manner above described was guilty of negligence such as gives rise to a civil obligation to repair the damage done1 and we are of the opinion that he is so liable. As the defendant started across the bridge, he had the right to assume that the horse and the rider would pass over to the proper side1 but as he moved toward the center of the bridge it was demonstrated to his eyes that this would not be done1 and he must in a moment have perceived that it was too late for the horse to cross with safety in front of the moving vehicle. In the nature of things this change of situation occurred while the automobile was yet some distance away1 and from this moment it was not longer within the power of the plaintiff to escape being run down by going to a place of greater safety. )he control of the situation had then passed entirely to the defendant1 and it was his duty either to bring his car to an immediate stop or, seeing that there were no other persons on the bridge, to take the other side and pass sufficiently far away from the horse to avoid the danger of collision. Instead of doing this, the defendant ran straight on until he was almost upon the horse. (e was, we think, deceived into doing this by the fact that the horse had not yet e.hibited fright. 'ut in view of the known nature of horses, there was an appreciable risk that, if the animal in /uestion was unac/uainted with automobiles, he might get e.ited and ump under the conditions which here confronted him. 0hen the defendant e.posed the horse and rider to this danger he was, in our opinion, negligent in the eye of the law. )he test by which to determine the e.istence of negligence in a particular case may be stated as follows2 3id the defendant in doing the alleged negligent act use that person would have used in the same situation4 If not, then he is guilty of negligence. )he law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the 5oman law. )he e.istence of negligence in a given case is not determined by reference to the personal udgment of the actor in the situation before him. )he law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and determines liability by that. )he /uestion as to what would constitute the conduct of a prudent man in a given situation must of course be always determined in the light of human e.perience and in view of the facts involved in the particular case. Abstract speculations cannot here be of much value but this much can be profitably said2 5easonable men govern their conduct by the circumstances which are before them or known to them. )hey are not, and are

not supposed to be, omniscient of the future. (ence they can be e.pected to take care only when there is something before them to suggest or warn of danger. $ould a prudent man, in the case under consideration, foresee harm as a result of the course actually pursued4 If so, it was the duty of the actor to take precautions to guard against that harm. 5easonable foresight of harm, followed by ignoring of the suggestion born of this prevision, is always necessary before negligence can be held to e.ist. Stated in these terms, the proper criterion for determining the e.istence of negligence in a given case is this2 $onduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing conduct or guarding against its conse/uences. Applying this test to the conduct of the defendant in the present case we think that negligence is clearly established. A prudent man, placed in the position of the defendant, would in our opinion, have recogni6ed that the course which he was pursuing was fraught with risk, and would therefore have foreseen harm to the horse and the rider as reasonable conse/uence of that course. &nder these circumstances the law imposed on the defendant the duty to guard against the threatened harm. It goes without saying that the plaintiff himself was not free from fault, for he was guilty of antecedent negligence in planting himself on the wrong side of the road. 'ut as we have already stated, the defendant was also negligent1 and in such case the problem always is to discover which agent is immediately and directly responsible. It will be noted that the negligent acts of the two parties were not contemporaneous, since the negligence of the defendant succeeded the negligence of the plaintiff by an appreciable interval. &nder these circumstances the law is that the person who has the last fair chance to avoid the impending harm and fails to do so is chargeable with the conse/uences, without reference to the prior negligence of the other party. )he decision in the case of 5kes vs. Atlantic, 7ulf and Pacific $o. 8* Phil. 5ep., !+9: should perhaps be mentioned in this connection. )his $ourt there held that while contributory negligence on the part of the person in ured did not constitute a bar to recovery, it could be received in evidence to reduce the damages which would otherwise have been assessed wholly against the other party. )he defendant company had there employed the plaintiff, as a laborer, to assist in transporting iron rails from a barge in ;anila harbor to the company<s yards located not far away. )he rails were conveyed upon cars which were hauled along a narrow track. At certain spot near the water<s edge the track gave way by reason of the combined effect of the weight of the car and the insecurity of the road bed. )he car was in conse/uence upset1 the rails slid off1 and the plaintiff<s leg was caught and broken. It appeared in evidence that the accident was due to the effects of the typhoon which had dislodged one of the supports of the track. )he court found that the defendant company was negligent in having failed to repair the bed of the track and also that the plaintiff was, at the moment of the accident, guilty of contributory negligence in walking at the side of the car instead of being in front or behind. It was held that while the defendant was liable to the plaintiff by reason of its negligence in having failed to keep the track in proper repair nevertheless the amount of the damages should be reduced on account of the contributory

negligence in the plaintiff. As will be seen the defendant<s negligence in that case consisted in an omission only. )he liability of the company arose from its responsibility for the dangerous condition of its track. In a case like the one now before us, where the defendant was actually present and operating the automobile which caused the damage, we do not feel constrained to attempt to weigh the negligence of the respective parties in order to apportion the damage according to the degree of their relative fault. It is enough to say that the negligence of the defendant was in this case the immediate and determining cause of the accident and that the antecedent negligence of the plaintiff was a more remote factor in the case. A point of minor importance in the case is indicated in the special defense pleaded in the defendant<s answer, to the effect that the sub ect matter of the action had been previously ad udicated in the court of a ustice of the peace. In this connection it appears that soon after the accident in /uestion occurred, the plaintiff caused criminal proceedings to be instituted before a ustice of the peace charging the defendant with the infliction of serious in uries 8lesiones graves:. At the preliminary investigation the defendant was discharged by the magistrate and the proceedings were dismissed. $onceding that the ac/uittal of the defendant at the trial upon the merits in a criminal prosecution for the offense mentioned would be res ad udicata upon the /uestion of his civil liability arising from negligence -- a point upon which it is unnecessary to e.press an opinion -- the action of the ustice of the peace in dismissing the criminal proceeding upon the preliminary hearing can have no effect. 8See &. S. vs. 'an6uela and 'an6uela, !" Phil. 5ep., +=,.: From what has been said it results that the udgment of the lower court must be reversed, and udgment is her rendered that the plaintiff recover of the defendant the sum of two hundred pesos 8P>##:, with costs of other instances. )he sum here awarded is estimated to include the value of the horse, medical e.penses of the plaintiff, the loss or damage occasioned to articles of his apparel, and lawful interest on the whole to the date of this recovery. )he other damages claimed by the plaintiff are remote or otherwise of such character as not to be recoverable. So ordered. Arellano, C.J., Torres, Car G.R. No. L-1"5#5 F$%r&ar' (, 1919

G O. ). DA*)ALT, plaintiff-appellant, vs. LA CORPORACION D LOS PADR S AG+STINOS R COL TOS, T AL., defendants-appellees. C. C. Cohn and Thos. D. Aitken for appellant. Crossfield & O !rien for appellee. STR T, J.!

In "9#>, )eodorica ?ndencia, e.ecuted a contract whereby she obligated herself to convey to 7eo. 0. 3aywalt, a ,+> hectares of land for P,,###. )hey agreed that a deed should be e.ecuted as spoons as the ?nndencia@s title to the land was perfected in %and 5egistration and a )orrens )itle is issued in her name. 0hen the torrens title was issued, ?ndencia found out that the area ">,- hectares and not ,+> hectares as stated in the contract. She became reluctant to transfer the whole lot. 3aywalt filed an action for specific performance. )he Supreme $ourt, ordered ?ndencia to convey the entire and. ;eanwhile, )he defendant, %a $orporacion de los Padres 5ecoletos, is a religious corporation owned an estate ad acent to the property sold by ?ndencia to 3aywalt. It happened that Fr. Fran6, the representative of 5ecoletos e.erted some influence and ascendancy over ?ndencia who was a woman of little force and easily sub . to influene of other people. Fr. France knew of the e.istence of contracts wA 3aywalt and discouraged her from conveying the entire lot. 3aywalt filed an action 3aywalt filed an action for damages against the 5ecoletos on the ground that it unlawfullyinduced ?ndencia to refrain from the performance of her contract for the sale of the land in/uestion and to withhold delivery of the )orrens title. 3aywalt@s claim for damages against the5ecoletos was for the huge sum of P +##### Bin the year "9"9C, since he claims that because of the interference of the 5ecoletos, he failed to consummate a contract with another person for thesale of the property and its conversion into a sugar mill. I,,&$! whether 5ecoletos is liable to 3aywalt4 H$-.! Do, it is not liable. )he stranger who interferes in a contract between other parties cannot become more e.tensively liable in damages for the non-performance of the contract than the party in whose behalf heintermediates. (ence, in order to determine the liability of the 5ecoletos, there is first a need toconsider the liability of ?ndencia to 3aywalt. )he damages claimed by 3aywalt from ?ndenciacannot be recovered from her, first, because these are special damages wAc were not wAin thecontemplation of the parties when the contract was made, and secondly, these damages are tooremote to be the sub ect of recovery. Since ?ndencia is not liable for damages to 3aywalt,neither can the 5ecoletos be held liable. As already suggested, by advising ?ndencia not toperform the contract, the 5ecoletos could in no event render itself more e.tensively liable thanthe principal in the contract.

;alice in some form is generally supposed to be an essential ingredient in cases of interference with contract relations. 'ut upon the authorities it is enough if the wrongdoer, having knowledge of the e.istence of the contract relations, in bad faith sets about to break it up. 0hether his motive is to benefit himself or gratify his spite by working

mischief to the employer is immaterial. ;alice in the sense of ill-will or spite is not essential. &pon the /uestion as to what constitutes legal ustification, a good illustration was put in the leading case. If a party enters into contract to go for another upon a ourney 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. 'ut if the advice is not disinterested and the persuasion is used for Ethe indirect purpose of benefiting the defendant at the e.pense of the plaintiff,E the intermedler is liable if his advice is taken and the contract broken. )he doctrine embodied in the cases ust 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 /uestion in a case of this kind is found in South 0ales ;iners Federation "s. 7lamorgan $oal $o. 8B"9#+C:, A. $., >!9:. It there appeared that certain miners employed in the plaintiff<s collieries, acting under the order of the e.ecutive council of the defendant federation, violated their contract with the plaintiff by abstaining from work on certain days. )he federation and council acted without any actual malice or ill-will towards the plaintiff, and the only ob ect of the order in /uestion 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 ustification was shown and that the federation was liable. In the &nited States, the rule established in ?ngland by %umley "s. 7ye Bs#praC and subse/uent 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 re ected, and in these urisdictions the doctrine, if accepted at all, is limited to the situation where the contract is strictly for personal service. 8'oyson "s. )horn, 9- $al., +*-1 $hambers F ;arshall "s. 'aldwin 9" Gy., ">"1 'ourlier "s. ;acauley, 9" Gy., "!+1 7lencoe %and F 7ravel $o. "s. (udson 'ros. $om. $o., "!- ;o., ,!9.: It should be observed in this connection that, according to the ?nglish and American authorities, no /uestion can be made as to the liability to one who interferes with a contract e.isting between others by means which, under known legal cannons, can be denominated an unlawful means. )hus, 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 urisdictions where the doctrine of %umley "s. 7ye Bs#praC is re ected, no liability can arise from a meddlesome and malicious interference with a contract relation unless some such unlawful means as those ust indicated are used. 8See cases last above cited.: )his brings us to the decision made by this court in 7ilchrist "s. $uddy 8>9 Phil. 5ep., +,>:. It there appeared that one $uddy, the owner of a cinematographic film, let it under a rental contract to the plaintiff 7ilchrist for a specified period of time. In violation of the

terms of this agreement, $uddy proceeded to turn over the film also under a rental contract, to the defendants ?spe o and Haldarriaga. 7ilchrist thereupon restored to the $ourt of First Instance and produced an in unction restraining the defendants from e.hibiting the film in /uestion in their theater during the period specified in the contract of $uddy with 7ilchrist. &pon appeal to this court it was in effect held that the in unction 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 e.istence of a contract in favor of someone. It was also said arg#endo, that the defendants would have been liable in damages under article "9#> of the $ivil $ode, if the action had been brought by the plaintiff to recover damages. )he force of the opinion is, we think, somewhat weakened by the criticism contain in the concurring opinion, where it is said that the /uestion of breach of contract by inducement was not really involved in the case. )aking 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 pre udice of the person having the prior and better right. )ranslated into terms applicable to the case at bar, the decision in 7ilchrist "s. $uddy 8>9 Phil. 5ep., +,>:, indicates that the defendant corporation, having notice of the sale of the land in /uestion to 3aywalt, might have been en oined by the latter from using the property for gra6ing its cattle thereon. )hat 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. 'ut it will be observed that in order to sustain this liability it is not necessary to resort to any subtle e.egesis 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 "9#> of the $ivil $ode declares that any person who by an act or omission, characteri6ed 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 act1 and by Eculpable actE we mean any act which is blameworthy when udged by accepted legal standards. )he idea thus e.pressed is undoubtedly broad enough to include any rational conception of liability for the tortious acts likely to be developed in any society. )hus considered, it cannot be said that the doctrine of %umley "s. 7ye Bs#praC and related cases is repugnant to the principles of the civil law. Devertheless, it must be admitted that the codes and urisprudence 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 ">+* of the $ivil $ode 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 e.cept in the case especially contemplated in the second paragraph of the same article. 8&y )am and &y Iet "s. %eonard, !# Phil. 5ep., ,*".: As observed by this court in ;anila 5ailroad $o. "s. $ompaJia )ransatlantica, 5. 7. Do. ""!"- 8!- Phil.

5ep., -*+:, a contract, when effectually entered into between certain parties, determines not only the character and e.tent of the liability of the contracting parties but also the person or entity by whom the obligation is e.igible. )he same idea should apparently be applicable with respect to the person against whom the obligation of the contract may be enforced1 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 ust brought into u.taposition 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 e$ %ontra%t# against a party to the contract resulting from the breach thereof. (owever, 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 %umley "s. 7ye Bs#praC nor the application made of it by this court in 7ilchrist "s. $uddy 8>9 Phil. 5ep., +,>:, 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 0akefield contract. 0hatever 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. )his is, that the stranger cannot become more e.tensively liable in damages for the nonperformance of the contract than the party in whose behalf he intermeddles. )o hold the stranger liable for damages in e.cess of those that could be recovered against the immediate party to the contract would lead to results at once grotes/ue and un ust. In the case at bar, as )eodorica ?ndencia 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 e.ceed hers. )his leads us to consider at this point the e.tent of the liability of )eodorica ?ndencia 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 )eodorica ?ndencia for damages resulting from the breach of her contract with 3aywalt was a proper sub ect for ad udication in the action for specific performance which 3aywalt instituted against her in "9#9 and which was litigated by him to a successful conclusion in this court, but without obtaining any special ad udication with reference to damages. Indemnification for damages resulting from the breach of a contract is a right inseparably anne.ed to every action for the fulfillment of the obligation 8art. "">,, $ivil $ode:1 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 )eodorica ?ndencia, therefore, it should be considered that the right of action to recover damages for the breach of the contract in /uestion was e.hausted in the prior suit. (owever, her attorneys have not seen fit to interpose the defense of res j#di%ata in her behalf1 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 /uestion of the liability of )eodorica ?ndencia for damages without refernce to this point. )he most that can be said with refernce to the conduct of )eodorica ?ndencia 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. )he result was that the plaintiff was prevented during a period of several years from e.erting that control over the property which he was entitled to e.ert and was meanwhile unable to dispose of the property advantageously. Dow, 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 possession4 )he 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. )he measure of damages is the value of the leasehold interest, or use and occupation, less the stipulated rent, where this has not been paid. )he 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 8!9 cyc., "=!#1 >, $yc., "#+> Sedgewick on 3amages, Dinth ed., sec. "-+.: K 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. 0e recogni6e the possibility that more e.tensive 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 sub ect 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. )he 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 pro ect portrayed in ?.hibit $. )he e.tent of the liability for the breach of a contract must be determined in the light of the situation in e.istence at the time the contract is made1 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. 0here 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 possession1 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 e.cess of the normal value of use and occupation. Ln the contrary, the most fundamental conceptions of the law relative to the assessment of damages are inconsistent with such idea. )he principles governing this branch of the law were profoundly considered in the case (adley "s. 'a.endale 89 ?.ch., !,":, decided in the ?nglish $ourt of ?.che/uer in "-+,1 and a few words relative to the principles governing will here be found instructive. )he decision in that case is considered a leading authority in the urisprudence of the common law. )he plaintiffs in that case were proprietors of a mill in 7loucester, which was propelled by steam, and which was engaged in grinding and supplying meal and flour to customers. )he shaft of the engine got broken, and it became necessarily that the broken shaft be sent to an engineer or foundry man at 7reenwich, to serve as a model for casting or manufacturing another that would fit into the machinery. )he broken shaft could be delivered at 7reenwich 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 7reenwich on the second day after its delivery to them, if delivered at a given hour. )he 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, )hey 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 7reenwich until the broken one arrived to serve as a model. )here was delay beyond the two days in delivering the broken shaft at 7reenwich, and a corresponding delay in starting the mill. Do e.planation of the delay was offered by the carriers. )he 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. )he 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, 8": the ordinary, natural, and in a sense necessary damage1 and 8>: special damages. Lrdinary damages is found in all breaches of contract where the are no special circumstances to distinguish the case specially from other contracts. )he 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, Eaccording to the usual course of things.E In case involving only ordinary damage no discussion is ever indulged as to whether that damage was contemplated or not. )his is conclusively presumed from the immediateness and inevitableness of the damage, and the recovery of such damage follows as a necessary legal conse/uence of the breach. Lrdinary 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 e.ternal condition, apart from the actual terms to the contract e.ists 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 e.ternal

condition, could not reasonably be e.pected to foresee. $oncerning this sort of damage, (adley "s.'a.endale 8"-+,: Bs#praC lays down the definite and ust rule that before such damage can be recovered the plaintiff must show that the particular condition which made the damage a possible and likely conse/uence of the breach was known to the defendant at the time the contract was made. )he 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 (adley "s. 'a.endale, is yet clearly to be drawn from subse/uent cases. )his 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. )o 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 sub ect of contract in such sense as to become an e.press or implied term of the engagement. (orne "s. ;idland 5. $o. 8%. 5., - $. P., "!": is a case where the damage which was sought to be recovered as special damage was really remote, and some of the udges 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. 'ut others proceeded on the idea that the notice given to the defendant was not sufficiently full and definite. )he result was the same in either view. )he facts in that case were as follows2 )he plaintiffs, shoe manufacturers at G, were under contract to supply by a certain day shoes to a firm in %ondon for the French government. )hey delivered the shoes to a carrier in sufficient time for the goods to reach %ondon 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. )he defendants negligently failed to forward the good in due season. )he 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 )eodorica ?ndencia1 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 /uestion 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 sub ect of recovery. )his 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 )eodorica not to perform the contract, said corporation could in no event render itself more e.tensively liable than the principle in the contract. Lur conclusion is that the udgment of the trial court should be affirmed, and it is so ordered, with costs against the appellant.

Daywalt vs. La Corporation de los Padres Agustinos Recoletos (Art 1314) Held !"#e $ost t#at can %e said wit# re&erence to t#e conduct o& "eodorica 'ndencia is t#at s#e re&used to carry out a contract &or t#e sale o& certain land and resisted to t#e last an action &or speci&ic per&or$ance in court. "#e result was t#at t#e plainti&& was prevented during a period o& several years &ro$ e(erting t#at control over t#e property w#ic# #e was entitled to e(ert and was $eanw#ile una%le to dispose o& t#e property advantageously. !"#e e(tent o& t#e lia%ility &or t#e %reac# o& a contract $ust %e deter$ined in t#e lig#t o& t#e situation in e(istence at t#e ti$e t#e contract is $ade) and t#e da$ages ordinarily recovera%le in all events li$ited to suc# as $ig#t %e reasona%ly &oreseen in t#e lig#t o& t#e &acts t#en *nown to t#e contracting parties. +#ere t#e purc#aser desires to protect #i$sel&, in t#e contingency o& t#e &ailure o& t#e vendor pro$ptly to give possession, &ro$ t#e possi%ility o& incurring ot#er da$ages t#an suc# as are incident to t#e nor$al value o& t#e use and occupation, #e s#ould cause to %e inserted in t#e contract a clause providing &or stipulated a$ount to %e paid upon &ailure o& t#e vendor to give possession) and no case #as %een called to our attention w#ere, in t#e a%sence o& suc# a stipulation, da$ages #ave %een #eld to %e recovera%le %y t#e purc#ase in e(cess o& t#e nor$al value o& use and occupation. "#e da$ages recovera%le in case o& t#e %reac# o& a contract are two sorts, na$ely, (1) t#e ordinary, natural, and in a sense, necessary da$age) and (-) special da$ages. !.rdinary da$ages is &ound in all %reac#es o& contract w#ere t#ere are no special circu$stances to distinguis# t#e case especially &ro$ ot#er contracts. "#e consideration paid &or an unper&or$ed pro$ise is an instance o& t#is sort o& da$age. /n all suc# cases t#e da$ages recovera%le are suc# as naturally and generally would result &ro$ suc# a %reac#, !according to t#e usual course o& t#ings0. /n cases involving only ordinary da$age, it is conclusively presu$ed &ro$ t#e i$$ediateness and inevita%leness o& t#e da$age, and t#e recovery o& suc# da$age &ollows as a necessary legal conse1uence o& t#e %reac#. .rdinary da$age is assu$ed as a $atter o& law to %e wit#in t#e conte$plation o& t#e parties. !2pecial da$age, on t#e ot#er #and, is suc# as &ollows less directly &ro$ t#e %reac# t#an ordinary da$age. /t is only &ound in cases w#ere so$e e(ternal condition, apart &ro$ t#e actual ter$s o& t#e contract e(ists or intervenes, as it were, to give a turn to a&&airs and to increase da$age in a way t#at t#e pro$issor, wit#out actual notice o& t#e e(ternal condition, could not reasona%ly %e e(pected to &oresee.

G.R. No. L-21("8

S$/0$1%$r 28, 1922

AIR FRANC , petitioner, vs. RAFA L CARRASCOSO a3. 0h$ HONORA4L CO+RT OF APP ALS, respondents.

&i%ha#%o, 'i%a(o and Ag%aoili for petitioner. !eng(on )illegas and *arraga for respondent +. Carras%oso.

SANCH 5, J.: )he $ourt of First Instance of ;anila " sentenced petitioner to pay respondent 5afael $arrascoso P>+,###.## by way of moral damages1 P"#,###.## as e.emplary damages1 P!9!.># representing the difference in fare between first class and tourist class for the portion of the trip 'angkok-5ome, these various amounts with interest at the legal rate, from the date of the filing of the complaint until paid1 plus P!,###.## for attorneys< fees1 and the costs of suit. Ln appeal,> the $ourt of Appeals slightly reduced the amount of refund on $arrascoso<s plane ticket from P!9!.># to P!-!."#, and voted to affirm the appealed decision Ein all other respectsE, with costs against petitioner. )he case is now before us for review on %ertiorari. )he facts declared by the $ourt of Appeals as E fully supported by the evidence of recordE, are2 Plaintiff, a civil engineer, was a member of a group of ,- Filipino pilgrims that left ;anila for %ourdes on ;arch !#, "9+-. Ln ;arch >-, "9+-, the defendant, Air France, through its authori6ed agent, Philippine Air %ines, Inc., issued to plaintiff a Efirst classE round trip airplane ticket from ;anila to 5ome. From ;anila to 'angkok, plaintiff travelled in Efirst classE, but at 'angkok, the ;anager of the defendant airline forced plaintiff to vacate the Efirst classE seat that he was occupying because, in the words of the witness ?rnesto 7. $uento, there was a Ewhite manE, who, the ;anager alleged, had a Ebetter rightE to the seat. 0hen asked to vacate his Efirst classE seat, the plaintiff, as was to be e.pected, refused, and told defendant<s ;anager that his seat would be taken over his dead body1 a commotion ensued, and, according to said ?rnesto 7. $uento, Emany of the Filipino passengers got nervous in the tourist class1 when they found out that ;r. $arrascoso was having a hot discussion with the white man BmanagerC, they came all across to ;r. $arrascoso and pacified ;r. $arrascoso to give his seat to the white manE 8)ranscript, p. ">, (earing of ;ay >=, "9+9:1 and plaintiff reluctantly gave his Efirst classE seat in the plane.! ". )he trust of the relief petitioner now seeks is that we review Eall the findingsE , of respondent $ourt of Appeals. Petitioner charges that respondent court failed to make complete findings of fact on all the issues properly laid before it. 0e are

asked to consider facts favorable to petitioner, and then, to overturn the appellate court<s decision. $oming into focus is the constitutional mandate that EDo decision shall be rendered by any court of record without e.pressing therein clearly and distinctly the facts and the law on which it is basedE. + )his is echoed in the statutory demand that a udgment determining the merits of the case shall state Eclearly and distinctly the facts and the law on which it is basedE1 = and that E?very decision of the $ourt of Appeals shall contain complete findings of fact on all issues properly raised before itE. * A decision with absolutely nothing to support it is a nullity. It is open to direct attack. - )he law, however, solely insists that a decision state the Eessential ultimate factsE upon which the court<s conclusion is drawn. 9 A court of ustice is not hidebound to write in its decision every bit and piece of evidence "# presented by one party and the other upon the issues raised. Deither is it to be burdened with the obligation Eto specify in the sentence the factsE ,hi%h a part- .%onsidered as pro"ed.. "" )his is but a part of the mental process from which the $ourt draws the essential ultimate facts. A decision is not to be so clogged with details such that proli.ity, if not confusion, may result. So long as the decision of the $ourt of Appeals contains the necessary facts to warrant its conclusions, it is no error for said court to withhold therefrom Eany specific finding of facts with respect to the evidence for the defenseE. 'ecause as this $ourt well observed, E)here is no law that so re/uiresE. "> Indeed, Ethe mere failure to specify 8in the decision: the contentions of the appellant and the reasons for refusing to believe them is not sufficient to hold the same contrary to the re/uirements of the provisions of law and the $onstitutionE. It is in this setting that in Manig/#e, it was held that the mere fact that the findings Ewere based entirely on the evidence for the prosecution without taking into consideration or even mentioning the appellant<s side in the controversy as shown by his own testimonyE, would not vitiate the udgment. "! If the court did not recite in the decision the testimony of each witness for, or each item of evidence presented by, the defeated party, it does not mean that the court has overlooked such testimony or such item of evidence. ", At any rate, the legal presumptions are that official duty has been regularly performed, and that all the matters within an issue in a case were laid before the court and passed upon by it. "+ Findings of fact, which the $ourt of Appeals is re/uired to make, maybe defined as Ethe written statement of the ultimate facts as found by the court ... and essential to support the decision and udgment rendered thereonE. "= )hey consist of the court<s .%on%l#sions. with respe%t to the determinati"e fa%ts in iss#eE. "* A /uestion of law, upon the other hand, has been declared as Eone which does not call for an e.amination of the probative value of the evidence presented by the parties.E ">. 'y statute, Eonly /uestions of law may be raisedE in an appeal by certiorari from a udgment of the $ourt of Appeals. "9 )hat udgment is conclusive as to the facts. It is not appropriately the business of this $ourt to alter the facts or to review the /uestions of fact. >#

0ith these guideposts, we now face the problem of whether the findings of fact of the $ourt of Appeals support its udgment. !. 0as $arrascoso entitled to the first class seat he claims4 It is conceded in all /uarters that on ;arch >-, "9+- he paid to and received from petitioner a first class ticket. 'ut petitioner asserts that said ticket did not represent the true and complete intent and agreement of the parties1 that said respondent knew that he did not have confirmed reservations for first class on any specific flight, although he had tourist class protection1 that, accordingly, the issuance of a first class ticket was no guarantee that he would have a first class ride, but that such would depend upon the availability of first class seats. )hese are matters which petitioner has thoroughly presented and discussed in its brief before the $ourt of Appeals under its third assignment of error, which reads2 E)he trial court erred in finding that plaintiff had confirmed reservations for, and a right to, first class seats on the EdefiniteE segments of his ourney, particularly that from Saigon to 'eirutE. >" And, the $ourt of Appeals disposed of this contention thus2 3efendant seems to capitali6e on the argument that the issuance of a firstclass ticket was no guarantee that the passenger to whom the same had been issued, would be accommodated in the first-class compartment, for as in the case of plaintiff he had yet to make arrangements upon arrival at every station for the necessary first-class reservation. 0e are not impressed by such a reasoning. 0e cannot understand how a reputable firm like defendant airplane company could have the indiscretion to give out tickets it never meant to honor at all. It received the corresponding amount in payment of first-class tickets and yet it allowed the passenger to be at the mercy of its employees. It is more in keeping with the ordinary course of business that the company should know whether or riot the tickets it issues are to be honored or not. >> Dot that the $ourt of Appeals is alone. )he trial court similarly disposed of petitioner<s contention, thus2 Ln the fact that plaintiff paid for, and was issued a EFirst classE ticket, there can be no /uestion. Apart from his testimony, see plaintiff<s ?.hibits EAE, EA-"E, E'E, E'-",E E'->E, E$E and E$-"E, and defendant<s own witness, 5afael Altonaga, confirmed plaintiff<s testimony and testified as follows2 M. In these tickets there are marks EL.G.E From what you know, what does this LG mean4 A. )hat the space is confirmed.

M. $onfirmed for first class4 A. Ies, Efirst classE. 8)ranscript, p. "=9: ... ... ...

3efendant tried to prove by the testimony of its witnesses %uis Haldariaga and 5afael Altonaga that although plaintiff paid for, and was issued a Efirst classE airplane ticket, the ticket was sub ect to confirmation in (ongkong. )he court cannot give credit to the testimony of said witnesses. Lral evidence cannot prevail over written evidence, and plaintiff<s ?.hibits EAE, EA-lE, E'E, E'-lE, E$E and E$-"E belie the testimony of said witnesses, and clearly show that the plaintiff was issued, and paid for, a first class ticket without any reservation whatever. Furthermore, as hereinabove shown, defendant<s own witness 5afael Altonaga testified that the reservation for a Efirst classE accommodation for the plaintiff was confirmed. )he court cannot believe that after such confirmation defendant had a verbal understanding with plaintiff that the Efirst classE ticket issued to him by defendant would be sub ect to confirmation in (ongkong. >! 0e have heretofore adverted to the fact that e.cept for a slight difference of a few pesos in the amount refunded on $arrascoso<s ticket, the decision of the $ourt of First Instance was affirmed by the $ourt of Appeals in all other respe%ts. 0e hold the view that such a udgment of affirmance has merged the udgment of the lower court. >, Implicit in that affirmance is a determination by the $ourt of Appeals that the proceeding in the $ourt of First Instance was free from pre udicial error and Eall /uestions raised by the assignments of error and all /uestions that might have been raised are to be regarded as finally ad udicated against the appellantE. So also, the udgment affirmed Emust be regarded as free from all errorE. >+ 0e reached this policy construction because nothing in the decision of the $ourt of Appeals on this point would suggest that its findings of fact are in any way at war with those of the trial court. Dor was said affirmance by the $ourt of Appeals upon a ground or grounds different from those which were made the basis of the conclusions of the trial court. >= If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat, notwithstanding the fact that seat availability in specific flights is therein confirmed, then an air passenger is placed in the hollow of the hands of an airline. 0hat security then can a passenger have4 It will always be an easy matter for an airline aided by its employees, to strike out the very stipulations in the ticket, and say that there was a verbal agreement to the contrary. 0hat if the passenger had a schedule to fulfill4 0e have long learned that, as a rule, a written document speaks a uniform language1 that spoken word could be notoriously unreliable. If only to achieve stability in the relations between passenger and air carrier, adherence to the ticket so issued is desirable. Such is the case here. )he lower courts refused to believe the oral evidence intended to defeat the covenants in the ticket.

)he foregoing are the considerations which point to the conclusion that there are facts upon which the $ourt of Appeals predicated the finding that respondent $arrascoso had a first class ticket and was entitled to a first class seat at 'angkok, which is a stopover in the Saigon to 'eirut leg of the flight. >* 0e perceive no Ewelter of distortions by the $ourt of Appeals of petitioner<s statement of its positionE, as charged by petitioner. >- Dor do we subscribe to petitioner<s accusation that respondent $arrascoso Esurreptitiously took a first class seat to provoke an issueE. >9 And this because, as petitioner states, $arrascoso went to see the ;anager at his office in 'angkok Eto confirm my seat and because from Saigon I was told again to see the ;anagerE. !# 0hy, then, was he allowed to take a first class seat in the plane at 'angkok, if he had no seat4 Lr, if another had a better right to the seat4 ,. Petitioner assails respondent court<s award of moral damages. Petitioner<s trenchant claim is that $arrascoso<s action is planted upon breach of contract1 that to authori6e an award for moral damages there must be an averment of fraud or bad faith1!" and that the decision of the $ourt of Appeals fails to make a finding of bad faith. )he pivotal allegations in the complaint bearing on this issue are2 !. )hat ... plaintiff entered into a %ontra%t of air carriage with the Philippine Air %ines for a valuable consideration, the latter acting as general agents for and in behalf of the defendant, under which said contract, plaintiff was entitled to, as defendant agreed to furnish plaintiff, First $lass passage on defendant<s plane during the entire duration of plaintiff<s tour of ?urope with (ongkong as starting point up to and until plaintiff<s return trip to ;anila, ... . ,. )hat, during the first two legs of the trip from (ongkong to Saigon and from Saigon to 'angkok, defendant furnished to the plaintiff First $lass accommodation but only after protestations, arguments andAor insistence were made by the plaintiff with defendant<s employees. +. )hat finally, defendant failed to pro"ide First $lass passage, but instead furnished plaintiff only To#rist$lass accommodations from 'angkok to )eheran andAor $asablanca, ... the plaintiff has been %ompelled by defendant<s employees to leave the First $lass accommodation berths at 'angkok after he ,as alreadseated. =. )hat conse/uently, the plaintiff, desiring no repetition of the inconvenience and embarrassments brought by defendant<s breach of contract was forced to take a Pan American 0orld Airways plane on his return trip from ;adrid to ;anila. !> ... ... ...

>. )hat likewise, as a result of defendant<s failure to furnish First $lass accommodations aforesaid, plaintiff suffered inconveniences, embarrassments, and humiliations, thereby causing plaintiff mental anguish, serious an.iety, wounded

feelings, social humiliation, and the like in ury, resulting in moral damages in the amount of P!#,###.##. !! ... ... ...

)he foregoing, in our opinion, substantially aver2 0irst, )hat there was a contract to furnish plaintiff a first class passage covering, amongst others, the 'angkok-)eheran leg1 1e%ond, )hat said contract was breached when petitioner failed to furnish first class transportation at 'angkok1 and Third, that there was bad faith when petitioner<s employee compelled $arrascoso to leave his first class accommodation berth .after he ,as alread-, seated. and to take a seat in the tourist class, by reason of which he suffered inconvenience, embarrassments and humiliations, thereby causing him mental anguish, serious an.iety, wounded feelings and social humiliation, resulting in moral damages. It is true that there is no specific mention of the term bad faith in the complaint. 'ut, the inference of bad faith is there, it may be drawn from the facts and circumstances set forth therein. !, )he contract was averred to establish the relation between the parties. 'ut the stress of the action is put on wrongful e.pulsion. Muite apart from the foregoing is that 8a: right the start of the trial, respondent<s counsel placed petitioner on guard on what $arrascoso intended to prove2 )hat while sitting in the plane in 'angkok, $arrascoso was o#sted by petitioner<s manager who gave his seat to a white man1 !+ and 8b: evidence of bad faith in the fulfillment of the contract was presented without ob ection on the part of the petitioner. It is, therefore, unnecessary to in/uire as to whether or not there is sufficient averment in the complaint to ustify an award for moral damages. 3eficiency in the complaint, if any, was cured by the evidence. An amendment thereof to conform to the evidence is not even re/uired. != Ln the /uestion of bad faith, the $ourt of Appeals declared2 )hat the plaintiff was forced out of his seat in the first class compartment of the plane belonging to the defendant Air France while at 'angkok, and was transferred to the tourist class not only without his consent but against his will, has been sufficiently established by plaintiff in his testimony before the court, corroborated by the corresponding entry made by the purser of the plane in his notebook which notation reads as follows2 EFirst-class passenger was forced to go to the tourist class against his will, and that the captain refused to interveneE, and by the testimony of an eye-witness, ?rnesto 7. $uento, who was a copassenger. )he captain of the plane who was asked by the manager of defendant company at 'angkok to intervene even refused to do so. It is noteworthy that no one on behalf of defendant ever contradicted or denied this evidence for the plaintiff. It could have been easy for defendant to present its manager at 'angkok to testify at the trial of the case, or yet to secure his disposition1 but defendant did neither. !*

)he $ourt of appeals further stated K Deither is there evidence as to whether or not a prior reservation was made by the white man. (ence, if the employees of the defendant at 'angkok sold a first-class ticket to him when all the seats had already been taken, surely the plaintiff should not have been picked out as the one to suffer the conse/uences and to be sub ected to the humiliation and indignity of being e ected from his seat in the presence of others. Instead of e.plaining to the white man the improvidence committed by defendant<s employees, the manager adopted the more drastic step of ousting the plaintiff who was then safely ensconsced in his rightful seat. 0e are strengthened in our belief that this probably was what happened there, by the testimony of defendant<s witness 5afael Altonaga who, when asked to e.plain the meaning of the letters EL.G.E appearing on the tickets of plaintiff, said Ethat the space is confirmed for first class. %ikewise, Henaida Faustino, another witness for defendant, who was the chief of the 5eservation Lffice of defendant, testified as follows2 EM (ow does the person in the ticket-issuing office know what reservation the passenger has arranged with you4 A )hey call us up by phone and ask for the confirmation.E 8t.s.n., p. >,*, Nune "9, "9+9: In this connection, we /uote with approval what the trial Nudge has said on this point2 0hy did the, using the words of witness ?rnesto 7. $uento, Ewhite manE have a Ebetter rightE to the seat occupied by ;r. $arrascoso4 )he record is silent. )he defendant airline did not prove Eany betterE, nay, any right on the part of the Ewhite manE to the EFirst classE seat that the plaintiff was occupying and for which he paid and was issued a corresponding Efirst classE ticket. If there was a ustified reason for the action of the defendant<s ;anager in 'angkok, the defendant could have easily proven it by having taken the testimony of the said ;anager by deposition, but defendant did not do so1 the presumption is that evidence willfully suppressed would be adverse if produced BSec. =9, par 8e:, 5ules of $ourtC1 and, under the circumstances, the $ourt is constrained to find, as it does find, that the ;anager of the defendant airline in 'angkok not merely asked but threatened the plaintiff to throw him out of the plane if he did not give up his Efirst classE seat because the said ;anager wanted to accommodate, using the words of the witness ?rnesto 7. $uento, the Ewhite manE. !It is really correct to say that the $ourt of Appeals in the /uoted portion first transcribed did not use the term Ebad faithE. 'ut can it be doubted that the recital

of facts therein points to bad faith4 )he manager not only prevented $arrascoso from en oying his right to a first class seat1 worse, he imposed his arbitrary will1 he forcibly e ected him from his seat, made him suffer the humiliation of having to go to the tourist class compartment - ust to give way to another passenger whose right thereto has not been established. $ertainly, this is bad faith. &nless, of course, bad faith has assumed a meaning different from what is understood in law. For, Ebad faithE contemplates a Estate of mind affirmatively operating with furtive design or with some motive of self-interest or will or for ulterior purpose.E !9 And if the foregoing were not yet sufficient, there is the e.press finding of bad faith in the udgment of the $ourt of First Instance, thus2 )he evidence shows that the defendant violated its contract of transportation with plaintiff in bad faith, with the aggravating circumstances that defendant<s ;anager in 'angkok went to the e.tent of threatening the plaintiff in the presence of many passengers to have him thrown out of the airplane to give the Efirst classE seat that he was occupying to, again using the words of the witness ?rnesto 7. $uento, a Ewhite manE whom he 8defendant<s ;anager: wished to accommodate, and the defendant has not proven that this Ewhite manE had any Ebetter rightE to occupy the Efirst classE seat that the plaintiff was occupying, duly paid for, and for which the corresponding Efirst classE ticket was issued by the defendant to him. ,# +. )he responsibility of an employer for the tortious act of its employees need not be essayed. It is well settled in law. ," For the willful malevolent act of petitioner<s manager, petitioner, his employer, must answer. Article >" of the $ivil $ode says2 A5). >". Any person who willfully causes loss or in ury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. In parallel circumstances, we applied the foregoing legal precept1 and, we held that upon the provisions of Article >>"9 8"#:, $ivil $ode, moral damages are recoverable. ,> =. A contract to transport passengers is /uite different in kind and degree from any other contractual relation. ,! And this, because of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. )he contract of air carriage, therefore, generates a relation attended with a public duty. Deglect or malfeasance of the carrier<s employees, naturally, could give ground for an action for damages. Passengers do not contract merely for transportation. )hey have a right to be treated by the carrier<s employees with kindness, respect, courtesy and due consideration. )hey are entitled to be protected against personal misconduct, in urious language, indignities and abuses from such employees. So it is, that any rule or

discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier. ,, )hus, E0here a steamship company ,+ had accepted a passenger<s check, it was a breach of contract and a tort, giving a right of action for its agent in the presence of third persons to falsely notify her that the check was worthless and demand payment under threat of e ection, though the language used was not insulting and she was not e ected.E ,= And this, because, although the relation of passenger and carrier is Econtractual both in origin and natureE nevertheless Ethe act that breaks the contract may be also a tortE. ,* And in another case, E0here a passenger on a railroad train, when the conductor came to collect his fare tendered him the cash fare to a point where the train was scheduled not to stop, and told him that as soon as the train reached such point he would pay the cash fare from that point to destination, there was nothing in the conduct of the passenger which ustified the conductor in using insulting language to him, as by calling him a lunatic,E ,- and the Supreme $ourt of South $arolina there held the carrier liable for the mental suffering of said passenger. 2a,ph3l.n4t Petitioner<s contract with $arrascoso is one attended with public duty. )he stress of $arrascoso<s action as we have said, is placed upon his wrongful e.pulsion. )his is a violation of public duty by the petitioner air carrier K a case of /#asi5deli%t. 3amages are proper. *. Petitioner draws our attention to respondent $arrascoso<s testimony, thus K M Iou mentioned about an attendant. 0ho is that attendant and purser4 A 0hen we left already K that was already in the trip K I could not help it. So one of the flight attendants approached me and re/uested from me my ticket and I said, 0hat for4 and she said, E0e will note that you transferred to the tourist classE. I said, EDothing of that kind. )hat is tantamount to accepting my transfer.E And I also said, EIou are not going to note anything there because I am protesting to this transferE. M 0as she able to note it4 A Do, because I did not give my ticket. M About that purser4 A 0ell, the seats there are so close that you feel uncomfortable and you don<t have enough leg room, I stood up and I went to the pantry that was ne.t to me and the purser was there. (e told me, EI have recorded the incident in my notebook.E (e read it and translated it to me K because it was recorded in French K EFirst class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene.E

;r. OA%)? K I move to strike out the last part of the testimony of the witness because the best evidence would be the notes. Iour (onor. $L&5) K I will allow that as part of his testimony.
,9

Petitioner charges that the finding of the $ourt of Appeals that the purser made an entry in his notebook reading EFirst class passenger was forced to go to the tourist class against his will, and that the captain refused to interveneE is predicated upon evidence B$arrascoso<s testimony aboveC which is incompetent. 0e do not think so. )he sub ect of in/uiry is not the entry, but the ouster incident. )estimony on the entry does not come within the proscription of the best evidence rule. Such testimony is admissible. ,9a 'esides, from a reading of the transcript ust /uoted, when the dialogue happened, the impact of the startling occurrence was still fresh and continued to be felt. )he e.citement had not as yet died down. Statements then, in this environment, are admissible as part of the res gestae. +# For, they grow Eout of the nervous e.citement and mental and physical condition of the declarantE. +" )he utterance of the purser regarding his entry in the notebook was spontaneous, and related to the circumstances of the ouster incident. Its trustworthiness has been guaranteed. +> It thus escapes the operation of the hearsay rule. It forms part of the res gestae. At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It would have been an easy matter for petitioner to have contradicted $arrascoso<s testimony. If it were really true that no such entry was made, the deposition of the purser could have cleared up the matter. 0e, therefore, hold that the transcribed testimony of $arrascoso is admissible in evidence. -. ?.emplary damages are well awarded. )he $ivil $ode gives the court ample power to grant e.emplary damages K in contracts and /uasi- contracts. )he only condition is that defendant should have Eacted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.E +! )he manner of e ectment of respondent $arrascoso from his first class seat fits into this legal precept. And this, in addition to moral damages.+, 9. )he right to attorney<s fees is fully established. )he grant of e.emplary damages ustifies a similar udgment for attorneys< fees. )he least that can be said is that the courts below felt that it is but ust and e/uitable that attorneys< fees be given. ++ 0e do not intend to break faith with the tradition that discretion well e.ercised K as it was here K should not be disturbed.

"#. Muestioned as e.cessive are the amounts decreed by both the trial court and the $ourt of Appeals, thus2 P>+,###.## as moral damages1 P"#,###.##, by way of e.emplary damages, and P!,###.## as attorneys< fees. )he task of fi.ing these amounts is primarily with the trial court. += )he $ourt of Appeals did not interfere with the same. )he dictates of good sense suggest that we give our imprimatur thereto. 'ecause, the facts and circumstances point to the reasonableness thereof. +* Ln balance, we say that the udgment of the $ourt of Appeals does not suffer from reversible error. 0e accordingly vote to affirm the same. $osts against petitioner. So ordered. Con%ep%ion, C.J., +e-es, J.!.&., !arrera, Di(on, +egala, Makalintal, *aldi"ar and Castro, JJ., %on%#r. !eng(on, J.'., J., took no part. A6r Fra3c$ 7. Ra8a$- Carra,co,o 9 CA 8"9==: A Sanche6 Facts 5afael $arrascoso was part of a group of pilgrims leaving for %ourdes. Air France, through PA%, issued to $arrascoso a first class round trip ticket. From ;anila to 'angkok, he traveled in first class but at 'angkok, the manager of Air France forced him to vacate his seat, because a Ewhite manE had a Ebetter rightE to it. (e refused and even had a heated discussion with the manager but after being pacified by fellow passengers, he reluctantly gave up the seat. Air France asserts that the ticket does not represent the true and complete intent and agreement of the parties, and that the issuance of a first class ticket did not guarantee a first class ride 8depends upon the availability of seats:. $FI and $A disposed of this contention. Issue and Holding 0LD $arrascoso was entitled to the first class seat he claims. * S Ratio On CA s de%ision Air France charges that $A failed to make complete findings of fact on all issues presented. S$ says that so long as $A<s decision contains the facts necessary to warrant its conclusions, there is nothing wrong in withholding any specific finding of facts with respect to the evidence for the defense. On the seat iss#e If a first-class ticket holder is not entitled to a corresponding seat, what security can a passenger have4 It<s very easy to strike out the stipulations in the ticket and say that there was a contrary verbal agreement. )here was no e.planation as to why he was allowed to take a first class seat before coming to 'angkok if indeed he had no seat or if someone had a better right to it.

On %ontra%t to transport, 6D, et%. )his is different in kind and degree from any other contractual obligation because of the relation which an air carrier sustains with the public. Passengers do not contract merely for transportation as they have a right to be treated by the employees with kindness, respect, courtesy, consideration. 0hat happened was a violation of public duty by Air France--a case of M3, so damages are proper. A case was cited wherein it was said that although the relation of passenger and carrier is contractual in origin and nature, the act that breaks the G may be also a tort. On the iss#e of a,ard of damages Air France assails $A<s award of moral damages, claiming that since $arrascoso<s action is based on breach of contract, there must be an averment of fraud or bad faith in order to avail of said award. 0hile there was no specific mention of Ebad faith,E it may be drawn from the facts and circumstances set forth. 3eficiency in the complaint, if any, was cured by evidence. Allegations in the complaint on this issue2 ". )here was a G to furnish plaintiff a first class passage covering the 'angkok-)eheran leg >. )his G was breached when Air France failed to furnish first class transpo at 'angkok !. )here was bad faith when the manager compelled $arrascoso to leave his seat after he was already seated and to transfer to the tourist class, thereby making him suffer inconvenience, embarrassment, humiliation, etc. bad faith - state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for ulterior purposes See D$$ >". &pon the provisions of D$$ >>"9 8"#:, moral damages are recoverable. ?.emplary damages are well awarded also, since D$$ gives the court power to grant such in G and MG, with the condition that the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.

G.R. No. L-9356 C. S. GILCHRIST, plaintiff-appellee, vs. E. A. CUDDY, ET AL., defendants. JOSE FERNANDEZ ESPEJO and MARIANO ZALDARRIAGA, appellants. C. Lozano for appellants. Bruce, Lawrence, Ross and Block for appellee.

TRENT, J.: An appeal by the defendants, Jose Fernande !spe"o and #ariano $aldarria%a, fro& a "'d%&ent of the (o'rt of First )nstan*e of )loilo, dis&issin% their *ross-*o&plaint 'pon the &erits for da&a%es a%ainst the plaintiff for the alle%ed +ron%f'l iss'an*e of a &andatory and a preli&inary in"'n*tion. ,pon the appli*ation of the appellee an e- parte &andatory in"'n*tion +as iss'ed on the ..d of #ay, /9/3, dire*tin% the defendant, !. A. ('ddy, to send to the appellee a *ertain *ine&ato%raph fil& *alled 0$i%o&ar1 in *o&plian*e +ith an alle%ed *ontra*t +hi*h had been entered into bet+een these t+o parties, and at the ti&e an e- parte preli&inary in"'n*tion +as iss'ed restrainin% the appellants fro& re*eivin% and e-hibitin% in their theater the $i%o&ar 'ntil f'rther orders of the *o'rt. 2n the .6th of that &onth the appellants appeared and &oved the *o'rt to dissolve the preli&inary in"'n*tion. 3hen the *ase +as *alled for trial on A'%'st 6, the appellee &oved for the dis&issal of the *o&plaint 0for the reason that there is no f'rther ne*essity for the &aintenan*e of the in"'n*tion.1 4he &otion +as %ranted +itho't ob"e*tion as to ('ddy and denied as to the appellants in order to %ive the& an opport'nity to prove that the in"'n*tion +ere +ron%f'lly iss'ed and the a&o'nt of da&a%es s'ffered by reason thereof. 4he pertinent part of the trial *o'rt5s findin%s of fa*t in this *ase is as follo+s6 It appears in this case that Cuddy was the owner of the film Zigomar and that on the 2 th of !pril he rented it to C. ". #ilchrist for a week for $%2&, and it was to 'e deli(ered on the 2)th of *ay, the week 'eginning that day. ! few days prior to this Cuddy sent the money 'ack to #ilchrist, which he had forwarded to him in *anila, saying that he had made other arrangements with his film. +he other arrangements was the rental to these defendants ,spe-o and his partner for $.&/ for the week and the in-unction was asked 'y #ilchrist against these parties from showing it for the week 'eginning the 2)th of *ay. It appears from the testimony in this case, conclusi(ely, that Cuddy willfully (iolated his contract, he 'eing the owner of the picture, with #ilchrist 'ecause the defendants had offered him more for the same period. *r. ,spe-o at the trial on the permanent in-unction on the 2)th of *ay admitted that he knew that Cuddy was the owner of the film. 0e was trying to get it through his agents $athe Brothers in *anila. 0e is the agent of the same concern in Iloilo. +here is in e(idence in this case on the trial today as well as on the 2)th of *ay, letters showing that the $athe Brothers in *anila

ad(ised this man on two different occasions not to contend for this film Zigomar 'ecause the rental price was prohi'iti(e and assured him also that he could not get the film for a'out si1 weeks. +he last of these letters was written on the 2)th of !pril, which showed conclusi(ely that he knew they had to get this film from Cuddy and from this letter that the agent in *anila could not get it, 'ut he made Cuddy an offer himself and Cuddy accepted it 'ecause he was paying a'out three times as much as he had contracted with #ilchrist for. +herefore, in the opinion of this court, the defendants failed signally to show the in-unction against the defendant was wrongfully procured. 4he appellants d'ly e-*epted to the order of the *o'rt denyin% their &otion for ne+ trial on the %ro'nd that the eviden*e +as ins'ffi*ient to "'stify the de*ision rendered. 4here is la*7in% fro& the re*ord before 's the deposition of the defendant ('ddy, +hi*h apparently thro+s li%ht 'pon a *ontra*t entered into bet+een hi& and the plaintiff Gil*hrist. 4he *ontents of this deposition are dis*'ssed at len%th in the brief of the appellants and an endeavor is &ade to sho+ that no s'*h *ontra*t +as entered into. 4he trial *o'rt, +hi*h had this deposition before it, fo'nd that there +as a *ontra*t bet+een ('ddy and Gil*hrist. Not havin% the deposition in 8'estion before 's, it is i&possible to say ho+ stron%ly it &ilitates a%ainst this findin%s of fa*t. 9y a series of de*isions +e have *onstr'ed se*tion /:3 and :9; <.= of the (ode of (ivil >ro*ed're to re8'ire the prod'*tion of all the eviden*e in this *o'rt. 4his is the d'ty of the appellant and, 'pon his fail're to perfor& it, +e de*line to pro*eed +ith a revie+ of the eviden*e. )n s'*h *ases +e rely entirely 'pon the pleadin%s and the findin%s of fa*t of the trial *o'rt and e-a&ine only s'*h assi%ned errors as raise 8'estions of la+. <Ferrer vs. Neri Abe"'ela, 9 >hil. Rep., 3.:? @alle vs. Galera, /A >hil. Rep., 6/9? Balva*ion vs. Balva*ion, /3 >hil. Rep., 366? 9reta vs. B&ith, 9ell C (o., /5 >hil. Rep., ::6? Arroyo vs. D'lo, /E >hil. Rep., .36? 2lsen C (o. vs. #atson, Lord C 9elser (o., /9 >hil. Rep., /A.? 9l'& vs. 9arretto, /9 >hil. Rep., /6/? ('y'%an vs. A%'as, /9 >hil. Rep., 3;9? #apa vs. (haves, .A >hil. Rep., /:;? #ans vs. Garry, .A >hil. Rep., /3:.= )t is tr'e that so&e of the &ore re*ent of these *ases &a7e e-*eptions to the %eneral r'le. 4h's, in 2lsen C (o. vs. #atson, Lord C 9elser (o., </9 >hil. Rep., /A.=, that portion of the eviden*e before 's tended to sho+ that %rave in"'sti*e &i%ht res'lt fro& a stri*t relian*e 'pon the findin%s of fa*t *ontained in the "'d%&ent appealed fro&. 3e, therefore, %ave the appellant an opport'nity to e-plain the o&ission. 9't +e re8'ired that s'*h e-planation &'st sho+ a satisfa*tory reason for the o&ission, and that the &issin% portion of the eviden*e &'st be s'b&itted +ithin si-ty days or *a'se sho+n for failin% to do so. 4he other *ases &a7in% e-*eptions to the r'le are based 'pon pe*'liar *ir*'&stan*es

+hi*h +ill seldo& arise in pra*ti*e and need not here be set forth, for the reason that they are +holly inappli*able to the present *ase. 4he appellants +o'ld be entitled to ind'l%en*e only 'nder the do*trine of the 2lsen *ase. 9't fro& that portion of the re*ord before 's, +e are not in*lined to believe that the &issin% deposition +o'ld be s'ffi*ient to "'stify 's in reversin% the findin%s of fa*t of the trial *o'rt that the *ontra*t in 8'estion had been &ade. 4here is in the re*ord not only the positive and detailed testi&ony of Gil*hrist to this effe*t, b't there is also a letter of apolo%y fro& ('ddy to Gil*hrist in +hi*h the for&er enters into a len%thy e-planation of his reasons for leasin% the fil& to another party. 4he latter *o'ld only have been *alled forth by a bro7en *ontra*t +ith Gil*hrist to lease the fil& to hi&. 3e, therefore, fail to find any reason for overloo7in% the o&ission of the defendants to brin% 'p the &issin% portion of the eviden*e and, adherin% to the %eneral r'le above referred to, pro*eed to e-a&ine the 8'estions of la+ raised by the appellants. Fro& the above-8'oted findin%s of fa*t it is *lear that ('ddy, a resident of #anila, +as the o+ner of the 0$i%o&ar?1 that Gil*hrist +as the o+ner of a *ine&ato%raph theater in )loilo? that in a**ordan*e +ith the ter&s of the *ontra*t entered into bet+een ('ddy and Gil*hrist the for&er leased to the latter the 0$i%o&ar1 for e-hibition in his <Gil*hrist5s= theater for the +ee7 be%innin% #ay .6, /9/3? and that ('ddy +illf'lly violate his *ontra*t in order that he &i%ht a**ept the appellant5s offer of >35A for the fil& for the sa&e period. Fid the appellants 7no+ that they +ere ind'*in% ('ddy to violate his *ontra*t +ith a third party +hen they ind'*ed hi& to a**ept the >35AG !spe"o ad&itted that he 7ne+ that ('ddy +as the o+ner of the fil&. He re*eived a letter fro& his a%ents in #anila dated April .6,assuring him that he could not get the film for a'out si1 weeks. 4he arran%e&ent bet+een ('ddy and the appellants for the e-hibition of the fil& by the latter on the .6th of #ay +ere perfe*ted after April .6, so that the si- +ee7s +o'ld in*l'de and e-tend beyond #ay .6. 4he appellants &'st ne*essarily have 7no+n at the ti&e they &ade their offer to ('ddy that the latter had boo7ed or *ontra*ted the fil& for si- +ee7s fro& April .6. 4herefore, the inevitable *on*l'sion is that the appellants 7no+in%ly ind'*ed ('ddy to violate his *ontra*t +ith another person. 9't there is no spe*ifi* findin% that the appellants 7ne+ the identity of the other party. Bo +e &'st ass'&e that they did not 7no+ that Gil*hrist +as the person +ho had *ontra*ted for the fil&. 4he appellants ta7e the position that if the preli&inary in"'n*tion had not been iss'ed a%ainst the& they *o'ld have e-hibited the fil& in their theater for a n'&ber of days be%innin% #ay .6, and *o'ld have also s'bleased it to

other theater o+ners in the nearby to+ns and, by so doin%, *o'ld have *leared, d'rin% the life of their *ontra*t +ith ('ddy, the a&o'nt *lai&ed as da&a%es. 4a7in% this vie+ of the *ase, it +ill be 'nne*essary for 's to in8'ire +hether the &andatory in"'n*tion a%ainst ('ddy +as properly iss'ed or not. No 8'estion is raised +ith referen*e to the iss'an*e of that in"'n*tion. 4he ri%ht on the part of Gil*hrist to enter into a *ontra*t +ith ('ddy for the lease of the fil& &'st be f'lly re*o%ni ed and ad&itted by all. 4hat ('ddy +as liable in an a*tion for da&a%es for the brea*h of that *ontra*t, there *an be no do'bt. 3ere the appellants li7e+ise liable for interferin% +ith the *ontra*t bet+een Gil*hrist and ('ddy, they not 7no+in% at the ti&e the identity of one of the *ontra*tin% partiesG 4he appellants *lai& that they had a ri%ht to do +hat they did. 4he %ro'nd 'pon +hi*h the appellants base this *ontention is, that there +as no valid and bindin% *ontra*t bet+een ('ddy and Gil*hrist and that, therefore, they had a ri%ht to *o&pete +ith Gil*hrist for the lease of the fil&, the ri%ht to *o&pete bein% a "'stifi*ation for their a*ts. )f there had been no *ontra*t bet+een ('ddy and Gil*hrist this defense +o'ld be tenable, b't the &ere ri%ht to *o&pete *o'ld not "'stify the appellants in intentionally ind'*in% ('ddy to ta7e a+ay the appellee5s *ontra*t'al ri%hts. (hief J'sti*e 3ells in 3al7er vs. (ronin </A; #ass., 555=, said6 0!veryone has a ri%ht to en"oy the fr'its and advanta%es of his o+n enterprise, ind'stry, s7ill and *redit. He has no ri%ht to be free fro& &ali*io's and +anton interferen*e, dist'rban*e or annoyan*e. )f dist'rban*e or loss *o&e as a res'lt of *o&petition, or the e-er*ise of li7e ri%hts by others, it is da&n'& abs8'e in"'ria, 'nless so&e s'perior ri%ht by *ontra*t or other+ise is interfered +ith.1 )n Read (s. 2riendly "ociety of 3perati(e "tonemasons <I/9A.J . K. 9., EE=, Farlin%, J., said6 0) thin7 the plaintiff has a *a'se of a*tion a%ainst the defendants, 'nless the *o'rt is satisfied that, +hen they interfered +ith the *ontra*t'al ri%hts of plaintiff, the defendants had a s'ffi*ient "'stifi*ation for their interferen*e? . . . for it is not a "'stifi*ation that Lthey a*ted bona fide in the best interests of the so*iety of &asons,5 i. e., in their o+n interests. Nor is it eno'%h that Lthey +ere not a*t'ated by i&proper &otives.5 ) thin7 their s'ffi*ient "'stifi*ation for interferen*e +ith plaintiff5s ri%ht &'st be an e8'al or s'perior ri%ht in the&selves, and that no one *an le%ally e-*'se hi&self to a &an, of +hose *ontra*t he has pro*'red the brea*h, on the %ro'nd that he a*ted on a +ron% 'nderstandin% of his o+n ri%hts, or +itho't &ali*e, or bona fide, or in the best interests of hi&self, or even that he

a*ted as an altr'ist, see7in% only %ood of another and *areless of his o+n advanta%e.1 <M'oted +ith approval in 9ee7&an vs. #arsters, /95 #ass., .A5.= )t is said that the %ro'nd on +hi*h the liability of a third party for interferin% +ith a *ontra*t bet+een others rests, is that the interferen*e +as &ali*io's. 4he *ontrary vie+, ho+ever, is ta7en by the B'pre&e (o'rt of the ,nited Btates in the *ase of An%le vs. Rail+ay (o. </5/ ,. B., /=. 4he only &otive for interferen*e by the third party in that *ase +as the desire to &a7e a profit to the in"'ry of one of the parties of the *ontra*t. 4here +as no &ali*e in the *ase beyond the desire to &a7e an 'nla+f'l %ain to the detri&ent of one of the *ontra*tin% parties. )n the *ase at bar the only &otive for the interferen*e +ith the Gil*hrist N ('ddy *ontra*t on the part of the appellants +as a desire to &a7e a profit by e-hibitin% the fil& in their theater. 4here +as no &ali*e beyond this desire? b't this fa*t does not relieve the& of the le%al liability for interferin% +ith that *ontra*t and *a'sin% its brea*h. )t is, therefore, *lear, 'nder the above a'thorities, that they +ere liable to Gil*hrist for the da&a%es *a'sed by their a*ts, 'nless they are relieved fro& s'*h liability by reason of the fa*t that they did not 7no+ at the ti&e the identity of the ori%inal lessee <Gil*hrist= of the fil&. 4he liability of the appellants arises fro& 'nla+f'l a*ts and not fro& *ontra*t'al obli%ations, as they +ere 'nder no s'*h obli%ations to ind'*e ('ddy to violate his *ontra*t +ith Gil*hrist. Bo that if the a*tion of Gil*hrist had been one for da&a%es, it +o'ld be %overned by *hapter ., title /6, boo7 : of the (ivil (ode. Arti*le /9A. of that *ode provides that a person +ho, by a*t or o&ission, *a'ses da&a%es to another +hen there is fa'lt or ne%li%en*e, shall be obli%ed to repair the da&a%e do done. 4here is nothin% in this arti*le +hi*h re8'ires as a *ondition pre*edent to the liability of a tort-feasor that he &'st 7no+ the identity of a person to +ho& he *a'ses da&a%es. )n fa*t, the *hapter +herein this arti*le is fo'nd *learly sho+s that no s'*h 7no+led%e is re8'ired in order that the in"'red party &ay re*over for the da&a%e s'ffered. 9't the fa*t that the appellants5 interferen*e +ith the Gil*hrist *ontra*t +as a*tionable did not of itself entitle Gil*hrist to s'e o't an in"'n*tion a%ainst the&. 4he allo+an*e of this re&edy &'st be "'stified 'nder se*tion /6: of the (ode of (ivil >ro*ed're, +hi*h spe*ifies the *ir*'&stan*e 'nder +hi*h an in"'n*tion &ay iss'e. ,pon the %eneral do*trine of in"'n*tion +e said in 4e(esa (s. !r'es </3 >hil. Rep., .;3=6

!n in-unction is a 5special remedy6 adopted in that code 7!ct 8o. %9/: from !merican practice, and originally 'orrowed from ,nglish legal procedure, which was there issued 'y the authority and under the seal of a court of e;uity, and limited, as in order cases where e;uita'le relief is sought, to cases where there is no 5plain, ade;uate, and complete remedy at law,6 which 5will not 'e granted while the rights 'etween the parties are undetermined, e1cept in e1traordinary cases where material and irrepara'le in-ury will 'e done,6 which cannot 'e compensated in damages, and where there will 'e no ade;uate remedy, and which will not, as a rule, 'e granted, to take property out of the possession of one party and put it into that of another whose title has not 'een esta'lished 'y law. 3e s'bse8'ently affir&ed the do*trine of the Fevesa *ase in $alafo1 (s. *adam'a </9 >hil., Rep., :::=, and +e ta7e this o**asion of a%ain affir&in% it, believin%, as +e do, that the indis*ri&inate 'se of in"'n*tions sho'ld be dis*o'ra%ed. Foes the fa*t that the appellants did not 7no+ at the ti&e the identity of the ori%inal lessee of the fil& &ilitate a%ainst Gil*hrist5s ri%ht to a preli&inary in"'n*tion, altho'%h the appellant5s in*'rred *ivil liability for da&a%es for s'*h interferen*eG )n the e-a&ination of the ad"'di*ated *ases, +here in in"'n*tions have been iss'ed to restrain +ron%f'l interferen*e +ith *ontra*ts by stran%ers to s'*h *ontra*ts, +e have been 'nable to find any *ase +here this pre*ise 8'estion +as involved, as in all of those *ases +hi*h +e have e-a&ined, the identity of both of the *ontra*tin% parties +as 7no+n to the tort-feasors. 3e &i%ht say, ho+ever, that this fa*t does not see& to have a *ontrollin% feat're in those *ases. 4here is nothin% in se*tion /6: of the (ode of (ivil >ro*ed're +hi*h indi*ates, even re&otely, that before an in"'n*tion &ay iss'e restrainin% the +ron%f'l interferen*e +ith *ontrast by stran%ers, the stran%ers &'st 7no+ the identity of both parties. )t +o'ld see& that this is not essential, as in"'n*tions fre8'ently iss'e a%ainst &'ni*ipal *orporations, p'bli* servi*e *orporations, p'bli* offi*ers, and others to restrain the *o&&ission of a*ts +hi*h +o'ld tend to in"'rio'sly affe*t the ri%hts of person +hose identity the respondents *o'ld not possibly have 7no+n beforehand. 4his *o'rt has held that in a proper *ase in"'n*tion +ill iss'e at the instan*e of a private *iti en to restrain 'ltra vires a*ts of p'bli* offi*ials. <Beverino vs. Governor-General, /6 >hil. Rep., 366.= Bo +e pro*eed to the deter&ination of the &ain 8'estion of +hether or not the preli&inary in"'n*tion o'%ht to have been iss'ed in this *ase. As a r'le, in"'n*tions are denied to those +ho have an ade8'ate re&edy at la+. 3here the *hoi*e is bet+een the ordinary and the e-traordinary pro*esses of la+, and the for&er are s'ffi*ient, the r'le +ill not per&it the

'se of the latter. <)n re Febs, /5E ,. B., 56:.= )f the in"'ry is irreparable, the ordinary pro*ess is inade8'ate. )n <ahle (s. Rein'ach <;6 )ll., 3..=, the s'pre&e *o'rt of )llinois approved a definition of the ter& 0irreparable in"'ry1 in the follo+in% lan%'a%e6 09y Lirreparable in"'ry5 is not &eant s'*h in"'ry as is beyond the possibility of repair, or beyond possible *o&pensation in da&a%es, nor ne*essarily %reat in"'ry or %reat da&a%e, b't that spe*ies of in"'ry, +hether %reat or s&all, that o'%ht not to be s'b&itted to on the one hand or infli*ted on the other? and, be*a'se it is so lar%e on the one hand, or so s&all on the other, is of s'*h *onstant and fre8'ent re*'rren*e that no fair or reasonable redress *an be had therefor in a *o'rt of la+.1 <M'oted +ith approval in Nashville R. R. (o. vs. #*(onnell, E. Fed., 65.= 4he *ase at bar is so&e+hat novel, as the only *ontra*t +hi*h +as bro7en +as that bet+een ('ddy and Gil*hrist, and the profits of the appellee depended 'pon the patrona%e of the p'bli*, for +hi*h it is *on*eded the appellants +ere at liberty to *o&plete by all fair does not deter the appli*ation of re&ar7ed in the *ase of the 0ti*7et s*alpers1 <E. Fed., 65=, the novelty of the fa*ts does not deter the appli*ation of e8'itable prin*iples. 4his *o'rt ta7es "'di*ial noti*e of the %eneral *hara*ter of a *ine&ato%raph or &otion-pi*t're theater. )t is a 8'ite &odern for& of the play ho'se, +herein, by &eans of an apparat's 7no+n as a *ine&ato%raph or *ine&ato%raph, a series of vie+s representin% *losely s'**essive phases of a &ovin% ob"e*t, are e-hibited in rapid se8'en*e, %ivin% a pi*t're +hi*h, o+in% to the persisten*e of vision, appears to the observer to be in *ontin'o's &otion. <4he !n*y*lopedia 9ritani*a, vol. 6, p. 3;:.= 4he s'b"e*ts +hi*h have lent the&selves to the art of the photo%rapher in this &anner have in*reased enor&o'sly in re*ent years, as +ell as have the pla*es +here s'*h e-hibition are %iven. 4he attendan*e, and, *onse8'ently, the re*eipts, at one of these *ine&ato%raph or &otion-pi*t're theaters depends in no s&all de%ree 'pon the e-*ellen*e of the photo%raphs, and it is 8'ite *o&&on for the proprietor of the theater to se*'re an espe*ially attra*tive e-hibit as his 0feat're fil&1 and advertise it as s'*h in order to attra*t the p'bli*. 4his feat're fil& is depended 'pon to se*'re a lar%er attendan*e that if its pla*e on the pro%ra& +ere filled by other fil&s of &edio*re 8'ality. )t is evident that the fail're to e-hibit the feat're fil& +ill red'*e the re*eipts of the theater. Hen*e, Gil*hrist +as fa*in% the i&&ediate prospe*t of di&inished profits by reason of the fa*t that the appellants had ind'*ed ('ddy to rent to the& the fil& Gil*hrist had *o'nted 'pon as his feat're fil&. )t is 8'ite apparent that to esti&ate +ith any de*ree of a**'ra*y the da&a%es +hi*h Gil*hrist +o'ld li7ely s'ffer fro& s'*h an event +o'ld be 8'ite diffi*'lt if not i&possible. )f

he allo+ed the appellants to e-hibit the fil& in )loilo, it +o'ld be 'seless for hi& to e-hibit it a%ain, as the desire of the p'bli* to +itness the prod'*tion +o'ld have been already satisfied. )n this e-tre&ity, the appellee applied for and +as %ranted, as +e have indi*ated, a &andatory in"'n*tion a%ainst ('ddy re8'irin% hi& to deliver the $i%o&ar to Gil*hrist, and a preli&inary in"'n*tion a%ainst the appellants restrainin% the& fro& e-hibitin% that fil& in their theater d'rin% the +ee7s he <Gil*hrist= had a ri%ht to e-hibit it. 4hese in"'n*tion saved the plaintiff har&less fro& da&a%es d'e to the 'n+arranted interferen*e of the defendants, as +ell as the diffi*'lt tas7 +hi*h +o'ld have been set for the *o'rt of esti&atin% the& in *ase the appellants had been allo+ed to *arry o't their ille%al plans. As to +hether or not the &andatory in"'n*tion sho'ld have been iss'ed, +e are not, as +e have said, *alled 'pon to deter&ine. Bo far as the preli&inary in"'n*tion iss'ed a%ainst the appellants is *on*erned, +hi*h prohibited the& fro& e-hibitin% the $i%o&ar d'rin% the +ee7 +hi*h Gil*hrist desired to e-hibit it, +e are of the opinion that the *ir*'&stan*es "'stified the iss'an*e of that in"'n*tion in the dis*retion of the *o'rt. 3e are not la*7in% in a'thority to s'pport o'r *on*l'sion that the *o'rt +as "'stified in iss'in% the preli&inary in"'n*tion a%ainst the appellants. ,pon the pre*ise 8'estion as to +hether in"'n*tion +ill iss'e to restrain +ron%f'l interferen*e +ith *ontra*ts by stran%ers to s'*h *ontra*ts, it &ay be said that *o'rts in the ,nited Btates have 's'ally %ranted s'*h relief +here the profits of the in"'red person are derived fro& his *ontra*t'al relations +ith a lar%e and indefinite n'&ber of individ'als, th's red'*in% hi& to the ne*essity of provin% in an a*tion a%ainst the tort-feasor that the latter +as responsible in ea*h *ase for the bro7en *ontra*t, or else obli%in% hi& to instit'te individ'al s'its a%ainst ea*h *ontra*tin% party and so e-posin% hi& to a &'ltipli*ity of s'its. Bperry C H't*hinson (o. vs. #e*hani*s5 (lothin% (o. </.E Fed., EAA=? Bperry C H't*hinson (o. vs. Lo'is 3eber C (o. </6/ Fed., ./9=? Bperry C H't*hinson (o. vs. >o&&er </99 Fed., 3A9=? +ere all *ases +herein the respondents +ere ind'*in% retail &er*hants to brea7 their *ontra*ts +ith the *o&pany for the sale of the latters5 tradin% sta&ps. )n"'n*tion iss'ed in ea*h *ase restrainin% the respondents fro& interferin% +ith s'*h *ontra*ts. )n the *ase of the Nashville R. R. (o. vs. #*(onnell <E. Fed., 65=, the *o'rt, a&on% other thin%s, said6 02ne +ho +ron%f'lly interferes in a *ontra*t bet+een others, and, for the p'rpose of %ain to hi&self ind'*es one of the parties to brea7 it, is liable to the party in"'red thereby? and his *ontin'ed interferen*e &ay be %ro'nd for an in"'n*tion +here the in"'ries res'ltin% +ill be irreparable.1

)n 0am'y = +oomer (s. #eorgia Iron = Coal Co. </.; Ga., ;9.=, it appears that the respondents +ere interferin% in a *ontra*t for prison labor, and the res'lt +o'ld be, if they +ere s'**essf'l, the sh'ttin% do+n of the petitioner5s plant for an indefinite ti&e. 4he *o'rt held that altho'%h there +as no *ontention that the respondents +ere insolvent, the trial *o'rt did not ab'se its dis*retion in %rantin% a preli&inary in"'n*tion a%ainst the respondents. )n Beekman (s. *arsters </95 #ass., .A5=, the plaintiff had obtained fro& the Ja&esto+n Hotel (orporation, *ond'*tin% a hotel +ithin the %ro'nds of the Ja&esto+n !-position, a *ontra*t +hereby he +as &ade their e-*l'sive a%ent for the Ne+ !n%land Btates to soli*it patrona%e for the hotel. 4he defendant ind'*ed the hotel *orporation to brea7 their *ontra*t +ith the plaintiff in order to allo+ hi& to a*t also as their a%ent in the Ne+ !n%land Btates. 4he *o'rt held that an a*tion for da&a%es +o'ld not have afforded the plaintiff ade8'ate relief, and that an in"'n*tion +as proper *o&pellin% the defendant to desist fro& f'rther interferen*e +ith the plaintiff5s e-*l'sive *ontra*t +ith the hotel *o&pany. )n Citizens> Light, 0eat = $ower Co. (s. *ontgomery Light = <ater $ower Co. </;/ Fed., 553=, the *o'rt, +hile ad&ittin% that there are so&e a'thorities to the *ontrary, held that the *'rrent a'thority in the ,nited Btates and !n%land is that6 +he (iolation of a legal right committed knowingly is a cause of action, and that it is a (iolation of a legal right to interfere with contractual relations recognized 'y law, if there 'e no sufficient -ustification for the interference. 7?uinn (s. Leatham, supra, &%/@ !ngle (s. Chicago, etc., Ry. Co., %&% A. "., %@ % "up. Ct., 2 /@ .B L. ,d., &&@ *artens (s. Reilly, %/9 <is., ) , B 8. <., B /@ Rice (s. *anley, )) 8. C., B2@ 2. !m. Rep., ./@ Bitterman (s. L. = 8. R. R. Co., 2/D A. "., 2/&@ 2B "up. Ct., 9%@ &2 L. ,d., %D%@ Beekman (s. *arsters, %9& *ass., 2/&@ B/ 8. ,., B%D@ %% L. R. !. E8. ".F 2/%@ %22 !m. "t. Rep., 2.2@ "outh <ales *iners> 2ed. (s. #lamorgan Coal Co., !ppeal Cases, %9/&, p. 2.9.: Bee also Ni&s on ,nfair 9'siness (o&petition, pp. 35/- 3;/. )n 3 !lliot on (ontra*ts, se*tion .5//, it is said6 0)n"'n*tion is the proper re&edy to prevent a +ron%f'l interferen*e +ith *ontra*t by stran%ers to s'*h *ontra*ts +here the le%al re&edy is ins'ffi*ient and the res'ltin% in"'ry is irreparable. And +here there is a &ali*io's interferen*e +ith la+f'l and valid *ontra*ts a per&anent in"'n*tion +ill ordinarily iss'e +itho't proof of e-press &ali*e. Bo, an in"'n*tion &ay be iss'ed +here the *o&plainant to brea7 their *ontra*ts +ith hi& by a%reein% to inde&nify +ho brea7s his *ontra*ts of e&ploy&ent &ay be ad"oined fro& in*l'din% other e&ployees to brea7 their *ontra*ts and enter into ne+ *ontra*ts +ith a ne+ e&ployer of

the servant +ho first bro7e his *ontra*t. 9't the re&edy by in"'n*tion *annot be 'sed to restrain a le%iti&ate *o&petition, tho'%h s'*h *o&petition +o'ld involve the violation of a *ontra*t. Nor +ill e8'ity ordinarily en"oin e&ployees +ho have 8'it the servi*e of their e&ployer fro& atte&ptin% by proper ar%'&ent to pers'ade others fro& ta7in% their pla*es so lon% as they do not resort to for*e or inti&idations on obstr'*t the p'bli* thoro'%hfares.1 Beekman (s. *arster, supra, is pra*ti*ally on all fo'rs +ith the *ase at bar in that there +as only one *ontra*t in 8'estion and the profits of the in"'red person depended 'pon the patrona%e of the p'bli*. 0am'y = +oomer (s. #eorgia Iron = Coal Co., supra, is also si&ilar to the *ase at bar in that there +as only one *ontra*t, the interferen*e of +hi*h +as stopped by in"'n*tion. For the fore%oin% reasons the "'d%&ent is affir&ed, +ith *osts, a%ainst the appellants. !rellano, C.G., +orres, Carson and !raullo, GG., concur. Beparate 2pinions MORELAND, J., *on*'rrin%6 4he *o'rt see&s to be of the opinion that the a*tion is one for a per&anent in"'n*tion? +hereas, 'nder &y vie+ of the *ase, it is one for spe*ifi* perfor&an*e. 4he fa*ts are si&ple. (. B. Gil*hrist, the plaintiff, proprietor of the !a%le 4heater of )loilo, *ontra*ted +ith !. A. ('ddy, one of the defendants, of #anila, for a fil& entitled 0$i%o&ar or !els7in, 3d series,1 to be e-hibited in his theater in )loilo d'rin% the +ee7 be%innin% #ay .6, /9/3. Later, the defendants !spe"o and $aldarria%a, +ho +ere also operatin% a theater in )loilo, representin% >athe Freres, also obtained fro& ('ddy a *ontra*t for the e-hibition of the fil& aforesaid in their theater in )loilo d'rin% the sa&e +ee7. 4he plaintiff *o&&en*ed this a*tion a%ainst ('ddy and the defendants !spe"o and $aldarria%a for the spe*ifi* perfor&an*e of the *ontra*t +ith ('ddy. 4he *o&plaint prays 0that the *o'rt, by a &andatory in"'n*tion, order ('ddy to deliver, on the .:th of #ay, /9/3, in a**ordan*e +ith the aforesaid *ontra*t, the said fil& O$i%o&ar, 3d series, or !els7in,5 to the plaintiff Gil*hrist, in a**ordan*e +ith the ter&s of the a%ree&ent, so that plaintiff *an e-hibit the sa&e d'rin% the last +ee7 be%innin% #ay .6, /9/3, in the !a%le 4heater, in )loilo? that the *o'rt iss'e a preli&inary in"'n*tion a%ainst the defendants !spe"o and $aldarria%a prohibitin% the& fro& re*eivin%, e-hibitin%, or 'sin% said fil& in )loilo d'rin% the last +ee7 of #ay, /9/3, or at any other ti&e prior to the delivery to the plaintiff? that, on the trial, said in"'n*tion be &ade perpet'al and that ('ddy be ordered and *o&&anded to spe*ifi*ally perfor& his *ontra*t +ith the plaintiff.1

2n the filin% of the *o&plaint the plaintiff &ade an appli*ation for a &andatory in"'n*tion *o&pellin% the defendant ('ddy to deliver to plaintiff the fil& in 8'estion by &ailin% it to hi& fro& #anila on the .:th of #ay so that it +o'ld rea*h )loilo for e-hibition on the .6th? and for a preli&inary restrainin% order a%ainst the order t+o defendants prohibitin% the& fro& re*eivin% or e-hibitin% the said fil& prior to its e-hibition by plaintiff. 4he *o'rt, on this appli*ation, entered an order +hi*h provided that ('ddy sho'ld 0not send said fil& O$i%o&ar, 3d series, or !els7in,5 to the defendants !spe"o and $aldarria%a and that he sho'ld send it to the plaintiff, Gil*hrist, on the .:th day of #ay, /9/3, in the &ail for )loilo,1 4his order +as d'ly served on the defendants, in*l'din% ('ddy, in +hose possession the fil& still +as, and, in *o&plian*e there+ith ('ddy &ailed the fil& to the plaintiff at )loilo on the .:th of #ay. 4he latter d'ly re*eived it and e-hibited it +itho't &olestation d'rin% the +ee7 be%innin% the .6th of #ay in a**ordan*e +ith the *ontra*t +hi*h he *lai&ed to have &ade +ith ('ddy. 4he defendants !spe"o and $aldarria%a havin% re*eived d'e noti*e of the iss'an*e of the &andatory in"'n*tion and restrainin% order of the ..d of #ay, appeared before the *o'rt on the .6th of #ay and &oved that the *o'rt va*ate so &'*h of the order as prohibited the& fro& re*eivin% and e-hibitin% the fil&. )n other +ords, +hile the order of the ..d of #ay +as *o&posed of t+o parts, one a &andatory order for i&&ediate spe*ifi* perfor&an*e of the plaintiff5s *ontra*t +ith the defendant ('ddy, and the other a preli&inary restrainin% order dire*ted to !spe"o and $aldarria%a prohibitin% the& fro& re*eivin% and e-hibitin% the fil& d'rin% the +ee7 be%innin% the .6th of #ay, their &otion of the .6th of #ay referred e-*l'sively to the in"'n*tion a%ainst the& and to'*hed in no +ay that portion of the order +hi*h re8'ired the i&&ediate perfor&an*e by ('ddy of his *ontra*t +ith Gil*hrist. )ndeed, the defendants !spe"o and $aldarria%a did not even e-*ept to the order re8'irin% ('ddy to spe*ifi*ally perfor& his a%ree&ent +ith the plaintiff nor did they in any +ay &a7e an ob"e*tion to or sho+ their disapproval of it. )t +as not e-*epted to or appealed fro& and is not before this *o'rt for revie+. 4he &otion of !spe"o and $aldarria%a to va*ate the in"'n*tion restrainin% the& fro& re*eivin% the fil& +as denied on the .6th of #ay. After the ter&ination of the +ee7 be%innin% #ay .6th, and after the e-hibition of the fil& by the plaintiff in a**ordan*e +ith the alle%ed *ontra*t +ith ('ddy, the plaintiff *a&e into *o'rt and &oved that, in vie+ of the fa*t that he had already obtained all that he desired to obtain or *o'ld obtain by his a*tion, na&ely, the e-hibition of the fil& in 8'estion d'rin% the +ee7 be%innin% #ay

.6th, there +as no reason for *ontin'in% it and &oved for its dis&issal. 4o this &otion ('ddy *onsented and the a*tion +as dis&issed as to hi&. 9't the other defendants ob"e*ted to the dis&issal of the a*tion on the %ro'nd that they desired to present to the *o'rt eviden*e sho+in% the da&a%es +hi*h they had s'ffered by reason of the iss'an*e of the preli&inary in"'n*tion prohibitin% the& fro& re*eivin% and e-hibitin% the fil& in 8'estion d'rin% the +ee7 be%innin% #ay .6. 4he *o'rt s'stained their ob"e*tion and de*lined to dis&iss the a*tion as to the&, and, on the Eth of A'%'st, heard the eviden*e as to da&a%es. He denied defendants the relief as7ed for and dis&issed their *lai& for da&a%es. 4hey there'pon too7 an appeal fro& that order, and that is the appeal +hi*h +e have no+ before 's and +hi*h is the s'b"e*t of the opinion of the *o'rt +ith +hi*h ) a& *on*'rrin%. 3e th's have this stran%e *ondition6 !n action for specific performance of a contract to deli(er a film for e1hi'ition during a gi(en time. ! preliminary mandatory in-unction ordering the deli(ery of the film in accordance with the contract. +he deli(ery of the film in accordance with the preliminary mandatory in-unction. +he actual e1hi'ition of the film during the time specified in the contract. 8o o'-ection to the issuance of the mandatory in-unction, to the deli(ery of the film, or to the ground that the plaintiff had o'tained full relief 'y means of the soHcalled preliminary remedy 'y (irtue of which the contract was actually specifically performed 'efore the action was tried. 8o o'-ection or e1ception to the order re;uiring the specific performance of the contract. ,nder s'*h *onditions it is possible for the defendant !spe"o and $aldarria%a to se*'re da&a%es for the +ron%f'l iss'an*e of the preli&inary in"'n*tion dire*ted a%ainst the& even tho'%h it be ad&itted that it +as erroneo'sly iss'ed and that there +as no %ro'nd therefor +hateverG )t see&s to &e that it is not. At the ti&e this a*tion +as be%'n the fil&, as +e have seen, +as in the possession of ('ddy and, +hile in his possession, he *o&plied +ith a *o&&and of the *o'rt to deliver it to plaintiff. )n p'rs'an*e of that *o&&and he delivered it to plaintiff, +ho 'sed it d'rin% the ti&e spe*ified in his *ontra*t +ith ('ddy? or, in other +ords, he &ade s'*h 'se of it as he desired and then ret'rned it to ('ddy. 4his order and the delivery of the fil& 'nder it +ere &ade in an a*tion in +hi*h the defendants !spe"o and $aldarria%a +ere parties, +itho't ob"e*tion on their part and +itho't ob"e*tion or e-*eption to the order. 4he fil& havin% been delivered to defendants5 *o&petitor, the plaintiff, 'nder a de*ree of the *o'rt to +hi*h they &ade no ob"e*tion and too7 no e-*eption and fro& +hi*h they have not appealed, +hat in"'ry *an they sho+ by reason of the in"'n*tion restrainin%

the& fro& &a7in% 'se of the fil&G )f they the&selves, by their *ond'*t, per&itted the plaintiff to &a7e it i&possible for the& to %ain possession of the fil& and to 'se it, then the preli&inary in"'n*tion prod'*ed no in"'ry for the reason that no har& *an res'lt fro& restrainin% a party fro& doin% a thin% +hi*h, +itho't s'*h restraint, it +o'ld be i&possible for hi& to do. #oreover, the order for the delivery of the fil& to plaintiff +as a *o&plete deter&ination of the ri%hts of the parties to the fil& +hi*h, +hile the *o'rt had no ri%ht to &a7e, nevertheless, +as valid and bindin% on all the parties, none of the& ob"e*tin% or ta7in% e-*eption thereto. 9ein% a *o&plete deter&ination of the ri%hts of the parties to the a*tion, it sho'ld have been the first point atta*7ed by the defendants, as it fore*losed the& *o&pletely and, if left in for*e, eli&inatin% every defense. 4his order +as &ade on #ay ..d and +as not e-*epted to or appealed fro&. 2n the Eth of A'%'st follo+in% the defendants appealed fro& the order dis&issin% their *lai& to da&a%es b't the order for the delivery of the fil& to plaintiff +as final at that ti&e and is no+ *on*l'sive on this *o'rt. Be*tion /:3 of the (ode of (ivil >ro*ed're, providin% for appeals by bill of e-*eptions, provides that 0'pon the rendition of final "'d%&ent disposin% of the a*tion, either party shall have the ri%ht to perfe*t a bill of e-*eptions for a revie+ by the B'pre&e (o'rt of all r'lin%s, orders, and "'d%&ent &ade in the a*tion, to +hi*h the party has d'ly e-*epted at the ti&e of &a7in% s'*h r'lin%, order, or "'d%&ent.1 3hile the order for the delivery of the fil& to plaintiff +as in one sense a preli&inary order, it +as in reality a final deter&ination of the ri%hts of the parties to the fil&, as it ordered the delivery thereof to plaintiff for his 'se. )f it had been d'ly e-*epted to, its validity *o'ld have been atta*7ed in an appeal fro& the final "'d%&ent thereafter entered in the a*tion. Not havin% been e-*epted to as re8'ired by the se*tion "'st referred to, it be*a&e final and *on*l'sive on all the parties to the a*tion, and +hen, on the Eth day of A'%'st follo+in%, the defendants presented their *lai& for da&a%es based on the alle%ed +ron%f'l iss'an*e of a te&porary restrainin% order, the +hole fo'ndation of their *lai& had disappeared by virt'e of the fa*t that the e-e*'tion of the order of the ..d of #ay had left nothin% for the& to liti%ate. 4he trial *o'rt, on the Eth of A'%'st, +o'ld have been f'lly "'stified in ref'sin% to hear the defendants on their *lai& for da&a%es. 4heir ri%ht thereto had been ad"'di*ated on the ..d of #ay and that ad"'di*ation had been d'ly p't into e-e*'tion +itho't protest, ob"e*tion or e-*eption, and +as, therefore, final and *on*l'sive on the& on the Eth of A'%'st. ) have presented this *on*'rrin% opinion in an atte&pt to prevent *onf'sion, if any, +hi*h &i%ht arise fro& the theory on +hi*h the *o'rt de*ides this

*ase. )t see&s to &e i&possible that the a*tion *an be one for a per&anent in"'n*tion. 4he very nat're of the *ase de&onstrates that a per&anent in"'n*tion is o't of the 8'estion. 4he only thin% that plaintiff desired +as to be per&itted to 'se the fil& for the +ee7 be%innin% the .6th of #ay. 3ith the ter&ination of that +ee7 his ri%hts e-pired. After that ti&e ('ddy +as perfe*tly free to t'rn the fil& over to the defendants !spe"o and $aldarria%a for e-hibition at any ti&e. An in"'n*tion per&anently prohibitin% the defendants fro& e-hibitin% the fil& in )loilo +o'ld have been 'n"'stifiable, as it +as so&ethin% that plaintiff did not as7 and did not +ant? and +o'ld have been an invasion of the ri%hts of ('ddy as, after the ter&ination of the +ee7 be%innin% #ay .6, he +as at liberty, 'nder his *ontra*t +ith plaintiff, to rent the fil& to the defendants !spe"o and $aldarria%a and per&it its e-hibition in )loilo at any ti&e. 4he plaintiff never as7ed to have defendants per&anently en"oined fro& e-hibitin% the fil& in )loilo and no party to the a*tion has s'%%ested s'*h thin%. 4he a*tion is one for spe*ifi* perfor&an*e p'rely? and +hile the *o'rt %ranted plaintiff ri%hts +hi*h sho'ld have been %ranted only after a trial of the a*tion, nevertheless, s'*h ri%ht havin% been %ranted before trial and none of the defendants havin% &ade ob"e*tion or ta7en e-*eption thereto, and the order %rantin% the& havin% be*o&e final, s'*h order be*a&e a final deter&ination of the a*tion, by reason of the nat're of the a*tion itself, the ri%hts of the parties be*a&e thereby finally deter&ined and the defendants !spe"o and $aldarria%a, bein% parties to the a*tion, +ere pre*l'ded fro& f'rther liti%ation relative to the s'b"e*t &atter of the *ontroversy. No da&a%es are *lai&ed by reason of the iss'an*e of the &andatory in"'n*tion 'nder +hi*h the fil& +as delivered to plaintiff and 'sed by hi& d'rin% the +ee7 be%innin% the .6th of #ay. 3hile the opinion says in the first para%raph that the a*tion is 0for da&a%es a%ainst the plaintiff for the alle%ed +ron%f'l iss'an*e of a &andatory and preli&inary in"'n*tion,1 the opinion also says in a latter portion that 0)t +ill be 'nne*essary for 's to in8'ire +hether the &andatory in"'n*tion a%ainst ('ddy +as properly iss'ed or not. No 8'estion is raised +ith referen*e to the iss'an*e of that in"'n*tion?1 and still later it is also stated that 0as to +hether or not the &andatory in"'n*tion sho'ld have been iss'ed, +e are not, as +e have said, *alled 'pon to deter&ine.1 ) repeat that no ob"e*tion +as &ade by the defendants to the iss'an*e of the &andatory in"'n*tion, no e-*eption +as ta7en to the order on +hi*h it +as iss'ed and no appeal has been ta7en therefro&. 4hat order is no+ final and *on*l'sive and +as at the ti&e this appeal +as ta7en. 4hat bein% so, the ri%hts of the defendants +ere fore*losed thereby. 4he defendants !spe"o and $aldarria%a *annot no+ be

heard to say that they +ere da&a%ed by the iss'an*e of the preli&inary restrainin% in"'n*tion iss'ed on the sa&e day as the &andatory in"'n*tion. Fro& +hat has been said it is *lear, it see&s to &e, that the 8'estion of a brea*h of *ontra*t by ind'*e&ent, +hi*h is s'bstantially the only 8'estion dis*'ssed and de*ided, is not in the *ase in reality and, in &y "'d%&ent, sho'ld not be to'*hed 'pon. (o'rts +ill not pro*eed +ith a liti%ation and dis*'ss and de*ided 8'estion +hi*h &i%ht possibly be involved in the *ase +hen it *learly appears that there re&ains nothin% abo't +hi*h to liti%ate, the +hole s'b"e*t &atter of the ori%inal a*tion havin% been settled and the parties havin% no real *ontroversy to present. At the ti&e the defendants !spe"o and $aldarria%a offered their *lai& for da&a%es arisin% o't of the +ron%f'l iss'an*e of the restrainin% order, there +as nothin% bet+een the& and the plaintiff to liti%ate, the ri%htf'lness of plaintiff5s de&and havin% already been finally ad"'di*ated and deter&ined in the sa&e a*tion.

FA$)S2 ('ddy +as the o+ner of the fil& $i%o&ar April .:6 He rented it to (. B. Gil*hrist for a +ee7 for >/.5 A fe+ days to the date of delivery, ('ddy sent the &oney ba*7 to Gil*hrist ('ddy rented the fil& to !spe"o and his partner $aldarria%a >35A for the +ee7 7no+in% that it +as rented to so&eone else and that ('ddy a**epted it be*a'se he +as payin% abo't three ti&es as &'*h as he had *ontra*ted +ith Gil*hrist b't they didnPt 7no+ the identity of the other party Gil*hrist filed for in"'n*tion a%ainst these parties 4rial (o'rt and (A6 %ranted - there is a *ontra*t bet+een Gil*hrist and ('ddy ISS&?2 0AD !spe"o and his partner $aldarria%a sho'ld be liable for da&a%es tho'%h they do not 7no+ the identity of Gil*hrist

(?%32 I?S. "'d%&ent is affir&ed 4hat ('ddy +as liable in an a*tion for da&a%es for the brea*h of that *ontra*t, there *an beno do'bt. the &ere ri%ht to *o&pete *o'ld not "'stify the appellants in intentionally ind'*in% ('ddy to ta7e a+ay the appelleePs *ontra*t'al ri%hts

!veryone has a ri%ht to en"oy the fr'its and advanta%es of his o+n enterprise, ind'stry, s7ill and *redit. He has no ri%ht to be free fro& &ali*io's and +anton interferen*e, dist'rban*e or annoyan*e. )f dist'rban*e or loss *o&e as a res'lt of *o&petition, or the e-er*ise of li7e ri%hts by others, it is da&n'& abs8'e in"'ria<loss +itho't in"'ry=, 'nless so&e s'perior ri%ht by *ontra*t or other+ise is interfered +ith $uddy contract on the part of the appellants was a desire to make a profit by e.hibiting the film in their theater. )here was no malice beyond this desire1 but this fact does not relieve them of the legal liabilityfor interfering with that contract and causing its breach. liability of the appellants arises fro& 'nla+f'l a*ts and not fro& *ontra*t'al obli%ations, as they +ere 'nder no s'*h obli%ations to ind'*e ('ddy to violate his *ontra*t +ith Gil*hrist Bo that if the a*tion of Gil*hrist had been one for da&a%es, it +o'ld be %overned by *hapter ., title /6, boo7 : of the (ivil (ode. Arti*le /9A. of that *ode provides that a person +ho, by a*t or o&ission, *a'ses da&a%es to another +hen there is fa'lt or ne%li%en*e, shall be obli%ed to repair the da&a%e do done 4here is nothin% in this arti*le +hi*h re8'ires as a *ondition pre*edent to the liability of a tort-feasor that he &'st 7no+ the identity of a person to +ho& he *a'ses da&a%es An in"'n*tion is a Qspe*ial re&edyQ +hi*h +as there iss'ed by the a'thority and 'nder the seal of a *o'rt of e8'ity, and li&ited, as in order *ases +here e8'itable relief is so'%ht, to *ases +here there is no Qplain, ade8'ate, and *o&plete re&edy at la+,Q +hi*h Q+ill not be %ranted +hile the ri%hts bet+een the parties are 'ndeter&ined, e-*ept in e-traordinary *ases +here &aterial and irreparable in"'ry +ill be done,Q +hi*h *annot be *o&pensated in da&a%es, and +here there +ill be no ade8'ate re&edy, and +hi*h +ill not, as a r'le, be %ranted, to ta7e property o't of the possession of one party and p't it into that of another +hose title has not been established by la+ irreparable in"'ry not &eant s'*h in"'ry as is beyond the possibility of repair, or beyond possible *o&pensation in da&a%es, nor ne*essarily %reat in"'ry or %reat da&a%e, b't that spe*ies of in"'ry, +hether %reat or s&all, that o'%ht not to be s'b&itted to on the one hand or infli*ted on the other? and, be*a'se it is so lar%e on the one hand, or so s&all on the other, is of s'*h *onstant and fre8'ent re*'rren*e that no fair or reasonable redress *an be had therefor in a *o'rt of la+

Gil*hrist +as fa*in% the i&&ediate prospe*t of di&inished profits by reason of the fa*t that the appellants had ind'*ed ('ddy to rent to the& the fil& Gil*hrist had *o'nted 'pon as his feat're fil& )t is 8'ite apparent that to esti&ate +ith any de*ree of a**'ra*y the da&a%es +hi*h Gil*hrist +o'ld li7ely s'ffer fro& s'*h an event +o'ld be 8'ite diffi*'lt if not i&possible Bo far as the preli&inary in"'n*tion iss'ed a%ainst the appellants is *on*erned, +hi*h prohibited the& fro& e-hibitin% the $i%o&ar d'rin% the +ee7 +hi*h Gil*hrist desired to e-hibit it, +e are of the opinion that the *ir*'&stan*es "'stified the iss'an*e of that in"'n*tion in the dis*retion of the *o'rt the re&edy by in"'n*tion *annot be 'sed to restrain a le%iti&ate *o&petition, tho'%h s'*h *o&petition +o'ld involve the violation of a *ontra*t Beparate 2pinion6 #2R!LANF, J., *on*'rrin%6 4he *o'rt see&s to be of the opinion that the a*tion is one for a per&anent in"'n*tion? +hereas, 'nder &y vie+ of the *ase, it is one for spe*ifi* perfor&an*e. 4he very nat're of the *ase de&onstrates that a per&anent in"'n*tion is o't of the 8'estion. 4he only thin% that plaintiff desired +as to be per&itted to 'se the fil& for the +ee7 be%innin% the .6th of #ay. 3ith the ter&ination of that +ee7 his ri%hts e-pired. After that ti&e ('ddy +as perfe*tly free to t'rn the fil& over to the defendants !spe"o and $aldarria%a for e-hibition at any ti&e. No da&a%es are *lai&ed by reason of the iss'an*e of the &andatory in"'n*tion 'nder +hi*h the fil& +as delivered to plaintiff and 'sed by hi& d'rin% the +ee7 be%innin% the .6th of #ay.

G.R. No. L-188#5

A&:&,0 1(, 192;

TH 4OARD OF LI<+IDATORS1 r$/r$,$3063: TH GO= RNM NT OF TH R P+4LIC OF TH PHILIPPIN S,plaintiff-appellant, vs. H IRS OF MA>IMO M. KALA),2 J+AN 4OCAR, STAT OF TH D C AS D CASIMIRO GARCIA," a3. L ONOR MOLL, defendants-appellees. 1imeon M. Gopeng%o and 1oli%itor General for plaintiff5appellant. &. 7. 7ernande(, Emma 6#is#mbing, 0ernando and 6#is#mbing, Jr.8 'on%e Enrile, 1ig#ion +e-na, Monte%illo and !elo for defendants5appellees.

SANCH 5, J.: )he Dational $oconut $orporation 8DA$L$L, for short: was chartered as a non-profit governmental organi6ation on ;ay *, "9,# by $ommonwealth Act +"- avowedly for the protection, preservation and development of the coconut industry in the Philippines. Ln August ", "9,=, DA$L$L<s charter was amended B5epublic Act +C to grant that corporation the e.press power Eto buy, sell, barter, e.port, and in any other manner deal in, coconut, copra, and dessicated coconut, as well as their by-products, and to act as agent, broker or commission merchant of the producers, dealers or merchantsE thereof. )he charter amendment was enacted to stabili6e copra prices, to serve coconut producers by securing advantageous prices for them, to cut down to a minimum, if not altogether eliminate, the margin of middlemen, mostly aliens. , 7eneral manager and board chairman was ;a.imo ;. Galaw1 defendants Nuan 'ocar and $asimiro 7arcia were members of the 'oard1 defendant %eonor ;oll became director only on 3ecember >>, "9,*. DA$L$L, after the passage of 5epublic Act +, embarked on copra trading activities. Amongst the scores of contracts e.ecuted by general manager Galaw are the disputed contracts, for the delivery of copra, "i(2 8a: Nuly !#, "9,*2 Ale.ander Adamson F $o., for >,### long tons, P"=*.##2 per ton, f. o. b., delivery2 August and September, "9,*. )his contract was later assigned to %ouis 3reyfus F $o. 8Lverseas: %td. 8b: August ",, "9,*2 Ale.ander Adamson F $o., for >,### long tons P",+.## per long ton, f.o.b., Philippine ports, to be shipped2 September-Lctober, "9,*. )his contract was also assigned to %ouis 3reyfus F $o. 8Lverseas: %td. 8c: August >>, "9,*2 Pacific Oegetable $o., for !,### tons, P"!*.+# per ton, delivery2 September, "9,*. 8d: September +, "9,*2 Spencer Gellog F Sons, for ",### long tons, P"=#.## per ton, c.i.f., %os Angeles, $alifornia, delivery2 Dovember, "9,*. 8e: September 9, "9,*2 Franklin 'aker 3ivision of 7eneral Foods $orporation, for ",+## long tons, P"=,,## per ton, c.i.f., Dew Iork, to be shipped in Dovember, "9,*. 8f: September ">, "9,*2 %ouis 3reyfus F $o. 8Lverseas: %td., for !,### long tons, P"+,.## per ton, f.o.b., ! Philippine ports, delivery2 Dovember, "9,*. 8g: September "!, "9,*2 Nuan $o uangco, for >,### tons, P"*+.## per ton, delivery2 Dovember and 3ecember, "9,*. )his contract was assigned to Pacific Oegetable $o.

8h: Lctober >*, "9,*2 Fairwood F $o., for ",### tons, P>"#.## per short ton, c.i.f., Pacific ports, delivery2 3ecember, "9,* and Nanuary, "9,-. )his contract was assigned to Pacific Oegetable $o. 8i: Lctober >-, "9,*2 Fairwood F $o., for ",### tons, P>"#.## per short ton, c.i.f., Pacific ports, delivery2 Nanuary, "9,-. )his contract was assigned to Pacific Oegetable $o. An unhappy chain of events conspired to deter DA$L$L from fulfilling these contracts. Dature supervened. Four devastating typhoons visited the Philippines2 the first in Lctober, the second and third in Dovember, and the fourth in 3ecember, "9,*. $oconut trees throughout the country suffered e.tensive damage. $opra production decreased. Prices spiralled. 0arehouses were destroyed. $ash re/uirements doubled. 3eprivation of e.port facilities increased the time necessary to accumulate shiploads of copra. Muick turnovers became impossible, financing a problem. 0hen it became clear that the contracts would be unprofitable, Galaw submitted them to the board for approval. It was not until 3ecember >>, "9,* when the membership was completed. 3efendant ;oll took her oath on that date. A meeting was then held. Galaw made a full disclosure of the situation, apprised the board of the impending heavy losses. Do action was taken on the contracts. Deither did the board vote thereon at the meeting of Nanuary *, "9,- following. )hen, on Nanuary "", "9,-, President 5o.as made a statement that the DA$L$L head did his best to avert the losses, emphasi6ed that government concerns faced the same risks that confronted private companies, that DA$L$L was recouping its losses, and that Galaw was to remain in his post. Dot long thereafter, that is, on Nanuary !#, "9,-, the board met again with Galaw, 'ocar, 7arcia and ;oll in attendance. )hey unanimously approved the contracts hereinbefore enumerated. As was to be e.pected, DA$L$L but partially performed the contracts, as follows2 !#-ers Pacific Oegetable Lil Spencer Gellog Franklin 'aker %ouis 3reyfus %ouis 3reyfus 8Adamson contract of Nuly !#, "9,*: %ouis 3reyfus 8Adamson $ontract of August ",, "9,*: )L)A%S Tons Deli"ered >,!-=.,+ Done ",### -## ","+# ",*++ *,#9".,+ 9ndeli"ered ,,="!.++ ",### +## >,>## -+# >,+ 9,,#-.++

)he buyers threatened damage suits. Some of the claims were settled, "i(2 Pacific Oegetable Lil $o., in copra delivered by DA$L$L, P+!9,###.##1 Franklin 'aker $orporation, P*-,>"#.##1 Spencer Gellog F Sons, P"+9,#,#.##. 'ut one buyer, %ouis 3reyfus F 7o. 8Lverseas: %td., did in fact sue before the $ourt of First Instance of ;anila, upon claims as follows2 For the undelivered copra under the Nuly !# contract 8$ivil $ase ,,+9:1 P>-*,#>-.##1 for the balance on the August ", contract 8$ivil $ase ,!9-:, P*+,#9-.=!1 for that per the September "> contract reduced to udgment 8$ivil $ase ,!>>, appealed to this $ourt in %->->9:, P,,*,9#-.,#. )hese cases culminated in an out-of-court amicable settlement when the Galaw management was already out. )he corporation thereunder paid 3reyfus P+=*,#>,.+> representing *#Q of the total claims. 0ith particular reference to the 3reyfus claims, DA$L$L put up the defenses that2 8": the contracts were void because %ouis 3reyfus F $o. 8Lverseas: %td. did not have license to do business here1 and 8>: failure to deliver was due to for%e maje#re, the typhoons. )o pro ect the utter unreasonableness of this compromise, we reproduce in hae% "erba this finding below2 . . . (owever, in similar cases brought by the same claimant B%ouis 3reyfus F $o. 8Lverseas: %td.C against Santiago Sy uco for non-delivery of copra also involving a claim of P!,+,=+,.=- wherein defendant set up same defenses as above, plaintiff accepted a promise of P+,###.## only 8?.hs. !" F !> (eirs.: Following the same proportion, the claim of 3reyfus against DA$L$L should have been compromised for only P"#,###.##, if at all. Dow, why should defendants be held liable for the large sum paid as compromise by the 'oard of %i/uidators4 This is j#st a sample to sho, ho, #nj#st it ,o#ld be to hold defendants liable for the readiness ,ith ,hi%h the !oard of &i/#idators disposed of the :ACOCO f#nds, altho#gh there ,as m#%h possibilit- of s#%%essf#llresisting the %laims, or at least settlement for nominal s#ms like ,hat happened in the 1-j#%o %ase.+ All the settlements sum up to P",!,!,>*,.+>. In this suit started in February, "9,9, DA$L$L seeks to recover the above sum of P",!,!,>*,.+> from general manager and board chairman ;a.imo ;. Galaw, and directors Nuan 'ocar, $asimiro 7arcia and %eonor ;oll. It charges Galaw with negligence under Article "9#> of the old $ivil $ode 8now Article >"*=, new $ivil $ode:1 and defendant board members, including Galaw, with bad faith andAor breach of trust for having approved the contracts. )he fifth amended complaint, on which this case was tried, was filed on Nuly >, "9+9. 3efendants resisted the action upon defenses hereinafter in this opinion to be discussed. )he lower court came out with a udgment dismissing the complaint without costs as well as defendants< counterclaims, e.cept that plaintiff was ordered to pay the heirs of ;a.imo Galaw the sum of P>,=#".9, for unpaid salaries and cash deposit due the deceased Galaw from DA$L$L.

Plaintiff appealed direct to this $ourt. Plaintiff<s brief did not, /uestion the udgment on Galaw<s counterclaim for the sum of P>,=#".9,. 5ight at the outset, two preliminary /uestions raised before, but adversely decided by, the court below, arrest our attention. Ln appeal, defendants renew their bid. And this, upon established urisprudence that an appellate court may base its decision of affirmance of the udgment below on a point or points ignored by the trial court or in which said court was in error.= ". First of the threshold /uestions is that advanced by defendants that plaintiff 'oard of %i/uidators has lost its legal personality to continue with this suit. Accepted in this urisdiction are three methods by which a corporation may wind up its affairs2 8": under Section !, 5ule "#,, of the 5ules of $ourt Bwhich superseded Section == of the $orporation %awC* whereby, upon voluntary dissolution of a corporation, the court may direct Esuch disposition of its assets as ustice re/uires, and may appoint a receiver to collect such assets and pay the debts of the corporation1E 8>: under Section ** of the $orporation %aw, whereby a corporation whose corporate e.istence is terminated, Eshall nevertheless be continued as a body corporate for three years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property and to divide its capital stock, but not for the purpose of continuing the business for which it was established1E and 8!: under Section *- of the $orporation %aw, by virtue of which the corporation, within the three year period ust mentioned, Eis authori6ed and empowered to convey all of its property to trustees for the benefit of members, stockholders, creditors, and others interested.E It is defendants< pose that their case comes within the coverage of the second method. )hey reason out that suit was commenced in February, "9,91 that by ?.ecutive Lrder !*>, dated Dovember >,, "9+#, DA$L$L, together with other government-owned corporations, was abolished, and the 'oard of %i/uidators was entrusted with the function of settling and closing its affairs1 and that, since the three year period has elapsed, the 'oard of %i/uidators may not now continue with, and prosecute, the present case to its conclusion, because ?.ecutive Lrder !*> provides in Section " thereof that K Sec.". )he Dational Abaca and Lther Fibers $orporation, the Dational $oconut $orporation, the Dational )obacco $orporation, the Dational Food Producer $orporation and the former enemy-owned or controlled corporations or associations, . . . are hereby abolished. )he said corporations shall be li/uidated in accordance with law, the provisions of this Lrder, andAor in such manner as the President of the Philippines may direct1 'ro"ided, ho,e"er, )hat each of the said corporations shall nevertheless be continued as a body corporate for a period of three 8!: years from the effective date of this ?.ecutive Lrder for the

purpose of prosecuting and defending suits by or against it and of enabling the 'oard of %i/uidators gradually to settle and close its affairs, to dispose of and, convey its property in the manner hereinafter provided. $iting ;r. Nustice Fisher, defendants proceed to argue that even where it may be found impossible within the ! year period to reduce disputed claims to udgment, nonetheless, Esuits by or against a corporation abate when it ceases to be an entity capable of suing or being suedE 8Fisher, )he Philippine %aw of Stock $orporations, pp. !9#-!9":. Corp#s J#ris 1e%#nd#m likewise is authority for the statement that EBtChe dissolution of a corporation ends its e.istence so that there must be statutory authority for prolongation of its life e"en for p#rposes of pending litigationE9 and that suit Ecannot be continued or revived1 nor can a valid udgment be rendered therein, and a udgment, if rendered, is not only erroneous, but void and sub ect to collateral attack.E "# So it is, that abatement of pending actions follows as a matter of course upon the e.piration of the legal period for li/uidation, "" unless the statute merely re/uires a commencement of suit within the added time. "> For, the court cannot e.tend the time alloted by statute. "! 0e, however, e.press the view that the e.ecutive order abolishing DA$L$L and creating the 'oard of %i/uidators should be e.amined in conte.t. )he proviso in Section " of ?.ecutive Lrder !*>, whereby the corporate e.istence of DA$L$L was continued for a period of three years from the effectivity of the order for Ethe purpose of prosecuting and defending suits by or against it and of enabling the 'oard of %i/uidators gradually to settle and close its affairs, to dispose of and convey its property in the manner hereinafter providedE, is to be read not as an isolated provision but in con unction with the whole. So reading, it will be readily observed that no time limit has been tacked to the e.istence of the 'oard of %i/uidators and its function of closing the affairs of the various government owned corporations, including DA$L$L. 'y Section > of the e.ecutive order, while the boards of directors of the various corporations were abolished, their powers and functions and duties under e.isting laws were to be assumed and e.ercised by the 'oard of %i/uidators. )he President thought it best to do away with the boards of directors of the defunct corporations1 at the same time, however, the President had chosen to see to it that the 'oard of %i/uidators step into the vacuum. And nowhere in the e.ecutive order was there any mention of the lifespan of the 'oard of %i/uidators. A glance at the other provisions of the e.ecutive order buttresses our conclusion. )hus, li/uidation by the 'oard of %i/uidators may, under section ", proceed in accordance with law, the provisions of the e.ecutive order, Eand;or in s#%h manner as the 'resident of the 'hilippines ma- dire%t .E 'y Section ,, when any property, fund, or pro ect is transferred to any governmental instrumentality Efor administration or continuance of any pro ect,E the necessary funds therefor shall be taken from the corresponding special fund created in Section +. Section +, in turn, talks of special funds established from the Enet proceeds of the li/uidationE of the various corporations abolished. And by Section, *, fifty per centum of the fees collected from the copra standardi6ation and inspection service shall accrue Eto the special fund created in section + hereof for the rehabilitation and development of the coconut industry.E Implicit in all these, is that the term of life of the 'oard of %i/uidators is without time limit.

$ontemporary history gives us the fact that the 'oard of %i/uidators still e.ists as an office with officials and numerous employees continuing the ob of li/uidation and prosecution of several court actions. Dot that our views on the power of the 'oard of %i/uidators to proceed to the final determination of the present case is without urisprudential support. )he first udicial test before this $ourt is :ational Aba%a and Other 0ibers Corporation "s. 'ore , %-"=**9, August "=, "9=". In that case, the corporation, already dissolved, commenced suit within the three-year e.tended period for li/uidation. )hat suit was for recovery of money advanced to defendant for the purchase of hemp in behalf of the corporation. She failed to account for that money. 3efendant moved to dismiss, /uestioned the corporation<s capacity to sue. )he lower court ordered plaintiff to include as co-party plaintiff, The !oard of &i/#idators, to which the corporation<s li/uidation was entrusted by E$e%#ti"e Order !*>. Plaintiff failed to effect inclusion. )he lower court dismissed the suit. Plaintiff moved to reconsider. 7round2 e.cusable negligence, in that its counsel prepared the amended complaint, as directed, and instructed the board<s incoming and outgoing correspondence clerk, ;rs. 5eceda Oda. de Lcampo, to mail the original thereof to the court and a copy of the same to defendant<s counsel. She mailed the copy to the latter but failed to send the original to the court. )his motion was re ected below. Plaintiff came to this $ourt on appeal. 0e there said that Ethe rule appears to be well settled that, in the absence of statutory provision to the contrary, pending actions by or against a corporation are abated upon e.piration of the period allowed by law for the li/uidation of its affairs.E 0e there said that EBoCur $orporation %aw contains no provision authori6ing a corporation, after three 8!: years from the e.piration of its lifetime, to continue in its corporate name actions instituted by it within said period of three 8!: years.E ", (owever, these precepts notwithstanding, we, in effect, held in that case that the 'oard of %i/uidators escapes from the operation thereof for the reason that EBoCb"io#sl-, the %omplete loss of plaintiff s %orporate e$isten%e after the e$piration of the period of three 8<: -ears for the settlement of its affairs is ,hat impelled the 'resident to %reate a !oard of &i/#idators, to %ontin#e the management of s#%h matters as ma- then be pending.E"+ 0e accordingly directed the record of said case to be returned to the lower court, with instructions to admit plaintiff<s amended complaint to include, as party plaintiff, the 'oard of %i/uidators. 3efendants< position is vulnerable to attack from another direction. 'y ?.ecutive Lrder !*>, the government, the sole stockholder, abolished DA$L$L, and placed its assets in the hands of the 'oard of %i/uidators. )he 'oard of %i/uidators thus became the tr#stee on behalf of the government. It was an e.press trust. )he legal interest became vested in the trustee K the 'oard of %i/uidators. )he beneficial interest remained with the sole stockholder K the government. At no time had the government withdrawn the property, or the authority to continue the present suit, from the 'oard of %i/uidators. If for this reason alone, we cannot stay the hand of the 'oard of %i/uidators from prosecuting this case to its final conclusion. "= )he provisions of Section *- of the $orporation %aw K the third method of winding up corporate affairs K find application.

0e, accordingly, rule that the 'oard of %i/uidators has personality to proceed as2 partyplaintiff in this case. >. 3efendants< second poser is that the action is unenforceable against the heirs of Galaw. Appellee heirs of Galaw raised in their motion to dismiss, "* which was overruled, and in their nineteenth special defense, that plaintiff<s action is personal to the deceased ;a.imo ;. Galaw, and may not be deemed to have survived after his death. "- )hey say that the controlling statute is Section +, 5ule -*, of the "9,# 5ules of $ourt. "9 which provides that EBaCll claims for money against the decedent, arising from contract, e.press or impliedE, must be filed in the estate proceedings of the deceased. 0e disagree. )he suit here revolves around the alleged negligent acts of Galaw for having entered into the /uestioned contracts without prior approval of the board of directors, to the damage and pre udice of plaintiff1 and is against Galaw and the other directors for having subse/uently approved the said contracts in bad faith andAor breach of trust.E $learly then, the present case is not a mere action for the recovery of money nor a claim for money arising from contract. )he suit involves alleged tortious acts. And the action is embraced in suits filed Eto recover damages for an in ury to person or property, real or personalE, which survive. ># )he leading e.positor of the law on this point is Ag#as "s. &lemos, %-"-"#*, August !#, "9=>. )here, plaintiffs sought to recover damages from defendant %lemos. )he complaint averred that %lemos had served plaintiff by registered mail with a copy of a petition for a writ of possession in $ivil $ase ,->, of the $ourt of First Instance at $atbalogan, Samar, with notice that the same would be submitted to the Samar court on February >!, "9=# at -2## a.m.1 that in view of the copy and notice served, plaintiffs proceeded to the said court of Samar from their residence in ;anila accompanied by their lawyers, only to discover that no such petition had been filed1 and that defendant %lemos maliciously failed to appear in court, so that plaintiffs< e.penditure and trouble turned out to be in vain, causing them mental anguish and undue embarrassment. 3efendant died before he could answer the complaint. &pon leave of court, plaintiffs amended their complaint to include the heirs of the deceased. )he heirs moved to dismiss. )he court dismissed the complaint on the ground that the legal representative, and not the heirs, should have been made the party defendant1 and that, anyway, the action being for recovery of money, testate or intestate proceedings should be initiated and the claim filed therein. )his $ourt, thru ;r. Nustice Nose '. %. 5eyes, there declared2 Plaintiffs argue with considerable cogency that contrasting the correlated provisions of the 5ules of $ourt, those concerning claims that are barred if not filed in the estate settlement proceedings 85ule -*, sec. +: and those defining actions that survive and may be prosecuted against the e.ecutor or administrator 85ule --, sec. ":, it is apparent that actions for damages caused by tortious conduct of a defendant 8as in the case at bar: survive the death of the latter.

&nder 5ule -*, section +, the actions that are abated by death are2 8": claims for funeral e.penses and those for the last sickness of the decedent1 8>: udgments for money1 and 8!: Eall claims for money against the decedent, arising from %ontra%t e$press or implied.E Done of these includes that of the plaintiffsappellants1 for it is not enough that the claim against the deceased party be for money, but it must arise from Econtract e.press or impliedE, and these words 8also used by the 5ules in connection with attachments and derived from the common law: were construed in &e#ng !en "s. O !rien, !- Phil. "->, "-9-"9,, Eto include all purely personal obligations other than those which have their source in deli%t or tort.E &pon the other hand, 5ule --, section ", enumerates actions that survive against a decedent<s e.ecutors or administrators, and they are2 8": actions to recover real and personal property from the estate1 8>: actions to enforce a lien thereon1 and 8!: actions to recover damages for an in ury to person or property. )he present suit is one for damages under the last class, it having been held that Ein ury to propertyE is not limited to in uries to specific property, but e.tends to other wrongs by which personal estate is in ured or diminished 8'aker vs. $randall, ,* Am. 5ep. ">=1 also "*" A.%.5., "!9+:. )o maliciously cause a party to incur unnecessary e.penses, as charged in this case, is certainly in ury to that party<s property 8Navier vs. Araneta, %-,!=9, Aug. !", "9+!:. )he ruling in the preceding case was hammered out of facts comparable to those of the present. Do cogent reason e.ists why we should break away from the views ust e.pressed. And, the conclusion remains2 Action against the Galaw heirs and, for the matter, against the ?state of $asimiro 7arcia survives. )he preliminaries out of the way, we now go to the core of the controversy. !. Plaintiff levelled a ma or attack on the lower court<s holding that Galaw ustifiedly entered into the controverted contracts without the prior approval of the corporation<s directorate. Plaintiff leans heavily on DA$L$L<s corporate by-laws. Article IO 8b:, $hapter III thereof, recites, as amongst the duties of the general manager, the obligation2 E8b: )o perform or e.ecute on behalf of the $orporation upon prior approval of the 'oard, all contracts necessary and essential to the proper accomplishment for which the $orporation was organi6ed.E Dot of de minimis importance in a proper approach to the problem at hand, is the nature of a general manager<s position in the corporate structure. A rule that has gained acceptance through the years is that a corporate officer Eintrusted with the general management and control of its business, has implied authority to make any contract or do any other act which is necessary or appropriate to the conduct of the ordinary business of the corporation. >"As such officer, Ehe may, without any special authority from the 'oard of 3irectors perform all acts of an ordinary nature, which by usage or

necessity are incident to his office, and may bind the corporation by contracts in matters arising in the usual course of business. >> )he problem, therefore, is whether the case at bar is to be taken out of the general concept of the powers of a general manager, given the cited provision of the DA$L$L by-laws re/uiring prior directorate approval of DA$L$L contracts. )he peculiar nature of copra trading, at this point, deserves e.press articulation. Lrdinary in this enterprise are copra sales for future delivery. )he movement of the market re/uires that sales agreements be entered into, even though the goods are not yet in the hands of the seller. Gnown in business parlance as for,ard sales, it is concededly the practice of the trade. A certain amount of speculation is inherent in the undertaking. DA$L$L was much more conservative than the e.porters with big capital. )his short-selling was inevitable at the time in the light of other factors such as availability of vessels, the /uantity re/uired before being accepted for loading, the labor needed to prepare and sack the copra for market. )o DA$L$L, forward sales were a necessity. $opra could not stay long in its hands1 it would lose weight, its value decrease. Above all, DA$L$L<s limited funds necessitated a /uick turnover. $opra contracts then had to be e.ecuted on short notice K at times within twenty-four hours. )o be appreciated then is the difficulty of calling a formal meeting of the board. Such were the environmental circumstances when Galaw went into copra trading. %ong before the disputed contracts came into being, Galaw contracted K by himself alone as general manager K for forward sales of copra. For the fis%al -ear ending J#ne <=, 2>?@, Galaw signed some =# such contracts for the sale of copra to divers parties. 3uring that period, from those copra sales, DA$L$L reaped a gross profit of P!,=!","-".,-. So pleased was DA$L$L<s board of directors that, on 3ecember +, "9,=, in Galaw<s absence, it voted to grant him a spe%ial bon#s Ein recognition of the signal achievement rendered by him in putting the $orporation<s business on a selfsufficient basis within a few months after assuming office, despite numerous handicaps and difficulties.E )hese previous contract it should be stressed, were signed by Galaw ,itho#t prior a#thorit- from the board. Said contracts were known all along to the board members. Dothing was said by them. )he aforesaid contracts stand to prove one thing2 Lbviously, DA$L$L board met the difficulties attendant to forward sales by leaving the adoption of means to end, to the sound discretion of DA$L$L<s general manager ;a.imo ;. Galaw. %iberally spread on the record are instances of contracts e.ecuted by DA$L$L<s general manager and submitted to the board after their consummation, not before. )hese agreements were not Galaw<s alone. Lne at least was e.ecuted by a predecessor way back in "9,#, soon after DA$L$L was chartered. It was a contract of lease e.ecuted on Dovember "=, "9,# by the then general manager and board chairman, ;a.imo 5odrigue6, and A. Soriano y $ia., for the lease of a space in Soriano

'uilding Ln Dovember ",, "9,=, DA$L$L, thru its general manager Galaw, sold !,### tons of copra to the Food ;inistry, %ondon, thru Sebastian Palanca. Ln 3ecember >>, "9,*, when the controversy over the present contract cropped up, the board voted to approve a lease contract previously e.ecuted between Galaw and Fidel Isberto and &lpiana Isberto covering a warehouse of the latter. Ln the same date, the board gave its nod to a contract for renewal of the services of 3r. ;anuel %. 5o.as. In fact, also on that date, the board re/uested Galaw to report for action all %opra %ontra%ts signed by him Eat the meeting immediatel- follo,ing the signing of the %ontra%ts .E )his practice was observed in a later instance when, on Nanuary *, "9,-, the board approved two previous contracts for the sale of ",### tons of copra each to a certain ES$APE and a certain E7DAPLE. And more. Ln 3ecember "9, "9,=, the board resolved to ratify the brokerage commission of >Q of Smith, 'ell and $o., %td., in the sale of ,,!## long tons of copra to the French 7overnment. Such ratification was necessary because, as stated by Galaw in that same meeting, Eunder an e.isting resolution he is authori6ed to give a brokerage fee of only "Q on sales of copra made through brokers.E Ln Nanuary "+, "9,*, the brokerage fee agreements of "-"A>Q on three e.port contracts, and >Q on three others, for the sale of copra were approved by the board with a proviso authori6ing the general manager to pay a commission up to the amount of "-"A>Q E ,itho#t f#rther a%tion b- the !oard.E Ln February +, "9,*, the brokerage fee of >Q of N. $o uangco F $o. on the sale of >,### tons of copra was favorably acted upon by the board. Ln ;arch "9, "9,*, a >Q brokerage commission was similarly approved by the board for Pacific )rading $orporation on the sale of >,### tons of copra. It is to be noted in the foregoing cases that only the brokerage fee agreements were passed upon by the board,not the sales contracts themselves. And even those fee agreements were submitted onl- when the commission e.ceeded the ceiling fi.ed by the board. Gnowledge by the board is also discernible from other recorded instances. 2A,phB2.CDt 0hen the board met on ;ay "#, "9,*, the directors discussed the copra situation2 )here was a slow downward trend but belief was entertained that the nadir might have already been reached and an improvement in prices was e.pected. In view thereof, Galaw informed the board that Ehe intends to ,ait #ntil he has signed %ontra%ts to sell before starting to b#- %opra.E>! In the board meeting of Nuly >9, "9,*, Galaw reported on the copra price conditions then current2 )he copra market appeared to have become fairly steady1 it was not e.pected that copra prices would again rise very high as in the unprecedented boom during Nanuary-April, "9,*1 the prices seemed to oscillate between P",# to P"+# per ton1 a radical rise or decrease was not indicated by the trends. Galaw continued to say that Ethe Corporation has been %losing %ontra%ts for the sale of %opra generally with a margin of P+.## to P*.## per hundred kilos.E >,

0e now lift the following e.cerpts from the minutes of that same board meeting of Nuly >9, "9,*2 +>". In connection with the buying and selling of copra the 'oard in/uired ,hether it is the pra%ti%e of the management to %lose %ontra%ts of sale first before b#-ing. )he 7eneral ;anager replied that this pra%ti%e is generallfollo,ed but that it is not always possible to do so for two reasons2 8": )he role of the Dacoco to stabili6e the prices of copra re/uires that it should not cease buying even when it does not have actual contracts of sale since the suspension of buying by the Dacoco will result in middlemen taking advantage of the temporary inactivity of the $orporation to lower the prices to the detriment of the producers. 8>: )he movement of the market is such that it may not be practical always to wait for the consummation of contracts of sale before beginning to buy copra. )he 7eneral ;anager e.plained that in this connection a certain amount of speculation is unavoidable. (owever, he said that the Dacoco is much more conservative than the other big e.porters in this respect. >+ Settled urisprudence has it that where similar acts have been approved by the directors as a matter of general practice, custom, and policy, the general manager may bind the company without formal authori6ation of the board of directors. >= In varying language, e.istence of such authority is established, by proof of the %o#rse of b#siness, the #sage and pra%ti%es of the company and by the kno,ledge which the board of directors has, or must bepres#med to have, of acts and doings of its subordinates in and about the affairs of the corporation. >* So also, . . . authority to act for and bind a corporation may be presumed from acts of recognition in other instances where the power was in fact e.ercised. >. . . )hus, when, in the usual course of business of a corporation, an officer has been allowed in his official capacity to manage its affairs, his authority to represent the corporation may be implied from the manner in which he has been permitted by the directors to manage its business. >9 In the case at bar, the practice of the corporation has been to allow its general manager to negotiate and e.ecute contracts in its copra trading activities for and in DA$L$L<s behalf ,itho#t prior board approval. If the by-laws were to be literally followed, the board should give its stamp of prior approval on all corporate contracts. 'ut that board itself, by its acts and through ac/uiescence, practically laid aside the by-law re/uirement of prior approval. &nder the given circumstances, the Galaw contracts are valid corporate acts.

,. 'ut if more were re/uired, we need but turn to the board<s ratification of the contracts in dispute on Nanuary !#, "9,-, though it is our 8and the lower court<s: belief that ratification here is nothing more than a mere formality. Authorities, great in number, are one in the idea that Eratification by a corporation of an unauthori6ed act or contract by its officers or others relates back to the time of the act or contract ratified, and is e/uivalent to original authority1E and that E BtChe corporation and the other party to the transaction are in precisely the same position as if the act or contract had been authori6ed at the time.E !# )he language of one case is e.pressive2 E)he adoption or ratification of a contract by a corporation is nothing more or less than the making of an original contract. )he theory of corporate ratification is predi%ated on the right of a %orporation to %ontra%t, and any ratification or adoption is e/#i"alent to a grant of prior a#thorit-.E !" Indeed, our law pronounces that EBrCatification cleanses the contract from all its defects from the moment it was constituted.E !> 'y corporate confirmation, the contracts e.ecuted by Galaw are thus purged of whatever vice or defect they may have. !! In sum, a case is here presented whereunder, even in the face of an e.press by-law re/uirement of prior approval, the law on corporations is not to be held so rigid and infle.ible as to fail to recogni6e e/uitable considerations. And, the conclusion inevitably is that the embattled contracts remain valid. +. It would be difficult, even with hostile eyes, to read the record in terms of Ebad faith andAor breach of trustE in the board<s ratification of the contracts without prior approval of the board. For, in reality, all that we have on the government<s side of the scale is that the board knew that the contracts so confirmed would cause heavy losses. As we have earlier e.pressed, Galaw had authority to e.ecute the contracts without need of prior approval. ?verybody, including Galaw himself, thought so, and for a long time. 3oubts were first thrown on the way only when the contracts turned out to be unprofitable for DA$L$L. 5ightfully had it been said that bad faith does not simply connote bad udgment or negligence1 it imports a dishonest purpose or some moral obli/uity and conscious doing of wrong1 it means breach of a known duty thru some motive or interest or ill will1 it partakes of the nature of fraud.!, Applying this precept to the given facts herein, we find that there was no Edishonest purpose,E or Esome moral obli/uity,E or Econscious doing of wrong,E or Ebreach of a known duty,E or ESome motive or interest or ill willE that Epartakes of the nature of fraud.E Dor was it even intimated here that the DA$L$L directors acted for personal reasons, or to serve their own private interests, or to pocket money at the e.pense of the corporation. !+ 0e have had occasion to affirm that bad faith contemplates a Estate of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for ulterior purposes.E != !riggs "s. 1pa#lding, "," &.S. "!>, ",--",9, !+ %. ed.

==>, ==9, /uotes with approval from Nudge Sharswood 8in Spering<s App., *" Pa. "":, the following2 E&pon a close e.amination of all the reported cases, although there are many dicta not easily reconcilable, yet I have found no udgment or decree which has held directors to account, e.cept when they have themselves been personally guilty of some fraud on the corporation, or have known and connived at some fraud in others, or where such fraud might have been prevented had they given ordinary attention to their duties. . . .E Plaintiff did not even dare charge its defendant-directors with any of these malevolent acts. Lbviously, the board thought that to ettison Galaw<s contracts would contravene basic dictates of fairness. )hey did not think of raising their voice in protest against past contracts which brought in enormous profits to the corporation. 'y the same token, fair dealing disagrees with the idea that similar contracts, when unprofitable, should not merit the same treatment. Profit or loss resulting from business ventures is no ustification for turning one<s back on contracts entered into. )he truth, then, of the matter is that K in the words of the trial court K the ratification of the contracts was Ean act of simple ustice and fairness to the general manager and the best interest of the corporation whose prestige would have been seriously impaired by a re ection by the board of those contracts which proved disadvantageous.E !* )he directors are not liable.E
!-

=. )o what then may we trace the damage suffered by DA$L$L. )he facts yield the answer. Four typhoons wreaked havoc then on our copra-producing regions. 5esult2 $opra production was impaired, prices spiralled, warehouses destroyed. Muick turnovers could not be e.pected. DA$L$L was not alone in this misfortune. )he record discloses that private traders, old, e.perienced, with bigger facilities, were not spared1 also suffered tremendous losses. 5oughly estimated, eleven principal trading concerns did run losses to about P"#,!##,###.##. Plaintiff<s witness Sisenando 'arretto, head of the copra marketing department of DA$L$L, observed that from late "9,* to early "9,- Ethere were many who lost money in the trade.E !9 DA$L$L was not immune from such usual business risk. )he typhoons were known to plaintiff. In fact, DA$L$L resisted the suits filed by %ouis 3reyfus F $o. by pleading in its answers for%e maje#re as an affirmative defense and there vehemently asserted that Eas a result of the said typhoons, e.tensive damage was caused to the coconut trees in the copra producing regions of the Philippines and according to estimates of competent authorities, it will take about one year until the coconut producing regions will be able to produce their normal coconut yield and it will take some time until the price of copra will reach normal levels1E and that Eit had never been the intention of the contracting parties in entering into the contract in /uestion that, in the event of a sharp rise in the price of copra in the Philippine market produce by for%e maje#reor by caused beyond defendant<s control, the defendant should buy the copra contracted for at e.orbitant prices far beyond the buying price of the plaintiff under the contract.E ,#

A high regard for formal udicial admissions made in court pleadings would suffice to deter us from permitting plaintiff to stray away therefrom, to charge now that the damage suffered was because of Galaw<s negligence, or for that matter, by reason of the board<s ratification of the contracts. ," Indeed, were it not for the typhoons, ,> DA$L$L could have, with ease, met its contractual obligations. Stock accessibility was no problem. DA$L$L had 9# buying agencies spread throughout the islands. It could purchase >,### tons of copra a day. )he various contracts involved delivery of but "=,+## tons over a five-month period. 3espite the typhoons, DA$L$L was still able to deliver a little short of +#Q of the tonnage re/uired under the contracts. As the trial court correctly observed, this is a case of damn#m abs/#e inj#ria. $on unction of damage and wrong is here absent. )here cannot be an actionable wrong if either one or the other is wanting. ,! *. Ln top of all these, is that no assertion is made and no proof is presented which would link Galaw<s acts K ratified by the board K to a matri. for defraudation of the government. Galaw is clear of the stigma of bad faith. Plaintiff<s %orporate %o#nsel ,, concedes that Galaw all along thought that he had authority to enter into the contracts, that he did so in the best interests of the corporation1 that he entered into the contracts in pursuance of an overall policy to stabili6e prices, to free the producers from the clutches of the middlemen. )he prices for which DA$L$L contracted in the disputed agreements, were at a level calculated to produce profits and higher than those prevailing in the local market. Plaintiff<s witness, 'arretto, categorically stated that Eit would be foolish to think that one would sign 8a: contract when you are going to lose moneyE and that no contract was e.ecuted Eat a price unsafe for the Dacoco.E ,+ 5eally, on the basis of prices then prevailing, DA$L$L envisioned a profit of around P*+>,,,#.##. ,= Galaw<s acts were not the result of hapha6ard decisions either. Galaw invariably consulted with DA$L$L<s $hief 'uyer, Sisenando 'arretto, or the Assistant 7eneral ;anager. )he dailies and /uotations from abroad were guideposts to him. Lf course, Galaw could not have been an insurer of profits. (e could not be e.pected to predict the coming of unpredictable typhoons. And even as typhoons supervened Galaw was not remissed in his duty. (e e.erted efforts to stave off losses. (e asked the Philippine Dational 'ank to implement its commitment to e.tend a P,##,###.## loan. )he bank did not release the loan, not even the sum of P>##,###.##, which, in Lctober, "9,*, was approved by the bank<s board of directors. In frustration, on 3ecember ">, "9,*, Galaw turned to the President, complained about the bank<s short-sighted policy. In the end, nothing came out of the negotiations with the bank. DA$L$L eventually faltered in its contractual obligations. )hat Galaw cannot be tagged with %rassa negligentia or as much as simple negligence, would seem to be supported by the fact that even as the contracts were being

/uestioned in $ongress and in the DA$L$L board itself, President 5o.as defended the actuations of Galaw. Ln 3ecember >*, "9,*, President 5o.as e.pressed his desire Ethat the 'oard of 3irectors should reelect (on. ;a.imo ;. Galaw as 7eneral ;anager of the Dational $oconut $orporation.E ,* And, on Nanuary *, "9,-, at a time when the contracts had already been openly disputed, the board, at its regular meeting, appointed ;a.imo ;. Galaw as acting general manager of the corporation. 0ell may we profit from the following passage from Montelibano "s. !a%olod5M#r%ia Milling Co., En%., %-"+#9>, ;ay "-, "9=>2 E)hey 8the directors: hold such office charged with the duty to act for the corporation according to their best udgment, and in so doing they cannot be controlled in the reasonable e.ercise and performance of such duty. 0hether the business of a corporation should be operated at a loss during a business depression, or closed down at a smaller loss, is a purely business and economic problem to be determined by the directors of the corporation, and not by the court. It is a well known rule of law that /uestions of policy of management are left solely to the honest decision of officers and directors of a corporation, and the court is without authority to substitute its udgment for the udgment of the board of directors1 the board is the business manager of the corporation, and solong as it a%ts in good faith its orders are not re"ie,able b- the %o#rts.E 8Fletcher on $orporations, Ool. >, p. !9#.: ,Galaw<s good faith, and that of the other directors, clinch the case for defendants.
,9

Oiewed in the light of the entire record, the udgment under review must be, as it is hereby, affirmed. 0ithout costs. So ordered. BOARD OF LIQUIDATORS vs.HEIRS OF MAXIMO M. KALAW FACTS: Kalaw is the General Manager and Board Chairman of NACOCO(National Coconut Corporation). n !"#$% NACOCO contracted to sell coconut product with several &u'ers. (hat 'ear% there were four t'phoons that hit )hil. Coconut trees throughout the countr' suffered e*tensive damage. Copra production decreased. +hen it &ecame clear that the contracts would &e unprofita&le Kalaw su&mitted them to the &oard for approval. +hich was approved &' the Board. As was to &e e*pected% NACOCO &ut partiall' performed the contracts.the &u'ers filed a case for the full performance of the Contract. settlements were paid. NACOCO see,s to recover from Kalaw the said paid settlements. -or &ad faith and.or &reach trust for having approved the contracts.According to Kalaw he did so acted for the &est interest of the Corp.(rial Court decided for Kalaw. ISSUE: s Kalaw lia&le/ HELD: 0udgment affirmed.

RATIO:Kalaw is not lia&le. the trial court correctl' o&served% this is a case of damnum a&s1ue in0uria. Con0unction of damage and wrong is here a&sent. (here cannot &e an actiona&le wrong if either one or the other is wanting. Kalaw all along thought that he had authorit' to enter into the contracts2 that he did so in the &est interests of the corporation. Board of Liquidator !. H"ir of Ka#a$ %&'()* 3octrine4 t is possi&le for an e*press provision of the &'5laws to &e violated and the Board ma'% in certain corporate actions% &ind the corporation in spite of the fact that it is contrar' to the &'5law provision. (here are 6 wa's &' which corporate actions ma' come a&out through its Board of 3irectors4 o o (he &oard ma' empower or authori7e the act or contract2 or 8atification from the &oard

As long as there is approval &' the &oard% e*press or implied% it is valid to &ind the corporation.

-acts4 National Coconut Corporation (NACOCO) was a chartered as a non5profit governmental organi7ation% in charge of all transactions involving coconut and its &'5products. Ma*imo Kalaw sat as its General Manager and &oard chairman. Because of # t'phoons that hit the countr' in% NACOCO was una&le to fulfill its o&ligations under the numerous contracts it entered into with several &u'ers. (he aggrieved &u'ers threatened to &ring damage suits &ut most of these were settled% e*cept for one who actuall' pushed through with the suit (9ouis 3re'fus ltd.). :u&se1uentl'% NACOCO was a&olished &' ;O <$6% giving the Board of 9i1uidators the function of settling and closing its affairs.

All the settlements sum up to )!%<#<%6$#.=6. t is this sum that NACOCO% through the Board of 9i1uidators% now see,s to recover from General Manager Kalaw and the other two directors% charging the latter with negligence and &ad faith.&reach of trust for having approved entered into the aforementioned unprofita&le contracts. t is alleged that while the &'5laws re1uired prior approval of the &oard% Kalaw entered into the contracts alone as general manager and without the &oard>s prior approval. :ometime after% Kalaw died and the suit was &rought against his estate.

ssues4 !. +.N Kalaw and the rest of the &oard were guilt' negligence and &ad faith and.or &reach of

trust for having entered into the unprofita&le contracts 6. ?civpro related@ w.n the action survives his death2 and if so% is his heirs lia&le Aeld4

A;934 1. NO. Bnder the circumstances% Kalaw>s acts were valid corporate acts. Although the &'5 laws re1uired that a general manager first procure approval of the &oard mem&ers &efore entering into contracts that would &ind the corporation% the contrar' practice &' Kalaw was ratified &' the Board. ;vidence shows that it $a t+" ,ra-ti-" of t+" -or,oratio. to a##o$ it /"."ra# 0a.a/"r to ."/otiat" -o.tra-t % in its copra trading for and in NACOCO>s &ehalf% $it+out ,rior 1oard a,,ro!a#. (he Court ruled that Cif the &'5laws were to &e literall' followed% the &oard should give its stamp of prior approval on all corporate contracts. But ?in this case@ the board itself, by its acts and through acquiescence, practically laid aside the by-law requirement of prior approvalD ?please see a&ove doctrine@ 6. ?civpro related@ (he action% &eing one for a tort% does survive his death.