e. Tortious Interference

D. Tortious Interference (Civil Code, art. 1314)

> Article 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. (n)

Any third person who induces another to violate his contract shall be liable for damages to the other contracting party (Art. 1314).

General Rule: Only the parties to a contract are bound by the terms of the contract and only a party can file an action for breach of contract or for rescission or annulment thereof.

Exceptions:

• Stipulation in favor of third person;
• Contracts intended to defraud creditors.

It is tortious because it violates the rights of the contracting parties to fulfill the contract and to have it fulfilled, to reap the profits resulting therefrom, and to compel the performance by the other party.

Elements:

• Existence of a valid contract;
• Knowledge on the part of the third person of the existence of the contract;
• Interference of the third person without legal justification

Note: Malice is not essential. Breach must occur because of the alleged act of interference (So Ping Bun v. Court of Appeals, G.R. No. 120554, 1999).

Contracts may bind and affect strangers in the following cases:

• Stipulations Pour Autrui (Art. 1311(2), NCC) – Stipulation in favor of a third person. Benefits clearly and deliberately conferred by parties to a contract upon third persons and which stipulation is merely part of a contract entered into by the parties, neither of whom acted as agents of the third person and which favor can be demanded by the third person if duly accepted by him before it could be revoked. Requisites of stipulation pour atrui:
• Stipulation in favor of a third person;
• Stipulation is just part and not the whole obligations of the contract;
• Contracting parties must have clearly and deliberately conferred a favor upon a third person;
• Favor or benefit conferred is not just an incidental benefit or interest;
• Third person must have communicated his acceptance; and
• Neither of the contracting parties bears the legal representation or authorization of the third person. (OSPA v. CA, G.R. No. 156660, 24 Aug. 2009) NOTE: The fairest test to determine whether the interest of third person in a contract is a stipulation pour autrui or merely an incidental interest is to rely upon the intention of the parties as disclosed by their contract. In applying this test, it matters not whether the stipulation is in the nature of a gift or whether there is an obligation owing from the promise to the third person. (Rabuya, 2017)
• Accion directa –The creditor is authorized by the statute to sue on his debtor’s contract. Examples:
• Lessor against Sublessee; and (Arts. 1651, 1652, NCC)
• Laborers of Contractor against Owner of the work (Art. 1729, NCC)
• Third Person in Possession of Object of Contract (Art. 1312, NCC) In contracts creating real rights, third persons who come into possession of the object of the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land Registration Laws.
• Fraud of Creditors by Contracting Parties (Accion Pauliana) (Art. 1313, NCC) Creditors are protected against contracts intended to defraud them. Creditors of the contracting parties may rescind contracts intended to defraud them although they did not intervene therein. (Reyes and Puno, 1964)
• Tortious Interference (Art. 1314, NCC) (1991, 1998 BAR) Any third person who induces another to violate his contract shall be liable for damages to the other contracting party (even though the third person is not bound by the stipulations). NOTE: This tort or wrongful conduct is known as “interference with contractual relations.”

The word "induce" refers to situations where a person causes another to choose one course of conduct by persuasion or intimidation.

Requisites:

• Existence of a valid contract;
• The third person’s knowledge of the existence of the contract; and NOTE: Knowledge alone is not sufficient to make a third person liable for tortious interference. Malice is not an essential element of tortious interference. NOTE: A third person can be held liable for tort interference even if he does not know the identity of one of the contracting parties. The interference with lawful contracts by strangers thereto gives rise to an action for damage in favor of the injured person. The law does not require that the responsible person shall have known the identity of the injured person. (Rabuya, 2017)
• Interference by third person without legal justification or excuse that caused a breach of the contract. (So Ping Bun v. Court of Appeals, G.R. No. 120554, 21 Sept. 1999)

Q: PCGG filed a complaint for reconveyance, reversion, accounting, restitution, and damages before the Sandigan Bayan against Ferdinand and Imelda Marcos, and several of their cronies including Benedicto and Africa. PCGG, through its Chairman, David M Castro, entered into a Compromise Agreement with Benedicto where the latter undertook to cede to the government properties listed in the agreement and transfer to the government whatever rights he may have in the assets of the corporations listed in the same agreement. The SB dismissed the case against Africa and ruled that since that act being complained of constituted a quasi-delict or tort and the obligation of the defendants were solidary therefore the obligation of Africa has been extinguished by the Compromise Agreement. Did the Compromise Agreement between PCGG and Benedicto extinguish the liability of Africa?

A: NO. A stipulation pour autrui to be appreciated, it is indispensable that there be a stipulation deliberately conferring a benefit or favor to a third person. The requisites of a stipulation pour autrui are the following:

• There is a stipulation in favor of a third person;
• The stipulation is a part, not the whole, of the contract;
• The contracting parties clearly and deliberately conferred a favor to the third person — the favor is not an incidental benefit;
• The favor is unconditional and uncompensated;
• The third person communicated his or her acceptance of the favor before its revocation; and
• The contracting parties do not represent, or are not authorized by, the third party.

The Compromise Agreement executed between Benedicto and PCGG does not contain any express stipulation that confers the benefit of absolute immunity to Africa. The compromise did not automatically extinguish Africa’s liability. A non-signatory may benefit from a compromise where the plaintiff alleged a common cause of action against all defendants and all were indispensable parties; those requirements were not established here. Payment under the compromise reduces, but does not necessarily extinguish, the aggregate claim. (Republic v. Legal Heirs of Jose L. Africa, G.R. No. 205722, 19 Aug. 2015)

CONSENSUALITY OF CONTRACTS