shall be exigile in case in which it has been stipulated, the debtor not being allowed to allege that the performance of the obligation has not done any damage to the creditor or that it has benefited him (Chile, Art. 1542; Columbia, Art. 1599).

Under the Common law. In an action to recover a sum stipulated in a contract as liquidated damages, no proof of actual damages is necessary (Spicer vs. Hoop, 51 Ind. 365; Sandford vs. First National Bank, 94 Iowa, 680).

Extent of recovery. Under the Civil law. Art. 1152. Part I, Civil Code. In obligation with a penal clause the penalty shall substitute the indemnity for dam ages and the payment of interest if it has not been otherwise stipulated. The question is, are the parties confined to the amount of damages stipulated in case of breach or total loss of the object of the obligation? The writer does not think so. In support of his opinion he cites Manresa, Vol. 8, page 239, wherein the commentator says in case of fraud, the obligee has to prove this fact in order to recover more besides the penalties stipulated. Art. 1109, Civil Code, provides that interest due shall produce legal interest from the date on which it was judicially demanded, even if the obligation is silent on this point. Georgi says on this point: "The judge can besides the penalty concede an indemnification for injuries arising from acts which the agreed penalty does not cover, or for acts of losses different from those stipulated for by the penalty." For instance, there is an agreement to pay five pesos for every day's delay of delivery of thing purchased. Now, suppose the vendor delays and besides destroys or injures the thing. Is it not reasonable that the vendee is entitled both to the value of the thing and compensation for the delay? (Georgi, Vol. IV, p. 473.)

Under the American law. Penalties are often stipulated to be paid in agreements and covenants in the event of the breach of affirmative stipulations. In such cases the party injured is not confined to his actions for the penalty, but has an election to sue on the agreements or covenants. In that action he is entitled to recover full damages without regard to the penalty. It is not the measure of damages, nor does it limit the recovery thereof, if the actual injury requires a larger amount for just compensation (Meinert vs. Bottcher, 60 Minn. 204; New Holland Turnpike Co. vs. Lancaster, 71 Pa. 442). In case of penal bond with condition for the payment of money only the plaintiff is entitled to recover the full amount of the penalty as a debt and the excess of interest beyond the penalty in the shape of damages for the detention of the debt (Long vs. Long, N. J. Eq., 59).

Nullity of the Principal Obligation or Penal Clause.-Civil law. The nullity of the penal clause does not carry with it that of the principal obligation. The nullity of the principal obligation carries with it that of the penal clause Art. 1155, Civil Code; Argentina, Art. 697. The reason of this rule is this: The parties when contracting have in mind the performance of the principal obligation. The penal clause is nothing more than a guarantee for its fulfillment. The performance of the obligation should not therefore be frustrated by the mere nullity of the accessory, which is secondary in character. The nullity of the principal obligation carries with it that

of the penal clause. It is a maxim of law that the accessory follows the principal. A penalty presupposes an offended right. If the principal obligation is void, there is no right offended.

Under the American law. If the condition be impossible when the bond was made or becomes so afterwards by the act of God, the law or the obligee, the penalty is saved and bond in one case is void and in the other is discharged. (Commonwealth vs. Oberry, 44 Am. Rep. 471; where condition of bond is to do a thing impossible or illegal, the obligor is discharged. (Brown vs. Dillahunty, 43 American Decision, 499.)

In terrorem.-Exorbitant and oppressive interests stipulated in penal obligations when their object is to coerce and intimidate the debtor are reduced by the courts (Sentencia de 9 de Febrero, 1906, Supreme Court, Sp.). A sentence of the Court of Trani, Italy, Aug. 3, 1898, has ruled that the penal clause cannot be enforced when, by its enormity, it appears to have been inserted solely to intimidate the debtor.

Under the American law. Where a contract provides for a forfeiture of a sum so great that it is apparent that the provision was inserted in terrorem, it will be treated as a penalty and not as a liquidated damage.

Power to reduce the penalty. Under the Civil law. The judge shall equitably modify the penalty, when the principal obligation has been partly or irregularly complied with by the debtor. (Spain, Art. 1154, C. C.; Argentina, Art. 694; Bolivia, Art. 822.) The only case recognized by the Civil Code in which the court is authorized to intervene for the purpose of reducing the penalty stipulated in the contract is when the principal obligation has been partially or irregularly fulfilled and the court can see that the person demanding has received the benefit of such part or irregular performance. In such case the Court is authorized to reduce the penalty to the extent of the benefit received by the party enforcing the penalty. (Lambert vs. Fox, 26 Phil. 590; Fornow vs. Hoffmeister, 6 Phil. 33; Palacios vs. Municipality of Cavite, 12 Phil. 140; Gsell vs. Kock, 16 Phil. 1.)

Judges cannot moderate the penalty when the obligation is absolutely unperformed, and its fulfillment is demanded side by side with the penalty. The liberty of stipulation is respected. (Sentence of Feb. 6, 1906, Supreme Court, Spain.) Georgi, however, the great commentator of the Italian Code whose provision on this subject is exactly like that of the civil code enforced in these islands give three instances in which the judge may intervene as to the modifications of the penalty.

(1) The judge can mitigate the penalty when the parties have conceded him this power.

(2) The judge can, besides the penalty, concede an indemnization for losses and injuries to which the stipulated penalty does not extend, or in other words, for causes of injuries different from those which are the subject of the penalty. If the creditor

maliciously desires not to perform his contract in order to cause greater damages than that which is stipulated in the penal clause, the judge can also adjust the penalty or damages.

(3) The judge may reduce the penalty when there is partial fulfillment of the obligation.

Under the American law. Where the agreement has been partially performed, it is the policy of the Court to regard the damages as a penalty and allow the plaintiff to recover only such damages as he actually sustained (Cook vs. Finch, 19 Minn. 407). It must be noted, however, that the American courts have greater powers than our courts with regard to the modifications or reductions of the penalty. Where there is partial compliance or no compliance at all the courts can modify the penalty. That is why they make such distinctions between liquidated damages and penalty. In case of liquidated damages, courts enforce the stipulated damages. If the covenant is considered a penalty, they substitute their judgment in place of what is stipulated and make such modifications as the case warrants. American Courts do not favor forfeiture. As was said by Judge Deady in Harris vs. Miller, 11 Fed. 118. "The law is peculiar, and instead of giving effect to the contract of the parties according to their intentions, it assumes to control them according to its standard of justice."

CONCLUSION

In concluding this laborious task of comparison, which is not free from difficulties -the author finds that the Civil law on the subject of obligations with a penal clause is very similar in its nature, scope and effect to that of the Common Law liquidated damages; that is to say, courts enforce the penal stipulation as the measure of damages in case of breach of the contract, without admitting evidence as to the extent of the injury done, so long as the breach is proved. It resembles the Common Law penalty in that the judge is empowered to reduce the penal sum in certain circumstances. with this notable difference, however, that under the Civil Law, the judge can modify the penalty only when there is part or irregular performance; whereas, under the American law, the judge is given great discretion. Whether there is irregular or part performance or no performance at all, American courts do "not favor forfeiture," but will enforce the penalty only to such an extent as will justly and equitably compensate the injured party.

The question is likely to arise whether or not it is desirable in the Philippines to adopt the American law on the subject of Liquidated Damages and penalty. The author, inspired by the completeness and thoroughness of the American Jurisprudence on the subject is strongly persuaded to the conclusion that it is wise that the courts of the Philippine Islands should have the same ample powers as the courts of the United States and England have with regard to the modification of the "penalty" reducing the sum stipulated or mitigating the penalty covenanted as the reason of the case warrants.

If often happens that a penalty is stipulated simply as a security for the principal obligation or as an intimidation to the obligor. Its amount may far exceed the value of the principal obligation. In case of absolute non-performance is it reasonable to enforce a penalty of five thousand pesos (P5,000) when the obligation is worth only one hundred pesos? We should be guided by the principle that the liquidation must be reasonable. "Just compensation for the injury sustained is the principle at which the law aims."

PHILIPPINE LAW JOURNAL

Published monthly, August to April inclusive, during the academic year, by the alumni and students of the College of Law, University of the Philippines

FACULTY ADVISORY COMMITTEE

Jorge Bocobo, Dean of the College of Law.

Quintin Paredes, Professorial Lecturer on Criminal Law.

Enrique Altavas, Lecturer on Land Registration and Mortgages.

NOVEMBER, NINETEEN HUNDRED AND EIGHTEEN

NOTE AND COMMENT

THE ANNOTATED CIVIL CODE

BY JUSTICE F. C. FISHER

The need of a new and authoritative translation of the Civil Code of Spain with local annotations has been felt for a number of years. The constant use of the English language in our courts of justice and the increasing number of students studying law in the University of the Philippines and the Philippine Law School where English is the official language have given rise to the necessity of an authoritative translation of the Civil Code which forms a part of the substantive law of these Islands. It is true that we have the translations by Walton and by the Bureau of Insular affairs of the U. S. War Department which "have been excellent in the main" but "here and there they have failed to satisfy the discriminating user".

Hon. F. C. Fisher, associate justice of the Supreme Court of the Philippine Islands, has at last solved this lamentable situation by his translation and annotation of the Civil Code of Spain recently published by the Lawyers Cooperative Publishing Company. Perhaps there is no other man best qualified for the task of translating and annotating our Civil Code than Justice Fisher. His thorough know