Woodhouse vs. Halili GR No. L-4811 | July 31, 1953 Petitioner: Charles F. Woodhouse Respondent: Fortunato F.

Halili Partnership Doctrine: An agreement to form a partnership is an obligation to do, hence the court may not compel compliance. Labrador, J.: Factual Antecedence November 29, 1947 Woodhouse and Halili entered into a written agreement, with the following important provisions: o They shall organize a partnership for the bottling and distribution of Mission softdrinks. o Woodhouse will act as an industrial partner and attend to the operation and development of the bottling plant; AND defendant to supply the capital, as well as decide matters of general policy. o Woodhouse will secure the Mission softdrinks franchise and will receive 30% of the profits. PRIOR TO entering the agreement, Woodhouse informed the mother corporation in Los Angeles that he found an interested financier (Halili) who was willing to finance 500K USD and requested that he be granted the right to bottle and distribute the softdrink for a limited time to consummate his deal with Halili. The contract between the two parties was signed. They went to the US and obtained a franchise agreement from Mission Dry Corporation on December 10, 1947. It is stated in the agreement that the DEFENDANT has the exclusive right to produce, bottle, distribute, and sell Mission beverages in the Philippines. (Take note: At this point, the partnership has not been formed yet) When the plant was in operation, Woodhouse demanded Halili that the partnership papers be executed. A first, defendant excused himself saying that there was no hurry. Then he again promised to do it after the sales had been increased to P50,000. As nothing definite was forthcoming, after this condition was attained, and as defendant refused to give further allowances to plaintiff, Woodhouse tried to settle the matters. As none could be arrived at, the present action was instituted. Plaintiffs contention o The partnership be executed plus accounting of profits plus his 30% share. Respondents defense o His consent to the agreement was secured by the representation of the plaintiff that he was the owner or was about to become owner of an exclusive franchise, which was FALSE, because the franchise was granted to him (Halili). o Plaintiff failed to do his undertaking in the partnership. Issues:

1. Whether plaintiff had falsely represented that he had an exclusive franchise to bottle Mission beverages YES, but 2. Whether this false representation or fraud, if it existed, annuls the agreement to form the partnership - NO 3. Whether Halili may be compelled to enter into a partnership with Woodhouse - NO Rationale FIRST and SECOND ISSUE Fraud is manifested in illimitable number of degrees or gradations from the innocent praises of a salesman about the excellence of his wares to those malicious machinations and representations that the law punishes as a crime. In consequence, article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud: o Causal Fraud (dolo causante)- may be a ground for the annulment of a contract, o Incidental Fraud (dolo incidente) - only renders the party who employs it liable for damages. In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dole in- cidente), inducement to the making of the contract. In the case at bar, inasmuch as the principal consideration, the main cause that induced defendant to enter into the partnership agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to bottle and distribute for the defendant or for the partnership, the false representation made by the plaintiff was not the casual consideration, or the principal inducement, that led the defendant to enter into the partnership agreement. o The representation was used by plaintiff to get from defendant a share of 30% of the net profits. By pretending that he had the exclusive franchise and promising to transfer it to the defendant, he obtained the consent of the latter to give him a big slice in the net profits. This is the DOLO INCIDENTE defined in the Spanish Civil Code. THIRD ISSUE The partnership was not a fait accompli from the time of the operation of the plant. It is evident from the very language of the agreement that the parties intended that the execution of the agreement to form a partnership was to be carried out at a later date. The defendant may not be compelled against his will to carry out the agreement nor execute the partnership. The defendant has an obligation to do. The law recognizes the individuals freedom or liberty to do an act he has promised to do, or not to do it, as he pleases. It is a very personal act which the courts may not compel compliance.