A2 Woodhouse v.

Halili

FACTS
Woodhouse informed Mission Dry Corp. of Los Angeles
that he has an interested financer who is willing to
invest $500,000 in the bottling and distribution of
Mission Dry beverages.
He requested that the right to bottle and distribute be
granted him for a limited time under the condition that
it will finally be transferred to the corp. Hence, he was
given 30-day option on exclusive bottling and
distribution rights for the Philippines.
Nov. 29, 1947 Woodhouse entered into a written
agreement with Halili.
a. they shall organize partnership for bottling &
distribution of Mission soft drinks, Woodhouse as
industrial partner or manager and Halili as capitalist.
b. Halili was to decide matters of general policy
regarding the business, Woodhouse to attend to the
operation and development of the bottling plant.
c. Woodhouse to secure the Mission soft drinks
franchise for and in behald of the proposed partnership
d. Woodhouse to receive 30% of the net profit
Dec. 3, 1947 contract was finally signed. They went to
the US and on Dec. 10, a franchise agreement was
entered into between Mission Dry Corp and Halili
and/or Woodhouse. Halili was granted the exclusive
right, license and authority to produce, bottle,
distribute and sell Mission beverages in the Phils.
Woodhouse reported for duty in Jan 1948 but operations
only started on the 1st week of Feb, 1948. In Jan, he
was given 2k as advance on account of profits plus the
use of a car. In Feb, also 2k while in March only 1k
and the car was withdrawn from him.
Bottling plant was already in operation, Woodhouse
demanded the execution of the partnership, but the
Halili excused himself, saying that there was no hurry
to do so and promised to do so after the sales had
increased to 50k.
Woodhouse filed a complaint for the execution of the
contract of partnership, an accounting of the profits,
and a share thereof of 30% including damages of
P200,000.
Halili on his defense alleged that (1) his consent to the
agreement, was secured by the representation of
Woodhouse that he was the owner, or was about to
become owner of an exclusive bottling franchise,
which representation was false, and that Woodhouse
did not secure the franchise but was given to him (2)

that he did not fail to carry out his undertakings, but

that it was Woodhouse who failed and (3) that
Woodhouse agreed to contribute to the exclusive
franchise to the partnership, but failed to do so with a
(4) counterclaim for P200,00 as damages.
CFI: ordered Halili to (1) render accounting of the
profits and pay Woodhouse 15% thereof; (2) execution
of contract cannot be enforced upon parties; (3) fraud
was not proved.
ISSUES
1. Whether Woodhouse falsely represented that he had
an exclusive franchise to bottle Mission beverages.
2. Whether false representation, if it existed, annuls the
agreement to form the partnership.
3. Whether Woodhouse and Halili entered into a valid
contract of partnership.
HELD
1. YES
Plaintiff did make false representations and this can be
seen through his letters to Mission Dry Corporation
asking for the latter to grant him temporary franchise so
that he could settle the agreement with defendant. The
trial court reasoned, and the plaintiff on this appeal
argues, that plaintiff only undertook in the agreement to
secure the Mission Dry franchise for and in behalf of the
proposed partnership. The existence of this provision in
the final agreement does not militate against plaintiff
having represented that he had the exclusive franchise; it
rather strengthens belief that he did actually make the
representation. The defendant believed, or was made to
believe, that plaintiff was the grantee of an exclusive
franchise. Thus it is that it was also agreed upon that the
franchise was to be transferred to the name of the
partnership, and that, upon its dissolution or termination,
the same shall be reassigned to the plaintiff.
Again, the immediate reaction of defendant, when in
California he learned that plaintiff did not have the
exclusive franchise, was to reduce, as he himself
testified, plaintiffs participation in the net profits to one
half of that agreed upon. He could not have had such a
feeling had not plaintiff actually made him believe that
he (plaintiff) was the exclusive grantee of the franchise.
2. NO

The false representations of Woodhouse do not amount

to the invalidity of the contract they entered into. In
order that fraud may vitiate consent, it must be the
causal (dolo causante), not merely the incidental (dolo
incidente), inducement to the making of the contract.
The supposed ownership of an exclusive franchise was
actually the consideration or price Woodhouse gave in
exchange for the share of 30% granted him in the net
profits of the partnership business. This only amounts to
dolo icnidente since it only involves getting Halilis
consent to a big slice in the profits, which is only an
incidental matter in the agreement.
3. YES
a. Written agreement by Woodhouse and Halili
b. Woodhouse as industrial partner/manager, to attend to
the operations and development of bottling plant, to
secure Mission soft drinks franchise for and in behalf of
the partnership, to receive 30% of the profits.
c. Halili as capitalist and will decide matters of general
policy.
The ownership of an exclusive franchise was actually the
consideration or price Woodhouse gave in exchange for
the share of 30% granted him in the net profits of the
partnership business.
Having arrived at the conclusion that the agreement may
not be declared null and void, the question that next
comes before us is, May the agreement be carried out or.

executed? We find no merit in the claim of plaintiff that

the partnership was already a fait accompli from the time
of the operation of the plant, as 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. They expressly
agreed that they shall form. a partnership. (Par. No. 1,
Exhibit A.) As a matter of fact, from the time that the
franchise from the Mission Dry Corporation was
obtained in California, plaintiff himself had been
demanding that defendant comply with the agreement.
And plaintiff's present action seeks the enforcement of
this agreement. Plaintiff's claim, therefore, is both
inconsistent with their intention and incompatible with
his own conduct and suit.
As the trial court correctly concluded, the defendant may
not be compelled against his will to carry out the
agreement nor excute the partnership papers. Under the
Spanish Civil Code, the defendant has an obligation to
do, not to give. The law recognizes the individual's
freedom or liberty to do an act he has promised to do, or
not to do it, as he pleases. It falls within what Spanish
commentators call a very personal act (acto
personalisimo), of which courts may not compel
compliance, as it is considered an act of violence to do
so.
Dispositive: Judgment affirmed. Woodhouses share of
15% of the net profits shall continue to be paid while
Halili uses the franchise from Mission Dry Corp.